As filed with the Securities and Exchange Commission on October 27, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
PLUG POWER INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 3629 22-3672377
(Primary Standard Industrial (I.R.S. Employer
(State or Other Classification Code Number) Identification No.)
Jurisdiction
of Incorporation or
Organization)
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968 Albany-Shaker Road
Latham, NY 12110
(518) 782-7700
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
Gary Mittleman
President and Chief Executive Officer
Plug Power Inc.
968 Albany-Shaker Road
Latham, NY 12110
(518) 782-7700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Stuart M. Cable, P.C. David C. Chapin, Esq.
Robert P. Whalen, Jr., P.C. Ropes & Gray
Goodwin, Procter & Hoar llp One International Place
Exchange Place Boston, Massachusetts 02110
Boston, Massachusetts 02109-2881 (617) 951-7000
(617) 570-1000
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Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_]
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the SEC, acting pursuant to Section
8(a), may determine.
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+The information in this preliminary prospectus is not complete and may be + +changed. These securities may not be sold until the registration statement + +filed with the Securities and Exchange Commission is effective. This + +preliminary prospectus is not an offer to sell nor does it seek an offer to + +buy these securities in any jurisdiction where the offer or sale is not + +permitted. + |
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Subject to Completion. Dated October 27, 1999.
6,000,000 Shares
[Plug Power logo appears here]
Common Stock
This is an initial public offering of shares of Plug Power Inc. All of the shares of common stock are being sold by Plug Power.
Before this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $13.00 and $15.00. Application has been made for quotation of the common stock on the Nasdaq National Market under the symbol "PLUG".
See "Risk Factors" on page 8 to read about factors you should consider before buying shares of the common stock.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share Total
--------- -------
Initial public offering price................................. $ $
Underwriting discount......................................... $ $
Proceeds, before expenses, to Plug Power...................... $ $
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To the extent that the underwriters sell more than 6,000,000 shares of common stock, the underwriters have the option to purchase up to an additional 900,000 shares from Plug Power at the initial public offering price less the underwriting discount.
The underwriters expect to deliver the shares against payment in New York, New York on , 1999.
Goldman, Sachs & Co.
Hambrecht & Quist
Merrill Lynch & Co.
FAC/Equities
Prospectus dated , 1999.
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed information and Plug Power's financial statements, the notes to those financial statements and the other financial information appearing elsewhere in this prospectus. In addition to historical information, the following summary and other parts of this prospectus contain forward-looking statements that reflect our plans, estimates, intentions, expectations and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those set forth in the "Risk Factors" section and contained elsewhere in this prospectus.
Plug Power Inc.
Our Business
We are a leading designer and developer of on-site, electricity generation systems utilizing proton exchange membrane (PEM) fuel cells for residential applications. We believe that the electricity our residential fuel cell systems will provide to homes can be less expensive, more reliable, more efficiently produced and environmentally cleaner than the electricity provided by the existing electric utility grid and other power generation technologies. We plan to bring our first residential fuel cell systems to market in 2001 and to become the first mass market producer of residential fuel cell systems by selling 100,000 systems per year by 2003.
Our Product
Our residential fuel cell system will be an appliance, initially about the size of a refrigerator, that will produce electricity through a clean, efficient process without combustion. Our system will receive fuel from a home's existing natural gas line or propane tank, convert the fuel into a hydrogen-rich stream, and then combine it with oxygen from the air in a chemical reaction that produces electric power. Our initial residential systems will be designed to supply 7 kilowatts (kW) of baseload power, 10 kW of peak power and 15 kW of surge load capacity, which will provide the full electricity needs of a home, although the home can remain connected to the electric grid for back-up purposes. To date, we have conducted successful demonstrations of hydrogen-, methanol-, and natural gas-fueled systems and expect to demonstrate a propane-fueled system during 2000.
Our Alliance with General Electric Company
General Electric Company has selected Plug Power to be its exclusive supplier of fuel cell systems for residential and commercial applications under 35 kW. Together with GE On-Site Power, Inc., a subsidiary of General Electric that operates within General Electric's GE Power Systems business, we formed GE Fuel Cell Systems, LLC, a joint venture dedicated to marketing, selling, installing and servicing Plug Power fuel cell systems. GE Fuel Cell Systems is the exclusive, global distributor and servicer of our systems (except in four states assigned to another distributor) and all systems that it sells will be co-branded with both the General Electric and Plug Power names and trademarks. We believe that our strength in fuel cell system design and development, coupled with General Electric's brand name, worldwide sales and distribution network, service capabilities, and commitment to the commercialization of our fuel cell technology, will allow us to bring the first and best residential fuel cell system to market and, by doing so, establish the industry standard for this new product.
Changes in the Power Industry
Industrialized societies are dependent upon reliable, on-demand electric power to function. Demand for electricity is expected to continue to grow as the economies of the United States and other industrialized nations expand, particularly with the increased reliance on computers and other electronics. At the same time, developing nations will need additional electricity to improve their standards of living.
Reliance upon the existing infrastructure has been and continues to be problematic due to capacity constraints, environmental concerns and other issues. In addition, utility deregulation is creating new challenges and opportunities in the electric power industry. This evolving competitive industry environment coupled with the consumer demand for more reliable, accessible and competitively priced sources of electric power, is driving traditional energy providers to develop new strategies and seek new technologies for electricity generation, transmission, and distribution.
Our Solution
We believe our residential fuel cell systems will offer the following benefits to energy providers and consumers:
. Electric utilities and rural electric cooperatives will be able to lower capital expenditures by deploying our systems to meet increasing demand for electricity rather than expanding, repairing or replacing existing generation, transmission and distribution infrastructure.
. Natural gas and propane distributors will be able to increase the utilization of their existing distribution infrastructure, and mitigate the seasonality of their businesses, by taking advantage of additional demand for the fuels used by our systems.
. Energy providers will be able to satisfy stricter environmental regulations by using our fuel cell systems, which will generate electricity through an efficient chemical process that produces fewer harmful by-products than conventional combustion-based technologies.
. Consumers will be able to lower their exposure to weather- and capacity- driven outages by utilizing our on-site systems to provide their residential electricity, and may also benefit from lower electricity costs.
Our Strategy
Our business strategy focuses on combining existing fuel cell technology with improvements in system integration, component design, and manufacturing processes to achieve the low-cost manufacturing capability necessary to bring our product to the mass market. The key components of this strategy are:
. Focus on residential applications. We intend to focus on commercializing our fuel cell systems for the residential mass market, which we believe is the most accessible market for early fuel cell applications.
. Develop low-cost manufacturing capability and processes. We seek to develop high-volume manufacturing capability by working closely with a network of carefully selected suppliers to develop and produce low-cost components and subsystems, while focusing internally on improving system design and integration.
. Utilize General Electric's product development expertise and purchasing capabilities. We believe we can utilize General Electric's engineering, testing and analytical resources, as well as its purchasing power, to help us develop a superior product more rapidly and at lower cost.
. Leverage our strategic alliance with General Electric to achieve market leadership. We believe we can leverage General Electric's brand name and worldwide marketing, distribution and servicing capability to gain immediate recognition for our product and achieve market leadership.
. Acquire or license complementary technologies. We regularly review strategic opportunities to acquire or license technologies that can advance the development of low-cost system components and subsystems.
. Capitalize on our experience in the residential market to develop other fuel cell applications, including automotive applications. We believe that we can build on the experience and knowledge we will gain through the development of our residential fuel cell systems to develop other commercial applications of fuel cell technology, including automotive applications. We have a team of engineers dedicated to developing fuel cell power systems for automotive applications, but do not anticipate commercial production until at least 2006.
Additional Equity Financing at Time of Offering
Immediately before this offering and in addition to the shares of common stock to be sold in this offering, the following current stockholders of Plug Power will purchase additional shares of common stock as follows:
. Our founding stockholders, Mechanical Technology Incorporated and Edison Development Corporation (a wholly owned subsidiary of DTE Energy Company), will purchase an aggregate of 5,466,666 shares of common stock for a total purchase price of $41.0 million,
. GE On-Site Power, Inc. will purchase 3,000,000 shares of common stock for $37.5 million and
. Two additional stockholders will purchase an aggregate of 750,000 shares of common stock for a total purchase price of $6.4 million.
The Offering
Shares offered by Plug Power........................ 6,000,000 shares
Common stock to be outstanding after this offering.. 42,208,480 shares(1)
Estimated net proceeds to Plug Power................ $77,300,000
Use of Proceeds..................................... For general corporate
purposes, including
research and product
development,
manufacturing and market
development, capital
expenditures and
potential acquisitions.
See "Use of Proceeds".
Proposed Nasdaq National Market symbol.............. "PLUG"
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We were formed as a Delaware limited liability company on June 27, 1997 and will be merged into a newly-formed Delaware corporation immediately before this offering. Unless otherwise indicated, all information that we present in this prospectus for any date or period gives effect to the merger as if it had occurred on that date or as of the beginning of that period and all references to capital stock for periods before the merger mean our issued and outstanding membership interests. Our principal executive offices are located at 968 Albany-Shaker Road, Latham, New York 12110. Our telephone number at that location is (518) 782-7700 and our Internet address is www.plugpower.com. The information contained on our website is not incorporated by reference in this prospectus.
The name Plug Power and our logo are names and trademarks that belong to us. This prospectus also contains the names of other entities which are the property of their respective owners.
Summary Financial Data
The tables below present our statement of operations data for the period from June 27, 1997 (date of inception) to December 31, 1997, the year ended December 31, 1998, and the six month periods ended June 30, 1998 and 1999, and our balance sheet data at June 30, 1999. The balance sheet information is presented:
. on an actual basis;
. on a pro forma basis giving effect to the issuance of 533,334 shares of common stock for $4.0 million pursuant to a September 1999 capital call, the issuance of 9,216,666 shares of common stock to be issued for $84.9 million upon the exercise of outstanding warrants and other purchase rights immediately before this offering, and the acquisition of real estate from Mechanical Technology in July 1999 for $10.9 million (which includes our assumption of $6.2 million of debt), all as described in "Management's Discussion and Analysis of Financial Condition and Results of Operations".
. on a pro forma, as adjusted basis to reflect the pro forma adjustments described above and the sale of 6,000,000 shares of common stock in this offering at an assumed initial public offering price of $14.00 per share, after deducting the estimated underwriting discounts and commissions and our estimated offering expenses.
Six months ended June 30,
-----------------------------
Period from
June 27,
1997 to Year ended
December 31, December 31,
1997 1998 1998 1999
------------ ------------ ------------ -------------
(Unaudited) (Unaudited)
(In thousands, except per share data)
Statement of Operations
Data:
Contract revenue........ $ 1,194 $ 6,541 $ 2,549 $ 3,696
Cost of contract
revenue................ 1,227 8,864 3,439 5,118
------- ------- ------------ -------------
Loss on contracts....... (33) (2,323) (890) (1,422)
In-process research and
development............ 4,042 -- -- --
Research and development
expense................ 1,301 4,632 2,154 7,780
General and
administrative
expense................ 630 2,754 1,328 6,069
------- ------- ------------ -------------
Operating loss......... (6,006) (9,709) (4,372) (15,271)
Other income,
principally interest... 103 93 42 218
------- ------- ------------ -------------
Loss before equity in
losses of affiliate... (5,903) (9,616) (4,330) (15,053)
Equity in losses of
affiliate.............. -- -- -- (32)
------- ------- ------------ -------------
Net loss............... $(5,903) $(9,616) $ (4,330) $ (15,085)
======= ======= ============ =============
Basic and diluted net
loss per share......... $ (0.62) $ (0.71) $ (0.40) $ (0.71)
======= ======= ============ =============
Shares used in computing
basic and diluted net
loss per share......... 9,500 13,617 10,865 21,299
======= ======= ============ =============
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June 30, 1999
----------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
------- -------------- -----------
(in thousands)
Balance Sheet Data:
Cash and cash equivalents.................... $17,243 $106,118 $183,418
Working capital.............................. 13,570 102,165 179,465
Total assets................................. 37,233 186,966 214,266
Long-term obligations........................ 155 6,035 6,035
Total stockholders' equity................... 32,306 125,879 203,179
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RISK FACTORS
You should carefully consider the following risks and all other information contained in this prospectus before purchasing our common stock. If any of the following risks occur, our business, prospects, results of operations or financial condition could be harmed. In that case, the trading price of our common stock could decline, and you could lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks described below and elsewhere in this prospectus.
We have only been in business for a short time and your basis for evaluating us is limited
We were formed in June 1997 to further the research and development of residential fuel cell systems. We do not expect to have a commercially viable product until at least 2001. Accordingly, there is only a limited basis upon which you can evaluate our business and prospects. An investor in our common stock should consider the challenges, expenses and difficulties that we will face as a development stage company seeking to develop and manufacture a new product.
We have incurred losses and anticipate continued losses through at least 2003
As of June 30, 1999, we had an accumulated deficit of $30.6 million. We have not achieved profitability and expect to continue to incur net losses until we can produce sufficient revenues to cover our costs. We expect the cost to produce our pre-commercial systems during 1999 and 2000 to be higher than their sales price under the terms of our distribution arrangements with GE Fuel Cell Systems and Edison Development. Futhermore, even if we achieve our objective of bringing our first commercial product to market in 2001, we anticipate that we will continue to incur losses until we can cost-effectively produce and sell our residential fuel cell systems to the mass market, which we do not expect to occur until after 2002. Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future. See "Selected Historical Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations".
We may never complete the research and development of a commercially viable residential fuel cell system
We do not know when or whether we will successfully complete research and development of a commercially viable residential fuel cell system. We have produced and are currently demonstrating a number of test and evaluation systems and are continuing our efforts to decrease the costs of our systems' components and subsystems, improve their overall reliability and efficiency, and ensure their safety. However, we must complete substantial additional research and development on our systems before we will have a commercially viable product. In addition, while we are conducting tests to predict the overall life of our systems, we will not have run our systems over their projected useful life prior to commercialization. See "Business--Product Development and Commercialization Process".
A mass market for residential fuel cell systems may never develop or may take longer to develop than we anticipate
Fuel cell systems for residential use represent an emerging market, and we do not know whether our targeted distributors and resellers will want to purchase them or whether end-users will want to use them. If a mass market fails to develop or develops more slowly than we anticipate, we may be unable to recover the losses we will have incurred to develop our product and may be unable to achieve profitability. The development of a mass market for our systems may be impacted by many factors 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 are currently constructing a 51,000 square foot manufacturing facility and are continuing to develop our manufacturing capability and processes. We do not know whether or when we will be able to develop efficient, low-cost manufacturing capability and processes that will enable us to meet the quality, price, engineering, design and production standards or production volumes required to successfully mass market our residential fuel cell systems. Even if we are successful in developing our manufacturing capability and processes, we do not know whether we will do so in time to meet our product commercialization schedule or to satisfy the requirements of our distributors or customers. See "Business--Manufacturing".
We are heavily dependent on our relationship with GE Fuel Cell Systems and General Electric's commitment to develop the residential fuel cell market
Substantially all of our revenue for the foreseeable future will be derived from sales of our products to GE Fuel Cell Systems. We have granted to GE Fuel Cell Systems exclusive worldwide rights to market, distribute, install and service Plug Power fuel cell systems designed for residential and commercial applications under 35 kW (other than the states of Illinois, Indiana, Michigan and Ohio, in which Edison Development has exclusive distribution rights). Under our distribution agreement, we will sell our systems directly to GE Fuel Cell Systems, which, in turn, will seek to sell them to selected resellers. We are also obligated under an amendment to our agreement to purchase $12.0 million of technical support services from General Electric during the next three years. Our distribution agreement expires in 2009, although General Electric may terminate the agreement earlier if, among other reasons, we fail to do any of the following:
. remain in material compliance with the development schedule toward a January 1, 2001 product release;
. produce competitive commercial fuel cell systems;
. meet commercial production and cost requirements;
. produce systems that comply with regulatory requirements; or
. obtain all necessary approvals and certifications for our systems.
Our ability to sell our systems to the mass market is heavily dependent upon General Electric's worldwide sales and distribution network and service capabilities. Even though we own a minority interest in GE Fuel Cell Systems, we cannot control its operations or business decisions. Any change in our relationship with General Electric, whether as a result of market, economic, or competitive pressures, including any decision by General Electric to alter its commitment to our fuel cell technology in favor of other fuel cell technologies, to develop fuel cell systems targeted at different markets than ours or to focus on different energy product solutions could harm our potential earnings by depriving us of the benefits of General Electric's worldwide sales and distribution network and service capabilities. See "Business--Our Strategy" and "Business--Distribution and Marketing".
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. See "Business--Product Development and Commercialization Process".
We are dependent on third party suppliers for the development and supply of key components for our products
While we have recently entered into relationships with 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. See "Business--Competition".
Changes in government regulations and electric utility industry restructuring may affect demand for our fuel cell systems
The market for electricity generation products is heavily influenced by federal and state governmental regulations and policies concerning the electric utility industry. The loosening of current regulatory standards could deter further investment in the research and development of alternative energy sources, including fuel cells, and could result in a significant reduction in the potential market demand for our products. We cannot predict how the deregulation and restructuring of the industry will affect the market for residential fuel cell systems. See "Business--Changes in the Power Industry".
Our business may become subject to future government regulation which may impact our ability to market our product
We do not believe that our product will be subject to existing federal and state regulations governing traditional electric utilities and other regulated entities. We do believe that our product and its installation will be subject to oversight and regulation at the local level in accordance with state and local ordinances relating to building codes, safety, pipeline connections and related matters. Such regulation may depend, in part, upon whether a fuel cell system is placed outside or inside a home. At this time, we do not know which jurisdictions, if any, will impose regulations upon our product. We also do not know the extent to which any existing or new regulations may impact our ability to distribute, install and service our product. Once our product reaches the commercialization stage and we begin distributing our systems to our target early markets, federal, state or local government entities or competitors may seek to impose regulations. Any new government regulation of our product, whether at the federal, state or local level, including any regulations relating to installation and servicing of our products, may increase our costs and 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 expect that the net proceeds of this offering, together with the proceeds from our issuance of shares to current stockholders in September 1999 and immediately before the closing of this offering and all other existing sources of capital, will be sufficient to fund our activities through the end of 2001. We believe it is likely we will need to raise additional funds to achieve full commercialization of our product. We do not know whether we will be able to secure additional funding, or funding on terms acceptable to us, to pursue our commercialization plans through the mass market stage. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations".
We may have difficulty managing the expansion of our operations
We are undergoing rapid growth in the number of our employees, the size of our physical plant and the scope of our operations. For example, we began with 22 employees in June 1997 and expect to have approximately 300 by the end of 1999. Such rapid expansion is likely to place a significant strain on our senior management team and other resources. Our business, prospects, results of operations or financial condition could be harmed if we encounter difficulties in effectively managing the budgeting, forecasting and other process control issues presented by such a rapid expansion.
We face risks associated with our plans to market, distribute and service our products internationally
We intend to market, distribute, and service our residential fuel cell systems internationally through GE Fuel Cell Systems. We have limited experience developing, and no experience manufacturing, our products to comply with the commercial and legal requirements of international markets. Our success in those markets will depend, in part, on GE Fuel Systems' ability to secure relationships with foreign resellers and our ability to manufacture products that meet foreign regulatory and commercial requirements. In addition, our planned international operations are subject to other inherent risks, including 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 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. See "Business--Proprietary Rights".
Our government contracts could restrict our ability to effectively commercialize our technology
Under some of our contracts, government agencies can require us to obtain or produce components for our systems from sources located in the United States rather than foreign countries. Our contracts with government agencies are also subject to the risk of termination at the convenience of the contracting agency, potential disclosure of our confidential information to third parties, and the exercise of "march-in" rights by the government. March-in rights refer to the right of the United States government or government agency to exercise its non-exclusive, royalty-free, irrevocable worldwide license to any technology developed under contracts funded by the government if the contractor fails to continue to develop the technology. The implementation of restrictions on our sourcing of components or the exercise of march-in rights could harm our business, prospects, results of operations, or financial condition.
Our existing stockholders will control all matters requiring a stockholder vote
Upon the completion of this offering, Edison Development, Mechanical Technology, and GE On-Site Power will retain approximately 77.4% of our outstanding stock. If all of these stockholders were to vote together as a group, they would have the ability to exert significant influence over our Board of Directors and its policies. For instance, these stockholders would be able to control the outcome of all stockholder votes, including votes concerning director elections, charter and by-law amendments and possible mergers, corporate control contests and other significant corporate transactions. See "Principal Stockholders" and "Description of Capital Stock".
Our future plans could be harmed if we are unable to attract or retain key personnel
We have attracted a highly skilled management team and specialized workforce, including scientists, engineers, researchers, and manufacturing and marketing professionals. Based on our planned expansion, we will require a significant increase in the number of our employees and outside contractors. Our future success, therefore, will depend, in part, on attracting and retaining additional qualified management and technical personnel. We do not know whether we will be successful in hiring or retaining qualified personnel. Our inability to hire qualified personnel on a timely basis, or the departure of key employees, could harm our expansion and commercialization plans.
There has been no prior public market for our common stock
Before this offering, there has been no public market for our common stock. Although we expect our common stock to be quoted on the Nasdaq National Market, an active trading market for our shares may not develop or be sustained following this offering. Purchasers in this offering may not be able to resell their shares at prices equal to or greater than the initial public offering price. The initial public offering price will be determined through negotiations between us and the underwriters and may not be indicative of the market price for these shares following this offering. See "Underwriting".
We may be subject to litigation if our stock price is volatile
The stock market has, from time to time, experienced extreme price and volume fluctuations. Many factors may cause the market price for our common stock to decline, perhaps substantially, following this offering, including:
. failure to meet our product development and commercialization milestones;
. demand for our common stock;
. revenues and operating results failing to meet the expectations of securities analysts or investors in any quarter;
. downward revisions in securities analysts' estimates or changes in general market conditions;
. technological innovations by competitors or in competing technologies;
. investor perception of our industry or our prospects; or
. general technology or economic trends.
In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. We may be involved in a securities class action litigation in the future. Such litigation often results in substantial costs and a diversion of management's attention and resources and could harm our business, prospects, results of operations, or financial condition.
Provisions of Delaware law and of our charter and by-laws may make a takeover more difficult
Provisions in our certificate of incorporation and by-laws and in the Delaware corporate law may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt which is opposed by our management and Board of Directors. Public stockholders who might desire to participate in such a transaction may not have an opportunity to do so. We also have a staggered Board of Directors which makes it difficult for stockholders to change the composition of the Board of Directors in any one year. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change in control or change our management and Board of Directors. See "Description of Capital Stock".
You will suffer immediate and substantial dilution
The initial public offering price per share will be substantially higher than the net tangible book value per share immediately after the offering. If you purchase common stock in this offering, you will incur dilution of $9.19 per share from the price per share you paid based on pro forma as adjusted net book value at June 30, 1999. We also have a large number of outstanding stock options to purchase our common stock with exercise prices significantly below the initial public offering price of the common stock. To the extent these options are exercised, there will be further dilution. See "Dilution" and "Principal Stockholders".
Future sales of our common stock could adversely affect our stock price
Substantial sales of our common stock in the public market following this offering, or the perception by the market that such sales could occur, could lower our stock price or make it difficult for us to raise additional equity capital in the future. After this offering, we will have 42,208,480 shares of common stock outstanding. Of these shares, the 6,000,000 shares sold in this offering will be freely tradeable. All the remaining 36,208,480 shares are subject to 180-day lock-up agreements. Up to 25,049,850 shares may be available for sale in the public market 180 days after the date of this prospectus.
In addition, after this offering, we also intend to register 5,671,191 shares of common stock for issuance under our stock option and grant plan and 1,000,000 shares of common stock under our employee stock purchase plan. As of September 30, 1999, options to purchase 3,377,189 shares of common stock were issued and outstanding, of which options to purchase 1,220,782 shares have vested. See "Underwriting" and "Shares Eligible for Future Sale".
We cannot predict if future sales of our common stock, or the availability of our common stock for sale, will harm the market price for our common stock or our ability to raise capital by offering equity securities.
We may experience Year 2000 compliance problems
Our product development activities are dependent upon the use of computer systems. As a result, we are vulnerable to the "Year 2000" issue which means that our computer systems could fail or create erroneous data as a result of misinterpreting the year designation "00" on January 1, 2000. We have completed a review and evaluation of the potential impact of this issue on our computer systems and believe that all of our material computer systems will function properly although we can give no assurance in this regard. We have also completed a review and assessment to identify all other time dependent systems and have determined that all systems critical to our business have been verified to be Year 2000 compliant. We have not fully assessed the state of Year 2000 readiness of our suppliers and customers and do not know whether Year 2000 related difficulties of third parties could have a material impact on our business, prospects, results of operations, or financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations".
We will have broad discretion as to the use of the net proceeds from this offering
Our Board of Directors and our management will have broad discretion over the use of the net proceeds of this offering. Investors will be relying on the judgment of our Board of Directors and our management regarding the application of the net proceeds of this offering. See "Use of Proceeds".
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of 6,000,000 shares of our common stock in this offering will be $77.3 million, at an assumed initial public offering price of $14.00 per share, after deducting the estimated underwriting discounts and commissions and our estimated offering expenses. We will also receive proceeds of $84.9 million from the issuance of 9,216,666 shares of common stock upon the exercise of outstanding warrants and other purchase rights immediately before this offering. We estimate that our total net proceeds of $162.2 million will be used as follows:
. approximately $20.0 million will be used for manufacturing equipment, facilities and other capital expenditures in support of commercialization activities during 1999 and 2000; and
. approximately $142.2 million will be used for general corporate purposes, including working capital, funds for operations, research and product development, market development and capital expenditures after the year 2000 and potential acquisitions.
Pending their use, we will invest these proceeds in government securities and other short-term, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the expansion of our business and do not expect to pay any dividends in the foreseeable future.
Payment of future cash dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
. on an actual basis;
. on a pro forma basis giving effect to the issuance of 533,334 shares of common stock for $4.0 million pursuant to a September 1999 capital call, the issuance of 9,216,666 shares of common stock to be issued for $84.9 million upon the exercise of outstanding warrants and other purchase rights immediately before this offering and the acquisition of real estate from Mechanical Technology in July 1999 for $10.9 million (which includes our assumption of $6.2 million of debt), all as described in "Management's Discussion and Analysis of Financial Condition and Results of Operations".
. on a pro forma, as adjusted basis to reflect the pro forma adjustments described above and the sale of 6,000,000 shares of common stock in this offering at an assumed initial public offering price of $14.00 per share, after deducting the estimated underwriting discounts and commissions and our estimated offering expenses.
June 30, 1999
--------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
-------- --------- -----------
(In thousands)
Capital lease obligations...................... $ 246 $ 246 $ 246
Note payable................................... -- 6,160 6,160
-------- -------- --------
Total debt.................................... 246 6,406 6,406
-------- -------- --------
Stockholders' equity:
Class A membership interest, no par value,
40,000,000 shares authorized, 26,458,480
shares issued and outstanding............... --
Class B membership interest, no par value,
3,000,000 shares authorized, none issued.... --
Membership interest subscribed............... (4,698)
Preferred stock, $0.01 par value per share;
5,000,000 shares authorized, none issued and
outstanding, actual, pro forma, and pro
forma as adjusted........................... -- --
Common stock, $0.01 par value per share;
95,000,000 shares authorized; none issued
and outstanding, actual; 36,208,480 shares
issued and outstanding, pro forma; and
42,208,480 shares issued and outstanding,
pro forma, as adjusted...................... 362 422
Paid-in capital................................ 67,608 156,121 233,361
Deficit accumulated during the development
stage......................................... (30,604) (30,604) (30,604)
-------- -------- --------
Total stockholders' equity .................... 32,306 125,879 203,179
-------- -------- --------
Total capitalization......................... $ 32,552 $132,285 $209,585
======== ======== ========
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DILUTION
As of June 30, 1999, we had a pro forma net tangible book value of $125.9 million, or $3.48 per share of common stock. Pro forma net tangible book value per share is equal to our total tangible assets less total liabilities, divided by the pro forma number of shares of our outstanding common stock. After giving effect to the sale of the 6,000,000 shares of common stock offered hereby at an assumed initial public offering price of $14.00 per share, and after deducting the estimated underwriting discounts and commissions and our estimated offering expenses, our pro forma net tangible book value as adjusted, as of June 30, 1999, would have been $203.2 million, or $4.81 per pro forma share of common stock. This represents an immediate increase in pro forma net tangible book value as adjusted of $1.33 per share to our existing stockholders and an immediate dilution of $9.19 per share to new investors in this offering. If the initial public offering price is higher or lower than $14.00 per share, the dilution to new investors will be higher or lower, respectively. The following table illustrates this per share dilution:
Assumed initial public offering price per share.................... $14.00
Pro forma net tangible book value per share before this
offering........................................................ $3.48
Increase per share attributable to this offering................. 1.33
-----
Pro forma net tangible book value per share after this offering.... 4.81
------
Dilution per share to new investors................................ $ 9.19
======
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The following table summarizes, on a pro forma basis as of June 30, 1999, the difference between existing stockholders and new investors with respect to the number of shares of common stock purchased, the total consideration paid and the average price per share paid. The table assumes that the initial public offering price will be $14.00. If the underwriters' over-allotment option is exercised in full, the percentage of the total number of shares of common stock held by existing stockholders will decrease from 85.8% to 84.0% of the total number of shares of common stock outstanding after the offering, and the percentage of the total number of shares of common stock held by new investors will increase from 14.2% to 16.0% of the total number of shares of common stock outstanding after the offering.
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
Existing stockholders..... 36,208,480 85.8% $156,482,964 65.1% $ 4.32
New investors............. 6,000,000 14.2 84,000,000 34.9% 14.00
---------- ----- ------------ -----
Total................... 42,208,480 100.0% $240,482,964 100.0%
========== ===== ============ =====
|
The table excludes:
. up to 900,000 shares that may be issued by us pursuant to the underwriters' overallotment option;
. 3,377,189 shares of common stock issuable upon exercise of stock options outstanding at September 30, 1999 at a weighted average exercise price of $4.98 per share;
. 2,561,002 shares of common stock available for future grant under our 1999 stock option plan as of September 30, 1999 (plus an additional 984,000 shares of common stock to become available for future grant under our 1999 stock option plan as a result of this offering); and
. 1,000,000 shares of common stock reserved for purchase after this offering under our employee stock purchase plan.
To the extent these shares are issued, there will be further dilution to new investors. See "Management" and the notes to our financial statements included elsewhere in this prospectus.
SELECTED HISTORICAL FINANCIAL DATA
The following tables present selected historical financial data for the period from June 27, 1997 (date of inception) through December 31, 1997, the year ended December 31, 1998 and the six month periods ended June 30, 1998 and 1999. The balance sheet data as of December 31, 1997 and 1998 and the statement of operations data for the period from inception through December 31, 1997 and for the year ended December 31, 1998 have been derived from financial statements (including those set forth elsewhere in this prospectus) that have been audited by PricewaterhouseCoopers LLP, independent accountants. The statement of operations data for the six month periods ended June 30, 1998 and 1999 and the balance sheet data as of June 30, 1999 are derived from our unaudited financial statements and, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our results of operations and financial condition for those periods. The data for the six-month period ended June 30, 1999 are not necessarily indicative of results for the year ending December 31, 1999 or any future period.
Period from
June 27, 1997 to Year ended
December 31, December 31, Six months ended June 30,
---------------- ------------ -----------------------------
1997 1998 1998 1999
---------------- ------------ ------------ -------------
(Unaudited) (Unaudited)
(In thousands, except per share data)
Statement of Operations
Data:
Contract revenue........ $ 1,194 $ 6,541 $ 2,549 $ 3,696
Cost of contract
revenue................ 1,227 8,864 3,439 5,118
------- ------- ------------ -------------
Loss on contracts....... (33) (2,323) (890) (1,422)
In-process research and
development............ 4,042 -- -- --
Research and development
expense................ 1,301 4,632 2,154 7,780
General and
administrative
expense................ 630 2,754 1,328 6,069
------- ------- ------------ -------------
Operating loss......... (6,006) (9,709) (4,372) (15,271)
Other income,
principally interest... 103 93 42 218
------- ------- ------------ -------------
Loss before equity in
losses of affiliate... (5,903) (9,616) (4,330) (15,053)
Equity in losses of
affiliate.............. -- -- -- (32)
------- ------- ------------ -------------
Net loss.............. $(5,903) $(9,616) $(4,330) $(15,085)
======= ======= ============ =============
Basic and diluted net
loss per share......... $ (0.62) $ (0.71) $ (0.40) $ (0.71)
======= ======= ============ =============
Shares used in computing
basic and diluted net
loss per share......... 9,500 13,617 10,865 21,299
======= ======= ============ =============
December 31, June 30,
------------------------- -------------
1997 1998 1999
------------ ------------ -------------
(Unaudited)
(In thousands)
Balance Sheet Data:
Cash and cash equivalents................ $ 3,080 $ 3,993 $ 17,243
Working capital.......................... 2,667 2,692 13,570
Total assets............................. 4,847 8,093 37,233
Long-term obligations.................... -- -- 155
Total stockholders' equity............... 3,597 5,493 32,306
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Plug Power's financial statements, the notes to those financial statements and other financial information appearing elsewhere in this prospectus. In addition to historical information, the following discussion and other parts of this prospectus contain forward-looking statements that reflect our plans, estimates, intentions, expectations and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those set forth in the "Risk Factors" section and contained elsewhere in this prospectus.
Plug Power was formed in June 1997 as a Delaware limited liability company. Immediately before this offering, we will merge into a newly-formed Delaware corporation and all of our outstanding equity interests will be converted on a one-for-one basis into shares of common stock. Unless otherwise indicated, all information that we present in this prospectus for any date or period gives effect to the merger as if it had occurred on such date or as of the beginning of such period and all references to capital stock in this prospectus for periods prior to the merger mean our issued and outstanding membership interests.
Overview
Plug Power is a leading designer and developer of on-site, electricity generation systems utilizing proton exchange membrane (PEM) fuel cells for residential applications. GE Fuel Cell Systems, LLC, a joint venture 75% owned by General Electric's GE Power Systems business and 25% owned by Plug Power, will market, sell, service, and install our product.
Plug Power was formed in June 1997 as a joint venture to further the development of fuel cells for electric power generation in residential and other applications. Through September 30, 1999, our existing stockholders in the aggregate have contributed $45.9 million in cash 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. Five of our eight existing stockholders have committed to invest an additional $84.9 million in cash upon the exercise of outstanding warrants and purchase commitments immediately before the closing of this offering. Since inception, we have devoted substantially all of our resources toward the development of our PEM fuel cell systems.
We are a development stage company and expect to bring our first commercial product to market in 2001. Through June 30, 1999, we derived all of our revenue from government research and development contracts. Substantially all of these government contracts relate to PEM fuel cell research and development with a focus on automotive applications. We believe most of the technology developed under these government contracts is easily transferable to residential fuel cell applications.
Since our inception in June 1997, we have raised capital through the issuance of equity, formed strategic alliances with 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 expect to produce approximately 50 test and evaluation systems which will be installed in laboratory and field locations for field and market testing. Based on the system performance and market data provided by these field trials, we will determine the final design of our first pre-commercial product. During 2000 we expect to manufacture approximately 500 pre-commercial residential fuel cell systems to further our field testing activities and prepare for commercial production, which is planned to begin in 2001. We do not expect significant product sales until after we begin commercial production.
From inception through June 30, 1999 we incurred losses of $30.6 million. We expect to continue to incur losses as we expand our product development and commercialization program and prepare for the commencement of manufacturing operations. We expect that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial as a result of, among other factors, the number of systems we produce and install for internal and external testing, the related service requirements necessary to monitor those systems and potential design changes required as a result of field testing. There can be no assurance that we will manufacture or sell residential fuel cell systems successfully or ever achieve or sustain product revenues or profitability.
Results of Operations
Comparison of the Six Months Ended June 30, 1998 and June 30, 1999
Revenues. Through June 30, 1999, our revenues have been derived exclusively from cost reimbursement government contracts relating to the research and development of PEM fuel cell technology. These contracts provide for the partial recovery of direct and indirect costs from the specified government agency, generally requiring us to absorb from 25% to 50% of contract costs incurred. Contract revenues increased from $2.5 million for the six months ended June 30, 1998 to $3.7 million for the six months ended June 30, 1999. As of June 30, 1999, we have three ongoing government contracts which we expect will produce approximately $7.6 million in contract revenue over the next eight quarters.
We expect to continue to pursue government contracts that relate to the further development and commercialization of PEM fuel cells and have been awarded several additional contracts totaling $16.5 million that commenced in the quarter ending September 30, 1999 and continue through 2003. These are also cost reimbursement contracts in which the specific government agency will reimburse us for 50% of the costs we incur. As a result, we will report a loss on these contracts. We expect to continue to incur losses on future government contracts awarded while developing proprietary information that we expect will enhance our ability to commercialize our PEM fuel cell systems.
We expect to begin manufacturing pre-commercial residential fuel cell systems during 2000. All users of these systems will be expected to participate in field trials and evaluations designed to test system performance, market conditions and customer preferences, including usage patterns, fuel availability, buying criteria, and regulatory matters. We intend to use this data to achieve optimal product design and speed commercialization and mass market acceptance. The information obtained from the field test results will be used to improve the design and performance of the commercial units planned for production and sale in the year 2001. GE Fuel Cell Systems has committed to purchase from us, on a take or pay basis, 485 of the pre-commercial residential fuel cell systems prior to December 31, 2000. The total sales price for these units will be approximately $10.3 million.
Cost of revenues. Cost of contract revenues includes compensation and benefits for the engineering and related support staff, fees paid to outside suppliers for subcontracted components and services, fees paid to consultants for services provided, materials and supplies used and other general overhead costs directly allocable to specific government contracts. Cost of contract revenue was $3.4 million for the six months ended June 30, 1998 as compared to $5.1 million for the six months ended June 30, 1999. This increase relates to the additional staff and related support costs necessary to earn the additional contract revenue as reported. The result was a loss on contracts of $890,000 for the six months ended June 30, 1998 compared to a loss on contracts of $1.4 million for the six months ended June 30, 1999.
We expect the cost to produce our initial systems to be higher than their sales price under the terms of our distribution arrangements with GE Fuel Cell Systems and Edison Development. We expect to continue to experience costs in excess of product sales until we achieve higher production levels, which we do not expect will occur until after 2002.
Research and Development. Research and development expense includes compensation and benefits for the engineering and related staff, expenses for contract engineers, materials to build prototype units, fees paid to outside suppliers for subcontracted components and services, supplies used, facility related costs, such as computer and network services and other general overhead costs. Research and development expenses increased from $2.2 million for the six months ended June 30, 1998 to $7.8 million for the six months ended June 30, 1999. The increase was a result of the growth of Plug Power's research and development activities focused on residential PEM fuel cell systems.
We expect to significantly increase our spending on research and development in the future in order to bring our residential PEM fuel cell systems to the marketplace by 2001. Beyond 2001, we plan to continue development activities related to performance improvements of the residential PEM fuel cell system and to develop other commercial PEM fuel cell applications.
General and Administrative. General and administrative expense includes compensation, benefits and related costs in support of our general corporate functions, including general management, finance and accounting, human resources, business development, information and legal services. General and administrative expenses increased from $1.3 million for the six months ended June 30, 1998 to $6.1 million for the six months ended June 30, 1999. The increase was primarily due to a $2.3 million charge for non-cash stock-based compensation and a $1.9 million write-off of deferred rent, both further explained below. We expect general and administrative expenses to increase in future years as we prepare for expected increased sales volume.
The $2.3 million charge for non-cash stock-based compensation represents the aggregate fair value of stock granted to Mechanical Technology. Our original formation agreements provided for Mechanical Technology to earn non-cash credits relating to services it rendered prior to our formation in connection with securing future government contracts. Upon our formation, Mechanical Technology contributed its fuel cell operations to Plug Power and we received the right to these government contracts if ever awarded in the future. When these contracts were awarded to us, Mechanical Technology earned the non-cash credits, entitling it to receive 2,250,000 shares of common stock with a fair value at the time of grant of $2.3 million. Accordingly, we recognized $2.3 million in non-cash stock-based compensation expense during the first six months of 1999.
In June 1999, we entered into a real estate purchase agreement with Mechanical Technology to acquire our current facility, a portion of which we previously leased from them. As a result, we wrote off deferred rent expense in the amount of $1.9 million. We originally recorded $2.0 million for deferred rent in October 1998, representing the value of a ten-year lease agreement with Mechanical Technology at favorable lease rates. See "Liquidity and Capital Resources--Capital Contributions by Initial Investors".
Other Income. Other income consists principally of interest income earned on our cash and cash equivalents. Other income increased from $41,000 for the six months ended June 30, 1998 to $218,000 for the six months ended June 30, 1999. The increase was due to interest earned on higher balances of cash and cash equivalents available during the six months ended June 30, 1999.
Equity in losses of affiliate. Equity in losses of affiliate of $31,698 is our proportionate share of the losses of GE Fuel Cell Systems for the period ended June 30, 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 is reported in the financial statements, since before the merger, which will occur immediately before the closing of this offering, we had elected to be taxed as a partnership. Therefore, for the periods presented, the federal and state income tax benefits of our losses were recorded by our stockholders. Subsequent to our merger into a C corporation immediately before the closing of this offering, we will account for
income taxes in accordance with Statement of Financial Accounting Standards No.
109 (SFAS 109), "Accounting for Income Taxes", and expect to be subject to an
effective tax rate of 40%. Had we applied the provisions of SFAS 109 since
inception, the deferred tax asset generated, primarily from net operating loss
carryforwards, would have been offset by a full valuation allowance. We believe
any tax benefit resulting from expected operating losses occurring after our
conversion to a C corporation will also have a full valuation allowance.
Comparison of the Period from June 27, 1997 (Date of Inception) to December 31, 1997 and the Year Ended December 31, 1998
Revenues. Our revenues during this period were derived exclusively from cost reimbursement government contracts relating to the development of PEM fuel cell technology. These contracts provide for the partial recovery of direct and indirect costs from the specified government agency, generally requiring us to absorb from 25% to 50% of contract costs incurred. Contract revenues increased from $1.2 million for the period from inception through December 31, 1997 to $6.5 million for the year ended December 31, 1998. This increase was due to twelve months of activity in 1998 compared to six months in the period from inception through December 31, 1997, combined with increased government contract activities.
Cost of revenues. Cost of contract revenue includes compensation and benefits for the engineering and related support staff, fees paid to outside suppliers for subcontracted components and services, fees paid to consultants for services provided, materials and supplies used and other directly allocable general overhead costs allocated to specific government contracts. Cost of contract revenue was $1.2 million for the period from inception through December 31, 1997 as compared to $8.9 million for the year ended December 31, 1998. This increase in costs was due to twelve months of activity in 1998 compared to six months in the period from inception through December 31, 1997, combined with the additional staff and related support costs necessary to earn the additional contract revenue as reported. The result was a loss on contracts of $33,000 for the year ended December 31, 1997 compared to a loss on contracts of $2.3 million for the year ended December 31, 1998.
Research and Development. Research and development expense includes compensation and benefits for the engineering and related staff, expenses for contract engineers, materials to build prototype units, fees paid to outside suppliers for subcontracted components and services, supplies used, facility related costs, such as computer and network services and other general overhead costs. Research and development expenses increased from $1.3 million in the period from inception through December 31, 1997 to $4.6 million for the year ended December 31, 1998, an increase of $3.3 million. This increase was related to Plug Power's research and development activities focused on residential PEM fuel cell systems in the year ended December 31, 1998 over that expensed for the period from inception through December 31, 1997.
At inception, we recorded a $4.0 million in-process research and development expense related to Mechanical Technology's initial equity contribution. 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 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. As of June 30, 1999, we have spent in excess of $13.0 million on this project, and we expect to spend an additional $60.0 million to $70.0 million on research and development related to the commercialization of the residential fuel systems prior to the end of 2001, when we plan to bring our first fuel cell systems to market.
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 from $630,000 for the period from inception through December 31, 1997 to $2.8 million for the year ended December 31, 1998. The increase was due to twelve months of activity in 1998 compared to six months in the period from inception through December 31, 1997, combined with increased personnel cost and general expenses associated with expanding operations.
Other Income. Other income consists principally of interest income earned on our cash and cash equivalents. Other income was $103,000 for the period from inception through December 31, 1997 and $93,000 for the year ended December 31, 1998.
Income Taxes. No benefit for federal and state income taxes is reported in the financial statements, since before the merger, which will occur immediately before the closing of this offering, we had elected to be taxed as a partnership. Therefore, for the periods presented, the federal and state income tax benefits of our losses were recorded by our stockholders. Subsequent to our conversion from a limited liability company to a C corporation, we will account for income taxes in accordance with SFAS 109. Had we applied the provisions of SFAS 109 since inception, the deferred tax asset generated, primarily from net operating loss carryforwards, would have been offset by a full valuation allowance.
Liquidity and Capital Resources
Summary
Our cash requirements depend on numerous factors, including completion of our product development activities, ability to commercialize our residential fuel cell systems, market acceptance of our systems and other factors. We expect to devote substantial capital resources to continue our development programs directed at commercializing our fuel cell systems for worldwide residential use, to hire and train our production staff, develop and expand our manufacturing capacity, begin production activities and expand our research and development activities. We believe that our current cash balances, the proceeds we will receive in connection with the exercise by five of our eight existing stockholders of warrants and other purchase rights immediately before the closing of this offering, and the net proceeds from this offering will provide us with sufficient capital to fund operations through 2001.
We have financed our operations through June 30, 1999 primarily from the sale of equity which has provided us cash of $41.9 million. We anticipate incurring substantial additional losses over at least the next several years.
As of June 30, 1999, we had cash and cash equivalents totaling $17.2 million. As a result of our purchase of real estate from Mechanical Technology, we were required to escrow $6.2 million of the $17.2 million in cash to secure the debt assumed on the purchase. Since inception, net cash used in operating activities has been $16.4 million and cash used in investing activities has been $8.2 million. For the reasons stated above, we expect that our cash requirements will increase in future periods.
Capital Contributions by Initial Investors
Plug Power was formed in June 1997 as a joint venture between Mechanical Technology and Edison Development. At formation, Mechanical Technology contributed assets related to its fuel cell program, including intellectual property, 22 employees, equipment, and the right to receive 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 June 1999 we entered into a real estate purchase agreement with Mechanical Technology to acquire approximately 36 acres of land, two commercial buildings, and a residential building located in Latham, New York. This property is the location of our current facilities and we are presently constructing our new production facility at this site.
As part of the real estate transaction with Mechanical Technology, we assumed a $6.2 million letter of credit issued by KeyBank National Association for the express purpose of servicing $6.2 million of debt related to Industrial Development Revenue Bonds issued by the Town of Colonie Industrial Development Agency. As consideration for the purchase, we issued 704,315 shares of common stock to Mechanical Technology, valued at $6.67 per share. The transaction closed in July 1999 and a receivable for membership interests of $4.7 million was recorded as shares subscribed as of June 30, 1999. In connection with this transaction, we wrote off deferred rent expense in the amount of $1.9 million during the first six months of 1999. This deferred rent expense related to a 10-year facilities lease, at a favorable lease rate, on one of the purchased buildings. In connection with the July 1999 closing, we agreed to lease some of the office and manufacturing space back to Mechanical Technology on a short- term basis.
In June 1999, Edison Development purchased 704,315 shares of common stock for $4.7 million in cash under provisions of our original formation documents that allowed Edison Development and Mechanical Technology to maintain equal ownership percentage in Plug Power. This equity contribution was recorded as of June 30, 1999.
As of June 30, 1999, Mechanical Technology had made aggregate cash contributions of $4.5 million plus non-cash contributions of $9.5 million and we had a receivable for membership interests from Mechanical Technology of $4.7 million, while Edison Development had made aggregate cash contributions of $18.7 million.
Capital Calls
In January 1999, we entered into an agreement with Mechanical Technology and Edison Development. Pursuant to this agreement, we have the right to require Edison Development and Mechanical Technology to contribute $7.5 million each in 1999 and $15.0 million each in 2000 in exchange for which each will receive common stock valued at $7.50 per share. The agreement terminates on the earlier of December 31, 2000 or upon an initial public offering of our shares at a price greater than $7.50 per share. The agreement permits Mechanical Technology and Edison Development to contribute any funds not previously called by us on the termination date in exchange for shares at a price of $7.50 per share. In September 1999, we made a capital call of $4.0 million, and Mechanical Technology and Edison Development each contributed $2.0 million in cash in exchange for 266,667 shares of common stock. Mechanical Technology and Edison Development have committed to contribute the remaining $41.0 million immediately before this offering in exchange for an aggregate of 5,466,666 shares of common stock.
GE Fuel Cell Systems
In February 1999, we entered into an agreement with GE On-Site Power to create GE Fuel Cell Systems, a joint venture owned 75% by GE On-Site Power and 25% by Plug Power, which is dedicated to marketing, selling, installing, and servicing Plug Power residential fuel cell systems on a worldwide basis (other than in the states of Illinois, Indiana, Michigan and Ohio). See "Business-- Distribution and Marketing".
In connection with the formation of GE Fuel Cell Systems, we issued 2,250,000 shares of our common stock to GE On-Site Power 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 On-Site Power to purchase 3,000,000 additional shares of common stock at a price of $12.50 per share. GE On-Site Power has committed to exercise this warrant immediately before this offering for a total exercise price of $37.5 million in cash.
General Electric has agreed to provide capital to GE Fuel Cell Systems, in the form of loans, to fund GE Fuel Cell Systems' commitment to purchase 485 pre-commercial systems during the period ending December 31, 2000. General Electric has also agreed to provide additional capital, in the form of a loan not to exceed $8.0 million, to fund GE Fuel Cell Systems' ongoing operations.
Southern California Gas Company
In April 1999, Southern California Gas Company purchased 1,000,000 shares of common stock for $6.7 million and agreed to spend $840,000 for market research and services related to distributed power generation technologies, including PEM fuel cell systems. In the event Southern California Gas does not expend these amounts by April 2002, up to 111,851 previously issued shares may be returned. Additionally, Southern California Gas received warrants to purchase an additional 350,000 shares of common stock at an exercise price of $8.50 per share. Southern California Gas has committed to exercise these warrants immediately before this offering for a total exercise price of $3.0 million in cash.
Private Investors
In February 1999, two investors, including Michael J. Cudahy, a director of Plug Power, purchased 1,500,000 shares of common stock for a total of $10.0 million. In addition, Mr. Cudahy received a warrant to purchase 400,000 shares of common stock at a price of $8.50 per share. Mr. Cudahy has committed to exercise this warrant immediately before this offering for a total exercise price of $3.4 million in cash. In April 1999 an unrelated investor purchased 299,850 common shares for $2.0 million.
Line of Credit
In October 1999, we entered into a loan agreement for a $6.0 million line of credit from KeyBank, National Association. The line of credit bears interest at the prime rate in effect from time to time, matures upon the earlier of the closing of this offering or November 30, 1999, and is collateralized by an assignment of our right to call capital from Mechanical Technology and Edison Development.
Year 2000 Readiness Disclosure
The statements in the following section include "Year 2000 readiness disclosure" within the meaning of the Year 2000 Information and Readiness Disclosure Act of 1998. The protections of this Act do not apply to claims under the anti-fraud provisions of the federal securities laws.
Introduction
The Year 2000 issue relates to the various problems that may result from the improper processing of dates and date-sensitive calculations by computers and other machinery as the year 2000 is approached and reached. These problems arise from hardware and software unable to distinguish dates in the "2000s" from dates in the "1900s" and from other sources such as the use of special codes and conventions in software that make use of date fields. These problems could result in a system failure or miscalculations causing disruptions of operations, including a temporary inability to process transactions, send invoices or engage in other normal business activities. The Year 2000 issue may pose additional problems due to the fact that Year 2000 is a leap year and some computers and programs may fail to recognize the extra day.
Our State of Readiness
We have completed a review and evaluation of the potential impact that the change in the date to the Year 2000 will have on our computer systems. As a result of this review, we have determined that all of our major computer systems are able to recognize and appropriately process dates commencing in the Year 2000. Our computer systems are based upon commercial personal computer- based software packages. All such software packages have been examined for their compliance and appropriate upgrades are being purchased and installed. Existing personal computer systems that are not Year 2000 compliant are scheduled for replacement prior to October 1999. We have also completed a review and assessment to identify all other computer-related systems and time dependent processes and have determined that all of our business critical systems have been verified to be Year 2000 compliant. New systems acquired during 1999 have also been reviewed to verify that they are Year 2000 compliant.
Cost to Address Year 2000 Issues
Our historical costs to assess our Year 2000 readiness have been negligible. We are not currently able to estimate the final aggregate cost of addressing the Year 2000 issue because funds may be required as a result of future findings. The majority of the costs required to complete our
Year 2000 compliance process will be incurred as part of our normal capital asset acquisition program and would have been incurred without consideration of Year 2000 issues. We do not expect these costs to have an adverse effect on our business and financial results.
Risks Presented by Year 2000 Issues
Computer systems are also used to operate and monitor our fuel cell systems. However, due to the early stage of commercialization of our fuel cell systems, any potential failures of our test and evaluation systems related to the Year 2000 are not expected to have a material impact on our product development or commercialization schedule. During mid-1999, all key suppliers received a copy of our Year 2000 compliance questionnaire. To date approximately 40% have replied that they are or will be compliant prior to Year 2000. We are re- contacting suppliers that have not yet responded. We plan to have responses from all key suppliers by October 1999. We ask all new suppliers to confirm their Year 2000 compliance. We are contacting all suppliers of equipment and services that may be date- and time-sensitive to verify that their products and equipment will meet with Year 2000 standards. We are unable to fully assess the state of Year 2000 readiness of our suppliers and customers. Given our current development state and our pilot scale production volumes, we do not anticipate that Year 2000 related difficulties in third parties will have a material impact on our business activities or prospects.
Our Contingency Plans
We do not have, but we will continue to evaluate the need for, a contingency plan for business risks that might result from Year 2000-related events. As we progress with our Year 2000 readiness plan and identify specific risk areas, we intend to implement appropriate remedial actions and contingency plans.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosure about Segments of an Enterprise and Related Information." SFAS 131 establishes new standards for the way companies report information about operating segments in annual financial statements. The disclosures prescribed by SFAS 131 are effective for the year ended December 31, 1998. We do not believe we operate in more than one segment.
Quantitative and Qualitative Disclosures About Market Risk
We invest our excess cash in interest-bearing, investment-grade securities that we hold for the duration of the term of the respective instrument. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions in any material fashion. Accordingly, we believe that, while the investment-grade securities we hold are subject to changes in the financial standing of the issuer of such securities, we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments.
Forward-looking Statements
This prospectus contains forward-looking statements. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue" or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition or state other "forward-looking" information. We believe that it is important to
communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including product development delays, changing environmental and governmental regulations, the ability to attract and retain employees and business partners, future levels of government funding, competition from other manufacturers of fuel cell systems and from other existing and advanced power technologies, evolving markets for generating electricity and power, the ability to provide the capital required for product development, operations and marketing, and Year 2000 readiness. These factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of the events described in the "Risk Factors" section and elsewhere is this prospectus could harm our business, operating results and financial condition.
BUSINESS
Overview
We are a leading designer and developer of on-site, electricity generation systems utilizing proton exchange membrane (PEM) fuel cells for residential applications. Our goal is to become the first mass market producer of residential fuel cell systems by selling 100,000 of our systems per year by 2003. The continued growth in demand for electric power, coupled with the ongoing deregulation of the electric industry, is creating a market opportunity for a variety of distributed, or on-site, generation technologies. We believe that the electricity our residential fuel cell systems will provide to homes can be less expensive, more reliable, more efficiently produced and environmentally cleaner than the electricity provided by the existing electric utility grid and other power generation technologies. We intend to leverage our strategic alliances with General Electric Company and other leading energy companies, as well as with selected product component suppliers, to achieve leadership in residential fuel cell system design, manufacturing, and sales.
Our Product
Our residential fuel cell system will be an appliance, initially about the size of a refrigerator, that will produce electricity through a clean, efficient process without combustion. Our system will receive fuel from a home's existing natural gas line or propane tank, convert the fuel into a hydrogen-rich stream, and then combine it with oxygen from the air in a chemical reaction that produces electric power. Our initial residential systems will be designed to supply 7 kW of baseload power, 10 kW of peak power, and 15 kW of surge load capacity, which will provide the full electricity needs of a home, although the home can remain connected to the electric grid for back-up purposes. We plan to bring our first residential fuel cell systems to market in 2001, and, by 2003, we expect to offer different model sizes designed to meet the specific power needs of various market segments.
Our Investors
We were formed in June 1997 as a joint venture between Mechanical Technology Incorporated and Edison Development Corporation to further the development of fuel cells for electric power generation in residential and other applications. Mechanical Technology is a manufacturer of advanced test and measurement products for commercial and military customers and an early developer of fuel cell technology. Edison Development is a subsidiary of DTE Energy Company, a diversified energy company involved in the development and management of energy-related businesses and services and the parent company of Detroit Edison, Michigan's largest electric utility.
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. Based in part on Mechanical Technology's contributions, we have been awarded approximately $40.0 million in federal and state government contracts related to PEM fuel cell research and development, substantially all of which are focused on automotive applications. We believe most of the basic technology developed under these government contracts can be leveraged to further our residential fuel cell development and commercialization program.
To date, our current stockholders, including Edison Development and Mechanical Technology, in the aggregate have contributed $45.9 million in cash 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. Five of our eight existing stockholders have committed to invest an additional $84.9 million in cash upon the exercise of outstanding warrants and purchase rights
immediately before the closing of this offering. In addition to Edison Development and Mechanical Technology, our current stockholders include:
. GE On-Site Power, Inc., a subsidiary of General Electric Company that operates within General Electric's GE Power Systems business, one of the world's leading suppliers of power generation technology, energy services, and energy management systems; and
. Southern California Gas Company, a subsidiary of Sempra Energy and the nation's largest regulated natural gas distribution utility in terms of customers served.
Our Alliance with General Electric Company
General Electric has selected Plug Power to be its exclusive supplier of fuel cell systems for residential and commercial applications under 35 kilowatts (kW). In February 1999, we entered into an agreement with GE On-Site Power to create GE Fuel Cell Systems, LLC, a joint venture owned 75% by GE On-Site Power and 25% by Plug Power, which is dedicated to marketing, selling, installing and servicing Plug Power fuel cell systems. Except for distribution rights we granted to Edison Development for the states of Illinois, Indiana, Michigan, and Ohio, GE Fuel Cell Systems is the exclusive global distributor and servicer of our systems. We believe that our strength in fuel cell system design and development, coupled with General Electric's brand name, worldwide sales and distribution network, service capabilities, and commitment to the commercialization of our fuel cell technology, will allow us to bring the first and best residential fuel cell system to market and, by doing so, establish the industry standard for this new product.
Product Development
We plan to achieve mass market distribution of our residential fuel cell systems by 2003, which we define as manufacturing and selling 100,000 units or more in a single year. To date, we have achieved the following major milestones along our product development and commercialization schedule:
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 agreement with GE On-Site Power to distribute
and service our residential fuel cell systems
June 1999 Began construction of a state-of-the-art, 51,000 square foot
manufacturing facility in Latham, New York
June 1999 Hired our 250th employee, up from 22 employees at inception
August 1999 Powered a three-bedroom home with a residential fuel cell
system connected to its existing natural gas pipeline
September 1999 Filed our 50th patent application relating to fuel cell
technology, system designs and manufacturing processes
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Changes in the Power Industry
Industrialized societies are dependent upon reliable, on-demand electric power. Worldwide, electricity consumption has grown rapidly in response to economic development. Uses for electricity have grown as all segments of society have taken advantage of its general availability, reliability and convenience, particularly as movement towards service-based economies increases the reliance on computers and other electronics. According to the United States Department of Energy, electricity consumption in the United States has grown tenfold during the second half of the century, from approximately 300 million kilowatt-hours in 1949 to more than three billion kilowatt-hours in 1997.
Demand for electricity is expected to continue to grow as the economies of the United States and other industrialized nations expand. At the same time, developing nations will need additional electricity and, in some cases, basic energy infrastructure to improve their standards of living. The Department of Energy reports that developing nations account for approximately 85% of the world population, but only 46% of the world's fossil fuel electricity consumption. Nearly two billion people in the world, approximately 35% of the global population, still do not have electricity.
Historically, demand growth has been met by expansion of the existing infrastructure, including additional investments in centralized generating plants, high-voltage transmission lines and distribution wires. Reliance upon this infrastructure has been and continues to be problematic for a number of reasons. First, according to the Department of Energy, capacity reserve margins have decreased from 33% in 1982 to 15% in 1997, indicating the increased potential for power outages during peak periods. Second, some areas of the country are experiencing capacity constraints and weather-related outages due to the nature of the existing transmission and distribution system. Finally, there is difficulty in finding suitable locations for additional generating plants and transmission towers, because of environmental concerns regarding emissions from generating plants and local zoning laws.
Utility deregulation is creating new challenges and opportunities in the electric power industry in the United States and internationally. Due in part to regulatory changes designed to encourage competition, vertically integrated utilities are being separated into their generation, transmission and distribution components. New entrants have become significant participants in the generation of electricity as the industry moves toward open competition. In the United States, regulatory organizations at the federal, state and local level are revising how electric service is provided. Customers in many states have or will soon have the chance to choose their electricity provider. Internationally, in countries such as the United Kingdom where deregulation of the electric industry has already occurred, industrial and commercial customers have been the primary beneficiaries of increased competition, while residential consumers have generally not benefited.
The evolving competitive industry environment, coupled with consumer demand for more reliable, more accessible and more competitively priced sources of electric power, is driving traditional energy providers to develop new strategies and seek new technologies for electricity generation, transmission and distribution.
Plug Power's Solution
We believe our residential fuel cell systems will enable electric utilities and other energy suppliers to meet increasing residential electricity demand in a cost-effective, reliable, efficient and environmentally friendly manner while avoiding the costs and problems associated with installing and maintaining traditional generation, transmission, and distribution infrastructure. We believe residential consumers who acquire or utilize our systems will benefit from potential cost savings, as well as from high reliability and efficiency.
Benefits to Energy Providers
We believe our systems will offer the following benefits to natural gas and propane distributors, rural electric cooperatives, electric utilities, and other energy providers:
. Lower Capital Costs and Decreased Investment Risk. Our residential fuel cell systems will be installed on-site and will supply power directly to a home's electric system. Consequently, electric utilities can employ our fuel cell systems to decrease capital expenditures by deferring or eliminating the expansion, repair or replacement of generation, transmission and distribution assets.
. Better Utilization of Existing Fuel Distribution Infrastructure. Use of our natural gas- and propane-fueled systems will increase consumption of these fuels over the course of the year, enabling distributors of these fuels to better utilize their existing assets and mitigate the seasonality of their businesses.
. Environmental Benefits. Energy providers are facing increasing governmental pressures to provide environmentally clean power generation systems. Fuel cell systems generate electricity through a chemical process that produces water, useable heat, some carbon dioxide and negligible levels of other pollutants as by-products. By contrast, conventional power plants burn fossil fuels to create electricity, emitting sulfur and nitrogen oxides, relatively higher levels of carbon dioxide, particulate matter, unburned hydrocarbons and heat pollution.
Benefits to Residential Consumers
We believe our systems will offer the following benefits to residential consumers:
. Potential Savings. Due to our system's high energy efficiency and on- site location, we expect that, following the beginning of mass market production of our residential fuel cell systems, the cost of electricity to consumers (including the consumer's cost to purchase the system and pay for routine maintenance and periodic replacement parts over the system's estimated 15- to 20-year life) who purchase our system directly, or who utilize a system purchased by an energy provider, will be equal to or less than residential grid rates in many regions.
. Better Reliability. Our residential fuel cell system will generate electricity at the home. As a result, it will not be as susceptible to weather-related or capacity-driven outages, which are inherent problems for traditional central generation and/or transmission and distribution systems.
. Higher Efficiency. Fuel cells convert fuel directly into electricity through an on-site chemical reaction. By contrast, a typical central generation combustion process requires a series of steps, each of which results in energy losses. As a result, fuel cells can deliver electricity to a home more efficiently than the grid.
. Co-Generation Potential. Our systems will produce heat as a by-product. In the future, we plan to modify our basic system to use that excess heat to supplement traditional residential hot water and space heating systems, thereby significantly increasing total system efficiency and providing expected cost savings for consumers.
Our Strategy
Our business strategy focuses on combining existing fuel cell technology with improvements in system integration, component design, and manufacturing processes to achieve the low-cost manufacturing capability necessary to bring our product to the mass market. The key components of this strategy are:
. Focus on residential applications. We have selected the residential market as our primary focus because we believe it will be the first mass market in which fuel cell products
will be economically viable. We also chose the residential market because of its large size, industry trends favoring distributed generation, and the range of benefits our fuel cell systems can provide to energy providers and consumers. We intend to continue to leverage our experience gained under government contracts and grants for research and development on automotive applications to further the development of our residential systems. We believe we can achieve manufacturing cost reductions that will make our systems commercially viable by the end of 2001.
. Develop low-cost manufacturing capability and processes. We have focused our efforts on utilizing technology and designs that are conducive to low-cost mass manufacturing. Our strategy is to create a network of selected suppliers who, with our help, can design and develop subsystems and components that meet our cost, performance and quality specifications. Based on our commercialization schedule, we believe that we can purchase our components in larger volumes from these suppliers beginning in 2000, which should further lower costs. Internally, we will focus on overall system design, component and subsystem integration, final assembly and quality control. We have nearly completed construction of a 51,000 square foot manufacturing facility that will enable us to develop our manufacturing capabilities and implement more efficient manufacturing processes as we move toward the commercialization stage.
. Utilize General Electric's product development expertise and purchasing capabilities. Under our product development agreement with General Electric, we will consult with appliance manufacturing and plant design experts from General Electric to complete the design of our first commercial system. To enhance our ability to meet General Electric's quality control standards, we will also purchase technical support services from General Electric in the areas of engineering, testing, manufacturing and quality control services. We believe this collaboration will provide us with the engineering, testing and analytical resources to develop a superior product more rapidly. We will also be able to utilize General Electric's purchasing power to lower our component costs.
. Leverage our strategic alliance with General Electric to achieve market leadership. We believe our strategic alliance with General Electric gives us a substantial competitive advantage by providing an immediate worldwide marketing, distribution and servicing capability. GE Fuel Cell Systems is developing a global network of qualified resellers who will distribute our systems to consumers, co-branded with both the General Electric and Plug Power brand names. We believe that this co-branding strategy will give us immediate recognition in the market and speed consumer acceptance of our systems. Once in the market, GE Fuel Cell Systems' coordination of the installation, servicing and maintenance of our systems will also be an important factor in developing consumer confidence in a new, high-technology product. As a result, we expect to achieve our goals of being the first company to bring a residential fuel cell system to market and to become the market leader.
. Acquire or license complementary technologies. Our goal is to manufacture the best residential fuel cell system as quickly as possible, whether we develop components and subsystems internally or obtain them from third party suppliers. Accordingly, we regularly review strategic opportunities to acquire or license technologies that can advance the development of low-cost system components and subsystems.
. Capitalize on our experience in the residential market to develop other fuel cell applications, including automotive applications. We believe that the fuel cell technology, system designs and manufacturing processes that we develop and acquire during the course of commercializing our initial residential systems can be leveraged to develop and commercialize other fuel cell applications, including automotive applications, combined heat and power applications, and emergency back-up systems. Our existing automotive program, which is funded primarily by government contracts and grants, consists
of a team of 32 engineers and technicians focused on developing the smaller, more powerful, lower cost and lighter weight fuel cell systems that exhibit the rapid start-up and quick response necessary for automotive applications. Just as we have used our automotive research to enhance the development of the basic technologies of our residential systems, we believe that mass production of residential systems will give us the manufacturing experience and economies of scale needed to address these technological challenges and produce commercial automotive systems. We do not anticipate commercial production of automotive systems until at least 2006 and expect that contract revenues related to development of our initial automotive systems will be less than 10% of our total revenues in 2001 and less than 5% of our total annual revenues in 2002 through 2006.
Product Development and Commercialization Process
We are implementing our product development plan in four phases. Our cash requirements during this time period will depend on numerous factors, including the progress of our product commercialization activities, and the pace at which we hire and train our production staff, develop and expand our manufacturing capacity and expand our research and development activities. We believe that our current cash balances, the proceeds from the exercise of warrants and other purchase rights immediately before the closing of this offering, and the net proceeds from this offering will provide us with sufficient capital to fund operations through 2001.
. Phase 1--Research, Development and Engineering. Our 56,000 square foot research and development facility, one of the largest fuel cell development laboratories in the world, contains over 70 test stations where we conduct design optimization and verification testing, rapid- aging testing, failure mode and effects analysis, multiple technology evaluations, and endurance testing in our effort to accelerate the development and commercialization of our fuel cell systems. Since our inception, we have shown considerable progress in our product development, including demonstrating laboratory systems running on methanol and natural gas and powering a three-bedroom home with a residential fuel cell system fueled from the home's existing natural gas line. Through the end of 1999, we will focus on developing and testing residential fuel cell systems, both in the laboratory and at selected test sites, to obtain data that can help us advance the design and construction of low-cost systems. We will also be selecting suppliers to provide components and subsystems for our pre-commercial and commercial systems on a long-term basis. During 1999, we expect to produce approximately 50 natural gas-fueled test and evaluation systems built to varying specifications in order to test different system design elements. These systems will be evaluated in our laboratories and at selected test sites. Based on the data we obtain from these field trials, we will determine the final design of our pre-commercial product.
. Phase 2--Pre-Commercial Testing. In early 2000, we expect to begin small-scale production of our pre-commercial systems. GE Fuel Cell Systems has committed to purchase 485 of these systems and is expected to place them with its local market distribution partners. All of these partners will be expected to participate in field trials and evaluations designed to test system design and performance, as well as customer preferences. We intend to use this data to optimize product design and speed commercialization and mass market acceptance. During this period we also expect to complete development of a propane-fueled system.
. Phase 3--Manufacturing and Commercialization. In 2001, we intend to begin producing our first commercial fuel cell systems for residential use. These systems will include any necessary modifications identified during pre-commercial testing. During this period, we also intend to expand our manufacturing capabilities, beginning large scale commercial production while continuing to refine our low-cost manufacturing processes. By 2003, we believe we will be manufacturing over 100,000 systems per year.
. Phase 4--Next Generation Models. In 2003, when we expect to have achieved mass market production of our basic systems, we intend to produce new models offering enhanced features, including models with co- generation capabilities. In July 1999, we entered into a Collaboration Agreement with Joh. Vaillant GmbH u. Co. to develop a residential combined heat and power system for commercial introduction in Europe. Vaillant is a leading European heating technology company and offers its customers a complete range of products for central heating and hot water. The Collaboration Agreement is contingent upon the successful negotiation and execution of supply and distribution arrangements, as well as product development arrangements, among Plug Power, Vaillant, and GE Fuel Cell Systems.
Manufacturing
Our goal is to mass manufacture reliable and safe residential fuel cell systems at the lowest cost. We have made, and expect to continue to make, technological improvements that reduce the cost to produce our systems. We are focusing our efforts on overall system design, component and subsystem integration, assembly, and quality control processes. We have also begun to establish a manufacturing infrastructure by hiring assembly and related support staff, installing a new management information system, and developing our manufacturing processes, including defining work centers and related responsibilities. In November 1999, we expect to complete construction of our new 51,000 square foot manufacturing facility, adjacent to our development laboratories, that will allow us to begin large-scale manufacturing of our pre- commercial and initial commercial systems.
We plan to utilize third-party suppliers who, with our assistance, can design, develop and/or manufacture subsystems and components that achieve our cost and reliability targets. We plan to perform significant quality testing before we integrate any third-party subsystems and components into our final assembled fuel cell system. We will also take advantage of General Electric's volume purchasing capabilities to procure low-cost parts and components. As we move toward the commercialization stage we will begin to shift our focus from research and development to high volume production.
Based on our commercialization plan, we anticipate that our existing facilities and our new manufacturing plant will provide sufficient capacity through 2001, and that we will need to develop or build additional capacity in order to achieve mass market production by 2003.
Distribution and Marketing
Plug Power will serve as GE Fuel Cell Systems' exclusive worldwide supplier of fuel cell systems designed for residential and commercial applications under 35kW. We believe that most residential applications and many small commercial applications require less than 35kW. GE Fuel Cell Systems will have the exclusive worldwide rights to market, distribute, install and service our systems (other than in the states of Illinois, Indiana, Michigan and Ohio, in which Edison Development will be our exclusive distributor). Under this arrangement, we will sell our systems directly to GE Fuel Cell Systems, which, in turn, will utilize General Electric's worldwide sales and distribution network to identify qualified resellers who can distribute and service these systems. Plug Power systems sold through GE Fuel Cell Systems will be co- branded with both the General Electric and Plug Power names and trademarks, and may also carry the brand of the local reseller.
The following chart summarizes how we expect GE Fuel Cell Systems to distribute our residential fuel cell systems to consumers:
[A chart appears with a graphic depiction of the Plug Power and GE Fuel Cell Systems distribution with Plug Power at the top of the chart; GE Fuel Cell Systems, LLC (Distributor) on the next level; Natural Gas Distributors, Propane Distributors, Rural Electric Cooperatives, Electric Utilities and New Market Entrants listed as Resellers on the next level; and on the final level a box captioned "Markets" under which are listed (i) Early Target Markets (2001-2002) of Homes serviced by rural electric cooperatives, Homes in urban and suburban load packets, High-consumption households, Owners and builders of remote homes and Dissatisfied utility customers, and (ii) Mass Markets (2003 and beyond) of homes utilizing natural gas, new homes and homes in countries with inadequate or no existing electric power infrastructure. Each of these boxes is connected by downward arrows to the next level.]
Targeted Resellers
We expect that GE Fuel Cell Systems' resellers will have, on a regional and local basis, pre-existing customer bases, billing and service capabilities, brand recognition, market credibility, and regulatory expertise. Through the use of these qualified resellers, we believe that GE Fuel Cell Systems will be able to quickly penetrate multiple markets, avoid costly investment in sales and support resources, leverage its sales organization, and accelerate the technology acceptance process.
Potential resellers include the following:
. Natural Gas Distributors. By marketing our natural gas-fueled residential fuel cell systems within their distribution territories, we believe natural gas distributors can increase overall gas consumption and pipeline utilization, enabling them to develop stronger customer relationships, mitigate the seasonality of their business and enhance their overall revenue stream.
. Propane Distributors. Propane distributors also should be able to leverage their existing infrastructure to increase revenue and mitigate seasonality. Since propane is generally delivered by truck to a widespread customer base, the potential for increasing the number of customers serviced and/or the amount of propane distributed per delivery route should decrease distributors' marginal service costs.
. Rural Electric Cooperatives. Generally, rural electric cooperatives serve a geographically dispersed customer base. We expect that our on- site, residential fuel cell systems will enable these cooperatives to meet their service obligations to customers without incurring the substantial cost of extending, maintaining or replacing electricity distribution lines.
. Electric Utilities. Electric utilities can selectively install on-site fuel cell systems to meet increased electricity demand in remote areas or in urban and suburban areas referred to as "load pockets," which suffer from frequent capacity-driven outages. By doing so, they can reduce the costs associated with installing and operating new infrastructure or modifying or repairing existing infrastructure.
. New Market Entrants. The ongoing deregulation of the electric utility industry and the accompanying introduction of consumer choice are spawning new market entrants into the retail electric market, including gas and power marketers, unregulated affiliates of utilities, appliance distributors, and energy service companies. As these new market entrants seek to achieve a market presence, we expect that the relatively low capital cost and ease of installation of our fuel cell systems will make this distributed form of electricity supply particularly attractive.
Potential resellers will be required to purchase fuel cell systems only from GE Fuel Cell Systems and to commit to minimum purchase requirements. To date, GE Fuel Cell Systems has entered into memoranda of understanding with potential resellers, including NJR Energy Holdings Corporation, an affiliate of New Jersey Natural Gas Company, and Flint Energies, a Georgia-based rural electric cooperative. We expect GE Fuel Cell Systems to enter into similar arrangements with selected resellers around the world.
GE Fuel Cell Systems will focus on creating brand and product awareness at the consumer level through media advertising, trade shows and other mass marketing channels. Resellers are expected to augment this effort through local advertising, mass mailings, catalog sales, educational seminars, promotional pricing for systems or fuel, and bundled service offerings. Resellers may also work with building contractors, financial institutions and other intermediaries to create cost-effective programs to reach consumers.
Targeted Early Markets
Together with GE Fuel Cell Systems, we have conducted a preliminary evaluation of target markets and potential customers, taking into account such factors as average household electricity usage, ability to pay, power availability and quality, availability of fuel, the prices of electricity and natural gas, penetration of competing distributed generation technologies, new capacity requirements and the cost of new capacity additions. Based on this evaluation, we intend to target the following market segments during 2001 and 2002 for our first commercial fuel cell systems, which we estimate will be priced to the consumer between $7,000 and $10,000, subject to market demand:
. Homes served by rural electric cooperatives. A rural electric cooperative may choose to install fuel cell systems in homes rather than incurring the cost to extend, maintain or replace existing power distribution lines.
. Homes in urban and suburban load pockets. Electric utilities serving urban and suburban load pockets may install our systems in selected homes to lessen the frequency of capacity-driven outages.
. High-consumption households. Many high-consumption households place importance on power quality, particularly with their increased use of home computers and other electronics. Our systems, which are designed to independently power the home while maintaining a grid connection as backup, should provide a compelling solution to power quality and reliability concerns.
. Owners and builders of remote homes. Building contractors and homeowners often have the flexibility to choose how power will be provided to the home. For many of these homes in remote areas, fuel cell systems can be a cost effective and reliable alternative to new distribution infrastructure, backup generators, or other alternative power sources.
. Dissatisfied utility customers. Some homeowners are dissatisfied with the reliability and expense of the electricity and service provided by the local utility company. We believe these homeowners will be willing to try an easy-to-install alternative that could provide added reliability without requiring them to disconnect from the grid altogether.
Mass Markets
After introducing our first commercial systems in 2001 to our targeted early markets, we believe that we will gain the experience and capabilities necessary to lower the estimated price of our systems to consumers to approximately $3,000 to $5,000, subject to market demand, expand our manufacturing capacity and, through GE Fuel Cell Systems, extend our sales efforts to the mass market beginning in 2003. Our targeted mass market segments will include:
. Homes utilizing natural gas. According to the National Gas Supply Association, more than half of all homes in the United States and over 60% of newly constructed homes in the United States use natural gas for heating and appliances. In areas with existing natural gas lines, the cost of electricity from our natural gas-fueled residential fuel cell systems may compare favorably to the cost of electricity from the grid.
. New homes. According to the United States Department of Housing and Urban Development, 1.2 million single family houses were constructed in the United States in 1998. Our residential fuel cell systems will offer contractors and homeowners the opportunity to build developments or individual homes powered by fuel cells rather than by the electric grid.
. Homes in countries with inadequate or no existing electric power infrastructure. According to the World Bank, there are nearly two billion people worldwide without electricity. In addition, many countries have existing centralized electric power infrastructures that are unreliable and outdated. Many of these developing countries do not have the means to build or upgrade large, central power generation plants and accompanying transmission and distribution networks to serve a broad customer base. These countries may selectively purchase and deploy fuel cell systems to supply electricity where it is most needed as an alternative to major capital investment.
Installation, Servicing and Maintenance
GE Fuel Cell Systems has committed to provide complete product support for Plug Power systems through its own service structure, reseller service network, and contracts with third party service providers. We believe potential third party service providers will include companies with
existing national service infrastructures, as well as regional companies with strong reputations and service capabilities. Selected providers will be required to meet General Electric's quality standards and customer needs of timeliness, quality and cost-effectiveness.
GE Fuel Cell Systems' service program is expected to be closely coordinated with the introduction of Plug Power's fuel cell systems, so that a sufficient level of installation, maintenance, and customer support service will be available in all areas where our systems are sold. We also expect that GE Fuel Cell Systems will provide the warranty service for our products according to terms to be mutually agreed upon by Plug Power and GE Fuel Cell Systems. We will review GE Fuel Cell Systems' service plan and suggest modifications based on the pace of product development and field test results. We expect that GE Fuel Cell Systems' service plan will be completed and the requisite service contracts in place prior to the release of our commercial units in 2001.
Fuel Cell Technology and Fuel Cell Systems
A fuel cell is a device that combines hydrogen, derived from a fuel such as natural gas, propane, methanol or gasoline, and oxygen from the air to produce electric power without combustion. Plug Power fuel cells consist principally of two electrodes, the anode and the cathode, separated by a polymer electrolyte membrane. Each of the electrodes is coated on one side with a platinum-based catalyst. Hydrogen fuel is fed into the anode and air enters through the cathode. Induced by the platinum catalyst, the hydrogen molecule splits into two protons and two electrons. The electrons from the hydrogen molecule are conducted around the membrane creating an electric current. Protons from the hydrogen molecule are transported through the polymer electrolyte membrane and combine at the cathode with the electrons and oxygen from the air to form water and produce heat.
The following diagram illustrates how fuel cells work:
[A Diagram appears with a graphic depiction demonstrating the process by which hydrocarbon fuels are passed through a PEM membrane in order to produce electricity, water and heat and the following words appear in the diagram:
HOW FUEL CELLS WORK; Fuel cells extract hydrogen ions from hydrocarbon fuels and combine them with oxygen to generate power...; Hydrogen molecules; Electrons; Protons; Electricity; PEM Membrane; Electricity is generated via an electrochemical process versus traditional combustion...; Oxygen (from air); Water; Heat; The output from the process includes electricity, water and heat.]
To obtain the desired level of electric power, individual fuel cells are combined into a fuel cell stack. Increasing the number of fuel cells in a stack increases the voltage, while increasing the surface area of each fuel cell increases the current. Our initial residential systems will provide 7kW of baseload power, 10kW of peak power and 15kW of surge load capacity.
We plan to design our fuel cell systems to last approximately 15 to 20 years, with major component maintenance and replacements scheduled to occur every four to seven years. Items such as air filters will require annual replacement. The chart below sets forth a brief description of our systems' components and subsystems:
Component or Subsystem Description
---------------------- -----------
Fuel reformer (processor) Converts or reforms the specified
hydrocarbon fuel, such as natural gas,
propane, methanol or gasoline, into a
hydrogen-rich stream for use in the fuel
cell stack. Design may differ based upon the
type of fuel used.
Fuel cell stack Produces electricity in a chemical reaction
by combining hydrogen with oxygen.
Power conditioner (inverter) Converts the direct current, or DC,
electricity created by the fuel cell stack
into alternating current, or AC, electricity
for use in the home. Also designed to handle
voltage spikes, as well as distortions
caused by the concurrent use of multiple
appliances. Design may differ based upon the
country in which it will be used.
Fuel supply subsystem Connects the fuel supply to the fuel
reformer and filters out unwanted sulfur and
other fuel contaminants.
Air supply subsystem Supplies filtered air to both the fuel
reformer and the fuel cell stack.
Water management loop Supplies humidification water to the fuel
cell stack to prevent the system from drying
out and reaction water to the fuel reformer
to facilitate the conversion of the fuel to
hydrogen.
Thermal management system Regulates the operating temperature of both
the fuel reformer and the fuel cell stack to
ensure optimum performance.
Microprocessor-based control unit Monitors system parameters and provides
control signals to the various subsystems to
maintain efficient operation. Also signals
need for service or maintenance.
Battery Powers the system from initial start until
the fuel cell stack warms up to appropriate
temperature and also provides 3 kilowatt-
hours of back-up power. Recharges while
system is in use.
|
The following diagram illustrates how a Plug Power fuel cell system produces electricity:
[A Chart appears showing the components of the residential fuel cell system, and the following words appear: Natural Gas; Air; Fuel Processor; Hydrogen; Fuel Cell Stack; Controller; DC Electricity; DC AC Inverter; 120/240 VAC Current; Heat and Water].
Proprietary Rights
Fuel cell technology has existed since the 19th century, and PEM fuel cells were first developed in the 1950s. Consequently, we believe that neither we nor our competitors can achieve a significant proprietary position on the basic technologies used in fuel cell systems. For example, platinum catalysts have been a standard component of fuel cells for decades. Recently, companies have developed different formulations and methods for incorporating platinum into the fuel cell that increases overall performance of the fuel cell while reducing the amount of platinum required. While we have developed our own proprietary technology to incorporate platinum which we have chosen to protect as a trade secret, we currently purchase fuel cell components from several vendors who have their own patented and trade secret platinum incorporation technology. However, if these vendors were no longer willing or able to supply such components, our own platinum incorporation technology would be available for use, as would the platinum incorporation technologies of other potential vendors.
Despite the inability to achieve a significant proprietary position on the basic technologies of fuel cell systems, we believe the design and integration of the system and system components, as well as some of the low-cost manufacturing processes that we have developed, can be protected. Accordingly, our overall intellectual property development and protection strategy has the following components:
. Maximize protection of our internally developed processes and designs. Our goal is to encourage employees to develop promising ideas with potential business impact and then protect these ideas as patents or trade secrets. To date, we have three issued patents and 47 patents pending. These patents cover, among other things, fuel cell components that
reduce manufacturing part count, fuel cell system designs that lend themselves to mass manufacturing, improvements to fuel cell system efficiency, reliability, and longer system life, and control strategies, such as added safety protections and operation under extreme conditions. Each of our employees has agreed that all inventions made or conceived while an employee of Plug Power which are related to or result from work or research that Plug Power performs will remain the sole and exclusive property of Plug Power, whether patented or not.
. Monitor relevant patents issued for their impact on the development of our systems. We actively monitor issued patents and other patent actions that may impact the development of fuel cell systems. We also seek to ensure that the components manufactured for us by third parties do not infringe on patents covered by others. Our experts in the various technical fields assess these inventions for possible interference with Plug Power technology. Based on our assessments to date, we do not believe that patents issued to other parties will prevent us from reaching our strategic goals.
. Purchase selected intellectual property rights. We regularly review strategic opportunities to acquire or license technologies that can advance the development of low cost system components and subsystems.
Competition
There are a number of companies located in the United States, Canada and abroad that are developing PEM fuel cell technology. Ballard Power Systems Inc., a publicly traded company located in Vancouver, British Columbia, has been developing PEM fuel cell technology since the mid-1980s and has attracted substantial funding from a number of partners, including DaimlerChrysler AG and Ford Motor Company. A number of major automotive and manufacturing companies also have in-house PEM fuel cell development efforts. To the extent publicly disclosed, the primary efforts of many of these companies, including Ballard and International Fuel Cells Corporation, a subsidiary of United Technologies Corporation, appear to have been directed toward the development of fuel cell systems for automotive and large stationary power applications. Although we believe approximately 10 companies have established residential fuel cell system development programs, we believe they are still in the research and development stage and have not yet developed the product manufacturing and distribution infrastructure necessary to reach commercialization.
We also compete with companies that are developing other types of fuel cells. There are four types of fuel cells other than PEM fuel cells that are generally considered to have viable commercial applications: phosphoric acid fuel cells, molten carbonate fuel cells, solid oxide fuel cells and alkaline fuel cells. Each of these fuel cells differs in the component materials, as well as in its overall operating temperature. While all fuel cell types have environmental and efficiency advantages over traditional power sources, we believe that PEM fuel cells can be manufactured less expensively and are more efficient and more practical in small-scale applications.
Our systems will also compete with other distributed generation technologies, including microturbines and reciprocating engines, available at prices competitive with existing forms of power generation. We believe that our fuel cell systems will have a competitive advantage in that they can be more easily scaled to residential size and will be more efficient in handling the load profile of residential customers. We also believe that they will be quieter, environmentally cleaner, more efficient, and less expensive to install, service and maintain. Our systems will also compete with solar and wind-powered systems.
Once we begin selling our systems, we intend to compete primarily on the basis of cost, reliability, efficiency and environmental considerations.
Government Regulation
We do not believe that we will be subject to existing federal and state regulatory commissions governing traditional electric utilities and other regulated entities. We do believe that our product and its installation will be subject to oversight and regulation at the local level in accordance with state and local ordinances relating to building codes, safety, pipeline connections and related matters. Such regulation may depend, in part, upon whether a system is placed outside or inside a home. At this time, we do not know which jurisdictions, if any, will impose regulations upon our product or installation. We also do not know the extent to which any existing or new regulations may impact our ability to distribute, install and service our product. Once our product reaches the commercialization stage and we begin distributing our systems to our target early markets, federal, state or local government entities or competitors may seek to impose regulations. We intend to encourage the standardization of industry codes to avoid having to comply with differing regulations on a state-by-state or locality-by-locality basis.
Facilities
Our principal executive offices are located in Latham, New York. At our 36 acre campus, we own a 56,000 square foot research and development center and a 32,000 square foot office building that we are currently leasing to Mechanical Technology until December 1999, and are in the process of constructing a 51,000 square foot manufacturing facility. We own all of our facilities and believe that they are sufficient to accommodate our anticipated growth through at least 2001.
Employees
As of September 30, 1999, we had a total staff of approximately 280, including approximately 230 full-time employees, of which approximately 120 were engineers, scientists, and other degreed professionals. We consider our relations with our employees to be good.
Legal Proceedings
We may from time to time be involved in legal proceedings in the ordinary course of our business. We are not currently involved in any pending legal proceedings that, either individually or taken as a whole, could harm our business, prospects, results of operations, or financial condition.
MANAGEMENT
Executive Officers, Key Employees and Directors
Our executive officers, directors, director-nominees, and key employees, their positions and their ages as of September 30, 1999, are as follows:
Name Age Position ---- --- -------- Executive Officers and Directors Gary Mittleman.......... 46 President, Chief Executive Officer and Director William H. Largent...... 44 Chief Financial Officer and Treasurer Gregory A. Silvestri.... 39 Senior Vice President--Operations Louis R. Tomson......... 59 Senior Vice President--Corporate Development Dr. William P. Acker.... 38 Vice President of Technology and Product Development Dr. Manmohan Dhar....... 52 Vice President and Chief Engineer of the Residential Program Michael J. Cudahy....... 75 Director Anthony F. Earley, Jr... 49 Director Larry G. Garberding..... 60 Director George C. McNamee....... 52 Chairman Dr. Walter L. Robb...... 71 Director Robert L. Nardelli...... 51 Director-nominee John M. Shalikashvili... 63 Director-nominee Key Employees Dr. Glenn A. Eisman..... 48 Chief Technology Officer Dr. William D. Ernst.... 60 Vice President and Chief Scientist Russel H. Marvin........ 32 Vice President of Component Engineering and Design Ana-Maria Galeano....... 31 General Counsel and Corporate Secretary |
Gary Mittleman has served as President and Chief Executive Officer since June 1997 and as a director since August 1999. From October 1993 to June 1997, Mr. Mittleman was the President of Edison Development Corporation, a wholly owned subsidiary of DTE Energy Company, where he directed business development efforts. Mr. Mittleman previously served as Manager of Corporate Strategy at Ameritech, a telecommunications company. Prior to that he was employed at Booz Allen & Hamilton, a consulting firm, in its commercial practice area and at American Can Company. Mr. Mittleman received his Bachelor of Arts degree in Mathematics and Master of Science degree in Mechanical and Aerospace Engineering from the University of Rochester and a Master of Business Administration degree, with honors, from the University of Chicago. Mr. Mittleman is a trustee of the Albany Institute of History and Art and a trustee of the Eastern New York State Chapter of the Nature Conservancy.
William H. Largent has served as Chief Financial Officer and Treasurer since May 1999. From May 1997 to May 1999, Mr. Largent served as Senior Vice President, Operations and Chief Financial Officer of Applied Innovation Inc., a leading provider of mediation and data communications products for the management of telecommunications providers' customer service networks. From 1994 to April 1997, Mr. Largent served as the Executive Vice President and Chief Financial Officer of Metatec Corporation, an information services company engaged in optical disc manufacturing and distribution, software development and network services. Mr. Largent also served as a director of Metatec from 1990 until 1997. From 1990 to 1993, Mr. Largent was President of Liebert Capital Management Corporation, a private investment management and consulting company. Mr. Largent is a director of Applied Innovation, Inc. and until July 1999, was also a director AmeriLink Corporation, a company (subsequently merged into Tandy Corp.) that designs, constructs, installs and maintains cabling systems for transmission of audio, video and data on a national basis. Mr. Largent, a certified public accountant, received his Bachelor of Science degree in accounting from Franklin University.
Gregory A. Silvestri has served as Senior Vice President--Operations since June 1999. In that capacity, Mr. Silvestri manages the full range of manufacturing activities, develops the strategy and structures alliances with key component suppliers, and manages the sales and marketing interactions with Plug Power's distribution partners. From May 1991 to May 1999, Mr. Silvestri served in a number of senior general management positions responsible for North American and Asia-Pacific operations for Norton Company, an operating unit of Saint-Gobain Corporation that supplies engineered materials to a variety of industries. Prior to that time, Mr. Silvestri served as an Engagement Manager within the Industrial Practice Group of McKinsey & Company. Mr. Silvestri received his Bachelor of Science and Engineering degree in Chemical Engineering from Princeton University and a Masters in Business Administration degree, with honors, from the University of Virginia.
Louis R. Tomson has served as Senior Vice President--Corporate Development since January 1999. In that capacity, Mr. Tomson manages business development, government relations and legal affairs. From January 1995 to January 1999, Mr. Tomson was Deputy Secretary and subsequently First Deputy Secretary to Governor George E. Pataki of the State of New York. Mr. Tomson was also the Governor's Chief Policy Maker for energy and communications and served as the Governor's liaison to New York's Public Service Commission and to New York's more than 60 public authorities. From 1992 to December 1994, Mr. Tomson was a partner in the law firm of Plunkett & Jaffe in New York, New York. Mr. Tomson currently serves as the Chairman of the New York State Thruway Authority. Mr. Tomson received a Bachelor of Arts degree from Columbia College and a Bachelor of Law degree from Columbia Law School.
Dr. William P. Acker has served as Vice President of Technology and Product Development since October 1997. In that capacity, Dr. Acker manages the development of Plug Power's fuel cell products as well as the ongoing development of next generation fuel cell technology. From 1990 to October 1997, Dr. Acker served in several positions for Texaco, including Global Manager for Engineering and Product Testing. Dr. Acker received a Bachelor of Science degree from Rensselaer Polytechnic Institute and a Master of Science, Master of Philosophy and Ph.D. in Applied Physics and Engineering from Yale University.
Dr. Manmohan Dhar has served as Vice President and Chief Engineer of the Residential Program since November 1998. In that capacity, Dr. Dhar is responsible for managing the development of low-cost, highly reliable fuel cell systems for residential electric power generation. From June 1997 to November 1998, Dr. Dhar served as our Director of Residential Programs. From 1978 to June 1997, Dr. Dhar worked in various positions at Mechanical Technology Incorporated, including as Chief Engineer for its Stirling Space Power Program, an effort to develop a 12.5 kW power generation system as a backup power source for Space Station Freedom, and, from 1993 to 1997, as a key member of Mechanical Technology's fuel cell development efforts. Dr. Dhar has a Ph.D. in Systems Dynamics from Purdue University, and a Master of Science degree in Machine Design from the Indian Institute of Technology.
Michael J. Cudahy has served as a member of the Board of Directors since February 1999. Mr. Cudahy co-founded and, prior to its sale to General Electric Company in 1998, served from 1965 to November 1998 as Chairman of the Board, and from 1965 to November 1997 as Chief Executive Officer, of Marquette Medical Systems, Inc., a developer and manufacturer of medical equipment and integrated systems for patient monitoring and diagnostic cardiology applications. Mr. Cudahy currently serves as a Special Advisor to GE Marquette Medical Systems, Inc. and as a director of Molecular OptoElectronics Corp., a developer and manufacturer of optoelectronic technologies relating to information systems.
Anthony F. Earley, Jr. has served as a member of the Board of Directors since June 1997. Mr. Earley has served as a director of DTE Energy Company since 1994, as Chairman of the Board and Chief Executive Officer of DTE Energy Company and its subsidiary, The Detroit Edison
Company, since 1998, and as President and Chief Operating Officer of DTE Energy and Detroit Edison since 1994. From 1989 to 1994, Mr. Earley served as the President and Chief Operating Officer of Long Island Lighting Company. Mr. Earley currently serves as a director of Comerica Bank and Mutual of America Capital Management Corporation. Mr. Earley received a Bachelor of Science degree in physics, a Master of Science degree in engineering, and a Juris Doctorate from the University of Notre Dame.
Larry G. Garberding has served as a member of the Board of Directors since June 1997. Mr. Garberding has served as a director of DTE Energy Company since 1990 and as Executive Vice President and Chief Financial Officer of DTE Energy and its subsidiary, The Detroit Edison Company, since 1995. Mr. Garberding received a Bachelor of Science degree in industrial administration from Iowa State University. Mr. Garberding is extensively involved with the United Way of Southern Michigan, is a director/trustee of the Detroit Medical Center and the Detroit Symphony Orchestra Hall, and is a Chairman of the Board of ArtServe Michigan.
George C. McNamee has served as Chairman of the Board of Directors since June 1997. Mr. McNamee has served as Chairman since 1984 and as Co-Chief Executive Officer since 1993 of First Albany Companies, Inc., a publicly traded holding company the principal subsidiaries of which are First Albany Corporation, a specialty investment banking firm and an underwriter of this offering, and First Albany Asset Management. Mr McNamee previously served as President of First Albany Companies from 1975 to 1989. Mr. McNamee has served as a director of Mechanical Technology Incorporated since 1996 and as Chief Executive Officer since 1998, and previously served as Chairman of the Board from 1996 to 1998. Mr. McNamee also serves as a director of MapInfo Corporation, a maker of mapping software products, application development tools, and data products, and the META Group, Inc., a company that provides market assessments for clients in the information technology industry. Mr. McNamee is a member of the Board of Directors of the New York Stock Exchange, the New York State Science and Technology Foundation, and the New York Conservation Education Fund. Mr. McNamee received his Bachelor of Arts degree from Yale University.
Dr. Walter L. Robb has served as a member of the Board of Directors of Plug Power since June 1997. He has been a member of the Board of Directors of Mechanical Technology since January, 1997. Since 1993, Dr. Robb has served as President of Vantage Management, Inc., a management consulting firm. Prior to 1993, Dr. Robb served as the Senior Vice President for Corporate Research and Development at General Electric Company. In that capacity, Dr. Robb directed the GE R & D Center, one of the world's largest and most diversified industrial laboratories, and served on General Electric's Corporate Executive Council. He serves on the Board of Directors of Cree Research, Inc., a developer and manufacturer of semiconductor materials and electronic devices, Celgene Corporation, a specialty pharmaceutical company engaged in the development and commercialization of human pharmaceuticals, and Neopath, Inc., a developer and marketer of visual intelligence technology designed to increase accuracy in medical testing.
Robert L. Nardelli has been nominated and has agreed to serve as a member of the Board of Directors effective upon the offering. Since 1995, Mr. Nardelli has served as President and Chief Executive Officer of GE Power Systems, a $7.5 billion division of General Electric Company headquartered in Schenectady, New York and is a Senior Vice President of General Electric Company and a member of the Board of Directors of GE Capital Corporation. Previously, Mr. Nardelli served from 1992 to 1995 as President and Chief Executive Officer of GE Transportation Systems. From 1991 to 1992, Mr. Nardelli served as President and Chief Executive Officer of CAMCO, Inc., General Electric's Canadian appliance manufacturing company, and from 1988 to 1991, he served as an Executive Vice President and General Manager at Case Corporation, a designer, manufacturer
and distributor of farm and construction equipment. Mr. Nardelli received a Bachelor of Science degree in business from Western Illinois University and a Master of Business Administration degree from the University of Louisville.
John M. Shalikashvili (U.S. Army-ret.) has been nominated and has agreed to serve as a member of the Board of Directors effective upon the offering. General Shalikashvili was the senior officer of the United States military and principal military advisor to the President of the United States, the Secretary of Defense and National Security Council by serving as the thirteenth Chairman of the Joint Chiefs of Staff, Department of Defense, for two terms from 1993 to 1997. Prior to his tenure as Chairman of the Joint Chiefs of Staff, he served as the Commander in Chief of all United States forces in Europe and as NATO's tenth Supreme Allied Commander, Europe. He has also served in a variety of command and staff positions in the continental United States, Alaska, Belgium, Germany, Italy, Korea, Turkey and Vietnam. General Shalikashvili is currently a director of L-3 Communications Holdings, Inc., a manufacturer of communications and related equipment, and United Defense Industries, Inc., a privately held manufacturer of military track equipment and naval armament. General Shalikashvili received a Bachelor of Science degree in Mechanical Engineering from Bradley University and a Master of Arts degree in International Affairs from George Washington University, and is a graduate of the Naval Command and Staff College and the United States Army War College.
Dr. Glenn A. Eisman has served as Chief Technology Officer since November 1998. In that capacity, Dr. Eisman manages the development of fuel cell membranes and electrodes and other related technology. From June 1998 to November 1998, Dr. Eisman served as our Director of Technology. From 1984 to June 1998, Dr. Eisman held various technical positions at The Dow Chemical Company where, from 1984 to 1989, he directed and conducted research pertaining to all aspects of PEM fuel cell development efforts, including polymer materials science, catalysts, coatings technology and electrochemical techniques. From 1980 to 1983, Dr. Eisman was the Robert A. Welch Research Fellow in Materials Science and Engineering at the University of Texas-Austin. Dr. Eisman received a Bachelor of Science in Chemistry degree from Temple University and a Ph.D. in Physical Inorganic Chemistry from Northeastern University.
Dr. William D. Ernst has served as Vice President and Chief Scientist since June 1997. In that capacity, Dr. Ernst is responsible for advancing our scientific, competitive and intellectual property position within the fuel cell industry and serves as Principal Investigator for government-sponsored programs. From 1989 to June 1997, Dr. Ernst held various positions at Mechanical Technology Incorporated, including Program Director for its automotive fuel cell development program and Manager of Power Systems, in which capacity he initiated their fuel cell development program and directed all fuel cell programs and technical development activities. Dr. Ernst received a Master of Science in Engineering degree from the Massachusetts Institute of Technology and a Ph.D. in Aeronautical Engineering from Rensselaer Polytechnic Institute.
Russel H. Marvin has served as Vice President of Component Engineering and Design since November 1998. In that capacity Mr. Marvin manages Plug Power's design for manufacturing efforts to bring the residential product to market. From January 1998 to November 1998, Mr. Marvin served as our Vice President of Engineering and Manufacturing. From 1994 to January 1998, Mr. Marvin served as the Director of Engineering for two different divisions of Axiohm Transaction Solutions, Inc., a manufacturer and marketer of transaction printers. Mr. Marvin served from 1991 to 1994 as a Project Leader for Eastman Kodak Co.'s Clinical Products Division, a maker of blood analysers, and from 1989 to 1991 as a Senior Mechanical Engineer for NCR Corp.'s printer division. Mr. Marvin received a Bachelor of Science degree from Clarkson University and a Master of Science degree from Rensselaer Polytechnic Institute.
Ana-Maria Galeano has served as General Counsel and Corporate Secretary since April 1998. In that capacity, Ms. Galeano advises the company on legal issues in such areas as corporate law, contracts, strategic alliances and intellectual property. From September 1993 to April 1998, Ms. Galeano served as an attorney at the law firm of Whiteman, Osterman & Hanna in Albany, New York, where she participated in the formation of Plug Power. Ms. Galeano received a Bachelor of Arts degree from the State University of New York at Binghamton and a Juris Doctorate from Brooklyn Law School.
Board Composition
Effective upon the closing of this offering, the number of our directors will be fixed at nine. Initially we will have eight directors, with the one vacancy to be filled with an independent director selected by the Board of Directors. Effective upon the offering, Messrs. Nardelli and Shalikashvili, each a director-nominee, will be elected to our Board of Directors for an initial term of three years. Pursuant to our amended distribution agreement with GE Fuel Cell Systems, we have agreed to nominate Mr. Nardelli, or another designee of GE Power Systems, for election to the Board of Directors during the term of the agreement. Our Board of Directors will be divided into three classes, each of whose members will serve for a staggered three-year term. Our Board of Directors will consist of three Class I directors, Messrs. Mittleman, Robb and Earley, whose term of office will continue until the 2000 annual meeting of stockholders, three Class II directors, Messrs. McNamee, Cudahy and the independent director to be selected following the offering, whose term of office will continue until the 2001 annual meeting of stockholders, and three Class III directors, Messrs. Garberding, Nardelli and Shalikashvili, whose term of office will continue until the 2002 annual meeting of stockholders. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. Vacancies on our Board of Directors may be filled solely by the Board of Directors.
There are no family relationships among any of our directors or executive officers.
Board Committees
Effective upon the closing of this offering, our Board of Directors will establish an Audit Committee and a Compensation Committee. The members of the Audit Committee, which will include Mr. Cudahy, an independent director, and one of the independent directors to be selected after the offering, will be responsible for recommending to the Board of Directors the engagement of our outside auditors and reviewing our accounting controls and the results and scope of audits and other services provided by our auditors. The Compensation Committee, which will be made up of Messrs. McNamee and Earley, will be responsible for reviewing and recommending to the Board of Directors the amount and type of non-stock compensation to be paid to senior management and establishing and reviewing general policies relating to compensation and benefits of employees. The administration of our stock option plan will be conducted by the entire Board of Directors.
Director Compensation
Directors who are employees receive no additional compensation for their services as directors. Non-employee directors receive cash compensation of $1,000 for each Board meeting attended in person and $500 for each Board meeting attended by telephone. Non-employee directors are eligible to participate in our 1999 Stock Option and Incentive Plan at the discretion of the full Board of Directors. In accordance with a policy approved by our Board of Directors, upon initial election or appointment to the Board of Directors, new non-employee directors will receive non-qualified stock options to purchase 15,000 shares (50,000 shares for any new non-employee Chairman) of common stock which will be fully vested upon grant. Each year of a non-employee director's tenure, the
director will receive non-qualified options to purchase 10,000 shares (20,000 shares for any non-employee Chairman), plus non-qualified options to purchase an additional 5,000 shares for a non-employee director serving as chairman of the Audit Committee and non-qualified options to purchase an additional 2,000 shares for a non-employee director serving as chairman of any other committee, including the Compensation Committee. These annual options will fully vest on the first anniversary of the date of grant. In accordance with this policy, upon the effectiveness of the registration statement of which this prospectus is a part, (i) Messrs. Cudahy, Earley, Garberding, Robb, Nardelli and Shalikashvili will receive non-qualified options to purchase 25,000 shares of common stock at the initial public offering price with 15,000 shares vested upon grant and 10,000 shares vesting on the date of our 2000 annual meeting of stockholders, and (ii) Mr. McNamee will receive non-qualified options to purchase 70,000 shares of common stock at the initial public offering price with 50,000 shares vested upon grant and 20,000 shares vesting on the date of our 2000 annual meeting of stockholders. During 1998, options to purchase an aggregate of 20,000 shares were granted to Messrs. McNamee and Robb as compensation for their services as directors.
Executive Compensation
The following table sets forth the total compensation paid in the year ended December 31, 1998 to Messrs. Mittleman, Acker and Dhar, who were the only Plug Power executive officers whose aggregate compensation exceeded $100,000.
Summary Compensation Table
Long-Term
Compensation
-------------
Number
of Securities
Annual Compensation Underlying All
--------------------- Options Other
Name Salary($) Bonus($) Granted(#) Compensation(1)
---- ---------- --------- ------------- ---------------
Gary Mittleman.............. $ 152,885 $ 45,000 100,000 $6,115
President and Chief
Executive Officer
Dr. William P. Acker........ 112,316 -- 55,000 2,877
Vice President of
Product Development
and Commercialization
Dr. Manmohan Dhar........... 103,269 -- 30,000 2,692
Vice President and Chief
Engineer of the Residential
Program
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Option Grants In Last Fiscal Year
The following table sets forth information regarding stock options granted during 1998 to our executive officers listed in the Summary Compensation Table. During 1998, we granted options to purchase an aggregate of 597,650 shares of common stock to employees. The exercise price per share for these options was equal to the fair market value of the common stock as of the grant date as determined by the Board of Directors.
Option Grants In Last Fiscal Year
Individual Grants
------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Number of Percent of Total Stock Price
Securities Options Appreciation
Name Underlying Granted to Exercise for Option Term(2)
---- Options Employees in Price Expiration ---------------------
Granted(1) Fiscal Year ($/Share) Date 5%($) 10%($)
---------- ---------------- --------- ---------- ---------- ----------
Gary Mittleman.......... 100,000 16.7% $5.00 7/16/08 $ 314,447 $ 796,871
Dr. William P. Acker.... 55,000 9.2% 1.00 2/27/08 34,589 87,656
Dr. Manmohan Dhar....... 20,000 3.3% 1.00 2/27/08 12,578 31,875
10,000 1.7% 1.00 6/29/08 6,289 15,937
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Fiscal Year-End Option Values
The following table sets forth information concerning the number and value of unexercised options to purchase common stock held as of December 31, 1998 by our executive officers listed in the Summary Compensation Table. There was no public trading market for our common stock as of December 31, 1998. Accordingly, the values of the unexercised in-the-money options have been calculated on the basis of an assumed initial public offering price of $14.00 per share less the applicable exercise price multiplied by the number of shares that may be acquired on exercise. None of the executive officers listed in the Summary Compensation Table exercised any stock options in 1998.
Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- In-The-Money Options
End (#) at Fiscal Year-End (1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Gary Mittleman.............. -- 600,000 -- $7,400,000
Dr. William P. Acker........ -- 90,000 -- 1,170,000
Dr. Manmohan Dhar........... -- 50,000 -- 650,000
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Stock Option Plans
Effective July 1, 1997, we established a stock option plan to provide employees, consultants, and members of the Board the ability to acquire an ownership interest in Plug Power. Options for employees generally vest 20% per year and expire ten years after issuance. Options granted to members of the Board vest 50% upon grant and 25% per year thereafter. Options granted to consultants vest one-third on the expiration of the consultant's initial contract term, with an additional one-third vesting on each anniversary thereafter. At September 30, 1999, there were a total of 3,377,189 options granted under this plan. Although no further options will be granted under this plan, the options previously granted will continue to vest in accordance with this plan and vested options will be exercisable for shares of common stock upon completion of the offering.
Our Board of Directors and stockholders have adopted the 1999 Stock Option and Incentive Plan, which allows for the issuance of up to 2,561,002 shares of common stock and other awards. The number of shares of common stock available for issuance under our plan will be increased by the amount of any forfeitures under the 1999 Stock Option and Incentive Plan and under the 1997 Stock Option Plan. The number of shares of common stock under our plan will further increase 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. This offering will result in an increase of 984,000 shares of stock available for issuance under our plan. The 1999 Stock Option and Incentive Plan permits us to:
. grant incentive stock options;
. grant non-qualified stock options;
. grant stock appreciation rights;
. issue or sell common stock with vesting or other restrictions, or without restrictions;
. grant rights to receive common stock in the future with or without vesting;
. grant common stock upon the attainment of specified performance goals; and
. grant dividend rights in respect of common stock.
These grants may be made to officers, employees, non-employee directors, consultants, advisors and other key persons of Plug Power.
The 1999 Stock Option and Incentive Plan will be administered by our Board of Directors or by a committee designated by our Board of Directors consisting solely of two or more independent directors. Subject to the provisions of the plan, the Board or the committee may select the individuals eligible to receive awards, determine or modify the terms and conditions of the awards granted, accelerate the vesting schedule of any award and generally administer and interpret the plan.
The exercise price of options granted under the 1999 Stock Option and Incentive Plan is determined by the Board or committee. Under present law, incentive stock options and options
intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986 may not be granted at an exercise price less than the fair market value of the common stock on the date of grant, or less than 110% of the fair market value in the case of incentive stock options granted to optionees holding more than 10% of the voting power. Non-qualified stock options may be granted at prices which are no less than 85% of the fair market value of the underlying shares on the date granted. Options are typically subject to vesting schedules, terminate ten years from the date of grant, may be exercised for specified periods after the termination of the optionee's employment or other service relationship with us, and are generally non-transferable. Upon the exercise of options, the option exercise price must be paid in full:
. in cash or by certified or bank check or other instrument acceptable to the committee;
. in the sole discretion of the committee, by delivery of shares of common stock that have been owned by the optionee free of restrictions for at least six months;
. by promissory note if the loan of these funds to the optionee has been authorized by the Board of Directors and the optionee pays so much of the exercise price as represents the par value of the common stock acquired in a form other than a promissory note; and
. by a broker under irrevocable instructions to the broker selling the underlying shares from the optionee.
Upon certain events, including a merger, reorganization or consolidation, the sale of all or substantially all of our assets or all of our outstanding capital stock or a liquidation or other similar transaction, all outstanding awards issued under the 1999 Stock Option and Incentive Plan will become fully vested and exercisable upon the closing of the transaction. The 1999 Stock Option and Incentive Plan and all awards issued under the plan will terminate upon any of the transactions described above, unless Plug Power and the other parties to such transactions have agreed otherwise. All participants under the 1999 Stock Option and Incentive Plan will be permitted, for a period of time to be determined by the committee, to exercise before any termination all awards held by them which are then exercisable or will become exercisable upon the closing of the transaction.
1999 Employee Stock Purchase Plan
We have adopted the Plug Power 1999 Employee Stock Purchase Plan under which employees will be eligible to purchase shares of our common stock at a discount through periodic payroll deductions. The plan is intended to meet the requirements of Section 423 of the Internal Revenue Code. After the initial period, purchases will occur at the end of six month offering periods at a purchase price equal to 85% of the market value of our common stock at either the beginning of the offering period or the end of the offering period, whichever is lower. The first offering period under the plan will begin on January 1, 2000 and will end on April 30, 2000. Participants may elect to have from 1% to 10% of their pay withheld for purchase of common stock at the end of the offering period, up to a maximum of $12,500 within any offering period. We have reserved 1,000,000 shares of common stock for issuance under this plan.
Employment Agreements
We have entered into the following agreements with our senior management:
Gary Mittleman, our President and Chief Executive Officer, will receive 100% of his base salary, continuation of employee benefits and vesting of stock options for twelve months if we terminate his employment for any reason other than failure to perform, gross negligence and/or fraud. For 1999, Mr. Mittleman's base salary is $205,000.
Dr. Manmohan Dhar, our Vice President and Chief Engineer of the Residential Program, will receive 100% of his base pay for twelve months if he voluntarily terminates his employment or if we terminate his employment for any reason other than gross misconduct, negligence, theft, dishonesty, or fraud.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mechanical Technology Incorporated and Edison Development Corporation formed Plug Power in June 1997. In exchange for 4,750,000 shares of common stock each in Plug Power, Mechanical Technology contributed to Plug Power $4.75 million of in-process research and development and other assets and Edison Development contributed $4.75 million in cash.
In June 1997, Plug Power and Edison Development Corporation entered into a distribution agreement which provides Edison Development with the exclusive right to distribute fuel cell systems of 2 kilowatts and higher to end-users for stationary applications in the states of Illinois, Indiana, Michigan and Ohio. The agreement expires in January 2010. In exchange for commitments to purchase pre-commercial fuel cell systems and meet minimum sales obligations during commercial production, we agreed to amend the distribution agreement to permit Edison Development to, among other things, sell fuel cell systems to resellers.
In June 1997, we granted to Edison Development options to purchase 200,000 shares of common stock at an exercise price of $1.00 per share. In June 1998, we granted Edison Development an additional option to purchase 30,000 shares of common stock at an exercise price of $5.00 per share.
On June 27, 1997, we entered into a management services agreement with Mechanical Technology to obtain services relating to the management of Plug Power and lease office space for a period of one year. The management services agreement terminated in June 1998. At the expiration of this agreement, we extended the existing facilities lease through September 30, 1998. In June 1998, we entered into a new facilities lease with Mechanical Technology which commenced on October 1, 1998, and had a term of ten years with an option to extend for an additional five years. We paid rent to Mechanical Technology of $79,000 for the period from June 27, 1997 to December 31, 1997, $378,000 for the year ended December 31, 1998, and $215,000 for the six months ended June 30, 1999. As part of the new facilities lease, Mechanical Technology reimbursed Plug Power $2.0 million for improvements made to the facilities.
Our limited liability company agreement gave us the right to call upon Edison Development for additional contributions up to an aggregate of $4.25 million beginning on June 27, 1998, subject to achieving defined milestones relating to technology development and system production, and gave Mechanical Technology the right to match the contribution within a stated period to preserve its percentage ownership in Plug Power. We made such calls on Edison Development in April 1998 for $2.25 million and in June 1998 for $2.0 million, and Mechanical Technology matched these contributions by making in-kind contributions to us of a below-market lease valued at $2.0 million and research (non cash) credits valued at $2.25 million, as described below. In exchange for such contributions we issued 4,250,000 shares of our common stock to each of Mechanical Technology and Edison Development.
In April 1998, Mechanical Technology purchased 2,000,000 shares of Plug Power common stock in exchange for a below-market lease for office and manufacturing facilities valued at $2.0 million. In April and June 1998, Mechanical Technology paid $191,250 for two one-year options which entitled Mechanical Technology to acquire a total of 2,250,000 shares of Plug Power at a price of $1.00 per share. In March 1999, we agreed that Mechanical Technology had earned research (non-cash) credits valued at $2.25 million which were used by Mechanical Technology to exercise their option to acquire the 2,250,000 shares, and the $191,250 was returned to Mechanical Technology in accordance with the terms of the option agreements. The research credits were earned by Mechanical Technology by assisting Plug Power in obtaining government grants and research contracts.
After receiving these $4.25 million contributions from Mechanical Technology and Edison Development, the limited liability company agreement required us to seek additional financing from Mechanical Technology and Edison Development, allowing them to maintain their ownership percentage, before seeking financing from new investors. In accordance with the agreement, in August 1998 we offered Mechanical Technology and Edison Development the opportunity to contribute additional funds. Mechanical Technology and Edison Development each committed to contribute an additional $5.0 million to Plug Power.
Pursuant to this committment, in August 1998 Mechanical Technology purchased 200,000 shares of Plug Power common stock at a price of $5.00 per share in exchange for a contribution to capital of a $500,000 short-term loan and accounts receivable (totaling $500,000) owed by Plug Power to Mechanical Technology for management services under our management services agreement and rent. Between October 1998 and February 1999, Mechanical Technology purchased 800,000 additional shares of Plug Power at a price of $5.00 per share for $4.0 million in cash pursuant to its $5.0 million commitment. To match these contributions, in August 1998 Edison Development purchased 200,000 shares of Plug Power common stock at a price of $5.00 per share in exchange for a contribution to capital of two $500,000 short-term loans. Between October 1998 and February 1999, Edison Development purchased 800,000 shares of Plug Power common stock at a price of $5.00 per share for $4.0 million in cash.
In January 1999, we entered into an agreement with Mechanical Technology and Edison Development, pursuant to which we have the right to call upon Edison Development and Mechanical Technology to contribute $7.5 million each in 1999 and $15.0 million each in 2000 in exchange for which each will receive common stock valued at $7.50 per share. The agreement terminates on the earlier of December 31, 2000 or upon an initial public offering of our shares at a price greater than $7.50 per share. An amendment to the agreement permits Mechanical Technology and Edison Development to contribute any funds not previously called by us on the termination date in exchange for shares at a price of $7.50 per share. Mechanical Technology and Edison Development committed to contribute $22.5 million each in exchange for an aggregate of 6,000,000 shares of common stock prior to the closing of this offering. In September 1999 Mechanical Technology and Edison Development contributed $2.0 million each pursuant to these agreements. Accordingly, Mechanical Technology and Edison Development will each contribute $20.5 million immediately before this offering.
In June 1999, we entered into an agreement with Mechanical Technology to acquire its 36 acre office facilities in Latham, New York, including all land and buildings, in exchange for 704,315 shares of Plug Power common stock valued at $6.67 per share or a total of $4.7 million and the assumption of approximately $6.2 million in debt. In accordance with the terms of our limited liability company agreement, Edison Development purchased 704,315 shares of Plug Power common stock at $6.67 per share for $4.7 million in cash.
After giving effect to the offering and the additional investments contemplated, Mechanical Technology will beneficially own approximately 32.5% of Plug Power's outstanding common stock. FAC/Equities, a co-manager of this offering, is a division of First Albany Corporation, whose parent, First Albany Companies, Inc., owns approximately 34.0% of the outstanding common stock of Mechanical Technology. George C. McNamee, the Chairman and Co-Chief Executive Officer of First Albany Companies, the Chairman and Co-Chief Executive Officer of First Albany Corporation and the Chief Executive Officer and a director of Mechanical Technology, is currently the Chairman of the Board of Directors of Plug Power and will be the Chairman of the Board of Directors of Plug Power upon completion of the offering. In addition, Dr. Walter L. Robb, a director of Mechanical Technology, is a director of Plug Power and will be a director of Plug Power upon completion of this offering.
After giving effect to the offering, Edison Development will beneficially own approximately 32.8% of Plug Power's outstanding common stock. Anthony F. Earley, Jr., the Chairman, Chief Executive Officer, President and Chief Operating Officer of DTE Energy Company and its subsidiary, The Detroit Edison Company, is a director of Plug Power and will be a director of Plug Power upon completion of the offering. Detroit Edison is the parent company of Edison Development. In addition, Larry G. Garberding, a director of DTE Energy and the Executive Vice President and Chief Financial Officer of DTE Energy and Detroit Edison, is also director of Plug Power and will be a director of Plug Power upon completion of the offering.
In February 1999, we granted a warrant to Mr. Michael Cudahy, a director of Plug Power, to purchase up to 400,000 shares of common stock at an exercise price of $8.50 per share and sold Mr. Cudahy 1,440,000 shares of common stock for a purchase price of $9,600,000. Mr. Cudahy committed to exercise his warrant to purchase 400,000 shares before the closing of this offering for a total purchase price of $3,400,000.
In February 1999, we also entered into an agreement with GE On-Site Power to create GE Fuel Cell Systems, a joint venture owned 75% by GE On-Site Power and 25% by Plug Power, which is dedicated to marketing, selling, installing, and servicing Plug Power residential fuel cell systems on a worldwide basis (other than in the states of Illinois, Indiana, Michigan and Ohio). In connection with the formation of GE Fuel Cell Systems we issued 2,250,000 shares of our common stock to GE On-Site Power, of which 750,000 shares vested immediately. We have capitalized the fair value of these shares ($11.3 million) under the caption "Investment in Affiliate" in the financial statements. Before this agreement was amended, as described below, the remaining 1,500,000 shares were to vest ratably over the next four years.
We also issued a warrant to GE On-Site Power to purchase 3,000,000 additional shares of common stock at a price of $12.50 per share. GE On-Site Power has committed to exercise this warrant immediately before the closing of this offering for a total exercise price of $37.5 million in cash.
In February 1999 we entered into an agreement with General Electric pursuant to which General Electric 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 also agreed to provide additional capital, in the form of a loan not to exceed $8.0 million, to fund GE Fuel Cell Systems' ongoing operations. In addition, the agreement provides that, as long as we are providing PEM fuel cell systems that are competitive, as determined by GE On-Site Power, in good faith, based on objective factors set forth in the joint venture agreement, GE Power Systems may not sell PEM fuel cell systems that compete with our fuel cell systems. If GE On-Site Power determines that our fuel cell systems are not competitive, we have 12 months to make them competitive before the noncompete provision terminates. Divisions or subsidiaries of General Electric Company other than GE Power Systems are not prohibited from selling competing fuel cell systems but, in the event that they do, we can terminate our agreements with GE Fuel Cell Systems or appoint additional distributors.
In August 1999, we amended our agreement with GE On-Site Power to vest all remaining shares. In addition, we have agreed to purchase $12.0 million of technical support services from General Electric during the next three years and extended the term of the distribution agreement by 5 years to 2009. We also agreed with GE On-Site Power to use our best efforts to cause one individual nominated by GE Power Systems to be elected to our Board of Directors for as long as our distribution agreement with GE Fuel Cell Systems remains in effect. Robert L. Nardelli, President and Chief Executive Officer of GE On-Site Power, will be elected to our Board of Directors as a Class III Director effective upon this offering, with an initial term expiring in 2002.
As of September 30, 1999, we had granted options to purchase 3,377,189 shares of common stock under our 1997 stock option plan to our officers, directors, employees, consultants and advisors. We have reserved for issuance up to 2,561,002 additional options under our 1999 stock option plan and 1,000,000 shares of common stock for issuance under our 1999 employee stock purchase plan under which employees will be eligible to purchase shares of common stock at a discount through periodic payroll deductions.
We have granted GE On-Site Power the right, on one occasion at any time after the second anniversary of this offering, to require us to register up to 3,000,000 shares of our common stock under the Securities Act. In addition, upon the closing of this offering, we will grant all of our eight current stockholders the right to include their shares of common stock in any of the first three registration statements we may file under the Securities Act.
Plug Power has agreed to purchase power conditioners from Satcon Technology Corporation for our residential fuel cell systems. Mechanical Technology owns 16% of Satcon's outstanding stock on a fully diluted basis and has the right to appoint two members to Satcon's board of directors.
We believe that each of the transactions described above was entered into on terms no less favorable to Plug Power than could be obtained with non- affiliated parties. For all future transactions, we have adopted a conflict of interest policy whereby all material transactions between Plug Power and our officers, directors and other affiliates must (i) be approved by a majority of the members of the Board of Directors, including a majority of the disinterested members and (ii) be on terms no less favorable to us than could be obtained from unaffiliated third parties. In addition, any loans to our officers, directors and other affiliates must be for bona fide business purposes only.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of our common stock on a pro forma basis to reflect the issuance of shares to current stockholders immediately prior to the closing of this offering and on a pro forma, as adjusted basis to reflect the sale of the common stock offered hereby, by:
. all persons known by us to own beneficially 5% or more of the common stock;
. each of our directors;
. the executive officers listed in the Summary Compensation Table; and
. all directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares of common stock beneficially owned by the stockholder. The address of Mechanical Technology Incorporated is 968 Albany-Shaker Road, Latham, NY 12110. The address of Edison Development Corporation is c/o DTE Energy Company, 2000 Second Avenue, 644 WCB, Detroit, Michigan 48226. The address of GE On-Site Power, Inc. is c/o GE Power Systems, One River Road, Schenectady, New York 12345. The address of Michael Cudahy is 10850 West Park Place, Suite 980, Milwaukee, Wisconsin 53224. The address of all other listed stockholders is c/o Plug Power Inc., 968 Albany-Shaker Road, Latham, New York 12110.
The number of shares beneficially owned by each stockholder is determined under rules issued by the Securities and Exchange Commission and includes voting or investment power with respect to securities. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and includes any shares as to which the individual or entity has the right to acquire beneficial ownership within 60 days after September 30, 1999 through the exercise of any warrant, stock option or other right. The inclusion in this prospectus of such shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner of such shares. The number of shares of common stock outstanding used in calculating the percentage for each listed person includes the shares of common stock underlying options held by such person that are exercisable within 60 days of September 30, 1999, but excludes shares of common stock underlying options held by any other person. Percentage of beneficial ownership is based on 36,208,480 shares of common stock outstanding as of September 30, 1999 on a pro forma basis.
Shares Beneficially Owned
-------------------------------------------
Prior to the Offering After the Offering
-------------------------------------------
Name of Beneficial Owners Number Percent Number Percent
------------------------- ------------- --------------------- -------
DTE Energy Company(1).......... 13,926,815 38.2% 13,926,815 32.8%
Mechanical Technology
Incorporated(2)............... 13,704,315 37.8 13,704,315 32.5
General Electric Company(3).... 5,250,000 14.5 5,250,000 12.4
Michael J. Cudahy(4)........... 1,840,000 5.1 1,840,000 4.4
Gary Mittleman(5).............. 380,000 1.0 380,000 *
Dr. William P. Acker(5)........ 57,000 * 57,000 *
Dr. Manmohan Dhar(5)........... 49,000 * 49,000 *
Anthony F. Earley, Jr.(6) ..... 13,926,815 38.2 13,926,815 32.8
Larry G. Garberding(6)......... 13,926,815 38.2 13,926,815 32.8
George C. McNamee(7)........... 13,811,815 38.0 13,811,815 32.6
Dr. Walter L. Robb(5).......... 57,500 * 57,500 *
Robert L. Nardelli(8).......... 5,250,000 14.5 5,250,000 12.4
John M. Shalikashvili.......... -- -- -- --
All executive officers,
directors, and director-
nominees as a group (13
persons)(9)................... 35,372,130 95.4 35,372,130 82.1
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(1) Includes 13,926,815 shares owned of record by Edison Development
Corporation, an indirect wholly-owned subsidiary of DTE Energy Company, of
which 2,733,333 are shares of common stock that will be acquired upon the
exercise of certain purchase rights immediately prior to the closing of
this offering and 222,500 are shares of common stock that are issuable
upon the exercise of outstanding options that are exercisable within 60
days of September 30, 1999.
(2) Includes 2,733,333 shares of common stock to be acquired upon the exercise
of certain purchase rights immediately before the closing of this
offering.
(3) Includes 5,250,000 shares of common stock owned of record by GE On-Site
Power, Inc., an indirect wholly-owned subsidiary of General Electric that
operates within its GE Power Systems business, of which 3,000,000 are
shares of common stock that will be acquired upon the exercise of a
warrant immediately before the closing of this offering.
(4) Includes 400,000 shares of common stock to be acquired upon the exercise
of a warrant immediately before the closing of this offering.
(5) All shares shown represent shares of common stock issuable upon exercise
of outstanding options that are exercisable within 60 days of September
30, 1999.
(6) Includes 13,926,815 shares owned of record by Edison Development
Corporation, an indirect wholly-owned subsidiary of DTE Energy Company, of
which 2,733,333 are shares of common stock that will be acquired upon the
exercise of certain purchase rights immediately before the closing of this
offering and 222,500 are shares of common stock that are issuable upon the
exercise of outstanding options that are exercisable within 60 days of
September 30, 1999. Messrs. Earley and Garberding, who are directors and
executive officers of DTE Energy, may be deemed the beneficial owners of
these shares. Each of Messrs. Early and Garberding disclaim beneficial
ownership of these shares.
(7) Includes 13,704,315 shares of common stock owned of record by Mechanical
Technology, of which 2,733,333 are shares of common stock to be acquired
upon the exercise of certain purchase rights in connection with the
closing of this offering. Mr. McNamee, a director and Chief Executive
Officer of Mechanical Technology, may be deemed the beneficial owner of
these shares. Mr. McNamee disclaims beneficial ownership of these shares.
Also includes 107,500 shares of common stock issuable upon exercise of
outstanding options held by Mr. McNamee that are exercisable within 60
days of September 30, 1999.
(8) Includes 5,250,000 shares of common stock owned of record by GE On-Site
Power, Inc., an indirect wholly-owned subsidiary of General Electric that
operates within its GE Power Systems business, of which 3,000,000 are
shares of common stock that will be acquired upon the exercise of a
warrant immediately before the closing of this offering. Mr. Nardelli, a
Senior Vice President of General Electric and the President and Chief
Executive Officer of GE Power Systems, disclaims beneficial ownership of
these shares.
(9) Includes 873,500 shares of common stock issuable upon exercise of
outstanding options held by the executive officers, directors and director-
nominees as a group that are exercisable within 60 days of September 30,
1999.
DESCRIPTION OF CAPITAL STOCK
Authorized and Outstanding Capital Stock
As of September 30, 1999 there were 36,208,480 shares of common stock issued and outstanding after giving effect to the issuance of 9,216,666 shares of common stock upon the exercise of purchase rights and warrants by current stockholders immediately before this offering. Following the offering, our authorized capital stock will consist of 95,000,000 shares of common stock, of which 42,208,480 will be issued and outstanding, and 5,000,000 shares of undesignated preferred stock issuable in one or more series designated by our Board of Directors, of which no shares will be issued and outstanding. In addition, as of September 30, 1999, there were outstanding stock options to purchase 3,377,189 shares of common stock. Of the issued and outstanding common stock, 111,851 shares are subject to forfeiture by the holder. At September 30, 1999, there were eight holders of record of our common stock.
Common Stock
Voting Rights
The holders of our common stock have one vote per share. Holders of our common stock are not entitled to vote cumulatively for the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority, or, in the case of election of directors, by a plurality, of the votes entitled to be cast at a meeting at which a quorum is present by all shares of common stock present in person or represented by proxy, voting together as a single class, subject to any voting rights granted to holders of any then outstanding preferred stock.
Dividends
Holders of common stock will share ratably in any dividends declared by our Board of Directors, subject to the preferential rights of any preferred stock then outstanding. Dividends consisting of shares of common stock may be paid to holders of shares of common stock.
Other Rights
On liquidation, dissolution or winding up of Plug Power, all holders of common stock are entitled to share ratably in any assets available for distribution to holders of shares of common stock. No shares of common stock are subject to redemption or have preemptive rights to purchase additional shares of common stock.
Preferred Stock
Our certificate of incorporation provides that shares of preferred stock may be issued from time to time in one or more series. Our Board of Directors is authorized to fix the voting rights, if any, designations, powers, preferences, qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our Board of Directors may, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. We have no present plans to issue any shares of preferred stock. The ability of our Board of Directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of Plug Power or the removal of existing management.
Indemnification Matters
Our certificate of incorporation contains a provision permitted by Delaware law that generally eliminates the personal liability of directors for monetary damages for breaches of their fiduciary duty,
including breaches involving negligence or gross negligence in business combinations, unless the director has breached his or her duty of loyalty, failed to act in good faith, engaged in intentional misconduct or a knowing violation of law, paid a dividend or approved a stock repurchase in violation of the Delaware General Corporation Law or obtained an improper personal benefit. This provision does not alter a director's liability under the federal securities laws and does not affect the availability of equitable remedies, such as an injunction or rescission, for breach of fiduciary duty. Our by-laws provide that directors and officers shall be, and in the discretion of our board of directors, non-officer employees may be, indemnified by Plug Power to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended, against all expenses and liabilities reasonably incurred in connection with service for or on behalf of Plug Power. Our by-laws also provide that the right of directors and officers to indemnification shall be a contract right and shall not be exclusive of any other right now possessed or hereafter acquired under any by-law, agreement, vote of stockholders or otherwise. We also have directors' and officers' insurance against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling Plug Power as described above, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. At present, there is no pending material litigation or proceeding involving any director, officer, employee or agent of Plug Power in which indemnification will be required or permitted.
Provisions of Certificate of Incorporation and By-laws which may have Anti- takeover Effect
A number of provisions of our certificate of incorporation and by-laws which will be effective upon completion of this offering concern matters of corporate governance and the rights of stockholders. These provisions, as well as the ability of our Board of Directors to issue shares of preferred stock and to set the voting rights, preferences and other terms, may be deemed to have an anti- takeover effect and may discourage takeover attempts not first approved by our Board of Directors, including takeovers which stockholders may deem to be in their best interests. If takeover attempts are discouraged, temporary fluctuations in the market price of our common stock, which may result from actual or rumored takeover attempts, may be inhibited. These provisions, together with our classified Board of Directors and the ability of our Board of Directors to issue preferred stock without further stockholder action, also could delay or frustrate the removal of incumbent directors or the assumption of control by stockholders, even if the removal or assumption would be beneficial to our stockholders. These provisions also could discourage or make more difficult a merger, tender offer or proxy contest, even if favorable to the interests of stockholders, and could depress the market price of our common stock. Our Board of Directors believes that these provisions are appropriate to protect the interests of Plug Power and of our stockholders. Our Board of Directors has no present plans to adopt any further measures or devices which may be deemed to have an "anti-takeover effect."
No Stockholder Action by Written Consent
Our certificate of incorporation provides that any action required or permitted to be taken by our stockholders at an annual or special meeting of stockholders must be effected at a duly called meeting and may not be taken or effected by a written consent of stockholders.
Meetings of Stockholders
Our certificate of incorporation and by-laws provide that a special meeting of stockholders may be called only by the Chairman, if any, the President, the Chief Executive Officer or our Board of Directors unless otherwise required by law. Our by-laws provide that only those matters included in the notice of the special meeting may be considered or acted upon at that special meeting unless otherwise provided by law. In addition, our by-laws include advance notice and informational
requirements and time limitations on any director nomination or any new proposal which a stockholder wishes to make at an annual meeting of stockholders.
Director Vacancies and Removal
Our certificate of incorporation and by-laws provide that vacancies in our Board of Directors may be filled only by the affirmative vote of a majority of the remaining directors. Our certificate of incorporation provides that directors may be removed from office only with cause and only by the affirmative vote of holders of at least two-thirds of the shares then entitled to vote at an election of directors.
Ability to Adopt Stockholder Rights Plan
Our Board of Directors may in the future resolve to issue shares of preferred stock or rights to acquire such shares in order to implement a stockholder rights plan. A stockholder rights plan typically creates voting or other impediments to discourage persons seeking to gain control of Plug Power by means of a merger, tender offer, proxy contest or otherwise if our Board of Directors determines that such change in control is not in the best interests of Plug Power and our stockholders. Our Board of Directors has no present intention of adopting a stockholder rights plan and is not aware of any attempt to effect a change in control of Plug Power.
Amendment of the Certificate of Incorporation
Any amendment to our certificate of incorporation must first be approved by a majority of our Board of Directors and, if required by law, thereafter approved by a majority of the outstanding shares entitled to vote with respect to such amendment, except that any amendment to the provisions relating to stockholder action, directors, limitation of liability and the amendment of our certificate of incorporation must be approved by a super-majority of the outstanding shares entitled to vote with respect to such amendment.
Amendment of By-laws
Our certificate of incorporation and by-laws provide that our by-laws may be amended or repealed by our Board of Directors or by the stockholders. Such action by the Board of Directors requires the affirmative vote of a majority of the directors then in office. Such action by the stockholders requires the affirmative vote of at least two-thirds of the shares present in person or represented by proxy at an annual meeting of stockholders or a special meeting called for such purpose unless our Board of Directors recommends that the stockholders approve such amendment or repeal at such meeting, in which case such amendment or repeal shall only require the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting.
Statutory Business Combination Provision
Following the offering, we will be subject to Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation from consummating a "business combination," except under certain circumstances, with an "interested stockholder" for a period of three years after the date such person became an "interested stockholder" unless:
. before such person became an interested stockholder, the board of directors of the corporation approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination;
. upon the closing of the transaction that resulted in the interested stockholder's becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares held by directors who are also officers of the corporation and shares held by employee stock plans; or
. following the transaction in which such person became an interested stockholder, the business combination is approved by the board of directors of the corporation and authorized at a meeting of stockholders by the affirmative vote of the holders of 66 2/3% of the outstanding voting stock of the corporation not owned by the interested stockholder.
The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three
years, owned, 15% or more of a corporation's outstanding voting stock. The term
"business combination" includes mergers, asset sales and other similar
transactions resulting in a financial benefit to an interested stockholder.
Section 203 makes it more difficult for an "interested stockholder" to effect
various business combinations with a corporation for a three-year period. A
Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or by-laws resulting from an amendment approved by
holders of a least a majority of the outstanding voting stock. Neither our
certificate of incorporation nor our by-laws contains any such exclusion.
Trading on the Nasdaq National Market System
We have applied to have our common stock approved for quotation on the Nasdaq National Market under the symbol "PLUG".
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be the American Stock Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock, and no prediction can be made as to the effect, if any, that sales of common stock or the availability of common stock for sale will have on the market price of our common stock prevailing from time to time. Nonetheless, substantial sales of common stock in the public market following this offering, or the perception that sales could occur, could lower the market price of our common stock or make it difficult for us to raise additional equity capital in the future.
Following this offering, there will be 42,208,480 shares of our common stock outstanding on a fully diluted basis. Of these shares, the 6,000,000 shares which are being sold in this offering generally will be freely transferable without restriction or further registration under the Securities Act, except that any shares held by our "affiliates" as is defined in Rule 144 under the Securities Act may be sold only in compliance with the limitations described below.
The remaining 36,208,480 shares of common stock which will be outstanding after the offering will be "restricted securities" as defined in Rule 144, and may be sold in the future without registration under the Securities Act subject to compliance with the provisions of Rule 144 or any other applicable exemption under the Securities Act.
In connection with this offering, our existing officers, directors, and stockholders, who hold all of the currently outstanding shares of common stock and will own an aggregate of 36,208,480 shares of common stock after this offering, have agreed with the underwriters that, subject to exceptions, they will not sell or dispose of any of their shares for 180 days after the date of this prospectus. Goldman, Sachs & Co. may, in its sole discretion and at any time without notice, release all or any portion of the shares subject to such restrictions. Subject to these lock-up agreements, the shares of common stock outstanding upon the closing of the offering will be available for sale in the public market as follows:
Approximate
Number of Shares Description
---------------- ------------------------------------------------------------
After the date of this prospectus, freely tradeable shares
6,000,000 sold in the offering.
25,049,850 After 180 days from the date of this prospectus, the lock-up
period will expire and these shares will be saleable under
Rule 144 (subject, in some cases, to volume limitations).
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In general, under Rule 144 as currently in effect, assuming we are current in our public filings with the Securities Exchange Commission, a person or persons whose shares are required to be aggregated, including an affiliate of ours, and who has beneficially owned shares for at least one year is entitled to sell through a brokers transaction or in a transaction directly with a market maker, within any three-month period commencing 90 days after the date of this prospectus, a number of shares that does not exceed the greater of 1% of the then outstanding shares of common stock, which is expected to be 422,085 shares upon the completion of this offering, or the average weekly trading volume of the common stock during the four calendar weeks preceding the date on which notice of such sale is filed, subject to certain restrictions. In addition, a person who is not deemed to have been an affiliate of ours at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years would be entitled to sell such shares under Rule 144(k) without regard to the requirements described above. To the extent that shares were acquired from an affiliate of ours, such person's holding period for the purpose of effecting a sale under Rule 144 commences on the date of transfer from the affiliate.
We have agreed not to sell or otherwise dispose of any shares of common stock during the 180-day period following the date of this prospectus, except we may issue, and grant options to purchase, shares of common stock under the 1999 stock option plan and our employee stock purchase plan.
We have granted GE On-Site Power the right, on one occasion at any time after the second anniversary of this offering, to require us to register up to 3,000,000 shares of our common stock under the Securities Act. In addition, upon the closing of this offering, we will grant all of our eight current stockholders the right to include their shares of common stock in any of the first three registration statements we may file under the Securities Act.
We intend to file a registration statement on Form S-8 with respect to the aggregate of shares of common stock issuable under our stock option plans and our employee stock purchase plan promptly following the consummation of this offering. Shares issued upon the exercise of stock options after the effective date of the Form S-8 resgistration statement will be eligible for resale in the public market without restriction, subject to Rule 144 limitations applicable to affiliates and the lock-up agreements described above.
VALIDITY OF COMMON STOCK
The validity of the shares of common stock offered hereby will be passed upon for Plug Power by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Various legal matters related to the sale of the common stock offered hereby will be passed upon for the underwriters by Ropes & Gray, Boston, Massachusetts.
EXPERTS
The financial statements as of December 31, 1997 and 1998, the period from June 27, 1997 (date of inception) to December 31, 1997, and for the year ended December 31, 1998, included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration statement on Form S-1 (including the exhibits and schedules thereto) under the Securities Act and the rules and regulations thereunder, for the registration of the common stock offered hereby. This prospectus is part of the registration statement. This prospectus does not contain all the information included in the registration statement because we have omitted certain parts of the registration statement as permitted by the Securities and Exchange Commission's rules and regulations. For further information about us and our common stock, you should refer to the registration statement. Statements contained in this prospectus as to any contract, agreement or other document referred to are not necessarily complete. Where the contract or other document is an exhibit to the registration statement, each statement is qualified by the provisions of that exhibit.
You can inspect and copy all or any portion of the registration statements or any reports, statements or other information we file at the public reference facility maintained by the Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may call the Securities and Exchange Commission at 1-800-SEC-0330 for further information about the operation of the public reference rooms. Copies of all or any portion of the registration statement can be obtained from the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the registration statement is publicly available through the Securities and Exchange Commission's site on the Internet's World Wide Web, located at http://www.sec.gov.
We will also file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. You can also request copies of these documents, for a copying fee, by writing to the Securities and Exchange Commission. We intend to furnish to our stockholders annual reports containing audited financial statements for each fiscal year.
PLUG POWER, LLC
(A Development Stage Enterprise)
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of independent accountants......................................... F-2
Balance sheets as of December 31, 1997 and 1998 and June 30, 1999
(unaudited).............................................................. F-3
Statements of operations for the period from June 27, 1997 (date of
inception) to December 31, 1997, the year ended December 31, 1998, the
six months ended June 30, 1998 (unaudited), the six months ended June 30,
1999 (unaudited), and cumulative amounts from inception (unaudited)...... F-4
Statements of stockholders' equity for the period from June 27, 1997 (date
of inception) to December 31, 1997, the year ended December 31, 1998 and
the six months ended June 30, 1999 (unaudited)........................... F-5
Statements of cash flows for the period from June 27, 1997 (date of
inception) to December 31, 1997, the year ended December 31, 1998, the
six months ended June 30, 1998 (unaudited), the six months ended June 30,
1999, and cumulative amounts from inception (unaudited).................. F-6
Notes to financial statements............................................. F-7
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Members and Holders of Membership Interests
In our opinion, the accompanying balance sheets and the related statements of operations, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Plug Power, LLC (a development stage enterprise), at December 31, 1997 and 1998, and the results of its operations and its cash flows for the period from June 27, 1997 (date of inception) to December 31, 1997, and for the year ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Albany, New York
April 9, 1999
PLUG POWER, LLC
(A Development Stage Enterprise)
Balance Sheets
December 31, December 31, June 30,
1997 1998 1999
------------ ------------ -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents, principally
commercial paper..................... $3,080,181 $ 3,993,122 $17,242,734
Accounts receivable................... 803,557 599,955 1,016,402
Other current assets.................. 33,550 14,647 81,614
Due from investor..................... -- 685,306 --
---------- ----------- -----------
Total current assets................ 3,917,288 5,293,030 18,340,750
Property, plant and equipment, net...... 737,613 2,753,492 8,142,513
Investment in affiliate................. -- -- 10,749,552
Other assets............................ 191,665 46,913 --
---------- ----------- -----------
Total assets........................ $4,846,566 $ 8,093,435 $37,232,815
========== =========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable...................... $ 434,795 $ 568,007 $ 3,233,998
Accrued expenses...................... 797,864 1,746,239 1,439,454
Due to investor....................... 17,247 286,492 7,610
Current portion of capital lease
obligation........................... -- -- 90,173
---------- ----------- -----------
Total current liabilities........... 1,249,906 2,600,738 4,771,235
Capital lease obligation.............. -- -- 155,397
---------- ----------- -----------
Total liabilities................... 1,249,906 2,600,738 4,926,632
---------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Class A membership interest; no par
value, authorized 18,000,000,
25,000,000 and 40,000,000 in 1997,
1998 and 1999, respectively; issued
and outstanding; 9,500,000,
17,150,000 and 26,458,480 in 1997,
1998 and 1999, respectively.......... -- -- --
Class B membership interests; no par
value, authorized 3,000,000, none
issued............................... -- -- --
Paid-in capital....................... 9,500,000 21,012,000 67,607,964
Class A membership interests
subscribed........................... -- -- (4,697,782)
Deficit accumulated during the
development stage.................... (5,903,340) (15,519,303) (30,603,999)
---------- ----------- -----------
Total stockholders' equity.......... 3,596,660 5,492,697 32,306,183
---------- ----------- -----------
Total liabilities and stockholders'
equity............................. $4,846,566 $ 8,093,435 $37,232,815
========== =========== ===========
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The accompanying notes are an integral part of the financial statements.
PLUG POWER, LLC
(A Development Stage Enterprise)
Statements of Operations
For the period from June 27, 1997 (date of inception) to December 31, 1997, the year ended December 31, 1998, the six months ended June 30, 1998, the six months ended June 30, 1999, and cumulative amounts from inception
Cumulative
December 31, December 31, June 30, June 30, Amounts from
1997 1998 1998 1999 Inception
------------ ------------ ----------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
Contract revenue........ $ 1,193,530 $ 6,541,040 $ 2,548,653 $ 3,695,535 $ 11,430,105
Cost of contract
revenue................ 1,226,443 8,863,845 3,438,301 5,117,834 15,208,122
----------- ----------- ----------- ------------ ------------
Loss on contracts....... (32,913) (2,322,805) (889,648) (1,422,299) (3,778,017)
In-process research and
development............ 4,042,640 -- -- -- 4,042,640
Research and development
expense................ 1,300,877 4,632,729 2,153,775 7,780,246 13,713,852
General and
administrative
expense................ 630,033 2,753,645 1,328,256 6,068,486 9,452,164
----------- ----------- ----------- ------------ ------------
Operating loss......... (6,006,463) (9,709,179) (4,371,679) (15,271,031) (30,986,673)
Other income,
principally interest... 103,123 93,216 41,472 218,033 414,372
----------- ----------- ----------- ------------ ------------
Loss before equity in
losses of affiliate... (5,903,340) (9,615,963) (4,330,207) (15,052,998) (30,572,301)
Equity in losses of
affiliate.............. -- -- -- (31,698) (31,698)
----------- ----------- ----------- ------------ ------------
Net loss............... $(5,903,340) $(9,615,963) $(4,330,207) $(15,084,696) $(30,603,999)
=========== =========== =========== ============ ============
Loss per membership
interest:
Basic and diluted...... $ (0.62) $ (0.71) $ (0.40) $ (0.71)
=========== =========== =========== ============
Weighted average number
of membership interests
outstanding:........... 9,500,000 13,616,986 10,864,641 21,299,034
=========== =========== =========== ============
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The accompanying notes are an integral part of the financial statements.
PLUG POWER, LLC
(A Development Stage Enterprise)
Statements of Stockholders' Equity
For the period from June 27, 1997 (date of inception) to December 31, 1997, the year ended December 31, 1998, and the six months ended June 30, 1999
(unaudited)
Deficit
Accumulated
Class A Additional Membership During the Total
Membership Paid-in Interests Development Stockholders'
Interests Capital Subscribed Stage Equity
---------- ----------- ----------- ------------ -------------
Balance, June 27, 1997.. -- $ -- $ -- $ -- $ --
Capital contributions... 9,500,000 9,500,000 9,500,000
Net loss................ (5,903,340) (5,903,340)
---------- ----------- ----------- ------------ -----------
Balance, December 31,
1997................... 9,500,000 9,500,000 (5,903,340) 3,596,660
Capital contributions... 7,650,000 13,250,000 13,250,000
Deferred rent expense... (2,000,000) (2,000,000)
Amortization of deferred
rent expense........... 50,000 50,000
Compensatory options.... 212,000 212,000
Net loss................ (9,615,963) (9,615,963)
---------- ----------- ----------- ------------ -----------
Balance, December 31,
1998................... 17,150,000 21,012,000 (15,519,303) 5,492,697
Capital contributions... 4,808,480 31,065,564 (4,697,782) 26,367,782
Shares issued for equity
in affiliate........... 2,250,000 11,250,000 11,250,000
Stock based
compensation........... 2,250,000 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 options.... 80,400 80,400
Net loss................ (15,084,696) (15,084,696)
---------- ----------- ----------- ------------ -----------
Balance, June 30, 1999.. 26,458,480 $67,607,964 $(4,697,782) $(30,603,999) $32,306,183
========== =========== =========== ============ ===========
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The accompanying notes are an integral part of the financial statements.
PLUG POWER, LLC
(A Development Stage Enterprise)
Statements of Cash Flows
For the period from June 27, 1997 (date of inception) to December 31, 1997, the year ended December 31, 1998, the six months ended June 30, 1998, the six months ended June 30, 1999 and cumulative amounts from inception
Cumulative
December 31, December 31, June 30, June 30, Amounts from
1997 1998 1998 1999 Inception
------------ ------------ ----------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
Cash Flows From Operating
Activities:
Net loss........................ $(5,903,340) $(9,615,963) $(4,330,207) $(15,084,696) $(30,603,999)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization.. 187,708 499,142 187,673 692,967 1,379,817
In-process research and
development................... 4,042,640 -- -- -- 4,042,640
Equity in losses of affiliate.. -- -- -- 31,698 31,698
Amortization of deferred rent.. -- 50,000 -- 100,000 150,000
Write-off of deferred rent..... -- -- -- 1,850,000 1,850,000
In-kind services............... -- 500,000 -- -- 500,000
Stock based compensation....... -- -- -- 2,406,250 2,406,250
Compensatory options........... -- 212,000 106,000 80,400 292,400
Increases (decreases) in
operating assets:
Accounts receivable............ (803,557) 203,602 (267,915) (416,447) (1,016,402)
Other current assets........... (33,550) 18,903 (26,703) (66,967) (81,614)
Change in due from/due to
investor...................... 17,247 (416,061) (367,759) 406,424 7,610
Accounts payable and accrued
expenses...................... 1,184,551 1,081,587 1,066,239 2,359,206 4,625,344
Other assets................... -- -- -- 21,914 21,914
----------- ----------- ----------- ------------ ------------
Net cash used in operating
activities................... (1,308,301) (7,466,790) (3,632,672) (7,619,251) (16,394,342)
----------- ----------- ----------- ------------ ------------
Cash Flows From Investing
Activities:
Purchase of property, plant and
equipment...................... (361,518) (2,370,269) (1,876,440) (5,498,919) (8,230,706)
----------- ----------- ----------- ------------ ------------
Cash used in investing
activities................... (361,518) (2,370,269) (1,876,440) (5,498,919) (8,230,706)
----------- ----------- ----------- ------------ ------------
Cash Flows From Financing
Activities:
Contributed capital............. 4,750,000 10,750,000 4,250,000 26,367,782 41,867,782
----------- ----------- ----------- ------------ ------------
Cash provided by financing
activities................... 4,750,000 10,750,000 4,250,000 26,367,782 41,867,782
----------- ----------- ----------- ------------ ------------
Increase (decrease) in cash...... 3,080,181 912,941 (1,259,112) 13,249,612 17,242,734
Cash and cash equivalents,
beginning....................... -- 3,080,181 3,080,181 3,993,122 --
----------- ----------- ----------- ------------ ------------
Cash and cash equivalents,
ending.......................... $ 3,080,181 $ 3,993,122 $ 1,821,069 $ 17,242,734 $ 17,242,734
=========== =========== =========== ============ ============
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The accompanying notes are an integral part of the financial statements.
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 and 1999 amounts are unaudited
1. Nature of Operations
Plug Power, LLC (Company), was formed as a joint venture between Edison Development Corporation (EDC) and Mechanical Technology Incorporated (MTI) on June 27, 1997. The Company is a development stage enterprise formed to research, develop, manufacture and distribute fuel cells for electric power generation.
The unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented.
2. Significant Accounting Policies
Use of estimates:
The financial statements of the Company have been prepared in conformity with generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents:
Cash and cash equivalents include cash on hand and short term investments with original maturities of three months or less.
Inventories:
Inventories are stated at lower of cost (first-in, first-out) or market.
Property, plant and equipment, and long-lived assets:
Property, plant and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives ranging from 2 to 10 years.
The Company reviews long-lived assets and identifiable intangible assets for impairment whenever any events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.
Revenue recognition:
The Company's contract revenue is derived from revenues earned under contracts principally with government agencies. Such contracts require the Company to deliver research and tangible developments in fuel cell technology and system design and prototype fuel cell systems for test and evaluation by the government agency. Revenues are recognized in proportion to the costs incurred. Total estimated cost to complete a contract in excess of the awarded contract amounts are charged to operations during the period such costs are estimated. While the Company's accounting for these contract costs are subject to audit by the sponsoring agency, in the opinion of management, no material adjustments are expected as a result of such audits.
The Company generally is required to absorb from 25% to 50% of the total costs incurred on government contracts. At June 30, 1999 the Company has been awarded approximately $40 million of such government contracts.
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
2. Significant Accounting Policies, continued
At December 31, 1998 and at June 30, 1999, $25,688 of retainage was owed to the Company and is included in accounts receivable.
Recent Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information"(SFAS 131). SFAS 131 establishes new standards for the way companies report information about operating segments in annual financial statements. The disclosures prescribed by SFAS 131 are effective for the year ended December 31, 1998. We do not believe we operate in more than one segment.
3. Inventories
Inventories at December 31, 1997 and 1998, and June 30, 1999 consist of unbilled work-in-progress on research contracts of $20,911 and $14,647, and $53,087 respectively, and are included in other current assets.
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 1997 and 1998 and June 30, 1999 consisted of the following:
December 31, December 31
1997 1998 June 30, 1999
------------ ----------- -------------
Leasehold improvements.. $ 36,778 $ 97,889 $ 97,889
Machinery and
equipment.............. 817,643 3,104,887 5,562,223
Construction in
progress............... 3,287,153
--------- ---------- ----------
854,421 3,202,776 8,947,265
Less accumulated
depreciation........... (116,808) (449,284) (804,752)
--------- ---------- ----------
Property, plant and
equipment, net......... $ 737,613 $2,753,492 $8,142,513
========= ========== ==========
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Depreciation and amortization expense was approximately $29,375 for the period from June 27, 1997 (date of inception) to December 31, 1997, $332,476 for the year ended December 31, 1998, and $104,340 and $355,468 for the six months ended June 30, 1998 and 1999, respectively.
As of June 30, 1999, the Company has committed to approximately $4 million of additional capital expenditures. The Company also leased equipment under a capital lease transaction subsequent to December 31, 1998 with a net book value at June 30, 1999 of $248,110 which is included in machinery and equipment. Future minimum non-cancelable lease payments are as follows:
1999.............................................................. $ 58,921
2000.............................................................. 93,022
2001.............................................................. 93,022
2002.............................................................. 34,068
2003.............................................................. 5,368
---------
284,401
Less amounts representing interest................................ (38,831)
---------
$ 245,570
=========
|
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
5. Loss Per Membership Interest
Loss per membership interest for the Company is as follows:
June 27, 1997 Six months
to Year ended ended Six months
December 31, December 31, June 30, ended
1997 1998 1998 June 30, 1999
------------- ------------ ----------- -------------
Numerator:
Net loss............... $(5,903,340) $(9,615,963) $(4,330,207) $(15,084,696)
Denominator:
Weighted average
membership interests
outstanding........... 9,500,000 13,616,986 10,864,661 21,299,034
|
No options, warrants, or contingently issuable membership interests were included in the calculation of diluted loss per membership interest because their impact would have been anti-dilutive.
6. Income Taxes
The Company's income taxes or credits resulting from earnings or losses were payable by, or accrued to, its members. Therefore, no provision has been made for income taxes in these financial statements.
7. Stockholders' Equity
The Company has two classes of membership interests, Class A voting and Class B non voting interests. All Class B membership interests will be converted to Class A membership interests on the earlier of (1) the date on which the Company (or its successor) files a registration statement for the public sale of interests in the Company (or shares of a successor), under the Securities Act of 1933; or (2) approval by a majority of the Class A membership interests, of (a) a sale, lease, assignment, transfer or other conveyance of all or substantially all of the assets of the Company, or (b) a merger, combination or dissolution of the Company. At December 31, 1998 and June 30, 1999, 3,000,000 Class B membership interests were reserved for issuance under the membership option plan. At June 30, 1999, 9,750,000 Class A membership interests are reserved for warrant exercises and capital calls. Subsequent to June 30, 1999, an additional 1,300,000 Class B membership interests were authorized for issuance, for a total of 4,300,000.
In exchange for EDC's initial cash contribution of $4,750,000, the Company issued 4,750,000 Class A membership interests in the Company. MTI made noncash contributions of $4,750,000 consisting of in-process research and development ($4,042,640), and certain net assets, in exchange for 4,750,000 Class A membership interests. The 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.
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
7. Stockholders' Equity, continued
During the year ended December 31, 1998, EDC and MTI made additional total contributions of $13,250,000 in exchange for 7,650,000 Class A membership interests. EDC contributed $7,750,000 in cash for 4,950,000 Class A membership interests. MTI contributed $3,000,000 in cash, $2,000,000 of deferred rent related to a below market lease for office and manufacturing facilities, and $500,000 of in-kind services ($5,500,000 in total) for 2,700,000 Class A membership interests. In 1998, MTI purchased options for $191,250, which entitled MTI to acquire 2,250,000 Class A membership interests by June, 1999 for $2,250,000.
According to the joint venture agreement, MTI may earn non-cash credits which will be applied toward the purchase price of Class A membership interests under option. MTI can earn these credits based on the Company obtaining certain defined levels of research contracts. In March 1999, all parties to the agreement mutually agreed that MTI had earned $2,250,000 of non-cash credit which were used to acquire 2,250,000 Class A membership interests.
Accordingly, these interests were issued in March 1999, a charge to operations of $2,250,000 was recorded under the caption "General and Administrative Expense," and $191,250 was returned to MTI in accordance with the terms of the option agreement.
A summary of equity transactions from inception through June 30, 1999 is as follows:
Membership
Number of Price per Total Paid Interests
Date Shares Share Cash Non-cash in Capital Subscribed
---- ---------- --------- ----------- ----------- ----------- -----------
June, 1997................... 4,750,000 $1.00 $ 4,750,000 $ $ 4,750,000 $
June, 1997................... 4,750,000 1.00 4,750,000 4,750,000
---------- ----------- ----------- ----------- -----------
December 31, 1997............ 9,500,000 4,750,000 4,750,000 9,500,000
April and June, 1998......... 4,250,000 1.00 4,250,000 4,250,000
June, 1998................... 2,000,000 1.00 2,000,000 2,000,000
August, 1998................. 300,000 5.00 1,500,000 1,500,000
August, 1998................. 100,000 5.00 500,000 500,000
October, November, and
December, 1998.............. 1,000,000 5.00 5,000,000 5,000,000
---------- ----------- ----------- ----------- -----------
Capital contributions, 1998 7,650,000 10,750,000 2,500,000 13,250,000
Deferred rent expense........ (2,000,000) (2,000,000)
Amortization of deferred rent
expense..................... 50,000 50,000
Compensatory options......... 212,000 212,000
---------- ----------- ----------- ----------- -----------
December 31, 1998............ 17,150,000 15,500,000 5,512,000 21,012,000
January and February, 1999... 600,000 5.00 3,000,000 3,000,000
February, 1999............... 1,500,000 6.67 10,000,000 10,000,000
April and June, 1999(a)...... 2,004,165 6.67 13,367,782 13,367,782
June, 1999................... 704,315 6.67 4,697,782 4,697,782 (4,697,782)
---------- ----------- ----------- ----------- -----------
Capital contributions,
1999...................... 4,808,480 26,367,782 4,697,782 31,065,564 (4,697,782)
Share issued for equity in
affiliate, February, 1999... 2,250,000 5.00 11,250,000 11,250,000
Stock based compensation,
March 1999(b)............... 2,250,000 1.00 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 options......... 80,400 80,400
---------- ----------- ----------- ----------- -----------
June 30, 1999................ 26,458,480 $41,867,782 $25,740,182 $67,607,964 $(4,697,782)
========== =========== =========== =========== ===========
|
(a) Excludes $840,000 of in-kind marketing services not yet provided.
(b) Represents exercise of April, 1998 option.
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
8. Related Party Transactions
On June 27, 1997, the Company entered into a distribution agreement with the EDC. Under the agreement, EDC was appointed the Company's exclusive independent distributor in Michigan, Ohio, Indiana and Illinois to promote and assist in the sale of products developed by the Company, subject to certain terms and conditions.
On June 27, 1997, the Company entered into a management services agreement with MTI to obtain certain services and lease certain facilities for a period of one year. At the expiration of this agreement, the Company extended the existing facilities lease through September 30, 1998. In June 1998, the Company entered into a new facilities lease which commenced on October 1, 1998, and had a term of ten years with an option for an additional five years. Rental expense was $79,000 for the period from June 27, 1997 (date of inception) to December 31, 1997, and $378,000 for the year ended December 31, 1998. Rental expense was $256,000 and $215,000 for the six months ended June 30, 1998 and 1999, respectively. The total amount due MTI was $17,247, $286,492 and $7,610 at December 31, 1997, December 31, 1998 and June 30, 1999, respectively.
As part of the new facilities lease, MTI agreed to reimburse the Company up to $2.0 million for improvements made to the Company's facilities. At December 31, 1998, $685,306 in Company expenditures had not yet been reimbursed by MTI, and is included in due from investor. Subsequent to June 30, 1999, the lease and the management agreement with MTI were terminated in connection with MTI's contribution of its real estate to the Company in exchange for Class A membership interests (see Note 10).
9. Employee Benefit Plans
Membership Option Plan:
Effective July 1, 1997, the Company established a Membership Option Plan (the Plan) to provide employees an option to purchase Class B membership interests. Employee options generally vest 20% per year and expire ten years after issuance. Options granted to the Board of Managers vest 50% upon grant and 25% per year thereafter. Options granted to consultants vest one-third on expiration of the consultant's initial contract term with an additional one- third vesting on each anniversary thereafter. Except as discussed below, no options can be exercised prior to July 1, 2000. All options granted shall become immediately vested and exercisable in the event of the sale of all or substantially all of the Company's assets, or in the event of the sale of all or substantially all of the Company's Class A Membership interests. All vested options shall become immediately exercisable in the event the Company's Class A membership interests become publicly traded. At June 30, 1999, there are 3,000,000 interests authorized for issuance under the Plan. Subsequent to June 30, 1999, an additional 1,300,000 interests were authorized for issuance, for a total of 4,300,000.
The following table summarizes information about the membership options outstanding under the Plan at December 31, 1998:
Outstanding
---------------------------- ---
Average Weighted
Remaining Average
Life Exercise
Exercise Price Interests (Years) Price
-------------- --------- --------- --------
$ 1.00...................................... 1,435,200 8.9 $1.00
$ 5.00...................................... 240,000 9.8 5.00
--------- --- -----
1,675,200 9.1 1.57
--------- --- -----
|
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
9. Employee Benefit Plans, continued
The following table summarizes information about the membership options outstanding under the Plan at June 30, 1999:
Outstanding
----------------------------
Average Weighted
Remaining Average
Life Exercise
Exercise Price Interests (Years) Price
-------------- --------- --------- --------
$ 1.00.......................................... 1,435,200 8.4 $1.00
$ 5.00.......................................... 583,039 9.6 5.00
$ 6.67.......................................... 591,500 10.0 6.67
---------
2,609,739 9.0 3.18
=========
|
The following table summarizes activity of the Plan:
Weighted
Average
Number of Exercise
Interests Price
Under Per
Option Activity Option Interest
--------------- --------- --------
Balance, June 27, 1997................................... -- $--
Granted at fair value.................................... 1,132,500 1.00
Forfeited or terminated.................................. (18,500) 1.00
---------
Balance December 31, 1997................................ 1,114,000 1.00
Granted below fair value................................. 197,000 1.00
Granted at fair value.................................... 460,650 3.09
Forfeited or terminated.................................. (96,450) 1.03
---------
Balance December 31, 1998................................ 1,675,200 1.57
---------
Granted at fair value.................................... 934,539 6.06
---------
Balance at June 30, 1999................................. 2,609,739 3.12
=========
|
Accounting for Stock Based Compensation:
The per share weighted average fair value of the options granted during 1997, 1998 and 1999 was $0.26, $0.58 and $1.45, respectively, using the minimum value method of valuing stock options under Statement of Financial Accounting Standard No. 123 (SFAS No.123) "Accounting for Stock-Based Compensation".
The dividend yield was assumed to be $0 for all periods. The risk free interest rate ranged from 5.8% to 6.1% in 1997 and 4.5% to 5.6% in 1998, and 5.1% to 5.7% in 1999. An expected life of five years was assumed. The Company applies Accounting Principles Board Opinion No. 25 in accounting for the Plan and does not record compensation cost for options granted at fair value.
During 1998 the Company awarded 197,000 options to key employees for which issuance was contingent upon the attainment of specified performance objectives. Of those awarded, 51,500 were forfeited. The difference between the fair value of the membership interests at the measurement date and the exercise price of the options was $582,000, and will be charged to expense over the four
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
9. Employee Benefit Plans, continued
year vesting period of the options. The charge to operations was $212,000 and $80,400 for the year ended December 31, 1998 and for the six months ended June 30, 1999, respectively.
Had the Company determined compensation cost based on fair value in accordance with SFAS 123, the Company's net loss would have increased to the pro forma amounts indicated below:
Six months
June 27, 1997 Year ended ended
to December 31, December 31, June 30,
1997 1998 1999
--------------- ------------ -------------
Net loss, as reported............. $ (5,903,340) $ (9,615,963) $ (15,084,696)
Proforma net loss................. (6,000,628) (9,775,441) (15,197,507)
Proforma loss per membership in-
terest, basic and
diluted.......................... $ (0.63) $ (0.72) $ (0.71)
|
401(k) Savings & Retirement Plan:
The Company offers a 401(k) Savings & Retirement Plan to eligible employees meeting certain age and service requirements. This plan permits participants to contribute up to 15% of their salary, up to the maximum allowable by the Internal Revenue Service regulations. Participants are immediately vested in their voluntary contributions plus actual earnings thereon. Participants are vested in the Company's matching contribution based on the years of service completed. Participants are fully vested upon completion of four years of service. The Company's expense for this plan was $23,000 for the period from June 27, 1997 (date of inception) to December 31, 1997 and $95,000 for the year ended December 31, 1998. The Company's expense for this plan was $34,000 and $90,000 for the six months ended June 30, 1998 and 1999, respectively.
10. Subsequent Events (Unaudited)
Capital Call:
Effective January 26, 1999, the Company entered into an agreement with MTI and EDC. The agreement provides that the Company has the right to call upon MTI and EDC to make capital contributions (Capital Call), at any time through December 31, 2000, if the Company determines that it requires additional funds, as follows:
. The agreement requires both MTI and EDC to each fund capital calls of up to $7.5 million in 1999 and $15 million in 2000 (Capital Commitment).
. In exchange for such Capital Commitment, MTI and EDC will receive Class A membership interests from the Company at $7.50 per interest.
. MTI and EDC will share the Capital Commitment equally.
. The Company's Board of Managers will determine when there is a requirement for additional funds.
. MTI and EDC shall have sixty days from the date of such determination to tender their payment to the Company.
The agreement will terminate on the earlier of i) December 31, 2000 or ii) an initial public offering of shares by the Company at a price of greater than $7.50 per share (Termination Date).
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
10. Subsequent Events (Unaudited), continued
Under an amendment to the agreement, the Company has also agreed to permit MTI and EDC to make capital contributions on the Termination Date, whether or not such funds have been called, to the extent of their Capital Commitment. Such contributions will be made at a fixed price of $7.50 per Class A membership interest.
If the Company makes a Capital Call and either MTI or EDC fail to make the required capital contribution (Defaulting Member), then such Defaulting Member shall permanently forfeit the right to receive the interests it is entitled to under the agreement (Defaulted Interests). Additionally, to the extent of outstanding Capital Commitments, the Defaulting Member shall forfeit the right to receive additional interests equal to two times the Defaulted Interests. The non-defaulting Member may then elect to fund the Defaulting Member's share of the Capital Call in exchange for membership interests at the fixed price of $7.50 per interest.
Subsequent to June 30, 1999, the Company made a capital call on EDC and MTI in the amount of $4,000,005, representing 266,667 Class A membership interests each at $7.50 per share.
GE On-Site Power:
In February 1999, the Company entered into an agreement with GE On-Site Power, Inc. (a wholly owned subsidiary of General Electric Co.) to create GE Fuel Cell Systems, L.L.C. (GEFCS) a limited liability company created to market and distribute fuel cell systems world-wide. GE On-Site Power, Inc. owns 75% of the new entity and the Company owns 25% of the new entity.
As part of the agreement, the Company will work closely with General Electric's Corporate Research and Development Center for product development and manufacturing support. GEFCS will market, sell, install and service fuel cells systems, designed and manufactured by the Company, world-wide (with the exception of EDC's exclusive four state territory of Michigan, Ohio, Indiana and Illinois) for residential and small business power applications up to 35kW. In addition, the Company entered into a ten year distribution agreement with GEFCS that requires GEFCS purchase from the Company a specified number of pre- commercial units by December 31, 2000.
In accordance with the terms of the agreement, General Electric will provide capital, in the form of loans, to fund the purchase of pre-commercial units during the period ending December 31, 2000. General Electric will also provide additional capital, in the form of a loan not to exceed $8.0 million, to fund the operations of GEFCS. The Company has agreed to purchase a minimum of $12.0 million of technical support services over a three year period and extend the term of the distribution agreement by five years to 2009.
In connection with the formation of GEFCS, the Company issued 2,250,000 Class A membership interests to GE On-Site Power, Inc. in exchange for a 25% interest in GEFCS. Of these, 750,000 interests vested immediately and the remaining 1,500,000 interests in August 1999. As of the date of the issuance of such interests, the Company capitalized $11,250,000, the fair value of the interests issued, under the caption "Investment in Affiliate."
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
10. Subsequent Events (Unaudited), continued
The Company 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". At June 30, 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 $10,749,552. Such amount is being amortized on the straight line basis over a ten year period.
The Company also issued warrants to purchase 3,000,000 additional Class A
membership interests at $12.50 per interest. These warrants expire the later of
i) December 31, 2000, ii) twelve months after an initial public offering of
shares, by the Company, at a price less than $12.50 per share, or iii) an
initial public offering of shares, by the Company, at a price of at least
$12.50 per share.
Other Financing Transactions:
During the first quarter of 1999 MTI and EDC each purchased 300,000 Class A membership interests for $1.5 million each.
In February 1999, two investors purchased 1,500,000 Class A membership
interests for $10.0 million. In addition, one of the investors received a
warrant to purchase 400,000 Class A membership interests at a price of $8.50
per interest. These warrants expire at the earliest of i) December 31, 2001,
ii) an initial public offering of the Company, at a price of at least $8.50 per
share, or iii) eighteen months after an initial public offering of shares by
the Company at a price less than $8.50 per share.
In April 1999 an investor purchased 299,850 Class A membership interests for $2.0 million.
In April 1999, an investor purchased 1,000,000 Class A membership interests for $6.7 million. In connection with the purchase agreement, the investor is required to spend an aggregate of $840,000 for market research and related services on behalf of the Company. In the event such amounts are not expended by April, 2002, up to 111,851 of the previously issued interests may be returned to the Company. The Company will account for these services by recording a charge to earnings and a credit to paid-in capital as these services are rendered. As of June 30, 1999, no services had been provided. Additionally, the investor received warrants to purchase an additional 350,000 Class A membership interests at an exercise price of $8.50 per interest. These warrants terminate on the earliest of i) December 31, 2001, ii) an initial public offering of shares, by the Company, at a price of at least $8.50 per share, or iii) twelve months after an initial public offering of shares, by the Company, at a price less than $8.50 per share.
On June 23, 1999, EDC purchased 704,315 interests of the Company's Class A membership interests for $4,697,782. Also, the Company entered into a purchase agreement with MTI to acquire approximately 36 acres of land, two commercial buildings and a residential building located in Latham, New York in exchange for 704,315 Class A membership interests.
As part of the transaction, the Company assumed a $6.2 million letter of credit to KeyBank National Association. In connection with the agreement, the Company was required to escrow $6.2 million. The KeyBank debt was issued for the express purpose of servicing debt related to $6.2 million of Industrial Development Revenue (IDR) Bonds issued by the Town of Colonie Industrial Development Agency.
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
10. Subsequent Events (Unaudited), continued
The transaction closed on July 7, 1999, and a receivable for membership interests of $4,697,782 is recorded as membership interests subscribed as of June 30, 1999. Simultaneous with the July closing, the Company agreed to lease back to MTI certain office and manufacturing space on a short-term basis.
In connection with the transaction with MTI, the Company has written off deferred rent expense in the amount of $1,850,000 relating to a 10-year facilities lease associated with the property.
Option Remeasurement:
Subsequent to June 30, 1999, the Company modified the terms of an employee's option. The impact of this modification will result in a charge to earnings of between $680,000 and $800,000 in the fourth quarter of 1999.
Line of Credit:
In October 1999, the Company entered into a loan agreement for a $6.0 million line of credit from KeyBank, N.A. The line of credit bears interest at the prime rate in effect from time to time, matures upon the earlier of the closing of the offering or November 30, 1999, and is collateralized by an assignment of our right to call capital from Mechanical Technology and Edison Development.
Initial Public Offering:
The Company is currently undertaking an initial public offering. In the event that the public offering becomes effective, the Company will be converted from a limited liability corporation to a C corporation with one class of common stock and authorization to issue preferred stock. In connection with this conversion, the Company would then be subject to state and federal income taxes and would account for income taxes under SFAS 109, "Accounting for Income Taxes". In addition, it is expected that the Company will revise its employee membership interest plan and implement an employee stock purchase plan.
UNDERWRITING
Plug Power and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co., Hambrecht & Quist LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and FAC/Equities, a division of First Albany Corporation, are the representatives of the underwriters.
Underwriters Number of Shares
------------ ----------------
Goldman, Sachs & Co.........................................
Hambrecht & Quist LLC.......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................
FAC/Equities, a division of First Albany Corporation........
---------
Total..................................................... 6,000,000
=========
|
If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to buy up to an additional 900,000 shares from Plug Power to cover such sales. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters by Plug Power. Such amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.
Paid by Plug Power
------------------
No Exercise Full Exercise
----------- -------------
Per Share.......................................... $ $
Total.............................................. $ $
|
Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. Any such securities dealers may resell any shares purchased from the underwriters to certain other brokers or dealers at a discount of up to $ per share from the initial offering price. If all the shares are not sold at the initial offering price, the representatives may change the offering price and the other selling terms.
Plug Power, its directors, officers and persons owning its common stock have agreed with the underwriters not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of the representatives. This agreement does not apply to gifts or transfers to affiliates or transactions under any existing employee benefit plans. Please see "Shares Eligible for Future Sale" for a discussion of various transfer restrictions.
At Plug Power's request, the underwriters have reserved up to 300,000 shares of the common stock offered hereby for sale, at the initial public offering price, to employees, customers and other friends of Plug Power through a directed share program. The number of shares available for sale to
the general public will be reduced to the extent these persons purchase the reserved shares. There can be no assurance that any of the reserved shares will be so purchased. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as other shares offered hereby.
Prior to the offering, there has been no public market for the shares. The initial public offering price will be negotiated among Plug Power and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be Plug Power's historical performance, estimates of the business potential and earnings prospects of Plug Power, an assessment of Plug Power's management and the consideration of the above factors in relation to market valuation of companies in related businesses.
Application has been made for quotation of the common stock on the Nasdaq National Market under the symbol of "PLUG".
In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the common stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. These transactions may be effected on the Nasdaq National Market, in the over-the-counter market or otherwise.
The underwriters may not confirm sales to discretionary accounts without the prior written approval of the customer.
Plug Power estimates that its share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $820,000.
Because of the relationships between First Albany Corporation and Plug Power, the offering is being conducted in accordance with Rule 2720 of the National Association of Securities Dealers. See "Certain Relationships and Related Transactions". That rule requires that the initial public offering price can be no higher than that recommended by a "qualified independent underwriter", as defined by the NASD. Goldman, Sachs & Co. has served in that capacity and performed due diligence investigations and reviewed and participated in the preparation of the registration statement of which this prospectus forms a part. Goldman, Sachs & Co. has received $10,000 from Plug Power as compensation for such role.
Plug Power has agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act of 1933.
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
TABLE OF CONTENTS
Page
----
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Historical Financial Data....................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 30
Management............................................................... 45
Certain Relationships and Related Transactions........................... 54
Principal Stockholders................................................... 58
Description of Capital Stock............................................. 60
Shares Eligible For Future Sale.......................................... 64
Validity of Common Stock................................................. 65
Experts.................................................................. 65
Where You Can Find More Information...................................... 65
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
|
Through and including , 1999 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
6,000,000 Shares
Common Stock
PROSPECTUS
Goldman, Sachs & Co.
Hambrecht & Quist
Merrill Lynch & Co.
FAC/Equities
Representatives of the Underwriters
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses payable by us in connection with the offering (excluding underwriting discounts and commissions):
Nature of Expense Amount
----------------- --------
SEC Registration Fee.................................................. $ 32,610
NASD Filing Fee....................................................... 12,230
Nasdaq National Market Listing Fee.................................... 66,875
Accounting Fees and Expenses.......................................... 180,000
Legal Fees and Expenses............................................... 310,000
Printing Expenses..................................................... 130,000
Blue Sky Qualification Fees and Expenses.............................. 35,000
Transfer Agent's Fee.................................................. 4,000
Miscellaneous......................................................... 49,285
--------
TOTAL............................................................... $820,000
========
|
The amounts set forth above, except for the Securities and Exchange Commission and National Association of Securities Dealers, Inc. fees, are in each case estimated.
Item 14. Indemnification of Directors and Officers
In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of our amended and restated certificate of incorporation provides
that no director of Plug Power shall be personally liable to Plug Power or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the director's duty of loyalty to
Plug Power or its stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) in
respect of unlawful dividend payments or stock redemptions or repurchases, or
(4) for any transaction from which the director derived an improper personal
benefit. In addition, our amended and restated certificate of incorporation
provides that if the Delaware General Corporation Law is amended to authorize
the further elimination or limitation of the liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
Article V of our amended and restated by-laws provides for indemnification by Plug Power of its officers and certain non-officer employees under certain circumstances against expenses, including attorneys fees, judgments, fines and amounts paid in settlement, reasonably incurred in connection with the defense or settlement of any threatened, pending or completed legal proceeding in which any such person is involved by reason of the fact that such person is or was an officer or employee of the registrant if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of Plug Power, and, with respect to criminal actions or proceedings, if such person had no reasonable cause to believe his or her conduct was unlawful.
Item 15. Recent Sales of Unregistered Securities
Since its formation in June 1997, Plug Power has issued the following securities that were not registered under the Securities Act of 1933, as amended (the "Securities Act"). The shares of capital
II-1
stock and other securities issued in the following transactions were offered and sold in reliance upon the following exemptions: (i) in the case of the transactions described in (a) below, Section 4(2) of the Securities Act or Regulation D promulgated thereunder relative to sales by an issuer not involving a public offering; and (ii) in the case of the transactions described in (b) below, Section 3(b) of the Securities Act and Rule 701 promulgated thereunder relative to sales pursuant to certain compensatory benefits plans.
(a) Issuance of Capital Stock:
(i) In June 1997, Plug Power sold 4,750,000 shares of its common stock for an aggregate purchase price of $4,750,000 to Edison Development.
(ii) In June 1997, Plug Power sold 4,750,000 shares of its common stock for an aggregate purchase price of $4,750,000 to Mechanical Technology.
(iii) In April 1998, Plug Power sold 2,250,000 shares of its common stock for an aggregate purchase price of $2,250,000 to Edison Development.
(iv) In April 1998, Plug Power sold options to purchase an aggregate of 250,000 shares of its common stock at an exercise price of $1.00 per share to Mechanical Technology for a purchase price of $21,250.
(v) In June 1998, Plug Power sold 2,000,000 shares of its common stock for an aggregate purchase price of $2,000,000 to Edison Development.
(vi) In June 1998, Plug Power sold 2,000,000 shares of its common stock in consideration of a below-market real estate leasehold interest to Mechanical Technology.
(vii) In June 1998, Plug Power sold options to purchase an aggregate of 2,000,000 shares of its common stock at an exercise price of $1.00 per share to Mechanical Technology for a purchase price of $170,000.
(viii) In August 1998, Plug Power sold 200,000 shares of its common stock for an aggregate purchase price of $1,000,000 to Edison Development.
(ix) In August 1998, Plug Power sold 200,000 shares of its common stock for an aggregate purchase price of $1,000,000 to Mechanical Technology.
(x) In October 1998, Plug Power sold 200,000 shares of its common stock for an aggregate purchase price of $1,000,000 to Edison Development.
(xi) In October 1998, Plug Power sold 200,000 shares of its common stock for an aggregate purchase price of $1,000,000 to Mechanical Technology.
(xii) In November 1998, Plug Power sold 200,000 shares of its common stock for an aggregate purchase price of $1,000,000 to Edison Development.
(xiii) In November 1998, Plug Power sold 200,000 shares of its common stock for an aggregate purchase price of $1,000,000 to Mechanical Technology.
(xiv) In December 1998, Plug Power sold 100,000 shares of its common stock for an aggregate purchase price of $500,000 to Edison Development.
(xv) In December 1998, Plug Power sold 100,000 shares of its common stock for an aggregate purchase price of $500,000 to Mechanical Technology.
(xvi) In January 1999, Plug Power sold 100,000 shares of Plug Power's common stock for an aggregate purchase price of $500,000 to Edison Development.
(xvii) In January 1999, Plug Power sold 100,000 shares of Plug Power's common stock for an aggregate purchase price of $500,000 to Mechanical Technology.
II-2
(xviii) In January 1999, pursuant to an Equity Contribution and Warrant Agreement, Plug Power granted each of Mechanical Technology and Edison Development warrants to purchase up to 3,000,000 shares of Plug Power's common stock at an exercise price of $7.50 per share.
(xix) In February 1999, Plug Power sold 200,000 shares of Plug Power's common stock for an aggregate purchase price of $1,000,000 to Edison Development.
(xx) In February 1999, Plug Power sold 200,000 shares of Plug Power's common stock for an aggregate purchase price of $1,000,000 to Mechanical Technology.
(xxi) In February 1999, Plug Power sold 2,250,000 shares of Plug Power's common stock to GE On-Site Power, Inc. in consideration of Plug Power's receipt of a 25% interest in GE Fuel Systems, LLC.
(xxii) In February 1999, Plug Power sold 1,440,000 shares of Plug Power's common stock for an aggregate purchase price of $9,600,000 to Michael Cudahy.
(xxiii) In February 1999, Plug Power granted warrants to purchase an aggregate of 400,000 shares of Plug Power's common stock to Michael Cudahy at an exercise price of $8.50 per share.
(xxiv) In February 1999, Plug Power sold 60,000 shares of Plug Power's common stock for an aggregate purchase price of $400,000 to Kevin Lindsey.
(xxv) In February 1999, Plug Power granted a warrant to purchase up to 3,000,000 shares of Plug Power's common stock to GE On-Site Power, Inc. at an exercise price of $12.50 per share.
(xxvi) In March 1999, Plug Power issued 2,250,000 shares of Plug Power's common stock to Mechanical Technology upon the exercise of its outstanding options in consideration of the application by Mechanical Technology of certain non-cash research credits towards the exercise price.
(xxvii) In April 1999, Plug Power sold 299,850 shares of Plug Power's common stock for an aggregate purchase price of $2,000,000 to Antaeus Enterprises, Inc.
(xxviii) In April 1999, Plug Power sold 1,000,000 shares of Plug Power's common stock for an aggregate purchase price of $6,670,000 to Southern California Gas Company.
(xxix) In April 1999, Plug Power granted warrants to purchase an aggregate of 350,000 shares of Plug Power's common stock to Southern California Gas Company at an exercise price of $8.50 per share.
(xxx) In June 1999, Plug Power sold 704,315 shares of Plug Power's common stock for an aggregate purchase price of $4,697,782 to Edison Development.
(xxxi) In June 1999, Plug Power sold 704,315 shares of Plug Power's common stock in consideration of the net asset value of certain real estate to Mechanical Technology.
(xxxii) In September 1999, Plug Power sold 266,667 shares of Plug Power's common stock at an exercise price of $7.50 per share to Mechanical Technology.
(xxxiii) In September 1999, Plug Power sold 266,667 shares of Plug Power's common stock at an exercise price of $7.50 per share to Edison Development.
(b) Grants of Stock Options (i) As of September 30, 1999, options to purchase 3,377,189 shares of common stock were outstanding under Plug Power's Membership Option Plan of which options to purchase 1,220,782 shares are exercisable within 60 days of such date. None of the outstanding options have been exercised. All such options were granted between June 1997 and July 1999 to officers, directors, employees, consultants and advisors of Plug Power.
II-3
Item 16. Exhibits and Financial Statement Schedules
Exhibit Page
Number Description No.
------- --------------------------------------------------------------- ----
.1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Merger by and between Plug Power and Plug
Power, LLC, a Delaware limited liability company, dated as of
October 7, 1999 (excluding schedules, which Plug Power agrees
to furnish supplementally to the Commission upon request).
.3.1 Certificate of Incorporation of Plug Power.
3.2 Amended and Restated Certificate of Incorporation of Plug Power
(to be filed immediately prior to the consummation of the
offering referred to in the Registration Statement).
.3.3 By-laws of Plug Power.
3.4 Amended and Restated By-laws of Plug Power.
.4.1 Specimen certificate for shares of common stock, $.01 par
value, of Plug Power.
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of
the securities being offered.
+10.1 Amended and Restated Limited Liability Company Agreement of GE
Fuel Cell Systems, LLC, dated February 3, 1999, between GE On-
Site Power, Inc. and Plug Power, LLC.
.10.2 Contribution Agreement, dated as of February 3, 1999, by and
between GE On-Site Power, Inc. and Plug Power, LLC.
.10.3 Trademark and Trade Name Agreement, dated as of February 2,
1999, between General Electric Company and GE Fuel Cell
Systems, LLC.
.10.4 Trademark Agreement, dated as of February 2, 1999, between Plug
Power LLC and GE Fuel Cell Systems, LLC.
+10.5 Distributor Agreement, dated as of February 2, 1999, between GE
Fuel Cell Systems, LLC and Plug Power, LLC.
.10.6 Side letter agreement, dated February 3, 1999, between General
Electric Company and Plug Power LLC.
.10.7 Mandatory Capital Contribution Agreement, dated as of January
26, 1999, between Edison Development Corporation, Mechanical
Technology Incorporated and Plug Power, LLC and amendments
thereto, dated August 25, 1999 and August 26, 1999.
.10.8 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Michael J. Cudahy.
.10.9 Warrant Agreement, dated as of February 16, 1999, between Plug
Power, LLC and Michael J. Cudahy and amendment thereto, dated
July 26, 1999.
.10.10 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Kevin Lindsey.
.10.11 LLC Interest Purchase Agreement, dated as of April 1, 1999,
between Plug Power, LLC and Antaeus Enterprises, Inc.
.10.12 LLC Interest Purchase Agreement, dated as of April 9, 1999,
between Plug Power, LLC and Southern California Gas Company.
.10.13 Warrant Agreement, dated as of April 9, 1999, between Plug
Power, LLC and Southern California Gas Company and amendment
thereto, dated August 26, 1999.
+10.14 Agreement, dated as of June 26, 1997, between the New York
State Energy Research and Development Authority and Plug Power
LLC, and amendments thereto dated as of December 17, 1997 and
March 30, 1999.
+10.15 Agreement, dated as of January 25, 1999, between the New York
State Energy Research and Development Authority and Plug Power
LLC.
.10.16 Agreement, dated as of September 30, 1997, between Plug Power
LLC and the U.S. Department of Energy.
|
II-4
Exhibit Page
Number Description No.
------- --------------------------------------------------------------- ----
.10.17 Cooperative Agreement, dated as of September 30, 1998, between
the National Institute of Standards and Technology and Plug
Power, LLC, and amendment thereto dated May 10, 1999.
.10.18 Joint venture agreement, dated as of June 14, 1999 between Plug
Power, LLC, Polyfuel, Inc., and SRI International.
+10.19 Cooperative Research and Development Agreement, dated as of
February 12, 1999, between Plug Power, LLC and U.S. Army Benet
Laboratories.
.10.20 Nonexclusive License Agreement, dated as of April 30, 1993,
between Mechanical Technology Incorporated and the Regents of
the University of California.
.10.21 Development Collaboration Agreement, dated as of July 30, 1999,
by and between Joh. Vaillant GMBH. U. CO. and Plug Power, LLC.
.10.22 Agreement of Sale, dated as of June 23, 1999, between
Mechanical Technology, Incorporated and Plug Power LLC.
.10.23 Assignment and Assumption Agreement, dated as of July 1, 1999,
between the Town of Colonie Industrial Development Agency,
Mechanical Technology, Incorporated, Plug Power, LLC, KeyBank,
N.A., and First Albany Corporation.
.10.24 Replacement Reimbursement Agreement, dated as of July 1, 1999,
between Plug Power, LLC and KeyBank, N.A.
10.25 1997 Membership Option Plan and amendment thereto dated
September 27, 1999.
.10.26 Trust Indenture, dated as of December 1, 1998, between the Town
of Colonie Industrial Development Agency and Manufacturers and
Traders Trust Company, as trustee.
+10.27 Distribution Agreement, dated as of June 27, 1997, between Plug
Power, LLC and Edison Development Corporation and amendment
thereto dated September 27, 1999.
.10.28 Agreement, dated as of June 27, 1999, between Plug Power, LLC
and Gary Mittleman.
.10.29 Agreement, dated as of June 8, 1999, between Plug Power, LLC
and Louis R. Tomson.
.10.30 Agreement, dated as of August 6, 1999, between Plug Power, LLC
and Gregory A. Silvestri.
.10.31 Agreement, dated as of August 12, 1999, between Plug Power, LLC
and William H. Largent.
.10.32 Agreement, dated as of August 20, 1999, between Plug Power, LLC
and Dr. Manmohan Dhar.
10.33 1999 Stock Option and Incentive Plan.
10.34 Employee Stock Purchase Plan
.10.35 Agreement, dated as of August 27, 1999, by Plug Power, LLC,
Plug Power Inc., GE On-Site Power, Inc., GE Power Systems
Business of General Electric Company, and GE Fuel Cell Systems,
L.L.C.
10.36 Form of Registration Rights Agreement to be entered into by the
Registrant and the stockholders of the Registrant.
10.37 Form of Registration Rights Agreement to be entered into by
Plug Power, L.L.C. and GE On-Site Power, Inc.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
hereto).
23.2 Consent of PricewaterhouseCoopers LLP.
.24.1 Powers of Attorney (included on signature page).
.27.1 Financial Data Schedule.
.99.1 Consent of Robert L. Nardelli.
99.2 Consent of John M. Shalikashvili
|
+ Filed herewith; portions of this exhibit have been omitted pursuant to a
request for confidential treatment.
. Previously filed.
II-5
(b) Financial Statement Schedules
All schedules have been omitted because they are not required or because the required information is given in the Financial Statements or Notes to those statements.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 4 to the Registration Statement (File No. 333-86089) to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Latham, State of New York, on October 26, 1999.
Plug Power Inc.
By: /s/ Gary Mittleman
-----------------------------------
Gary Mittleman
President and Chief Executive
Officer
|
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 4 to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Gary Mittleman President, Chief Executive October 26, 1999
______________________________________ Officer and Director
Gary Mittleman (Principal Executive
Officer)
/s/ William H. Largent Chief Financial Officer October 26, 1999
______________________________________ (Principal Financial
William H. Largent Officer and Principal
Accounting Officer)
* Director October 26, 1999
______________________________________
Michael J. Cudahy
* Director October 26, 1999
______________________________________
Anthony F. Earley, Jr.
* Director October 26, 1999
______________________________________
Larry G. Garberding
* Director October 26, 1999
______________________________________
George C. McNamee
* Director October 26, 1999
______________________________________
Walter L. Robb
|
/s/ Ana-Maria Galeano
*By: __________________________
Ana-Maria Galeano,
Attorney-in-Fact
|
II-7
EXHIBIT INDEX
Exhibit
Number Description
------- ----------------------------------------------------------------------
.1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Merger by and between Plug Power and Plug Power,
LLC, a Delaware limited liability company, dated as of October 7, 1999
(excluding schedules, which Plug Power agrees to furnish
supplementally to the Commission upon request).
.3.1 Certificate of Incorporation of Plug Power.
3.2 Amended and Restated Certificate of Incorporation of Plug Power (to be
filed immediately prior to the consummation of the offering referred
to in the Registration Statement).
.3.3 By-laws of Plug Power.
3.4 Amended and Restated By-laws of Plug Power.
.4.1 Specimen certificate for shares of common stock, $.01 par value, of
Plug Power.
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
securities being offered.
+10.1 Amended and Restated Limited Liability Company Agreement of GE Fuel
Cell Systems, LLC, dated February 3, 1999, between GE On-Site Power,
Inc. and Plug Power, LLC.
.10.2 Contribution Agreement, dated as of February 3, 1999, by and between
GE On-Site Power, Inc. and Plug Power, LLC.
.10.3 Trademark and Trade Name Agreement, dated as of February 2, 1999,
between General Electric Company and GE Fuel Cell Systems, LLC.
.10.4 Trademark Agreement, dated as of February 2, 1999, between Plug Power
LLC and GE Fuel Cell Systems, LLC.
+10.5 Distributor Agreement, dated as of February 2, 1999, between GE Fuel
Cell Systems, LLC and Plug Power, LLC.
.10.6 Side letter agreement, dated February 3, 1999, between General
Electric Company and Plug Power LLC.
.10.7 Mandatory Capital Contribution Agreement, dated as of January 26,
1999, between Edison Development Corporation, Mechanical Technology
Incorporated and Plug Power, LLC and amendments thereto, dated August
25, 1999 and August 26, 1999.
.10.8 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Michael J. Cudahy.
.10.9 Warrant Agreement, dated as of February 16, 1999, between Plug Power,
LLC and Michael J. Cudahy and amendment thereto, dated July 26, 1999.
.10.10 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Kevin Lindsey.
.10.11 LLC Interest Purchase Agreement, dated as of April 1, 1999, between
Plug Power, LLC and Antaeus Enterprises, Inc.
.10.12 LLC Interest Purchase Agreement, dated as of April 9, 1999, between
Plug Power, LLC and Southern California Gas Company.
.10.13 Warrant Agreement, dated as of April 9, 1999, between Plug Power, LLC
and Southern California Gas Company and amendment thereto, dated
August 26, 1999.
+10.14 Agreement, dated as of June 26, 1997, between the New York State
Energy Research and Development Authority and Plug Power LLC, and
amendments thereto dated as of December 17, 1997 and March 30, 1999.
+10.15 Agreement, dated as of January 25, 1999, between the New York State
Energy Research and Development Authority and Plug Power LLC.
.10.16 Agreement, dated as of September 30, 1997, between Plug Power LLC and
the U.S. Department of Energy.
|
Exhibit
Number Description
------- ----------------------------------------------------------------------
.10.17 Cooperative Agreement, dated as of September 30, 1998, between the
National Institute of Standards and Technology and Plug Power, LLC,
and amendment thereto dated May 10, 1999.
.10.18 Joint venture agreement, dated as of June 14, 1999 between Plug Power,
LLC, Polyfuel, Inc., and SRI International.
+10.19 Cooperative Research and Development Agreement, dated as of February
12, 1999, between Plug Power, LLC and U.S. Army Benet Laboratories.
.10.20 Nonexclusive License Agreement, dated as of April 30, 1993, between
Mechanical Technology Incorporated and the Regents of the University
of California.
.10.21 Development Collaboration Agreement, dated as of July 30, 1999, by and
between Joh. Vaillant GMBH. U. CO. and Plug Power, LLC.
.10.22 Agreement of Sale, dated as of June 23, 1999, between Mechanical
Technology, Incorporated and Plug Power LLC.
.10.23 Assignment and Assumption Agreement, dated as of July 1, 1999, between
the Town of Colonie Industrial Development Agency, Mechanical
Technology, Incorporated, Plug Power, LLC, KeyBank, N.A., and First
Albany Corporation.
.10.24 Replacement Reimbursement Agreement, dated as of July 1, 1999, between
Plug Power, LLC and KeyBank, N.A.
10.25 1997 Membership Option Plan and amendment thereto dated September 27,
1999.
.10.26 Trust Indenture, dated as of December 1, 1998, between the Town of
Colonie Industrial Development Agency and Manufacturers and Traders
Trust Company, as trustee.
+10.27 Distribution Agreement, dated as of June 27, 1997, between Plug Power,
LLC and Edison Development Corporation and amendment thereto dated
September 27, 1999.
.10.28 Agreement, dated as of June 27, 1999, between Plug Power, LLC and
Gary Mittleman.
.10.29 Agreement, dated as of June 8, 1999, between Plug Power, LLC and
Louis R. Tomson.
.10.30 Agreement, dated as of August 6, 1999, between Plug Power, LLC and
Gregory A. Silvestri.
.10.31 Agreement, dated as of August 12, 1999, between Plug Power, LLC and
William H. Largent.
.10.32 Agreement, dated as of August 20, 1999, between Plug Power, LLC and
Dr. Manmohan Dhar.
10.33 1999 Stock Option and Incentive Plan.
10.34 Employee Stock Purchase Plan
.10.35 Agreement, dated as of August 27, 1999, by Plug Power, LLC, Plug Power
Inc., GE On-Site Power, Inc., GE Power Systems Business of General
Electric Company, and GE Fuel Cell Systems, L.L.C.
10.36 Form of Registration Rights Agreement to be entered into by the
Registrant and the stockholders of the Registrant.
10.37 Form of Registration Rights Agreement to be entered into by Plug
Power, L.L.C. and GE On-Site Power, Inc.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
hereto).
23.2 Consent of PricewaterhouseCoopers LLP.
.24.1 Powers of Attorney (included on signature page).
.27.1 Financial Data Schedule.
.99.1 Consent of Robert L. Nardelli.
99.2 Consent of John M. Shalikashvili
|
+ Filed herewith; portions of this exhibit have been omitted pursuant to a
request for confidential treatment.
. Previously filed.
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
PLUG POWER INC.
a Delaware corporation
AND
PLUG POWER, LLC
a Delaware limited liability company
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is made and entered into as of October 7, by and among Plug Power, LLC, a Delaware limited liability company (the "Merging Company"), and Plug Power Inc., a Delaware corporation (the "Surviving Company").
WHEREAS, the Merging Company is a limited liability company duly organized and existing under the laws of the State of Delaware and the Surviving Company is a corporation duly organized and existing under the laws of the State of Delaware;
WHEREAS, the Surviving Company is a wholly-owned subsidiary of the Merging Company;
WHEREAS, the Board of Directors of the Surviving Company and the Managers and Members of the Merging Company have determined that it is advisable and to the advantage of each of the Merging Company and the Surviving Company to merge upon the terms and conditions herein provided, in accordance with the applicable provisions of the statutes of the State of Delaware;
NOW THEREFORE, in consideration of the mutual agreements and covenants set forth herein, the Merging Company and the Surviving Company agree to merge as follows:
THE MERGER
privileges, powers, franchises, properties, and assets of the Merging Company of any kind or nature shall be vested in the Surviving Company, and all debts, liabilities, duties and other obligations of the Merging Company shall attach to the Surviving Company, and, following the Effective Time, the Surviving Company shall continue its existence as a corporation, and the identity, rights, titles, privileges, powers, franchises, properties and assets of the Surviving Company shall continue unaffected and unimpaired by the Merger.
(a) At the Effective Time, each share of Surviving Company Common Stock then outstanding shall, by virtue of the Merger and without any action on the part of any holder thereof, cease to be outstanding and shall be cancelled and retired and shall cease to exist.
(b) At the Effective Time, each share of Merging Company Class A Membership Interests and Class B Membership Interests then outstanding shall, by virtue of the Merger and without any action on the part of any holder thereof, be converted into the right to receive one (1) fully paid and non-assessable share of Surviving Company Common Stock.
(c) At the Effective Time, each right to acquire a share of Merging Company Class A Membership Interests or Class B Membership Interests upon the conversion or exercise of any then outstanding options, warrants or other derivative securities of the Company, shall by virtue of the Merger and without any action on the part of any holder thereof, be converted into the right to acquire, at the same exercise price and upon the same vesting provisions and other terms thereof, one (1) fully paid and non-assessable share of Surviving Company Common Stock upon the conversion or exercise of such option, warrant or other derivative security.
perfect or confirm, of record or otherwise, in the Surviving Company title to and possession of any property or right of the Merging Company acquired or to be acquired by reason of, or as a result of, the Merger, or (b) otherwise to carry out the purposes of the Merger Agreement, the Merging Company and its members, managers and officers shall be deemed to have granted to the Surviving Company an irrevocable power of attorney to execute and deliver all such proper deeds, assignments and assurances in law and to do all acts necessary or proper to vest, perfect or confirm title to and possession of such property or rights in the Surviving Company and otherwise to carry out the purposes of the Merger Agreement; and the directors and officers of the Surviving Company are fully authorized in the name of the Merging Company or otherwise to take any and all such action.
* * * * * * *
IN WITNESS WHEREOF, this Merger Agreement is hereby executed as of the date first above written on behalf of the Merging Company and the Surviving Company.
PLUG POWER INC.,
a Delaware corporation
By: /s/ Gary Mittleman
--------------------------------------
Name: Gary Mittleman
Its: President and Chief Executive Officer
|
PLUG POWER, LLC,
a Delaware limited liability company
By: /s/ Gary Mittleman
--------------------------------------
Name: Gary Mittleman
Its: President and Chief Executive Officer
|
EXHIBIT 3.2
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.
ARTICLE IV
The total number of shares of capital stock which the Corporation shall
have authority to issue is One Hundred Million (100,000,000) shares, of which
(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.
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.
(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
ARTICLE VI
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.
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.
ARTICLE VII
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
ARTICLE IX
[End of Text]
THIS AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is executed as of
this ____ day of October, 1999.
PLUG POWER INC.
By: /s/ Gary Mittleman
--------------------------------------
Name: Gary Mittleman
Title: Chief Executive Officer and
President
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EXHIBIT 3.4
AMENDED AND RESTATED
BY-LAWS
OF
PLUG POWER INC.
(the "Corporation")
(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.
(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.
(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
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.
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.
transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
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.
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.
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.
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.
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.
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.
It shall be the duty of each stockholder to notify the Corporation of his or her post office address and any changes thereto.
(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
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.
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.
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.
counsel or at an office of its transfer agent or at such other place or places as may be designated from time to time by the Board of Directors.
Adopted October___, 1999 and effective as of October ____, 1999.
Exhibit 5.1
October 27, 1999
Plug Power Inc.
968 Albany-Shaker Road
Latham, New York 12110
Ladies and Gentlemen:
We have acted as counsel to Plug Power Inc., a Delaware corporation (the "Company"), in connection with the offer and sale by the Company of up to 6,900,000 shares of common stock, par value $.01 per share ("Common Stock"), of the Company (the "Shares"). The Shares include an overallotment option of up to 900,000 shares of Common Stock. This opinion is being delivered in connection with the Company's Registration Statement on Form S-1 (No. 333-86089) (the "Registration Statement") relating to the registration of the offering and sale of the Shares under the Securities Act of 1933, as amended (the "Securities Act"). All of the Shares are to be sold by the Company to the several underwriters (the "Underwriters") of which Goldman, Sachs & Co., Hambrecht & Quist, Merrill Lynch & Co., and FAC/Equities are the representatives (the "Representatives") pursuant to an Underwriting Agreement (the "Underwriting Agreement") to be entered into between the Company and the Representatives of the Underwriters.
In connection with rendering this opinion, we have examined the form of the proposed Underwriting Agreement being filed as an Exhibit to the Registration Statement; the Certificate of Incorporation and By-laws of the Company, each as amended to date; such records of the corporate proceedings of the Company as we deemed material; and such other certificates, receipts, records and documents as we considered necessary for the purpose of this opinion. In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as certified, photostatic or facsimile copies, the authenticity of the originals of such copies and the authenticity of telephonic confirmations of public materials. As to facts material to our opinion, we have relied upon certificates or telephonic confirmations of public officials and certificates, documents, statements and other information of the Company or representatives or officers thereof.
We are attorneys admitted to practice in The Commonwealth of Massachusetts. We express no opinion concerning the laws of any jurisdictions other than the laws of the United States of America, the laws of The Commonwealth of Massachusetts and the laws of the State of Delaware.
Based upon the foregoing, we are of the opinion that when (i) the Underwriting Agreement is completed (including the insertion therein of pricing terms) and executed and delivered by the Company and on the behalf of the Underwriters, and (ii) the Shares are sold to the Underwriters and paid pursuant to the terms of the Underwriting Agreement, the Shares will be duly
authorized, validly issued and fully paid and non-assessable by the Company.
The foregoing assumes that all requisite steps will be taken to comply with the requirements of the Securities Act and applicable requirements of state laws regulating the offer and sale of securities.
We hereby consent to being named as counsel to the Company in the Registration Statement, to the references therein to our firm under the caption "Legal Matters" and to the inclusion of this opinion as an exhibit to the Registration Statement.
Very truly yours,
GOODWIN, PROCTER & HOAR LLP
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
EXHIBIT 10.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
GE FUEL CELL SYSTEMS, L.L.C.
between
GE ON-SITE POWER, INC.
and
PLUG POWER, L.L.C.
dated
February 3, 1999
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS 1
Section 1.1 Definitions 1
ARTICLE II ORGANIZATION 1
Section 2.1 Formation; Name 1
Section 2.2 Certificate of Formation; Foreign Qualification 1
Section 2.3 No State Law Partnership; Liability to Third Parties 2
Section 2.4 Registered Office 2
Section 2.5 Representations and Warranties of the Members 2
ARTICLE III PURPOSES AND POWERS; TERM OF COMPANY 2
Section 3.1 Purposes and Powers 2
Section 3.2 Scope 2
Section 3.3 Term 2
ARTICLE IV MEMBERSHIP, DISPOSITIONS OF INTERESTS AND BANKRUPT MEMBER 2
Section 4.1 Members 2
Section 4.2 Additional Members 3
Section 4.3 Withdrawal 3
Section 4.4 Disposition of a Membership Interest 3
ARTICLE V CAPITAL CONTRIBUTIONS 5
Section 5.1 Initial Contributions 5
Section 5.2 Additional Members 5
Section 5.3 Guarantees 5
Section 5.4 Return of Contributions 5
Section 5.5 Member Affiliate Loans 6
ARTICLE VI PROFITS, LOSSES, ACCOUNTING, TAXES AND DISTRIBUTIONS 6
Section 6.1 Allocation of Profits and Losses 6
Section 6.2 Books; Fiscal Year 6
Section 6.3 Capital Accounts 7
Section 6.4 Tax Returns 8
Section 6.5 Tax Matters Partner 8
Section 6.6 Distributions 8
Section 6.7 Withdrawals 8
ARTICLE VII MANAGEMENT; CONDUCT OF BUSINESS 9
Section 7.1 Management by Committee 9
Section 7.2 Establishment of the Committee 9
Section 7.3 Officers 10
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Page
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Section 7.4 Conduct of Business 10
Section 7.5 Conflicts of Interest 11
Section 7.6 Employment and Secondment Matters 11
ARTICLE VIII MEETINGS OF THE COMMITTEE 11
Section 8.1 Regular and Special Meetings 11
Section 8.2 Notices of Meetings 11
Section 8.3 Quorum 11
Section 8.4 Action by Written Consent or Telephone Conference 11
Section 8.5 Substitute Committee Members 12
ARTICLE IX ADDITIONAL COVENANTS 12
Section 9.1 Public Announcements, Etc. 12
Section 9.2 Confidentiality 12
Section 9.3 Protection of Business 13
Section 9.4 Promotion of the Company 14
Section 9.5 Ethical and Environmental Standards 14
Section 9.6 Tax Matters 14
Section 9.7 Other Covenants 15
Section 9.8 Further Assurances 15
Section 9.9 Ancillary Agreements 15
ARTICLE X DEADLOCK; TERMINATION OF THIS LLC AGREEMENT 15
Section 10.1 Resolution of Disputes 15
Section 10.2 Termination 16
Section 10.3 Effect of Termination 16
Section 10.4 Survival of Representations and Warranties 16
Section 10.5 Indemnifiable Claims 16
ARTICLE XI DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY 18
Section 11.1 Dissolution 18
Section 11.2 Liquidation and Termination 18
Section 11.3 Payment of Debts 18
Section 11.4 Debts to Members 19
Section 11.5 Remaining Distribution 19
Section 11.6 Reserve 19
Section 11.7 Final Accounting 19
ARTICLE XII MISCELLANEOUS 20
Section 12.1 Relationship of the Parties 20
Section 12.2 Performance by the Company 20
Section 12.3 Agreement for Further Execution 20
Section 12.4 Notices 20
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Page
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Section 12.5 Amendments; No Waivers 21
Section 12.6 Successors and Assigns 21
Section 12.7 Governing Law 21
Section 12.8 Illegality and Severability 21
Section 12.9 Counterparts; Effectiveness 21
Section 12.10 Entire Agreement 22
Section 12.11 Captions 22
Section 12.12 Expenses 22
Section 12.13 Limitation of Liability 22
ANNEX A Definitions
ANNEX B Representations and Warranties of the Members
ANNEX C Employment and Secondment Matters
PP Disclosure Schedule
GEOSP Disclosure Schedule
EXHIBIT 1 Membership Interests
EXHIBIT 2 Allocation and Capital Account Provisions
EXHIBIT 3 Strategic Plan and 1999 Operating Plan
EXHIBIT 4 GE Company Policies
EXHIBIT 5 Form of Contribution Agreement
EXHIBIT 6 Form of Promissory Note and Security Agreement
EXHIBIT 7 Form of GE Trademark and Tradename Agreement
EXHIBIT 8 Form of PP Trademark Agreement
EXHIBIT 9 Form of Distributor Agreement
|
Exhibit 10.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
GE FUEL CELL SYSTEMS, L.L.C.
A Delaware Limited Liability Company
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this "LLC Agreement") is made and entered into on the 3rd day of February, 1999, by and between GE ON-SITE POWER, INC., a Delaware corporation ("GEOSP"), a wholly owned subsidiary of GENERAL ELECTRIC COMPANY ("GE"), which is controlled by GE's Power Systems business ("GEPS"), having offices at One River Road, Schenectady, New York 12345, and PLUG POWER, L.L.C., a Delaware limited liability company ("PP"), having offices at 968 Albany-Shaker Road, Latham, New York 12110 (GEOSP and PP, collectively the "Members" and each individually, a "Member"), to join together to operate a limited liability company under the laws of the State of Delaware for the purposes and upon the terms and conditions set forth in this LLC Agreement.
ARTICLE I
DEFINITIONS
ARTICLE II
ORGANIZATION
ARTICLE III
PURPOSES AND POWERS; TERM OF COMPANY
ARTICLE IV
MEMBERSHIP, DISPOSITIONS OF INTERESTS AND
BANKRUPT MEMBER
(i) PP may, without restriction, Dispose of all or part of PP to a purchaser that is not a GEPS Competitor, and the provisions of this Section 4.4(c) shall not apply in the case of an initial public offering of securities by PP. Notwithstanding the provisions of Section 4.4(b), if: there is a proposal to Dispose, directly or indirectly, of an interest in PP (by merger, sale of stock or assets thereof or otherwise), including its
interest in the Company ("PP Interest"), to a GEPS Competitor, then PP shall provide prompt written notice (the "Transfer Notice") to GEOSP. The Transfer Notice shall identify the Person with which such transaction is proposed to be consummated and all other material terms of the proposed transaction, including the consideration to be paid for the PP Interest, and, in the case of an offer in which the consideration payable for the PP Interest consists in whole or in part of consideration other than cash, such information relating to such other consideration as is reasonably necessary for GEOSP to be informed of all material facts relating to such consideration.
(ii) GEOSP shall have the right and option, for a period of 30 days after the date on which all information required to be provided to GEOSP has been so provided (the "Notice Period"), to deliver a notice to PP (the "Purchase Notice") of GEOSP's intention to purchase the PP Interest. The consideration to be paid by GEOSP for the PP Interest shall be cash in an amount equal to the price to be paid for the PP Interest by the proposed purchaser thereof. Notwithstanding the preceding sentence, if the consideration to be paid for the PP Interest is wholly or partially non-cash consideration, then GEOSP shall pay cash in lieu of the non-cash consideration, in an amount equal to the fair market value thereof, such amount to be determined by good faith negotiations between the Members (and, in the absence of agreement, using a procedure similar to that used to determine the Fair Market Value of an Interest in the Company). Delivery of the Purchase Notice by GEOSP shall constitute an irrevocable election by GEOSP to purchase the PP Interest for the consideration and on the other terms and conditions set forth in the proposed transaction and in this Section 4.4(c).
(iii) The transfer of the PP Interest to GEOSP shall be consummated as soon as practicable following the giving of the Purchase Notice by GEOSP, but in no event more than 30 days thereafter (subject to any extension necessary to comply with any applicable regulatory requirement). If at the end of the Notice Period GEOSP shall not have given a Purchase Notice with respect to the PP Interest, GEOSP will be deemed to have waived its rights under this Section 4.4(c) with respect to the Disposition contemplated by the Transfer Notice. If GEOSP rejects the Transfer Notice, or is deemed to have waived its rights as set forth in the preceding sentence, PP shall have the right, for a period of 180 days following such rejection or waiver (subject to any extension necessary to comply with any applicable regulatory requirement), to dispose of the PP Interest to the proposed transferee identified in the Transfer Notice and on terms no more favorable to the proposed transferee than are set forth in the Transfer Notice. If, at the end of the 180-day period following the rejection or waiver, PP has not completed the sale of the PP Interest, such Disposition may not occur and PP and the PP Interest shall again be subject to the restrictions contained in this Section 4.4(c).
with respect to the Disposition have been complied with and the other applicable provisions of this Section 4.4 have been satisfied and the Committee has received, on behalf of the Company, a document (i) executed by both the Member effecting the Disposition and the Person to which the Membership Interest is transferred, (ii) including the notice address of any Person to be admitted to the Company as a Substitute Member and such Person's agreement to be bound by this LLC Agreement in respect of the Membership Interest being obtained, (iii) setting forth the Membership Interest after the Disposition of the Member effecting the Disposition and the Person to which the Membership Interest is transferred, and (iv) containing a warranty and representation that the Disposition was made in accordance with all applicable laws and regulations. Each Disposition and, if applicable, admission complying with the provisions of this Section 4.4(d) shall be effective as of the first day of the calendar month immediately succeeding the month in which the requirements of this Section 4.4 have been met.
ARTICLE V
CAPITAL CONTRIBUTIONS
(a) GEOSP shall arrange for its Affiliate, GE, to provide, during the period ending December 31, 2000, in the form of loans to the Company (i) capital to fund the Company's purchase of $10,250,000 of Pre-Commercial Units in accordance with the Distributor Agreement, and (ii) additional capital as required to fund the Company's operations, in accordance with the Distributor Agreement, in an amount not to exceed $8,000,000. The loans shall be made to the Company pursuant to the terms of a non-recourse promissory note substantially in the form attached to this LLC Agreement as Exhibit 6. The loans referred to in this subsection (b) shall be conditioned upon (i) PP's materially complying with the terms and conditions of the Distributor Agreement so that no event of termination thereunder has occurred, and (ii) PP's remaining on schedule for a January 1, 2001 commercial release of the Products. Within 60 days of the effective date of this Agreement, the Members will mutually agree to a product development schedule for the period ending December 31, 2000, that will include milestones and objective measures of progress towards the January 1, 2001 Product release. The Members will meet not less than quarterly for the purpose of evaluating PP's compliance with the product development schedule. In the event that GEOSP determines, in good faith, that PP is not in material compliance with the product development schedule, GEOSP may after 120 days' written notice to PP (with such notice not to be given earlier than January 1, 2000), terminate this LLC Agreement if such noncompliance remains uncured.
(b) In the event that further capital, in addition to that referred to in subsection (a) above, is required by the Company in order to meet any obligation or pay any liability of the Company, the Company may borrow such required capital from any Person, including any Member or any Affiliate of a Member, on such commercially reasonable terms as the Committee may determine; provided, that the Company shall offer to the Members the opportunity to lend such funds on such commercially reasonable terms pro rata in proportion to their respective Membership Interests. Any such transactions with Members or their Affiliates are subject to Section 7.1(b).
ARTICLE VI
PROFITS, LOSSES, ACCOUNTING, TAXES AND
DISTRIBUTIONS
(a) The Company shall maintain or cause to be maintained proper and complete books and records in which shall be entered fully and accurately all transactions and other matters relating to the Company's business in the detail and completeness customary and usual for businesses of the type engaged in by the Company. The Company's financial statements shall be kept on the accrual basis and in accordance with GE General Accounting Policies (as they may be modified from time to time) and GAAP, consistently applied. The Company's financial statements shall be audited annually by independent public
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
accountants selected by the Committee. The fact that such independent public accountants may audit the financial statements of one or more of the Members or their Affiliates shall not disqualify such accountants from auditing the Company's financial statements.
(b) The fiscal year of the Company (the "Fiscal Year") shall be the calendar year (or such other 12-month period as the Committee may select) or, if applicable, that shorter period within the calendar year (or such other period) during which the Company had legal existence.
(c) The Company shall prepare and distribute to each Member unaudited quarterly financial statements (including, without limitation, current Capital Account balances), prepared in accordance with Section 6.2(a). Such quarterly financial statements shall be distributed to the Members within a time that will permit, and shall provide such information concerning the operations of the Company as may be required for, the Members to prepare and timely file with the Securities and Exchange Commission their quarterly financial statements.
(d) At a minimum, the Company shall keep at its principal executive office such books and records as may be required by the Act and such other books and records as are customary and usual for businesses of the type engaged in by the Company.
(e) Each Member or its duly authorized representatives shall have the right, during normal business hours and in accordance with the Act, to inspect and copy the Company's books and records at the requesting Member's expense.
(a) There shall be maintained a Capital Account for each Member in accordance with this Section 6.3 and the principles set forth in Exhibit 2 attached to this LLC Agreement. The amount of cash or the fair market value of property contributed to the Company by each Member (including the property deemed contributed to the Company by PP pursuant to Section 3 of the Contribution Agreement), net of liabilities assumed by the Company from such Member or to which the contributed property is subject, shall be credited to such Member's Capital Account, and from time to time, but not less often than at the end of each Fiscal Year, the allocations to each Member of Profits and Losses (including any special allocations made pursuant to the provisions of Exhibit 2) and the fair market value of property distributed to each Member, net of liabilities assumed by the Member or to which the property distributed is subject, shall be credited or debited to such Member's Capital Account. The determination of Members' Capital Accounts, and any adjustments thereto, shall be made consistent with tax accounting and other principles set forth in Section 704(b) of the Code and the applicable regulations thereunder.
(b) Except as otherwise specifically provided in this LLC Agreement or any Ancillary Agreement, no Member shall be required to make any further contribution to the capital of the Company to restore a loss, to discharge any liability of the Company or for any other purpose, nor shall any Member personally be liable for any liabilities of the Company or of any other Member, except as provided by law.
(c) Immediately following a permitted transfer of any Membership Interest, the Capital Account of the transferee Member shall equal the Capital Account of the transferor Member attributable to the
transferred Membership Interest and such Capital Account shall not be adjusted to reflect any basis adjustment under Section 743 of the Code.
(d) For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Members' Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes, taking into account any adjustments required pursuant to Section 704(b) of the Code and the applicable regulations thereunder as more fully described in Exhibit 2.
ARTICLE VII
MANAGEMENT; CONDUCT OF BUSINESS
(a) The powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, the Members. In managing the business and affairs of the Company and exercising its power, the Members shall act through their representatives on the Committee as described in Section 7.2. Any Member who binds or obligates the Company for any debt or liability or causes the Company to act, except in accordance with the immediately preceding sentence, shall be liable to the Company for any such debt, liability or act. Decisions or actions taken by Members in accordance with this LLC Agreement (whether through the Committee or otherwise) shall constitute decisions or actions by the Company and shall be binding on each Member (in its capacity as such).
(b) Except as hereinafter provided, all decisions and actions of the Company shall require the approval of a majority of the Committee members meeting in accordance with Article VIII. Notwithstanding the foregoing provisions of this Article VII, the following actions (collectively, "Supermajority Transactions") shall require the consent of five (5) Committee members:
(i) any merger/acquisition or sale or purchase of any material assets which are greater than 20% of the fair value of the total assets of the Company;
(ii) any transaction with a Member or its Affiliates, except as expressly provided for in this LLC Agreement or in the Ancillary Agreements;
(iii) changes, modifications and/or amendments to the Strategic Plan;
(iv) approval of the Company's annual Operating Plan only if the aggregate expenditures for such Operating Plan differs by a material amount (e.g., greater than or equal to 20%) from the Strategic Plan;
(v) any amendment to the Company's Certificate of Formation, this LLC Agreement, or any of the Ancillary Agreements;
(vi) the entering into of any contract valued at more than $10 million; and
(vii) the issuance or repurchase of Membership Interests or admission of additional Members in accordance with Section 4.2.
(a) GEOSP and PP hereby establish the Committee. The Committee shall consist of seven members, three appointed by each of GEOSP and PP and a seventh member, who shall be the
Company's President and who shall be selected in accordance with Section 7.3(a) and treated for all purposes of this LLC Agreement as being appointed to the Committee by GEOSP. At any time the Company does not have a President, GEOSP may designate the seventh member, who shall serve until a President is appointed in accordance with Section 7.3 of this LLC Agreement. The Chairman of the Committee shall be designated by GEOSP from among the members of the Committee appointed by GEOSP, and the Vice-Chairman of the Committee shall be designated by PP from among the members of the Committee appointed by PP. The members of the Committee shall serve at the pleasure and on behalf of the party that appointed such member, until such member resigns or is removed by the party that appointed such member. All such members shall be officers, directors or employees of a Member or the Company. A member of the Committee may be removed, with or without cause, only by the party that appointed such member.
(b) The Members shall act through their representatives on the Committee in the manner set forth below. Except as described in Section 7.1(b), decisions by the Committee will require majority approval of a quorum of the Committee members.
(c) Each Member shall designate its representatives on the Committee to the other Members in writing, and such designation shall remain in effect until the revocation of such designation has been made in writing. Such writing will be signed by the chief executive officer of PP in the case of PP and by the president of GEOSP in the case of GEOSP.
(a) The Company shall hire as its President such individual as may be designated from time to time by GEOSP for the compensation and on the other terms and conditions designated by GEOSP. The President shall be vested by the Committee with all necessary powers to conduct the normal business of the Company. The President will be removed at the request of GEOSP with or without cause at any time. Except as otherwise agreed to by GEOSP and PP, other primary management functions of the Company shall be assigned by the President.
(b) The Committee may appoint such other officers as it may determine from time to time. Except as otherwise agreed, each officer of the Company shall hold office at the pleasure of the Committee, and the Committee may remove any officer at any time, with or without cause. If appointed by the Committee, the officers shall have the duties assigned to them by the Committee.
including but not limited to U.S. export control laws. In carrying out their responsibilities, the Committee members and officers of the Company shall be indemnified by the Company to the fullest extent allowed by Delaware law.
ARTICLE VIII
MEETINGS OF THE COMMITTEE
execution of such consent shall constitute attendance or presence in person at a meeting of the Committee. Subject to the requirements of the Act or this LLC Agreement, members of the Committee may participate in and hold a meeting of the Committee by means of a conference telephone or similar communications equipment by means of which all participants can hear each other, and participation in such meeting shall constitute attendance and presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.
ARTICLE IX
ADDITIONAL COVENANTS
(a) Each Member and the Company (each, for purposes of this
Section 9.2, a "Party") expects to furnish to one or more of the other Parties
certain confidential information which will constitute trade secrets or other
proprietary business or technical information belonging to the disclosing Party
(including, but not limited to, components, processes, financial information,
drawings, specifications and other data, whether in written, printed, oral or
other form) and will be marked "Confidential" or "Proprietary" (such information
is hereinafter referred to as "Confidential Information") at the time it is
disclosed. Oral information which is confidential or proprietary shall be
reduced to writing by the disclosing Party within ten (10) working days after
disclosure, which writing shall specifically reference the date of disclosure
and otherwise conform to the requirements of this paragraph. Any information
which is disclosed in any other manner shall be deemed to be non-confidential.
The receiving Party shall not disclose Confidential Information to anyone except
its employees who have a need to know such Confidential Information in order to
perform their work and shall inform such individuals of the confidential nature
of the Confidential Information. Subject to the provisions of subsection (b),
below, the receiving Party shall use the Confidential Information only for the
purpose of such work and shall use efforts to protect the confidentiality of
such Confidential Information commensurate with those which it employs for the
protection of its own confidential information, but it shall not be liable for
unauthorized revelations of such Confidential Information which occur in spite
of such efforts.
(b) Notwithstanding the provisions of subsection (a) above, (i) the receiving Party shall not be subject to any restriction hereunder with respect to any part of such Confidential Information which appears in issued patents or publications, which is known or becomes generally known to the relevant public through no fault of the receiving Party, which is independently generated by the receiving Party without use of the Confidential Information, which is furnished to others by the disclosing Party without restriction on disclosure, which was or becomes known to the receiving Party through other sources free of any confidentiality restriction, which must be disclosed by requirements of law or valid legal or regulatory process, in which case the Party intending to make such disclosure shall notify the Party which designated the material as confidential in advance of any such disclosure and reasonably cooperate with any attempt to maintain the confidentiality of such materials; and (ii) any and all restrictions with respect to Confidential Information provided hereunder will expire three (3) years after the date that such Confidential Information is disclosed to the receiving Party.
(c) When one Party no longer desires to use the Confidential Information of another Party, it shall return to the other Party any such Confidential Information and shall destroy all copies of such Confidential Information with the exception of one copy which may be retained exclusively for the purpose of documenting the disclosures made hereunder.
(d) The Company will restrict access to any Confidential Information made available or disclosed by a Member to the Company hereunder only to those employees of the Company with a need to know such information in performance of their jobs with the Company.
(a) PP and its Affiliates will not compete with the Company, directly or indirectly, in the Territory, for the sale of Products, Pre- Commercial Units, and Test & Evaluation Units, and the provision of Services, so long as, and to the extent that, the Company is PP's exclusive distributor in the Territory under the Distributor Agreement (except for sales of Test & Evaluation Units and Pre-Commercial Units to federal, state, municipal and other governmental entities, the Gas Research Institute, Electric Power Research Institute, and such other industry groups mutually agreed to by SUPPLIER and DISTRIBUTOR, to the extent such entities and groups are purchasing the units for their research and development, as opposed to purchasing the units for resale);
(b) GEOSP shall not sell PEM Fuel-Cell Powered Generator Sets, replacement parts, upgrades, accessories, and improvements that compete with the Products and Pre-Commercial Units in the Territory, directly or through any Person other than the Company, provided that the Products are competitive, as determined pursuant to this subsection (b), with non-PP manufactured PEM Fuel Cell-Powered Generator Sets. If GEOSP determines, in good faith, that the Products are not competitive, then PP will be allowed a period of 12 months to make the Products competitive, after which, if the products are still not competitive, GEOSP shall not be bound by the non-compete provisions of this subsection (b) and/or GEOSP may terminate this LLC Agreement. If GEOSP decides, in accordance with this subsection (b), to sell PEM Fuel-Cell Powered Generator Sets, replacement parts, upgrades, accessories, and improvements that compete
with the Products and Pre-Commercial Units in the Territory directly or through
any other Person, then either Member may terminate this LLC Agreement. GEOSP
will consider the following factors, in good faith and as a whole, in
determining whether the Products are competitive: (i) the wholesale price of
Products is no more than 5% greater than such price for non-PP manufactured PEM
Fuel Cell-Powered Generator Sets; (ii) the lifetime end user cost per kWh
generated by the Products is no more than 5% greater than that for non-PP
manufactured PEM Fuel Cell-Powered Generator Sets, where end user cost per kWh
will be calculated as the wholesale price plus installation, lifetime operations
and maintenance cost, divided by the kWh consumption over the operating life;
(iii) the Product's emissions (NOx and CO measured in parts per million), noise
(in Db), and size (in cubic feet) are no more than 10% greater than that for
non-PP manufactured PEM Fuel Cell-Powered Generator Sets; and (iv) the Product's
reliability is no more than 5% worse than that for non-PP manufactured PEM Fuel
Cell-Powered Generator Sets.
Notwithstanding the preceding paragraph of subsection (b), for any particular year beginning in "2001" (as defined in Schedule D of the Distributor Agreement), if the Company achieves at least 50% of its Major Market Sales Commitment (as defined in Schedule D of the Distributor Agreement) in any Major Market in any year, then the Products will be deemed to be competitive in such Major Market for such year. Notwithstanding the failure of the Company to achieve at least 50% of its Major Market Sales Commitment in any Major Market for such year, if the Company achieves at least 66% of its Global Sales Commitment (as defined in Schedule D of the Distributor Agreement) for such year, then the Products will be deemed to be competitive for the entire Territory for such year. In any part of the Territory outside of the Major Markets, the Products shall be deemed competitive for such part of the Territory for such year if the Company achieves at least 50% of its Global Sales Commitment for such year.
to cooperate to make such mutually acceptable changes to this LLC Agreement insofar as allowed under law as will enable the affected party to optimize its tax position resulting from the change in the law.
(a) PP will train sufficient personnel in the Company, PP, GEOSP and GEOSP's Affiliates as may be needed in the conduct of the Company's operations, at terms and prices mutually agreed to between PP and the Company.
(b) The Company will use its best efforts to hire marketing, sales, and service personnel and/or contract with third parties to market and sell Products and Pre-Commercial Units in the manner that its Affiliates market and sell similar products, and to provide Services to ensure a level of customer service consistent with that provided for other GE-branded products, taking into consideration the sales volumes of Products and Pre-Commercial Units.
ARTICLE X
DISPUTES; TERMINATION OF THIS LLC AGREEMENT
(a) This LLC Agreement may be terminated by either GEOSP or PP by giving 30 days' notice if (i) the other party is in Material Breach, or (ii) the Distributor Agreement or any other Ancillary Agreement is terminated and not replaced.
(b) This LLC Agreement shall automatically be terminated upon:
(i) the written consent of all Members; or
(ii) the sale, exchange or other disposition of all or substantially all of the assets of the Company.
(c) This LLC Agreement may be terminated in accordance with the provisions of Sections 5.5(a), 9.3(b), and 10.1 of this LLC Agreement.
would otherwise terminate pursuant to the preceding sentence, if notice of the inaccuracy or breach thereof giving rise to such right to indemnity shall have been given to the party against whom such indemnity may be sought prior to such time. All covenants and agreements contained in this LLC Agreement shall survive until fully performed in accordance with their terms.
or their own counsel and at its or their own expense. The Indemnifying Party shall (A) select counsel, contractors and consultants of recognized standing and competence after consultation with the Indemnified Party or Parties, (B) take all steps necessary in the defense or settlement thereof and (C) at all times diligently and promptly pursue the resolution thereof. The Indemnified Party or Parties shall, and shall cause each of their respective Affiliates and their respective directors, members, officers, employees, and agents to, cooperate fully with the Indemnifying Party in the defense of any Indemnified Claim.
ARTICLE XI
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY
(a) the Members shall agree in writing to dissolve the Company;
(b) any Member shall become a Bankrupt Member or dissolve, or there shall occur any other event (other than a transfer of a Membership Interest in accordance with Article IV or Article X) that terminates the continued membership in the Company of any Member;
(c) the entry of a decree of judicial dissolution of the Company
under (S) 18-802 of the Act; and
(d) the termination of this LLC Agreement.
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the Company's assets, liabilities, and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable, and shall apply the proceeds of liquidation as set forth in the remaining sections of this Article XI.
(a) If non-cash property of the Company is to be distributed, the fair market value of such property as of the date of dissolution shall be determined by the Members pursuant to Part B.7(a) of Exhibit 2 using such reasonable methods of valuation as they may adopt. Such property shall be deemed to have been sold as of the date of dissolution for such fair market value, and the Capital Accounts of the Members shall be adjusted prior to the distribution of such property pursuant to Article VI of this LLC Agreement to reflect the manner in which gain or loss which would have been realized by the Company as a result of such deemed sale would have been allocated under Article VI and Exhibit 2 of this LLC Agreement.
(b) Distributions shall be made according to the positive balance(s) (if any) of the Members' Capital Accounts (as determined after taking into account all Capital Account adjustments for the Company's Fiscal Year during which the liquidation occurs), either in cash or in kind, as determined by the Committee, with any assets distributed in kind being valued for this purpose at their fair market value as determined pursuant to Section 11.5(a). Any such distributions to the Members in respect of their Capital Accounts shall be made in accordance with the time requirements set forth in Treas. Reg. (S) 1.704-1(b)(2)(ii)(b)(2).
(c) Notwithstanding anything to the contrary in this LLC
Agreement, upon a liquidation within the meaning of Treas. Reg. (S) 1.704-
1(b)(2)(ii)(g), if any Member has a deficit Capital Account (after giving effect
to all contributions, distributions, allocations, and other Capital Account
adjustments for all Fiscal Years, including the year during which such
liquidation occurs), the Member shall have no obligation to make any Capital
Contribution, and the negative balance of such Capital Account shall not be
considered a debt owed by the Member to the Company or to any other Person for
any purpose whatsoever.
Company as of the date of the complete liquidation. Upon the compliance by the liquidator with the foregoing distribution plan, the liquidator shall execute and cause to be filed a certificate of cancellation and any and all other documents necessary with respect to termination and cancellation of the Company under the Act.
ARTICLE XII
MISCELLANEOUS
if to GEOSP: GE On-Site Power, Inc.
One River Road
Schenectady, NY 12345
Attention: President
Telecopy: (518) 385-5704
with a copy to: GE Power Systems
One River Road
Schenectady, NY 12345
Attention: General Counsel
Telecopy: (518) 385-4725
-20-
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if to PP: Plug Power, L.L.C.
968 Albany-Shaker Road
Latham, NY 12110
Attention: President and CEO
Telecopy: (518) 782-7914
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or to such other address or telecopy number and with such other copies, as such party may hereafter specify by notice to the other parties. Each such notice, request or other communication shall be effective upon receipt, provided that if the day of receipt is not a Business Day then it shall be deemed to have been received on the next succeeding Business Day.
(a) Any provision of this LLC Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by all the Members, or in the case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or privilege under this LLC Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this LLC Agreement provided shall be cumulative and not exclusive of any rights or remedies provided by law.
IN WITNESS WHEREOF, the Members have hereunto set their hands on the day and year first above written.
GE ON-SITE POWER, INC.
By: /s/ Ricardo Artigas ----------------------------------------- Ricardo Artigas, President |
PLUG POWER, L.L.C.
By: /s/ Gary Mittleman ----------------------------------------- Gary Mittleman, President and CEO |
"Act" means the Delaware Limited Liability Company Act, Del. Stat. (S)(S) 18-101 to 18-1107, inclusive, as in effect from time to time in the State of Delaware.
"Additional Member" means any Person admitted as a Member of the Company after the date of original execution of this LLC Agreement in accordance with the provisions of Section 4.2 hereof.
"Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person, except that an Affiliate of PP shall only include any Person directly or indirectly controlled by PP. As used herein, control shall mean the ownership, either directly or by attribution, of more than 50% of the combined voting rights attributable to the equity interests of a Person or the ability, either direct or indirect, to control the composition of the majority of the Board of Directors or comparable management body of a person.
"Ancillary Agreements" means the Contribution Agreement, Promissory Note and Security Agreement, GE Trademark and Tradename Agreement, PP Trademark Agreement, and Distributor Agreement contemplated by and executed in connection with this LLC Agreement, forms of which are attached to this LLC Agreement as Exhibits 5 through 9, respectively.
"Applicable Law" means, with respect to any Person, any domestic or foreign, federal, state or local statute, law, ordinance, rule, administrative action, regulation, order, writ, injunction, judgment, decree or other requirement of any Governmental Authority (including any Environmental Law) applicable to such Person or any of its Affiliates or any of their respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer's, director's, employee's, consultant's or agent's activities on behalf of such Person or any of its Affiliates).
"Bankrupt Member" means any Member (i) that (A) makes an assignment
for the benefit of creditors; (B) files a voluntary petition in bankruptcy; (C)
is adjudged bankrupt or insolvent, or has entered against such Member an order
for relief, in any bankruptcy or insolvency proceedings; (D) files a petition or
answer seeking for the Member any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation; (E) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the Member in any
proceeding of the type described in subclauses (A) through (D) of this clause
(i); or (F) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver or liquidator of the Member or of all or any substantial part of the
Member's properties; or (ii) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any statute, law or regulation has been commenced and one hundred
twenty (120) days have expired without dismissal thereof or with respect to
which, without the Member's consent or acquiescence, a trustee, receiver or
liquidator of the Member or of all or any substantial part of the Member's
properties has been appointed and ninety (90) days have expired
without the appointment having been vacated or stayed, or ninety (90) days have expired after the date of expiration of a stay, if the appointment has not previously been vacated.
"Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.
"Capital Account" means, as to a Member, the account established and maintained for such Member pursuant to Article VI hereof.
"Capital Contribution" means the amount in cash or the value of property contributed by each Member (or its original predecessor in interest) to the capital of the Company in exchange for such Member's interest in the Company.
"Code" means the Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.
"Committee" means the committee established pursuant to Section 7.2 hereof.
"Company" means "GE Fuel Cell Systems, L.L.C.," a Delaware limited liability company.
"Contemplated Transactions" means the transactions contemplated by this LLC Agreement and the Ancillary Agreements.
"Damages" means all assessments, losses, damages, costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties, charges and amounts paid in settlement, including, without limitation, reasonable costs, fees and expenses of attorneys, experts, accountants, appraisers, consultants, witnesses, investigators and any other agents or representatives (with such amounts to be determined net of any resulting tax benefit and net of any refund or reimbursement of any portion of such amounts including, without limitation, reimbursement by way of third party insurance or third party indemnification) arising from or incurred in connection with any demand, claim, action, cause of action or proceeding.
"Dispose," "Disposing," or "Disposition" means a sale, assignment, transfer, exchange, mortgage, pledge, grant of a security interest, or other disposition or encumbrance (including, without limitation, by operation of law).
"Fair Market Value" means, with respect to a Membership Interest in the Company, the cash price that an unrelated party would pay for such Membership Interest, in light of all relevant factors in an arm's length transaction in which neither party is compelled to buy or sell. The Fair Market Value of Membership Interest in the Company shall be determined pursuant to the procedure set forth in the balance of this paragraph. Each party shall submit simultaneously to the other party a sealed proposal for the Fair Market Value within 30 days after the event which triggers the valuation. Following the delivery of the two proposals,
the amounts of the two proposals shall be compared. If the lower of the proposals is equal to or more than 90% of the higher of the proposals, the Fair Market Value shall be deemed to be the average of the two proposals. If the lower of the proposals is more than 10% less than the higher of the two proposals, the parties shall negotiate in good faith to determine the Fair Market Value. If the parties cannot agree on the Fair Market Value within 30 days of the opening of the sealed proposals, the parties shall each appoint, within ten days after the end of such period, an investment banking firm or other firm with significant experience in the valuation of businesses, in either case, of recognized standing, which firms need not be independent of the Company, PP and GE. Such firms shall negotiate in good faith to determine the Fair Market Value. If the firms cannot agree on the Fair Market Value within 30 days after the latter of them to be appointed, the two firms shall, within 10 days after the end of such 30-day period, (i) appoint a third such firm with significant experience in the valuation of businesses, of recognized standing, and independent of the Company, PP and GE, and (ii) share the results of their valuation analysis with such third firm. The third firm shall determine the Fair Market Value within 45 days after being appointed. The determination of Fair Market Value by this third firm shall be final and conclusive. The parties shall share equally the costs of compensating all of the foregoing firms.
"Fiscal Year" has the meaning set forth in Section 6.2(b) of this LLC Agreement.
"GAAP" means generally accepted accounting principles.
"GE Company Policies" means the corporate policy statements relating to compliance with law, GE's General Accounting Practices and other matters adopted and published by GE, which are attached to this LLC Agreement as Exhibit 4, as amended and supplemented from time to time, or any successor policies adopted by GE.
"GEOSP Disclosure Schedule" means the Disclosure Schedule provided by GEOSP to PP on the date of signing of this LLC Agreement.
"GEPS Competitor" means any of the following Persons, provided that
GEOSP may revise this list upon written notice to PP to include additional
Persons involved directly, or indirectly through an Affiliate, in the
manufacture, assembly, or provision of O & M services for, gas or steam
turbines, regardless of origin or design: AAR Engine Group - USA; ABB -
Switzerland; Advanced Materials Technologies, Inc. - USA; Aero & Industrial
Technology - UK; Aetc Ltd./ - UK; Alfa Laval - UK; AlliedSignal - US; Bailey
Automation PLC - UK; Baird Analtical - USA; Baker/MO Services Inc. - USA; Bales
Scientific Inc. - USA; Bently Nevada - USA; Bosman Powersource B.V. -
Netherlands; Boyce Engineering Int'l. Ltd. - UK; Boyce Engineering International
- USA; Brush Electrical Machines Ltd. - UK; Chromalloy Gas Turbine - USA;
Concepts ETI, Inc. - USA; Conmec, Inc. - USA; Cooper Energy Services - USA;
Cooper Rolls - USA; Demag Delaval Turbomachinery Corp. - USA; Dresser Rand Turbo
Products Division - USA; Ebara Corporation - Japan; Elbar BV - Netherlands;
European Gas Turbines Ltd. - UK; Fern Engineering, Inc. - USA; Fiat Avio S.P.A.
- Italy; Gas-Path Technology, Inc. - USA; Hickham Industries, Inc. - USA;
Hitachi - Japan; Honeywell Solid State Electric Center - USA; HSDE - UK; IHI-
Japan; John Brown / Kvearner Engineering - UK; Kawasaki - Japan; Liburdi
Engineering Ltd. - Canada; Man Gutehoffnungshutte AG - Germany; Mannesmann Demag
Veidichter - Germany; McGuffy Systems, Inc. - USA; Mitsubishi Heavy Industries -
Japan; Moog Controls - USA; Natole Turbine Enterprises, Inc. - USA; Ormat
Industries Ltd. - Israel; Petrotech, Inc. - USA; Polytec P.I. Inc. - USA; Powmat
Ltd - USA;
Pratt & Whitney - USA; Precision Castparts Corp. - USA; Preco Turbine Services Inc. - USA; Rolls-Royce Industrial & Marine - UK; Senior Thermal Engineering - UK; Sermatech International Inc. - USA; Siemens-Westinghouse Power Corp. - USA; Solar Turbines Incorporated - USA; SPE Mashproekt - Ukraine; Stork RMO BV - Netherlands; Sulzer Turbo - Germany; Thomassen International B.V. -Netherlands; Toshiba - Japan; Triconex Systems, Inc. - USA; Turbine Controls Ltd. - UK; Turbine Technology Services Corp. - USA; Wilson & Daleo Inc. -Canada; Wood Group Gas Turbines Ltd. - UK.
"Governmental Authority" means any foreign, federal, territorial, state or local governmental authority, quasi-governmental authority, instrumentality, court, commission or tribunal or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing.
"IRS" means the U.S. Internal Revenue Service.
"LLC Agreement" means this Amended and Restated Limited Liability Company Agreement, as it may be amended from time to time in accordance with its terms.
"Majority Interest" means one or more Members having among them at least fifty-one percent (51%) of the Membership Interests of all Members.
"Material Adverse Effect" means, with respect to any event, occurrence or condition, or series of events, occurrences or conditions, a material adverse effect on the operations, property or financial condition of the affected business or entity taken as a whole.
"Material Breach" means a breach by GEOSP or PP, as the case may be, of this LLC Agreement which breach, if not cured, would have a Material Adverse Effect on the Company or the non-breaching party. A Material Breach shall not exist for purposes of this definition unless the non-breaching party has given written notice of such breach to the breaching party and (i) the party in Material Breach fails to cure the subject default within 120-days of the receipt of such notice or (ii) if such default cannot reasonably be cured within such 120-day period, (A) the party in Material Breach fails promptly to take and continue to take all reasonable steps to cure the default as promptly as practicable after receipt of such notice or (B) at the end of such 120-day period it appears that the breaching party will not be able to cure the Material Breach within a commercially reasonable time (not to exceed an additional 60 days); provided that the foregoing notice and cure periods shall not apply to a particular provision of this LLC Agreement if other such periods are specified in such provision.
"Members" means GEOSP and PP and any Person hereafter admitted to the Company as a member as provided in this LLC Agreement.
"Membership Interest" means the interest of a Member (expressed as a percentage) in the Company. Membership Interests will be varied only as specifically agreed by the parties and will not be affected by allocations of Profits and Losses or other changes in Members' Capital Accounts.
"Officer" means any individual appointed to act as the President or any other officer appointed by the Committee pursuant to this LLC Agreement.
"Operating Plan" means the operating plan of the Company attached to this LLC Agreement in Exhibit 3.
"PEM Fuel-Cell Powered Generator Set" means a proton exchange membrane ("PEM") fuel cell stack packaged with a fuel processor (to convert fuel at standard available pressure and quality to fuel usable by the fuel cell stack), with maximum continuous output no greater than 35 kW, and all of the ancillary components, systems, electronics, batteries, controls, protective relaying (e.g., over/under current, transfer switch), and enclosure(s) required to be ready for indoor or outdoor installation and operation for stand alone or grid interconnected stationary power applications.
"Person" means an individual, a corporation, a partnership, a limited liability company, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
"PP Disclosure Schedule" means the Disclosure Schedule provided by PP to GEOSP on the date of signing of this LLC Agreement.
"Pre-Commercial Unit" means a 7kW output PEM Fuel Cell-Powered Generator Set manufactured by PP and meeting the specifications outlined in Schedule B to the Distributor Agreement, without changes or additions (other than standard installation materials - e.g., ducting, pipe, wire) by the Company and/or the Company's designated service provider.
"Products" means the following items manufactured by or on behalf of PP: PEM Fuel-Cell Powered Generator Sets, without changes or additions (other than standard installation materials - e.g., ducting, pipe, wire), and components (e.g., fuel processor, fuel cell stack, power electronics), replacement parts, upgrades, accessories (e.g., combined power and hot water packages), and improvements, of various sizes no larger than 35kW of maximum continuous output that (A) meet the Commercial Unit specifications set forth in Schedule B of the Distributor Agreement, and (B) are designed for use in residential, commercial, and industrial stationary power applications (e.g., base load power, peaking power, emergency back-up power, enhanced power quality, cogeneration, trailer-mounted units for temporary stationary power and/or rental power use); and
"Products" excludes the following, regardless of their manufacturer:
(i) PEM Fuel-Cell Powered Generator Sets and/or components designed for use in transportation or vehicle applications;
(ii) PEM Fuel-Cell Powered Generator Sets and/or components designed
for use in extended run, uninterruptible power supply ("UPS") systems for
data centers applications, where the PEM Fuel-Cell Powered Generator Set
(A) produces DC or AC premium (i.e., superior power quality to the grid)
power for data center supporting information technology ("IT") equipment,
(B) does not provide power to the entire facility, (C) is installed at a
sub-panel downstream from the Customer's main distribution panel, (D) is
designed to enable remote IT equipment shutdown and power cycling
for IT equipment that is no longer responding to commands, and (E) is designed to promote reliability over efficiency;
(iii) PEM Fuel-Cell Powered Generator Sets and/or components for rack-mounted equipment in telecommunications, cellular, or cable television applications; and
(iv) PEM Fuel-Cell Powered Generator Sets and/or components that are integrated with another device that utilizes all of the electrical output of the Fuel-Cell Powered Generator Set for that specific device only (e.g., an air conditioner powered by a Fuel-Cell Powered Generator Set, but not a combined Fuel-Cell Powered Generator Set-chiller cogen unit).
"Profits" and "Losses" mean, for each Fiscal Year or other period, an amount equal to the Company's taxable income or loss for such year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:
(i) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be added to such taxable income or loss and any related expenses not allowed as a deduction pursuant to Section 265 of the Code shall be subtracted from such taxable income or loss;
(ii) Any expenditures of the Company described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be subtracted from such taxable income or loss; and
(iii) Notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Exhibit B to this LLC Agreement shall not be taken into account in computing Profits or Losses.
"Seconded Employees" means the employees of GEOSP (or an Affiliate of GEOSP) or PP who are seconded to the Company pursuant to Annex C to this LLC Agreement.
"Secondment" means the temporary assignment of an employee of GEOSP, its Affiliate, or PP to work for the Company pursuant to Annex C without changing such employee's status as an employee of GEOSP, its Affiliate, or PP, as the case may be.
"Services" means the following activities associated with the Products: installation; permitting; application engineering; operation; routine maintenance; unscheduled maintenance; repair; overhaul (e.g., stack replacement); upgrade; remote monitoring, diagnostics and/or control (i.e., dispatch); operator and customer training; customer service; customer support.
"Strategic Plan" means the strategic plan of the Company attached to this LLC Agreement in Exhibit 3.
"Substitute Member" means any Person not a Member of the Company (prior to the transfer of a Membership Interest to such Person) to whom a Membership Interest in the Company has been transferred and who has been admitted to the Company as a Member pursuant to and in accordance with the provisions of Section 4.4 of this LLC Agreement.
"Supermajority Transaction" means a Supermajority Transaction defined as such in Section 7.1 of this LLC Agreement.
"Territory" means every country, province, territory or other principality in the world, except the States of Michigan, Indiana, Ohio, and Illinois in the United States of America while Edison Development Corporation has exclusive rights to market and sell products similar to Products and provide services similar to Services therein. In the event that Edison Development Corporation ("EDC") shall lose all of its rights to market and sell similar products and provide similar services in the States of Michigan, Indiana, Ohio and Illinois (the "EDC Territory"), this definition of "Territory" shall be expanded to include the EDC Territory. In the event that EDC shall lose its exclusive rights to market and sell similar products and provide similar services in the EDC Territory, the Company will have the rights to market and sell Products and provide Services in the EDC Territory on a non-exclusive basis.
"Test & Evaluation Unit" means a pre-commercial version of the Product with performance (e.g., efficiency, emissions, size, noise, reliability) below that of a Pre-Commercial Unit, which is intended to demonstrate proof of concept and provide the manufacturer with field test data.
(b) "To the best of an entity's knowledge" or "to the knowledge of an entity" (or any similar phrase) means (i) with respect to GEOSP, to the best of the knowledge of (or to the knowledge of, as the case may be) the President of GEOSP, and (ii) with respect to PP, to the best of the knowledge of (or to the knowledge of, as the case may be) the President and CEO and the General Counsel of PP.
The following representations and warranties which relate to PP, its assets and businesses are made solely by PP to and in favor of GEOSP and the Company, and the representations and warranties which relate to GEOSP, its assets and businesses are made solely by GEOSP to and in favor of PP and the Company. Neither GEOSP nor PP makes any representation with respect to representations of the other party:
to any right of termination, cancellation or acceleration of any right or obligation of GEOSP or PP, as the case may be, or to a loss of any benefit to which GEOSP or PP is entitled under, any agreement, contract or other instrument binding upon GEOSP or PP or by which any of its properties or assets is or may be bound or any license, franchise, permit or similar authorization held by GEOSP or PP except, in the case of clauses (ii) and (iii), for any such contravention, conflict, violation, default, termination, cancellation, acceleration or loss that would not, individually or in the aggregate, have a Material Adverse Effect on the Company.
ARTICLE 1
DEFINED TERMS
1.1.1 Committee means the committee established by GEOSP and PP, in accordance with Section 7.2 of the Amended and Restated Limited Liability Company Agreement between GEOSP and PP dated February ___, 1999, to conduct the affairs of the Company on their behalf and as their representatives.
1.1.2 Employees means individuals employed directly by the Company itself, rather than individuals seconded to the Company, who remain employed by PP, GEOSP or their Affiliates (other than the Company).
1.1.3 GE, for purposes of this Annex C, means General Electric Company and its Affiliates, including GEOSP.
1.1.4 Governmental Regulations means any statute, rule, regulation, decree, executive order, preliminary or permanent injunction or court order issued by a Governmental Authority. A reference to a statutory provision includes the regulations and other instruments under it.
1.1.5 Party or Parties means, as the context may require, PP, GEOSP, or the Company or all of the foregoing.
1.1.6 Third Party means any Person other than a Party.
ARTICLE 2
GENERAL PROVISIONS
The purpose of this Annex C is to define the terms and conditions relating to the employment of Employees and the secondment of Seconded Employees by the Company.
ARTICLE 3
RECRUITMENT AND SELECTION OF EMPLOYEES
ARTICLE 4
REMUNERATION OF COMPANY EMPLOYEES
ARTICLE 5
COMPANY POLICIES AND TRAINING
ARTICLE 6
SECONDED EMPLOYEES
provide the Company with copies of returns, receipts or similar documents showing that all the taxes and social security payments (if any) have been made to the applicable Governmental Authorities. GEOSP shall indemnify the Company against any claims by the GEOSP Seconded Employees or any applicable Governmental Authority with respect to the payment of wages, salaries, taxes, social security payments, other payments resulting from the termination of employment by GE or any of its Affiliates or the proper filing of returns with the applicable Governmental Authorities with respect to the foregoing.
ARTICLE 7
LIMITATION OF LIABILITY
7.1 The Parties agree that each Seconded Employee to the Company by GEOSP or PP shall, in all respects, be acting for the Company and not GEOSP or PP, respectively. Nothing contained herein shall constitute or be construed to be or create a partnership or joint venture between the Company, GEOSP and/or PP. The debts and liabilities incurred by the Company are those of the Company and, subject to Clauses 6.1.2 and 6.2.3 above, neither GEOSP nor PP shall have any liability for them.
7.2 The Company hereby represents that in accepting the secondment of any GEOSP or PP employee to the Company, it has not relied on any projection of earnings, statements as to the possibility of future success or other similar matter which may have been prepared or presented by GEOSP, PP or their Affiliates, and understands that no guaranty is made or implied by GEOSP or PP as to the future financial success of the business of the Company.
7.3 Neither GEOSP nor PP shall have any liability to the Company or to any other Person for any act or omission of the Seconded Employees in connection with the operation or activities of the Company. Additionally, subject to Clauses 6.1.2 and 6.2.3 above, at GEOSP's or PP's request, the Company will, at its own cost and expense, assume the defense of any proceeding brought by any Third Party to establish any such liability and will indemnify and hold harmless GEOSP and PP from any such liability and all related costs and expenses, including attorney's fees.
7.4 As used in this Article, "liability" includes liability for any claim of any kind whether the claim is based on contract, indemnity, warranty, tort (including negligence of any degree), strict liability or otherwise for any loss or damage arising out of or connected with performance or breach of the provisions of this Annex C or operations of the Company.
7.5 As used in this Article, "GEOSP" and "PP" shall include GE or PP, as the case may be, and its respective Affiliates and any of their respective officers, employees or agents, including any officers, employees or agents also seconded to work in the Company as Seconded Employees.
7.6 The Company shall indemnify GEOSP and PP against Third Party claims arising out of the acts or omissions of its employees, including Employees and Seconded Employees.
7.7 The foregoing limitations and indemnity shall apply to the full extent permitted by law regardless of degree of fault or negligence, and, notwithstanding any other provisions of this Annex C, shall survive termination of this LLC Agreement. The limitations contained in Section 10.5(a) of this LLC Agreement shall also apply to all indemnity provisions of this Annex C, and the liability of GEOSP and the Company shall be considered together for purposes of the $1,000,000 limitation in Section 10.5(a).
EXHIBIT A
Initial Management of the Company
Barry Glickman President Frank Scovello Director of Sales Rick Robertson Director of Marketing |
EXHIBIT B
(Acknowledgment From Employees of GE and its Affiliates Concerning Secondment to the Company)
RE: Secondment to GE Fuel Cell Systems, L.L.C.
I refer to [our recent discussions/your letter dated _______] concerning my secondment to GE Fuel Cell Systems, L.L.C., for an initial period of ________. I hereby acknowledge and agree that I will not, by reason of my secondment, become an employee of GE Fuel Cell Systems, L.L.C., but shall, throughout my period of secondment, remain your employee.
I hereby covenant with you (as trustee for and on behalf of GE Fuel Cell Systems, L.L.C.) that I shall not maintain any claim, nor institute any proceedings whatsoever against GE Fuel Cell Systems, L.L.C., whether in respect of breach of contract, redundancy, unfair dismissal, compensation for loss of office and any other ground whatsoever, whether under common law, statute or otherwise by reason of any termination of my secondment to GE Fuel Cell Systems, L.L.C., or the termination of my employment with you.
I hereby confirm that I understand and have considered in full the effect of the foregoing (and in particular those provisions of this Acknowledgment which may deprive me of rights) and accept that this Acknowledgment is legally binding on me. I acknowledge that you have advised me to obtain independent legal advice prior to execution of this Acknowledgment and I confirm that I have had sufficient opportunity to take and that I have taken such advice or decided (without any influence having been brought to bear on me) not to obtain such advice.
This Acknowledgment shall be governed by and construed in accordance with the Laws of the State of New York.
Executed by: Witness:
EXHIBIT B (Continued)
(Acknowledgment From Employees of PP
Concerning Secondment to the Company)
___________, 1999
Plug Power, L.L.C.
968 Albany-Shaker Road
Albany, New York 12110
RE: Secondment to GE Fuel Cell Systems, L.L.C.
I refer to [our recent discussions/your letter dated _______] concerning my secondment to GE Fuel Cell Systems, L.L.C., for an initial period of ________. I hereby acknowledge and agree that I will not, by reason of my secondment, become an employee of GE Fuel Cell Systems, L.L.C., but shall, throughout my period of secondment, remain an employee of Plug Power, L.L.C.
I hereby covenant with Plug Power, L.L.C. (as trustee for and on behalf of GE Fuel Cell Systems, L.L.C.) that I shall not maintain any claim, nor institute any proceedings whatsoever against GE Fuel Cell Systems, L.L.C., whether in respect of breach of contract, redundancy, unfair dismissal, compensation for loss of office and any other ground whatsoever, whether under common law, statute or otherwise by reason of any termination of my secondment to GE Fuel Cell Systems, L.L.C., or the termination of my employment with Plug Power, L.L.C.
I hereby confirm that I understand and have considered in full the effect of the foregoing (and in particular those provisions of this Acknowledgment which may deprive me of rights) and accept that this Acknowledgment is legally binding on me. I acknowledge that Plug Power, L.L.C., has advised me to obtain independent legal advice prior to execution of this Acknowledgment and I confirm that I have had sufficient opportunity to take and that I have taken such advice or decided (without any influence having been brought to bear on me) not to obtain such advice.
This Acknowledgment shall be governed by and construed in accordance with the Laws of the State of New York.
Executed by: Witness:
MEMBERSHIP INTERESTS
NAME AND MEMBERSHIP NOTICE ADDRESS INTEREST -------------- -------- GE On-Site Power, Inc. 75% One River Road Schenectady, NY 12345 Plug Power, L.L.C. 25% 968 Albany-Shaker Road Albany, NY 12110 |
ALLOCATION AND CAPITAL ACCOUNT PROVISIONS
For purposes of interpreting and implementing the LLC Agreement, the following rules shall apply and shall be treated as part of the terms of the LLC Agreement:
1. For purposes of determining the amount of gain or loss to be allocated pursuant to Article VI of the LLC Agreement, any basis adjustments permitted pursuant to Section 743 of the Code shall be disregarded.
2. Income, loss, deductions and credits shall be allocated to the Members in accordance with the portion of the Fiscal Year during which the Members have held their respective interests. All items of income, loss and deduction shall be considered to have been earned ratably over the period of the Fiscal Year, except that gains and losses arising from the disposition of assets shall be taken into account as of the date thereof.
3. Notwithstanding any other provision of the LLC Agreement, to the extent required by law, income, gain, loss and deduction attributable to property contributed to the Company by a Member shall be allocated among the Members so as to take into account any variation between the basis of the property to the Company and the fair market value of the property at the time of contribution in accordance with the requirements of Section 704(c) of the Code and the applicable Treasury Regulations thereunder, as more fully described in Part B hereof. The Company shall use the traditional method with curative allocations described in Treasury Regulation Section 1.704-3(c) for purposes of complying with Section 704(c)(1)(A) of the Code.
4. Notwithstanding any other provision of the LLC Agreement, in the event the Company is entitled to a deduction for interest imputed under any provision of the Code on any loan or advance from a Member (whether such interest is currently deducted, capitalized or amortized), such deduction shall be allocated solely to such Member.
5. Notwithstanding any provision of the LLC Agreement to the contrary, to the extent any payments in the nature of fees made to a Member are finally determined by the IRS to be distributions to a Member for federal income tax purposes, there will be a gross income allocation to such Member in the amount of such distribution.
6. (a) Notwithstanding any provision of the LLC Agreement to the contrary and subject to the exceptions set forth in Section 1.704-2(f)(2)-(5) of the Treasury Regulations, if there is a net decrease in Partnership Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member's share of the net decrease in Partnership Minimum Gain determined in accordance with Section 1.704-2(g)(2) of the Treasury Regulations. Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury
Regulations. This paragraph 6(a) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(f) of the Treasury Regulations and
shall be interpreted consistently therewith. To the extent permitted by such
Section of the Treasury Regulations and for purposes of this paragraph 6(a)
only, each Member's Adjusted Capital Account Balance shall be determined prior
to any other allocations pursuant to Article VI of the LLC Agreement with
respect to such Fiscal Year and without regard to any net decrease in Partner
Minimum Gain during such Fiscal Year.
(b) Notwithstanding any provision of the LLC Agreement to the contrary, except paragraph 6(a) of this Exhibit 2 and subject to the exceptions set forth in Section 1.704-2(i)(4) of the Treasury Regulations, if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any Fiscal Year, each Member who has a share of the Partner Nonrecourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(5) of the Treasury Regulations, shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(4) of the Treasury Regulations. Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This paragraph 6(b) is intended to comply with the minimum gain chargeback requirement in such Sections of the Treasury Regulations and shall be interpreted consistently therewith. To the extent permitted by such Sections of the Treasury Regulations, and solely for purposes of this paragraph 6(b), each Member's Adjusted Capital Account Balance shall be determined prior to any other allocations pursuant to Article VI of the LLC Agreement with respect to such Fiscal Year, other than allocations pursuant to paragraph 6(a) hereof.
7. (a) Notwithstanding any provision of the LLC Agreement to the
contrary, in the event any Member unexpectedly receives any adjustments,
allocations or distributions described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), items of
Company income and gain shall be specially allocated to such Members in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the deficits in their Adjusted Capital Account Balances
created by such adjustments, allocations or distributions as quickly as
possible, provided that an allocation pursuant to this paragraph 7(a) shall be
made only if and to the extent that such Members would have a deficit Adjusted
Capital Account Balance after all other allocations provided for in the LLC
Agreement and this Exhibit 2 have been tentatively made as if this paragraph
7(a) were not in the LLC Agreement or incorporated thereinto.
(b) In the event any Member has a deficit Capital Account at the end of any Fiscal Year which is in excess of the sum of (i) the amount such Member is obligated to restore pursuant to any provision of the LLC Agreement, and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations, each such Member shall be specially allocated items of Partnership income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this paragraph 7(b) shall be made only if and to the extent that such Member would have a deficit Capital Account in excess of
such sum after all other allocations provided for in the LLC Agreement and this Exhibit 2 have been made as if paragraph 7(a) hereof and this paragraph 7(b) were not in the LLC Agreement or incorporated thereinto.
8. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or Section 743(b) of the Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or Section 1.704- 1(b)(2)(iv)(m)(4) of the Treasury Regulations, to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of its interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as a item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interest in the Company in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event that Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations applies.
9. No loss shall be allocated to any Member to the extent that such allocation would result in a deficit in its Adjusted Capital Account Balance while any other Member continues to have a positive Adjusted Capital Account Balance; in such event losses shall first be allocated to any Members with positive Adjusted Capital Account Balances, and in proportion to such balances, to the extent necessary to reduce their positive Adjusted Capital Account Balances to zero. Any allocation of loss pursuant to this paragraph 9 shall be offset in subsequent years on a last-in first-out priority basis by special allocations of income in the corresponding amounts.
10. Any special allocations of items pursuant to this Part A (the "Regulatory Allocations") shall be taken into account in computing subsequent allocations so that the net amount of any items so allocated and the Profits, Losses and all other items allocated to each such Member pursuant to Article VI of the LLC Agreement shall, to the extent possible, be equal to the net amount that would have been allocated to each such Member pursuant to the provisions of Article VI of the Agreement if such Regulatory Allocations had not occurred.
11. Notwithstanding any provision of the LLC Agreement to the contrary, Nonrecourse Deductions for any Fiscal Year or other period shall be specially allocated to the Members pro rata in accordance with their respective Membership Interests.
12. Notwithstanding any provision of the LLC Agreement to the contrary, any Member Nonrecourse Deduction for any Fiscal Year or other period shall be specially allocated to the Member who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Section 1.704-2(i) of the Treasury Regulations.
1. For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Members' Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes; provided, however, that:
(a) Any deductions for depreciation, cost recovery or amortization (other than depletion under Section 611 of the Code) attributable to property contributed by a Member to the capital of the Company shall be determined as if the adjusted basis of such property on the date it was acquired by the Company was equal to the fair market value of the property as determined by the Members pursuant to Part B.7(a) hereof using such reasonable methods of valuation as they may adopt. Upon an adjustment to the Carrying Value of any Company property (other than property subject to depletion under Section 611 of the Code), any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined as if the adjusted basis of such property was equal to the Carrying Value of such property immediately following such adjustment.
(b) Any income, gain or loss attributable to the taxable disposition of any property (including any property subject to depletion under Section 611 of the Code) shall be determined by the Company as if the adjusted basis of such property as of such date of disposition was equal in amount to the Company's Carrying Value with respect to such property as of such a date.
(c) The computation of all items of income, gain, loss and deduction shall be made by the Company and, as to those items described in Section 705(a)(1)(B) or Section 705(a)(2)(B) of the Code, or treated as Section 705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalizable for federal income tax purposes.
2. A transferee of a Membership Interest will succeed to the Capital Account relating to the Membership Interest transferred.
3. Upon an issuance of additional Membership Interests for cash or property, the Capital Accounts of all Members (and the Carrying Values of all Company properties) shall, immediately prior to such issuance, be adjusted (consistent with the provisions hereof) upward or downward to reflect any unrealized gain or unrealized loss attributable to each Company property (as if such unrealized gain or unrealized loss had been recognized upon an actual sale of such property at the fair market value thereof, immediately prior to such issuance, and had been allocated to the Members, at such time, pursuant to Article VI of the Agreement). In determining such unrealized gain or unrealized loss attributable to the properties, the fair market value of Company properties shall be determined by the Members pursuant to Part B.7(a) hereof using such reasonable methods of valuation as they may adopt.
4. Immediately prior to the distribution of any Company property in liquidation of the Company, or the distribution by the Company to a Member of any Company property as consideration for an interest in the Company, the capital accounts of all Members (and the Carrying Values of all Company properties) shall be adjusted (consistent with the provisions hereof and Section 704 of the Code) upward or downward to reflect any unrealized gain or unrealized loss attributable to each Company property (as if such unrealized gain or unrealized loss had been recognized upon an actual sale of each such property, immediately prior to such distribution, and had been allocated to the Members, at such time, pursuant to Article VI of the Agreement). In determining such unrealized gain or unrealized loss attributable to the properties, the fair market value of Company properties shall be determined by the Members pursuant to Part B.7(a) hereof using such reasonable methods of valuation as they may adopt.
5. In the event the value of any Company asset is adjusted as described in paragraph 3 or 4 above, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the value and the adjusted basis of such asset for federal income tax purposes in the same manner as under Section 704(c) of the Code and the Treasury Regulations thereunder.
6. Any elections or other decisions relating to such allocations shall be made by the Committee in any manner that reasonably reflects the purpose and intention of the LLC Agreement.
7. The following actions shall require the consent of the holder(s) of a majority of outstanding membership interests:
(a) the valuation of any non-cash property contributed to the Company by a Member, or distributed to a Member by the Company, and the valuation of all the assets of the Company if required for purposes of computing the Members' Capital Accounts pursuant to the Regulations under Section 704 of the Code; and
(b) the distribution by the Company to a Member of non-cash property which had been previously contributed by a Member to the capital of the Company, provided such distribution is made within the seven year period following the date on which the property was contributed to the Company and such distribution, if made, would cause the recognition of taxable income or gain under Section 704(c)(1)(B) or Section 737 of the Code.
allocable to an increase in Partnership Minimum Gain, determined according to the provisions of Section 1.704-2(c) of the Treasury Regulations.
For purposes of this Exhibit, all other capitalized terms will have the same definition as in the LLC Agreement.
STRATEGIC PLAN AND OPERATING PLAN
(See Attached)
GE FUEL CELL SYSTEMS, LLC
OPERATING PLAN
JANUARY 1999
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
1999
----------
Unit Sales
- # of Units [***]
- Average Unit Size (kW) 7
- # of MW [***]
- Installed Base (MW) [***]
Transfer Price (= JV COGS per Unit) [***]
Sales Price ($ per Unit)* [***]
Revenues
- Unit Sales ($MM) [***]
- Installation ($MM) [***]
- Revenue ($ per Unit) [***]
- JV Market Share (%) [***]
- Maintenance ($MM) [***]
- Revenue ($ per Unit) [***]
- JV Market Share (%) [***]
- Franchise Fees ($MM) [***]
- Total ($MM) [***]
Gross Margin ($MM)
- Unit Sales [***]
- Installation [***]
- Maintenance [***]
- Franchise Fees [***]
- Total [***]
- Total (% of Revenues) [***]
Operating Expenses ($MM)**
- Sales [***]
- # of Dedicated Sales People [***]
- Salary (plus benefits)/Person [***]
- Sales Commission (% of GM) [***]
- Sales Commission [***]
- Travel [***]
- Technical Support [***]
- # of People [***]
- Salary (plus benefits)/Person [***]
- Marketing (people, shows, brochures, etc.) [***]
- R&D (electronics, testing) [***]
- G&A (office space, legal/finance support) [***]
- Consulting/Market Research [***]
- Non-warranty service/unit replacements [***]
- Total [***]
- Total (% of Revenues) [***]
Operating Margin ($MM)
- Total [***]
- Total (% of Revenues) [***]
|
GE FUEL CELL SYSTEMS, LLC
|
STRATEGIC PLAN
JANUARY 1999
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED MATERIALS HAVE BEEN INDICATED WITH ASTERISKS.
OVERVIEW
GE Fuel Cell Systems, L.L.C. (hereafter the "Company") is being formed to market, install, and service proton exchange membrane (PEM) fuel cell systems designed and manufactured by Plug Power, L.L.C. (hereafter "PP"). The Company will be PP's distributor of fuel cell systems for residential and small commercial and industrial (C&I) power applications less than or equal to 35kW, certain defined exclusions. Except for the distribution rights previously granted to DTE Energy (parent company of Detroit Edison) for Michigan, Illinois, Indiana, and Ohio, the Company will be PP's exclusive, global distributor. Ownership of the Company is split 75%/25% between GE On-Site Power, Inc. (hereafter "GEOSP") and PP.
PRODUCT
The Company's initial efforts will focus on PP's residential-sized fuel cel1 product, the "Plug Power 7000." When fully commercialized this product this product will provide 100% of the power requirements of a target household, or approximately 2-4kW of baseload power, 10-15kW of peak power, and [***]kWh/year of energy. Power will be generated from the fuel cell "stack" with batteries providing supplementary power to meet short-term power surges. The unit will run on natural gas, propane, or methanol, and will be 40% efficient (8,500 Btu/kWh) in typical baseload operation. Unlike traditional power generators, efficiency falls with increased output above the optimal design point.
The Company expects to use 1999 to conduct additional market research on typical residential and C&I power usage, tariff structures, fuel availability, fuel prices, buying criteria, etc. in order to better understand (1) Requisite product features by geography and customer segment (e.g., baseload power requirement vs. instantaneous requirement), (2) Acceptable customer payback periods, and (3) Regulatory requirements, etc. The Company will use this data to define the optimal unit sizes, determine the mix between fuel cell-supplied and battery-supplied output, and revise, as needed, performance specifications by geography/customer segment, etc.
RESIDENTIAL FUEL CELL MARKET
The Company has conducted a preliminary evaluation of target markets and customers taking into account such factors as average household demand, ability to pay, power availability/quality, availability of fuel, grid power vs. fuel price spreads, penetration of competing distributed generation (DG) technologies (e.g., reciprocating engine generators), new capacity requirements, and the cost of new capacity additions (including transmission and distribution). Based on this evaluation, the Company believes the available global market for PP's residential-sized fuel cells will be over 20,000,000 households by 2005. The market size in the initial commercial period (i.e., 2001 to 2003) will be smaller due to customers' technology validation concerns and higher unit prices (driven by sub-scale PP production volumes). The Company estimates market size and retail prices as follows:
Global Market Size--2001-2003*
Available Market Size Unit Price (Retail, Installed)
--------------------- ------------------------------
2001 1,700,000 $6,700
2002 5,000,000 $4,500
2003 11,000,000 $3,250
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* PP and the Company plan to revisit this preliminary market assessment as additional market research provides better information about required customer savings, consumer willingness to pay for environmental and power quality benefits, impact of financing/ownership alternatives on capital costs and customer acceptance, rate of customer adoption, particularly in the developing world, and the costs of incremental transmission and distribution vs. new construction activity.
GO-TO-MARKET STRATEGY
The Company plans to use early 1999 to validate its market prioritization and develop detailed, country-specific go-to-market strategies consistent with each market's potential and the expected pace of market development. However, in general, the Company plans to pursue a sale-for-resale approach wherever possible. That is, the Company will seek to enter into agreements with "resellers", entities capable of reselling fuel cell systems to residential customers within defined territories. Potential resellers include electric utilities, local gas distribution companies, gas and/or Power marketers, propane distributors, rural cooperatives, gas and/or power regulatory bodies, government agencies, reciprocating engine generator distributors, and HVAC (heating, ventilation and air conditioning) and/or appliance dealers. These entities typically have, on a regional basis, an installed base of customers, billing and customer support capability, brand recognition, local market credibility, and regulatory expertise. By working through resellers the Company expects to be able to quickly penetrate multiple markets, avoid costly investment in sales and support resources and accelerate the technology acceptance process. The benefits to the reseller include margins on fuel cell system sales, service revenues (in certain instances), and sales of ancillary products (fuel, appliances). Due to the ease of fuel cell system installation relative to traditional generation/T&D, resellers can also quickly enter electricity markets beyond their existing customer footprint, thus significantly increasing both revenue opportunity and brand recognition.
In 1999 and early 2000, the Company will have the option to offer to its resellers Test and Evaluation units. Resellers will either purchase these units directly or receive the units free as part of a broader commercial relationship that may include franchise fees, take-or-pay commitments, and territorial exclusivity. In either case the expectation is for the reseller to be a full participant in the Test and Evaluation Program, running the Test and Evaluation units through a prescribed regimen of tests, and providing data and feedback to the Company and PP. Any Test and Evaluation units purchased by the Company will be credited, dollar for dollars, against its obligation to purchase Pre- Commercial units in 2000.
In 2000, the Company has a "take-or-pay" obligation to purchase 485 Pre- Commercial units from PP, for a total purchase price of $10.25 million. These units will meet the performance specifications included in the Distributor Agreement. The Company will be offering these units to its customers to allow them to get familiar with the performance, installation, operation, and maintenance of the units. Customers will be expected to provide test data to the Company and PP so that improvements can be incorporated into the commercial systems.
Reseller Approach
From Company From Reseller
Full range of fuel cell products (less than)35kW Testing of prototype units
GE-PP branded products Local customer base
Application/engineering expertise Brand
Marketing/sales support Dedicated sales force
Sales/service training Gas/power commodity sales
Financing (where needed and Financing (where needed and
cost-effective) cost-effective)
Extended Warranties Relationship with regulators
Marketing materials Local billing, call/customer care
Service (where cost-effective, through center
contracts with GE and/or Service (where qualified and
third party suppliers) cost-effective)
|
The Company is in the process of incorporating customer feedback into the reseller contract offering. However, the Offering will likely include the following elements: [***]
Sales Strategy and Target Customers
Target customers are residential and small commercial consumers and/or the gas and electric its, government agencies, and independent power producers that deliver energy sources to those consumers. During the first one to two years of commercialization, virtually all customer demand is expected to come from the U.S. and W. Europe, where household electricity utilization is highest. As cell system capital costs fall, the Company will sell product to serve residential customers worldwide.
The Company will sell to consumers through a reseller network, but will also create brand product awareness at the consumer level through media advertising, trade shows and other mass marketing. Resellers will augment this effort through local advertising, mass mailings, catalog sales, and educational seminars, promotional pricing for systems or fuel, and bundled service offerings that provide "premium" power packages. Resellers will also work with building contractors, financial institutions and other intermediaries to create cost- effective mechanisms to reach consumers.
The sales strategy will highlight three core benefits of residential fuel cell systems:
. Grid Displacement -- Electricity at lower than grid power delivered to the home. High efficiency, low capital cost and low transmission and distribution requirements enable fuel cell systems to produce electricity at costs below the existing grid in regions covering tens of millions of homes in the U.S., Western Europe and Latin America.
. Power Quality -- Highly reliable power that is also environmentally friendly. Growth in information technology in the home for entertainment and business
use (there are an estimated 20 million home offices in the U.S alone) has increased the inconvenience and the economic impact of weather- related as well as capacity-driven power outages. In the developing world, such outages can occur daily for extended periods. Fuel cells are an environmentally friendly, low cost, low noise, small, modular, etc. solution to power reliability concerns.
. Electricity Access -- Electricity supply where grid does not exist or is expensive to extend and maintain. The World Bank estimates that 40% of the world's population does not have electricity today; most of this unelectrified population is in the developing nations. In many low density and/or rugged terrain areas, the capital cost of building a distributed network of fuel cell systems will over time fall substantially below the investments required for central station generation, transmission and distribution.
Service Strategy
The Company is committed to provide complete product support, through its own service infrastructure and/or through contracts with third party service providers. Potential third party service providers include those companies with an existing national service infrastructure (e.g., Honeywell, GE Appliances), or regional companies with strong service capabilities (e.g., HVAC companies). In either case, the Company will seek to ensure that the service is: 1) provided at a comparable level of quality to other GE-branded products; and 2) sufficient to meet reasonable customer needs in the areas of timeliness, quality, and cost- effectiveness.
The roll-out of the Company's service offering will be closely coordinated with the introduction of the fuel cell products, such that where the product is available, a sufficient level of installation, maintenance, and customer support service is also available. The Company, through its service contracts, will also provide the warranty service for the PP fuel cell systems covered by the Distributor Agreement, according to terms to be mutually agreed between PP and the Company.
By late 1999, the Company expects to have identified an overall service strategy for each high-priority market. By year-end 1999, the Company expects to have the overall service strategy translated to a comprehensive service plan that addresses the following:
. Installation, operation, and maintenance requirements
. Service standards (e.g. response time, rework, customer support, etc.)
. Geographic coverage
. Technical qualifications
. Call center operations
. Training program
. Warrant support
At all times the Company will review its service plan with PP, and make modifications as needed based on the pace of product development and field test results. The Company expects the service plan to be finalized no later than June 2000, with all requisite service contracts in place at least 3 months prior to the expected release of commercial units in January 2001.
ORGANIZATION
GE Fuel Cell Systems (Within GEPS)
The Company will be organized and operated as a stand-alone entity, with 25% owned by Plug Power, and the remaining 75% owned by GE On-Site Power, Inc., a wholly owned subsidiary of General Electric Company that is controlled by GE's Power Systems business ("GEPS"). The Company will compensate PP and GEPS for any use of parent company resources, services, facilities, etc. The Company's financial results will be consolidated by GEOSP, with Plug Power's ownership accounted for as a distribution to minority interest.
The Company will have access (under a sales and services agreement) to the Energy Services Sales organization (under Ellen Smith), and the GE Global Sales division (under Del Williamson). These two groups work closely, together, with Services focused on after-market sales, and Global Sales on new turbine and generator equipment. Both groups work closely with the Company's target Customers (e.g., electric utilities, gas companies, power and gas marketers). The Company plans to Utilize the Services and Global Sales groups to introduce the Company's products to the widest Possible market of potential reseller customers. Working through the existing GEPS sales forces allows the Company to capitalize on GEPS' credibility and existing customer relationships, and avoid the cost and time-to-market delays in creating a new market channel. In addition, the Company will employ a small number of full-time sales people who will be dedicated exclusively to the Company's products. These dedicated sales people will train the GEPS sales force, and, after the Services and Global Sales groups have generated reseller interest, work with the Services/Global Sales teams to structure the specific transactions. The Company sales people will also be responsible for developing markets outside the GEPS market focus (e.g., propane distributors).
GE Fuel Cell Systems (Internal)
In year 1, the Company expects to have a small group of core professionals, supplemented by consultants and contract employees as needed. As PP nears commercial production, the Company add significantly to its dedicated sales force and "technical support" group. The technical support personnel will work with PP and the Company's resellers/customers to monitor alpha and testing, establish installation and operating procedures, coordinate product testing and development efforts with GE's Corporate Research
and Development Center, obtain all requisite regulatory approvals and certifications, address all grid-interconnect issues, and provide technical expertise in support of the Company's sales efforts. The overall Company headcount plan is forecast as follows:
Resources--1999-2003
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
Dedicated Sales 1.0 3.0 6.0 10.0 12.0
Technical Support 1.5 2.0 5.0 5.0 6.0
Marketing 2.0 3.0 4.0 5.0 5.0
General Management 1.0 1.0 1.0 1.0 1.0
Total 5.5 9.0 16.0 21.0 24.0
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GE - Plug Power Fuel Cell JV - Projections
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
Unit Sales
- # of Units [***] [***] [***] [***] [***]
- Average Unit Size (kW) [***] [***] [***] [***] [***]
- # of MW [***] [***] [***] [***] [***]
- Installed Base (MW) [***] [***] [***] [***] [***]
Transfer Price (= JV COGS
per Unit) [***] [***] [***] [***] [***]
Sales Price ($ per Unit) [***] [***] [***] [***] [***]
Revenues*
- Unit Sales ($MM) [***] [***] [***] [***] [***]
- Franchise Fees ($MM) [***] [***] [***] [***] [***]
- Total ($MM) [***] [***] [***] [***] [***]
* Early year sales may be structured as a lower sales price plus a franchise fee
Gross Margin ($MM)
- Unit Sales [***] [***] [***] [***] [***]
- Franchise Fees [***] [***] [***] [***] [***]
- Total [***] [***] [***] [***] [***]
- Total (% of
Revenues) [***] [***] [***] [***] [***]
Operating Expenses ($MM)
- Sales [***] [***] [***] [***] [***]
- # of Dedicated Sales
People [***] [***] [***] [***] [***]
- Salary (plus benefits)/
Person [***] [***] [***] [***] [***]
- Sales Commission (%) [***] [***] [***] [***] [***]
- Sales Commission [***] [***] [***] [***] [***]
- Travel [***] [***] [***] [***] [***]
- Technical Support [***] [***] [***] [***] [***]
- # of People [***] [***] [***] [***] [***]
- Salary (plus benefits)/
Person [***] [***] [***] [***] [***]
- Marketing (people, shows,
brochures, etc.) [***] [***] [***] [***] [***]
- R&D (electronics,
testing) [***] [***] [***] [***] [***]
- G&A (office space,
support) [***] [***] [***] [***] [***]
- Consulting/Market
Research [***] [***] [***] [***] [***]
- Non-warranty
service/unit
replacements [***] [***] [***] [***] [***]
- Total [***] [***] [***] [***] [***]
- Total (% of
Revenues) [***] [***] [***] [***] [***]
Operating Margin ($MM)
- Total [***] [***] [***] [***] [***]
- Total (% of
Revenues) [***] [***] [***] [***] [***]
|
[***]
[Note: All numbers in this table have been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act]
GE COMPANY POLICIES
POLICY 20.4: ETHICAL BUSINESS PRACTICES
GE expects employees to use only ethical practices in selling goods and services and in representing the company to governmental authorities. This policy sets forth the ethical standards of conduct and practices which must be followed with respect to certain kinds of payments, entertainment and political contributions. GE will not authorize, involve itself in or tolerate any business practice that does not follow this policy.
Scope
This policy applies to employees of GE.
Controlled affiliates must adopt corresponding policies. (A controlled affiliate is an affiliated company in which GE owns, directly or indirectly, more than 50% of the voting shares, or in which the power of control is possessed and exercised by or on behalf of GE.)
We must encourage affiliated but non-controlled companies to follow practices consistent with this policy.
We must require independent third parties to represent GE in a manner that is consistent with our commitment to integrity and the principles of this policy. Independent third parties include: consultants, agents, sales representatives, distributors, contractors and any other outside persons representing GE.
Requirements
General
Never make or offer, directly or indirectly, anything of value (such as a bribe
or kickback) to a customer or government official to influence or reward an
action. A business courtesy, such as a gift, contribution or entertainment,
should never be offered under circumstances that might create the appearance
of an impropriety.
Obey the laws of the United States and other countries that relate to matters covered by this policy.
Third parties
Require independent third parties to represent GE in accordance with this policy
and to obey the laws of the U.S. and other countries related to matters
covered by this policy.
Be careful! Exercise due diligence when selecting a third party to represent
GE,
keeping in mind that GE and its employees may, in some circumstances, be held responsible for the actions of sales agents and other third parties. For example, if a sales agent makes an improper payment to a government official, the GE employee who works with that agent, as well as the Company, might be charged with a criminal violation of the Foreign Corrupt Practices Act if the employee a) knew about the payment (or consciously disregarded information that the payment likely took place); and b) authorized it, either explicitly or implicitly. When selecting a third party to represent GE, consider the following:
Employ only reputable, qualified individuals and firms.
Understand and obey any requirements governing the use of third parties (for example, funding agency restrictions, or customer, country or ministry prohibitions).
Make sure that the compensation is reasonable for the services provided.
Follow the implementing procedures or component guidelines for selecting and paying third parties.
If you spot a "red flag" (an indication of a potential policy violation) involving a third party, make sure that it is promptly investigated and resolved.
Seek the assistance of company legal counsel and management in exercising due diligence and resolving any red flags.
Political contributions
Obey the laws of the U.S. and host countries in promoting the company position
to government authorities and in making political contributions.
Political contributions by the company to U.S. federal, state or local candidates may be prohibited or regulated under the election laws. Any contribution of company funds or other assets for political purposes in the U.S. can only be made by GE's Vice President of Corporate Government Relations or Vice President of State Government Relations.
. Never make or offer, directly or indirectly, a payment or anything of value (such as a bribe or kickback) to any political party, party official, or any candidate for political office of a country outside the U.S. to influence or reward any governmental act or decision.
Permissible payments
You may provide customers with ordinary and reasonable entertainment and gifts
only if they are permitted by the law, the customer's own policies and
procedures, and your business component's procedures.
This policy does not prohibit lawful reimbursement for reasonable and bona fide expenditures - for example, travel and living expenses incurred by customers and directly related to the promotion of products or services, or the execution of a contract.
Gifts and entertainment to officials and employees of the governments of the U.S. and other countries are highly regulated and often prohibited. Do not provide such gifts or entertainment unless you have determined that you are permitted by applicable laws and regulations, and your business component's policies and procedures to do so.
The Foreign Corrupt Practices Act does allow facilitating payments.
Facilitating payments are gratuities paid to officials or employees of non-
U.S. governments to expedite a service or routine administrative action that
these individuals ordinarily perform and to which GE is entitled under the
laws of that country. This policy allows facilitating payments in some
countries (but not all countries) and only to low-level officials or
government employees when they are customary in those countries. Seek the
advice of the National Executive or your business legal counsel before
visiting a country. Make sure that these payments are clearly and accurately
reflected in financial reports.
Employee responsibilities
Understand and keep up-to-date on the laws of the U.S. and other countries, funding agency regulations and customer requirements related to your job and each requirement of this policy. These requirements can be complex, and it is not unusual to have questions related to a transaction. If you have any questions related to matters covered by this policy, consult with business leaders, their designees, company legal counsel, component guidelines, implementing procedures or the GE National Executive in the country in which you are operating.
Take the necessary steps to make sure any party acting on GE's behalf understands and agrees to follow the principles of this policy.
Carefully watch for "red flags" which might indicate illegal activities or violations of GE policies. These include:
a sales representative or other person representing GE or being considered to represent GE who:
has been accused of improper business practices
has influence on the buying decision and a reputation for bribes
has a family or other relationship that could improperly influence the customer's decision
approaches you near a customer's award decision and explains that he or she has a "special arrangement" with an official
insists on receiving a commission payment before the customer announces the award decision
a customer who suggests that a GE bid be made through a specific representative or partner
any request that a commission or other payment be made in a third country or to another name
a commission that seems unusually large in relation to the services provided.
If these or any other signs of a possible violation come to your attention, be sure to promptly resolve your concern before proceeding with the transaction that relates to it. Resolution should include management review and should be well documented.
Maintain timely, accurate and complete records of all expenditures of GE funds as spelled out in Financial Controls and Records - Policy 30.7.
Learn and follow your component's guidelines for travel and living expense reimbursement, business entertainment and gifts. In addition, learn and respect the policies of customers and government agencies concerning acceptance of business entertainment and gifts.
Seek assistance from your manager, company legal counsel, or other GE resources when you have questions about application of this policy.
Promptly report:
any concern that you may have about possible violations of this policy
any concerns others may have about a possible violation of this policy
any concerns about a possible request to violate this policy.
You may report your concerns to a GE manager, or, if you prefer, to a company legal counsel, GE auditor, GE ombudsperson or other designated person. Your report may be written or oral, and may be anonymous.
If you report a concern about this policy and the issue is not resolved, raise it with one of the other contacts listed above.
Cooperate with GE investigations into concerns covered by this policy.
GE employees at all levels are prohibited from taking retribution against anyone for reporting or supplying information about a policy concern.
Additional Responsibilities Of Leaders
Each business leader (business CEO) will set up and maintain an effective
compliance program to prevent and detect violations of this policy and
applicable laws. The business leader should tailor the compliance program to
the specific circumstances of the business, and adopt policies and procedures,
in addition to this policy, as needed. The compliance program should have the
following elements:
Set standards and procedures that are reasonably capable of reducing the prospect of violations of this policy and applicable laws.
Assign overall responsibility for compliance to specific high-level personnel.
Screen employees and agents to prevent discretionary authority from being delegated to persons who have demonstrated insensitivity to the requirements of this policy and the laws it covers.
Implement educational and training programs that will enable employees to understand the basic requirements of this policy and applicable laws.
Implement monitoring and auditing systems to detect violations of this policy and applicable laws.
Establish and communicate a procedure for promptly reporting possible violations and concerns that protects against fear of retribution.
Implement appropriate disciplinary mechanisms.
Take remedial action to correct weaknesses and prevent recurrence of failures.
Do not retain individuals or firms unless you are satisfied they will abide by the principles of this policy when representing GE. Pay them reasonably for services performed. Make sure the selection process includes a thorough consideration of the scope of activities, credentials, background, costs and compensation terms. Appropriate approvals should be obtained (for example, National Executive and appropriate management review). Make sure that the selection and payment process is consistent with the implementing procedures or other relevant component guidelines.
Lead by example, using your own behavior as a model for all employees.
Identify those persons inside and outside GE whose activities may involve issues covered by this policy. Carefully review and discuss the requirements of this policy with them and every individual or firm considered to represent GE. Make sure a program is in place to provide them with appropriate education and legal counseling on the requirements imposed by the law and this policy.
Create a culture which promotes compliance, encourages employees to raise their policy questions and concerns, and prohibits retribution.
Make sure employees understand that performance is never more important than compliance.
Closely monitor and control business entertainment and gifts.
Consult with company legal counsel in executing your responsibilities under this policy. Keep in mind that international operations may raise issues requiring familiarity with the laws and regulations of other countries.
Promptly report employee concerns of possible violations of this policy according to your business' reporting procedures.
. If you discover that a sales representative or other third party representing GE engages in improper business practices for other firms, you should consult with company legal counsel and take necessary remedial action.
Take prompt remedial action when required.
. Financial managers will make sure that accurate records are kept that show the amount and purpose of all payments. (See Financial Controls and Records - Policy 30.7)
Gather feedback to evaluate and continually improve compliance with this policy.
In evaluating and rewarding employees, consider their actions and judgments in promoting and complying with this policy.
Each business CEO will:
Review financial reports covered by this policy with the responsible financial manager.
Request, as required, financial reviews of matters covered by this policy from finance managers or the Corporate Audit Staff.
Review, as required, other matters covered by this policy with the responsible manager or with the Corporate Audit Staff.
Review compliance concerns or possible violations of this policy with company legal counsel to determine the appropriate company response and disclosure requirements.
Carefully consider the company's responsibilities under the Foreign Corrupt Practices Act in any investment decisions.
Authorize the execution of any new international sales representative or sales consultant services agreement that is related to a government contract and involves commissions, contingent fees or retainer compensation greater than $200,000 (total contract value).
Authorize (or designate a company officer to authorize) the execution of any international service agreement or subcontract that is greater than $2,000,000 in value and related to a government contract.
Clearly delegate the responsibility for the approval of all third party agreements, government or commercial.
Annually, each officer or manager reporting to a business leader (business
CEO) will review compliance with this policy with his or her direct reports
and provide the results of those reviews to the business leader.
Periodically, the business leader will report on the results of those reviews
in meetings to be scheduled by the Corporate Policy Compliance Review Board
(PCRB).
Penalties for violations
Employees who violate the spirit or letter of this policy are subject to
disciplinary action up to and including discharge. The following are examples
of conduct which may result in discipline.
Actions which violate this policy
Requesting others to violate this policy
Failure to promptly report a known or suspected policy violation
Failure to cooperate in GE investigations of possible violations
Retribution against another employee for reporting a policy concern
Failure to demonstrate the leadership and diligence needed to ensure compliance with GE policies and applicable law.
Violating this policy can also mean breaking the law and subjecting yourself or the company to criminal penalties (fines or jail sentences), or civil sanctions (damage awards or fines). The company could also lose its government contracting and defense export privileges.
GE will terminate contracts with consultants, sales representatives, distributors, independent contractors and any other third parties who are unwilling or unable to represent GE in a manner consistent with this policy.
Related policies:
Following International Trade Controls - Policy 20.9
Working with Government Agencies - Policy 20.10
Customer Satisfaction - Policy 20.11
Avoiding Conflicts of Interest - Policy 30.5
Financial Controls and Records - Policy 30.7
Supplier Relationships - Policy 30.13
Resources:
More information on matters covered by this policy is available through the
Corporate Audit Staff, Corporate International Law and Policy, and company legal
counsel
FORM OF CONTRIBUTION AGREEMENT
(See Exhibit 10.2)
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
$18,250,000.00
Schenectady, New York
February 2, 1999
(a) For each Disbursement, interest will accrue from the date of such Disbursement on the unpaid balance of such Disbursement outstanding from time to time at a rate equal to the greater of the [***] or [***] (whichever is applicable shall be the "Contract Rate"). Holder shall notify Maker monthly of the Contract rate that will apply for the month then ended;
(b) On each January 31, Maker will repay Holder an amount equal to the lesser of (i) the unpaid principal of all Disbursements and interest thereon, or (ii) 50% of Maker's cash available for distribution for the prior fiscal year in accordance with applicable law and provided that, following such distribution, Maker has positive cash flow from operations and the ability to continue its business without incurring additional debt; however, any principal and interest remaining unpaid after such January 31 payment date shall not be forgiven, and such unpaid interest shall also bear interest at the applicable Contract Rate from the January 1 preceding such payment date and thereafter; and
(c) On December 31, 2003, Maker will repay the entire unpaid principal amount and any interest accrued but remaining unpaid and all other sums due under this Note.
Interest shall be calculated on the basis of a 360-day year containing twelve 30-day months. All such payments on account of the indebtedness evidenced by this Note shall be first applied to all payments other than principal and interest due under this Note, second to interest accrued on the unpaid principal amount, and the remainder toward reduction of the unpaid principal amount.
The date, amount, and interest rate of each Disbursement made by Holder to Maker, and each payment made on account of the principal thereof, shall be recorded by Holder on its books and, prior to any transfer of this Note, endorsed by Holder on the schedule attached hereto or any continuation thereof. Holder shall provide written notice to Maker upon each such disbursement. This Note is the Promissory Note referred to in Section 5.5 of the LLC Agreement and evidences the loans made by Holder thereunder.
(a) Maker further promises to pay to Holder, immediately upon written notice from Holder: (i) all recordation, transfer, stamp, documentary or other fees or taxes levied on Holder (exclusive of Holder's income taxes) by reason of the making or recording of this Note, the Security Agreement, and any UCC-1 financing statement, and (ii) all intangible property taxes levied upon any Holder of this Note or secured party under the Security Agreement.
(b) Maker further promises to pay to Holder, immediately upon written notice from Holder, all actual costs, expenses, disbursements, escrow fees, title charges and reasonable legal fees and expenses actually incurred by Holder and its counsel in (i) the collection, attempted collection, or negotiation and documentation of any settlement or workout of the principal amount of this Note, the interest thereon or any installment or other payment due hereunder, and (ii) any suit or proceeding whatsoever at all trial and appellate levels in regard to this Note or to protect, sustain or enforce the lien of any instrument securing this Note, including, without limitation, in any bankruptcy proceeding or judicial or nonjudicial foreclosure proceeding. It is the intent of the parties that Maker pay all expenses and reasonable attorneys' and paralegals' fees incurred by Holder as a result of Holder's entering into the loan transaction evidenced by this Note.
levied upon pursuant to a judgment obtained by virtue of this Note, or any writ of execution issued thereon, may be sold in whole or in part in any order desired by Holder.
IN WITNESS WHEREOF, Maker has caused this Revolving Promissory Note to be duly executed on the date first written above.
MAKER:
GE FUEL CELL SYSTEMS, L.L.C.
By: /s/ Barry Glickman
-----------------------------------
Barry Glickman, President
|
SCHEDULE OF DISBURSEMENTS
This Note evidences loan disbursements made to Maker under the LLC Agreement on the dates, in the principal amounts, and bearing interest at the rates set forth below, subject to the payments of principal set forth below:
Principal Unpaid
Date of Amount of Interest Amount Principal Notation
Loan Loan Rate Paid Amount Made By
---- ---- ---- ---- ------ -------
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In consideration of certain financial accommodations given by General
Electric Company, a New York corporation (the "Secured Party"), GE Fuel Cell
Systems, L.L.C., a Delaware limited liability company (the "Debtor"), as
collateral security for the payment of that certain Promissory Note of Debtor to
Secured Party of even date herewith, in the aggregate principal amount of
[***], a copy of which is attached hereto as Exhibit "1" (the "Indebtedness"),
Debtor, pursuant to the provisions of the Uniform Commercial Code of the State
of New York (the "UCC") hereby grants Secured Party a security interest in and
to all assets of Debtor whether now owned or hereafter acquired, including, but
not limited to, all Accounts, Chattel Paper, Documents, Equipment, Fixtures,
General Intangibles, Goods, Instruments, and Inventory (all as defined in the
UCC), and all other tangible and intangible personal property of Debtor, and all
proceeds thereof, accessions thereto and replacements thereof (the
"Collateral").
Debtor hereby warrants and covenants that:
1. The security interest granted to Secured Party by Debtor shall apply to the Collateral whether or not title thereto or any part thereof shall have passed, or shall be deemed to have passed, to Debtor; Debtor is, or to the extent that this Agreement states that the Collateral is to be acquired after the date hereof, will be the owner of the Collateral free from any adverse lien, security interest or encumbrance; and Debtor will defend the Collateral against all claims and demands of all other persons at any time claiming the same or any interest therein.
2. The Collateral will be kept at the addresses designated at the conclusion of this Agreement.
3. At the request of Secured Party, Debtor will join with Secured Party in executing one or more financing statements, amendments, continuations and termination statements pursuant to the Uniform Commercial Code of the State of New York, in which Debtor is conducting business, in form satisfactory to Secured Party.
4. Debtor will not sell or offer to sell, or otherwise transfer the Collateral or any interest therein without having given Secured Party actual notice of any such sale and having received the written consent of Secured Party; provided, however, that if the Collateral is Debtor's merchandise inventory, Debtor shall be entitled to sell that portion of the Collateral which constitutes merchandise and inventory in the ordinary and usual course of business.
5. Debtor will, at all times, maintain in full force and effect insurance with respect to the Collateral against risks encompassed within the standard policy of fire insurance with extended coverage endorsement, theft and other risks as Secured Party may require, and written by such company or companies as may be satisfactory to Secured Party, such insurance to be payable to Secured Party and Debtor as their interests may appear.
7. Debtor will pay promptly when due all taxes and assessments upon the Collateral or for its use and operation. At its option, upon reasonable notice by Secured Party, and upon the failure of Debtor to comply with the terms set forth herein, Secured Party may discharge taxes, liens, security interests, or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the
maintenance and preservation of the Collateral. Debtor agrees to reimburse Secured Party on demand for any payment made or any expense incurred by Secured Party pursuant to the foregoing authorization, together with interest thereon at the highest rate permitted by law.
8. Until default, Debtor may have possession of the Collateral and use it in any lawful manner not inconsistent with this Agreement.
9. Debtor shall be in default under this Agreement upon the happening of any of the following events or conditions (each an "Event of Default"):
(a) Failure of Debtor to make final payment of the Promissory Note when such payment is due.
(b) Dissolution of Debtor.
Upon an Event of Default and at any time thereafter, Secured Party may declare the indebtedness secured hereby immediately due and payable and shall have the remedies of a secured party under the Uniform Commercial Code of the State of New York.
10. Should a lawsuit be brought to enforce the terms hereof or for any dispute arising out of this transaction, then the issues in any such action shall be determined pursuant to the laws of the State of New York, without regard to conflict of laws provisions thereof, and the parties hereto hereby consent to jurisdiction and venue in the courts of Schenectady County, New York, or the United States District Court for the Northern District of New York, at the option of Secured Party. The substantially prevailing party in such a lawsuit shall be entitled to recover from the substantially non-prevailing party its reasonable expenses, court costs, including taxed and untaxed costs, and reasonable attorneys' fees, whether suit be brought or not (jointly referred as to "Expenses"). As used herein, Expenses include expenses incurred in any appellate or bankruptcy proceeding. All such Expenses shall bear interest at the highest rate allowable under the laws of the State of New York from the date the substantially prevailing party pays such Expenses until the date the substantially non-prevailing party repays such Expenses.
11. No waiver by Secured Party of any Event of Default shall operate as a waiver of any other Event of Default or of the same Event of Default on a future occasion.
12. All rights of Secured Party hereunder shall inure to the benefit of its successors or assigns; and all obligations of Debtor shall bind Debtor's successors and assigns. Secured Party may assign this Security Agreement to one of its wholly-owned affiliates.
13. Secured Party acknowledges that the Collateral granted by Debtor shall not include any patents, trademarks, trade names, inventions, copyrights, know- how, trade secrets, licensed rights, or other intellectual property rights of any Member of Debtor, including any intellectual property now in existence or hereafter acquired or developed by any such Member.
IN WITNESS WHEREOF, Debtor and Secured Party have caused this instrument to be executed in duplicate by their authorized representatives this ____ day of February, 1999.
Debtor: Secured Party:
GE FUEL CELL SYSTEMS, L.L.C. GENERAL ELECTRIC COMPANY
By:_____________________________ By:____________________________________
Barry Glickman, President Ricardo Artigas
President and CEO, GE Energy Service
Address: 1 River Road
Schenectady, New York 12345
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FORM OF GE TRADEMARK AND TRADE NAME AGREEMENT
(See Exhibit 10.3)
FORM OF PLUG POWER TRADEMARK AGREEMENT
(See Exhibit 10.4)
FORM OF DISTRIBUTOR AGREEMENT
(See Exhibit 10.5)
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
EXHIBIT 10.5
DISTRIBUTOR AGREEMENT
THIS DISTRIBUTOR AGREEMENT is made and entered into as of this 2nd day of February, 1999 (herein referred to as the "Effective Date"), between GE FUEL CELL SYSTEMS, L.L.C., a Delaware limited liability company located at 1 River Road, Schenectady, New York 12345 (hereinafter referred to as "DISTRIBUTOR"), and PLUG POWER, L.L.C., a Delaware limited liability company located at 968 Albany-Shaker Road, Latham, New York 12110 (hereinafter referred to as "SUPPLIER").
WHEREAS, DISTRIBUTOR and SUPPLIER intend to enter into this Agreement in order to set forth, in writing, DISTRIBUTOR's obligation to market and sell Products (defined below) and Pre-Commercial Units (defined below) and provide Services (defined below) in the Territory (defined below); and
WHEREAS, the mission of DISTRIBUTOR and SUPPLIER through the term of this Agreement is to bring to customers the highest quality line of Products and Pre- Commercial Units and provide world-class Services for the purpose of increasing SUPPLIER's Product and Pre-Commercial Unit sales;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the mutual benefits to be derived herefrom, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
ARTICLE II - APPOINTMENT AND SCOPE
(a) SUPPLIER and its Affiliates shall not, directly or indirectly, market or sell PEM Fuel Cell-Powered Generator Sets, components, replacement parts, upgrades, accessories, or improvements that compete with Products, Pre- Commercial Units, or Test & Evaluation Units, market and sell the output of PEM Fuel Cell-Powered Generator Sets that compete with the Products, Pre-Commercial Units, or Test & Evaluation Units, or provide Services to Customers in the Territory, so long as, and to the extent that, DISTRIBUTOR is SUPPLIER's exclusive distributor in the Territory pursuant to this Agreement (except for sales of Test & Evaluation Units and Pre-Commercial Units to federal, state, municipal and other governmental entities, the Gas Research Institute, Electric Power Research Institute, and such other industry groups mutually agreed to by SUPPLIER and DISTRIBUTOR, to the extent such entities and groups are purchasing the units for their research and development, as opposed to purchasing the units for resale);
(b) DISTRIBUTOR will utilize SUPPLIER as its sole supplier of PEM Fuel Cell-Powered Generator Sets, components, replacement parts, upgrades, accessories, and improvements therefor.
ARTICLE III - TERMS AND CONDITIONS OF SALE OF THE PRODUCTS
(c) All prices for the Products, Pre-Commercial Units, Test & Evaluation Units, and Services shall be expressed in United States Dollars. All payments for Products, Pre-Commercial Units, Test & Evaluation Units, and Services shall be made in United States Dollars.
(d) To the extent DISTRIBUTOR assists SUPPLIER in sourcing components for the manufacturing of Products or Pre-Commercial Units, DISTRIBUTOR will receive 50% of any savings realized by SUPPLIER, for components of like quality and quantity, where savings is defined as the difference between the best quote obtained by SUPPLIER and the quote obtained by DISTRIBUTOR. DISTRIBUTOR's share of any savings will be applied as a credit against DISTRIBUTOR's purchases of Products or Pre-Commercial Units from SUPPLIER.
ARTICLE IV - TERM AND TERMINATION
for a five (5) year term ending on the fifth anniversary of the Commencement Date. The parties intend to negotiate an amendment to this Agreement which shall set forth purchase prices for Products and DISTRIBUTOR's purchase commitments for the period beyond the initial term. SUPPLIER and DISTRIBUTOR will initiate negotiations on the amendment no later than January 1, 2002.
(b) Termination by a party, if the other party should become a subject of any voluntary or involuntary bankruptcy, settlement, receivership, reorganization or other insolvency proceedings, unless such proceedings are terminated within one month from their formal opening; or
(c) Termination by a party, if the other party should attempt to sell, assign (in violation of this Agreement), delegate or transfer any of its rights and obligations under this Agreement without having obtained the other party's prior written consent thereto.
(b) Except as otherwise provided herein, all rights granted to DISTRIBUTOR under or pursuant to this Agreement shall cease, and where appropriate, revert to SUPPLIER; similarly, all rights granted to SUPPLIER under or pursuant to this Agreement shall cease, and where appropriate, revert to DISTRIBUTOR.
(c) The provisions of this Agreement that are expressed to survive this Agreement or to apply notwithstanding termination or expiration hereof shall be followed by the parties hereto.
(d) Termination or expiration of this Agreement shall not prejudice or otherwise affect the rights or liabilities of the parties with respect to the Products, Pre-Commercial Units or Services theretofore sold or rendered hereunder, or any indebtedness then owing by either party to the other; nor shall termination or expiration relieve the parties of any obligations imposed by the provisions of this Agreement which are expressed to survive the termination or expiration of this Agreement or any liability for damages resulting from breach of such provisions.
ARTICLE V - OBLIGATIONS OF DISTRIBUTOR
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
DISTRIBUTOR elects to purchase units available prior to the Pre-Commercial Units, DISTRIBUTOR's purchases will be credited against its take-or-pay commitment on a dollar-for-dollar basis (e.g., if DISTRIBUTOR purchases $1,000,000 of Test & Evaluation Units available in 1999, DISTRIBUTOR'S take-or- pay commitment on the Pre-Commercial Units will be reduced by $1,000,000). DISTRIBUTOR will make reasonable efforts to have its Customers for Pre- Commercial Units perform certain testing as prescribed by SUPPLIER, provide SUPPLIER with all data generated by such testing, and provide SUPPLIER with reasonable on-site access to the Pre-Commercial Units.
ARTICLE VI - OBLIGATIONS OF SUPPLIER
(b) SUPPLIER will use best efforts to produce 485 Pre-Commercial Units during the year 2000, and use best efforts to front load production in the first half of the year.
(c) Supplier shall supply Products to DISTRIBUTOR at the lower of
(i) the pricess set forth on Schedule C, or (ii) [***]. Supplier shall supply
Pre-
Commerical Units to DISTRIBUTOR at the prices set forth on Schedule C. To the
extent that [***], Supplier and Distributor shall agree to [***]. If SUPPLIER
and DISTRIBUTOR cannot reach such agreements, then this Agreement shall
terminate.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
ARTICLE VII - CONFIDENTIAL INFORMATION AND PROPRIETARY RIGHTS
(a) Each party hereto expects to furnish to the other party certain confidential information which will constitute trade secrets or other proprietary business or technical information belonging to the disclosing party (including, but not limited to, components, processes, financial information, drawings, specifications and other data, whether in written, printed, oral or other form) and will be marked "Confidential" or "Proprietary" (such information is hereinafter referred to as "Confidential Information") at the time it is disclosed. Oral information which is confidential or proprietary shall be reduced to writing by the disclosing party within ten (10) working days after disclosure, which writing shall
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
specifically reference the date of disclosure and otherwise conform to the requirements of this paragraph. Any information which is disclosed in any other manner shall be deemed to be non-confidential. The receiving party shall not disclose Confidential Information to anyone except its employees who have a need to know such Confidential Information in order to perform their work and shall inform such individuals of the confidential nature of the Confidential Information. Subject to the provisions of subsection (b), below, the receiving party shall use the Confidential Information only for the purpose of such work and shall use efforts to protect the confidentiality of such Confidential Information commensurate with those which it employs for the protection of its own confidential information, but it shall not be liable for unauthorized revelations of such Confidential Information which occur in spite of such efforts.
(b) Notwithstanding the provisions of subsection (a) above, (i) the receiving party shall not be subject to any restriction hereunder with respect to any part of such Confidential Information which appears in issued patents or publications, which is known or becomes generally known to the relevant public through no fault of the receiving party, which is independently generated by the receiving party without use of the Confidential Information, which is furnished to others by the disclosing party without restriction on disclosure, which was or becomes known to the receiving party through other sources free of any confidentiality restriction, which must be disclosed by requirements of law or valid legal or regulatory process, in which case the party intending to make such disclosure shall notify the party which designated the material as confidential in advance of any such disclosure and reasonably cooperate with any attempt to maintain the confidentiality of such materials; and (ii) any and all restrictions with respect to Confidential Information provided hereunder will expire three (3) years after the date that such Confidential Information is disclosed to the receiving party.
(c) When one party no longer desires to use the Confidential Information of another party, it shall return to the other party any such Confidential Information and shall destroy all copies of such Confidential Information with the exception of one copy which may be retained exclusively for the purpose of documenting the disclosures made hereunder.
(d) The receiving party will restrict access to any Confidential Information made available or disclosed by the disclosing party to the receiving party hereunder only to those employees of the receiving party with a need to know such information in performance of their jobs with the receiving party.
Customers in the Territory and in any other manner approved by SUPPLIER in writing. In addition, DISTRIBUTOR shall not register or attempt to register any of SUPPLIER's trademarks or any mark or name closely resembling them, unless requested to do so by SUPPLIER in writing.
and Pre-Commercial Units. In the event that DISTRIBUTOR elects not to have SUPPLIER affix DISTRIBUTOR's Trademark to the Products and Pre-Commercial Units, DISTRIBUTOR will affix DISTRIBUTOR's Trademark to the Products and Pre- Commercial Units. DISTRIBUTOR shall use DISTRIBUTOR's Trademarks for display, promotional, or advertising purposes in connection with solicitation of orders for Products and Pre-Commercial Units from Customers in the Territory. The only Products and Pre-Commercial Units that may bear DISTRIBUTOR's Trademark are those that are sold by DISTRIBUTOR. SUPPLIER acknowledges that it is not authorized to use DISTRIBUTOR's Trademark for any purpose unless expressly permitted in writing to do so by DISTRIBUTOR. All resulting use of DISTRIBUTOR's Trademark shall inure solely to the benefit of General Electric Company.
addition to all other rights or remedies which the DISTRIBUTOR may have pursuant to this Agreement, (a) procure for DISTRIBUTOR the right to continue using said Product, Pre-Commercial Unit, part, device, or process; (b) replace same with a non-infringing equivalent; or (c) remove said Product, Pre-Commercial Unit, part, device, or process and refund the purchase price and the transportation and installation costs thereof.
ARTICLE VIII - INDEMNIFICATION
be limited to $1,000,000; provided, that this sentence shall not apply to the
indemnification obligations set forth in Section 8.1 (f) and (g) and Section 8.2
(f). The foregoing indemnification shall not in any manner limit a party's legal
remedies under applicable law against the other party for breaches of this
Agreement.
ARTICLE IX - GENERAL PROVISIONS
If to SUPPLIER: PLUG POWER, L.L.C.
968 Albany-Shaker Road
Latham, New York 12110
Attn: Mr. Gary Mittleman
If to DISTRIBUTOR: GE FUEL CELL SYSTEMS, L.L.C.
1 River Road
Schenectady, New York 12345
Attn: Mr. Barry Glickman
|
such performance is so limited or prevented, without liability of any kind. Each party shall use its reasonable efforts to minimize the duration and consequences of any failure of or delay in performance resulting from a "Force Majeure" event.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
SUPPLIER:
PLUG POWER, L.L.C.
By:/s/ Gary Mittleman ------------------------------------------ Gary Mittleman, President & CEO |
DISTRIBUTOR:
GE FUEL CELL SYSTEMS, L.L.C.
By: /s/ Barry Glickman ------------------------------------------ Barry Glickman, President |
Schedule A-1 - Products ------------ Schedule A-2 - Services ------------ Schedule B - Terms and Conditions of Purchase/Sale; Specifications ---------- Schedule C - Product and Pre-Commercial Unit Prices ---------- Schedule D - DISTRIBUTOR's Sales Commitments ---------- Schedule E - SUPPLIER's Insurance ---------- Schedule F - Trademark Registrations ---------- |
DEFINITION OF PRODUCTS
The term "Products" shall include the following items manufactured by or on
behalf of SUPPLIER: Proton Exchange Membrane ("PEM") Fuel-Cell Powered Generator
Sets, without changes or additions (other than standard installation materials -
e.g., ducting, pipe, wire), and components (e.g., fuel processor, fuel cell
stack, power electronics), replacement parts, upgrades, accessories (e.g.,
combined power and hot water packages), and improvements, of various sizes no
larger than 35kW of maximum continuous output that (a) meet the Commercial Unit
Specifications set forth in Schedule B, and (b) are designed for use in
residential, commercial, and industrial stationary power applications (e.g.,
base load power, peaking power, emergency back-up power, enhanced power quality,
cogeneration, trailer-mounted units for temporary stationary power and/or rental
power use).
The term "Products" excludes the following, regardless of their manufacturer:
1. PEM Fuel Cell-Powered Generator Sets and/or components designed for use in transportation or vehicle applications;
2. PEM Fuel Cell-Powered Generator Sets and/or components designed for use in extended run, uninterruptible power supply ("UPS") systems for data centers applications, where the PEM Fuel Cell-Powered Generator Set (a) produces DC or AC premium (i.e., superior power quality to the grid) power for data center supporting information technology ("IT") equipment, (b) does not provide power to the entire facility, (c) is installed at a sub-panel downstream from the customer's main distribution panel, (d) is designed to enable remote IT equipment shutdown and power cycling for IT equipment that is no longer responding to commands, and (e) is designed to promote reliability over efficiency;
3. PEM Fuel Cell-Powered Generator Sets and/or components for rack-mounted equipment in telecommunications, cellular, or cable television applications; and
4. PEM Fuel Cell-Powered Generator Sets and/or components that are integrated with another device that utilizes all of the electrical output of the Fuel Cell-Powered Generator Set for that specific device only (e.g., an air conditioner powered by a Fuel Cell-Powered Generator Set, but not a combined Fuel Cell-Powered Generator Set-chiller cogen unit).
The term "Services" shall include the following activities associated with the Products and Pre-Commercial Units:
Installation
Permitting
Application Engineering
Operation
Routine Maintenance
Unscheduled Maintenance
Repair
Overhaul (e.g., stack replacement)
Upgrade
Remote monitoring, diagnostics, and/or control (i.e., dispatch)
Operator and Customer Training
Customer Service
Customer Support
TERMS AND CONDITIONS OF PURCHASE/SALE
3. DELIVERY AND PASSAGE OF TITLE. Time is of the essence of all purchase orders, except that delivery dates will be framed in terms of calendar months and orders will not be deemed late until after the end of such calendar month. If SUPPLIER fails to deliver the Products or Pre-Commercial Units or to complete any Services furnished hereunder, then DISTRIBUTOR shall be entitled, in addition to the remedies available elsewhere under the Agreement, to assess an amount, as liquidated damages for delay, equal to 1% of the total dollar value of DISTRIBUTOR's order for the first month of delay and 2% of the total dollar value of DISTRIBUTOR's order per subsequent month of delay; provided, (a) that such remedy will be capped at 6%, (b) if the order is more than three months late, then DISTRIBUTOR may cancel the order, and (c) such liquidated damages will only be available to DISTRIBUTOR for those orders to the extent that DISTRIBUTOR has provided such remedy to its Customer. SUPPLIER agrees that such amounts are a reasonable pre-estimate of the damages which DISTRIBUTOR may suffer as a result of such delay, and are to be assessed as liquidated damages and not as a penalty. Where such liquidated damages are available to DISTRIBUTOR, they shall be DISTRIBUTOR's only remedy for SUPPLIER's failure to make timely delivery, other than the remedies for non-performance expressly set forth in this Agreement.
Products or Pre-Commercial Units which will be shipped from within the United States for delivery within the United States shall be delivered FOB SUPPLIER's designated, continental U.S. manufacturing facility, unless otherwise agreed in writing by SUPPLIER and DISTRIBUTOR. Products or Pre-Commercial Units delivered to DISTRIBUTOR in advance of schedule may be returned to SUPPLIER at SUPPLIER's expense. Title shall pass to DISTRIBUTOR upon delivery to DISTRIBUTOR FOB SUPPLIER's designated, continental U.S. manufacturing facility.
4. CHANGES. The DISTRIBUTOR may at any time, in writing, request changes within the general scope of a purchase order in (a) specifications, where the Products or Pre-Commercial Units to be furnished are to be specifically manufactured in accordance therewith, (b) method of shipment or packing, or (c) place and time of delivery. Any such change shall be authorized only by an amendment executed by SUPPLIER and DISTRIBUTOR, with such amendment to specify any additional expense, to be borne by DISTRIBUTOR.
5. INSPECTION. (a) All Products and Pre-Commercial Units shall be subject to
inspection and test by DISTRIBUTOR at reasonable times and places upon
reasonable notice, including the place of manufacture (which SUPPLIER shall use
reasonable efforts to arrange, including providing for such access in SUPPLIER's
purchase orders to the manufacturer); (b) If any inspection or test is made on
the premises of SUPPLIER, then SUPPLIER, without additional charge, shall
provide reasonable facilities and assistance for the safety and convenience of
the inspectors in the performance of their duties, provided that the inspectors
must execute SUPPLIER's standard confidentiality agreement, must abide by such
facility's rules and regulations, and must be covered by insurance for
occurrences other than due to SUPPLIER's negligence or willful misconduct; and
(c) SUPPLIER shall provide and maintain a program, to the mutual satisfaction of
SUPPLIER and DISTRIBUTOR, in order to create ongoing product design,
manufacturing, testing, inspection, and other safety and quality-related
processes that are adequate to assure the safety and reliability of SUPPLIER's
Products and Pre-Commercial Units (the "Product Quality and Safety Assurance
Program"). Records of all inspection work by SUPPLIER shall be kept complete and
available to DISTRIBUTOR during the performance of a purchase order and for
three (3) years from the date of such inspection. SUPPLIER will allow
representatives of DISTRIBUTOR access to the facilities involved in performing
an order for purposes of reviewing the status and progress of production.
6. REJECTION. If any of the Products, Pre-Commercial Units or Services (to the extent that SUPPLIER is providing Services) ordered are found by DISTRIBUTOR within 30 days of delivery to be defective, or otherwise not in conformity with the requirements of the order, including any applicable specifications, SUPPLIER, at its option and sole discretion may: (a) instruct DISTRIBUTOR to return such goods at SUPPLIER's expense; (b) request that DISTRIBUTOR, with DISTRIBUTOR's written approval, take such actions as may be required to cure all defects and/or bring the Products or Pre-Commercial Units into conformity with all requirements, in which event any reasonable costs and expenses thereby incurred by DISTRIBUTOR, including material and handling charges, will be at SUPPLIER's expense; and (c) re-perform, at SUPPLIER's own expense, any defective portion of the Services performed, to the extent that SUPPLIER is performing Services. DISTRIBUTOR must notify SUPPLIER in writing of such defect or non-conformity within 30 days after delivery of the Products or Pre-Commercial Units or performance of Services, if applicable, or DISTRIBUTOR's rights under this Section 6 shall be waived. The remedies in this Section 6 shall be DISTRIBUTOR's exclusive remedies under this Section 6.
If any Product or Pre-Commercial Unit fails to meet the foregoing warranties during the warranty periods set forth above, SUPPLIER shall thereupon correct any such failure by either (with such choice to be solely SUPPLIER's) (a) repairing the defective Product or Pre-Commercial Unit, or (b) replacing the defective Product or Pre-Commercial Unit. All costs associated with such repair or replacement, including any transportation costs, shall be the sole responsibility of SUPPLIER, subject to the limitations set forth in the Service Agreement described in the next paragraph.
DISTRIBUTOR will provide the labor, transportation, and other Services necessary for such repairs and replacements pursuant to a Service Agreement that will be mutually agreed between SUPPLIER and DISTRIBUTOR. If such Service Agreement is not agreed to by June 1, 2000, then this Distributor Agreement will terminate. The Service Agreement will set forth limits on SUPPLIER's reimbursement to DISTRIBUTOR for labor, transportation, and other Services. The Service Agreement will also set forth a warranty approval process that will include pre-approval of major warranty claims prior to commencement of work, submission of all warranty claims for review and approval by SUPPLIER, and return of all parts subject to warranty claims to SUPPLIER.
THE WARRANTIES SET FORTH IN THIS SECTION 7 ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER ORAL, WRITTEN, EXPRESS, OR IMPLIED, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. SUPPLIER'S WARRANTY OBLIGATIONS AND DISTRIBUTOR'S REMEDIES UNDER THIS SECTION 7 (EXCEPT AS TO TITLE) ARE SOLELY AND EXCLUSIVELY AS STATED HEREIN.
8. PROPER BUSINESS PRACTICES. SUPPLIER and DISTRIBUTOR shall comply with all laws dealing with improper or illegal payments, gifts or gratuities, and SUPPLIER and DISTRIBUTOR agree not to pay, promise to pay or authorize the payment of any money or anything of value, directly or indirectly to any person for the purpose of illegally or improperly inducing a decision or obtaining or retaining business in connection with a purchase order.
9. COMPLIANCE WITH LAWS. SUPPLIER and DISTRIBUTOR agree to comply with the applicable provisions of any federal, state, provincial or local law or ordinance and all lawful orders, rules, and regulations issued thereunder. No forced or prison labor may be used in manufacturing the products to be supplied under this Agreement. If forced or prison labor is determined to have been used in the manufacture of the Products or Pre-Commercial Units supplied hereunder, the DISTRIBUTOR shall have the right to immediately terminate the purchase order and this Agreement without further compensation to the SUPPLIER; and, in such case, DISTRIBUTOR shall return to SUPPLIER any Products or Pre-Commercial Units for which it has not yet made payment.
Provisions applicable to orders for work to be performed, goods to be produced,
or services to be rendered within the United States. (a) SUPPLIER shall comply
with any provisions, representations or agreements or contractual clauses
required thereby to be included or incorporated by reference or operation of law
in the contract resulting from acceptance of this order and dealing with: (i)
Equal Opportunity (Executive Order 11246 as amended by Executive Orders 113575
and 10286 and applicable regulations promulgated pursuant thereto); (ii)
Employment of Veterans (Executive Order 11701 and applicable regulations
promulgated pursuant thereto); (iii) Employment of the Handicapped (Executive
Order 11758 as amended by Executive Order 11867 and applicable regulations
promulgated pursuant thereto); (iv) Employment Discrimination Because of Age
(Executive Order 11141 and applicable regulations promulgated pursuant thereto);
and (v) Utilization of Disadvantaged and Business Enterprises (Executive Order
11625, Public Law 95-507 and applicable regulations promulgated pursuant
thereto). (b) SUPPLIER certifies that with respect to orders which exceed
$10,000 it is in compliance with the requirements for non-segregated facilities
set forth in 41 CFR Chapter 60-1.8. (c) SUPPLIER warrants that each chemical
substance constituting or contained in goods sold or otherwise transferred to
DISTRIBUTOR hereunder is on the list of chemical substances compiled and
published by the Administrator of the Environmental Protection Administration
pursuant to the Toxic Substances Control Act (P.L. 92-573 as amended, and the
Federal Hazardous Substances Act (P.L. 92-516) as amended and lawful standards
and regulations thereunder. (d) In accepting an order SUPPLIER represents that
the goods to be furnished thereunder were or will be produced in compliance with
the requirements of the Fair Labor Standards Act of 1938, as amended, including
Section 12(a) and SUPPLIER shall insert a certificate to that effect on all
invoices submitted in connection with such order.
10. PACKING, PRESERVATION AND MARKING. Packing, preservation and marking requirements will be in accordance with the specification drawing or as otherwise agreed by SUPPLIER and DISTRIBUTOR. If none are specified, SUPPLIER shall use the commercially accepted practice.
services to be Year 2000 Compliant, nor shall such occurrence(s) be deemed a force majeure event. As used herein or in a purchase order, the words "date" and "dates" shall be deemed to include "time".
Notwithstanding anything in a purchase order or in this Agreement to the contrary, the period of the representations, warranties and covenants set forth in this section shall extend at least until January 31, 2001. Any statute of limitations that might be applicable to SUPPLIER's Year 2000 Compliant warranty and representation shall not accrue or begin to run until the later of January 31, 2001, or the time when such statute of limitations would otherwise accrue or begin to run, and, with respect to any claim based on any failure of the Products/Services to be Year 2000 Compliant, SUPPLIER shall not assert any defense based on or alleging the passage of time from the effective date of a purchase order to January 31, 2001.
12. LIMITATION OF LIABILITY. In no case will SUPPLIER or DISTRIBUTOR be liable for the other's special, incidental, or consequential damages, including, but not limited to, personal injury, property damage, loss of profit or revenues, or business interruption arising out of the manufacture, marketing, distribution, sale, or supplying of the Products, Pre-Commercial Units, or Services.
The remedies available to DISTRIBUTOR hereunder may be asserted only by DISTRIBUTOR and by no other party. DISTRIBUTOR may not expand warranty coverage to Customers beyond the coverage specifically described herein, except as agreed in writing by SUPPLIER.
Pre-Commercial Unit Performance Specifications
On or before October 1, 1999, DISTRIBUTOR and SUPPLIER will agree on the
specific testing protocol and acceptance criteria for all Pre-Commercial Units
("PCUs") purchased by DISTRIBUTOR. The protocol and acceptance criteria will (a)
incorporate the field test results from the "Test and Evaluation Units" ("TEUs")
that SUPPLIER expects to have available beginning the second quarter of 1999;
and (b) address all aspects of PCU system and component performance that are
expected to impact regulatory approvals and end-user economics, including, but
not limited to, useful life, output, reliability, efficiency, operating
environment requirements, power quality, load following capability, and
emissions. In the event that DISTRIBUTOR and SUPPLIER are unable to agree on the
testing protocol and/or acceptance criteria this Agreement will terminate.
PCU product design will be complete to the point where interfaces between major components (e.g., stack, reformer, inverter, etc.) will be similar to that of the final Product. The overall PCU package size and weight must be suitable for installation outside of a typical single family residence (and, where practicable, inside a typical single family residence).
Certifications (e.g., UL, NFPA, AGA, FCC Class B) are not required for the PCUs. However, PCUs must meet any customary local codes and regulations required for field testing by DISTRIBUTOR's Customers. To the extent the test site requires preparation to meet local codes, any site improvements will be at the Customer's expense.
Basic technology of all major PCU components must be the same as that of the Product; however, suppliers and manufacturers of the major components need not be the same as those for the Product.
PCUs will be capable of interconnection to the electrical system of a typical single family residence; provided however that the PCU will operate isolated from the grid with the use of a transfer switch ("stand-alone operation"). The transfer switch will, in the event that the PCU fails or is interrupted, transfer the household load from the PCU back to the utility grid within no more than one-tenth of a second.
PCUs must be in compliance with any applicable NEC installation requirements.
PCUs must be shipped with sufficient documentation (e.g., installation drawings, operating manuals, repair guides) to allow for start-up and Service by individuals with a skill level comparable to a typical HVAC technician, after such individual has completed the SUPPLIER training program or a training program approved by SUPPLIER.
PCUs must be provided in strict accordance with samples, drawings, and/or designs provided by SUPPLIER and approved in writing by SUPPLIER and DISTRIBUTOR.
SUPPLIER will make available by telephone to DISTRIBUTOR and its Customers PCU technical support during SUPPLIER's normal business hours. SUPPLIER will also establish a 24-hour telephone number to accommodate emergency calls from DISTRIBUTOR and its Customers.
SUPPLIER will prepare all PCUs to allow for standard commercial shipment (e.g., truck, rail, cargo ship) to Customer locations.
PCUs will be designed to accommodate remote monitoring and diagnostics ("RM&D") equipment (e.g., modems, data collection/storage). RM&D equipment will be provided, installed, and operated at DISTRIBUTOR's or its Customers' expense. At a minimum, the PCU control system will allow the RM&D equipment to monitor the following parameters:
Current System Status
Output Power
Voltage
Current
Others - TBD*
Plug Power assumed the following in developing the specifications set forth below:
(a) Natural gas line pressure at [***] or greater; and
(b) Average system usage of [***].
----------------------------------------------------------------------------------------------
Specification PCU
----------------------------------------------------------------------------------------------
kW output rating 7kW continuous, [***] operating design point, [***]
for [***]
----------------------------------------------------------------------------------------------
Voltage/frequency [***]
----------------------------------------------------------------------------------------------
Operating design point efficiency (i.e., [***]
efficiency at [***] output)
----------------------------------------------------------------------------------------------
Continuous capacity output efficiency [***]
(i.e., efficiency at 7kW output)
----------------------------------------------------------------------------------------------
Phase [***]
----------------------------------------------------------------------------------------------
Fuel capability ([***] by [***]
SUPPLIER will be fueled by [***]
will be fueled by [***] unless notified by
DISTRIBUTOR in writing 12 months prior
to PCU delivery)
----------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------
Specification PCU
----------------------------------------------------------------------------------------------
Allowable fuel contaminants Must be able to operate on [***].
For NG:
Sulfur ___ TBD*
Alkalis ___ TBD*
Water ___ TBD*
Nitrogen ___ TBD*
Non-Methane Hydrocarbons ____ TBD*
Methane ___ TBD*
For LPG: _______ TBD*
For Methanol: _______ TBD*
----------------------------------------------------------------------------------------------
System make up water requirements Must be able to operate on [***].
Iron (PPM maximum) ___ TBD*
Calcium (PPM maximum) ___ TBD*
Chlorine (PPM maximum) ____ TBD*
Particulate (PPM maximum) ___ TBD*
Other ______ (PPM maximum) ____ TBD*
----------------------------------------------------------------------------------------------
Noise ____ dBa (TBD*) [***]
____ dBa (TBD*) [***]
----------------------------------------------------------------------------------------------
|
-----------------------------------------------------------------------------------------------
Specification PCU
-----------------------------------------------------------------------------------------------
Operating environment requirements Must be able to operate [***].
Humidity
maximum ____% TBD*
minimum ____% TBD*
Salt in Air
maximum ____% TBD*
minimum ____% TBD*
Particulate [***]
maximum ____% TBD*
minimum ____% TBD*
Other Cathode contaminant(s) [***]
maximum ____% TBD*
minimum ____% TBD*
-----------------------------------------------------------------------------------------------
Emissions - TBD*
_ NOx (NG) ____/____ (maximum/target)
_ CO (NG) ____/____ (maximum/target)
_ NOx (LPG) ____/____ (maximum/target)
_ CO (LPG) ____/____ (maximum/target)
_ NOx (Methanol) ____/____ (maximum/target)
_ CO (Methanol) ____/____ (maximum/target)
-----------------------------------------------------------------------------------------------
Ambient temperature range [***]
-----------------------------------------------------------------------------------------------
Altitude [***]
-----------------------------------------------------------------------------------------------
Power conditioning system [***]
----------------------------------------------------------------------------------------------
Overload [***] [***]
----------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------
Specification PCU
----------------------------------------------------------------------------------------------
Harmonics Harmonics at 7 kW continuous operation to
satisfy [***], for harmonic voltages.
Harmonics at [***] will be subject to [***].
----------------------------------------------------------------------------------------------
Power quality (isolated)
----------------------------------------------------------------------------------------------
Voltage, steady state (up to [***] kW Reference [***]
continuous)
----------------------------------------------------------------------------------------------
Voltage, transient (up to overload [***]
rating)
----------------------------------------------------------------------------------------------
Control Suitable for isolated operation
----------------------------------------------------------------------------------------------
Communications [***] similar as needed to establish
communications links
----------------------------------------------------------------------------------------------
Grid connection [***]
----------------------------------------------------------------------------------------------
MTB stack replacement TBD*
[***]
----------------------------------------------------------------------------------------------
MTB system (i.e., PEM Fuel Cell-Powered TBD*
Generator Set) failure
----------------------------------------------------------------------------------------------
Performance degradation (e.g., TBD*
efficiency, output) (e.g., degradation of system efficiency and
output will not exceed [***] of rated values
at the end of [***] hours of operation)
----------------------------------------------------------------------------------------------
Non-fuel O&M ($/year up to first stack TBD*
replacement) at [***] kWh/year
----------------------------------------------------------------------------------------------
Product life with prescribed routine TBD*
maintenance (including stack (e.g., less than [***])
replacement) at more than [***] kWh/year
----------------------------------------------------------------------------------------------
|
* SUPPLIER and DISTRIBUTOR will mutually agree to the specific values for these areas no later than October 1, 1999 (e.g., based on TEU lab and field testing).
Product ("Commercial Unit") Performance Specifications
On or before June 1, 2000, DISTRIBUTOR and SUPPLIER will agree on the specific testing protocol and acceptance criteria for all Products purchased by DISTRIBUTOR. The protocol and acceptance criteria will (a) incorporate the field test results from the PCUs; and (b) address all aspects of Product system and component performance that are expected to impact regulatory approvals and end- user economics, including, but not limited to, useful life, output, reliability, efficiency, operating environment requirements, power quality, load following capability, and emissions. In the event that DISTRIBUTOR and SUPPLIER are unable to agree on the testing protocol and/or acceptance criteria this Agreement will terminate.
Product package size and weight must be suitable for installation indoor or outside of a typical single family residence within the Major Markets.
Commercial units, including packaging, must be compliant with all requisite standards (e.g., UL, NFPA, AGA, FCC Class B, CE) within the Major Markets. To the extent the installation site requires preparation to meet local codes, any site improvements will be at the Customer's expense.
Products will be capable of interconnection to the electrical system of a typical single family residence; provided however that the Product will operate isolated from the grid with the use of a transfer switch ("stand-alone operation"). The transfer switch will, in the event that the Product fails or is interrupted, transfer the household load from the Product back to the utility grid within no more than one-tenth of a second.
Should it be determined that DISTRIBUTOR's Customers require an interconnection scheme other than stand-alone operation (e.g., grid parallel), DISTRIBUTOR and SUPPLIER will jointly set the requirements of the new interconnection scheme. To the extent the new interconnection scheme results in
an increase in SUPPLIER's Product cost, SUPPLIER will adjust DISTRIBUTOR's transfer price proportionately.
In the event that SUPPLIER offers Products with a heat recovery option and such units require an interconnection scheme other than stand-alone operation, DISTRIBUTOR and SUPPLIER will jointly set the requirements of the new interconnection scheme. To the extent the new interconnection scheme results in an increase in SUPPLIER's Product cost, SUPPLIER will adjust DISTRIBUTOR's transfer price proportionately.
Products must be in compliance with any applicable installation requirements within the Major Markets.
Products must be shipped with sufficient documentation (e.g., installation drawings, operating manuals, repair guides) to allow for start-up and Service by individuals with a skill level comparable to a typical HVAC technician, after such individual has completed the SUPPLIER training program or a training program approved by SUPPLIER.
Products must be shipped with documentation sufficient for an average homeowner to perform routine maintenance.
Products must be provided in strict accordance with samples, drawings, and/or designs provided by SUPPLIER and approved in writing by SUPPLIER and DISTRIBUTOR.
SUPPLIER will make available by telephone to DISTRIBUTOR and its Customers Product technical support during SUPPLIER's normal business hours. SUPPLIER will also establish a 24-hour telephone number to accommodate emergency calls from DISTRIBUTOR and its Customers.
SUPPLIER will prepare all Products to allow for standard commercial shipment (e.g., truck, rail, cargo ship) to Customer locations.
Products will be designed to accommodate remote monitoring and diagnostics (RM&D) equipment (e.g., modems, data collection/storage). RM&D equipment will be provided, installed, and operated at DISTRIBUTOR's or its Customers' expense. At a minimum, the Product control system will allow the RM&D equipment to monitor the following parameters:
Current System Status
Output Power
Voltage
Current
Others - TBD*
Plug Power assumed the following in developing the specifications set forth below:
(a) Natural gas line pressure at [***] of water or greater; and
(b) Average system usage of [***].
-------------------------------------------------------------------------------------------------
Specification Product
-------------------------------------------------------------------------------------------------
kW output rating 7kW continuous, [***] operating design point, [***]
-------------------------------------------------------------------------------------------------
Voltage/frequency [***]
-------------------------------------------------------------------------------------------------
Operating design point efficiency (i.e., [***]
efficiency at 2kW output)
-------------------------------------------------------------------------------------------------
Continuous capacity output efficiency [***]
(i.e., efficiency at 7kW output)
-------------------------------------------------------------------------------------------------
Phase [***]
-------------------------------------------------------------------------------------------------
Fuel capability [***]
-------------------------------------------------------------------------------------------------
|
-------------------------------------------------------------------------------------------------
Specification Product
-------------------------------------------------------------------------------------------------
Allowable fuel contaminants Must be able to operate on [***]
For NG:
Sulfur ___ TBD*
Alkalis ___ TBD*
Water ___ TBD*
Nitrogen ___ TBD*
Non-Methane Hydrocarbons ____ TBD*
Methane ___ TBD*
For LPG: _______ TBD*
For Methanol: _______ TBD*
-------------------------------------------------------------------------------------------------
System make up water requirements Must be able to operate on [***]
Iron (PPM maximum) ___ TBD*
Calcium (PPM maximum) ___ TBD*
Chlorine (PPM maximum) ____ TBD*
Particulate (PPM maximum) ___ TBD*
Other(s) ______ (PPM maximum) ____ TBD*
-------------------------------------------------------------------------------------------------
Noise ____ dBa (TBD*) [***] meter for outdoor installations,
not to exceed [***]
____ dBa (TBD*) [***] meter for indoor installations,
not to exceed [***]
----------------------------------------------------------------------------------------------
Operating environment requirements Must be able to operate [***]
Humidity
maximum ____% TBD*
minimum ____% TBD*
Salt in Air
maximum ____% TBD*
minimum ____% TBD*
Particulate [***]
maximum ____% TBD*
minimum ____% TBD*
Other Cathode contaminant(s) [***]
----------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------
vapor)
maximum ____% TBD*
minimum ____% TBD*
----------------------------------------------------------------------------------------------
Emissions - TBD*
__ NOx (NG) ____/____ (maximum/target)
__ CO (NG) ____/____ (maximum/target)
__ NOx (LPG) ____/____ (maximum/target)
__ CO (LPG) ____/____ (maximum/target)
__ NOx (Methanol) ____/____ (maximum/target)
__ CO (Methanol) ____/____ (maximum/target)
----------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------
Specification Product
----------------------------------------------------------------------------------------------
Ambient temperature range [***]
----------------------------------------------------------------------------------------------
Altitude [***]
----------------------------------------------------------------------------------------------
Power conditioning system [***]
----------------------------------------------------------------------------------------------
Overload [***] [***]
----------------------------------------------------------------------------------------------
Harmonics Harmonics at [***] continuous operation to
satisfy [***] for harmonic voltages. Harmonics
at [***], including [***]
----------------------------------------------------------------------------------------------
Power quality (isolated)
----------------------------------------------------------------------------------------------
Voltage, steady state (up to 7.0 kW [***]
continuous load)
----------------------------------------------------------------------------------------------
Voltage, transient (up to overload [***]
rating)
----------------------------------------------------------------------------------------------
Control [***]
----------------------------------------------------------------------------------------------
Communications [***] or similar as needed to establish
communications links
----------------------------------------------------------------------------------------------
Grid Connection Suitable for isolated operation [***]
----------------------------------------------------------------------------------------------
MTB stack replacement [***]
----------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------
Specification Product
----------------------------------------------------------------------------------------------
MTB system (i.e., PEM Fuel Cell-Powered TBD*
Generator Set) failure [***]
----------------------------------------------------------------------------------------------
Performance degradation (e.g., TBD*
efficiency, output ) [***]
----------------------------------------------------------------------------------------------
Non-fuel O&M ($/year up to first stack TBD*
replacement) at [***] (e.g., [***]/year
Assumptions
-----------
Labor Hours: [***]
Labor Rate: [***]
Total Labor: [***]
Materials: [***]
----------------------------------------------------------------------------------------------
Product life with prescribed routine TBD*
maintenance (including stack [***]
replacement) at more than [***]
----------------------------------------------------------------------------------------------
|
* SUPPLIER and DISTRIBUTOR will mutually agree to the specific values for these areas no later than June 1, 2000 (e.g., based on PCU lab and field testing).
PCU AND PRODUCT PRICES
Pre-Commercial Units
------------------------------------------------------------------------------------------
SUPPLIER's
estimated Cumulative #
direct cost Price to DISTRIBUTOR of units
# of units per unit per unit (US$) purchased by
Lot # in Lot (US$) DISTRIBUTOR
------------------------------------------------------------------------------------------
1 485* [***] [***] 485
2 All units [***] ** greater than 485
purchased
after the
first 485
|
* [***]
** The price per unit to DISTRIBUTOR for Lot #2 will be equal to
[***] and SUPPLIER will provide DISTRIBUTOR with a firm cost/price
quote no later than January 1, 2000.
Products (Commercial Units)
--------------------------------------------------------------------------------------
SUPPLIER's
estimated Cumulative #
direct cost Price to of units
# of units per unit DISTRIBUTOR per purchased by
Lot # in Lot (US$) unit (US$) DISTRIBUTOR
--------------------------------------------------------------------------------------
1 [***-- Note: all numbers have been omitted and filed separately
with the Securities and Exchange Commission pursuant to Rule 406
under the Securities Act.]
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
|
Prices for the Pre-Commercial Units as shown are firm (i.e., not subject to change).
Product prices as shown are not firm. On April 1 of each year, beginning April 1, 2000, SUPPLIER will provide DISTRIBUTOR with a 3-year forecast of Product prices for the period nine months hence (e.g., on April 1, 2000, SUPPLIER will provide DISTRIBUTOR with Product prices for the 3-year period beginning January 1, 2001). The first year of each of SUPPLIER's forecast will be a firm price commitment (i.e., in the forecast provided to DISTRIBUTOR on April 1, 2000, SUPPLIER's Product prices for 2001 will be firm).
Prices are based upon cumulative quantity purchased (e.g., if DISTRIBUTOR
purchases [***] Product units in year 1, the price for the first [***] units is
[***] per unit, the price for the second [***] units is [***] per unit, and
the price for the first [***] units purchased in year 2 is [***] per unit).
On or before July 1, 2000, DISTRIBUTOR will provide SUPPLIER with a forecast of DISTRIBUTOR's monthly purchases for the 12 months beginning January 1, 2001. Each of the first 3 months of DISTRIBUTOR's forecast (i.e., January 1, 2001 to March 31, 2001) will be a firm order (i.e., subject to change at SUPPLIER's sole discretion). DISTRIBUTOR's forecast for the final 9 months of the forecast period (i.e., April 1, 2001 to December 31, 2001) is for SUPPLIER's planning purposes only. DISTRIBUTOR, at its sole discretion, may change the monthly purchase forecast in any month in the final 9-month forecast period by any amount.
On the first business day of each month beginning October 1, 2000, DISTRIBUTOR will provide SUPPLIER with a 12-month rolling forecast of monthly purchases for the period beginning 3 months hence. Each of the first 3 months of DISTRIBUTOR's forecast will be a firm order. DISTRIBUTOR's forecast for the final 9 months of each forecast period is for SUPPLIER'S planning purposes only. DISTRIBUTOR, at its sole discretion, may change the monthly purchase forecast in any month in the final 9-month forecast period by any amount.
Any Products that DISTRIBUTOR is obligated to purchase, but otherwise unable to sell, may be held in SUPPLIER's inventory at the request of DISTRIBUTOR. Electing to have SUPPLIER hold DISTRIBUTOR's inventory does not relieve DISTRIBUTOR of its obligation to purchase any of DISTRIBUTOR's units held in inventory. DISTRIBUTOR will reimburse SUPPLIER for its fully loaded inventory carrying cost, including warehouse expenses, interest, and any inventory carrying cost charged to SUPPLIER by SUPPLIER's vendors as a direct result of DISTRIBUTOR's request for SUPPLIER to hold inventory.
On or before April 1, 2000, SUPPLIER will provide DISTRIBUTOR with a firm price for the monthly inventory carrying charge for 2001. On or before August 1 of each subsequent year, SUPPLIER will provide DISTRIBUTOR with a firm price for the monthly inventory carrying charge for the upcoming year.
Prices to DISTRIBUTOR for Product and Pre-Commercial Unit replacement parts will not exceed SUPPLIER's fully loaded actual cost plus [***]. DISTRIBUTOR will have the right to audit SUPPLIER's financial records to the extent necessary to verify compliance with this provision.
SALES COMMITMENTS
DISTRIBUTOR'S Global Sales Commitments are as follows:
Calendar Total number of
year units
--------------- -----------------
2001 [***]
2002 [***]
2003 [***]
|
DISTRIBUTOR'S Major Market Sales Commitments are as follows:
Total number of Total number of
Calendar units sold in units sold in
year U.S. and Canada Western Europe
----------- ------------------- --------------------
2001 [***] [***]
2002 [***] [***]
2003 [***] [***]
|
Global Sales Commitments and Major Market Sales Commitments (collectively "Commitments") as shown are expressed in 7kW equivalent units based on maximum continuous output. If DISTRIBUTOR sells any units larger or smaller than 7kW, the sales targets will be adjusted accordingly (e.g., DISTRIBUTOR can satisfy its 2001 Global Sales Commitment with [***] units).
The Commitment for any 1-month period will be equal to [***] of the annual Commitment.
Global Sales Commitments
DISTRIBUTOR shall be deemed to have achieved the Global Sales Commitments if DISTRIBUTOR achieves global minimum sales of at least [***] of the Global Sales Commitment in each relevant 12-month period.
In the event DISTRIBUTOR's total sales in the Territory in "2001" (defined herein as the 12-month period commencing 12 months after SUPPLIER completes design and manufacturing of the lock-in system, but no earlier than January 1, 2001) are less than [***], but more than [***], of the "2001" Global Sales Commitment, DISTRIBUTOR must achieve sales in "2002" (defined herein as the 12-month period after the completion of "2001") of not less than [***] of the "2002" Global Sales Commitment, or SUPPLIER shall have the right to name additional distributors in the Territory for "2003" (defined herein as the 12-month period after the completion of "2002").
In the event DISTRIBUTOR's total sales in "2001" are less than [***], but more than [***], of the "2001" Global Sales Commitment, DISTRIBUTOR must achieve sales in the first 6 months of "2002" of not less than [***] of the Global Sales Commitment for the first 6 months of "2002", or SUPPLIER shall have the right to name additional distributors in the Territory beginning in month 7 of "2002". In the event that DISTRIBUTOR's total sales in "2001" are less than [***], but more than [***], of the "2001" Global Sales Commitment, and DISTRIBUTOR achieves sales in the first 6 months of "2002" of not less than [***] of the Global Sales Commitment for the first 6 months of "2002", DISTRIBUTOR must also achieve sales for the 12-month period from month 7, "2002" through month 6, "2003" of not less than [***] of the Global Sales Commitment for such 12-month period, or SUPPLIER shall have the right to name additional distributors in the Territory for the last 6 months of "2003".
In the event that, during any 12-month period, DISTRIBUTOR's total sales are less than [***] of the Global Sales Commitment for such period, SUPPLIER shall have the right to terminate this Agreement.
Major Market Sales Commitments
DISTRIBUTOR shall be deemed to have achieved the Major Market Sales Commitments if DISTRIBUTOR achieves sales of at least [***] of each Major Market Sales Commitment in each relevant 12-month period.
In the event DISTRIBUTOR's sales in a "Major Market" (defined herein as
U.S./Canada, and Western Europe) in "2001" are less than [***], but more than
[***], of the "2001" Major Market Sales Commitment for such Major Market,
DISTRIBUTOR must achieve sales in "2002" in such Major Market of not less than
[***] of the Major Market Sales Commitment for such Major Market in "2002", or
SUPPLIER shall have the right to name additional distributors in that Major
Market for "2003".
In the event that DISTRIBUTOR's sales in either Major Market in any 12-month period are less than [***] of the Major Market Sales Commitment for such Major Market for such period, SUPPLIER shall have the right to name additional distributors in that Major Market.
However, in the event that DISTRIBUTOR's total sales exceed [***] of the Global Sales Commitment for "2001" or "2002", SUPPLIER shall not be allowed to name additional distributors in either Major Market for the following year (the "Extension") (e.g., if DISTRIBUTOR achieves greater than [***] of the Global Sales Commitment for "2001", then SUPPLIER may not name additional distributors to either Major Market in "2002", regardless of DISTRIBUTOR's sales in the Major Markets in "2001"). This Extension shall apply only one time, such that if this clause applies in the "2001", it shall not apply in "2002".
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
SUPPLIER'S INSURANCE
SUPPLIER shall maintain in effect at all times during the Term of this Agreement products liability insurance as set forth on the following certificate, with DISTRIBUTOR named as additional insured:
Marshall & Sterling THIS CERTIFICATE
Upstate Inc ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
113 Saratoga Road HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND
Glenville, NY 12302 OR ALTER THE COVERAGE AFFORDED BY POLICIES BELOW
David P. Charnock COMPANIES AFFORDING COVERAGE
518-384-1100 518-384-0193
Company A Great Northern Insurance Company
Company B Pacific Indemnity
Plug Power LLC
968 Albany Shaker Road Company C First Rehabilitation Insurance
Latham NY 12110
Company D American Int'l Specialty Lines
|
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES LISTED BELOW HAVE BEEN ISSUED TO THE
INSURED NAMED ABOVE FOR THE POLICY PERIOD INDCATED, NOTWITHSTANDING ANY
REQUIREMENT, TERM OR CONDITION OF ANY CONTACT OR OTHER DOCUMENT WITH RESPECT TO
WHICH THIS CERTIFICATE MAY BE ISSUED OR AMY PERTAIN, THE INSURANCE AFFORDED BY
THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND
CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HVAE BEEN REDUCED BY PAID
CLAIMS.
Co TYPE OF INSURANCE POLICY NUMBER POLICY POLICY LIMITS
Ltr EFFECTIVE EXPIRATION
DATE DATE
A GENERAL LIABILITY 35365127CCG 06/27/98 06/27/99 GENERAL AGGREGATE $ 2,000,000
[_] COMMERCIAL GENERAL LIABILITY
[_][_] CLAIMS MADE [X] OCCUR PRODUCTS-COMMON COMP/AGG $ 2,000,000
[_] OWNERS AND CONTRACTORS
[_] PERSONAL AND ADV INJURY $ 1,000,000
[_]___________________________
[_] EACH OCCURRENCE $ 1,000,000
Fire DAMAGE $ INCLUDED
Med Exp $ 10,000
A AUTOMOBILE 35365127CCG 06/27/98 06/27/99 $ 1,000,000
LIABILITY SINGLE UNIT
[_] ANY AUTO
[_] ALL OWNED AUTOS BODILY INJURY $
[_]SCHEDULED AUTOS per person
[X] AUTOS
[X] NON-OWNED AUTOS BODILY INJURY $
[_]___________________________ per accident
[_]
PROPERTY DAMAGE $
GARAGE LIABILITY AUTO ONLY-EA ACCIDENT $
[_] ANY AUTO
[_]____________________________ OTHER THAN AUTO ONLY $
[_]
EACH ACCIDENT $
AGGREGATE $
D EXCESS LIABILITY 8189611 (BTE 08/01/98 08/01/98 EACH OCCURRENCE $ 25,000,000
[X] .UMBRELLA FORM ENERGY CO)
[_] OTHER THAN UMBRELLA FORM AGGREGATE $ 25,000,000
B WORLDWIDE COMPENSATION AND statutory limits
EMPLOYEE LIABILITY
71644855 06/27/98 06/27/99 EACH ACCIDENT $ 100,000
DISEASE POLICY LIMIT $ 500,000
THE PROTECTIONS AFFECTING [_]incl
EXECUTIVE OFFICERS ARE [_]exel disease-each employee $ 100,000
OTHER
A PROPERTY 35365127CCG 06/27/98 06/27/99 Limit $ 1,200,000
A TRANSPORTATION 35365127CCG 06/27/98 06/27/99 LIABILITY $ 500,000
|
COPIES OF TRADEMARK REGISTRATIONS
DISTRIBUTOR'S TRADEMARK [GENERAL ELECTRIC LOGO
APPEARS HERE]
SUPPLIER'S TRADEMARK [PLUG POWER LOGO
APPEARS HERE]
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
EXHIBIT 10.14
Agreement No: 4633-ERTER-TR-99
Amount: $1,191,478
Type: Cost-Sharing
RESTATED AGREEMENT
This Restated Agreement dated this 26th day of June, 1997 by and between the NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY ("NYSERDA"), a New York public benefit corporation having its principal office and place of business at Corporate Plaza West, 286 Washington Avenue Extension, Albany, New York 12203-6399, and MECHANICAL TECHNOLOGY, INC., a New York corporation having its principal office and place of business at 968 Albany-Shaker Road, Latham, New York (the "Contractor").
WHEREAS, NYSERDA and the Contractor have previously worked together under NYSERDA and MECHANICAL TECHNOLOGY, INC. Agreements 1791-ERER-ER-92, 4087-ERTER- TR-95 and 4540-ERTER-TR-97 to support the development, demonstration and commercialization of the Proton Exchange Membrane ("PEM") Fuel Cell (the "Project");
WHEREAS, in an effort to streamline and consolidate all of the rights and obligations under the aforementioned Project, NYSERDA and the Contractor desire to terminate Agreements 1791-ERER-ER-92, 4087-ERTER-TR-95, and 4540-ERTER-TR-97 and have all of the rights and obligations of NYSERDA and the Contractor under the aforementioned Agreements contained in this Agreement No. 4633-ERTER-TR-98; and
WHEREAS, NYSERDA and the Contractor desire to continue to work together to support the successful commercialization of the Project.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the parties do hereby agree as follows:
Article I
expense, such as design procedures or techniques. chemical composition of materials, or manufacturing methods, processes, or treatments, including minor modifications thereof, provided that such data:
(i) are not generally known or available from other sources without obligation concerning their confidentiality,
(ii) have not been made available by the owner to others without obligation concerning its confidentiality; and
(iii) are not already available to NYSERDA without obligation concerning their confidentiality.
Article II
Article III
Article IV
incidental expenses shall be reimbursed for reasonable and necessary costs incurred. Costs should generally not exceed the daily per diem rates, published in the Federal Travel Regulations. Reimbursement for the use of personal vehicles shall be limited to the Internal Revenue Service business standard mileage rate.
(a) Staff charges: for each employee, the name, title, number of hours worked, hourly rate and labor extension;
(b) Direct charges: all direct costs shall be itemized on the invoice and supported by documentation, such as vendor invoices, travel vouchers or other documentation; and
(c) Indirect charges: indirect cost rates and method by which rates are applied.
The Contractor shall be notified by NYSERDA in accordance with Section
5.04.4 (b)(2) of NYSERDA's Prompt Payment Policy Statement, attached hereto as
Exhibit D, of any such information or documentation which the Contractor did not
include with such invoice.
In accordance with and subject to the provisions of such Exhibit D, NYSERDA shall pay to the Contractor, within the prescribed time after receipt of an invoice for a progress
payment, 90% of NYSERDA's share of the amount so requested, unless NYSERDA should determine that any such payment or any part thereof is otherwise not properly payable pursuant to the terms of the Agreement or the Budget.
payment made under the Agreement shall be subject to retroactive reduction for amounts included therein which are found by NYSERDA on the basis of any audit of the Contractor by an agency of the United States, State of New York or NYSERDA not to constitute an allowable charge or cost hereunder. Further, the Contractor shall provide to NYSERDA, on a reasonable basis, access to its books and records and those of any parent, subsidiary, affiliate, franchisee, licensee, or assignee to assure compliance with the payment provisions contained in Section 8.03 of the Agreement.
Article V
The Contractor shall document the process by which a subcontractor or supplier is selected by making a record summarizing the nature and scope of the work, equipment, supplies or materials sought, the name of each person or organization submitting, or requested to submit, a bid or proposal, the price or fee bid, and the basis for selection of the
subcontractor or supplier. An explanation for, and justification of, a sole source selection must identify why the work, equipment, supplies or materials involved are obtainable from or require a subcontractor with unique or exceptionally scarce qualifications or experience, specialized equipment, or facilities not readily available from other sources, or patents, copyrights, or proprietary data.
All Subcontracts shall contain provisions comparable to those set forth in this Agreement applicable to a subcontractor or supplier, and those set forth in Exhibit B to the extent required by law, and all other provisions now or hereafter required by law to be contained therein.
The Contractor shall submit to NYSERDA's Contract Administrator for review and written approval any subcontract(s) specified in the Statement of Work as requiring NYSERDA approval. The Contractor shall submit to NYSERDA a copy of all fully executed subcontracts and purchase orders that total greater than $10,000.
Article VI
of such reports by the Contractor shall occur in a timely manner and in accordance with the requirements of the Exhibit A Schedule.
Article VII
Article VIII
(a) Technical Data: Rights in Technical Data shall be allocated as follows:
(1) NYSERDA shall have:
(i) rights in Contract Data and Proprietary Data in order to exercise license rights, as provided in paragraph (a)(2)(iii) below; and
(ii) no rights under this Agreement in any Technical Data which are not Contract Data.
(2) The Contractor shall have:
(i) unlimited rights in all Technical Data, Contract Data and Proprietary Data subject to paragraph (iii) below;
(ii) the right to withhold Proprietary Data except as otherwise provided in paragraph (iii) below; and
(iii) the right to make, use and sell the Product. In the event the Contractor fails to make, use, or sell any Subject Invention within 10 years from the Contractor's receipt of Final Payment as described in Section 4.04 hereof, so that the benefits of such Subject Invention are available to the public and after written notice to the Contractor and a period of not less than six months in which the parties shall negotiate in good faith in order to resolve any disputes, NYSERDA shall be granted a royalty-free, non-exclusive, worldwide license sufficient in scope to allow NYSERDA to make, use or sell the Subject Invention and to allow others to do so. NYSERDA shall keep any Proprietary Data concerning such Subject Invention confidential, and may disclose such Proprietary Data to its sublicensees who have agreed to keep such Proprietary Data confidential.
The Contractor agrees that to the extent it receives or is given access to Proprietary Data or other technical, business or financial data in the form of recorded information from NYSERDA or a NYSERDA contractor or subcontractor, the Contractor shall treat such data in accordance with any restrictive legend contained thereon, unless another use is specifically authorized by prior written approval of the Contract Administrator.
(a) The Contractor retains the entire right, title and interest throughout the world in each Subject Invention of the Contractor conceived or first actually reduced to practice in the performance of the Work under the Agreement; except, that with respect to any Subject Invention in which the Contractor elects to retain title, NYSERDA shall have a non-exclusive, non-transferrable, irrevocable, paid-up license for itself, the State of New York and all political subdivisions and other instrumentalities of the State of New York, to practice or have practiced for or on their behalf the Subject Invention throughout the world, exclusively for their own use of the Subject Invention.
(b) Effective on the date of this Agreement, the Contractor shall submit to NYSERDA, not less frequently than annually, written reports which indicate the status of utilization of Subject Inventions. The reports shall include information regarding the status of development, date of first commercial sale or use, and gross royalties received by the Contractor. Such report shall be furnished to NYSERDA not later than February 1 following the calendar year covered by the report. The Contractor may include the information required by this Section in the Annual Report required by Section 8.03 of this Agreement.
(a)
(1) When a Sale is made by a Seller when the Seller is a New York State Manufacturer: .5% of the Sale Price;
The Contractor's obligation to make payments to NYSERDA under this subparagraph (1) shall extend for a period of fifteen (15) years or until the Contractor has paid NYSERDA $1,200,000, whichever occurs first, commencing with the date of the filing of the Fiscal Report with NYSERDA.
(2) When a Sale is made by a Seller when the Seller is not a New York State Manufacturer: 3% of the Sale Price.
The Contractor's obligation to make payments to NYSERDA under
this subparagraph (2) shall extend for a period of ten (10) years
or until the Contractor has paid NYSERDA $2,400,000, whichever
occurs first, commencing with the date of the filing of the Final
Report with NYSERDA. In the event the Contractor is obligated to
make payments in accordance with the requirements of this
subparagraph, any payments made to NYSERDA as a result of the
sale of the Product pursuant to the conditions of subparagraph
(1) hereof shall be applied to the Contractor's revised maximum
payment obligation to NYSERDA of $2,400,000.
Also, after the fifteen (15) year payment period or dollar cap under subparagraph (1) has been met of the ten (10) year payment period or dollar cap under subparagraph (2) has been met, whichever obligation occurs first, the Contractor's obligation to make payments to NYSERDA shall extend for another period of ten (10) years and the Contractor shall make payments to NYSERDA of .1% of the Sale Price for any Sale made by any Seller if the Contractor's annual net sales for that year exceed $1,000,000,000.
All payments due pursuant to this Section 8.03 shall be payable in annual installments and shall be paid by the first day of March in the calendar year immediately following the year during which the Contractor receives revenues as described above (the "Due Date") and such annual installments to NYSERDA shall not exceed $200,000, in the aggregate, for any given year. Any payment not received by the applicable Due Date shall be deemed delinquent. A delinquent payment shall be made with interest with such interest computed commencing with the Due Date of such payment. The interest rate payable shall be the "Prime Rate" existing as of the due date of such payment plus five (5) percentage points. Such interest shall be compounded monthly.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
amounts:
receipts received, and the resultant amount earned by, and paid to, NYSERDA in accordance with paragraph (a) hereof. Such report shall be furnished to NYSERDA not later than February 1 following the calendar year covered by the report. The Contractor's obligation to provide Annual Reports shall commence on February 1 of the calendar year following either the Contractor's receipt of Final Payment pursuant to Section 4.04 hereto, or upon the first Sale, whichever event occurs first. In the event that, for a period of five consecutive years, the annual reports indicate that no Sales are made and no payment is due to NYSERDA, the Contractor may cease submittal of annual reports. If, however, Sales are made in subsequent years, the Contractor's obligation to submit annual reports shall resume.
Article IX
(a) it is financially and technically qualified to perform the Work;
(b) it is familiar with and will comply with all general and special Federal, State, municipal and local laws, ordinances and regulations, if any, that may in any way affect the performance of this Agreement;
(c) the design, supervision and workmanship furnished with respect to performance of the Work shall be in accordance with sound and currently accepted scientific standards and engineering practices;
(d) all materials, equipment and workmanship furnished by it and by Subcontractors in performance of the Work or any portion thereof shall be free of defects in design, material and workmanship, and all such materials and equipment shall be of first-class quality, shall conform with all applicable codes, specifications, standards and ordinances and shall have service lives and maintenance characteristics suitable for their intended purposes in accordance with sound and currently accepted scientific standards and engineering practices;
(e) neither the Contractor nor any of its employees, agents, representatives or servants has actual knowledge of any patent issued under the laws of the United States or any other matter which could constitute a basis for any claim that the performance of the Work or any part thereof infringes any patent or otherwise interferes with any other right of any Person;
(f) there are no existing undisclosed or threatened legal actions, claims, or encumbrances, or liabilities that may adversely affect the Work or NYSERDA's rights hereunder; and
(g) it has no actual knowledge that any information or document or statement furnished by the Contractor in connection with this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement not misleading, and that all facts have been disclosed that would materially adversely affect the Work.
Article X
Article XI
(a) name or be endorsed to cover NYSERDA, the State of New York and the Contractor as insureds, as their respective interests may appear;
(b) provide that such policy may not be cancelled or modified until at least 30 days after receipt by NYSERDA of written notice thereof; and
(c) be reasonably satisfactory to NYSERDA in all other respects.
(a) Commercial general liability insurance for bodily injury liability, including death, and property damage liability, incurred in connection with the performance of this Agreement, with minimum limits of $1,000,000 in respect of claims arising out of personal injury or sickness or death of any one person, $1,000,000 in respect of claims arising out of personal injury, sickness or death in any one accident or disaster, and $1,000,000 in respect of claims arising out of property damage in any one accident or disaster;
(b) Commercial automobile liability insurance in respect of motor vehicles owned, licensed or hired by the Contractor and the Subcontractors for bodily injury liability, including death and property damage, incurred in connection with the performance of this Agreement, with minimum limits of $500,000 in respect of claims arising out of personal injury, or sickness or death of any one person, $1,000,000 in respect of claims arising out of personal injury, sickness or death in any one accident or disaster, and $500,000 in respect of claims arising out of property damage in any one accident or disaster; and
(c) Upon commencement of marketing of the Product, product liability insurance for bodily injury liability, including death, and property damage liability, arising out or the use of the Product with minimum limits of $1,000,000 in respect of claims arising out of personal injury or sickness or death of any one person, $1,000,000 in respect of claims arising out of personal injury, sickness or death in any one accident or disaster, and $1,000,000 in respect of claims arising out of property damage in any one accident or disaster. Product liability insurance naming the NYSERDA and State of New York as additional insureds required under This Agreement shall remain in effect for as long as the payment obligation pursuant to Section 8.03 of this Agreement is in effect.
insurance evidencing the renewal of such policies, and the Contractor shall promptly pay all premiums thereon due. In the event of threatened legal action, claims, encumbrances, or liabilities that may affect NYSERDA hereunder, or if deemed necessary by NYSERDA due to events rendering a review necessary, upon request the Contractor shall deliver to NYSERDA a certified copy of each policy.
Article XII
(a) NYSERDA may at any time, by written Order to the Contractor, require the Contractor to stop all or any part of the Work called for by this Agreement for a period of up to 90 days after the Stop Work Order is delivered to the Contractor, and for any further period to which the parties may agree. Any such order shall be specifically identified as a Stop Work Order issued pursuant to this Section. Upon receipt of Such an Order, the Contractor shall forthwith comply with its terms and take all reasonable steps to minimize the incurrence of costs allocable to the Work covered by the Order during the period of work stoppage consistent with public health and safety. Within a period of 90 days after a Stop Work Order is delivered to the Contractor, or within any extension of that period to which the parties shall have agreed, NYSERDA shall either:
(i) by written notice to the Contractor, cancel the Stop Work Order, which shall be effective as provided in such cancellation notice, or if not specified therein, upon receipt by the Contractor, or
(ii) terminate the Work covered by such order as provided in the Termination Section of this Agreement.
(b) If a Stop Work Order issued under this Section is cancelled or the period of the Order or any extension thereof expires, the Contractor shall resume Work. An equitable adjustment shall be made in the delivery schedule, the estimated cost, the fee, if any, or a combination thereof, and in any other provisions of the Agreement that may be affected, and the Agreement shall be modified in writing accordingly, if:
(i) the Stop Work Order results in an increase in the time required for, or in the Contractor's cost properly allocable to, the performance of any part of this Agreement, and
(ii) the Contractor asserts a claim for such adjustments within 30 days after the end of the period of Work stoppage; provided that, if NYSERDA decides the facts justify such action, NYSERDA may receive and act
upon any such claim asserted at any time prior to final payment under this Agreement.
(c) If a Stop Work Order is not cancelled and the Work covered by such Order is terminated, the reasonable costs resulting from the Stop Work Order shall be allowed by equitable adjustment or otherwise.
(d) Notwithstanding the provisions of this Section 12.01, the maximum amount payable by NYSERDA to the Contractor pursuant to this Section 12.01 shall not be increased or deemed to be increased except by specific written amendment hereto.
(a) This Agreement may be terminated by NYSERDA at any time during the term of this Agreement with or without cause, upon 30 days prior written notice to the Contractor. In such event, compensation shall be paid to the Contractor for Work performed and expenses incurred prior to the effective date of termination in accordance with the provisions of the Article hereof entitled Compensation and in reimbursement of any amounts required to be paid by the Contractor pursuant to Subcontracts; provided, however, that upon receipt of any such notice of termination, the Contractor shall cease the performance of Work, shall make no further commitments with respect thereto and shall reduce insofar as possible the amount of outstanding commitments (including, to the extent requested by NYSERDA, through termination of subcontracts containing provisions therefor). Articles VIII, IX, and X shall survive any termination of this Agreement, and Article XVI shall survive until the payment obligations pursuant to Article VIII have been met.
(b) In the event of termination, the Contractor's payment obligations set forth in Section 8.03 of the Agreement shall be adjusted as of the effective date of termination, with such payment obligations being calculated as follows:
Total NYSERDA funds
actually paid to
the Contractor X Payments defined
---------------------------------------- in Section 8.03 of the
NYSERDA total maximum Agreement
commitment set forth
in Section 4.07 of
the Agreement
|
(c) Nothing in this Article shall preclude the Contractor from continuing to carry out the Work called for by the Agreement after receipt of a Stop Work Order or termination notice at its own election, provided that, if the Contractor so elects, (i) any such continuing Work after receipt of the Stop Work Order or termination notice shall be deemed not to be Work-pursuant to the Agreement and (ii) NYSERDA shall have no liability to the Contractor for any
costs of the Work continuing after receipt of the Stop Work Order or termination notice.
Article XIII
Article XIV
Article XV
communications which may or are required to be given by either party to the other under this Agreement shall be deemed to have been sufficiently given for all purposes hereunder when delivered or mailed by registered or certified mail, postage prepaid, return receipt requested, (i) if to NYSERDA, at Corporate Plaza West, 286 Washington Avenue Extension, Albany, New York 12203-6399 or at such other address as NYSERDA shall have furnished to the Contractor in writing, and (ii) if to the Contractor, at 968 Albany-Shaker Road, Latham, New York 12110-1487, or such other address as the Contractor shall have furnished to NYSERDA in writing.
Article XVI
(a) buy out its obligation to make payments to NYSERDA as described in
Section 8.03 of this Agreement by paying NYSERDA an amount equal to three times
the amount of funds actually paid by NYSERDA to the Contractor under this
Agreement; or
(b) assign or otherwise transfer to a new entity the Contractor's obligations under this Agreement, including, but not limited to, the obligation to make payments to NYSERDA as described in Section 8.03 of this Agreement. Such assignment or transfer shall be subject to the prior written approval of NYSERDA. Such approval shall not be unreasonably withheld, and, in the event that notice of approval or disapproval is not received by the Contractor within thirty days after receipt of request for approval, the assignment or transfer shall be considered approved. In the event that NYSERDA requires additional time for considering approval, NYSERDA shall notify the Contractor within thirty days of receipt of the request for approval that additional time is required and shall specify the additional amount of time necessary up to sixty (60) days.
Article XVII
(a) The Contractor shall collaborate with NYSERDA's Manager of Technical Communications to prepare any press release and to plan for any news conference concerning the Work. In addition the Contractor shall notify NYSERDA's Manager of Technical Communications regarding any media interview in which the Work is referred to or discussed.
(b) It is recognized that during the course of the Work under this Agreement, the Contractor or its employees may from time to time desire to publish information regarding scientific or technical developments made or conceived in the course of or under this Agreement. In any such information, the Contractor shall credit NYSERDA's funding participation in the Project, and shall state that "NYSERDA has not reviewed the information contained herein, and the opinions expressed in this report do not necessarily reflect those of NYSERDA or the State of New York." Notwithstanding anything to the contrary contained herein, the Contractor shall have the right to use and freely disseminate project results for educational purposes, if applicable, consistent with the Contractor's policies.
(c) Commercial promotional materials or advertisements produced by the Contractor shall credit NYSERDA, as stated above, and shall be submitted to NYSERDA for review and recommendations to improve their effectiveness prior to use. The wording of such credit can be approved in advance by NYSERDA, and, after initial approval, such credit may be used in subsequent promotional materials or advertisements without additional approvals for the credit, provided, however, that all such promotional materials or advertisements shall be submitted to NYSERDA prior to use for review, as stated above. Such approvals shall not be unreasonably withheld, and, in the event that notice of approval or disapproval is not received by the Contractor within thirty days after receipt of request for approval, the promotional materials or advertisement shall be considered approved. In the event that NYSERDA requires additional time for considering approval, NYSERDA shall notify the Contractor within thirty days of receipt of the request for approval that additional time is required and shall specify the additional amount of time necessary up to 60 days. If NYSERDA and the Contractor do not agree on the wording of such credit in connection with such materials, the Contractor may use such materials, but agrees not to include such credit.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day, month and year first above written.
MECHANICAL TECHNOLOGY, INC. NEW YORK STATE ENERGY
RESEARCH AND DEVELOPMENT
AUTHORITY
By: /s/ Martin J. Mastroianni By /s/ F. William Valentino
----------------------------- -----------------------------------
F. William Valentino
President
Name: Martin J. Mastroianni
---------------------------
Title: President
--------------------------
|
(Seal)
STATE OF NEW YORK )
) SS:
COUNTY OF ALBANY )
|
/s/ Gloria M. Edmund ------------------------------- Notary Public State of New York |
[NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY LETTERHEAD]
December 17, 1997
Mr. William P. Sumigray
Contract Manager
Plug Power, L.L.C.
966 Albany-Shaker Road
Latham, New York 12203-6399
Dear Mr. Sumigray:
Subject: Modification No. 1 to Agreement No. 4633-ERTER-TR-98
- PEM Fuel Cell Power System Project
Reference is made to the subject Agreement between us dated June 26, 1997 (the "Agreement").
WHEREAS, Plug Power, L.L.C. submitted a proposal to NYSERDA under competitive solicitation 380-97 to request NYSERDA's continued support of the Project; and
WHEREAS, NYSERDA desires to provide additional funding in the amount of $256,578 under this Modification to support the Phase II effort delineated in the attached Exhibit A-1, Statement of Work, Budget, and Schedule attached hereto and made a part hereof.
NOW, THEREFORE, the Agreement is hereby modified as follows:
No other provision of the Agreement is otherwise changed or modified.
The parties hereto do hereby indicate their acceptance of and agreement to the foregoing by causing their duly authorized representatives to execute this Modification No. 1 in the respective spaces provided below.
PLUG POWER, L. L.C. NEW YORK STATE ENERGY
RESEARCH AND DEVELOPMENT
AUTHORITY
By /s/ Gary Mittleman By /s/ F. William Valentino
-------------------------- ---------------------------------------
Name Gary Mittleman F. William Valentino
------------------------- President
Title Pres & CEO.
-----------------------
Jean M. Woodard
Vice President and Treasurer
[stamped]
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CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
FUEL PROCESSOR INTEGRATION PROGRAM FOR
TRANSPORTATION FUEL CELL POWER
SYSTEMS
A PROPOSAL TO THE
NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY
Prepared by:
Plug Power L.L.C.
968 Albany Shaker Road
Latham, New York 12110
March 18, 1998
This proposal contains proprietary information that may not be divulged outside the NYSERDA organization without prior written consent from Plug Power L.L.C.
Executive Summary
Fuel cell power systems for transportation applications hold great promise in meeting many areas of environmental concern, such as reduction of vehicle emissions and fuel conservation. While some fuel cell systems are being developed to run on pure hydrogen stored within the vehicle, more practical vehicle designs (aimed at running on, e.g., gasoline or methanol) require the incorporation of a fuel processor and a fuel cell that are tightly integrated to maximize efficiency and performance. However, the integration of fuel processors and fuel cells demands careful evaluation, analysis and attention to difficult system integration challenges. Comprehensive understanding of the issues associated with thermal integration, optimal system water management, control integration and fuel impurity effects are areas that Plug Power has identified as the most important and most critical for achieving successful commercialization of transportation power systems.
This proposal requests NYSERDA's support for the establishment of a fuel cell, fuel processor integration testing program that will help to resolve several of these fundamental system integration issues.
The proposed program includes the creation of a state-of-the-art reformate stack test stand that will be capable of supporting the testing needs of automotive sized fuel processor and fuel cell power systems. The test stand will support the operation of a variety of automotive fuel processor systems, and it will support the testing of Plug Power developed fuel cells. The test stand will also include a full complement of instrumentation and data acquisition equipment required for comprehensive testing and evaluation of alternative system configurations and components. Along with this unit, Plug Power will develop and establish a testing strategy that will be designed to evaluate critical fuel processor and fuel cell integration issues. Issues such as water balance, control strategy integration, reformate gas composition, and thermal balancing, of the integrated system will be primary focus areas for the testing program. Concurrent with the establishment of the testing program, Plug Power will begin testing fuel processors with Plug Power developed fuel cells.
This program will also establish the foundation for continued system performance improvements resulting from continued integration testing and system design refinements. Data acquired from testing fuel cells integrated with fuel processors will be used to define a continuing and evolving series of technology improvement programs, continued re-definition of integration testing plans, and progressive refinements in system designs and performance.
Program Goals and Objectives
The ultimate goal of the proposed program is to establish a fundamental understanding of fuel processor and fuel cell integration technology and issues that need to be addressed to improve system performance. From this basic understanding of the issues, further refinement of technology development programs will emerge. As interim goals and objectives of this program, Plug Power intends to:
. Construct a state-of-the-art test stand to permit testing of
integrated fuel processor fuel/ cell systems
. Improve our fuel processing technology base
. Perform technical assessments of fuel processors
. Evaluate reformate composition vs. fuel cell performance
. Evaluate thermal management alternatives
. Evaluate alternative methods of system water management
. Observe the effects of varying reactant stoichiometries
. Monitor the performance of alternative control strategies
. Establish a fundamental understanding of transient operation
. Begin to evaluate system start-up strategies
Background
Fuel cells have recently come into the spotlight as viable candidates for generating the electrical power required for all-electric and/or hybrid electric vehicles. Currently, there are several programs being conducted by Government agencies and private organizations, which are aimed at demonstrating the ability of fuel cells to provide the electrical power required for practical sized vehicles.
Aside from the selection of vehicle size and type of vehicle power system for fuel cell powered vehicles, the decision regarding fuel is perhaps the one with the most profound implications. While hydrogen is the fuel of choice for Proton Exchange Membrane (PEM) fuel cells, most system developers acknowledge the problems associated with storing significant amount of hydrogen fuel on a vehicle. This combined with the associated lack of on-highway hydrogen re- fueling infrastructure and the difficult challenge of developing such a system in the short term, leads power system developers into the decision to incorporate fuel processors capable of deriving hydrogen from "popular" fuels, such as gasoline, diesel or methanol into their system designs.
In simple terms, the fuel processor has to accomplish two goals and is usually thought of as two separate reactors: the reformer and the CO cleanup device.
. Reformer: Reforms the hydrocarbon fuel into a hydrogen rich gas (reformate) and
. Cleanup: Reduces the CO content of the reformate below 50 ppm.
There are basically three different types of reformers:
. Steam reformers,
. Partial oxidation reformers, and
. Catalytic autothermal reformers.
The steam reformer has the benefit of being the most widely used reformer for large-scale commercial hydrogen production purposes, so there is a wealth of knowledge on the technology. Of the various types of reformers, steam reforming is also noted for being able to produce the most hydrogen per kg of input fuel. Another positive attribute of steam reformers is the hydrogen concentration of the reformate is the highest of all technologies, since steam reformers do not mix any air into the chamber that produces the reformate.
The disadvantage with steam reforming is that it requires the most physical volume and consequently will be the heaviest of the reformer options. Since the steam reformer is the largest of the reactors, it is also most likely to have the highest capital cost. Steam reformers also have very slow start-up times, and are relatively slow to react to load changes.
Partial Oxidation reforming is relatively a mature and well-understood technology; however there are significant engineering issues in reducing the reformer size from plant-size to automotive-size. Partial oxidation has the advantage of being compact, and having less weight than steam reforming. Partial oxidation reformers also have fast start-up times, and are fairly responsive to load changes. Another important advantage is that partial oxidation reformers are promising to be the most economical of all reformer technologies.
Low hydrogen production efficiency is the main disadvantage of partial oxidation reformers. Because air is introduced into the reactor, N\2\ dilutes the reformate stream so the H\2\ concentration in the reformate is much lower than that of the steam reformer. Although the technology is mature, there is less commercial expertise with partial oxidation in comparison with steam reforming.
Catalytic Autothermal Reformers (CAR) combine the catalytic steam reforming reaction and the partial oxidation reactions in a single reaction chamber. This yields relatively good response times for start-ups and load changes, and also encourages lighter weight construction, smaller volumes, and higher conversion efficiencies.
The disadvantage with the CAR process is that it is the newest reformer technology with the least amount of commercial experience. As is the case for the partial oxidation system, air is introduced into the reactor, so the H\2\ concentration in the reformer will be low in comparison to the steam reformer. The cost for such a system is projected to fall between the costs of the partial oxidation reformer and the steam reformer.
CO cleanup devices
CO is a by-product of the reforming process, and CO in the reformate stream hurts the performance of PEM fuel cells. Consequently, CO levels in the reformate stream must be reduced to very low levels (10 to 50 parts-per-million, or ppm). There are several ways of eliminating or minimizing the levels of CO in the reformate stream. One way is to purify the hydrogen, meaning that the output from the device is pure hydrogen. The other method is to react the CO with another gas and convert it into another compound.
There are two hydrogen purification methods being considered; pressure swing adsorption (PSA) and membrane separation, that can both provide extremely pure hydrogen (less than 100 ppm CO). The benefit of such systems is that fuel cells run more efficiently with pure hydrogen than with an H/2/-rich gas that has many diluents, such as CO/2/ and N/2/. Currently, both processes are accomplished at extremely high pressures (200 psi) and with fairly high capital investments. Parasitic compression losses from the required high-pressures, as well as the high capital costs for compressors, are the key disadvantages.
The disadvantages with each of these systems are that they all need extremely good temperature control to be able to clean the CO down to the required levels and that the final reformate feeding the fuel cell will be filled with diluents.
The obvious challenge to developing an efficient and economical transportation fuel cell power system configuration is confident selection of the best reformer and CO cleanup devices. The selection process is fraught with system design trade-offs that can only be made using reliable data acquired under operating conditions. Other design selections need to be made based upon the results of parametric testing of alternative system configurations.
The proposed program constructs the test stand required to test alternative fuel processor and fuel cell configurations, to acquire the data required to make the system design decisions.
Statement of Work
The proposed program consists of three tasks that will be conducted in parallel. The first task will be the design and construction of a world-class reformate fuel cell test stand, the second task will be to develop a testing program to evaluate system integration design in order to drive toward optimal system configurations. The third task will be dedicated to Program Management, and will ensure that the two technical activities are well coordinated, and that the technologies developed are coordinated with the needs of other automotive oriented programs within Plug Power. The two technical tasks will be coordinated through a series of design reviews and strategy development sessions that will ensure the testing facility reflects the needs of the testing program. The following paragraphs described the planned work for each task.
TASK 1 -Test Stand Design and Construction
Under this task, Plug Power will design and fabricate a state-of-the-art testing reformate fuel cell test stand for integrated fuel processor and fuel cell systems. Each test stand will be designed to meet all local safety codes, and will provide the support services demanded by comprehensive fuel cell power system testing.
Task 1.1 - Test Stand Definition
Under this effort, Plug Power personnel will define the performance requirements and corresponding system needs of the test stand. Specific requirements will be driven by the objectives of the testing engineers, and by capacities dictated by the anticipated needs of automotive sized systems. Such needs are expected to include, but will not be limited to:
. Fuel storage and delivery
. Air compression and delivery
. Reformate composition and quality
. Cooling system
. Service water
. Instrumentation and control
. Safety system
. Space requirements
. Electrical
. Data acquisition and storage
Results of the test stand definition work will be summarized in the form of a "Test Stand Needs" document. This document will then be used to ensure that all needs are reflected in the test stand.
Task 1.2 -Test Stand Design
The test stand will be designed based upon the needs defined in Task 1.1. The initial design will be reviewed internally by Plug Power personnel to ensure conformance with the Test Stand Needs document developed in Task 1.1. After the design has been reviewed, a design package will be prepared and bids obtained.
In addition to the test stand design, interfaces will be completed for both fuel processors and fuel cells. The test station design will include manual and automated controls for all fuel processor and fuel cell parameters, and will be based upon the recent Plug Power test station designs. Test equipment will be carefully selected for ease of incorporation into each of the test stations and will provide critical data concerning gas composition, reactant flow rates and pressures, coolant loop temperatures and pressures, and characteristics of the electrical load. Other instrumentation will be incorporated to permit the accurate measurement and analysis of critical system mass and flow balances. The test station is envisioned to incorporate a dedicated data acquisition processor for high-speed collection of critical performance data.
The test station will then be connected, via a computer network, to a host computer for storage and post-test analysis of all the data.
Task 1.3 -Test Stand Construction
The test stand will be constructed according to design and its operation verified during commissioning tests. Wherever possible, the operation and performance of each component will be tested to ensure that all performance objectives have been met, and that the test stand will provide the desired capacities of flow, pressure, load, etc. for the test articles. It is envisioned that a fuel processor and a fuel cell will be made available to confirm the functionality of the various system elements.
Task 2.0 - Integrated System Testing
After completion of the test stand, the task of evaluating the various system integration issues will commence. Prior to the testing, however, a structured test strategy will be developed followed by detailed test plans. The following paragraphs detail the activities planned for the testing aspects of the integrated system program.
Task 2.1 - Develop Testing Strategy and Methodology
To ensure that all system development and testing requirements are addressed in all tests, a testing strategy and philosophy will be developed. If the testing is to provide useful data, it is essential that all system integration issues such as water balancing, thermal management, and integrated system control issues are addressed in a through and consistent manner. This task will strive to identify all the critical and essential testing objectives, and will develop a consistent set of testing methodologies to ensure that the objectives are consistently met. Results of this work will be used to ensure that the test stand designed in Task 1 supports all the testing objectives.
Task 2.2 - Develop Test Plans
General testing sequences will be developed during this task that utilize the testing methodology developed in Task 2.1, and are based upon the specific designs of the testing facilities. These test procedures will be established to ensure that consistent data will be acquired during all phases of testing. Several test plans will be prepared to address specific objectives. For example, a test plan for determining thermal balance throughout the integrated system will be developed. Another test plan will be developed to ensure that all anticipated control aspects of a system will be evaluated. Other general tests will be prepared to cover initial system start-up, steady state and transient modes of operation.
It is the intent of this task to create "generic" test recipes that can be easily modified for use on specific fuel processors or system configurations.
Task 2.3 - Enhance Plans for First Reformer Testing
Specific test plans for a specific fuel processor and fuel cell system components will be developed as part of this task. The general test plans prepared in Task 2.2 will be modified and enhanced for the specific requirements of specific reformers and system configurations. It is anticipated that a methanol reformer will be the first device tested in the new facility.
Task 2.4 - Conduct First Reformer Testing
Utilizing the testing procedures developed in Task 2.3, the first reformer will be tested to prepare for incorporation with the test stand. Particular attention will be paid to the performance of the facilities and operation of the safety systems incorporated into the facility. Other test objectives will be to confirm expectations regarding gas composition of the reformer output stream, confirm projections of water requirements and output from system components, and confirm control strategies.
Task 2.5 - Conduct Second Reformer Testing
To meet the program objectives of acquiring a broad range of fuel processor testing experience, testing of a second reformer will be conducted. In preparation of testing the second reformer, testing plans originally developed in Task 2.3 will be modified as required, and testing will be conducted.
Task 3.0 - Program Management
Ensuring that program objectives are achieved, and that schedules are maintained, will be the responsibility of an active program manager. An essential role of the program manager will be to ensure coordination between the test stand designers and the test planners and designers.
Additionally, the Program management activity will be responsible for preparing and delivering periodic reports to NYSERDA. and maintaining a line of frequent communications concerning program status, progress and areas requiring attention with representatives of NYSERDA.
Program Schedule - Plug Power has planned this proposed program for a 6-month duration. The program plan is depicted in Figure 1 below. Plug Power promises to make our best effort with the financial resources being supplied by New York State to meet all targeted objectives.
[Chart Appears Here Which Sets Forth the Schedule for Completion of Work Under the Program, as set forth below:]
2nd Quarter 3rd Quarter 4th Quarter
--------------- --------------- ---------------
Task Name Apr May Jun Jul Aug Sep Oct Nov Dec
--------- --- --- --- --- --- --- --- --- ---
NYSERDA REFORMER PROGRAM
1.0 Test Stand
1.1 Test Stand Definition [April through May]
1.2 Test Stand Design [April]
1.3 Test Stand Construction [Mid-April through Mid-May]
2.0 Integrated System Testing [Mid-April through Mid-October]
2.1 Develop Testing Methodology [Mid-April]
2.2 Develop Test Plans [Mid-April through May]
2.3 Enhance Plans for First Reformer Tests [Mid-May]
2.4 Conduct First Reformer Testing [August-October]
2.5 Conduct Second Reformer Testing [August-October]
3.0 Program Management [April through October]
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Deliverables - After the completion of all work, Plug Power will submit two copies of the draft final report to NYSERDA for Review. Within thirty days after receipt of the annotated report from NYSERDA, Plug Power shall submit six copies of the final report, plus one reproducible copy.
[***--Note: all numbers have been omitted from this table and filed separately with the Securities and Exchange Commission pursuant to Rule 406 under the Securities Act]
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New York State Energy Research and Development Authority Solicitation/Contract No. Page
Contract Pricing Proposal Form
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Contractor: Name of Proposed Project:
PLUG POWER, L.L.C. FUEL PROCESSOR INTEGRATION
FOR TRANSPORTATION FUEL
CELL POWER SYSTEMS.
-------------------------------------------------------------------------------
Address: 968 Albany-Shaker Road
Latham, New York 12110
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Location (where work is to be performed): NYSERDA funding:
SAME AS ABOVE
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Total Project Cost:
------------------------------------------------------------------------------------------------------------------------------------
Total Funding & Cost-sharing
Project Co-funding & Other
Cost Element Cost via NYSERDA Co-funding
------------------------------------------------------------------------------------------------------------------------------------
1. Direct Materials
------------------------------------------------------------------------------------------------------------------------------------
a. Purchased Parts 204,000 106,958 97,042
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b. Other FUEL 15,000 7,864 7,136
------------------------------------------------------------------------------------------------------------------------------------
Total Direct Materials 219,000 114,822 104,178
====================================================================================================================================
2. Materials Overhead Rate:
------------------------------------------------------------------------------------------------------------------------------------
3. Direct Labor (specify
names/titles) Hours Rate/hr 69,290 36,329 32,961
------------------------------------------------------------------------------------------------------------------------------------
ENGINEERING & 3250 $21.32
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TECHNICIAN
------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------
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Total Direct Labor 69,290 36,329 32,961
====================================================================================================================================
4. Labor Overhead Rate% $ Base
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Total Labor Overhead
====================================================================================================================================
5. Outside Special Testing
====================================================================================================================================
6. Equipment
====================================================================================================================================
7. Travel
====================================================================================================================================
8. Other Direct Costs
====================================================================================================================================
9. Subcontractors/Consultants
------------------------------------------------------------------------------------------------------------------------------------
BUILDING CONSULTANT 5,000 2,622 2,378
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------------------------------------------------------------------------------------------------------------------------------------
Total Subcontractors/Consultants
====================================================================================================================================
10. General & Administrative
Expense Rate% Element(s)
------------------------------------------------------------------------------------------------------------------------------------
21.5 402,750 86,591 45,415 41,176
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11. Fee or Profit (0 for cost-sharing
agreements) Rate:
====================================================================================================================================
12. Total Estimated Project Cost 489,341 256,578 232,763
====================================================================================================================================
This proposal reflects our best estimates of this date, in accordance with the instructions to proposers.
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Typed Name and Title: WILLIAM P. SUMIGRAY Signature: Date:
CONTRACT MANAGER /s/ William P. Sumigray 12/17/97
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Has any executive agency of the U.S. government performed any review of your records in connection with
any prime contract or subcontract within the past twelve months: X Yes No
--- ----
If yes, identify:
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Meoh fuel processor testing program
April May June July August September October Totals
Phase 1
Test stand design &
fabrication
J. Chen 40 40 40 120
E. White 20 20 20 60
Electrician 40 80 80 200
Electrical Engineer 40 20 60
FP engineer 80 80 80 240
Engineer *M. 60 40 20 120
Cusack)
Technician 80 80 80 240
Technician 80 80 80 240
1280
Phase 2
Test planning and
procedures
J. Chen 40 40 80
E. White 20 20 40
J. Love 20 20 40
FP engineer 40 40 40 120
Engineer (M 40 40 40 120
Cusack)
Test Engineer 40 40 80
480
Phase 3
Testing
J. Chen 40 40 20 20 20 140
FP engineer 40 40 80 80 80 320
Test technician 40 40 80 80 80 320
Test technician 80 80 80 240
J. Love 20 20 20 20 20 100
1120
Phase 4
Program Mgmt
D. Hicks 40 20 20 20 20 20 20 160
J. Law 20 20 20 20 20 20 20 140
D. Neuman 10 10 10 10 10 10 10 70
370
Materials
Lab modifications $ 30,000
Fuel system $ 30,000
Fuel usage $ 15,000
FP station build $ 57,000
Computer $ 5,000
DAQ $ 7,000
Frame $ 4,000
Fittings $ 3,000
Meters $10,000
pumps $ 2,000
flow control $ 7,000
display
flow controllers 7,000
gas conditioner 2,000
Infrared CO meter 10,000
Gas Chromatograph
$ 45,000
FC station build $ 27,000
Computer@5,000
Frame@4,000
Fittings@3,000
Meters@5,000
Elec load@10,000
Cooling system $ 15,000
Building consultant $ 5,000
Total Direct Direct
Material Cost $224,000 Materials $224,000
Direct Labor and Overhead ($55/hr) $178,750
G&A $ 86,591
(21.5%)
TOTAL $489,341
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THE INDIRECT RATES APPLICABLE TO THIS BUDGET EXHIBIT A-1 ARE AS FOLLOWS:
OVERHEAD 158% X DIRECT LABOR
G&A 21.5% X DIRECT LABOR, OVERHEAD AND
G&A
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[NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY LETTERHEAD]
March 30, 1999
Mr. William P. Sumigray
Contract Manager
Plug Power,-L.L.C.
968 Albany-Shaker Road
Latham, New York 12203-6399
SUBJECT: MODIFICATION NO. 2 TO AGREEMENT NO. 4633-ERTER-TR-98
-- PEM Fuel Cell Power System Project
Dear Mr. Sumigray:
Reference is made to the Agreement between us dated June 26, 1997 and Modification No. 1 dated December 17, 1997 ("the Agreement"), wherein the following changes are hereby incorporated:
WHEREAS, NYSERDA has provided Plug Power L.L.C. with $1,448,056 for the development of the PEM Fuel Cell Power System under the Referenced Agreement and subsequent Modification; and
WHEREAS, NYSERDA desires to provide additional funding from the 1996 Clean Water/Clean Air Bond Act in the amount of $3,000,000 under Agreement Number 4870-ERTER-BA-99 to undertake an air quality project and to support the Phase III effort; and
WHEREAS, PLUG Power L.L.C. has a certain payment obligation to NYSERDA under
Section 8.03 of the Subject Agreement.
NOW, THEREFORE, the Agreement is hereby modified as follows:
of the Final Report to NYSERDA."
No other provision of this Agreement is otherwise modified or changed.
The parties hereto do hereby indicate their acceptance of and agreement to the foregoing by causing their duly authorized representatives to execute this Modification No. 2 in the respective spaces provided below.
PLUG POWER L.L.C. NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY
By /s/Gary Mittleman By /s/ Jean M. Woodard
------------------------ --------------------------
Jean M. Woodard
Name Gary Mittleman Vice President & Treasurer
----------------------
Title Pres & CEO
---------------------
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CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
EXHIBIT 10.15
Agreement No: 4870-ERTER-BA-99 Amount: $3,000,000 Type: Cost-Sharing
Agreement
Agreement dated this 25th day of January, 1999 by and between the NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY ("NYSERDA"), a New York public benefit corporation having its principal office and place of business at Corporate Plaza West 286 Washington Avenue Extension, Albany, New York 12203- 6399. and PLUG POWER L.L.C., having its principal office and place of business at 968 Albany-Shaker Road, Albany, New York 12110 (the "Contractor").
Whereas, the New York State Public Authorities Law empowers NYSERDA to develop and implement new energy technologies consistent with economic, social and environmental objectives, to develop and encourage energy conservation technologies, and to promote, develop encourage and assist special energy projects and thereby advance job opportunities, health, general prosperity and the economic welfare of the people of the State of New York; and
Whereas, The New York State Department of Environmental Conservation ("NYSDEC"). pursuant to the 1996 Clean Water/Clean Air Bond Act, as specifically set forth in Environmental Conservation Law Section 56-0607 is authorized, in consultation with other state agencies as may be necessary, to make state assistance payments for projects which will enhance the quality of the State's environment and the State's air quality; and
Whereas, in accordance with the requirements of the Environmental Conservation Law Section 56-0607, the NYSDEC in consultation with NYSERDA, has developed a program to improve air quality in New York State, by improving the performance of, or lowering product cost to accelerate the widespread use of ultra-clean, innovative, and advanced power-generation technologies; and
Whereas, in an effort to implement this program, NYSERDA, in conjunction with the NYSDEC issued Program Opportunity Notice 425-98 entitled "Power- Generation Technologies Demonstrating Improvements to Air Quality" to solicit proposals under the Program; and
Whereas, the Contractor submitted a proposal to manufacture, test, and evaluate pre-production prototype residential fuel cell systems based upon Plug Power's prototype 7000 PEM Fuel Cell (the "Project") and to demonstrate the practical applications of such technology for the purpose of providing air quality benefits through the accelerated deployment of the technology; and
Whereas, NYSERDA and the NYSDEC desire to co-sponsor the further development of the Plug Power 7000 PEM Fuel Cell as described in the attached Exhibit A, Statement of Work of this Agreement, which shall be considered a continuation, enhancement, modification, and improvement to the Plug Power 7000 PEM Fuel Cell that the Contractor is continuing to develop.
NOW, THEREFORE, in consideration of the premises and of the mutual promises of the parties herein expressed, the parties agree as follows:
Article I Definitions
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined below shall have, for all purposes of this Agreement, the respective meanings set forth below, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined.
(a) General Definition.
Agreement: This Agreement and Exhibits A, B, C, and D hereto, all of which are made a part hereof as though herein set forth in full.
Budget: The Schedule and Milestone Payments set forth in Exhibit A hereto.
Contract Administrator: NYSERDA's Director of Contract Management, Robert G. Callender, or such other person who may be designated, in writing, by NYSERDA.
Effective Date: The effective date of this Agreement shall be the date in the first paragraph of page one, above.
Final Report: The Final Report required by the Statement of Work hereof.
MWBE Goal Plan: The Plan required under Section 3.02 of this Agreement.
MWBE Reports: The Reports required under Section 3.03 of this Agreement.
Person: An individual, a corporation, an association or partnership, an organization, a business or a government or political subdivision thereof, or any governmental agency or instrumentality.
Progress Reports: The Progress Reports required by the Statement of Work hereof.
Statement of Work: The Statement of Work attached hereto as Exhibit A.
Subcontract: An agreement for the performance of Work by a Subcontractor, including any purchase order for the procurement of permanent equipment or expendable supplies in connection with the Work.
Subcontractor: A person who performs Work directly or indirectly for or on
behalf of the Contractor (and whether or not in privity of contract with the Contractor) but not including any employees of the Contractor or the Subcontractors.
Work: The Work described in the Exhibit A (including the procurement of equipment and supplies in connection therewith) and the performance of all other requirements imposed upon the Contractor under this Agreement.
(b) Data Rights and Patents Definition.
Contract Data: Technical Data first produced in the performance of the contract, Technical Data which are specified to be delivered under the contract, or Technical Data actually delivered in connection with the contract.
Practical Application: To manufacture in the case of a composition or product, to practice in the case of a process or method, or to operate in the case of a machine or system and under conditions which indicate that the benefits of the invention are available to the public on reasonable terms.
Proprietary Data: Technical Data which embody trade secrets developed at private expense, such as design procedures or techniques, chemical composition of materials, or manufacturing methods, processes, or treatments, including minor modifications thereof provided that such data:
(i) are not generally known or available from other sources without obligation concerning their confidentiality;
(ii) have not been made available by the owner to others without obligation concerning its confidentiality; and
(iii) are not already available to NYSERDA without obligation concerning their confidentiality.
Subject Invention: Any invention or discovery of the Contractor conceived or first actually reduced to practice in the course of or under this Agreement, and includes any art, method, process, machine, manufacture, design, or composition of matter, or any new and useful improvement thereof, or any variety of plants, whether patented or unpatented, under the Patent Laws of the United States of America or any foreign country.
Technical Data: Recorded information regardless of form or characteristic, of a scientific or technical nature. It may, for example, document research, experimental or developmental, or demonstration, or engineering work, or be usable or used to define a design or process, or to procure, produce, support, maintain, or operate material. The data may be graphic or pictorial delineations in media such as drawings or photographs, text in specifications or related performance or design type documents or computer software
(including computer software programs, computer software data bases, and computer software documentation). Examples of Technical Data include research and engineering data, engineering drawings and associated lists, specifications, standards, process sheets, manuals, technical reports, catalog item identification, and related information. Technical Data as used herein does not include financial reports, cost analyses, and other information incidental to contract administration.
Unlimited Rights: Rights to use, duplicate, or disclose Technical Data, in whole or in part, in any manner and for any purpose whatsoever, and to permit others to do so.
Article II Performance of Work
Section 2.01. Manner of Performance. Subject to the provisions of Article XII hereof, the Contractor shall perform all of the Work described in the Statement of Work, or cause such Work to be performed in an efficient and expeditious manner and in accordance with all of the terms and provisions of this Agreement. The Contractor shall perform the Work in accordance with the current professional standards and with the diligence and skill expected for the performance of work of the type described in the Statement of Work. The Contractor shall furnish such personnel and shall procure such materials, machinery, supplies, tools, equipment and other items as may reasonably be necessary or appropriate to perform the Work in accordance with this Agreement.
Section 2.02. Project Personnel. It is understood and agreed that Mr. John Law shall serve as Project Director and as such shall have the responsibility of the overall supervision and conduct of the Work on behalf of the Contractor and that the persons described in the Statement of Work shall serve in the capacities described therein. Any change of Project Director by the Contractor shall be subject to the prior written approval of NYSERDA. Such approval shall not be unreasonably withheld, and, in the event that notice of approval or disapproval is not received by the Contractor within thirty days after receipt of request for approval by NYSERDA, the requested change in Project Director shall be considered approved. In the event that NYSERDA requires additional time for considering approval, NYSERDA shall notify the Contractor within thirty days of receipt of the request for approval that additional time is required and shall specify the additional amount of time necessary up to 180 days.
Article III Deliverables
Section 3.01. Deliverables. All deliverables shall be provided in accordance with the Exhibit A Statement of Work.
Section 3.02. MWBE Goal Plan. The Contractor shall deliver to NYSERDA its Plan to implement NYSERDA's goal of providing minority and women-owned subcontractors and
suppliers with at least 8.8% of subcontracts required to complete the Work as described in Exhibit A of this Agreement. Such Plan shall be approved by NYSERDA and NYSDEC and upon approval delivered to NYSERDA prior to commencing the Work set forth in Exhibit A of this Agreement.
Section 3.03. MWBE Report. The Contractor shall deliver to NYSERDA quarterly reports outlining the Contractor's progress at meeting the goal described in Section 3.02 above.
Article IV Compensation
Section 4.01. Payments. The Contractor will be paid upon submission of proper invoices, the prices stipulated in the Budget for Work delivered or rendered and accepted, less deductions, if any, as herein provided. The total price NYSERDA shall pay to the Contractor provisions of Article XII hereof, as represents the price of the Work. Subject to the limiting, NYSERDA's price of the Work, NYSERDA shall pay the Contractor the total price of $3,000,000, according to the Budget, subject to the provisions, restrictions contained herein. Such amount shall be paid only to the extent that costs are incurred by the Contractor in performance of the Work in accordance with the provisions of this Agreement the Budget and the following:
(a) Staff Charges: The Contractor shall be compensated for the services performed by its employees under the terms of this Agreement at the employee's actual wage rate. The Contractor represents and warrants to NYSERDA that such rates are, and during the period of this Agreement shall remain, the lowest rates being offered or charged by the Contractor to others for the performance of generally similar services. In the event that any of the Contractor's rates are reduced to the benefit of any client of the Contractor as a result of any audit or for any other reason, the Contractor shall so notify NYSERDA and the appropriate reductions shall be made to the rates utilized hereunder.
(b) Direct Charges: The Contractor shall be reimbursed for reasonable and necessary actual direct costs incurred (e.g., equipment, supplies, travel and other costs directly associated with the performance of the Agreement) to the extent required in the performance of the Work in accordance with the provisions of the Budget. Travel, lodging, meals and incidental expenses shall be reimbursed for reasonable and necessary costs incurred. Costs should generally not exceed the daily per diem rates published in the Federal Travel Regulations. Reimbursement for the use of personal vehicles shall be limited to the Internal Revenue Service business standard mileage rate.
(c) Indirect Costs: The Contractor shall be reimbursed for fringe benefits, overhead, general and administrative (G&A), and other indirect costs included in the Budget at such rates as the Contractor may periodically calculate, consistent with appropriate federal guidelines or generally accepted accounting principles.
Section 4.02. Schedule of Payment. At the completion of each Milestone Billing Event so identified in Exhibit A, the Contractor may submit invoices requesting payment by NYSERDA of the amounts corresponding to the amount identified in the Budget. NYSERDA shall make payment to the Contractor in accordance with and subject to its Prompt Payment Policy Statement attached hereto as Exhibit D. The Contractor shall be notified by NYSERDA in accordance with Section 5.04.4 (b)(2) of such Exhibit D, of any information or documentation which the Contractor did not include with such invoice.
Section 4.03. Title to Equipment. Title shall vest in the Contractor to all equipment purchased hereunder subject to the provisions of the Demonstration Agreements required in Exhibit A, Statement of Work.
Section 4.04. Final Payment. Upon final acceptance by NYSERDA of the Final
Report and all other deliverables contained in Exhibit A, Statement of Work,
pursuant to Section 6.02 hereof, the Contractor shall submit an invoice for
final payment with respect to the Work together with such supporting information
and documentation as, and in such form as, NYSERDA may require. An invoice for
final payment shall include, in addition to the material required pursuant to
Section 4.04 hereof, a statement as to whether any invention or patentable
devices have resulted from the performance of the Work. All invoices for final
payment hereunder must, under any and all circumstances, be received by NYSERDA
prior to October 1, 2001. In accordance with and subject to the provisions of
NYSERDA's Prompt Payment Policy Statement, attached hereto as Exhibit D, NYSERDA
shall pay to the Contractor within the prescribed time after receipt of such
invoice for final payment, the total amount payable pursuant to Section 4.01
hereof, less all progress payments previously made to the Contractor with
respect thereto and subject to the maximum commitment of $3,000,000 set forth in
Section 4.07 hereof.
Section 4.05. Release by NYSDEC and the Contractor. The acceptance by the Contractor of final payment shall release NYSERDA, NYDEC, and the State of New York from all claims and liability that the Contractor, its representatives and assigns might otherwise have relating to this Agreement.
Section 4.06. Maintenance of Records. The Contractor shall keep, maintain, and preserve at its principal office throughout the term of the Agreement and for a period of seven years after acceptance of the Work, full and detailed books, accounts, and records pertaining to the performance of the Agreement, including without limitation, all bills, invoices, payrolls, subcontracting efforts and other data evidencing, or in any material way related to, the direct and indirect costs and expenses incurred by the Contractor in the course of such performance.
Section 4.07. Maximum Commitment. The maximum aggregate amount payable by NYSERDA to the Contractor hereunder is $3,000,000. NYSERDA shall not be liable for any costs or expenses in excess of such amount incurred by the Contractor in the performance and completion of the Work.
Section 4.08. Audit. NYSERDA shall have the right from time to time and at all reasonable times during the term of the Agreement and such period thereafter to inspect and audit any and all books, accounts and records at the office or offices of the Contractor where they are then being kept, maintained and preserved pursuant to Section 4.06 hereof. Any payment made under the Agreement shall be subject to retroactive reduction for amounts included therein which are found by NYSERDA on the basis of any audit of the Contractor by an agency of the United States, State of New York or NYSERDA not to constitute an allowable charge or cost hereunder.
Article V Assignments, Subcontracts and Purchase Orders
Section 5.01. General Restriction. Except as specifically provided otherwise in this Article, the assignment, transfer, conveyance, subcontracting or other disposal of this Agreement or any of the Contractor's rights, obligations, interests or responsibilities hereunder, in whole or in part, without the express consent in writing of NYSERDA shall be void and of no effect as to NYSERDA.
Section 5.02. Subcontract Procedure . Without relieving it of, or in any way limiting, its obligations to NYSERDA under this Agreement, the Contractor may enter into Subcontracts for the performance of Work or for the purchase of materials or equipment. Except for a subcontractor or supplier specified in a team arrangement with the Contractor in the Contractor's original proposal, and except for any subcontract or order for equipment, supplies or materials from a single subcontractor or supplier totaling, under $5,000, the Contractor shall select all subcontractors or suppliers through a process of competitive bidding or multi-source price review. A team arrangement is one where a subcontractor or supplier specified in the Contractor's proposal is performing a substantial portion of the Work and is making a substantial contribution to the management and/or design of the Project. In the event that a competitive bidding or multi-source price review is not feasible, the Contractor shall document an explanation for, and justification of, a sole source selection.
The Contractor shall document the process by which a subcontractor or supplier is selected by making a record summarizing the nature and scope of the work, equipment, supplies or materials sought, the name of each person or organization submitting, or requested to submit, a bid or proposal, the price or fee bid, and the basis for selection of the subcontractor or supplier. An explanation for, and justification of, a sole source selection must identify why the work, equipment, supplies or materials involved are obtainable from or require a subcontractor with unique or exceptionally scarce qualifications or experience, specialized equipment, or facilities not readily available from other sources, or patents, copyrights, or proprietary data.
All Subcontracts shall contain provisions comparable to those set forth in this Agreement applicable to a subcontractor or supplier, and those set forth in Exhibit B to the extent required by law, and all other provisions now or hereafter required by law to be
contained therein.
The Contractor shall submit to NYSERDA's Contract Administrator for review
and written approval all subcontracts including the Phase II subcontracts,
deemed necessary by NYSERDA, based on the results and accomplishments of Phase
1. NYSERDA's maximum commitment to the Project shall not be affected by costs
incurred in subcontracting any of the Phase 11 tasks. The Contractor shall
submit to NYSERDA a copy of all fully executed subcontracts and purchase orders
that total greater than $5,000.
Section 5.03. Performance. The Contractor shall promptly and diligently comply with its obligations under each Subcontract and shall take no action which would impair its rights thereunder. The Contractor shall not assign, cancel or terminate any Subcontract without the prior written approval of the Contract Administrator as long as this Agreement remains in effect. Such approval shall not be unreasonably withheld and, in the event that notice of approval or disapproval is not received by the Contractor within thirty days after receipt of request for approval by NYSERDA, the requested assignment, cancellation, or termination of the Subcontract shall be considered approved by NYSERDA. In the event that NYSERDA requires additional time for considering approval, NYSERDA shall notify the Contractor within thirty days of receipt of the request for approval that additional time is required and shall specify the additional amount of time necessary up to 180 days.
Article VI Schedule: Acceptance of Work
Section 6.01. Schedule. The Work shall be performed as expeditiously as possible in conformity with the schedule requirements contained herein and in the Statement of Work. The draft and final versions of the Final Report shall be submitted by the dates specified in the Exhibit A Schedule. It is understood and agreed that the delivery of the draft and final versions of such reports by the Contractor shall occur in a timely manner and in accordance with the requirements of the Exhibit A Schedule.
Section 6.02. Acceptance of Work. The completion of the Work shall be subject to acceptance by NYSERDA in writing of the Final Report and all other deliverables as defined in Exhibit A, Statement of Work.
Article VII Force Majeure
Section 7.01. Force Majeure. Neither party hereto shall be liable for any failure or delay in the performance of its respective obligations hereunder if and to the extent that such delay or failure is due to a cause or circumstance beyond the reasonable control of such party, including, without limitation, acts of God or the public enemy, expropriation or confiscation of land or facilities, compliance with any law, order or request of any Federal, State, municipal or local governmental authority, acts of war, rebellion or sabotage or damage resulting
therefrom, fires, floods, storms, explosions, accidents, riots, strikes, or the delay or failure to perform by any Subcontractor by reason of any cause or circumstance beyond the reasonable control of such Subcontractor.
Article VIII
Technical Data, Patents
Section 8.01. Rights in Technical Data.
(a) Technical Data: Rights in Technical Data shall be allocated as follows:
(1) NYSERDA shall have:
(i) unlimited rights in Contract Data except as otherwise provided below with respect to Proprietary Data; and
(ii) no rights under this Agreement in any Technical Data which are not Contract Data.
(2) The Contractor shall have:
(i) the right to withhold Proprietary Data in accordance with the provisions of this clause; and
(ii) the right to make, use and sell the 7000 PEM Fuel Cell. If the Contractor fails to make, use, and sell the 7000 PEM Fuel Cell within five years from the Contractor's receipt of Final Payment as described in Section 4.04 hereof, under conditions which indicate that the benefits of the 7000 PEM Fuel Cell are available to the public on reasonable terms, NYSERDA shall have a royalty-free, exclusive, worldwide license sufficient in scope to allow NYSERDA to make, use or sell the 7000 PEM Fuel Cell and to allow others to do so, including a non-exclusive right in Proprietary Data incorporated into or necessary for use in connection with the making, use, or sale of the 7000 PEM Fuel Cell by NYSERDA or its sublicensees. The Contractor agrees to disclose such Proprietary Data to NYSERDA, and NYSERDA may disclose such Proprietary Data to its sublicensees who have agreed to keep such Proprietary Data confidential; and
(iii) the right to use for its private purposes subject to patent, or other provisions of this Agreement, Contract Data it first produces in the performance of this Agreement provided the data requirements of this Agreement have been met as of the date of the private use of such data.
The Contractor agrees that to the extent it receives or is given access to Proprietary
Data or other technical, business or financial data in the form of recorded information from NYSERDA or a NYSERDA contractor or subcontractor, the Contractor shall treat such data in accordance with any restrictive legend contained thereon, unless another use is specifically authorized by prior written approval of the Contract Administrator.
Section 8.02. Patents.
(a) The Contractor may elect to retain the entire right, title and interest throughout the world to each Subject Invention of the Contractor conceived or first actually reduced to practice in the performance of the Work under the Agreement; except, that with respect to any Subject Invention in which the Contractor elects to retain title, NYSERDA shall have a non-exclusive, non- transferrable, irrevocable, paid-up license for itself, the State of New York and all political subdivisions and other instrumentalities of the State of New York, to practice or have practiced for or on their behalf the Subject Invention throughout the world, exclusively for their own use of the Subject Invention.
(b) Within six months of the time a Subject Invention is made, or as part of the request for final payment, whichever shall occur first, the Contractor shall submit to NYSERDA a written invention disclosure. Within twelve months of the time a Subject Invention is made, or as part of the request for final payment, whichever shall occur first, the Contractor shall advise NYSERDA in writing whether the Contractor elects to retain principal rights in the Subject Invention. The Contractor shall file the patent application for a Subject Invention within two years of the date of election. If the Contractor fails to disclose a Subject Invention, fails to elect to retain principal rights thereto, or to file a patent application within the time specified in this paragraph, or if the Contractor elects not to retain principal rights in a Subject Invention, the Contractor shall convey to NYSERDA title to the Subject Invention unless NYSERDA shall waive in writing its right to take title. In the event the Contractor elects not to retain principal rights in a Subject Invention, the Contractor shall retain a non-exclusive, royalty-free license throughout the world in such Subject Invention transferable only with the written approval of NYSERDA. Such approval shall not be unreasonably withheld, and, in the event that notice of approval or disapproval is not received by the Contractor within thirty days after receipt of request for approval, the requested transfer shall be considered approved. In the event that NYSERDA requires additional time for considering approval, NYSERDA shall notify the Contractor within thirty days of receipt of the request for approval that additional time is required and shall specify the additional amount of time necessary up to 180 days.
(c) The Contractor shall submit to NYSERDA, not less frequently than annually, written reports which indicate the status of utilization of Subject Inventions in which the Contractor retains principal rights. The reports shall include information regarding the status of development, date of first commercial sale or use, and gross royalties received by the Contractor. Such report shall be furnished to NYSERDA not later than February 1 following the calendar year covered by the report. In the event the Contractor fails to demonstrate that the Contractor has taken effective steps within three years after a patent is issued to bring the
Subject Invention to the point of Practical Application, then NYSERDA shall have the right to grant a non-exclusive or exclusive license to responsible applicants under terms that are reasonable under the circumstances, or to require the Contractor to do so.
(d) The Contractor shall include the foregoing patent clauses, suitably modified to identify the parties, in all subcontracts which involve the performance of Work under this Agreement. The Subcontractor shall retain all rights provided for the Contractor, and the Contractor shall retain all rights provided for NYSERDA, as set forth above.
Article IX Warranties and Guarantees
Section 9.01. Warranties and Guarantees. The Contractor warrants and guarantees that:
(a) it is financially and technically qualified to perform the Work;
(b) it is familiar with and will comply with all general and special Federal, State, municipal and local laws, ordinances and regulations, if any, that may in any way affect the performance of this Agreement;
(c) the design, supervision and workmanship furnished with respect to performance of the Work shall be in accordance with sound and currently accepted scientific standards and engineering practices;
(d) all materials, equipment and workmanship furnished by it and by Subcontractors in performance of the Work or any portion thereof shall be free of defects in material and workmanship, and all such materials and equipment shall be of first-class quality, shall conform with all applicable codes, specifications, standards and ordinances and shall have service lives and maintenance characteristics suitable for their intended purposes in accordance with sound and currently accepted scientific standards and engineering practices;
(e) neither the Contractor nor any of its employees, agents, representatives or servants has actual knowledge of any patent issued under the laws of the United States or any other matter which could constitute a basis for any claim that the performance of the Work or any part thereof infringes any patent or otherwise interferes with any other right of any Person;
(f) there are no existing undisclosed or threatened legal actions, claims, or encumbrances, or liabilities that may adversely affect the Work or NYSERDA's rights hereunder; and
(g) it has no actual knowledge that any information or document or statement furnished by the Contractor in connection with this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement not
misleading, and that all facts have been disclosed that would materially adversely affect the Work.
Article X Indemnification
Section 10.01. Indemnification. The Contractor shall protect, indemnify and hold harmless NYSERDA, NYSDEC, and the State of New York from and against all liabilities, losses, claims, damages, judgments, penalties, causes of action, costs and expenses (including, without limitation, attorneys' fees and expenses) imposed upon or incurred by or asserted against NYSERDA, NYSDEC, or the State of New York resulting from, arising out of or relating to the performance of this Agreement. The obligations of the Contractor under this Article shall survive any expiration or termination of this Agreement and shall not be limited by any remuneration herein of required insurance coverage.
Article XI Insurance
Section 11.01. Maintenance of Insurance: Policy Provision . The Contractor, at no additional cost to NYSERDA and NYSDEC, shall maintain or cause to be maintained throughout the term of this Agreement, insurance of the types and in the amounts specified in the Section hereof entitled Types of Insurance. All such insurance shall be evidenced by insurance policies, each of which shall:
(a) name or be endorsed to cover NYSERDA, NYSDEC, the State of New York and the Contractor as insureds, as their respective interests may appear;
(b) provide that such policy may not be cancelled or modified until at least 30 days after receipt by NYSERDA of written notice thereof, and
(c) be reasonably satisfactory to NYSERDA in all other respects.
Section 11.02. Types of Insurance. The types and amounts of insurance required to be maintained under this Article are as follows:
(a) Commercial general liability insurance for bodily injury liability, including death, and property damage liability, incurred in connection with the performance of this Agreement, with minimum limits of $1,000,000 in respect of claims arising out of personal injury or sickness or death of any one person, $1,000,000 in respect of claims arising out of personal injury, sickness or death in any one accident or disaster, and $1,000,000 in respect of claims arising out of property damage in any one accident or disaster; and
(b) Commercial automobile liability insurance in respect of motor vehicles owned, licensed or hired by the Contractor and the Subcontractors for bodily injury liability,
including death and property damage, incurred in connection with the performance of this Agreement, with minimum limits of $500,000 in respect of claims arising out of personal injury, or sickness or death of any one person, $1,000,000 in respect of claims arising out of personal injury, sickness or death in any one accident or disaster, and $500,000 in respect of claims arising out of property damage in any one accident or disaster.
Section 11.03. Delivery of Policies: Insurance Certificate. Prior to commencing the Work, the Contractor shall deliver to NYSERDA certificates of insurance issued by the respective insurers, indicating the Agreement number thereon, evidencing the insurance required by this Article and bearing notations evidencing the payment of the premiums thereon or accompanied by other evidence of such payment satisfactory to NYSERDA. In the event any policy furnished or carried pursuant to this Article will expire on a date prior to acceptance of the Work by NYSERDA pursuant to the section hereof entitled Acceptance of Work. The Contractor, not less than 15 days prior to such expiration date, shall deliver to NYSERDA certificates of insurance evidencing the renewal of such policies, and the Contractor shall promptly pay all premiums thereon due. In the event of threatened legal action, claims. encumbrances, or liabilities that may affect NYSERDA hereunder. or if deemed necessary by NYSERDA due to events rendering a review necessary, upon request the Contractor shall deliver to NYSERDA a certified copy of each policy.
Article XII Stop Work Order: Termination
Section 12.01. Stop Work Order.
(a) NYSERDA may at any time, by written Order to the Contractor, require the Contractor to stop all or any part of the Work called for by this Agreement for a period of up to 90 days after the Stop Work Order is delivered to the Contractor, and for any further period to which the parties may agree. Any such order shall be specifically identified as a Stop Work Order issued pursuant to this Section. Upon receipt of such an Order, the Contractor shall forthwith comply with its terms and take all reasonable steps to minimize the incurrence of costs allocable to the Work covered by the Order during the period of work stoppage consistent with public health and safety. Within a period of 90 days after a Stop Work Order is delivered to the Contractor, or within any extension of that period to which the parties shall have agreed. NYSERDA shall either:
(i) by written notice to the Contractor, cancel the Stop Work Order, which shall be effective as provided in such cancellation notice, or if not specified therein, upon receipt by the Contractor, or
(ii) terminate the Work covered by such order as provided in the Termination Section of this Agreement.
(b) If a Stop Work Order issued under this Section is cancelled or the period
of the Order or any extension thereof expires, the Contractor shall resume Work. An equitable adjustment shall be made in the delivery schedule, the estimated cost, the fee, if any, or a combination thereof, and in any other provisions of the Agreement that may be affected, and the Agreement shall be modified in writing accordingly, if:
(i) the Stop Work Order results in an increase in the time required for, or in the Contractor's cost properly allocable to, the performance of any part of this Agreement, and
(ii) the Contractor asserts a claim for such adjustments within 30 days after the end of the period of Work stoppage; provided that, if NYSERDA decides the facts justify such action, NYSERDA may receive and act upon any such claim asserted at any time prior to final payment under this Agreement.
(c) If a Stop Work Order is not cancelled and the Work covered by such Order is terminated, the reasonable costs resulting from the Stop Work Order shall be allowed by equitable adjustment or otherwise.
(d) Notwithstanding the provisions of this Section 12.01, the maximum amount payable by NYSERDA to the Contractor pursuant to this Section 12.01 shall not be increased or deemed to be increased except by specific written amendment hereto.
Section 12.02. Termination.
(a) This Agreement may be terminated by NYSERDA at any time during the term of this Agreement with or without cause, upon 30 days prior written notice to the Contractor. In such event, compensation shall be paid to the Contractor for Work performed and expenses incurred prior to the effective date of termination in accordance with the provisions of the Article hereof entitled Compensation and in reimbursement of any amounts required to be paid by the Contractor pursuant to Subcontracts; provided, however, that upon receipt of any such notice of termination, the Contractor shall cease the performance of Work, shall make no further commitments with respect thereto and shall reduce insofar as possible the amount of outstanding commitments (including, to the extent requested by NYSERDA, through termination of subcontracts containing provisions therefor).
(b) Nothing in this Article shall preclude the Contractor from continuing to carry out the Work called for by the Agreement after receipt of a Stop Work Order or termination notice at its own election, provided that, if the Contractor so elects, (i) any such continuing Work after receipt of the Stop Work Order or termination notice shall be deemed not to be Work pursuant to the Agreement and (ii) NYSERDA shall have no liability to the Contractor for any costs of the Work continuing after receipt of the Stop Work Order or termination notice.
Article XIII
Independent Contractor
Section 13.01. Independent Contractor. The status of the Contractor under this Agreement shall be that of an independent contractor and not that of an agent, and in accordance with such status, the Contractor, the Subcontractors, and their respective officers, agents, employees, representatives and servants shall at all times during the term of this Agreement conduct themselves in a manner consistent with such status and by reason of this Agreement shall neither hold themselves out as, nor claim to be acting in the capacity of, officers, employees, agents, representatives or servants of NYSERDA nor make any claim, demand or application for any right or privilege applicable to NYSERDA, including, without limitation, rights or privileges derived from workers' compensation coverage, unemployment insurance benefits, social security coverage and retirement membership or credit.
Article XIV Compliance with Certain Law
Section 14.01. Laws of the State of New York. The Contractor shall comply with all of the requirements set forth in Exhibit B hereto.
Section 14.02. All Legal Provisions Deemed Included. It is the intent and understanding of the Contractor and NYSERDA that each and every provision of law required by the laws of the State of New York to be contained in this Agreement shall be contained herein, and if, through mistake, oversight or otherwise, any such provision is not contained herein, or is not contained herein in correct form, this Agreement shall, upon the application of either NYSERDA or the Contractor, promptly be amended so as to comply strictly with the laws of the State of New York with respect to the inclusion in this Agreement of all such provisions.
Section 14.03. Other Legal Requirements. The references to particular laws of the State of New York in this Article, in Exhibit B and elsewhere in this Agreement are not intended to be exclusive and nothing contained in such Article, Exhibit and Agreement shall be deemed to modify the obligations of the Contractor to comply with all legal requirements.
Article XV Severability
Section 15.01. Severability. This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations, and is intended, and shall for all purposes to be deemed to be, a single, integrated document setting forth all of the agreements and understandings of the parties hereto, and superseding all prior negotiations, understandings and agreements of such parties. If any term or provision of this Agreement or the application thereof to any person or circumstance shall for any reason and to any extent be held to be invalid or unenforceable, then such term or provision shall be ignored, and to the maximum extent possible, this Agreement shall continue
in full force and effect, but without giving effect to such term or provision.
Article XVI Notices, Entire Agreement, Amendment, Counterpart
Section 16.01. Notices. All notices, requests, consents, approvals and other communications; which may or are required to be given by either party to the other under this Agreement shall be deemed to have been sufficiently given for all purposes hereunder when delivered or mailed by registered or certified mail, postage prepaid, return receipt requested, (i) if to NYSERDA, at Corporate Plaza West 286 Washington Avenue Extension, Albany, New York 12203-6399 or at such other address as NYSERDA shall have furnished to the Contractor in writing, and (ii) if to the Contractor at 968 Albany-Shaker Road, Albany, New York 12110, or such other address as the Contractor shall have furnished to NYSERDA in writing.
Section 16.02. Entire Agreement: Amendment. This Agreement embodies the entire agreement and understanding between NYSERDA and the Contractor and supersedes all prior agreements and understandings relating to the subject matter hereof. Except as otherwise expressly provided for herein, this Agreement may be changed, waived, discharged or terminated only by an instrument in writing, signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
Section 16.03. Counterparts. This Agreement may be executed in counterparts each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
Article XVII Publicity
Section 17.01. Publicity.
(a) For a period of fifteen years from the date of execution of this Agreement, the Contractor shall collaborate with NYSERDA's Manager of Technical Communications to prepare any press release and to plan for any news conference concerning the Work. In addition, the Contractor shall notify in advance NYSERDA's Manager of Technical Communications regarding any media interview in which the Work is referred to or discussed. Subsequent to the fifteen year period, the Contractor shall make every good faith effort to provide prompt notification to NYSERDA's Manager of Technical Communications of any press releases and media events.
(b) In connection with any scientific or technical publications, the Contractor may from time to time desire to publish information regarding scientific or technical developments made or conceived in the course of or under this Agreement. In any such information the Contractor shall credit NYSERDA's funding participation in the Project, and
shall state that NYSERDA has not reviewed the information contained herein, and the opinions expressed in this report do not necessarily reflect those of NYSERDA or the State of New York. Notwithstanding anything to the contrary contained herein, the Contractor shall have the right to use and freely disseminate project results for educational purposes, if applicable, consistent with the Contractor's policies.
(c) For a period of fifteen years from the date of execution of this Agreement, commercial promotional materials or advertisements produced by the Contractor concerning the Work shall credit NYSERDA, as stated above, and shall be submitted to NYSERDA for review and recommendations to improve their effectiveness prior to use. The wording of such credit can be approved in advance by NYSERDA and, after initial approval, such credit may be used in subsequent promotional materials or advertisements without additional approvals for the credit, provided, however, that all such promotional materials or advertisements shall be submitted to NYSERDA prior to use for review, as stated above. Such approvals shall not be unreasonably withheld, and, in the event that notice of approval or disapproval is not received by the Contractor within thirty days after receipt of request for approval, the promotional materials or advertisement shall be considered approved. In the event that NYSERDA requires additional time for considering approval, NYSERDA shall notify the Contractor within thirty days of receipt of the request for approval that additional time is required and shall specify the additional amount of time necessary up to 180 days. If at any time NYSERDA and the Contractor do not agree on the wording of such credit in connection with such materials, the Contractor may use such materials, but agrees not to include such credit.
Article XVIII Availability of Funds
Section 18.01. Availability of Funds. This Agreement is conditioned upon the continued availability of funds for its purposes. Should such funds become unavailable, the Contractor and NYSERDA shall be relieved of any obligations hereunder beyond the period for which funds have actually been obligated; provided, however, that the Contractor shall in all events remain responsible for the completion of all reporting and record retention requirements under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day, month and year first above written.
PLUG POWER, L.L.C.
By: /s/ Gary Mittleman
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Title: President and CEO
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NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY
By: /s/ F. William Valentino
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Title: President
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EXHIBIT A
STATEMENT OF WORK (SOW)
4870-ERTER-BA-99
FUEL CELL DEMONSTRATION PROJECT
OBJECTIVES
The overall objective is to manufacture, test, evaluate and demonstrate a total of 80 Plug Power 7000 PEM fuel cell power systems. The publicly accessible demonstration sites shall be spread across publicly-owned facilities in New York State for a variety of different applications that verify the ultra clean and environmentally friendly nature of PEM fuel cell power systems and garner public support for their early introduction. This Project accelerates the process of and acts as a catalyst for the wide scale deployment and commercialization of distributed fuel cell generation throughout the world. Data shall be collected on emissions and operating experience that quantify air quality improvement, fuel efficiency, and provide a basis for future product upgrade and cost reduction efforts.
This effort consists of a three-phased Project that proceeds rapidly from laboratory evaluation of pre-production prototype units to initial field evaluation to large-scale field demonstration of production units.
TASKS
PHASE I - LABORATORY EVALUATION OF PRE-PRODUCTION PROTOTYPE UNITS
A total of 24 Plug Power 7000 PEM fuel cell powers systems shall be built by the Contractor and evaluated demonstrated in conjunction with the New York State Center for Fuel Cell Science and Technology. The test/demonstration shall focus on increasing the experience database for failure mode effects analysis (FMEA) establishing operating strategies for the selected applications, and gaining endurance experience under simulated field conditions.
The Contractor shall deliver a set of complete draft performance specifications for the Plug Power 7000 unit to the NYSERDA Project Manager and NYSDEC for review, comment, and written acceptance from the NYSERDA Project Manager. The Contractor shall build 24 pre-production prototype units using the best available technology that is expected to represent the serial production commercial product to be manufactured by Plug Power as the Plug Power 7000 and that meets the performance specifications. These units shall be complete systems containing all three major subsystems (fuel processor, stack and power conditioner) except for the first six units which will not require reformers since they will operate on simulated reformate. The units may utilize different components or control strategies for comparative evaluation purposes.
The Contractor shall develop a test plan to evaluate the reliability, endurance, and performance of the test units and their subcomponents in the laboratory under simulated field operating conditions, and shall submit the test plan to the NYSERDA Project Manager and NYSDEC for review, comment, and written approval from the NYSERDA Project Manager. The Contractor may amend the test plan from time to time throughout the test and evaluation program to accommodate changing design features or to more fully evaluate certain aspects of system performance; and each change to the test plan shall be submitted to the NYSERDA Project Manager and NYSDEC for review, comment, and written approval from the NYSERDA Project Manager. Test activities to be included in the plan are those of Tasks I-2, I-6, and I-7. The test plan shall include a list or brief description of test procedures, data to be collected, and success criteria. The target life for the commercial production system of [***] hours with planned maintenance requires extensive endurance testing at both the system and component level. Adequate repeat data shall be taken in such a manner as to facilitate the failure modes and effects analysis program. Accelerated life testing of specific components shall be used whenever feasible. The Contractor shall conduct testing, which will take place in conjunction with the New York State Center for Fuel Cell Science and Technology, in accordance with the approved test plan and amendments thereto.
The Contractor shall use test data and analysis to determine failure modes and effects. The Contractor shall adjust the test plan of Task I-2 to more fully address the findings, if needed, in accordance with the procedure specified in Task I-2.
The Contractor shall use the results of Tasks I-2 and I-3 to identify design changes that allow use of the lowest cost components that meet the overall life, reliability, and other performance specifications and project requirements. The design improvements shall be incorporated in hardware and tested in Task I-2. When the improvement is verified it shall be incorporated into the production design.
The Contractor shall analyze data generated in Tasks I-2 and I-3 to identify design improvements that reduce cost without impacting performance relevant to the expected applications. The design improvements shall be incorporated in hardware and tested in Task I-2. When the improvement is verified it shall be incorporated into the production design.
The Contractor shall subject one or more units to environmental testing over the range of expected operating conditions in accordance with the approved test plan (Task I-2). Typical operating ranges include -40 degrees F to 120 degrees F, -600 ft to 6000 ft elevation, water and salt spray environment, electro-magnetic radiation (EMR), etc. The Contractor shall make and retest design improvements as needed to meet performance requirements and success criteria in accordance with the approved test plan.
The Contractor shall submit to the NYSERDA Project Manager and NYSDEC, for written approval from the NYSERDA Project Manager, the name and address of qualified independent laboratories to perform testing in this task. The Contractor shall have tests, as identified in the approved test plan (Task I-2), conducted by an approved laboratory to determine overall performance, efficiency, emissions (CO, NMOG, NO/x/, particulates), electrical (i.e., EMR) and acoustical noise, etc. Where a value exceeds that considered to be acceptable in accordance with the approved test plan and accepted performance specifications, the Contractor shall take remedial action to correct the unacceptable parameter, and verify the impact of the action through retest.
The Contractor shall document the results of Phase I in an Interim Report, including summary tables or graphs of data collected, the results of all testing, and FMEA, and submit the report to the NYSERDA Project Manager and NYSDEC. (Results shall also be presented at the end-of-phase review, in accordance with Task IV-2.)
PHASE II - INITIAL FIELD EVALUATION
The Contractor shall manufacture six units using in the design, wherever possible, the information gained or design changes from Phase I that would improve performance or reduce cost. At a minimum, any design changes required to meet minimum performance requirements, in accordance with the accepted performance specification, shall be included.
The Contractor shall develop a Field Evaluation Plan, identifying in detail all tests to be accomplished, data to be collected, analysis to be performed and success criteria. The Contractor shall submit the Field Evaluation Plan to the NYSERDA Project Manager and NYSDEC for review, comments, and written approval from the NYSERDA Project Manager. The Contractor may amend the Field Evaluation Plan from time to time throughout the field evaluation period to accommodate needed design changes or to more fully evaluate some aspect of system performance; and the Contractor shall submit all changes to the NYSERDA Project
Manager and NYSDEC for review, comment, and written approval of the NYSERDA Project Manager. The plan shall identify intervals between emissions testing, data collection rates, and required monitoring, equipment, at a minimum. Analysis shall include a determination of air quality and energy benefits of the fully integrated system, at a minimum.
The Contractor shall develop and submit to NYSERDA and NYSDEC for review, comment, and written approval from the NYSERDA Project Manager, a Standard Draft Site Operating Agreement which shall be the basis for negotiating individual site operating agreements. This Standard Draft Site Operating Agreement shall address issues such as the State Environmental Quality Review Act (SEQRA), site preparation, site operator training, site maintenance, fuel cell system maintenance, fuel type and availability, insurance, liability, restoration of the site at the end of field evaluation, associated costs and responsibilities for those costs, and other issues determined necessary by NYSERDA or NYSDEC. It shall also address the ownership and rights to use the fuel cell units and fixtures after the field evaluation.
The Contractor shall coordinate with NYSERDA and NYSDEC during NYSDEC's site selection process. The Contractor shall develop specifications and requirements for potential field evaluation sites based on the fuel cell systems to be demonstrated, support requirements, and other factors, and shall provide those specifications and requirements to the NYSERDA Project Manager and NYSDEC. The Contractor shall work with the selected site owners/operators to establish the installation requirements, and shall develop a design that is adequate for a subcontractor to install the mounting pad, fuel supply, electrical connection, exhaust, and protective building, or any combination thereof. These requirements are expected to vary with the specific application and may include utility grid connection, choice of fuel, inside or outside installation, concrete pool, etc. The Contractor shall develop and enter into a Field Evaluation Site Operating Agreement, based on the Standard Draft Site Operating Agreement, with each site operator.
The Contractor shall subcontract for the site modifications and installation of the fuel cell system. The Contractor shall verify that the site is ready before the system is installed. The Contractor shall provide and install a remote data acquisition and control system to obtain frequent updates on system operating data and performance.
The Contractor shall examine the fuel cell system installation and verify that it is installed properly. The Contractor shall operate the system correcting all problems and certify that it is operating properly. The system shall then be turned over to the site owner/operator for use in accordance with the Field Evaluation Site Operating Agreement.
The systems are expected to operate for two to twelve months or until no further useful information can be obtained from them. The Contractor shall retain ownership of the system for the duration of the field evaluation period. The Contractor shall establish and implement a preventative maintenance plan for each system. The Contractor shall monitor, collect and maintain data to support analysis in accordance with the approved Field Evaluation Plan and to ensure maximum system availability by providing quick response to system failures.
The Contractor shall maintain the capability to provide routine service and service for unanticipated failures within a short time of a problem being reported. The Contractor's service team shall carry a supply of all critical parts in order to make speedy repairs. The service team shall be supported by additional Contractor staff as required.
The Contractor shall analyze the data to determine overall unit operation, performance, areas for improvement, and other information in accordance with the approved Field Evaluation Plan.
Upon the completion of a particular demonstration, the Contractor shall perform the appropriate tasks as per the Field Evaluation Site Operating Agreement.
Upon completion of Phase II, the Contractor shall write an interim report documenting the field evaluation results, including a summary of the data collected and the results of the analysis specified in the Field Evaluation Plan. The Contractor shall submit the report to the NYSERDA Project Manager and NYSDEC. (Results shall also be presented at the end-of-phase review, in accordance with Task IV.) The Contractor shall update the performance specification approved in Task I-1 to reflect design changes implemented in Phases I and II, and shall submit the revised performance specification to the NYSERDA Project Manager and NYSDEC for review, comment, and written acceptance of the NYSERDA Project Manager.
PHASE III - DEMONSTRATION OF PRODUCTION UNITS (50)
It is expected that the manufacturing design will have reached a level of maturity such that there is a significant confidence level for relatively unsupported operation. The demonstration program for this phase reflects that confidence level.
The Contractor shall manufacture fifty production units incorporating the information gained or design changes from Phases I and II that would improve performance or reduce cost, and that will meet the performance requirements of the accepted performance specification and accepted revisions thereto.
The Contractor shall develop a Demonstration Plan, identifying in detail all tests to be accomplished, data to be collected, and analysis to be performed during Phase III. The Contractor shall submit the Demonstration Plan to the NYSERDA Project Manager and NYSDEC for review, comment, and written approval of the NYSERDA Project Manager. The plan shall identify intervals between emissions testing, data collection rates, required monitoring equipment, and duration of the demonstration program, at a minimum. Analysis shall include a determination of air quality and energy benefits, at a minimum.
The Contractor shall coordinate with NYSERDA and NYSDEC during NYSDEC's site selection process. The Contractor shall develop specifications and requirements for potential demonstration sites based on the fuel cell systems to be demonstrated, support requirements, and other factors, and shall provide those specifications and requirements to the NYSERDA Project Manager and NYSDEC. The Contractor shall work with the selected site owners/operators to establish the installation requirements, and shall develop a design that is adequate for a subcontractor to install the mounting pad, fuel supply, electrical connection, exhaust, and protective building, or any combination thereof. These requirements are expected to vary with the specific application and may include utility grid connection, choice of fuel, inside or outside installation, concrete pad, etc. The Contractor shall develop and enter into a Demonstration Site Operating Agreement, based on the Demonstration Plan and Standard Draft Site Operating Agreement (Task II-2), with each site owner.
The Contractor shall subcontract for the site modifications and installation of the demonstration unit. The Contractor shall verify that the site is ready before the unit is installed. The Contractor shall provide and install a remote data acquisition and control system to obtain frequent updates on system operating data and performance.
The Contractor shall examine the unit installation and verify that the unit is installed properly. The Contractor shall operate the unit correcting all problems and certify that it is operating properly. The unit shall then be turned over to the site owner, operator for use in accordance with the Demonstration Site Operating Agreement.
The systems are expected to operate for a minimum of two months. The Contractor shall retain ownership of the system for the duration of the demonstration period. The Contractor shall establish and implement a preventative maintenance plan for each system. The Contractor shall monitor, collect and maintain data to support analysis in accordance with the approved Demonstration Plan and to ensure maximum system availability by providing quick response to system failures.
The Contractor shall maintain the capability to provide routine service and service for unanticipated failures within a short time of a problem being reported. The Contractor's service team shall carry a supply of all critical parts in order to make speedy repairs. The service team shall be supported by additional Contractor staff as required.
The Contractor shall analyze the data to determine overall unit operation, performance, areas for improvement, and other information in accordance with the approved Demonstration Plan.
Upon the completion of a particular demonstration, the Contractor shall perform the appropriate tasks as per the Demonstration Site Operating Agreement developed in Task III-2.
Upon completion of Phase III, the Contractor shall write an interim report documenting the demonstration results, including a summary of the data collected and the results of the analysis specified in the Demonstration Plan. The Contractor shall submit the report to the NYSERDA Project Manager and NYSDEC. (Results shall also be presented at the wrapup meeting, in accordance with Task IV-2.)
PROJECT MANAGEMENT
Task I V-I. Progress Reports: The Contractor shall provide brief progress reports once each month during the period that the work is performed, which shall be submitted to the NYSERDA Project Manager and NYSDEC in duplicate no later than the 15th of each following month. Progress Reports shall be in a letter format and shall include the following subjects in the order indicated, with appropriate explanation and discussion:
Title of project;
Agreement number;
Reporting period;
Progress of project during the reporting period;
Identification of problems;
Planned solutions;
Schedule - percent or degree of tasks completed to date, critical path
analysis, and ability to meet contract schedule, reasons for slippage, and
path to recovery; and
Cost - analysis of actual cost incurred in relation to budget and progress
to date, and ability to complete project within contract budget.
The Contractor shall immediately notify the NYSERDA Project Manager of any significant breakthroughs or problems. The Contractor shall, from time to time after completion of the project, provide at the request of NYSERDA data and information related to this project, including but not limited to energy and environmental data, system deployments, technology spinoffs, job creation, system limitations, and other information to assess the long-term effectiveness of this project.
Task- IV-2. Meetings: The Contractor shall allow the NYSERDA Project Manager or other designated NYSERDA personnel, and designated NYSDEC personnel, to visit the facility to review work in progress on a non- interference basis, at the request of the NYSERDA Project Manager. In addition, the Contractor shall hold the following meetings as indicated in the schedule: Kickoff Meeting, End-of-Phase Review Meetings, and a wrap-up meeting. The Contractor shall schedule meetings at a time and place agreeable to the participants, provide-of-Phase Review Meetings, and a wrap-up meeting. The Contractor shall schedule meetings at a time and place agreeable to the participants, provide a written agenda five days in advance of the meeting, and document each meeting with minutes that shall be distributed to the project team members and other attendees no later than 10 business days following the meeting. Invited participants shall include the NYSERDA Project Manager and designated NYSDEC personnel.
Task IV-3. Presentation of Results: Except for the Contractor's proprietary and business sensitive data, the Contractor shall publicize the technology and the results of the demonstration program in scientific journals and conference proceedings, as well as trade shows, magazines, and on the world- wide web, as appropriate. The Contractor shall work with the State, NYSERDA, NYSDEC, and the operators/managers of each State or other facility involved in the system demonstration to publicize and provide access to the general public, to the extent possible.
Task IV-4. Final Report: The Contractor shall prepare a detailed final report covering all of the work performed, except for information that would impact the Contractor's competitive position. In particular, the report shall provide the findings regarding potential air quality and energy benefits of widespread deployment of the system, and shall identify appropriate applications for the technology based on performance achieved in the demonstration program. Four copies of the draft final report shall be submitted to the
NYSERDA Project Manager in accordance with the schedule. NYSERDA and NYSDEC shall provide their comments to the Contractor within 60 working days after receipt of the draft. Within 30 working days after receipt of NYSERDA's and NYSDEC's comments, the Contractor shall submit the Final Report, reflecting NYSERDA's and NYSDEC's comments, to the NYSERDA Manager of Technical Publications in conformance with the NYSERDA Report Format and Style Guide.
[Chart listing milestone payment and progress schedule is omitted pursuant to Rule 406 under the Securities Act and has been filed separately with the Securities and Exchange Commission]
[***]
EXHIBIT B
REVISED 6/98
STANDARD TERMS AND CONDITIONS FOR ALL NYSERDA AGREEMENTS
(Based on Standard Clauses for New York State Contracts)
The parties to the attached agreement, contract, license, lease, amendment, modification or other agreement of any kind (hereinafter, "the Agreement" or "this Agreement") agree to be bound by the following clauses which are hereby made a part of the Agreement (the word "Contractor" herein refers to any party other than NYSERDA, whether a contractor, licensor, licensee, lessor, lessee or any other party):
1. NON-DISCRIMINATION REQUIREMENTS. In accordance with Article 15 of the
Executive Law (also known as the Human Rights Law) and all other State and
Federal statutory and constitutional non-discrimination provisions, the
Contractor will not discriminate against any employee or applicant for
employment because of race, creed, color, sex, national origin, age, disability
or marital status. Furthermore, in accordance with Section 220-e of the Labor
Law, if this is an Agreement for the construction, alteration or repair of any
public building or public work or for the manufacture, sale or distribution of
materials, equipment or supplies, and to the extent that this Agreement shall be
performed within the State of New York, Contractor agrees that neither it nor
its subcontractors shall, by reason of race, creed, color, disability, sex or
national origin: (a) discriminate in hiring against any New York State citizen
who is qualified and available to perform the work; or (b) discriminate against
or intimidate any employee hired for the performance of work under this
Agreement. If this is a building service Agreement as defined in Section 230 of
the Labor Law, then, in accordance with Section 239 thereof, Contractor agrees
that neither it nor its subcontractors shall, by reason of race, creed, color,
national origin, age, sex or disability: (a) discriminate in hiring against any
New York State citizen who is qualified and available to perform the work; or
(b) discriminate against or intimidate any employee hired for the performance of
work under this contract. Contractor is subject to fines of $50.00 per person
per day for any violation of Section 220-e or Section 239 as well as possible
termination of this Agreement and forfeiture of all moneys due hereunder for a
second subsequent violation.
2. WAGE AND HOURS PROVISION. If this is a public work Agreement covered by Article 8 of the Labor Law or a building service Agreement covered by Article 9 thereof, neither Contractor's employees nor the employees of its subcontractors may be required or permitted to work more than the number of hours or days stated in said statutes, except as otherwise provided in the Labor Law and as set forth in prevailing wage and supplement schedules issued by the State Labor Department. Furthermore, Contractor and its subcontractors must pay at least the prevailing wage rate and pay or provide the prevailing supplements, including the premium rates for overtime pay, as determined by the State Labor Department in accordance with the Labor Law.
3. NON-COLLUSIVE BIDDING REQUIREMENT. In accordance with Section
2878 of the Public Authorities Law, if this Agreement was awarded based upon the submission of bids, Contractor warrants, under penalty of perjury, that its bid was arrived at independently and without collusion aimed at restricting competition. Contractor further warrants that, at the time Contractor submitted its bid, an authorized and responsible person executed and delivered to NYSERDA a non-collusive bidding certification on Contractor's behalf.
4. INTERNATIONAL BOYCOTT PROHIBITION. If this Agreement exceeds $5,000, the Contractor agrees, as a material condition of the Agreement, that neither the Contractor nor any substantially owned or affiliated person, firm, partnership or corporation has participated, is participating, or shall participate in an international boycott in violation of the Federal Export Administration Act of 1979 (50 USC App. Sections 2401 et seq.) or regulations thereunder. If such Contractor, or any of the aforesaid affiliates of Contractor, is convicted or is otherwise found to have violated said laws or regulations upon the final determination of the United States Commerce Department or any other appropriate agency of the United States subsequent to the Agreement's execution, such Agreement, amendment or modification thereto shall be rendered forfeit and void. The Contractor shall so notify NYSERDA within five (5) business days of such conviction, determination or disposition of appeal. (See and compare Section 220-f of the Labor Law, Section 139-h of the State Finance Law, and 2 NYCRR 105.4).
5. SET-OFF RIGHTS. NYSERDA shall have all of its common law and statutory rights of set-off. These ri2hts shall include, but not be limited to, NYSERDA's option to withhold for the purposes of set-off any moneys due to the Contractor under this Agreement up to any amounts due and owing to NYSERDA with regard to this Agreement, any other Agreement, including any Agreement for a term commencing prior to the term of this Agreement. plus any amounts due and owing to NYSERDA for any other reason including, without limitation, tax delinquencies, fee delinquencies or monetary penalties relative thereto.
6. CONFLICTING TERMS. In the event of a conflict between the terms of the Agreement (including any and all attachments thereto and amendments thereof) and the terms of this Exhibit B, the terms of this Exhibit B shall control.
7. GOVERNING LAW. This Agreement shall be governed by the laws of the State of New York except where the Federal supremacy clause requires otherwise.
8. NO ARBITRATION. Disputes involving this Agreement, including the breach or alleged breach thereof, may not be submitted to binding arbitration (except where statutorily required) without the NYSERDA's written consent, but must, instead, be heard in a court of competent jurisdiction of the State of New York.
9. SERVICE OF PROCESS. In addition to the methods of service allowed by the State Civil Practice Law and Rules ("CPLR"), Contractor hereby consents to service of process upon it by registered or certified mail, return receipt requested. Service hereunder
shall be complete upon Contractor's actual receipt of process or upon NYSERDA's receipt of the return thereof by the United States Postal Service as refused or undeliverable. Contractor must promptly notify NYSERDA, in writing, of each and every change of address to which service of process can be made. Service by NYSERDA to the last known address shall be sufficient. Contractor will have thirty (30) calendar days after service hereunder is complete in which to respond.
10. CRIMINAL ACTIVITY. If subsequent to the effectiveness of this Agreement, NYSERDA comes to know of any allegation previously unknown to it that the Contractor or any of its principals is under indictment for a felony, or has been, within five (5) years prior to submission of the Contractor's proposal to NYSERDA, convicted of a felony, under the laws of the United States or Territory of the United States, then NYSERDA may exercise its stop work right under this Agreement. If subsequent to the effectiveness of this Agreement, NYSERDA comes to know of the fact, previously unknown to it, that Contractor or any of its principals is under such indictment or has been so convicted, then NYSERDA may exercise its right to terminate this Agreement. If the Contractor knowingly withheld information about such an indictment or conviction, NYSERDA may declare the Agreement null and void and may seek legal remedies against the Contractor and its principals. The Contractor or its principals may also be subject to penalties for any violation of law which may apply in the particular circumstances. For a Contractor which is an association, partnership, corporation. or other organization, the provisions of this paragraph apply to any such indictment or conviction of the organization itself or any of its officers, partners, or directors or members of any similar governing body, as applicable.
11. PERMITS. It is the responsibility of the Contractor to acquire and maintain, at its own cost, any and all permits, licenses, easements, waivers and permissions of every nature necessary to perform the work.
12. PROHIBITION ON PURCHASE OF TROPICAL HARDWOOD . The Contractor certifies and warrants that all wood products to be used under this Agreement will be in accordance with, but not limited to, the specifications and provisions of State Finance Law Section 165 (Use of Tropical Hardwoods), which prohibits purchase and use of tropical hardwoods, unless specifically exempted by NYSERDA.
EXHIBIT C
REPORT FORMAT AND STYLE GUIDE
PURPOSE
This document explains how to prepare a technical report for the New York State Energy Research and Development Authority (NYSERDA). It describes editorial and production procedures and gives electronic data-transfer information. NYSERDA's contractors prepare the reports describing NYSERDA research and development projects that NYSERDA publishes. Please direct questions about format and style to Paula Rosenberg of NYSERDA's Technical Publications unit: (518) 862-1090, ext. 3270; fax (518) 862-1091 - e-mail prlgnvserda.org
COPYRIGHTS
All material borrowed or adapted from other sources should be properly identified (i.e., document, source, date, and page). The contractor must obtain the copyright owner's written permission to use copyrighted illustrations, tables, or substantial amounts of text from another publication.
REPORT FORMAT AND SEQUENCE
The following items are required in all technical reports and should be paginated in the following sequence:
Title page (no page number) Notice (no page number) Abstract (iii) Acknowledgments (optional) (iv) |
Table of Contents including listings of figures and tables (v or vii) Summary (S- 1)
NOTE: the Abstract, Table of Contents, and each section begin on right-hand, odd-numbered pages.
The following information is required (see sample on last page):
Report title and type of report (i.e., final, interim or summary) Name of NYSERDA project manager(s) Corporate name, city, and state of contractor(s), including contact person(s) or project manager(s) Project cosponsors, including contact person(s) or project manager(s) Contract number (e.g., 3178-ERTER-MW-94)
Notices
One of these legal notices or disclaimers is required:
When NYSERDA is the project's sole sponsor, this notice must be used:
NOTICE
This report was prepared by in the course of performing work contracted for and sponsored by the New York State Energy Research and Development Authority (hereafter "NYSERDA"). The opinions expressed in this report do not necessarily reflect those of NYSERDA or the State of New York, and reference to any specific product., service, process, or method does not constitute an implied or expressed recommendation or endorsement of it. Further, NYSERDA, the State of New York, and the contractor make no warranties or representations, expressed or implied, as to the fitness for particular purpose or merchantability of product, apparatus, or service, or the usefulness, completeness, or accuracy of any processes, methods, or other information contained, described, disclosed, or referred to in this report. NYSERDA, the State of New York, and the contractor make no representation that the use of any product, apparatus, process, method, or other information will not infringe privately owned rights and will assume no liability for any loss, injury, or damage resulting from, or occurring in connection with, the use of information contained, described, disclosed, or referred to in this report.
When there are other project cosponsors, use the following notice instead:
NOTICE
This report was prepared by in the course of performing work contracted for and sponsored by the New York State Energy Research and Development Authority and the (hereafter the "Sponsors"). The opinions expressed in this report do not necessarily reflect those of the Sponsors or the State of New York. and reference to any specific product, service, process, or method does not constitute an implied or expressed recommendation or endorsement of it. Further, the Sponsors and the State of New York make no warranties or representations. expressed or implied, as to the fitness for particular purpose or merchantability of any product, apparatus. or service, or the usefulness, completeness, or accuracy of any processes, methods, or other information contained, described, disclosed, or referred to in this report. The Sponsors, the State of New York, and the contractor make no representation that the use of any product, apparatus, process, method, or other information will not infringe privately owned rights and will assume no liability for any loss. injury, or damage resulting from, or occurring, in connection with, the use of information contained, described. disclosed, or referred to in this report.
Abstract and Key Words - right-hand, odd-numbered page [iii]. An abstract is a brief, 200-word description of project objectives, investigative methods used, and research
conclusions or applications. This information will be used when NYSERDA registers the report with the National Technical Information Service (NTIS). A list of key words that describe the project and identify the major research concept should be submitted with the report. Four to six precise descriptors are generally sufficient and will be used for indexing, registering, and distributing the report through NTIS.
Acknowledgments (optional) - left-hand, even-numbered page [iv] Acknowledgments precede the contents and should be no longer than two paragraphs.
Table of Contents and Lists of Figures and Tables - begin on odd-numbered, right-hand pages [v. vii. ix, etc.]] The Table of Contents should list section numbers, titles, second-level headings, and their page numbers. Third-level headings also may be listed. If the report contains five or more figures or tables, they should be listed using the style of the Table of Contents. The following samples are boxed only to set them apart in this document.
Summary - right-hand, odd-numbered page entitled The Summary, which immediately precedes the body of the text, should be written for a general audience. The Summary may be the only part of the technical report closely read by a number of people, many of whom lack a technical background. These may include industry and utility executives, government officials, legislators. the general public, and media representatives. The Summary should be 500-1000 words long.
TABLE OF CONTENTS
Section Page SUMMARY................................................................ S-I I DESCRIPTION OF STUDY................................................. 1-1 Sources of Information................................................. 1-5 Bases of Evaluation................................................... 1-9 2 EXISTING CONDITIONS.................................................. 2-1 Architecture........................................................... 2-3 Mechanical and Electrical Systems...................................... 2-13 3 ANALYSIS OF PRESENT ENERGY USE....................................... 3-1 Analysis of Use by Systems............................................. 3-3 |
Analysis of Use by Hospital Services..................................... 3-17
APPENDIX A Comparison of Expenses for NYS Hospitals...................... A-1
APPENDIX B Forms for Energy Audits in Hospitals.......................... B-1
FIGURES
Page
1-1 Comparative Energy Use Per Cubic Foot in Hospitals Under 200 Beds.... 1-2
2-1 View of Community Hospital from South................................ 2-1
2-2 Site Plan............................................................ 2.5
|
GENERAL INFORMATION
The first reference to NYSERDA should read "the New York State Energy Research and Development Authority (NYSERDA)." Subsequent references should read simply "NYSERDA." When it is clear that you are referring to New York State, use State; otherwise, use New York State or the State of New York.
COPY
9 Page format:
. Margins should be 1.25 inches left and right; 1 inch top and bottom.
. Use left-hand justification only.
. Text should be in a 10-point serif font (i.e., Times Roman, Bookman, etc.); captions, tables, and figures should be in a sans-serif font (i.e., Helvetica, Arial, etc.).
. Spacing should be 1.5 lines, printed on one side of the paper.
. Block-style paragraphs should be used, with no indentation (except for fifth-level headings, which should be blocked on the left; see Heading Styles, below).
. There should be two returns between a paragraph and the next heading.
Material borrowed or extracted from external sources must be identified by document,
source, date, and page). Written permission to use copyrighted illustrations, tables. or text taken from another publication must be submitted with the report.
Avoid half-page and one-sentence paragraphs.
Do not use contractions.
When referring to a specific figure or table, spell out and capitalize the words "Figure" and "Table."
Indented lists of material should be set off with bullets:
. If a typographical bullet is unavailable, the bullet is a lower case "o," not zero.
. One blank line should precede and follow a list.
. Bulleted items should be indented left and right.
All new sections should begin on a right-hand, odd-numbered page (e.g., 1- 1, 2-1, A-1, etc.).
. Percentages should be written as follows: 1%, 76%, etc.
. Acronyms must be spelled out the first time used, followed by the acronym in parentheses.
HEADING STYLES
The heading styles illustrated below should be used. (Only section headings should be numbered.)
FIRST-LEVEL HEADING
Section I
INTRODUCTION
The heading is upper case, centered, and boldfaced: the text is below the heading at the left margin.
SECOND-LEVEL HEADING
The heading is upper case, at the left margin, and boldfaced: the text is at the left margin.
Third-Level Heading
The heading is upper and lower case, at the left margin, boldfaced and underscored; the text is at the left margin.
Fourth-Level Heading.
The heading is upper and lower case, at the left margin, boldfaced, and underscored. with a period at the end. The text continues on the same line as the heading. The remaining text goes back out to the left margin.
Fifth-Level Heading.
The heading, is upper and lower case, indented, boldfaced, and underscored with a period at the end. The text continues on the same line, with the remaining text indented left and right.
TABLES AND FIGURES
Tables and figures must be numbered sequentially and titled individually.
Place tables and figures as close as possible to the text in which they are mentioned.
Distinguish tabular material from the text.
Cite a source if the tabular material or figure content has not been generated by the contractor.
Figure captions should be complete sentences when appropriate.
Use "Figure I," not "Fig. I," or "Table I." in the text, as well as for captions. Examples:
. Table I details demand-side management options.
As shown in Figure 1, the demand-side management program offers numerous options.
. Figure captions should be typed in boldface.
- Figure 1. Demand-Side Management Options in New York State.
. Unless generated by the contractor, a source should always be cited.
The figure source should appear after the caption (e.g., Source:
Lawrence Berkeley Laboratory); the table source should be noted with
an asterisk and footnoted.
. Photographs and drawings should be limited in number, with the following guidelines:
- Black-and-white line drawings or good-quality, clear halftones (black-and-white photographs) may be used. Color artwork and photos will be printed in black-and-white.
- Slides should be converted to black-and-white photos before being submitted.
- Photographs should be printed on glossy stock, preferably 5"x7"
REFERENCES AND BIBLIOGRAPHIES
The format in Manual of Style (University of Chicago Press, Chicago. Illinois) should be used for reference listings and bibliographies.
Bibliographic entries should be listed alphabetically by author, as follows:
Hawkins, R.R. Scientific, Medical, and Technical Books Published in the United States of America. 2d ed. New York: Bowker, 1958.
REPORT REQUIREMENTS
Two hard copies of the draft final report must be submitted to NYSERDA's Manager of Technical Publications.
After review by the Project Manager and Technical Publications staff, the draft will be returned to the contractor for final corrections. The contractor is responsible for satisfactorily addressing technical comments from NYSERDA and other co-funders. When making editorial corrections, the contractor must ensure that technical content is not compromised.
After editorial corrections have been made, the contractor must submit two hard copies of the final report (one a camera-ready original and the other a photocopy) and the report on a PC-formatted computer diskette to NYSERDA'S Manager of Technical Publications.
Diskette Requirements
Material must be submitted on an IBM personal computer-compatible 3.5-inch, double-sided (DS), high-density (HD) diskette that has been formatted for 1.44 megabytes (MB) of storage.
A 3.5-inch IBM-PC-compatible diskette, double-sided, double-density, formatted for 720 kilobytes is acceptable only when the above requirements cannot be met.
Textual material should be created in a format compatible with WordPerfect 6.1.While other word-processing programs may be able to be converted, results may vary. Characteristics such as underlining, bold, italics, and many special characters that often appear in equations may be lost if WordPerfect 6.1 is not used. If you are unable to meet these electronic transfer requirements, before submitting your report please contact Paula Rosenberg of NYSERDA's Technical Publications unit at (518) 862-1090, ext. 3270; fax (518) 862-1091; e-mail prl@nyserda.org
CITY OF LOCKPORT INFLUENT HYDROPOWER FEASIBILITY STUDY
Final Report
Prepared for
THE NEW YORK STATE ENERGY, RESEARCH AND DEVELOPMENT AUTHORITY Albany, NY
Lawrence J. Pakenas, P.E. Senior Project Manager
Prepared by,
CITY OF LOCKPORT Lockport, NY
Michael Die, Project Manager
and
INIALCOLM PIPUNIE, INC.
Buffalo, NY
Vincent J. Funipiello. P.E. Project Manager
Sample title page. Font is a serif font (Times Roman). Bold-faced text is 13 pt., small caps. The rest of the type is 11 pt., plain text.
4311 -ERTER-NfW-97
NYSERDA Report 98-11
July 1998
New York State Energy Research and Development Authority Technical Publications Corporate Plaza West 286 Washington Avenue Extension Albany, New York 12203-6399 November 1998
EXHIBIT D
PROMPT PAYMENT POLICY STATEMENT
Section 504.1 Purpose and applicability.
(a) The purpose of this Part is to implement section 2880 of the Public Authorities Law by detailing NYSERDA's policy for making payment promptly on amounts properly due and owing by NYSERDA under contracts. This Part constitutes NYSERDA's prompt payment policy statement as required by that section.
(b) This Part generally applies to payments due and owing by NYSERDA to a person or business in the private sector under a contract it has entered into with NYSERDA on or after May 1, 1988. This Part does not apply to payments due and owing:
(1) under the Eminent Domain Procedure Law;
(2) as interest allowed on judgments rendered by a court pursuant to any provision of law except Section 2880 of the Public Authorities Law;
(3) to the Federal Government; to any state agency or its instrumentalities, to any duly constituted unit of local government, including but not limited to counties, cities, towns, villages, school districts, special districts or any of their related instrumentalities or any other public authority or public benefit corporation or to its employees when acting in, or incidental to, their public employment capacity;
(4) if NYSERDA is exercising a legally authorized set-off against all or part of the payment; or
(5) if other State or Federal law or rule or regulation specifically requires otherwise.
Section 504.2 Definitions. As used in this Part, the following terms shall have the following meanings, unless the context shall indicate another or different meaning or intent:
(a) "NYSERDA" means the New York State Energy Research and Development Authority.
(b) "Contract" means an enforceable agreement entered into between NYSERDA and a contractor.
(c) "Contractor" means any person, partnership, private corporation, or association:
(1) selling materials, equipment or supplies or leasing property or equipment to NYSERDA pursuant to a contract;
(2) constructing, reconstructing, rehabilitating or repairing buildings, highways or other improvements for, or on behalf of, NYSERDA pursuant to a contract; or
(3) rendering or providing services to NYSERDA pursuant to a contract.
(d) "Date of payment" means the date on which NYSERDA requisitions a check from its statutory fiscal agent, the Department of Taxation and Finance, to make a payment.
(e) "Designated payment office" means the Office of NYSERDA's Controller, located at Corporate Plaza West, 286 Washington Avenue Extension, Albany, New York 12203-6399.
(f) "Payment" means provision by NYSERDA of funds in an amount sufficient to satisfy a debt properly due and owing to a contractor and payable under all applicable provisions of a contract to which this Part applies and of law, including but not limited to provisions for retained amounts or provisions which may limit NYSERDA's power to pay, such as claims, liens, attachments or judgments against the contractor which have not been properly discharged, waived or released.
(g) "Prompt payment" means a payment within the time periods applicable pursuant to Sections 504.3 through 504.5 of this Part in order for NYSERDA not to be liable for interest pursuant to Section 504.6.
(h) "Payment due date" means the date by which the date of payment
must occur, in accordance with the provisions of Sections 504.3 through 504.5 of
this Part, in order for NYSERDA not to be liable for interest pursuant to
Section 506.
(i) "Proper invoice" means a written request for a contract payment that is submitted by a contractor setting forth the description, price or cost, and quantity of goods, property or services delivered or rendered, in such form, and supported by such other substantiating documentation. as NYSERDA may reasonably require, including but not limited to any requirements set forth in the contract; and addressed to NYSERDA's Controller, marked "Attention: Accounts Payable." at the designated payment office.
(1) "Receipt of an invoice" means:
(i) if the payment is one for which an invoice is required, the later of:
(a) the date on which a proper invoice is actually received in the designated payment office during normal business hours; or
(b) the date by which, during normal business hours, NYSERDA has actually received all the purchased goods, property or services covered by a proper invoice previously received in the designated payment office.
(ii) if a contract provides that a payment will be made on a specific date or at a predetermined interval, without having to submit a written invoice the 30th calendar day, excluding legal holidays, before the date so specified or predetermined.
(2) For purposes of this subdivision, if the contract requires a multifaceted, completed or working system, or delivery of no less than a specified quantity of goods, property or services and only a portion of such systems or less than the required goods, property or services are working, completed or delivered, even though the Contractor has invoiced NYSERDA for the portion working, completed or delivered, NYSERDA will not be in receipt of an invoice until the specified minimum amount of the systems, goods, property or services are working, completed or delivered.
(k) "Set-off" means the reduction by NYSERDA of a payment due a contractor by an amount equal to the amount of an unpaid legally enforceable debt owed by the contractor to NYSERDA.
Section 504.3 Prompt payment schedule. Except as otherwise provided by law or regulation or in
Sections 504.4 and 504.5 of this Part, the date of payment by NYSERDA of an amount properly due and owing under a contract shall be no later than 30 calendar days, excluding legal holidays, after such receipt.
Section 504.4 Payment procedures.
(a) Unless otherwise specified by a contract provision, a proper invoice submitted by the contractor to the designated payment office shall be required to initiate payment for goods, property or services. As soon as any invoice is received in the designated payment office during normal business hours, such invoice shall be date-stamped. The invoice shall then promptly be reviewed by NYSERDA.
(b) NYSERDA shall notify the contractor within 15 calendar days after receipt of an invoice of:
(1) any defects in the delivered goods, property or services;
(2) any defects in the invoice, and
(3) suspected improprieties of any kind.
(c) The existence of any defects or suspected improprieties shall prevent the commencement of the time period specified in Section 504.3 until any such defects or improprieties are corrected or otherwise resolved.
(d) If NYSERDA fails to notify a contractor of a defect or impropriety within the fifteen calendar day period specified in subdivision (b) of this section, the sole effect shall be that the number of days allowed for payment shall be reduced by the number of days between the 15th day and the day that notification was transmitted to the contractor. If NYSERDA fails to provide reasonable grounds for its contention that a defect or impropriety exists, the sole effect shall be that the payment due date shall be calculated using the original date of receipt of an invoice.
(e) In the absence of any defect or suspected impropriety, or upon satisfactory correction or resolution of a defect or suspected impropriety, NYSERDA shall make payment, consistent with any such correction or resolution and the provisions of this Part.
Section 504.5 Exceptions and extension of payment due date. NYSERDA has determined that, notwithstanding the provisions of Sections 504.3 and 504.4 of this Part, any of the following facts or circumstances, which may occur concurrently or consecutively, reasonably justify extension of the payment due date:
(a) If the case of a payment which a contract provides will be made on a specific date or at a predetermined interval, without having to submit a written invoice, if any documentation, supporting data, performance verification, or notice specifically required by the contract or other State or Federal mandate has not been submitted to NYSERDA on a timely basis, then the payment due date shall be extended by the number of calendar days from the date by which all such matter was to be submitted to NYSERDA and the date when NYSERDA has actually received such matter.
(b) If an inspection or testing period, performance verification, audit or other review or documentation independent of the contractor is specifically required by the contract or by other State or Federal mandate, whether to be performed by or on behalf of NYSERDA or another entity, or is specifically permitted by the contract or by other State or Federal provision and NYSERDA or other entity with the right to do so elects to have such activity or documentation undertaken, then the payment due date shall be extended by the number of calendar days from the date of receipt of an invoice to the date when any such activity or documentation has been completed, NYSERDA has actually received the results of such activity or documentation conducted by another entity, and any deficiencies identified or issues raised as a result of such activity or documentation have been corrected or otherwise
resolved.
(c) If an invoice must be examined by a State or Federal agency, or by another party contributing to the funding of the contract, prior to payment, then the payment due date shall be extended by the number of calendar days from the date of receipt of an invoice to the date when the State or Federal agency, or other contributing party to the contract, has completed the inspection, advised NYSERDA of the results of the inspection, and any deficiencies identified or issues raised as a result of such inspection have been corrected or otherwise resolved.
(d) If appropriated funds from which payment is to be made have not yet been appropriated or, if appropriated, not yet been made available to NYSERDA, then the payment due date shall be extended by the number of calendar days from the date of receipt of an invoice to the date when such funds are made available to NYSERDA.
Section 504.6 Interest eligibility and computation. If NYSERDA fails to make prompt payment, NYSERDA shall pay interest to a contractor on the payment when such interest computed as provided herein is equal to or more than ten dollars. Interest shall be computed and accrue at the daily rate in effect on the date of payment, as set by the New York State Tax Commission for corporate taxes pursuant to Section 1096(e)(1) of the Tax Law. Interest on such a payment shall be computed for the period beginning on the day after the payment due date and ending on the date of payment.
Section 504.7 Sources of funds to pay interest. Any interest payable by NYSERDA pursuant to this Part shall be paid only from the same accounts, funds, or appropriations that are lawfully available to make the related contract payment.
Section 504.8 Incorporation of prompt payment policy statement into contracts. The provisions' of this Part in effect at the time of the creation of a contract shall be incorporated into and made a part of such contract and shall apply to all payments as they become due and owing pursuant to the terms and conditions of such contract, notwithstanding that NYSERDA may subsequently amend this Part by further rulemaking.
Section 504.9 Notice of objection. Unless a different procedure is specifically prescribed in a contract, a contractor may object to any action taken by NYSERDA pursuant to this Part which prevents the commencement of the time in which interest will be paid by submitting a written notice of objection to NYSERDA. Such notice shall be signed and dated and concisely and clearly set forth the basis for the objection and be addressed to the Vice President, New York State Energy Research and Development Authority, Corporate Plaza West, 286 Washington Avenue Extension, Albany, New York 12203-6399. The Vice President of NYSERDA, or his or her designee, shall review the objection for purposes of affirming or modifying NYSERDA's action. Within 15 working days of the receipt of the objection, the Vice President, or his or her designee, shall notify the contractor either that NYSERDA's action is affirmed or that it is modified or that, due to the complexity of the issue, additional
time is needed to conduct the review; provided, however, in no event shall the extended review period exceed 30 working days.
Section 504.10 Judicial Review. Any determination made by NYSERDA pursuant to this Part which prevents the commencement of the time in which interest will be paid is subject to judicial review in a proceeding pursuant to Article 78 of the Civil Practice Law and Rules. Such proceedings shall be commenced upon completion of the review procedure specified in Section 504.9 of this Part or any other review procedure that may be specified in the contract or by other law, rule, or regulation.
Section 504.11 Court action or other legal processes.
(a) Notwithstanding any other law to the contrary, the liability of NYSERDA to make an interest payment to a contractor pursuant to this Part shall not extend beyond the date of a notice of intention to file a claim, the date of a notice of a claim, or the date commencing a legal action for the payment of such interest, whichever occurs first.
(b) With respect to the court action or other legal processes referred to in subdivision (a) of this section, any interest obligation incurred by NYSERDA after the date specified therein pursuant to any provision of law other than Public Authorities Law Section 2880 shall be determined as prescribed by such separate provision of law, shall be paid as directed by the court, and shall be paid from any source of funds available for that purpose.
Section 504.12 Amendments. These regulations may be amended by resolution of NYSERDA, provided that the Chair, upon written notice to the other Members of NYSERDA, may from time to time promulgate nonmaterial amendments of these regulations.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
Exhibit 10.19
A COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
Between
PLUG POWER, L.L.C.
and
U. S. ARMY BENET LABORATORIES
A. Whereas, the Federal Technology Transfer Act of 1986, 15 USC3710a, provides each Federal agency with the authority to permit the Directors of Government-operated Federal Laboratories to enter into Cooperative Research and Development Agreements (CRADA's) with Federal and non-Federal entities, including private firms and organizations. This authority allows Federal laboratories to accept, retain, and use funds, personnel, services, and property from collaborating parties and to provided personnel services, and property to collaborating parties. This authority also includes the disposition of patent rights in any inventions, which may result from such collaboration, or by delegation of the Assistant Secretary of the Army for Research, Development and Acquisition, other patent rights which are owned by the Government.
B. Whereas, the U.S. Army BENET Laboratories (BENET) has an installation and extensive state-of-the art infrastructure required to support an array of unique technologies, in Armaments, Munitions and in enabling technologies. BENET has the responsibility to make its procedures, processes and technologies available for use and transfer to the private sector. BENET has unique technologies and facilities in specialized materials, simulation and analysis for prototype fabrication, which PLUG POWER desires to adapt for commercial application.
C. Whereas, PLUG POWER, L.L.C. (PLUG POWER) desires to collaborate with BENET in the business of research, development, and engineering for the purpose of transferring unique process technologies from the United States Army for use and application by PLUG POWER for a commercial application.
NOW, THEREFORE, the parties agree as follows:
Article 1. Definitions.
As used in this Agreement, the following terms shall have the following meanings, and such meanings should be equally applicable to both the singular and plural forms of the terms defined:
1.1 "Agreement" means this Cooperative Research and Development Agreement.
1.2 "Invention" means any invention or discovery, which is or may be patentable or otherwise protected, under Title 35 of the United States Code.
1.3 "Made" in relation to any Invention means the conception or first actual reduction to practice of such Invention.
1.4 "Proprietary Information" means any patent rights, copyrights, trademark rights, trade secrets, mask works, proprietary information or data, moral rights, and know-how developed by PLUG POWER prior to, in the course of or subsequent to, this Agreement that: (i) is not generally known or available from other sources without obligation concerning its confidentiality; (ii) has not been made available by the owners to others without obligation concerning its confidentiality; and (iii) is not already available to the Government without obligation concerning its confidentiality, and does not constitute a Subject Invention, Subject Data or Protected CRADA Information.
1.5 "Subject Data" means all recorded information first produced in the performance of this Agreement.
1.6 "Subject Invention" means any invention made in the performance of work under this Agreement.
1.7 "Protected CRADA Information" means any patent rights, copyrights, trademark rights, trade secrets, mask works, proprietary information or data, moral rights, and know-how, developed in the course of this Agreement and directly related to the Statement of Work, by a BENET or PLUG POWER employee assigned to this project by his or her employer.
Article 2. Cooperate Research.
2.1 Statement of Work. Cooperative research performed under this Agreement shall be performed in accordance with the Statement of Work (SOW), incorporated as a part of this Agreement as Appendix A. Each party agrees to participate in the cooperative research and to utilize such personnel, resources, facilities, equipment, skills, know-how and information, as it considers necessary, consistent with its own policies, missions, and requirements. Work tasks will be added to Statement of Work and will become part of this Agreement and recorded as part of Appendix A. The work will be task-or-performance oriented.
2.2 Multiple Parties and Separate Technologies: BENET has unique technologies in several related but distinct areas to include, but not limited to: Mounts, Fire Control, and the enabling sciences and discipline. In addition, BENET has expertise located within Watervliet Arsenal.
2.3 Review of Work. Periodic conferences shall be held between BENET personnel and PLUG POWER personnel for the purpose of reviewing the progress of the work. It is understood that the nature of this cooperative research is such that completion within the limit of financial support allocated, cannot be guaranteed. Accordingly, it is agreed that all sponsored research is to be performed on a best efforts basis. It is agreed that individual work
tasks incorporated into the Statement of Work will make use of project management techniques detailing where appropriate, cost, schedule and technical milestone considerations to mitigate and control risk.
2.4 Change in Scope. The parties shall make a good faith effort to agree on any necessary changes to the SOW and make the changes by written notice. The parties agree that increases and decreases in effort may by mutual agreement not be considered a change in scope, minimizing administrative delays in the execution of effort.
2.5 Research and Development (R&D) Team. To the extent that the conduct of sponsored research requires a joint technical effort, PLUG POWER and BENET agree to establish a joint research and development team (the "TEAM"). The Team shall conduct cooperative research in accordance with the SOW. Each party shall pledge to make available to the Team such resources, facilities, equipment, skills, know-how, and information, as it considers necessary and appropriate. Both parties pledge to support the Team in a mutually cooperative manner, on a best effort basis, consistent with their respective policies, missions, and requirements. Each party may support changes to the SOW or to the scope and direction of the effort which, if agreed to by the other party, shall first be made to the SOW, and then implemented by the Team. While assigned to the Team, members shall continue to remain employed by their respective employers with full benefits and salary, and will not be considered to be employees of the other party for any reason. Each parties shall be solely responsible for the composition their of Team members.
Article 3. Reports.
3.1 Progress Reports. After this Agreement enters into force, BENET and PLUG POWER shall exchange periodic written reports during the term of this Agreement on the progress of their work, and the results being obtained, and shall make available to the extent reasonably requested, other project information in sufficient detail to explain the progress of the work. Specific report content and timing will be defined in the Statement of Work.
3.2 Final Report. BENET and PLUG POWER shall prepare a written report within three (3) months after expiration of this Agreement. This report shall set forth the technical progress made, identifying such problems as may have been encountered, and establishing goals and objectives requiring further effort. Inclusion of Proprietary Information or Subject Information in deliverable reports shall be subject to the provisions of Article 7.2. In addition, a portion of the results not including Proprietary Information, may be prepared for publication in a journal or conference, as appropriate, by BENET or PLUG POWER, with co-authorship, as appropriate, subject to the provisions of 7.4.
Article 4. Financial Obligation
Salary and Travel. BENET and PLUG POWER shall provide support to their respective personnel in performance of this Agreement. Attached Statements of Work set forth
in Appendix A will detail financial terms and conditions. If or when appropriate and required by a scope of work, reimbursement required by BENET will be provided by PLUG POWER. It is noted that reimbursement does not constitute a sale or transfer of ownership of property.
Article 5. Title to Property.
5.1 Equipment. All equipment first acquired under this Agreement, and all Government Furnished Equipment (GFE), if any, shall be the property of BENET except that title to items of equipment developed or purchased by PLUG POWER, or provided to BENET by PLUG POWER or acquired by BENET with funds supplied by PLUG POWER, shall remain or vest in PLUG POWER. ANY GFE shall be used solely for the performance of the effort contemplated by this Agreement. Upon completion of research under this Agreement, PLUG POWER shall be responsible for all costs attendant to the maintenance, removal, storage, and shipping of their equipment to their own facility. Prototype hardware, designed, produced and transferred by the Government to PLUG POWER will be considered GFE, with the Government retaining title. The applicable sections of Part 45 of the Federal Acquisition Regulations shall apply to PLUG POWER's management and disposition of GFE furnished under this Agreement.
5.2. Software
5.2.1. PLUG POWER Employee Software. Title to any copyright in software written by PLUG POWER employees necessary to perform this Agreement shall be held by PLUG POWER. PLUG POWER agrees to grant to the U.S. Government a non-exclusive, irrevocable, paid-up license for military applications only, to use or have used, throughout the world by, or on behalf of the U.S. Government, the copyright covering said software.
5.2.2. Joint Employee Software. Title to any copyright in software written jointly by BENET and PLUG POWER employees in the course of performance of this Agreement, shall be held by PLUG POWER. PLUG POWER agrees to grant to the U.S. Government a nonexclusive, irrevocable, paid-up license for military applications only, to use or have used, throughout the world by, or on behalf of the U.S. Government, the copyright covering said software.
5.2.3 Limited Scope. PLUG POWER shall retain ownership in any software or algorithms to which PLUG POWER has title prior to this Agreement, or written for its own requirements during the course of this Agreement which are not necessary for the performance of work under this Agreement.
5.2.4. BENET Employee Software. The U.S. Government hereby grants to PLUG POWER an exclusive, irrevocable, transferable, worldwide, paid-up license to make, use or sell any software written by BENET employees in the performance of this Agreement.
5.2.5 BENET Laboratories may provide interface drawings and other technical data to collaborators as required or negotiated for purposes other than for production of Large Caliber Cannon. In this instance Cannon is defined as consisting of the Cannon Tube, to include thermal management assembles, the Breech, Mechanism, to include breech actuation assemblies, the Bore evacuator and the Muzzle Break.
Article 6. Inventions and Patents.
6.1 Reporting. The parties shall promptly report to each other all Subject Inventions made in the performance of work under this Agreement. All Subject Inventions made in the performance of work under this Agreement shall be listed in the Final Report required by this Agreement.
6.2 Employee Inventions. BENET, on behalf of the U.S. Government, agrees that PLUG POWER shall retain title to any PLUG POWER employee Subject Invention. PLUG POWER may file patent applications on such Subject Inventions at its own expense. PLUG POWER further agrees to grant to the U.S. Government on PLUG POWER Subject inventions a nonexclusive, irrevocable, paid-up license in the patents covering a Subject Invention, to practice or have practiced, throughout the world by, or on behalf of the U.S. Government, the Subject Inventions which are covered by a resulting patent except for any application related to fuel cells. Such non-exclusive license shall be evidenced by a confirmatory license agreement prepared by PLUG POWER in a form satisfactory to BENET.
6.3. BENET Employee Inventions. BENET, on behalf of the U.S. Government, shall have the initial option to retain title to, and file patents on, each Subject Invention made by its employees. BENET may file patent applications thereon at its own expense. BENET, on behalf of the U.S. Government, agrees to grant to PLUG POWER on those BENET employee Subject Inventions upon which the U.S. Government has exercised the option to retain title to, a nonexclusive, irrevocable, transferable, paid-up license in the patents covering a Subject Invention, to practice or have practiced, throughout the world by, or on behalf of PLUG POWER, the Subject Inventions, which are covered by a resulting patent. The license on Subject Inventions excludes the right to produce or have produced Large Caliber Cannon at any facility other than Watervliet Arsenal.
6.4 Joint Employee Inventions. PLUG POWER have the initial option to file patent applications at its own expense on joint inventions, subject to the conditions specified in Paragraph 6.5. PLUG POWER is hereby granted all rights to patents filed in its name for joint inventions for all applications related to fuel cells, and the U.S. Government is hereby granted an exclusive, irrevocable, paid-up U.S. Government license to practice or have practiced, throughout the world by, or on behalf of the U.S. Government, the invention which is covered by a resulting patent for all applications except those related to fuel cell applications.
6.5 Filing of Patent Applications. The party having the right to retain title and file patent applications on a specific Subject Invention may elect not to file patent applications, provided it so advises the other party within 300 days from the date it reports the Subject Inventions to the other party. Thereafter, the other party may elect to file patent applications on the Subject Invention and the party initially reporting the Subject Invention agrees to assign its right, title, and interest in the Subject Invention to the other party. The assignment of the entire right, title, and interest to the other party, pursuant to this paragraph, shall be subject to the retention by the party assigning title of a nonexclusive, irrevocable, transferable, paid-up license to practice, or have practiced, the Subject Invention the world.
6.6 Patent Expenses. The expenses attendant to the filing of patent applications shall be borne by the party filing the patent applications. Each party shall provide the other party with copies of the patent applications it files on any Subject Invention along with the power to inspect and make copies of all documents retained in the official patent application files by the applicable patent office. The parties agree to reasonably cooperate with each other in the preparation and filing of patent applications resulting from this Agreement.
6.7 Maintenance Fees. The fees payable to the U.S. Patent and Trademark Office, in order to maintain the patent's enforcement, will be payable by the owner of the patent, at that party's option. In the event that BENET is the owner of the patent and PLUG POWER holds an exclusive license in said patent, PLUG POWER shall pay all maintenance fees for said patent, but shall not be required to pay any litigation fees for said patent. If deciding not to pay the maintenance fee, PLUG POWER must relinquish their exclusive license rights in said patent and must give BENET reasonable notification so as to permit BENET the option of paying said fee. In the event that PLUG POWER elects not to pay the maintenance fees and BENET elects to exercise it's option to pay said fee, PLUG POWER will retain a non-exclusive, irrevocable, transferable, paid-up license in said patent
6.8 Exclusive License
6.8.1 BENET, on behalf of the U.S. Government, agrees to grant to PLUG POWER a limited term exclusive, transferable, worldwide license in each U.S. patent application, and patents issued thereon, covering a BENET employee Subject Invention, which is filed by BENET on behalf of the U.S. Government subject to the reservation of a non-exclusive, irrevocable, paid-up license to practice and have practiced the Subject Invention on behalf of the U.S. Government.
6.8.2 Exclusive License Terms. PLUG POWER shall elect or decline to exercise its rights to acquire a limited term exclusive license to any Subject Invention(s) within six (6) months of being informed by BENET of the Subject Invention(s). A reasonable royalty rate and other terms of license shall be negotiated promptly in good faith and in conformance with the laws of the United States. Such exclusive license shall be for an initial term ending seven (7) years from the date of each patent and with respect to each such patent shall be
automatically renewable for successive seven (7) year periods provided PLUG POWER or any PLUG POWER sublicensee:
(i) is then conducting related research, or
(ii) continues to commercialize the subject matter covered by such patent(s).
6.8.3 Other BENET Inventions. This Agreement does not grant an implied license to PLUG POWER with respect to any other government inventions, including any BENET inventions not covered by Article 6.8.2. BENET agrees to grant an exclusive, transferable, worldwide license to PLUG POWER to such other BENET Inventions if requested by PLUG POWER at fair and reasonable terms, if such an exclusive license is necessary for PLUG POWER to practice, or have practice, any BENET Subject Invention under this Agreement, but only to the extent that BENET has an unencumbered right and/or authority to do so. Nothing in this Agreement shall be construed as a grant or an agreement to grant any license with respect to any invention made by any other U.S. Army laboratory or any other Government agency or laboratory.
6.8.4 Subsidiaries and Affiliates. The license to PLUG POWER under this Agreement also extend to PLUG POWER's United States subsidiaries.
6.8.5 Other PLUG POWER Inventions. This Agreement does not grant an implied license to BENET with respect to any other PLUG POWER inventions, including any PLUG POWER inventions not covered by Section 6 of this Agreement. PLUG POWER agrees to grant a nonexclusive, transferable, worldwide license to BENET to such other PLUG POWER inventions if requested by BENET at fair and reasonable terms, if such an nonexclusive license is necessary for BENET to practice, or have practiced, any PLUG POWER Subject Invention under this Agreement, but only to the extent that PLUG POWER has an unencumbered right and/or authority to do so. Nothing in this Agreement shall be construed as a grant or an agreement to grant any license with respect to any invention made by PLUG POWER.
Article 7. Data and Publication
7.1 Rights. Subject Data shall be individually owned by the parties hereto. Either party shall, upon request, have the right to review all Subject Data first produced under this Agreement which has not been delivered to the other party, except to the extent that such Subject Data is subject to a claim of confidence or privilege by a third party.
7.2 Proprietary Information. BENET agrees that any Proprietary Information furnished by PLUG POWER to BENET under this Agreement, or in contemplation of this Agreement, shall be used, reproduced and disclosed by BENET only for the purpose of carrying out this Agreement, and shall not be released by BENET to third parties unless
consent to the release is obtained from PLUG POWER. Proprietary Information
which is disclosed verbally by PLUG POWER shall be identified as proprietary at
the time of disclosure and then summarized in writing. Such summary shall be
marked as Proprietary information and provided to BENET within ten (10) days
after the verbal disclosure. PLUG POWER shall place a proprietary notice on all
information it delivers to BENET under this Agreement which it asserts is
proprietary. All Proprietary Information shall be protected for a period of five
(5) years from disclosure to BENET.
7.3 Release Restrictions. BENET shall have the right to use all Subject Data for military purposes only, and shall not release such Subject Data publicly except when: (i) BENET in reporting results of sponsored research, may publish Subject Data in technical articles and other documents to the extent it determines to be appropriate unless such disclosure will adversely affect PLUG POWER's rights; and (ii) BENET may release such Subject Data where such release is required by law or court order provided that prior notice is provided to PLUG POWER to allow Plug POWER to obtain a Protective Order.
7.4 Publication. BENET and PLUG POWER agree to confer prior to the publication of Subject Data to assure that no Proprietary Information or protected CRADA information are released and that patent rights are not jeopardized. Prior written approval is required from the other party before a party hereto can submit a manuscript for review, which contains the results of the research under this Agreement, or prior to publication if no such review is made. Each party shall be offered an ample opportunity to review such proposed manuscript and to file patent applications in a timely manner.
7.5 Obligations as to Protected CRADA Information. Each party hereto may designate as Protected CRADA Information, as defined in Article 1, any Subject Data produced by its employees, and with the agreement of the other party, mark any Subject Data produced by the other party's employees. All such designated Protected CRADA Information shall be appropriately marked.
For a period of five (5) years from the date Protected CRADA Information is produced, the parties hereto agree not to further disclose such Protected CRADA Information except:
(1) as necessary to perform this CRADA;
(2) as necessary for PLUG POWER to conduct its business;
(3) as necessary for BENET to provide to other Government facilities, and only at those Government facilities with the same protection in place, or
(4) as mutually agreed by the parties hereto in advance in writing.
The obligations of the parties with respect to Protected CRADA Information, shall end sooner for any Protected CRADA Information which shall: (1) become publicly known without fault
of either party; (2) come into a party's possession without breach by that party of the obligations set forth in this Article; or (3) be independently developed by a party's employees who did not have access to the Protected CRADA Information.
Article 8. Representations and Warranties.
8.1 Representations and Warranties of BENET. BENET hereby represents and warrants as follows:
8.1.1 Organization. BENET is a federal laboratory and is wholly owned by the Government of the United States and whose substantial purpose is the performance of research, development, and engineering.
8.1.2 Mission. The performance of the activities specified by this Agreement are consistent with the mission of BENET.
8.1.3 Authority. All prior reviews and approvals required by regulations or law have been obtained by BENET prior to the execution of this Agreement. The BENET official executing this Agreement has the requisite authority to do so. Notwithstanding the delegation of authority to execute this Agreement to the individual designated, that is the Director of BENET, the Secretary of the Army has reserved to the Assistant Secretary of the Army (Research, Development and Acquisition) the opportunity provided by 15 USC Sect. 3710a(c)(5)(A), to disapprove or require the modification of this Agreement within 30 days of the date it is presented to him or her by BENET.
8.2. Statutory Compliance. The BENET Director, prior to entering into this Agreement, has given special consideration to entering into CRADA's with small business firms and consortia involving small business firms.
8.3 Representations and Warranties. PLUG POWER hereby represents and warrants to BENET as follows:
8.3.1 POWER of Authority. PLUG POWER has the requisite power and authority to enter into this Agreement- and to perform according to terms thereof;
8.3.3 Due Authorization. PLUG POWER has taken all actions required to be taken by law, to authorize the execution and delivery of this Agreement;
8.3.4 No Violation. The execution and delivery of this Agreement does not contravene any material provision of, or constitute a material default under any material agreement binding on PLUG POWER or any valid order of any court, or any regulatory agency or other body having authority to which PLUG POWER is subject.
Article 9. Termination.
9.1 Termination by Mutual Consent. PLUG POWER and BENET may elect to terminate this Agreement, or portions thereof, at any time by mutual consent.
9.2 Termination by Unilateral Action. Either party may unilaterally terminate this entire Agreement at any time by giving the other party written notice, no less than 30 days prior to the desired termination date. Termination will consider any work in process and the financial effects on the parties.
9.3 Termination Procedures. In the event of termination, the parties shall specify by written notice the disposition of all property, patents, and other results of work accomplished or in progress, arising from or performed under this Agreement. Upon the receipt of written termination notice, the parties shall not take any new commitments that relate to this Agreement.
Article 10. Disputes.
10.1 Settlement. Any dispute arising under this Agreement which is not disposed of by agreement of the co-principal investigators, shall be submitted jointly to the signatories of this Agreement. A joint decision of the signatories or their designees shall be the disposition of such dispute. However, nothing in this section shall prevent any party from pursuing any and all administrative and/or judicial remedies, which may be allowable.
Article 11. Liability.
11.1 Property. Neither party shall be responsible for damages to any property provided to, or acquired by, the other party pursuant to this Agreement.
11.2 PLUG POWER Employees. PLUG POWER agrees to indemnify and hold harmless the U.S. Government for any loss, claim, damage, or liability of any kind involving any employee of PLUG POWER arising in connection with this Agreement, except to the extent that such loss, claim, damage, or liability is due to the negligence of BENET under the provision of the Federal Torts Claims Act.
11.3 No Warranty. Except as specifically stated elsewhere in this Agreement, BENET makes no express or implied warranty as to any matter whatsoever, including the conditions of the research or any invention or product, whether tangible or intangible; made, or developed under this Agreement, or the ownership, merchantability, or fitness for a particular purpose of the research or any invention or product.
11.4 Product and Other Liability as to the U.S. Government. PLUG POWER holds the U.S. Government harmless and indemnifies the U.S. government for all liabilities, demands, damages, expenses, and losses arising out of use by PLUG POWER of BENET's
research and technical developments or out of any use, sale, or other disposition by PLUG POWER of products made by the use of BENET's technical developments.
11.5 Indemnification. The U.S. government and PLUG POWER makes no express or implied warranty as to the conditions of the research or any intellectual property or product made, or developed under this Agreement, or the ownership, merchantability or fitness for a particular purpose of the research or resulting product. Neither the U.S. Government or PLUG POWER shall be liable for special, consequential, or incidental damages.
Article 12. Miscellaneous
12.1 No benefits. No member of, or delegate to the United States congress, or resident commissioner, shall be admitted to any share or part of this Agreement, nor to any benefit that may arise therefrom; but this provision shall not be construed to extend to this Agreement, if made with a corporation for its general benefit.
12.2 Governing Law. This Agreement shall be governed by the laws of the United States Government.
12.3. Fair Access. This Agreement shall not restrict either party from entering into similar agreements.
2.4.a Notices. All notices pertaining to or required by this Agreement, shall be in writing and shall be signed by an authorized representative, and shall be delivered by hand or sent by certified mail, return receipt requested, with postage prepaid.
2.4.b Independent Contractors. The relationship of PLUG POWER to BENET/to this Agreement is-that of independent contractors and not as agents of-each or as joint ventures or partners.
12.5 Use of Name or Endorsement: (i) PLUG POWER shall not use the name of BENET, BENET Laboratories, Watervliet Arsenal or the Department of the Army, on any product or service which is directly or indirectly related to either this Agreement or any patent license or assignment agreement, which implements this Agreement without the prior approval of BENET; (ii) by entering into this Agreement, BENET does not directly or indirectly endorse any product or service provided, or to be provided, by PLUG POWER, its successors, assignees, or licensees. PLUG POWER shall not in any way imply that this Agreement is any endorsement of such products or service.
12.6 The rights specified in provision of this Agreement covering Inventions and Patents", "Exclusive License", "Data and Publication", "Product and Other Liability as to the U.S. Government" and "Indemnification" shall survive the termination or expiration of this Agreement.
Article 13. Duration of Agreement and Effective Date
13.1 Expiration of Agreement. This Agreement will automatically expire on 1 December 2003, unless it is revised by written notice and mutual consent.
13.2 Effective Date. This Agreement shall enter into force as of the date it is signed by -the last authorized representative of the parties.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as follows:
For: PLUG POWER, L.L.C.
/s/ Gary Mittleman ------------------------------------- Gary Mittleman President and Chief Executive Officer Date:_______________________ |
For: BENET and the U.S. Government
/s/ Russell Fiscella ------------------------------------- Mr. Russell Fiscella Acting Director US Army BENET Laboratories Date:_______________________ |
APPENDIX A
STATEMENT OF WORK (SOW)
The overall purpose of this CRADA is for PLUG POWER, L.L.C. to acquire from the US Army BENET Laboratories unique technology and services which will be applied by PLUG POWER for commercial applications.
PLUG POWER desires to work with scientists and engineers of BENET to develop and commercialize new and innovative energy products. BENET scientists have unique knowledge in simulation and analysis, design and the application of- advanced materials. PLUG POWER is engaged in a commercial enterprise, which can apply BENET's technology to enhance product functionality, reliability and durability.
This Agreement does not commit PLUG POWER to any expenditure of funds. Detailed work tasks and associated costs will be agreed to by the parties in advance of commencing work. Increases or decreases to this Agreement will be accomplished by a written amendment to this statement of Work, authorized by representatives of both PLUG POWER and BENET.
STATEMENT OF WORK
Modification Number 001
Composite Plate Development
Version 1.0
January 12, 1998
Background:
PLUG POWER is investigating the use of [***] materials for commercial fabrication of PEM Fuel cell plates. [***] can potentially offer the following benefits:
. Low weight
. Low piece cost
. Corrosion resistance
. Higher volume capability
. Established manufacturing process and infrastructure
. Ability to attain elaborate geometric features
PLUG POWER has developed certain requirements and designs for the composition and geometry of composite plates and is progressing toward their development and eventual commercialization.
PLUG POWER seeks to discover the material composition and molding process best suited for these composite plates. A successful composite plate design will have to attain acceptable [***] and [***] properties.
Short Term Test Plan
1 - To mold blocks of various material compositions for subsequent material property testing
a. BENET Labs will fabricate a [***] simple mold plate.
b. BENET Labs will use the mold plate to mold 4 plates from each of the following 6 composition formulas:
MIX 1 MIX 2 MIX 3 MIX 4 MIX 5 MIX 6
-------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
-------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
-------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
-------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
-------------------------------------------------
|
c. Determine physical properties of the molded plates.
d. PLUG POWER will perform [***] tests on the plates.
e. BENET Labs will perform [***] testing on the plates including such tests
as [***].
f. BENET Labs will deliver to PLUG POWER all fabricated plates and test
results.
STATEMENT OF WORK
Modification Number 001
Composite Plate Development
Version 1.0
January 12, 1998
2 - hold Plates using the material selected in the block testing
a. PLUG POWER will fabricate low production volume molds.
b. BENET Labs will use the PLUG POWER supplied molds to fabricate at least
04 plates using a PLUG POWER specified material formulation.
c. BENET Labs will perform requested [***] measurements of the formed
plates.
d. PLUG POWER will test plates and identify areas of improvement.
e. BENET Labs will deliver to PLUG POWER all fabricated plates and test
results.
STATEMENT OF WORK
Modification Number 001
Estimate of required time and materials
Version 1.0
January 15,1998
BENET Laboratories will assist PLUG POWER in investigating the use of [***] for commercial fabrication of PEM fuel cell plates.
Reference PLUG POWER "[***] and Testing Version 1.0 Dated January 12, 1998." The following is an estimate of time and material costs required by BENET Laboratories to perform the work.
Task ID Task Name Materials Labor Estimate
------- --------------------- --------- --------------
2 Generate [***] mold drawing $ [***] [***]
3 Fabricate [***] mold $ [***] [***]
4 Procure Materials $ [***] [***]
5 Mold [***] trial plate $ [***] [***]
6 Mold [***] plates $ [***] [***]
7 Fabricate Property $ [***] [***]
Specimens
8 Perform property tests $ [***] [***]
9 Specify property tests $ [***] [***]
10 Procure mold materials $ [***] [***]
12 Generate final mold drawings $ [***] [***]
13 Fabricate final molds $ [***] [***]
14 Inspect molds (WVA) $ [***] [***]
15 Mold Final plates $ [***] [***]
16 Inspect final plates (WVA) $ [***] [***]
Total labor [***]
Labor rate $ [***]
Total Labor $ [***]
Total Material $ [***]
Grand Total $ [***]
|
Expenditures in excess of $ [***] by BENET Laboratories shall not be reimbursable unless authorized in advance by a written amendment to this Modification No. 1, executed by a representative of PLUG POWER.
Approvals to Commence Work: For PLUG POWER: For BENET Laboratories ___________________________ ________________________________ ___________________________ ________________________________ |
STATEMENT OF WORK
Modification Number 001
Composite Plate Development
Version 1.0
January 12,1998
Background:
PLUG POWER is investigating the use of [***] materials for commercial fabrication of PEM Fuel cell plates. [***] can potentially offer the following benefits:
PLUG POWER has developed certain requirements and designs for the composition and geometry of [***] and is progressing toward their development and eventual commercialization.
PLUG POWER seeks to discover the material composition and molding process best suited for these composite plates. A successful composite plate design will have to attain acceptable [***] and [***] properties.
Short Term Test Plan
1 - To mold blocks of various material compositions for subsequent material property testing
a. BENET Labs will fabricate a [***] simple mold plate.
b. BENET Labs will use the mold plate to mold [***] plates from each of the
following 6 composition formulas:
MIX 1 MIX 2 MIX 3 MIX 4 MIX 5 MIX 6
-------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
-------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
-------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
-------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
-------------------------------------------------
|
c. Determine physical properties of the molded plates.
d. PLUG POWER will perform conductivity and permeability tests on the
plates.
e. BENET Labs will perform mechanical testing on the plates including such
tests as strength, toughness, creep, thermal expansion, and thermal
conductivity.
f. BENET Labs will deliver to PLUG POWER all fabricated plates and test
results.
STATEMENT OF WORK
Modification Number 001
Composite Plate Development
Version 1.0
January 12, 1998
2 - Mold Plates using the material selected in the block testing
a. PLUG POWER will fabricate low production volume molds.
b. BENET Labs will use the PLUG POWER supplied molds to fabricate at least
[***] plates using a PLUG POWER specified material formulation.
c. BENET Labs will perform requested geometric and surface measurements of
the formed plates.
d. PLUG POWER will test plates and identify areas of improvement.
e. BENET Labs will deliver to PLUG POWER all fabricated plates and test
results.
STATEMENT OF WORK
Modification Number 002
Plate Corrosion Investigation
Version 1.0
February 17, 1998
Background:
PLUG POWER is investigating the cause(s) of corrosion witnessed on fuel cell plates. Although the plates are fabricated from [***], a significant amount of "contamination" has been found on certain areas of cell plates. To ensure reliable fuel cell operation, the source(s) of this "contamination" must be identified and mitigated.
PLUG POWER consequently seeks to enlist the assistance of BENET Laboratories to determine the origins and causes of this observed "contamination."
Scope of Work
BENET Laboratories personnel will utilize a variety of their metallurgical examination techniques, failure analysis skills, and analysis equipment to identify the species and causes of the observed contamination.
a. PLUG POWER will provide to BENET Labs several contaminated fuel cell
plates along with water samples and other components required to
facilitate the investigation.
b. PLUG POWER will familiarize BENET Labs personnel in the various
functional aspects of the contaminated plates to permit comprehensive
understanding of the potential corrosion mechanisms.
c. BENET Labs will inspect the plates using non-destructive techniques in
an effort to determine the origins and causes of the plate
contamination.
d. Only after receiving permission from PLUG POWER will BENET Labs be
permitted to perform destructive examinations of the fuel cell plates.
e. BENET Labs will provide interim reports of findings on an as required
basis.
f. BENET Labs will deliver to PLUG POWER an informal final of findings,
along with all plate samples and associated materials upon completion of
the investigation.
STATEMENT OF WORK
Modification Number 002
Estimate of required time and materials
Version 1.0
January 15, 1998
BENET Laboratories will assist PLUG POWER in investigating the causes of contamination found on fuel cell plates.
Reference PLUG POWER "Plate Corrosion Investigation Version 1.0 Dated February 17, 1998." The following is an estimate of time and material costs required by BENET Laboratories to perform the work.
Task ID Task Name Materials Labor Estimate
------- --------- --------- --------------
1 Analyze plates and write report $ [***] [***]
Total Labor [***]
Labor rate $ [***]
Total Labor $ [***]
Total Material $ [***]
Grand Total $ [***]
|
Expenditures in excess of $[***] by BENET Laboratories shall not be reimbursable unless authorized in advance by a written amendment of this Modification No. 2, executed by a representative of PLUG POWER
Approvals to Commence Work: For PLUG POWER: For BENET Laboratories ___________________________ ____________________________________ Date:______________________ Date:_______________________________ |
STATEMENT OF WORK
Modification Number 003
Estimate of required time and materials
Version 1.0
February 18, 1998 (modified 20 Feb 98; BENET estimates added)
BENET Laboratories will assist PLUG POWER in analyzing components of the [***] test fuel cell.
Reference PLUG POWER "[***] Test Study, Version 1.0 Dated February 18, 1998." The following is an estimate of time and material costs required by BENET Laboratories to perform the work.
Task ID Task Name Materials Labor Estimate
--------- ---------------------------------- --------- --------------
1 Support and witnessing disassembly $[***] [***]
2 Analysis of Water Samples $[***] [***]
3 Analysis of Hardware Components $[***] [***]
Total Labor [***]
Labor rate $[***]
Total Labor $[***]
Total Material $[***]
Grand Total $[***]
|
Expenditures in excess of $[***] by BENET Laboratories shall not be reimbursable unless authorized in advance by a written amendment to this Modification No. 3, executed by a representative of PLUG POWER
Approvals to Commence Work: For PLUG POWER: For BENET Laboratories ___________________________________ ________________________________ Date:______________________________ Date:_______________________________ |
Background:
PLUG POWER is investigating the effects of [***] on fuel cell components. To
begin the study, PLUG POWER will be conducting a series of [***] long tests
[***]. Each fuel cell will be operated under controlled conditions, and
periodically monitored for electrical performance. Additionally, water samples
from the fuel cell exhaust ports will be gathered on a periodic basis. At the
conclusion of the [***], the fuel cell will be disassembled and inspected for a
variety of mechanical, and electrochemical attributes. PLUG POWER wishes to
enlist the assistance of BENET Laboratories in performing metallurgical and
other physical analysis procedures.
Scope of Work
Following the conclusion of the first [***] test, PLUG POWER will disassemble the fuel cell. Components of the fuel cell, and a collection of water samples will be delivered to BENET Laboratories personnel for their examination and analysis as described below.
Part 1 - Support and witnessing of the disassembly
a. BENET laboratory personnel will attend the disassembly of the [***] test cell. By witnessing the disassembly, they will gain better first-hand knowledge of the condition of the assembly, and be able to advise potential analysis options on a "real-time" basis.
b. PLUG POWER will provide to BENET labs the following:
1 - Water samples as defined below
2 - Two reactant flow field plates (anode and cathode)
Part 2 - Analysis of Water samples
a. BENET Labs personnel will analyze water samples provided to them by PLUG POWER for chemical content. The samples will consist of:
1 - [***]
2 - [***]
3 - [***]
4 - [***]
Using appropriate techniques, BENET personnel will test each water sample for evidence of [***]. [***] will also be documented.
Part 3 - Analysis of hardware components
a. BENET Labs personnel will inspect the reactant flow field plates using non-destructive techniques in an effort to determine the origins and causes of any potential plate contamination. Plates will be provided to BENET Labs with components attached, and careful disassembly will be required. Plug Power will provide disassembly guidance as required. Photographs of the plates should be made documenting any areas of interest during the disassembly process.
b. BENET Labs personnel will inspect the plates and components for unusual conditions (i.e., corrosion, pitting, stains, etc.) as required, using electron microscopic and other surface examination techniques.
c. BENET Labs will provide interim reports of findings on an as required basis.
d. BENET Labs will deliver to PLUG POWER an informal final report of findings, along with all plates and materials upon completion of the investigation.
STATEMENT OF WORK
Modification Number 004
[***] STUDY
Version 2.0
June l, 1998
(Revised per May 29, 1998 Meeting)
Background:
PLUG POWER is investigating the effects of [***] on fuel cell components. To
begin the study, PLUG POWER will be conducting a series of [***], long tests of
[***] fuel cells. Each fuel cell will be operated under controlled conclusions,
and periodically monitored for electrical performance. At the conclusion of the
[***], the fuel cell will be disassembled and inspected for a variety of
mechanical, and electrochemical attributes. PLUG POWER wishes to enlist the
assistance of BENET Laboratories in performing chemical analysis procedures on
the [***], and [***] components of one such test cell.
Scope of Work
Following the conclusion of the first [***] test, PLUG POWER will disassemble the fuel cell. Components of the fuel cell. ([***] material will be delivered to BENET Laboratories personnel for their examination and analysis as described below.
Part 1 - [***] Level Analysis of the [***]
a. BENET laboratory personnel will utilize [***] (or other appropriate) techniques to analyze the content of [***] supplied by PLUG POWER. Each sample must be properly [***]. All examples must be [***]. The instrument must be calibrated to include the expected level of [***] for the samples.
b. PLUG POWER will provide to BENET labs the following:
1- Two (2) sample [***] each reassuring approximately [***]. The total expected [***]. And the total expected [***] on each sample. One sample is labeled the "Control" [***], and the second [***] is labeled the Test Sample."
Part 2 - [***] Analysis
a. Sub-task a. is no longer needed and has been deleted.
b. Sub-task b. is no longer needed and has been deleted.
c. BENET Labs personnel will then determine the weight of [***] present in
each sample of the [***] provided by PLUG POWER.
d. PLUG POWER will provide to BENET labs the following:
1 - [***] labeled "[***]."
2 - [***] labeled "[***]."
3 - [***] labeled "[***]."
STATEMENT OF WORK
Task Number 005
WATER SAMPLE ANALYSIS
August 10, 1998
Background:
PLUG POWER is developing PEM fuel cell systems for residential application. In this work, water samples will be collected and analyzed at various locations in a residential fuel cell system to identify contamination sources in water.
Scope of Work
Plug Power will provide BENET lab with the following water samples for [***] and
[***] analysis
1. Plug Power [***] water
2. [***] water from the [***]
3. [***] in the [***]
4. water from [***]
5. water from the [***] in the [***]
6. [***] water
[***] should be used for [***] analysis, while [***] should be used for [***] analysis
STATEMENT OF WORK
Task Number 005
ESTIMATE OF REQUIRED TIME AND MATERIALS
August 10, 1998
BENET Laboratories Will assist PLUG POWER in analyzing the water samples provided. The following is an estimate of time and material costs required by BENET Laboratories to perform the work.
Task ID Task Name Materials Labor Estimate
--------- --------- --------- --------------
0 [***] [***] [***]
1 [***] [***] [***]
Total Labor [***]
Labor rate $[***]
Total Labor $[***]
Total Material $[***]
Grand Total $[***]
|
Expenditures in excess of $[***] by BENET Laboratories shall not be reimbursable unless authorized in advance by a written amendment to this Statement of Work, Task Number 5, executed by a representative of PLUG POWER.
Approvals to Commence Work: For PLUG POWER: For BENET Laboratories _________________________ ________________________ Date:____________________ Date:____________________ |
STATEMENT OF WORK
Mod. 6 & 7
Composite Plate Development
Version 1.0
June 9,1998
Background:
Plug power is investigating the use of conductive composite materials for commercial fabrication of PEM Fuel Cell plates. Composite plates can potentially offer the following benefits:
Plug Power plans to test and fabricate several fuel cell stacks composed of
[***]. Much research has been spent exploring which material compositions and
molding processes are best suited for [***]. The [***] design must incorporate
acceptable [***] and [***] in order to function in a fuel cell stack. The
information that has been gathered to date will be utilized to mold a) several
small fuel cell stacks for testing purposes and b) a final [***] stack for
automotive testing in late August.
Scope of Work:
1. Replicate LANL's latest material mix:
a. Benet Laboratories will set-up press
b. Benet Laboratories will mold [***] using the latest LANL recipe
2. Mold sample plates using- LANL's latest mix:
a. Benet Laboratories will use large plate mold supplied by Plug Power to
mold sample plate at [***]
b. Benet will measure [***] on molded samples
c. Benet Laboratories will perform [***] and [***] measurements to ensure
compatibility between [***] and drawings provided. [***]
3. Molding of [***] plates for testing in final [***] fuel cell stack.
a. Benet Laboratories will mix the necessary materials based on
compositions and procedure requested.
b. Benet Laboratories will post-cure the molded plates for the required
time to eliminate any material leakage after delivery to Plug Power.
c. Benet laboratories will mold [***] with surface and material
consistencies allowing them to be placed in final working fuel cell
stack.
STATEMENT OF WORK
Estimate of required time and materials
Version 1.0
June 9, 1998
Task ID Task Name Materials Labor Estimate
--------- ------------------------ --------- --------------
1 Replicate LANL's latest material
mix $[***] [***]
2 Mold Sample [***] Plates $[***] [***]
3 Mold [***] Plates $[***] [***]
Total Labor [***]
Labor rate $[***]
Total Labor $[***]
Total Material $[***]
Grand Total $[***]
|
Expenditures in excess of $[***] by BENET Laboratories shall not be reimbursable unless authorized in advance by a written amendment to this Modification, executed by a representative of PLUG POWER.
Approvals to Commence Work: For PLUG POWER: For BENET Laboratories ___________________________ _______________________ Date:_____________________ Date:___________________ |
STATEMENT OF WORK
Task Number 008
ANALYSIS of MEA Surface Contamination
September 24, 1998
Background:
PLUG POWER is developing a series of high performance fuel cell MEAs for automotive applications. In this work, Plug Power has observed a build up of foreign matter within fuel cell stacks over a period of time. Plug Power wishes to get a better understanding of how these foreign materials are deposited onto the membrane surfaces.
Scope of Work
Plug Power will provide Benet Labs with 20 samples of membranes with that have been operated within fuel cells for various periods of time. Plug Power wishes to have an analysis performed on these samples for the following [***].
Additionally, Plug Power wishes [***] for: [***]
The membranes will be scanned in plane and section. Sectional views will be mounted in plastic and polished. Pictures and trace-scans will be taken for each scan.
Plug Power Contact
Uriel Oko, 782-7700, Ext. 209
STATEMENT OF WORK
Task Number 008
ESTIMATE OF REQUIRED TIME AND MATERIALS
September 24, 1998
BENET Laboratories will assist PLUG POWER in analyzing material from fuel cells for the presence of various [***] build-ups on [***]
Task ID Task Name Materials Labor Estimate
------- ----------------- --------- --------------
1 2 scans (w/pictures & trace scans) per [***]
sample (Total of 20 samples x 3 hours/
sample)
Total Labor [***]
Labor rate $[***]
Total Labor $[***]
Total Material $[***]
Grand Total $[***]
|
Expenditures in excess of $[***] by BENET Laboratories shall not be reimbursable unless authorized in advance by a written amendment to this Statement of Work, Task Number 8, executed by a representative of PLUG POWER.
Plug Power Project Number: 89,91-47011-200
Approvals to Commence Work:
For PLUG POWER: For BENET Laboratories
________________________________ ________________________________
Date:___________________________ Date:_______________________________
|
STATEMENT OF WORK
Modification Number 004
ESTIMATE OF REQUIRED TIME AND MATERIALS
Version 1.0
February 18, 1998
BENET Laboratories will assist PLUG POWER in analyzing components of the
[***] test fuel cell.
Reference PLUG POWER "[***] Study, Version 1.0 Dated March 2, 1998." The
following is an estimate of time and material costs required by BENET
Laboratories to perform the work.
Task ID Task Name Materials Labor Estimate
------------------ ----------------------------- ----------- --------------
1 [***] level analysis $ [***] [***]
2 [***] analysis $ [***] [***]
3 Additional water sample tests $ [***] [***]
Total Labor [***]
Labor rate $[***]
Total Labor $[***]
Total Material $[***]
Grand Total $[***]
|
Expenditures in excess of $[***] by BENET Laboratories shall not be reimbursable unless authorized in advance by a written amendment of this Modification No. 4, executed by a representative of PLUG POWER
Approvals to Commence Work: For PLUG POWER: For BENET Laboratories ___________________________ ________________________________ Date:______________________ Date:_______________________________ |
STATEMENT OF WORK
Modification Number 003 Estimate of required time and materials Version 1.0 February 18, 1998 (modified 20 Feb 98; Benet estimates added)
BENET Laboratories will assist PLUG POWER in analyzing components of the [***] test fuel cell.
Reference PLUG POWER "[***] Test Study. Version 1.0 Dated February 18, 1998," The following is an estimate of time and material costs required by BENET Laboratories to perform the work.
Task ID Task Name Materials Labor Estimate
--------- ---------------------------------- --------- --------------
1 Support and witnessing disassembly [***] [***]
2 Analysis of Water Samples [***] [***]
3 Analysis of Hardware Components [***] [***]
Total Labor [***]
Labor Rate [***]
Total Labor [***]
Total Material [***]
Grand Total [***]
|
Expenditures in excess of [***] by BENET Laboratories shall not be reimbursable unless authorized in advance by written amendment to this Modification No. 3 executed by a representative of PLUG POWER.
Approval to Commence Work: For PLUG POWER: For BENET Laboratories --------------------------- -------------------------- Date: Date: --------------------------- -------------------------- |
PLUG POWER Proprietary Information
Exhibit 10.25
PLUG POWER, L.L.C.
SECOND
AMENDMENT AND RESTATEMENT
OF THE
MEMBERSHIP OPTION PLAN
February 15, 1999
WHEREAS, Plug Power, L.L.C., a limited liability company organized under the laws of the State of Delaware ("Company") entered into a Membership Option Plan and Agreement, effective as of the 1st day of July, 1997 (the "Plan"); and
WHEREAS, the Company desires to amend the Plan to provide consultants the opportunity to acquire Class B membership interests in the Company and to share in its success, with the added incentive to work effectively for and in the Company's interest; and
WHEREAS, at a special meeting of the Members of Company held on January 26, 1999, at which all of the Members were present, either by person or by telephone, and acting with full authority, the Members unanimously agreed to amend the limited liability company agreement to permit the company to provide consultants the opportunity to acquire Class B membership interests in the Company, subject to the specific prior approval by the board of managers for each consulting contract that provides stock options as part of the contract; and
WHEREAS, the Company desires to also amend the Plan to include in the definition of "Employees" eligible to participate in the Plan those employees of the Company who become directly employed by GE Fuel Cell Systems, L.L.C. ("GEFCS"); and
WHEREAS, such former employees shall be subject to the same terms and conditions of the Plan; and
NOW, THEREFORE, the text of the original Plan as amended is hereby amended and restated in its entirety to read as follows:
Agreement, made and effective as of the 15th day of February, by Plug Power, L.L.C., a limited liability company organized under the laws of the State of Delaware ("Company").
WHEREAS, Company is a limited liability corporation with Class A membership interests and Class B membership interests, and
WHEREAS, Company has determined that its interests will be advanced and best served by providing an incentive to its current employees, certain former employees and certain consultants, to acquire Class B membership interests in Company and to share in its success, with the added incentive to work effectively for and in Company's interest,
NOW THEREFORE, Company hereby establishes the Plan as follows:
ESTABLISHMENT OF PLAN
The Plan shall be known as the Plug Power Membership Option Plan ("Plan"), and shall be effective on the date first above written.
ELIGIBILITY
GRANT OF OPTIONS
Company may, from time to time, grant additional Options to Employees.
Company may, from time to time, amend Exhibit "C", as may be required to add new Consultants who become eligible for the Plan, or to grant additional Options to Consultants, but not without the prior authorization of the board of managers.
OPTION PRICE
The option exercise price for shares of Class B membership interests shall be set forth on Exhibit "A" for Employees, Exhibit "B" for Managers, and Exhibit "C" for Consultants, and shall be determined by the Company's board of managers and which price shall represent the fair value of Company stock on the grant date.
WHEN OPTIONS ARE EXERCISABLE
Vesting under this Plan is determined by an Employee's length of service with the Employer, measured from an Employee's date of hire by the Employer, provided however, that if an Employee's direct prior employer was either Mechanical Technology, Inc. or Detroit Edison, such Employees prior service (measured from his date of hire) with either Mechanical Technology, Inc. or Detroit Edison shall be counted as service for purposes of this Plan.
Options shall vest as follows.
(a) If an Employee has completed 12 months of continuous service as of the date of the option grant, such Employee shall immediately be 20% vested in the Options granted. If an Employee has not completed 12 months of continuous service as of the date of Option grant, he shall become 20% vested in his Options once he has completed twelve months of continuous service.
(b) An additional 20% of Options shall vest on the first 12 month anniversary from the date of original Option grant.
(c) An additional 20% of Options shall vest on the second 12 month anniversary from the date of original Option grant.
(d) An additional 20% of Options shall vest on the third 12 month anniversary from the date of original Option grant.
(e) An additional 20% of Options shall vest on the fourth 12 month anniversary from the date of original Option grant.
(f) All Options originally granted shall become immediately vested and exercisable in the event of the sale of all or substantially all of the Company's assets, or in the event of the sale of all or substantially all of the Company's Class A membership interests.
(g) All vested options shall become immediately exercisable in the event the Company's Class A membership interests become publicly traded.
(h) Notwithstanding sub-paragraphs (a) through (e) above, Options granted to Managers, shall vest as follows:
(1) 50% of Options granted to Managers shall vest immediately upon grant.
(2) An additional 25% of Options granted to Managers shall vest 12 months following grant.
(3) An additional 25% of Options granted to Managers shall vest 24 months following date of grant.
Options granted under this Agreement shall automatically expire, and be null and void, ten (10) years after the date of grant, except in the death of an Employee.
In the event that an Employee's employment shall be terminated for any reason except death, any Options held by the affected Employee, and exercisable, must be exercised, if at all, within a period of one (1) month following any such termination. Any Options outstanding and not exercised within such one (1) month period shall become void. In no event shall this one (1) month period be in addition to the ten (10) year option periods described in the paragraph immediately preceding,
In the event of the death of an Employee while holding Options which were exercisable on the date of death, the estate or beneficiary of such Employee shall have the right to exercise any such outstanding Options for a period of one (1) year following death, even if such extended exercise period extends beyond the ten (10) year option period. The Options granted by this agreement shall not be transferable by the Employee other than by will or the laws of descent and distribution.
Options shall vest as follows:
(a) One-third (1/3) of the Options shall vest upon the expiration of Consultant's initial contract term.
(b) An additional one-third (1/3) of the Options shall vest on the first 12 month anniversary of the expiration of the initial contract term.
(c) The remaining one-third (1/3) of Options shall vest on the second 12 month anniversary of the expiration of the initial contract term.
Options shall vest in accordance with the foregoing schedule regardless of whether Consultant's initial contract terminates prior to the expiration of the contract term or whether Consultant's contract is renewed. Vesting, however, is subject to and contingent upon Consultant complying with the non-compete obligations set forth in his/her consulting contract. Additionally, should Consultant, at any time, provide services for, or work for a competing company, then all outstanding options, whether vested or not, become immediately null and void. If for any reason Consultant does not complete the contracted work as is evident by Consultant receiving less than the original contracted revenue, then the awarded options will be proportionately reduced to reflect the same percentage as cash paid versus original contract revenue.
(d) Options originally granted shall become immediately vested and exercisable in the event of the sale of all or substantially all of the Company's assets, or in the event of the sale of all or substantially all of the Company's Class A membership interests.
(e) All vested options shall become immediately exercisable in the event the Company's Class A membership interests become publicly traded.
Options granted under this Agreement shall automatically expire, and be null and void, five (5) years after the date of grant, except in the death of a Consultant.
In the event of the death of a Consultant while holding Options which were exercisable on the date of death, the estate or beneficiary of such Consultant shall have the right to exercise any such outstanding Options for a period of one (1) year following death, even if such extended exercise period extends beyond the five (5) year option period. The Options granted by this agreement shall not be transferable by the Consultant other than by will or the laws of descent and distribution.
HOW OPTIONS ARE EXERCISABLE
An Employee, Consultant or his/her estate or beneficiary shall exercise the Options granted by this agreement by written notice to the Company, which notice shall specify the number of Class B membership interests to be purchased, and which shall be accompanied by a check in full payment of the option price for such Class B membership interests. Until such payment, an Employee, Consultant or his/her estate or beneficiary shall have no rights in the optioned Class B membership interests.
Until such time as the Company's membership interests or stock is publicly traded or until such time that the board of managers amend this agreement, the Employee and Consultant agrees that all interests purchased by him/her, his/her estate or beneficiary under the Plan are
acquired for investment and not for distribution. The Employee and Consultant also agrees that any notice of exercise of the Option shall become accompanied by a written representation, signed by the Employee and/or Consultant, to that effect.
If the Company ever commences a public offering of its securities, it is likely the Company's membership interests will be reclassified into shares of common stock. Such reclassification will be structured so that Employee's and/or Consultant's percentage of ownership or interest in the Company is not diluted. Employees and Consultants also understand that should the Company's membership interests or stock become publicly traded, there may be certain restrictions placed on the sale of interests held by Employees and/or Consultants, and other insiders, for a period of up to one year or longer, as determined by the underwriter of any such transaction.
Employees and Consultants further understand that neither the Company, its officers, nor its board of managers can guarantee or promise that the Company's membership interests or stock will ever be registered or publicly traded. Additionally, there may never be a market for any such Company membership interests or stock, and that such Company membership interests or stock may be unmarketable.
The Company shall have no duty or obligation to repurchase any or all of its outstanding Class B membership interests.
CONTINUED SERVICE
Nothing in the Plan shall be deemed to confer to an Employee any guaranteed right to continue to be employed by the Company, or interfere in any way with the right of the Company to terminate his/her employment, as provided by the by- laws of the Company or as provided by law.
TAX EFFECTS
Employees and Consultants understand that there may be both federal and state income tax consequences associated with the exercise of the Options granted by the Plan, including withholding requirements. Employees acknowledge that they have conferred with their
respective counsel regarding any and all such tax consequences, and that in no event shall Company be liable or responsible for any such tax liability.
GOVERNING LAW
The Plan shall be governed by the law of the State of New York.
IN WITNESS WHEREOF, Corporation has caused this agreement to be executed on the date of first above written.
Plug Power, L.L.C.
By: /s/ Gary Mittleman
-----------------------------------
Gary Mittleman
President Chief Executive Officer
|
FIRST AMENDMENT TO
SECOND AMENDMENT AND RESTATEMENT
OF THE
MEMBERSHIP OPTION PLAN
PLUG POWER, L.L.C.
This First Amendment to Second Amendment and Restatement of the Membership Option Plan (the "Option Plan") is effective as of first day of October, 1999, and amends the Option Plan, dated as of February 15, 1999;
WHEREAS, Plug Power, L.L.C. (the "Company") desires to amend the Option Plan to provide for the ability of the Company to vary the terms of vesting and exercisability of options granted under the Option Plan;
WHEREAS, at a meeting of the Members of the Company held on October 1, 1999, at which all Members were present, either by person or by telephone, and acting with full authority, the Members agreed to amend the Option Plan, as set forth below;
NOW, THEREFORE, the Option Plan is hereby amended as follows:
1. On page 5 of the Option Plan, before the title "How Options Are Exercisable", insert the following sentence in a new paragraph:
"Notwithstanding anything to the contrary provided herein, the Company may, at its option, provide for different time limitations for vesting and exercisability of Options by written agreement with the grantee of such options."
2. The remainder of the Option Plan shall continue in full force and effect.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
EXHIBIT 10.27
This DISTRIBUTION AGREEMENT ("Agreement") is dated as of the 27th day of June, 1997, and entered into by and between Plug Power, L.L.C., a limited liability company organized and existing under the laws of the State of Delaware ("Company"), with its principal place of business at 968 Albany-Shaker Road, Latham, New York 12110, and Edison Development Corporation, a company organized and existing under the laws of the State of Michigan ("Distributor"), with its principal place of business at 2000 Second Avenue, Detroit, Michigan 48226.
BACKGROUND STATEMENTS
WHEREAS, the Company owns all right, title and interest in certain fuel cells with capacities of 2 kilowatts and higher, as is set out more fully in Exhibit 1 ("Products");
WHEREAS, the Distributor in consideration for and in reliance of the grant of the exclusive distributorship hereunder has or will expend considerable time and funds to establish a distribution network, plant and facilities and training its support and sales staff.
WHEREAS, the parties desire Distributor to act in certain circumstances as Company's exclusive distributor for the Products to certain entities within the United States as hereinunder specified.
NOW THEREFORE, in consideration of the mutual covenants and agreements hereinunder set forth, and other good and valuable consideration the receipt and sufficiency of which is acknowledged, the parties agree as follows:
a. Upon execution of this Agreement, Company hereby appoints Distributor as Company's exclusive independent distributor during the term of this Agreement to promote and assist Company in the sale of Products which are developed by Plug Power, to end-users for stationary applications in the Territory, as that term is defined below, and subject to the terms and conditions provided herein.
b. Upon execution of this Agreement, Distributor hereby accepts the appointment, subject to the terms and conditions as provided herein.
a. Distributor's territory for this Agreement shall mean the states of Michigan, Ohio, Indiana and Illinois ("Territory").
b. Without the prior written consent of the Company, Distributor shall not solicit nor seek customers for the Products, or establish or maintain a branch facility or distribution facility for the sale, servicing, warehousing, or storage of the Products or spare parts thereof outside the Territory.
c. Distributor may only sell the Products directly and not for resale.
d. DISTRIBUTOR MAY NOT SELL OR DISTRIBUTE THE PRODUCTS TO ANY ENTITY FOR TRANSPORTATION APPLICATIONS.
e. Distributor will be the sole person or entity acting in such capacity in the Territory; and Company shall not appoint any subdistributor, other agent or person to distribute or promote the Products, or otherwise undertake Distributor's obligations in the Territory.
a. The term "Exclusive" means that under this Agreement as long as Distributor is in full compliance with its obligations, including the percentage sales requirements set forth in Section 5 herein, Company shall not appoint any other distributor, agent, representative, or dealer for promotion or sale of ~he Products to end users for stationary applications in the Territory and shall further refrain from selling Products to end users for stationary applications in the Territory directly, other than through Distributor.
b. Company shall not be responsible for transgression of Distributor's exclusive rights hereunder by third parties not controlled by Company, but shall not sell or deliver Products to any other party outside of the Territory if Company has knowledge that the Products are to be sold or distributed by or through another party in the Territory.
c. In the event that Distributor is in default of its obligations under this Agreement, or after January 1, 2010, then Company retains the right, in addition to any other rights and remedies, to engage another distributor, dealer, agent, or other such representative on a nonexclusive basis for all or part of the Territory.
d. In the event that Distributor engages in the distribution of any fuel cell product to end users for stationary applications within the Territory that is competitive with the Products, then the Company retains the right, in addition to any other rights and remedies, to engage another distributor, dealer, agent, or other such representative on a nonexclusive basis for all or part of the Territory.
a. The purchase price for the Products purchased by Distributor shall be
[***], but nothing shall preclude the parties from mutually agreeing on a
different price. [***] available to Distributor hereunder shall be expressly
limited to cash sales payable in full at delivery and shall not include price
arrangements offered by Company to others involving the leasing or financing of
the Products, revenue sharing, or other hybrid arrangements with Company's
customers.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
b. Any and all orders from time to time submitted by Distributor shall be subject to Company's then-prevailing terms and conditions of sale, which may be changed or established from time to time by Company at its discretion on notice to Distributor, including late fees, and interest on any unpaid amounts.
Beginning on the third full calendar year after the Products are ready for market, and for each successive year during the term hereof, Distributor's sales of the Products shall meet or exceed the lower of either (i) on an annual basis [***], or (ii) [***] ("Sales Obligations"). Should Distributor fail to meet its Sales Obligations, this Agreement shall automatically and without notice become nonexclusive, provided however, that such failure to meet the Sales Obligations shall not be the basis for a default under or the termination of this Agreement. [***]
Distributor represents, warrants, to Company (its members, agents, officers, directors) and agrees:
a. To provide Company with monthly nonbinding good-faith forecasts of its anticipated requirements and shipping dates for the three month period following each forecast (or, if shorter, the remaining term of this Agreement).
b. Distributor shall not sell the Product outside the Territory. To ensure compliance with this requirement, each Product shall be identified by a unique serial number. This serial number will be used to identify Products sold outside the Territory. Should Company's review of a Product's serial number lead to the conclusion that a Product has been sold outside the Territory, such sale will be considered a breach of this Agreement.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
c. Not to (i) disassemble, decompile or otherwise reverse engineer the Product or otherwise attempt to learn the ideas underlying the Product; (ii) take any action contrary to Company's license granted to Distributor, except as expressly and unambiguously allowed under this Agreement; (iii) copy, modify or enhance the Product; or (iv) allow others to do any of the foregoing.
d. Distributor shall advertise, promote and label the products with Company's name and trademarks ("Branding Materials"). Distributor shall provide Company with all such Branding Materials for Company's approval prior to their use. Company shall not unreasonably withhold its approval of the Branding Materials. Distributor shall not design the Branding Materials in such a way as to either imply or state that Distributor's relationship with Company is greater than that of an independent distributor.
e. TO KEEP COMPANY INFORMED AS TO ANY PROBLEMS ENCOUNTERED WITH THE PRODUCTS AND ANY RESOLUTIONS ARRIVED AT FOR THOSE PROBLEMS, AND TO COMMUNICATE PROMPTLY TO COMPANY ANY AND ALL MODIFICATIONS, DESIGN CHANGES OR IMPROVEMENTS OF THE PRODUCT SUGGESTED BY ANY CUSTOMER, EMPLOYEE OR AGENT. DISTRIBUTOR FURTHER AGREES THAT COMPANY SHALL HAVE AND IS HEREBY ASSIGNED ANY AND ALL RIGHT, TITLE AND INTEREST IN AND TO ANY SUCH SUGGESTED MODIFICATIONS, DESIGN CHANGES, OR IMPROVEMENTS OF THE PRODUCT, WITHOUT THE PAYMENT OF ANY ADDITIONAL CONSIDERATION THEREFOR EITHER TO DISTRIBUTOR, OR ITS EMPLOYEES, AGENTS OR CUSTOMERS. DISTRIBUTOR WILL ALSO PROMPTLY NOTIFY COMPANY OF ANY INFRINGEMENT OF ANY TRADEMARKS OR OTHER PROPRIETARY RIGHTS RELATING TO THE PRODUCT.
f. To accept returns in accordance with procedures specified from time to time by Company.
g. Distributor shall carry out all sales promotion work and solicitation of sales for the Products diligently, using its reasonable efforts for the account of Company. These efforts shall include, but shall not in any way be limited to: (i) advertising and promoting the Products effectively; (ii) ordering and keeping a representative selection of Company's up-to-date promotional sales literature, technical bulletins, price lists, manuals, catalogues and other promotion materials in good condition; (iii) maintaining the equipment and facilities to enable Distributor to demonstrate the Products to potential new customers; and (iv) assisting Company in securing and protecting any property rights in connection with the Products in the Territory.
h. Distributor shall not make any representations as to the Products other than those, if any, contained in written information and data provided by Company. Distributor shall be totally responsible for any of its representations and shall hold Company harmless from any claims and expenses, including, but not limited to, reasonable attorneys' fees,
resulting from such unauthorized representations.
i. Distributor shall not manufacture the Products, nor engage any entity other than Company to do so.
a. Company shall supply Distributor with copies of brochures, catalogues, technical specification sheets, and promotional sales literature and such other information or materials as Company, in its sole judgment, believes will assist Distributor in promoting and assisting in the sale and acceptance of the Products in the Territory. These items shall be conveyed in English, unless the parties otherwise agree from time to time.
b. In the event that Company receives an inquiry for the Products from the end users in the Territory, Company will refer the prospect to Distributor.
c. Company shall, at all times maintain an adequate level of inventory to timely meet all current and anticipated orders for the Products.
The detailed operations of the Distributor under this Agreement are subject to its sole control and management, subject to compliance with the terms hereof. Distributor shall be responsible for all of its own expenses and employees. Distributor agrees that it shall incur no expense chargeable to Company except as may be specifically authorized, in advance, in writing, in each case by Company nor shall any such expenses, including taxes, fees, or similar charges, be deducted from any amounts due hereunder.
a. Company grants to Distributor a non-exclusive, non-transferable license to use trademark(s) described in Exhibit 2 to this Agreement ("Authorized Trademarks") only in connection with the sale and promotion of the Products in the Territory and during the term of and pursuant to the terms and conditions of the Agreement. No trademark, trade name or other designations may be used without the written consent of Company except as expressly provided in this section. Company expressly allows Distributor to represent that it is a distributor of the Products, including on the Products themselves, advertising materials, stationary and letterhead.
b. Distributor shall not assign or sub-license its rights to the Authorized Trademarks to any other person or entity.
c. Distributor shall not remove, change, obscure, or add to the labels, markings,
names or trademarks that Company has affixed to any of the Products.
d. Distributor shall not attempt to, or register any of the Authorized Trademarks in any jurisdiction without the express consent of Company.
e. Distributor acknowledges and agrees that Company's remedy at law for any breach of Company's obligations under this paragraph would be inadequate, and agrees and consents that temporary and permanent injunctive relief may be granted in any action or proceeding which may be brought to enforce any provision hereof without the necessity of proof of actual damages.
a. Without the prior written consent of Company, Distributor shall not disclose to any third party any confidential business information or trade secrets of Company, including but not limited to: the content of this Agreement; customer lists; product specifications; product technical manuals; service records; financial or sales reports; price lists; and any materials related to Company's customers, financial performance, or design of the Products, except for or in connection with any assignment permitted under Section 16 hereof.
b . Distributor hereby acknowledges and agrees that the Products are proprietary to Company. Distributor agrees to use utmost diligence to protect the trade secrets and other proprietary rights of Company in the Products from disclosure to third parties. Distributor shall also promote compliance with the terms and conditions of this Agreement by employees and others with access to the Products.
c. Distributor acknowledges and agrees that Company's remedy at law for any breach of Company's obligations under this paragraph would be inadequate, and agrees and consents that temporary and permanent injunctive relief may be granted in any action or proceeding which may be brought to enforce any provision hereof without the necessity of proof of actual damages.
d. Distributor's obligations under this confidentiality provision shall survive termination or expiration of this Agreement.
Distributor expressly agrees that it shall not be entitled to any commissions, fees, discounts or other compensation if facts are known to Company that reasonably support a belief that Distributor is in violation of any of the terms and conditions of paragraph 18 of this Agreement.
a. Company provides only the warranty set forth in its warranty policy, as modified by this Section 13(a). Distributor will handle and be responsible for all warranty returns from its direct customers. Products obtained from Company that do not comply with the warranty and are returned (by Distributor only) to Company during the warranty period (as shown by appropriate documentation) will be repaired or replaced at Company's option, provided Distributor bears the cost of freight and insurance to the point of repair. Company will bear the cost of freight and insurance for return of goods to Distributor. If Company cannot, or determines that it is not practical to, repair or replace the returned Product, the price therefor paid by Distributor will be refunded or, at the Company's discretion, credited against other Distributor obligations or toward future purchases. COMPANY MAKES NO OTHER WARRANTIES WITH RESPECT TO THE PRODUCTS OR ANY SERVICES AND DISCLAIMS ALL OTHER WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. ANY ACTION AGAINST COMPANY BASED ON THIS AGREEMENT MUST BE BROUGHT WITHIN ONE YEAR FOLLOWING INJURY.
b. The above warranty does not extend to any Product that is modified or altered, is not maintained to Company's maintenance recommendations, is operated in a manner other than that specified by Company, has its serial number removed or altered or is treated with abuse, negligence or other improper treatment (including, without limitation, use outside the recommended environment). Distributor's sole remedy with respect to any warranty or defect is as stated above.
c. Distributor may extend its own product warranty to its customers provided Distributor alone shall be responsible to such customer thereof and neither Distributor nor such customer shall have recourse against Company with respect thereto. Distributor hereby agrees to indemnify and hold Company harmless from any and against all claims, actions, losses, damages, costs, liabilities and expenses (including reasonable attorneys' fees) based upon any express or implied warranty made by Distributor to any customer.
EXCEPT AS SET FORTH IN SECTION 13, COMPANY WILL NOT BE LIABLE TO DISTRIBUTOR OR THIRD PARTY WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY, OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY AMOUNTS IN EXCESS IN THE AGGREGATE, OF THE AMOUNTS PAID TO COMPANY HEREUNDER DURING THE TWELVE-MONTH PERIOD PRIOR TO DATE THE CAUSE OF ACTION AROSE OR (11) ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS OR BUSINESS OPPORTUNITIES) OR (III) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY, OR SERVICES.
COMPANY SHALL HAVE NO LIABILITY FOR ANY FAILURE OR DELAY DUE TO MATTERS BEYOND ITS REASONABLE CONTROL.
The parties hereto expressly understand and agree that Distributor is an independent contractor in the performance of each and every part of this Agreement, is solely responsible for all of its employees and agents and its labor costs and expenses arising in connection therewith and is responsible for and will indemnify, defend and hold Company harmless from any and all claims, liabilities, damages, debts, settlements, costs, attorneys' fees, expenses, and liabilities of any type whatsoever that may arise on account of Distributor's activities, or those of its employees or agents, including, without limitation, providing unauthorized representations or warranties (or failing to disclose all limitations on warranties and liabilities set forth herein on behalf of Company) to its customers or breaching any term, representation or warranty of this Agreement. Company is in no manner associated with or otherwise connected with the actual performance of this Agreement on the part of Distributor, nor with Distributor's employment of other persons or incurring of other expenses. Except as expressly provided herein, Company shall have no right to exercise any control whatsoever over the activities or operations of Distributor.
Distributor shall not assign this Agreement or its rights under this Agreement to any other third party nor may Distributor sublicense the distribution of the Product to any subdistributor for further distribution, except that Distributor may assign its rights to and obligations under this Agreement to any entity that is 80% or more owned or controlled by DTE Energy Company or by any other entity that in turn is 80% or more owned or controlled by DTE Energy Company, provided that any such entity shall be bound, in writing, to all restrictions on Distributor contained in this Agreement.
This Agreement may be terminated by a party for cause immediately by written notice upon the occurrence of any of the following events:
i. If the other ceases to do business, or otherwise terminates it business operations or if there is a material change in control of the other; or
ii. If the other shall fail to promptly secure or renew any license, registration, permit, authorization or approval for the conduct of its business in the manner contemplated by this Agreement or if any such license, registration, permit, authorization or approval is revoked or suspended and not reinstated within sixty days; or
iii. If the other materially breaches any material provision of this Agreement and fails to substantially cure such breach within thirty days (ten days in the case of a failure to pay) of written notice describing the breach; or
iv. If the other becomes insolvent or seeks protection under any bankruptcy, receivership, trust deed, creditors arrangement, composition or comparable proceeding, or if any such proceeding is instituted against the other (and not dismissed within 90 days); or
v. If Distributor breaches any other agreement or contract with Company.
b. On termination or expiration of this Agreement for any reason whatsoever including, but not limited to, termination or expiration by passage of time or nonrenewal, the parties expressly agree that the following shall take effect: (i) all rights granted to Distributor under or pursuant to this Agreement shall immediately cease; (ii) all contracts and orders placed by Distributor for the Products and accepted, but not filled or delivered by Company as of the date of termination, shall be filled or delivered by Company subject to the terms and conditions of this Agreement; (iii) all contracts or orders for the Products not accepted by Company on or before the date of termination shall, at Company's sole option, be canceled; (iv) Distributor shall forthwith return to Company all promotional Sales information materials or demonstration products that have been furnished by Company to Distributor during the term of this Agreement, it being understood that no copies of these foregoing materials may be retained by Distributor subsequent to the date of termination or expiration of this Agreement; and (v) Company shall repurchase from Distributor, at the then fair market value in the Territory, any Products purchased from Company by Distributor for inventory or other purpose directly related to furthering the purposes of this Agreement.
c. Distributor acknowledges and expressly agrees that Company shall not be liable to Distributor, and Distributor hereby waives any claims for compensation or damages of any kind or character whatsoever, whether on account of the loss by Distributor of present or prospective compensation or anticipated compensation, or of expenditures, investments or commitments made either in connection therewith or in connection with the establishment, development or maintenance of establishment, development or maintenance of Distributor's business, or on account of any other cause or thing whatsoever.
d. Termination is not the sole remedy under this Agreement and, whether or not termination is affected, all other remedies will remain available.
The Products shall not be distributed for export nor sold to the end users for use outside the Territory. The parties further acknowledge and agree that all actions taken by the parties in furtherance of fulfillment of this Agreement shall be in full compliance with all applicable U.S. export control laws and regulations, as they are amended from time to time. The parties
recognize that such laws may require, among other things, applying for export licenses for the export of information ("Technical Data"). Failure to obtain such licenses or otherwise comply with such laws could subject the parties to criminal sanctions including imprisonment. It is further acknowledged that the export of Technical Data, including the Products, software, know-how and other proprietary information, is "deemed" by the U.S. government to be exported: (i) upon transmission from the United States; (ii) upon oral release by a U.S. citizen in a foreign country; or (iii) by release in the United States to non- U.S. nationals.
Except as otherwise expressly provided herein, any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or any particular instance and either retroactively or prospectively) only with the written consent of the parties.
This Agreement shall be governed by and construed under the laws of the State of Michigan and the United States without regard to conflicts of law provisions. Unless waived by Company in writing for the particular instance (which Company may do at its option), the sole jurisdiction and venue for actions related to the subject matter hereof shall be the State of Michigan and U.S. federal court for the Eastern District of Michigan. Both parties consent to the exhibit jurisdiction and venue of such courts and agree that process may be served in the manner provided herein for giving of notices or otherwise as allowed by Michigan or federal law. In any action or proceeding to enforce rights under this Agreement, the prevailing party shall be entitled to recover costs and reasonable attorneys' fees.
Neither party shall be liable under this Agreement for any loss or damage of any nature incurred as a result of any failures of delays in performance because of any cause or circumstances beyond its control. This includes, but is not limited to, any failure or delays in performance caused by any strikes, lockouts, labor disputes, fires, acts of God or the public enemy, riots, incendiaries, interference by civil or military authorities, compliance with the laws, orders or policies of any government authority, delays in transit or delivery on the part of transportation companies or failures of communication facilities or sources of raw materials. However, the party claiming a Force Majeure Event must notify the other in writing within ten days of the beginning of such an event, and no Force Majeure Event shall extend for a period of greater than 45 days.
Headings and captions are for convenience only and are not to be used in the
interpretation of this Agreement.
Any notices or other communications required or permitted hereunder shall
be in writing and shall be deemed sufficiently given if (i) delivered in person,
(ii) sent by recognized overnight courier, or (iii) by registered or certified
mail, postage prepaid, to the respective party at the address set out above or
to such other address any party shall have given notice in accordance with this
Section 23. Notices hand-delivered shall be deemed given the same day as
delivery-notices sent by overnight mail shall be deemed given the day following
delivery, and notices sent by mail shall be deemed given three business days
after the date posted, provided however, that any change of address shall be
effective only upon receipt.
This Agreement supersedes all proposals and agreements whether oral or written, all negotiations, conversations, or discussions between or among parties relating to the subject matter of this Agreement and all past dealing or industry custom.
If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid or unenforceable, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable.
The individuals executing this Agreement on behalf of Company and Distributor do each hereby warrant and represent that they respectively have been and are on the date of this Agreement duly authorized by all necessary or appropriate corporate action to execute this Agreement.
To facilitate execution, this Agreement may be executed in more than one counterpart, each of which shall constitute an original and all of which shall constitute one and the same Agreement.
Facsimile signatures to this Agreement shall be considered original signatures.
EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS AND LIABILITY AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL, BARGAINED-FOR BASES OF THIS AGREEMENT, AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND REFLECTED IN DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS AGREEMENT AND IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT.
SIGNATURE PAGE FOLLOWS.
EDISON DEVELOPMENT CORPORATION
(a Michigan corporation)
By: ____________________________________
Its: ____________________________________
"Distributor"
PLUG POWER, L.L.C.
(a Delaware limited liability company)
By its Managing Member:
By: ____________________________________
Its: ____________________________________
"Company"
Exhibit 1
"Products"
The Products made by the Company are a range of fuel cell systems that are capable of generating electricity through electrochemical reactions. The components comprising the fuel cell systems include, but are not limited to, one or more of the following whether used alone or in combination:
. A fuel processor that generates hydrogen gas and/or other gas(es).
. A fuel cell stack(s) that generates electricity through electrochemical reactions.
. An inverter system to convert direct current electricity to alternating current electricity.
. A system controller for operation of the fuel cell system or any component thereof.
. An energy storage system.
. A heat exchanger.
EXHIBIT 2 TO
DISTRIBUTION AGREEMENT
Authorized Trademarks
Pursuant to the Plug Power, L.L.C. Distribution Agreement ("Agreement") dated ________________, _____, between Plug Power, L.L.C. ("Company") and Mechanical Technology, Inc., ("Distributor"), it is further agreed, effective________________, 1997 (the "Exhibit 2 Effective Date"), that the Authorized Trademarks of Plug Power which the Agreement grants Distributor a non-exclusive nontransferable license to use consists of the following names and graphic representations thereof:
1 . "Plug Power, L.L.C."
2. Stylized Plug Power Logo
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH ASTERISKS.
This DISTRIBUTION AGREEMENT ("Agreement") is dated as of the 27th of September, 1999 and entered into by and between Plug Power, L.L.C., a limited liability company organized and existing under the laws of the State of Delaware ("Company"), with its principal place of business at 968 Albany-Shaker Road, Latham, New York 12110, and DTE Energy Technologies, Inc., a company organized and existing under the laws of the State of Michigan ("Distributor"), with its principal place of business at 37849 Interchange Drive, Farmington Hills, MI 48335.
BACKGROUND STATEMENTS
WHEREAS, the Company owns all right, title and interest in certain fuel cells with capacities of 2 kilowatts and higher, as is set out more fully in Exhibit 1; and
WHEREAS, Edison Development Corporation has assigned all of its right, title, and interest in a previous Distribution Agreement between Plug Power, L.L.C. and Edison Development Corporation, dated June 27, 1997, to DTE Energy Technologies, Inc., an entity that is 80% or more owned or controlled by an entity that is 80% or more owned or controlled by DTE Energy Company; and
WHEREAS, DTE Energy Technologies, Inc. (Distributor) has agreed in writing to all obligations and restrictions on Distributor contained in that Distribution Agreement as it may be amended from time to time; and
WHEREAS, the Distributor in consideration for and in reliance of the grant of the exclusive distributorship hereunder has or will expend considerable time and funds to establish a distribution network, plant and facilities and training its support and sales staff; and
WHEREAS, the parties desire Distributor to act in certain circumstances as Company's exclusive distributor for the Products to certain entities within the United States as hereinunder specified.
NOW THEREFORE, in consideration of the mutual covenants and agreements hereinunder set forth, and other good and valuable consideration the receipt and sufficiency of which is acknowledged, the parties agree as follows:
a. Upon execution of this Agreement, Company hereby appoints Distributor as Company's Exclusive independent distributor during the term of this Agreement to promote and assist Company in the sale of Products which are developed by Plug Power, to end-users for stationary applications in the Territory, as that term is defined below, and subject to the terms and conditions provided herein. For purposes of this Agreement, unless otherwise clear from the context, "Products" collectively means Pre-Commercial Product as specified on Exhibit 3 attached to this Agreement and Commercial Product as specified on Exhibit 4 attached to this Agreement.
b. When the Company develops a specification for a commercial version of a stationary, stand-alone product for a new market, Company shall endeavor to deliver the specifications to Distributor at least six months prior to expected commercial production of such product, and Company shall notify Distributor of the expected beginning date for commercial production. The term "stand-alone" shall mean a packaged system substantially ready for a specific end-user purpose, as opposed to a sub-system or component which is intended to be combined with other parts or components and then packaged as a system for a specific end-user purpose. Distributor shall develop a marketing plan for the new product, including sales estimates and expected minimum sales obligations within three months of the delivery of the specifications and share the marketing plan with Company on a
confidential basis. Upon presentation of the marketing plan to the Company the parties shall negotiate in good faith to determine a reasonable minimum sales obligation for the new product. Upon agreement to the minimum sales obligation, Exhibit 4 shall be amended to include the new product developed by Company. If commercial production begins less than three months after delivery of the specifications, and Distributor is unfairly prejudiced thereby in terms of ability to meet sales objectives as defined in the marketing plan, parties agree to adjust Distributor's sales obligations in a reasonable fashion.
c. Upon execution of this Agreement, Distributor hereby accepts the appointment, subject to the terms and conditions as provided herein.
a. Distributor's territory for this Agreement shall mean the states of Michigan, Ohio, Indiana and Illinois ("Territory").
b. Without the prior written consent of the Company, Distributor shall not solicit nor seek customers for the Products, or establish or maintain a branch facility or distribution facility for the sale, servicing, warehousing, or storage of the Products or spare parts thereof outside the Territory.
c. Distributor may appoint or contract with third parties (e.g., agents, distributors, sub-distributors) in connection with the marketing and sale of the Products and the provision of services within the Territory, so long as any compensation to such third parties shall be the sole responsibility of Distributor. Any such agent, distributor, or sub-distributor shall be subject to, and agree to be bound by, the applicable terms and conditions of this Agreement. If any anticipatory breach or any breach of the terms and conditions of this Agreement by such agents, distributors or sub-distributors is identified, Distributor will take all reasonable actions to rectify such anticipatory breach or breach of this Agreement.
d. Other than as expressly set forth in this Agreement, the Distributor and its agents, distributors, and sub-distributors shall not have any restrictions, in any manner, with respect to the resale of any Product acquired pursuant to this Agreement, including restrictions as to the price at which they may elect to resell any such Product.
e. DISTRIBUTOR MAY NOT SELL OR DISTRIBUTE THE PRODUCTS TO ANY ENTITY FOR TRANSPORTATION APPLICATIONS.
a. The term "Exclusive" means that under this Agreement as long as Distributor is in full compliance with its obligations, including the Minimum Sales Obligations set forth in Section 5 herein, Company shall not appoint any other distributor, agent, representative, or dealer for promotion or sale of the Products to end users for stationary applications in the Territory and shall further refrain from selling Products to end users for stationary applications in the Territory directly, other than through Distributor.
b. Company shall not be responsible for transgression of Distributor's exclusive rights hereunder by third parties not controlled by Company, but shall not sell or deliver Products to any other party outside of the Territory if Company has knowledge that the Products are to be sold or distributed by or through another party in the Territory.
c. Distributor shall not sell or deliver Products to any other party if Distributor has knowledge that the Products are to be sold or distributed by or through such party outside the Territory.
d. In the event that (i) Distributor is in default of its obligations under this Agreement, or (ii) after January 1, 2010, then Company retains the right, in addition to any other rights and remedies, to engage another distributor, dealer, agent, or other such representative on a nonexclusive basis for all or part of the Territory.
e. In the event that Distributor engages in the distribution of any fuel cell product to any third party (including agents, distributors, sub- distributors and end users) within the Territory that is competitive with the Products, then the Company retains the right, in addition to any other rights and remedies, to engage another distributor, dealer, agent, or other such representative on a nonexclusive basis for all or part of the Territory.
a. Performance specifications for Pre-Commercial Product and for Commercial Product are set forth on attached Exhibits 3 and 4, respectively. The purchase price for Commercial Product and replacement parts purchased by Distributor shall be [***], but nothing shall preclude the parties from mutually agreeing on a different price. [***] available to Distributor hereunder shall be on similar payment terms as to other distributors, customers or agents, including pricing to GE as defined in the existing Distributor Agreement with GE Fuel Cell Systems, L.L.C. dated February 2, 1999, and set forth in Schedule A, Terms and Conditions of Purchase/Sale, but shall not include pricing arrangements offered by Company to others involving the leasing or financing of the Products, revenue sharing, or other hybrid arrangements with Company's distributors, customers, or agents.
b. The Terms and Conditions for all orders for the Pre-Commercial Product and for Commercial Product shall be subject to all of the provisions set forth in this Section 4 and in Schedule A, and as otherwise negotiated between the parties.
a. A Product will be deemed ready for market at the time it meets the commercial Product specifications set forth in Exhibit 4. The parties anticipate commercial production to begin by January 1, 2001; provided, however, for purposes of this Agreement, commercial production shall be considered to have begun when the first such Product is shipped by Company for commercial installation and Company notifies Distributor the first commercial Product has been shipped.
Distributor shall have a Minimum Sales Obligation (subject to adjustments pursuant to sections 5.a, 5.c, and 7.g) of:
[***] units in 2001
[***] units in 2002
[***] units in 2003
If commercial production is delayed beyond January 1, 2001, the Minimum Sales Obligation shall be extended one month for each full or partial month of delay in the start of commercial production. Prior to October 1, 2003, the Parties shall negotiate in good faith to determine Minimum Sales Obligations for the following two years. If the Parties do not reach agreement on a Minimum Sales Obligation for any 12-month period, then Distributor must be one of the top three sellers of residential fuel cell systems in the Territory for such period, based on the dollar value of new units and replacement parts actually sold by Distributor. If Distributor fails to be one of the top three sellers in the Territory, as defined herein, then this Agreement shall automatically become nonexclusive.
A long-term lease shall be deemed a sale for the purposes of this sub- Section.
On the first business day of each month beginning three months prior to expected commercial production, Distributor will provide Company with a 12-month rolling forecast of monthly purchases for the period beginning 3 months hence. Each of the first 3 months of Distributor's forecast will be a firm order. Distributor's forecast for the final 9 months of each forecast period is for Company's planning purposes only. Distributor, at its sole discretion, may change the monthly purchase forecast in any month in the final 9-month forecast period by any amount.
b. Except as otherwise provided for in Sections 5.c and 5.d below, if Distributor fails to meet its Minimum Sales Obligation this Agreement shall automatically and without notice become nonexclusive, provided however, that such failure to meet the Minimum Sales Obligation shall not be the basis for default under, or the termination of, this Agreement. If Company cannot meet Distributor's shipment requirements as evidenced by valid purchase orders, the Company and Distributor will mutually agree to adjust the Minimum Sales Obligations accordingly.
c. Any failure of Distributor to meet its Minimum Sales Obligation in any year which is caused by Company's failure to deliver a competitive product (as defined below) shall not be grounds for Company to reduce or modify Distributor's distribution rights in any way. For the purposes of this Agreement, Distributor will consider the following factors, in good faith and as a whole, in determining whether the Products are competitive: (i) the wholesale price of Products is no more than 5% greater than such price for non-Company manufactured PEM fuel cell systems; (ii) the lifetime end user cost per kWh generated by the Products is no more than 5% greater than that for non-Company manufactured PEM fuel cell systems, where end user cost per kWh will be calculated as the wholesale price plus installation, lifetime operations and maintenance cost, divided by the kWh consumption over the operating life; (iii) the Product's emissions (NOx and CO measured in parts per million), noise (in Db), and size (in cubic feet) are no more than 10% greater than that for non- Company manufactured PEM fuel cell systems; and (iv) the Product's reliability is no more than 5% worse than that for non-Company manufactured PEM fuel cell systems.
d. If Distributor fails to meet its Minimum Sales Obligation, Company
will notify Distributor of that fact within 90 days of the end of the calendar
year for which Distributor fails to meet its Minimum Sales Obligation. However,
if Distributor's total sales exceed [***] of the Minimum Sales Obligation set
forth above for any of the years 2001, 2002, or 2003, or as adjusted per Section
5.a, Company shall not name an additional distributor. For example, if
Distributor achieves greater than [***] of the Minimum Sales Obligation for the
year 2001, Company may not name an additional Distributor. This provision shall
apply only one time during the first three years, such that if it applies to
sales in 2001, it shall not apply to sales in 2002 or 2003; and if it applies to
sales in 2002, it shall not apply to sales in 2003.
e. Distributor agrees to purchase, on a take-or-pay basis, a minimum of
[***] Test and Evaluation Units at a cost of [***] each, provided they are
shipped prior to December 31, 1999. Distributor further agrees to purchase
[***] Pre-Commercial Products at a cost of [***] each for the first
[***] and [***] each for the remaining [***], provided they are shipped
at least five (5) months prior to the shipment of the first commercial unit.
Distributor represents and warrants, to Company (its members, agents, officers, directors) and agrees:
a. To use its best efforts to market and sell Products and provide services within the Territory. Distributor shall maintain, at its own expense, such office space and facilities, and hire and train such personnel as Distributor may deem necessary to carry out its obligations under the Agreement.
b. During the term of this Agreement to use its best efforts to achieve the Minimum Sales Obligation as defined and specified in Section 5 of this Agreement.
c. Except as otherwise provided in this Agreement, to bear all expenses associated with Distributor's marketing and sale of Pre-Commercial and Commercial Product and the provision of services under this Agreement.
d. To spend a minimum of [***] on technical research and marketing during the period beginning January 1, 1999 and ending July 1, 2001 or six (6) months following commercial production, whichever comes later. No later than one (1) year prior to expected commercial production, Distributor shall prepare for confidential review by Company a marketing and services development schedule which will include milestones and objective measures of progress toward the January 1, 2001 Product release. Distributor shall make available to Company on a confidential basis all market and product intelligence gathered as a result of its research and marketing, as related to the sale and use of the Products, including but not limited to product applications, customer response, and customer demand.
e. In conjunction with Company's obligations in Section 7.f, Distributor shall be responsible for the administration and field work necessary to obtain any regulatory approvals for Distributor to conduct its operations in the Territory. Distributor shall provide assistance to the Company in order to assist Company in complying with registration requirements in the Territory, obtain such other approvals from governmental authorities of the Territory as may be necessary to comply with any and all governmental laws, regulations, and orders that may be applicable to Distributor by reason of the execution of this Agreement, and assist Company in taking those actions necessary for Distributor to be registered as Company's independent distributor with any governmental authority. Without limiting the foregoing, Distributor shall furnish Company with such documentation as Company may request to confirm Distributor's compliance with this Section, and Distributor agrees that it shall not engage in any course of conduct that would cause Company to be in violation of the laws of any jurisdiction within the Territory. Distributor shall comply fully with, and shall be solely responsible for all safety standards, health code requirements and regulations, specifications, and other requirements imposed by law, regulation, or order in the Territory and applicable to the marketing and sale of the Products and to the provision of services provided by Distributor.
f. Not to (i) disassemble, decompile or otherwise reverse engineer the Product or otherwise attempt to learn the ideas underlying the Product; (ii) take any action contrary to Company's license granted to Distributor, except as expressly and unambiguously allowed under this Agreement; (iii) copy, modify or enhance the Product; or (iv) allow others to do any of the foregoing.
g. To advertise and promote the Products labeled with Company's name and trademarks ("Branding Materials"). Distributor shall provide Company with all such Branding Materials for Company's approval prior to their use. Company shall not unreasonably withhold its approval of the Branding Materials. Distributor shall not design the Branding Materials in such a way as to either imply or state that Distributor's relationship with Company is other than that of an independent distributor.
h. TO KEEP COMPANY INFORMED AS TO ANY PROBLEMS ENCOUNTERED WITH THE PRODUCTS AND ANY RESOLUTIONS ARRIVED AT FOR THOSE PROBLEMS, AND TO COMMUNICATE PROMPTLY TO COMPANY ANY AND ALL MODIFICATIONS, DESIGN CHANGES OR IMPROVEMENTS OF
THE PRODUCT SUGGESTED BY ANY CUSTOMER, EMPLOYEE OR AGENT. DISTRIBUTOR FURTHER AGREES THAT COMPANY SHALL HAVE AND IS HEREBY ASSIGNED ANY AND ALL RIGHT, TITLE AND INTEREST IN AND TO ANY SUCH SUGGESTED MODIFICATIONS, DESIGN CHANGES, OR IMPROVEMENTS OF THE PRODUCT, WITHOUT THE PAYMENT OF ANY ADDITIONAL CONSIDERATION THEREFOR EITHER TO DISTRIBUTOR, OR ITS EMPLOYEES, AGENTS OR CUSTOMERS. DISTRIBUTOR WILL ALSO PROMPTLY NOTIFY COMPANY OF ANY INFRINGEMENT OF ANY TRADEMARKS OR OTHER PROPRIETARY RIGHTS RELATING TO THE PRODUCT.
i. To carry out all sales promotion work and solicitation of sales for
the Products diligently, using its reasonable efforts for the account of
Company. These efforts shall include, but shall not in any way be limited to:
(i) advertising and promoting the Products effectively and requiring its
distributors or sub-distributors to do the same; (ii) ordering and keeping a
representative selection of Company's up-to-date promotional sales literature,
technical bulletins, price lists, manuals, catalogues and other promotion
materials in good condition; (iii) maintaining the equipment and facilities to
enable Distributor to demonstrate the Products to potential new customers; and
(iv) assisting Company in securing and protecting any property rights in
connection with the Products in the Territory.
j. To not make any representations as to the Products other than those, if any, contained in written information and data provided by Company. Distributor shall be totally responsible for any of its representations and shall hold Company harmless from any claims and expenses, including, but not limited to, reasonable attorneys' fees, resulting from such unauthorized representations.
k. To not manufacture the Products, nor engage any entity other than Company to do so.
a. Company shall supply Distributor with copies of brochures, catalogues, technical specification sheets, and promotional sales literature and such other information or materials as Company, in its judgment, reasonably believes will assist Distributor in promoting and assisting in the sale and acceptance of the Products in the Territory. These items shall be conveyed in English, unless the parties otherwise agree from time to time. Company shall, at its expense, provide Distributor with reasonable amounts of technical materials (e.g., drawings, schematics, installation manuals, operating procedures, available marketing materials, field test results, training materials) and available information regarding Product applications and customer demand pertaining to the Products as are requested by Distributor from time to time. All such information and materials will be furnished in the English language.
b. Company shall notify Distributor of any material changes in or affecting the Products, projected delivery dates and schedule changes that may reasonably be expected to affect the obligations of Distributor hereunder; provided, that no such notification shall relieve Company of any of its obligations hereunder.
c. Company shall, if required by Distributor, provide Distributor with reasonable access to and assistance of its technical support personnel. Such assistance shall be without charge to Distributor except as may be otherwise mutually agreed.
d. Company shall maintain in effect at all times product liability insurance with policy limits as described in Exhibit 5 attached hereto, as such Exhibit may be revised from time to time upon the mutual agreement of Company and Distributor, and Distributor shall be named as an additional insured to each such policy. In the event Company cannot obtain such insurance on commercially reasonable terms, Company shall notify Distributor, and Distributor may terminate the Agreement.
e. If Company is contacted, or has been contacted, by third parties concerning the possible purchase of Products by customers in the Territory, Company will use its best efforts to refer such persons to the Distributor, provided Company has not named any additional or replacement distributor in the Territory in accordance with this Agreement.
f. Company shall comply with all registration requirements in the Territory that are applicable to the Company, obtain such other approvals from governmental authorities of the Territory as may be necessary to comply with any and all governmental laws, regulations, and orders that may be applicable to Company by reason of the execution of this Agreement, and take those actions necessary for Distributor to be registered as Company's independent distributor with any governmental authority. At Distributor's request, Company shall perform all tests for all certifications (regulatory or otherwise) required to certify use of the Products sold by Distributor for stand-alone and/or grid- connected stationary power applications. Without limiting the foregoing, Company shall furnish Distributor with such documentation as Distributor may request to confirm Company's compliance with this Section; and Company agrees that it shall not engage in any course of conduct that would cause Distributor to be in violation of the laws of any jurisdiction within the Territory.
g. Company will use its best efforts to maintain a minimum annual Product production required to fill any of Distributor's firm purchase orders; provided that Distributor is in compliance with this Agreement and proceeds to develop the infrastructure necessary to market, sell, and provide services to the volume of Products equal to the Distributor's Minimum Sales Obligations. If Company is unable to maintain annual Product production required to fill Distributor's firm purchase orders, Company will ship a pro rata share of Product to Distributor, based on Distributor's firm purchase orders, as compared to firm purchase orders from other distributors.
h. Company shall comply fully with, and shall be solely responsible for, all safety standards, health code requirements and regulations, specifications, and other requirements imposed by law, regulation, or order in the Territory, that are applicable to the design, manufacturing, and testing of the Products and the provision of services by Company. Company shall establish and maintain a program, to the mutual satisfaction of the Company and Distributor, in order to create ongoing product design, manufacturing, testing, inspection, and other safety and quality-related processes that are adequate to assure the safety and reliability of Company's Products.
i. Company shall include the name of Distributor in its Internet home page.
The detailed operations of the Distributor under this Agreement are subject to its sole control and management, subject to compliance with the terms hereof. Distributor shall be responsible for all of its own expenses and employees. Distributor agrees that it shall incur no expense chargeable to Company except as may be specifically authorized, in advance, in writing, in each case by Company nor shall any such expenses, including taxes, fees, or similar charges, be deducted from any amounts due hereunder.
a. Company grants to Distributor a non-exclusive, non-transferable license to use trademark(s) described in Exhibit 2 to this Agreement ("Authorized Trademarks") only in connection with the sale and promotion of the Products in the Territory and during the term of and pursuant to the terms and conditions of the Agreement. No trademark, trade name or other designations may be used without the written consent of Company except as expressly provided in this section. Company expressly allows Distributor to represent that it is a distributor of the Products, including on the Products themselves, advertising materials, stationary and letterhead. Company further
expressly allows Distributor to co-brand the Products, so long as Company branding and trading policies are not otherwise violated.
b. Distributor shall not assign or sub-license its rights to the Authorized Trademarks to any other person or entity, except to agents, distributors or sub-distributors. Any such assignment or sub-license to use Authorized Trademarks to an agent, distributor or sub-distributor is subject to the approval of Company, which approval shall not be unreasonably withheld. Company shall have the right to control the nature and quality of the Distributor's or sub-licensee's use of an Authorized Trademark to protect Company's rights in the Authorized Trademarks.
c. Distributor shall not remove, change, obscure, or add to the labels, markings, names or trademarks that Company has affixed to any of the Products.
d. Distributor shall not register, or attempt to register any of the Authorized Trademarks in any jurisdiction without the express consent of Company.
e. Distributor acknowledges and agrees that Company's remedy at law for any breach of Company's obligations under this paragraph would be inadequate, and agrees and consents that temporary and permanent injunctive relief may be granted in any action or proceeding which may be brought to enforce any provision hereof without the necessity of proof of actual damages.
a. Without the prior written consent of Company, Distributor shall not disclose to any third party any confidential business information or trade secrets of Company, including but not limited to: the content of this Agreement; customer lists; product specifications; product technical manuals; service records; financial or sales reports; price lists; and any materials related to Company's customers, financial performance, or design of the Products, except for or in connection with any assignments permitted under Sections 2.c and 15 hereof.
b. Distributor hereby acknowledges and agrees that the Products are proprietary to Company. Distributor agrees to use utmost diligence to protect the trade secrets and other proprietary rights of Company in the Products from disclosure to third parties. Distributor shall also promote compliance with the terms and conditions of this Agreement by employees and others with access to the Products.
c. Distributor acknowledges and agrees that Company's remedy at law for any breach of Company's obligations under this paragraph would be inadequate, and agrees and consents that temporary and permanent injunctive relief may be granted in any action or proceeding which may be brought to enforce any provision hereof without the necessity of proof of actual damages.
d. Distributor's obligations under this confidentiality provision shall survive termination or expiration of this Agreement.
Distributor expressly agrees that it shall not be entitled to any commissions, fees, discounts or other compensation if facts are known to Company that reasonably support a belief that Distributor is in violation of any of the terms and conditions of paragraph 17 of this Agreement.
a. Company will convey clear title to all Products to Distributor as provided hereunder; Company warrants and represents that all Products sold pursuant to this Agreement will be free from all material defects in workmanship and material, and that the Products are provided in strict accordance with the specifications set forth in Exhibits 3 and 4. Except as provided by this Agreement, any attempt by the Company to limit, disclaim, or restrict any such warranties or any remedies of Distributor, except as limited by this Agreement, by acknowledgement or otherwise, in accepting or performing an order, shall be null, void, and ineffective without Distributor's written consent. For Commercial Product purchased under this Agreement, the foregoing warranties shall apply for a period of the lesser of [***] months from the date of installation or [***] months from delivery from Company to the Distributor or Distributor's sub-distributors. For Pre-Commercial Product purchased under this Agreement, the foregoing warranties shall apply for a period of the lesser of [***] from the date of installation or [***] months from delivery from Company to the Distributor or Distributor's sub- distributors. For any component product purchased by the Company with a warranty in excess of the terms described above, the Company shall make such extended warranty coverage available to the Distributor for the relevant component. The foregoing warranties are conditioned upon (a) proper storage, handling, transportation, installation, use, repair, and maintenance, and conformance with any reasonable recommendations of the Company; and (b) Distributor promptly notifying the Company of any defects and, if required, promptly making the Commercial Product or Pre-Commercial Product available for correction. The foregoing warranties are provided at no cost to the Distributor or the Distributor's customers.
If any Product fails to meet the foregoing warranties during the warranty
periods set forth above, the Company shall correct any such failure by either
(a) repairing the defective Product, or (b) replacing the defective Product at
its sole option. All costs associated with such repair or replacement,
including transportation costs, shall be the sole responsibility of the Company,
subject to the limitations set forth in the service agreement described in the
next paragraph.
Distributor will provide the labor, transportation, and other services necessary for such repairs and replacements pursuant to a Service Agreement that will be mutually agreed upon between Company and Distributor. Such Service Agreement shall contain terms and conditions not less favorable to Distributor than the terms and conditions of similar service agreements with other distributors of Company's Products. Distributor and Company will negotiate the terms and conditions of the Service Agreement in good faith. If such Service Agreement is not agreed to by July 1, 2000, then this Agreement shall become non-exclusive unless the parties otherwise mutually agree. The Service Agreement will set forth limits on Company's reimbursement to Distributor for labor, transportation, and other services. The Service Agreement will also set forth a warranty approval process that will include pre-approval of major warranty claims prior to commencement of work by the Distributor, submission of all warranty claims for review and approval by the Company, and return of all parts subject to warranty claims to the Company.
For Commercial Product, Company will provide Distributor with the option of purchasing an extension to the initial warranty period. Such additional warranty will be for [***] years beyond the termination of the initial warranty period, and will cover [***]. The price for such warranty extension, if purchased, is expected to be a maximum of [***] for Commercial Product purchased during the first [***] of commercial production, and [***] for Commercial Product purchased thereafter, to be paid as a lump sum at the time of purchase. The Company may increase the price for warranty
extensions by a commercially reasonable amount if, in the good faith judgement of the Company, such increase is necessary based on prototype testing and repair experience.
For Pre-Commercial Product, Company will provide Distributor with the option of purchasing an extension to the initial warranty period. Such additional warranty will be for [***] beyond the termination of the initial warranty period, and Company will provide a firm price no later than October 1, 1999.
THE WARRANTIES SET FORTH IN THIS SECTION ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER ORAL, WRITTEN, EXPRESS, OR IMPLIED, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE COMPANY'S WARRANTY OBLIGATIONS AND DISTRIBUTOR'S REMEDIES UNDER THIS SECTION ARE SOLELY AND EXCLUSIVELY AS STATED HEREIN.
b. The above warranty does not extend to any Product that is modified or altered, is not maintained to Company's maintenance recommendations, is operated in a manner other than that specified by Company, has its serial number removed or altered or is treated with abuse, negligence or other improper treatment (including, without limitation, use outside the recommended environment).
c. Distributor may extend its own product warranty to its customers provided Distributor alone shall be responsible to such customer thereof and neither Distributor nor such customer shall have recourse against Company with respect thereto. Distributor hereby agrees to indemnify and hold Company harmless from any and against all claims, actions, losses, damages, costs, liabilities and expenses (including reasonable attorney's fees) based upon any express or implied warranty made by Distributor to any customer.
EXCEPT AS SET FORTH IN SECTION 12, COMPANY WILL NOT BE LIABLE TO DISTRIBUTOR OR THIRD PARTY WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY, OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY AMOUNTS IN EXCESS IN THE AGGREGATE, OF THE AMOUNTS PAID TO COMPANY HEREUNDER DURING THE TWELVE-MONTH PERIOD PRIOR TO DATE THE CAUSE OF ACTION AROSE OR (II) ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS OR BUSINESS OPPORTUNITIES) OR (III) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY, OR SERVICES. COMPANY SHALL HAVE NO LIABILITY FOR ANY FAILURE OR DELAY DUE TO MATTERS BEYOND ITS REASONABLE CONTROL.
The parties hereto expressly understand and agree that Distributor is an independent contractor in the performance of each and every part of this Agreement, is solely responsible for all of its employees and agents and its labor costs and expenses arising in connection therewith and is responsible for and will indemnify, defend and hold Company harmless from any and all claims, liabilities, damages, debts, settlements, costs, attorneys' fees, expenses, and liabilities of any type whatsoever that may arise on account of Distributor's activities, or those of its employees or agents, including, without limitation, providing unauthorized representations or warranties (or failing to disclose all limitations on warranties and liabilities set forth herein on behalf of Company) to its customers or breaching any term, representation or warranty of this Agreement. Company is in no manner associated with or otherwise connected with the actual performance of this Agreement on the part of Distributor, nor with Distributor's employment of other persons or incurring of other expenses. Except as expressly provided herein, Company shall have no right to exercise any
control whatsoever over the activities or operations of Distributor.
a. This Agreement may be terminated by a party for cause immediately by written notice upon the occurrence of any of the following events:
i. If the other ceases to do business, or otherwise terminates it business operations or if there is a material change in control of the other; or
ii. If the other shall fail to promptly secure or renew any license, registration, permit, authorization or approval for the conduct of its business in the manner contemplated by this Agreement or if any such license, registration, permit, authorization or approval is revoked or suspended and not reinstated within sixty days; or
iii. If the other materially breaches any material provision of this Agreement and fails to substantially cure such breach within thirty days (ten days in the case of a failure to pay) of written notice describing the breach; or
iv. If the other becomes insolvent or seeks protection under any bankruptcy, receivership, trust deed, creditors arrangement, composition or comparable proceeding, or if any such proceeding is instituted against the other (and not dismissed within 90 days); or
v. If Distributor breaches any other agreement or contract with Company, and the breach is not cured within thirty days of written notice describing the breach.
b. On termination or expiration of this Agreement for any reason whatsoever including, but not limited to, termination or expiration by passage of time or nonrenewal, the parties expressly agree that the following shall take effect: (i) all rights granted to Distributor under or pursuant to this Agreement shall immediately cease; (ii) all contracts and orders placed by Distributor for the Products and accepted, but not filled or delivered by Company as of the date of termination, shall be filled or delivered by Company subject to the terms and conditions of this Agreement; (iii) all contracts or orders for the Products not accepted by Company on or before the date of termination shall, at Company's sole option, be canceled; (iv) Distributor shall forthwith return to Company all promotional Sales information materials or demonstration products that have been furnished by Company to Distributor during the term of this Agreement, it being understood that no copies of these foregoing materials may be retained by Distributor subsequent to the date of termination or expiration of this Agreement; and (v) Company shall repurchase from Distributor, at the then fair market
value in the Territory, any Products and replacement parts purchased from Company by Distributor for inventory or other purpose directly related to furthering the purposes of this Agreement.
c. Distributor acknowledges and expressly agrees that Company shall not be liable to Distributor, and Distributor hereby waives any claims for compensation or damages of any kind or character whatsoever, whether on account of the loss by Distributor of present or prospective compensation or anticipated compensation, or of expenditures, investments or commitments made either in connection therewith or in connection with the establishment, development or maintenance of establishment, development or maintenance of Distributor's business, or on account of any other cause or thing whatsoever.
d. Termination is not the sole remedy under this Agreement and, whether or not termination is affected, all other remedies will remain available.
The Products shall not be distributed for export nor sold to the end users for use outside the Territory. The parties further acknowledge and agree that all actions taken by the parties in furtherance of fulfillment of this Agreement shall be in full compliance with all applicable U.S. export control laws and regulations, as they are amended from time to time. The parties recognize that such laws may require, among other things, applying for export licenses for the export of information ("Technical Data"). Failure to obtain such licenses or otherwise comply with such laws could subject the parties to criminal sanctions including imprisonment. It is further acknowledged that the export of Technical Data, including the Products, software, know-how and other proprietary information, is "deemed" by the U.S. government to be exported: (i) upon transmission from the United States; (ii) upon oral release by a U.S. citizen in a foreign country; or (iii) by release in the United States to non-U.S. nationals.
Except as otherwise expressly provided herein, any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or any particular instance and either retroactively or prospectively) only with the written consent of the parties.
This Agreement shall be governed by and construed under the laws of the State of Michigan and the United States without regard to conflicts of law provisions. Unless waived by Company in writing for the particular instance (which Company may do at its option), the sole jurisdiction and venue for actions related to the subject matter hereof shall be the State of Michigan and U.S. federal court for the Eastern District of Michigan. Both parties consent to the exhibit jurisdiction and venue of such courts and agree that process may be served in the manner provided herein for giving of notices or otherwise as allowed by Michigan or federal law. In any action or proceeding to enforce rights under this Agreement, the prevailing party shall be entitled to recover costs and reasonable attorneys' fees.
Neither party shall be liable under this Agreement for any loss or damage of any nature incurred as a result of any failures of delays in performance because of any cause or circumstances beyond its control. This includes, but is not limited to, any failure or delays in performance caused by any strikes, lockouts, labor disputes, fires, acts of God or the public enemy, riots, incendiaries, interference by civil or military authorities, compliance with the laws, orders or policies of any government authority, delays in transit or delivery on the part of transportation companies or failures
of communication facilities or sources of raw materials. However, the party claiming a Force Majeure Event must notify the other in writing within ten days of the beginning of such an event, and no Force Majeure Event shall extend for a period of greater than 45 days.
Headings and captions are for convenience only and are not to be used in the interpretation of this Agreement.
Any notices or other communications required or permitted hereunder shall
be in writing and shall be deemed sufficiently given if (i) delivered in person,
(ii) sent by recognized overnight courier, or (iii) by registered or certified
mail, postage prepaid, to the respective party at the address set out above or
to such other address any party shall have given notice in accordance with this
Section 22. Notices hand-delivered shall be deemed given the same day as
delivery-notices sent by overnight mail shall be deemed given the day following
delivery, and notices sent by mail shall be deemed given three business days
after the date posted, provided however, that any change of address shall be
effective only upon receipt.
This Agreement supersedes all proposals and agreements whether oral or written, all negotiations, conversations, or discussions between or among parties relating to the subject matter of this Agreement and all past dealing or industry custom.
If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid or unenforceable, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable.
The individuals executing this Agreement on behalf of Company and Distributor do each hereby warrant and represent that they respectively have been and are on the date of this Agreement duly authorized by all necessary or appropriate corporate action to execute this Agreement.
To facilitate execution, this Agreement may be executed in more than one counterpart, each of which shall constitute an original and all of which shall constitute one and the same Agreement.
Facsimile signatures to this Agreement shall be considered original signatures.
EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS AND
LIABILITY
AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL, BARGAINED-FOR BASES OF THIS AGREEMENT, AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND REFLECTED IN DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS AGREEMENT AND IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT. SIGNATURE PAGE FOLLOWS.
DTE ENERGY TECHNOLOGIES, INC.
(a Michigan corporation)
PLUG POWER, L.L.C.
(a Delaware limited liability company)
By its Managing Member:
EXHIBIT 1
The Products made by the Company are a range of fuel cell systems that are capable of generating electricity through electrochemical reactions. The components comprising the fuel cell systems include, but are not limited to, one or more of the following whether used alone or in combination:
. A fuel processor that generates hydrogen gas and/or other gas(es).
. A fuel cell stack(s) that generates electricity through electrochemical reactions.
. An inverter system to convert direct current electricity to alternating current electricity.
. A system controller for operation of the fuel cell system or any component thereof.
. An energy storage system.
. A heat exchanger.
EXHIBIT 2
Authorized Trademarks
1. "Plug Power"
Stylized Plug Power Logo
EXHIBIT 3
Pre-Commercial Product
Company Specifications
Packaging:
PCP product design will be complete to the point where interfaces between major components (e.g., stack, reformer, inverter, etc.) will be similar to that of the final Product.
Certifications (e.g., UL, NFPA, AGA, FCC Class B) are not required for the PCPs. However, PCPs must meet any customary local codes and regulations required for field testing by Distributor's Customers. To the extent the test site required preparation to meet local codes, any site improvements will be at the Customer's expense.
Basic technology of all major PCP components will be the same as that of the Commercial Product; however, suppliers and manufacturers of the major components need not be the same as those for the Commercial Product.
PCPs must be shipped with sufficient documentation (e.g., installation drawings, operating manuals, repair guides) to allow for start-up and Service by individuals with a skill level comparable to a typical HVAC technician, after such individual has completed the Company training program or a training program approved by Company.
PCPs must be provided in strict accordance with samples, drawings, and/or designs provided by Company and approved in writing by Company and Distributor.
Company will make available by telephone to Distributor and its sub- distributors PCU technical support during Company's normal business hours. Company will also establish a 24-hour telephone number to accommodate emergency calls from Distributor and its sub-distributors.
Company will prepare all PCPs to allow for standard commercial shipment (e.g., truck, rail, cargo ship) to Customer locations.
PCPs will be designed to accommodate remote monitoring and diagnostics ("RM&D") equipment (e.g., modems, data collection/storage). RM&D equipment will be provided, installed, and operated at Distributor's or its Customers' expense. At a minimum, the PCP control system will allow the RM&D equipment to monitor the following parameters:
Current System Status
Output Power
Voltage
Current
Others - TBD*
Plug Power assumed the following in developing the specifications set forth below:
Natural gas line pressure at [***] of water or greater; and Average system usage of [***] kWh/year.
-------------------------------------------------------------------------------------------------
Specification PCP
-------------------------------------------------------------------------------------------------
kW output rating 7kW continuous, [***] operating design point,
[***]
all outputs [***]
-------------------------------------------------------------------------------------------------
Voltage/frequency [***]
-------------------------------------------------------------------------------------------------
Operating design point efficiency (i.e., [***]
efficiency at [***] kW output)
-------------------------------------------------------------------------------------------------
Continuous output efficiency (i.e., [***]
efficiency at 7kW output)
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Phase [***]
-------------------------------------------------------------------------------------------------
Fuel capability [***] [***]
unless notified by DISTRIBUTOR in
writing 12 months prior to PCP delivery)
-------------------------------------------------------------------------------------------------
|
-------------------------------------------------------------------------------------------------
Allowable fuel contaminants Must be able to operate on [***]
For NG:
Sulfur ___ TBD*
Alkalis ___ TBD*
Water ___ TBD*
Nitrogen ___ TBD*
Non-Methane Hydrocarbons ____ TBD*
Methane ___ TBD*
For LPG: _______ TBD*
For Methanol: _______ TBD*
-------------------------------------------------------------------------------------------------
System make up water requirements Must be able to operate on [***]
Iron (PPM maximum) ___ TBD*
Calcium (PPM maximum) ___ TBD*
Chlorine (PPM maximum) ____ TBD*
Particulate (PPM maximum) ___ TBD*
Other ______ (PPM maximum) ____ TBD*
-------------------------------------------------------------------------------------------------
Noise ____ dBa (TBD*) [***]
____ dBa (TBD*) [***]
-------------------------------------------------------------------------------------------------
|
-------------------------------------------------------------------------------------------------
Operating environment requirements Must be able to operate [***]
Humidity
Maximum ____% TBD*
Minimum ____% TBD*
Salt in Air
Maximum ____% TBD*
Minimum ____% TBD*
Particulate (e.g., pollen)
Maximum ____% TBD*
Minimum ____% TBD*
Other Cathode contaminant(s) (e.g.,
hydrocarbon vapor)
Maximum ____% TBD*
Minimum ____% TBD*
-------------------------------------------------------------------------------------------------
Emissions - TBD*
NOx (NG) ____/____ (maximum/target)
CO (NG) ____/____ (maximum/target)
NOx (LPG) ____/____ (maximum/target)
CO (LPG) ____/____ (maximum/target)
NOx (Methanol) ____/____ (maximum/target)
CO (Methanol) ____/____ (maximum/target)
-------------------------------------------------------------------------------------------------
Ambient temperature range [***]
-------------------------------------------------------------------------------------------------
Altitude [***]
-------------------------------------------------------------------------------------------------
Power conditioning system [***]
-------------------------------------------------------------------------------------------------
Overload [***] [***]
-------------------------------------------------------------------------------------------------
|
-------------------------------------------------------------------------------------------------
Harmonics Harmonics at 7.0 kW continuous operation to
satisfy [***] for harmonic voltages.
Harmonics at [***] of non linear connected load
[***].
-------------------------------------------------------------------------------------------------
Power quality (isolated)
-------------------------------------------------------------------------------------------------
Voltage, steady state (up to 7.0 [***]
kW continuous)
-------------------------------------------------------------------------------------------------
Voltage, transient (up to overload [***]
rating)
-------------------------------------------------------------------------------------------------
Control [***]
-------------------------------------------------------------------------------------------------
Communications [***] or similar as needed to establish
communications links
-------------------------------------------------------------------------------------------------
Grid connection Suitable for isolated operation (via
a transfer switch) in a grid-connected site.
-------------------------------------------------------------------------------------------------
|
MTB stack replacement TBD*
[***]
MTB system (i.e., PEM Fuel Cell- TBD*
Powered Generator Set) failure
-------------------------------------------------------------------------------------------------
Performance degradation (e.g., TBD*
efficiency, output) [***]
-------------------------------------------------------------------------------------------------
Non-fuel O&M ($/year up to first stack TBD*
replacement) at [***] kWh/year
-------------------------------------------------------------------------------------------------
Product life with prescribed routine TBD*
maintenance (including stack [***]
replacement) at less than [***] kWh/year
---------------------------------------------------------------------------------------------
|
* COMPANY and DISTRIBUTOR will mutually agree to the specific values for these areas no later than October 1, 1999 (e.g., based on TEU lab and field- testing).
EXHIBIT 4
Commercial Product
Company Specifications
Product package size and weight must be suitable for installation indoor or outside of a typical single family residence within the Territory.
Commercial Product, including packaging, must be compliant with all requisite standards (e.g., UL, NFPA, AGA, FCC Class B, CE) within the Territory. To the extent the installation site requires preparation to meet local codes, any site improvements will be at the Customer's expense.
Products will be capable of interconnection to the electrical system of a typical single family residence; provided however that the Product will operate isolated from the grid with the use of transfer switch ("stand-alone operation"). The transfer switch will, in the event that the Product fails or is interrupted, transfer the household load from the Product back to the utility grid within no more than [***].
Should it be determined that the Distributor's Customers require an interconnection scheme other than stand-alone operation (e.g., grid parallel), Distributor and Company will jointly set the requirements of the new interconnection scheme. To the extent the new interconnection scheme results in an increase in Company's Product cost, Company will adjust Distributor's transfer price proportionately.
Products must be in compliance with any applicable installation requirements within the Territory.
Products must be shipped with sufficient documentation (e.g., installation drawings, operating manuals, repair guides) to allow for start-up and Service by individuals with a skill level comparable to a typical HVAC technician, after such individual has completed the Company training program or a training program approved by Company.
Products must be shipped with documentation sufficient for an average homeowner to perform routine maintenance.
Products must be provided in strict accordance with samples, drawings, and/or designs provided by Company and approved in writing by Company and Distributor.
Company will make available by telephone to Distributor and its sub- distributors Product technical support during Company's normal business hours. Company will also establish a 24-hour telephone number to accommodate emergency calls from Distributor and its sub-distributors.
Company will prepare all Products to allow for standard commercial shipment (e.g., truck, rail, cargo ship) to Customer locations.
Products will be designed to accommodate remote monitoring and diagnostics (RM&D) equipment (e.g., modems, date collection/storage). RM&D equipment will be provided, installed, and operated at Distributor's or its Customers' expense. At a minimum, the Product control system will allow the RM&D equipment to monitor the following parameters:
Current System Status
Output Power
Voltage
Current
Others - TBD*
Natural gas line pressure at [***] or greater; and Average system usage of [***].
--------------------------------------------------------------------------------------------------
Specification Product
--------------------------------------------------------------------------------------------------
kW output rating 7kW continuous, [***] operating design point,
[***]
all outputs [***]
--------------------------------------------------------------------------------------------------
Voltage/frequency [***]
--------------------------------------------------------------------------------------------------
Operating design point efficiency (i.e., [***]
efficiency at [***] output)
--------------------------------------------------------------------------------------------------
Continuous output efficiency (i.e., [***]
efficiency at 7kW output)
--------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------
Phase [***]
--------------------------------------------------------------------------------------------------
Fuel capability [***]
--------------------------------------------------------------------------------------------------
Allowable fuel contaminants Must be able to operate on [***]
For NG:
Sulfur ___ TBD*
Alkalis ___ TBD*
Water ___ TBD*
Nitrogen ___ TBD*
Non-Methane Hydrocarbons ____ TBD*
Methane ___ TBD*
For LPG: _______ TBD*
For Methanol: _______ TBD*
--------------------------------------------------------------------------------------------------
System make up water requirements Must be able to operate on [***]
--------------------------------------------------------------------------------------------------
Iron (PPM maximum) ___ TBD*
Calcium (PPM maximum) ___ TBD*
Chlorine (PPM maximum) ____ TBD*
Particulate (PPM maximum) ___ TBD*
Other(s) ______ (PPM maximum) ____ TBD*
--------------------------------------------------------------------------------------------------
Noise ____ dBa (TBD*) [***]
____ dBa (TBD*) [***]
--------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------
Operating environment requirements Must be able to operate [***]
Humidity
maximum ____% TBD*
minimum ____% TBD*
Salt in Air
maximum ____% TBD*
minimum ____% TBD*
Particulate (e.g., pollen)
maximum ____% TBD*
minimum ____% TBD*
Other Cathode contaminant(s) (e.g.,
hydrocarbon vapor)
maximum ____% TBD*
minimum ____% TBD*
--------------------------------------------------------------------------------------------------
Emissions - TBD*
NOx (NG) ____/____ (maximum/target)
CO (NG) ____/____ (maximum/target)
NOx (LPG) ____/____ (maximum/target)
CO (LPG) ____/____ (maximum/target)
NOx (Methanol) ____/____ (maximum/target)
CO (Methanol) ____/____ (maximum/target)
--------------------------------------------------------------------------------------------------
Ambient temperature range [***]
--------------------------------------------------------------------------------------------------
Altitude [***]
--------------------------------------------------------------------------------------------------
Power conditioning system [***]
--------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------
Overload [***] [***]
--------------------------------------------------------------------------------------------------
Harmonics Harmonics at 7.0 kW continuous operation to
satisfy [***] for harmonic voltages. Harmonics
at [***] of non linear connected load will be
subject to [***].
--------------------------------------------------------------------------------------------------
Power quality (isolated)
--------------------------------------------------------------------------------------------------
Voltage, steady state (up to 7.0 kW [***]
continuous load)
--------------------------------------------------------------------------------------------------
Voltage, transient (up to overload rating) [***]
--------------------------------------------------------------------------------------------------
Control [***] or similar as needed to establish
communication links.
--------------------------------------------------------------------------------------------------
Communications
[***]
--------------------------------------------------------------------------------------------------
Grid Connection Suitable for isolated operation (via a transfer
switch) in a grid-connected site.
--------------------------------------------------------------------------------------------------
MTB stack replacement [***]
--------------------------------------------------------------------------------------------------
MTB system (i.e., PEM Fuel Cell- TBD*
Powered Generator Set) failure [***]
--------------------------------------------------------------------------------------------------
Performance degradation (e.g., TBD*
efficiency, output ) [***]
--------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------
Non-fuel O&M ($/year up to first stack TBD*
replacement) at [***] kWh/year -----------
Labor Hours: [***]
Labor Rate: [***]
Total Labor: [***]
Materials: [***]
--------------------------------------------------------------------------------------------------
Product life with prescribed routine TBD*
maintenance (including stack ([***])
replacement) [***] kWh/year)
--------------------------------------------------------------------------------------------------
|
* COMPANY and DISTRIBUTOR will mutually agree to the specific values for these areas no later than June 1, 2000 (e.g., based on PCP lab and field testing).
SCHEDULE A
TERMS AND CONDITIONS OF PURCHASE/SALE
1. PRICES AND PAYMENTS. Company's total price is FOB Company's designated, continental U.S. manufacturing facility, unless otherwise agreed in writing by Company and Distributor. All prices are exclusive of any applicable federal, state or local sales, use, excise, or other similar taxes, provided, however, that any such taxes to which Company becomes subject as a result of manufacturing, having manufactured, or procuring Commercial Product or Pre- Commercial Product, shall be borne by Company. No extra charges of any kind will be allowed unless specifically agreed to in writing by Distributor. Unless otherwise agreed between Company and Distributor, payments shall become due 45 days from receipt of invoice. In the event of delay in payment, Distributor will pay Company a late fee equal to the lesser of [***], or [***], of any unpaid balance per month of delay or [***]. Distributor must make payment when due, without offset, deduction, or counterclaim, regardless of any claim by Distributor.
2. DELIVERY AND PASSAGE OF TITLE. Time is of the essence on all purchase orders, except that delivery dates will be framed in terms of calendar months and orders will not be deemed late until after the end of such calendar month. If Company fails to deliver the Commercial Product or Pre-Commercial Product or to complete any services furnished hereunder, then Distributor shall be entitled, in addition to the remedies available elsewhere under the Agreement, to assess an amount, as liquidated damages for delay, equal to [***] of the total dollar value of Distributor's order for the first month of delay and [***] of the total dollar value of Distributor's order per subsequent month of delay; provided, (a) that such remedy will be capped at [***], (b) if the order is more than three months late, then Distributor may cancel the order, and (c) such liquidated damages will only be available to Distributor for those orders to the extent that Distributor has provided such remedy to its Customer. Company agrees that such amounts are a reasonable pre-estimate of the damages which Distributor may suffer as a result of such delay, and are to be assessed as liquidated damages and not as a penalty. Where such liquidated damages are available to Distributor, they shall be Distributor's only remedy for Company's failure to make timely delivery, other than the remedies for non-performance expressly set forth in this Agreement.
Commercial Product or Pre-Commercial Product which will be shipped from within the United States for delivery within the United States shall be delivered FOB Company's designated, continental U.S. manufacturing facility, unless otherwise agreed in writing by Company and Distributor. Commercial Product or Pre-Commercial Product delivered to Distributor in advance of schedule may be returned to Company at Company's expense. Title shall pass to Distributor upon delivery to Distributor FOB Company's designated, continental U.S. manufacturing facility.
3. CHANGES. The Distributor may at any time, in writing, request changes within the general scope of a purchase order in (a) specifications, where the Commercial Product or Pre-Commercial Product to be furnished are to be specifically manufactured in accordance therewith, (b) method of shipment or packing, or (c) place and time of delivery. Any such change shall be authorized only by an amendment executed by Company and Distributor, with such amendment to specify any additional expense, to be borne by Distributor.
4. INSPECTION. (a) All Commercial Product and Pre-Commercial Product
shall be subject to inspection and test by Distributor at reasonable times and
places upon reasonable notice, including the place of manufacture (which Company
shall use reasonable efforts to arrange, including providing for such access in
Company's purchase orders to the manufacturer); (b) If any inspection or test is
made on the premises of Company, then Company, without additional charge, shall
provide reasonable facilities and assistance for the safety and convenience of
inspectors in the performance of their duties, provided that the inspectors must
execute Company's standard confidentiality agreement, must abide by such
facility's rules and regulations, and must be covered by insurance for
occurrences other than due to Company's negligence or willful misconduct; and
(c) Company shall provide and maintain a program in order to create ongoing
product design, manufacturing, testing, inspection, and other safety and
quality-related processes that are adequate to assure the safety and reliability
of Company's Commercial Product and Pre-Commercial Product (the "Product Quality
and Safety Assurance Program"). Records of all inspection work by Company shall
be kept complete and available to Distributor during the performance of a
purchase order and for three (3) years from the date of such inspection.
Company will allow representatives of Distributor access to the facilities
involved in performing an order for purposes of reviewing the status and
progress of
production.
5. REJECTION. If any of the Commercial Product, Pre-Commercial Product or
services (to the extent that Company is providing services) ordered are found by
Distributor within [***] of delivery to be defective, or otherwise not in
conformity with the requirements of the order, including any applicable
specifications, Company, at its option and sole discretion may: (a) instruct
Distributor to return such goods at Company's expense; (b) request that
Distributor, with Distributor's written approval, take such actions as may be
required to cure all defects and/or bring the Commercial Product or Pre-
Commercial Product into conformity with all requirements, in which event any
reasonable costs and expenses thereby incurred by Distributor, including
material and handling charges, will be at Company's expense; and (c) re-perform,
at Company's own expense, any defective portion of the services performed, to
the extent that Company is supplying services. Distributor must notify Company
in writing of such defect or non-conformity within [***] after delivery of the
Commercial Product or Pre-Commercial Product or performance of services, if
applicable, or Distributor's rights under this Section 5 shall be waived. The
remedies in this Section 5 shall be Distributor's exclusive remedies under this
Section 5.
Products (Commercial Units)
--------------------------------------------------------------------------------
COMPANY'S
estimated
Cumulative # of
direct cost Price to units
# of units per unit
DISTRIBUTOR per purchased by
Lot # in Lot (US$) unit(US$)
GEFCS
--------------------------------------------------------------------------------
1 [***] [***] [***] [***]
2 [***] [***] [***] [***]
3 [***] [***] [***] [***]
4 [***] [***] [***] [***]
5 [***] [***] [***] [***]
6 [***] [***] [***] [***]
7 [***] [***] [***] [***]
8 [***] [***] [***] [***]
9 [***] [***] [***] [***]
10 [***] [***] [***] [***]
11 [***] [***] [***] [***]
12 [***] [***] [***] [***]
13 [***] [***] [***] [***]
14 [***] [***] [***] [***]
15 [***] [***] [***] [***]
16 [***] [***] [***] [***]
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Note: All numbers have been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 under the Securities Act].
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Prices shown are for the Products as specified in EXHIBIT 4. Any modification to the EXHIBIT 4 specification requested by Distributor that result in a change to the Company's direct cost will cause Distributor's price to change by an equal amount.
EXHIBIT 5
COMPANY'S INSURANCE
Company shall maintain in effect at all times during the Term of this Agreement products liability insurance as set forth on the following certificate, with Distributor named as additional insured.
(See Attached)
EXHIBIT 10.33
PLUG POWER INC.
1999 STOCK OPTION AND INCENTIVE PLAN
The name of the plan is the Plug Power Inc. 1999 Stock Option and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable the officers, employees, Independent Directors and other key persons (including consultants) of Plug Power Inc. (the "Company") and its Subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company's welfare will assure a closer identification of their interests with those of the Company, thereby stimulating their efforts on the Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Administrator" is defined in Section 2(a).
"Award" or "Awards," except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock Awards, Unrestricted Stock Awards, Performance Share Awards and Dividend Equivalent Rights.
"Board" means the Board of Directors of the Company.
"Cause" means, except as provided in an individual agreement or by the Committee, a vote of the Board of Directors resolving that the participant should be dismissed as a result of (i) any material breach by the participant of any agreement to which the participant and the Company are parties, (ii) any act (other than retirement) or omission to act by the participant which may have a material and adverse effect on the business of the Company or any Subsidiary or on the participant's ability to perform services for the Company or any Subsidiary, including, without limitation, the commission of any crime (other than ordinary traffic violations), or (iii) any material misconduct or neglect of duties by the participant in connection with the business or affairs of the Company or any Subsidiary.
"Change of Control" is defined in Section 17.
"Code" means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in Section 2.
"Covered Employee" means an employee who is a "Covered Employee" within the meaning of Section 162(m) of the Code.
"Deferred Stock Award" means Awards granted pursuant to Section 8.
"Dividend Equivalent Right" means Awards granted pursuant to Section 12.
"Effective Date" means the date on which the Plan is approved by stockholders as set forth in Section 19.
"Incentive Stock Option" means any Stock Option designated and qualified as an "incentive stock option" as defined in Section 422 of the Code.
"Independent Director" means a member of the Board who is not also an employee of the Company or any Subsidiary.
"Initial Public Offering" means the first fully underwritten, firm commitment public offering pursuant to an effective registration statement under the Act, other than on Forms S-4 or S-8 or their then equivalents, covering the offer and sale by the Company of its Stock.
"Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock Option.
"Option" or "Stock Option" means any option to purchase shares of Stock granted pursuant to Section 5.
"Performance Share Award" means Awards granted pursuant to Section 10.
"Performance Cycle" means one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more performance criteria will be measured for the purpose of determining a participant's right to and the payment of a Performance Share Award, Restricted Stock Award or Deferred Stock Award.
"Restricted Stock Award" means Awards granted pursuant to Section 7.
"Stock" means the Common Stock, par value $0.01 per share, of the Company, subject to adjustments pursuant to Section 3.
"Stock Appreciation Right" means any Award granted pursuant to Section 6.
"Subsidiary" means any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company if each of the corporations or entities (other than the last corporation or entity in the unbroken chain) owns stock or other interests possessing 50 percent or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.
"Unrestricted Stock Award" means any Award granted pursuant to Section 9.
(i) to select the individuals to whom Awards may from time to time be granted;
(ii to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock Awards, Performance Share Awards and Dividend Equivalent Rights, or any combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered by any Award;
(iv) to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which
terms and conditions may differ among individual Awards and participants, and to approve the form of written instruments evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all or any portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend at any time the period in which Stock Options may be exercised;
(vii) to determine at any time whether, to what extent, and under what circumstances distribution or the receipt of Stock and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the participant and whether and to what extent the Company shall pay or credit amounts constituting interest (at rates determined by the Administrator) or dividends or deemed dividends on such deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan participants.
thereafter, 16.4 percent of any net increase since the preceding July 1 or January 1, as the case may be, in the total number of shares of Stock actually outstanding; plus (iii) shares of Stock underlying awards under the Plug Power, L.L.C. Membership Option Plan which are forfeited, cancelled, reacquired by the Company, satisfied without the issuance of Stock or otherwise terminated (other than be exercise) from time to time. Notwithstanding the foregoing, the maximum number of shares of Stock for which Incentive Stock Options may be issued under the Plan shall not exceed 2,561,002. For purposes of this limitation, the shares of Stock underlying any Awards which are forfeited, cancelled, reacquired by the Company, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) shall be added back to the shares of Stock available for issuance under the Plan. Subject to such overall limitation, shares of Stock may be issued up to such maximum number pursuant to any type or types of Award; provided, however, that from and after the date the Company becomes subject to the provisions of Section 162(m) of the Code, Stock Options or Stock Appreciation Rights with respect to no more than 500,000 shares of Stock may be granted to any one individual participant during any one calendar year period. The shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company and held in its treasury.
The Administrator may also adjust the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if it is determined by the Administrator
that such adjustment is appropriate to avoid distortion in the operation of the Plan, provided that no such adjustment shall be made in the case of an Incentive Stock Option, without the consent of the participant, if it would constitute a modification, extension or renewal of the Option within the meaning of Section 424(h) of the Code.
Participants in the Plan will be such full or part-time officers and other employees, Independent Directors and key persons (including consultants and prospective employees) of the Company and its Subsidiaries as are selected from time to time by the Administrator in its sole discretion.
Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a "subsidiary corporation" within the meaning of Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non- Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after August 16, 2009.
under this Section 5(a) shall terminate ten years from the date of grant (subject to the five year limitation in the next sentence); provided, however, that if such employee ceases to be an employee for Cause, such rights shall terminate immediately on the date on which he ceases to be an employee. If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation and an Incentive Stock Option is granted to such employee, the term of such option shall be no more than five years from the date of grant.
(A) In cash, by certified or bank check or other instrument acceptable to the Administrator;
(B) Through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the optionee on the open market or that have been beneficially owned by the optionee for at least six months and are not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date;
(C) By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or
(D) By the optionee delivering to the Company a promissory note if the Board has expressly authorized the loan of funds to the optionee for the purpose of enabling or assisting the optionee to effect the exercise of his Stock
Option; provided that at least so much of the exercise price as represents the par value of the Stock shall be paid other than with a promissory note.
Payment instruments will be received subject to collection. The delivery of certificates representing the shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Stock Option or applicable provisions of laws. In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of shares attested to.
(A) Unless otherwise determined by the Administrator, an Option granted under Section 5(c) shall be exercisable in full as of the grant date. The rights of an Independent Director in an Option granted under this Section 5(c) shall terminate ten years from the date of grant; provided, however, that if the
Independent Director ceases to be a member of the Board for Cause, such rights shall terminate immediately on the date on which he ceases to be a member of the Board.
(B) Options granted under this Section 5(c) may be exercised only
by written notice to the Company specifying the number of shares to be
purchased. Payment of the full purchase price of the shares to be
purchased may be made by one or more of the methods specified in
Section 5(a)(iv). An optionee shall have the rights of a stockholder
only as to shares acquired upon the exercise of a Stock Option and not
as to unexercised Stock Options.
A Stock Appreciation Right or applicable portion thereof granted in tandem with a Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Option.
(i) Stock Appreciation Rights granted in tandem with Options shall be exercisable at such time or times and to the extent that the related Stock Options shall be exercisable.
(ii) Upon exercise of a Stock Appreciation Right, the applicable portion of any related Option shall be surrendered.
(iii) All Stock Appreciation Rights shall be exercisable during the participant's lifetime only by the participant or the participant's legal representative.
shall have the right to repurchase Restricted Stock that has not vested at the time of termination at its original purchase price, from the participant or the participant's legal representative.
Equivalent Rights with respect to the phantom stock units underlying his Deferred Stock Award, subject to such terms and conditions as the Administrator may determine.
Notwithstanding anything to the contrary contained herein, if any Restricted Stock Award, Deferred Stock Award or Performance Share Award granted to a Covered Employee is intended to qualify as "Performance-based Compensation" under Section 162(m) of the Code and the regulations promulgated thereunder (a "Performance-based Award"), such Award shall comply with the provisions set forth below:
right to deduct any such taxes from any payment of any kind otherwise due to the participant. The Company's obligation to deliver stock certificates to any participant is subject to and conditioned on tax obligations being satisfied by the participant.
For purposes of the Plan, the following events shall not be deemed a termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee's right to re- employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing.
The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the holder's consent. If and to the extent determined by the Administrator to be required by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code or to ensure that compensation earned under Awards qualifies as performance-based compensation under Section 162(m) of the Code, if and to the extent intended to so qualify, Plan amendments shall be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders. Nothing in this Section 15 shall limit the Administrator's authority to take any action permitted pursuant to Section 3(c).
With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a participant, a participant shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion,
the Administrator may authorize the creation of trusts or other arrangements to meet the Company's obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.
Upon the occurrence of a Change of Control as defined in this Section 17:
(a) Except as otherwise provided in the applicable Award agreement, each outstanding Stock Option and Stock Appreciation Right shall automatically become fully exercisable.
(b) Except as otherwise provided in the applicable Award Agreement, conditions and restrictions on each outstanding Restricted Stock Award, Deferred Stock Award and Performance Share Award which relate solely to the passage of time and continued employment will be removed. Performance or other conditions (other than conditions and restrictions relating solely to the passage of time and continued employment) will continue to apply unless otherwise provided in the applicable Award Agreement.
(c) "Change of Control" shall mean the occurrence of any one of the following events:
(i) any "Person," as such term is used in Sections 13(d) and 14(d) of the Act (other than (w) the Company, (x) any of its Subsidiaries, (y) any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its Subsidiaries, or (z) either of Edison Development Corporation, a Michigan corporation or Mechanical Technology Incorporated, a New York corporation), together with all "affiliates" and "associates" (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 25 percent or more of the combined voting power of the Company's then outstanding securities having the right to vote in an election of the Company's Board of Directors ("Voting Securities") (in such case other than as a result of an acquisition of securities directly from the Company); or
(ii) persons who, as of the Effective Date, constitute the Company's Board of Directors (the "Incumbent Directors") cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the Effective Date shall be considered an Incumbent Director if such person's election was approved by or such person was nominated for election by either (A) a vote of at least a majority of the Incumbent Directors or (B) a vote of at least a majority of the Incumbent Directors who are members of a nominating
committee comprised, in the majority, of Incumbent Directors; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director; or
(iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than 50 percent of the voting shares of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any) (other than the merger of Plug Power, L.L.C. with and into the Company), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company.
No shares of Stock shall be issued pursuant to an Award until all applicable securities law and other legal and stock exchange or similar requirements have been satisfied. The Administrator may require the placing of such stop-orders and restrictive legends on certificates for Stock and Awards as it deems appropriate.
This Plan shall become effective upon approval by the holders of a majority of the votes cast at a meeting of stockholders at which a quorum is present or by written consent of stockholders. Subject to such approval by the stockholders and to the requirement that no Stock may be issued hereunder prior to such approval, Stock Options and other Awards may be granted hereunder on and after adoption of this Plan by the Board.
This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware, applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: August 16, 1999
DATE APPROVED BY STOCKHOLDERS: August 16, 1999
EXHIBIT 10.34
PLUG POWER INC.
EMPLOYEE STOCK PURCHASE PLAN
The purpose of the Plug Power Inc. Employee Stock Purchase Plan ("the Plan") is to provide eligible employees of Plug Power Inc. (the "Company") and certain of its subsidiaries with opportunities to purchase shares of the Company's common stock, par value $0.01 per share (the "Common Stock"). One million (1,000,000) shares of Common Stock in the aggregate have been approved and reserved for this purpose. The Plan is intended to constitute an "employee stock purchase plan" within the meaning of Section 423(b) of the Internal Revenue Code of 1986, as amended (the "Code"), and shall be interpreted in accordance with that intent.
and November 1 and will end on the last business day occurring on or before the following October 31 and April 30, respectively. The Administrator may, in its discretion, designate a different period for any Offering, provided that no Offering shall exceed six months in duration or overlap any other Offering.
eligible. Notwithstanding the foregoing, participation in the Plan will neither be permitted nor be denied contrary to the requirements of the Code.
remainder of the Offering, but may enroll in a subsequent Offering in accordance with Section 4.
Notwithstanding the foregoing, no employee may be granted an Option hereunder if such employee, immediately after the Option was granted, would be treated as owning stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Parent or Subsidiary (as defined in Section 11). For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of an employee, and all stock which the employee has a contractual right to purchase shall be treated as stock owned by the employee. In addition, no employee may be granted an Option which permits his rights to purchase Common Stock under the Plan, and any other employee stock purchase plan of the Company and its Parents and Subsidiaries, to accrue at a rate which exceeds $25,000 of the Fair Market Value of Common Stock (determined on the option grant date or dates) for each calendar year in which the Option
is outstanding at any time. The purpose of the limitation in the preceding sentence is to comply with Section 423(b)(8) of the Code.
The term "Compensation" means the amount of base pay, prior to salary reduction pursuant to either Section 125 or 401(k) of the Code, but excluding overtime, commissions, incentive or bonus awards, allowances and reimbursements for expenses such as relocation allowances or travel expenses, income or gains on the exercise of Company stock options, and similar items.
The term "Designated Subsidiary" means any present or future Subsidiary (as defined below) that has been designated by the Board to participate in the Plan. The Board may so designate any Subsidiary, or revoke any such designation, at any time and from time to time, either before or after the Plan is approved by the stockholders.
The term "Fair Market Value of the Common Stock" on any given date means the fair market value of the Common Stock determined in good faith by the Administrator; provided, however, that if the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), NASDAQ National Market or national securities exchange, the determination shall be made by reference to market quotations. If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations.
The term "Parent" means a "parent corporation" with respect to the Company, as defined in Section 424(e) of the Code.
The term "Subsidiary" means a "subsidiary corporation" with respect to the Company, as defined in Section 424(f) of the Code.
having been a Designated Subsidiary, ceases to be a Designated Subsidiary, then such employee will be deemed to have terminated employment for this purpose.
The Plan shall be governed by Delaware law except to the extent that such law is preempted by federal law.
DOCSB\603624.3
EXHIBIT 10.36
This Registration Rights Agreement (this "Agreement") is entered into as of November __, 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").
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:
The parties hereby agree as follows:
As used in this Agreement, the following terms have the following meanings:
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).
(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
securityholders, (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 ten
(10) business days before the filing of any Registration Statement with respect
thereto. If within five (5) business 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
thereof), 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 the Selling Stockholders (including Registrable Securities proposed to be sold by the Holders) 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) 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 by each 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).
(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.
(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 thereto 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 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 under which they were made, not misleading.
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, or (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, except insofar as 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, 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 a Registration Statement under this Agreement or otherwise and shall survive the termination of this Agreement.
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 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.
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 or any other equitable consideration provided for 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.
If to the Company: Plug Power Inc. 968 Albany-Shaker Road Latham, New York 12110 Attention: General Counsel Facsimile No.: 518-782-7914
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.
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.
[Remainder of Page Intentionally Left Blank]
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.
REGISTRATION RIGHTS AGREEMENT
HOLDER SIGNATURE PAGE
EDISON DEVELOPMENT CORPORATION
Title:
Address for Notice:
MECHANICAL TECHNOLOGY INCORPORATED
Title:
Address for Notice:
GE ON-SITE POWER, INC.
Title:
Address for Notice:
Address for Notice:
ANTEAUS ENTERPRISES, INC.
Title:
Address for Notice:
ANTEAUS RETIREMENT BENEFITS PLAN [2]
Title:
Address for Notice:
Address for Notice:
HOLDER NUMBER OF SHARES ------ ---------------- Edison Development Corporation 13,704,315 Mechanical Technology Incorporated 13,704,315 GE On-Site Power, Inc. 5,250,000 Michael J. Cudahy 1,840,000 Southern California Gas Company 1,350,000 Antaeus Enterprises [1] Antaeus Enterprises [2] [299,850] Kevin Linsey 60,000 |
DOCSC\803966.1
Exhibit 10.37
FORM OF REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and entered into as of August __, 1999, by and among PLUG POWER, L.L.C., a Delaware limited liability company ("PP, LLC"), and GE ON-SITE POWER, INC., a Delaware corporation ("GEOSP").
WHEREAS:
A. PP, LLC originally was formed in June 1997 as a Delaware limited liability company. Upon effectiveness of PP, LLC's proposed initial public offering (the "IPO"), PP, LLC will merge (the "Merger") into a newly formed Delaware corporation ("PP, Inc.") and all of PP, LLC's outstanding Class A membership interests (the " Class A Interests") will be converted on a one-for- one basis into shares of common stock of PP, Inc. (the "Common Stock").
B. GEOSP currently owns an aggregate of 2,250,000 shares of Class A Interests and an option (the "Option") to purchase an additional 3,000,000 shares of Class A Interests at a price of $12.50 per share. Pursuant to the terms of the Agreement dated of even date herewith (the "Exercise Agreement") by and among PP, LLC, GEOSP, GE Power Systems business of General Electric Company, a New York corporation, and GE Fuel Cell Systems, L.L.C., a Delaware limited liability company, GEOSP has agreed to exercise the Option concurrently with or prior to the IPO. As a result, upon effectiveness of the Merger, the Class A Interests then owned by GEOSP (including the 3,000,000 shares issuable upon exercise of the Option) will be converted into an aggregate of 5,250,000 shares of common stock. As used herein, the term "Shares" shall mean, for periods prior to the Merger, the 5,250,000 shares of Class A Interests owned by GEOSP (including the shares of Class A Interests issued or issuable upon exercise of the Option) and, for periods after the Merger, shall mean the 5,250,000 shares of Common Stock issued to GEOSP in exchange for its Class A Interests in connection with the Merger (including such shares issued in connection with the exercise of the Option). Further, the term "PP" shall mean, for periods prior to the Merger, PP, LLC, and, for periods after the Merger, PP, Inc.
C. To induce GEOSP to execute and deliver the Exercise Agreement, PP 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, PP and GEOSP hereby agree as follows:
a. As used in this Agreement, the following terms shall have the following meanings:
i. "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.
ii. "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 pursuant to Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous basis ("RULE 415"), and the declaration or ordering of effectiveness of such Registration Statement by the United States Securities and Exchange Commission (the "SEC").
iii. "REGISTRATION PERIOD" means, with regard to any Investor and the shares of Registrable Securities then held by such Investor, that period beginning on the first anniversary of the closing date of the IPO and ending on the date on which such shares of Regisitrable 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 result in the termination of the Registration Period applicable to other Investors.
iv. "REGISTRABLE SECURITIES" means (A) the Shares and (B) any other shares of Class A Interests or Common Stock, as the case may be, now held or hereafter acquired by GEOSP or any other entity that controls, is controlled by or is under common control with GEOSP, and (C) any Class A Interests or Common Stock issued or issuable with respect to Registrable Securities by reason of a stock dividend or stock split or connection with a confirmation of shares, recapitalization, merger, consolidation or other reorganization.
v. "REGISTRATION STATEMENT" means a registration statement of PP under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Exercise Agreement.
(i) If, at any time during the Registration Period, either (A) Investors holding at least 25% of the Registrable Securities then outstanding or (B) GEOSP, propose to dispose of, pursuant to a Long Form Registration Statement (as defined below) (whether or not PP is eligible to use a Short Form Registration Statement (as defined below)), all or part of their shares of the Registrable Securities, then such Investors or GESOP may request PP in writing to effect such registration under the 1933 Act, stating the form of registration statement under the 1933 Act to be used, the number of shares of Registrable Securities to be disposed of and the intended method(s) of disposition of such shares. The term "LONG FORM REGISTRATION STATEMENT" shall mean a registration statement on Form S-1, Form S-2, Form SB-1 or Form SB-2, or any similar or successor form of registration statement adopted by the SEC from and after the date hereof. The term "SHORT FORM REGISTRATION STATEMENT" shall mean a registration statement on Form S-3 or any similar or successor form of registration statement adopted by the SEC from and after the date hereof.
(ii) Notwithstanding the foregoing, if at any time at which PP is entitled to file a registration statement on a Short Form Registration Statement, either (A) Investors who propose to dispose of, pursuant to a Short Form Registration Statement, shares of Registrable Securities which such Investors in their good faith discretion determine would have an anticipated aggregate offering price of at least $100,000 or (B) GEOSP, proposes to dispose of all or part of its Registrable Securities pursuant to a Short Form Registration Statement, then such Investors or GESOP may request PP in writing to effect such registration on a Short Form Registration Statement, 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 Section 2.(a)(i) or (ii) are referred to herein as the "INITIATING HOLDERS".
(iii) Upon receipt of a request pursuant to Section 2(a)(i) or
(ii) above, PP shall give prompt written notice thereof to all other Investors
who hold Registrable Securities. Upon receipt of such request, PP shall
promptly effect the registration under the 1933 Act of all shares of Registrable
Securities specified in the requests of the Initiating Holders and the 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 PP
all to the extent requisite to permit the disposition (in accordance with the
intended methods of disposition) of the Registrable Securities to be registered.
immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the right hereunder 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 PP 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 PP, 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 Class A Interests or Common Stock included in such underwritten offering.
(ii) If a Piggyback Registration becomes a Cutback Registration, PP will include in such registration to the extent of the amount of the securities which the managing underwriter advises PP can be sold in such offering:
and any securities so excluded shall be withdrawn from and shall not be included in such Piggyback Registration.
In connection with the registration of the Registrable Securities, PP shall have the following obligations:
a. PP 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 pursuant to Rule 415 at all times until the
earlier of (i) the date as of which all Investors with Registrable Securities
included in the Registration Statement may sell all of their Registrable
Securities without restriction pursuant to Rule 144(k) promulgated under the
1933 Act, 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 PP when it
has sold all of its Registrable Securities.
b. PP 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 at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of PP 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. PP 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 PP, 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), PP shall furnish to the counsel of GEOSP each letter written by or on
behalf of PP 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 PP has sought confidential treatment).
e. PP 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, (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 Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or
f. In the event GEOSP selects underwriters for the offering, PP 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. PP 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, PP shall notify GEOSP of the happening of any event, of which PP 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 use its best efforts promptly to 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. PP 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, 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.
i. PP 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. PP 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 PP's fiscal quarter next following the effective date of the Registration Statement.
k. At the request of GEOSP, PP 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 PP'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 PP 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. PP 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
m. PP shall hold in confidence and not make any disclosure of information concerning GEOSP provided to PP 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. PP 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.
n. PP shall use its best efforts either to (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 PP are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules 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.
o. PP 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. PP 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, PP 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. PP shall take all other reasonable actions necessary to expedite and facilitate disposition by GEOSP of Registrable Securities pursuant to the Registration Statement.
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 PP 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 PP 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 PP may reasonably request. At least five (5) days
prior to the first anticipated filing date of the Registration Statement, PP
shall notify GEOSP in writing of the information PP requires from GEOSP if it
elects to have any of its Registrable Securities included in the Registration
Statement.
b. GEOSP by its acceptance of the Registrable Securities agrees to cooperate with PP as reasonably requested by PP in connection with the preparation and filing of the Registration Statement hereunder, unless GEOSP has notified PP 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 PP 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 PP 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 PP, GEOSP shall deliver to PP (at
the expense of PP) or destroy (and deliver to PP 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.
In the event any Registrable Securities are included in a Registration Statement under this Agreement:
a. To the extent permitted by law, PP 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
PP 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 PP 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 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, PP 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 reasonable
expenses 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 PP 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 PP 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 PP 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 PP; and (iv) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of PP, 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.
c. PP 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.
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. PP 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.
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 PP to the public without registration ("RULE 144"), PP 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 PP under the 1933 Act and the 1934 Act so long as PP remains subject to such requirements (it being understood that nothing herein shall limit PP's obligations under the Exercise Agreement) 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 PP that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of PP and such other reports and documents so filed by PP, and (iii) such other information as may be reasonably requested to permit GEOSP to sell such securities pursuant to Rule 144 without registration.
The rights to have PP 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 PP within a reasonable time after such assignment,
(ii) PP is, within a reasonable time after such 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 PP receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with PP to be
bound by all of the provisions contained herein, (v) such transfer shall have
been made in accordance with the applicable requirements of the Exercise
Agreement, and (vi) 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), the transferee agrees to pay all its reasonable expenses of
amending or supplementing such Registration Statement to reflect such
assignment.
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 PP and GEOSP. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon GEOSP and PP.
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 PP receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, PP shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.
If to PP: Plug Power, L.L.C.
968 Albany-Shaker Road
Latham, New York 12110
Attn: Mr. Gary Mittleman
Telecopy: (518) 782-7884
With a copy to:
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Attn: __________________________________
Telecopy:_______________________________
12
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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:
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Attn:
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Telecopy:
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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 and the Exercise Agreement constitute 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 and the Exercise Agreement supersede 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.
i. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed as of day and year first above written.
By:________________________ Name:______________________ Its:_______________________
GE ON-SITE POWER, INC.
By:________________________
Name:______________________
Its:_______________________
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 (File No. 333-86089) of our report dated April 9, 1999 relating to the financial statements of Plug Power LLC (a development stage enterprise), which appear in such Registration Statement. We also consent to the references to us under the headings "Experts" and "Selected Historical Financial Data" in such Registration Statement.
PricewaterhouseCoopers LLP
Albany, New York
October 26, 1999
EXHIBIT 99.2
Pursuant to Rule 438 of the Securities Act of 1933, I, General John M. Shalikashvili hereby consent to being named as a nominee for Director in the Registration Statement on Form S-1 being filed by Plug Power Inc. on or about October 21, 1999, and any amendments thereto.
By: /s/ John M. Shalikashvili
---------------------------------
General John M. Shalikashvili
Date: October 25, 1999
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