As
Filed with the Securities and Exchange Commission on September 2,
2005.
REGISTRATION
NO. 333-_________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
______________________________________
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
FUELCELL
ENERGY, INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
(State
or Other Jurisdiction of Incorporation or Organization)
06-0853042
(I.R.S.
Employer Identification Number)
Jerry
D. Leitman
President
FuelCell
Energy, Inc.
3
Great Pasture Road
Danbury,
Connecticut 06813
(203)
825-6000
(Address,
Including Zip Code, and Telephone Number, Including Area Code,
of
Registrant’s Principal Executive
Offices)
Copies
of
All Communications to:
Richard
A. Krantz, Esq.
Robinson
& Cole LLP
Financial
Centre
695
East Main Street
Stamford,
Connecticut 06904
(203)
462-7500
Approximate
Date of Commencement of Proposed Sale to the Public: From time to time after
the
effective date of this registration statement.
If
the
only securities being registered on this form are being offered pursuant
to
dividend or interest reinvestment plans, please check the following box.
[_]
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, other
than securities offered in connection with dividend or interest reinvestment
plans, check the following box. [x].
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
delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [_]
CALCULATION
OF REGISTRATION FEE
|
Title
of Each Class of Securities
to
Be Registered
|
|
|
Amount
To
Be
Registered
|
|
|
Proposed
Maximum
Offering
Price
Per Share
|
|
|
Proposed
Maximum
Aggregate
Offering
Price
|
|
|
Amount
of
Registration
Fee
|
|
|
Debt
Securities
Preferred
Stock, $0.01 par value(4)
Common
Stock, $0.0001 par value(5)
|
|
$
|
150,000,000(1)(2)
|
|
|
100%(1)
(2)
|
|
$
|
150,000,000(3)
|
|
$
|
17,655.00
|
|
|
5%
Series B Cumulative Convertible Perpetual Preferred Stock
|
|
|
3,500(6)
|
|
$
|
1,000(6)
|
|
$
|
3,500,000(6)
|
|
$
|
411.95
|
|
|
Common
Stock (upon conversion)
|
|
|
297,872(7)
|
|
$
|
-----(8)
|
|
$
|
-----(8)
|
|
$
|
-----(8)
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
$
|
18,066.95
|
|
___________________________
(1)
There
are
being registered under this Registration Statement such indeterminate number
of
shares of common stock and preferred stock of the Registrant, and such
indeterminate principal amount of debt securities of the Registrant, as shall
have an aggregate initial offering price not to exceed $150,000,000. Any
offering of debt securities by the Registrant denominated other than in U.S.
dollars will be treated as the equivalent of U.S. dollars based on the exchange
rate applicable to the purchase of such debt securities at the time of initial
offering. If any debt securities are issued at an original issue discount
by the
Registrant, then the securities registered shall include such additional
debt
securities as may be necessary such that the aggregate initial public offering
price of all securities issued pursuant to this Registration Statement will
equal $150,000,000. Any securities registered under this Registration Statement
may be sold separately or as units with other securities registered under
this
Registration Statement. The proposed maximum initial offering price per unit
will be determined from time to time by the Registrant in connection with,
and
at the time of, the issuance by the Registrant of the securities registered
under this Registration Statement.
(2)
Not
specified with respect to each class of securities to be registered by the
Registrant pursuant to General Instruction II.D1 to Form S-3.
(3)
Estimated
solely for the purpose of calculating the registration fee pursuant to Rule
457(o) under the Securities Act of 1933. No separate consideration will be
received for any securities registered hereunder that are issued upon exercise,
conversion or exchange of debt securities or preferred stock registered
hereunder.
(4)
Including
such indeterminate number of shares of preferred stock as may from time to
time
be issued upon exercise, conversion or exchange of debt securities registered
hereunder, to the extent any such debt securities are, by their terms,
convertible into preferred stock.
(5)
Including
such indeterminate number of shares of common stock as may from time to time
be
issued upon exercise, conversion or exchange of debt securities or preferred
stock registered hereunder, to the extent any of such debt securities or
shares
of preferred stock are, by their terms, convertible into common stock.
(6)
Represents
the number of shares of the Registrant’s 5% Series B Cumulative Convertible
Perpetual Preferred Stock (“Series B preferred stock”) that are hereby being
registered for resale by the selling shareholder named herein. The proposed
offering price for the convertible security offered hereby is $1,000 per
share,
which is based upon the price offered to the initial purchasers of such
convertible securities.
(7)
Represents
the number of shares of the Registrant’s common stock that are issuable upon
conversion of the 3,500 shares of Series B preferred stock (i) in a primary
offering of such shares to potential transferees of the Series B preferred
stock
and (ii) in a resale offering of these common shares by the selling shareholder.
For purposes of estimating the number of shares of common stock to be included
under this registration statement, the Registrant calculated the number of
shares issuable upon conversion of the Series B preferred stock based on
a
conversion rate of 85.1064 shares of common stock for each share of Series
B
preferred stock. Cash will be paid in lieu of fractional shares resulting
from
the conversion of the shares of the Series B preferred stock. In addition
to the
shares set forth in the table, pursuant to Rule 416 under the Securities
Act of 1933, as amended, the amount to be registered includes an indeterminate
number of shares of common stock issuable upon conversion of the Series B
preferred stock, as this amount may be adjusted as a result of among others,
stock splits, stock dividends and antidilution provisions.
(8)
No
additional consideration will be received for the shares of common stock
issuable upon conversion of the Series B preferred stock and, therefore,
no
registration fee is required pursuant to Rule 457(i) under the Securities
Act of
1933, as amended.
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 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 Commission, acting pursuant to said Section 8(a), may
determine.
THE
INFORMATION IN THIS 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 PROSPECTUS
IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT
TO COMPLETION, DATED SEPTEMBER 2, 2005
PROSPECTUS
[LOGO]
$150,000,000
Debt
Securities
Preferred
Stock
Common
Stock
and
3,500
Shares of 5% Series B Cumulative Convertible Perpetual Preferred Stock and
297,872
Shares of Common Stock, Subject to Adjustment, Issuable Upon Conversion of
5%
Series B Cumulative Convertible Perpetual Preferred Stock
___________________________________________
We
may
offer and sell debt securities, preferred stock and/or common stock with
an
aggregate offering price of up to $150 million in connection with this
prospectus.
The
securities may be offered to or through underwriters, through agents or dealers,
directly to one or more purchasers or through a combination of such methods.
See
“Plan of Distribution.” We will specify in any accompanying prospectus
supplement the offering price and terms of any offering of the securities,
including, but not limited to, the name(s) of any underwriters, agents or
dealers to sell the securities and applicable commissions or discounts. We
will
use the net proceeds received from the sale of the securities by the Company
for
general corporate purposes. You
should read this prospectus and any prospectus supplements carefully before
you
invest in the securities. This
Prospectus may not be used to consummate sales of the securities by us unless
it
is accompanied by a prospectus supplement.
In
addition, the selling shareholder named in the “Selling Shareholder” section of
this prospectus may sell up to 3,500 shares of our 5% Series B Cumulative
Convertible Perpetual Preferred Stock (“Series B preferred stock”) and 297,872
shares of our common stock, subject to adjustment, issuable upon conversion
of
such shares of our Series B preferred stock. The shares may be offered and
sold
from time to time by the selling shareholder, and any pledgees, donees,
transferees or other successors-in-interest of the shares, through public
or
private transactions at fixed prices, at prevailing market prices at time
of
sale, at varying prices determined at time of sale or at negotiated prices.
For
additional information on the method and manner of sale of these securities,
refer to the section entitled “Plan of Distribution—Securities Offered By
Selling Shareholder” on page 37. We will not receive any of the proceeds
from the sale of these shares. We have agreed to bear all of the expenses
in
connection with the registration and sale of these shares, except for sales
commissions.
Our
common stock is quoted on the Nasdaq National Market under the symbol “FCEL”. No
public market currently exists for the other securities offered hereby. The
applicable prospectus supplement will contain information, where applicable,
as
to any other listing on any securities exchange of the securities covered
by the
prospectus supplement.
Our
principal executive offices are located at 3 Great Pasture Road, Danbury,
Connecticut 06813, and our telephone number is (203) 825-6000.
Investing
in our securities involves risks that are described in the “Risk Factors”
section beginning on page 2 of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
___________________________________________
The
date
of this prospectus is __________, 2005.
You
should rely only on the information contained in this prospectus. We have
not
authorized anyone to provide you with different information. Our securities
are
not being offered in any state where the offer is not permitted.
You
should not assume that the information contained in this prospectus is accurate
as of any date other than the date on the front of this prospectus.
________________
TABLE
OF CONTENTS
|
FORWARD-LOOKING
STATEMENTS
|
|
ii
|
|
| |
|
|
|
|
ABOUT
THIS PROSPECTUS
|
|
ii
|
|
| |
|
|
|
|
FUELCELL
ENERGY, INC
|
|
1
|
|
| |
|
|
|
|
RISK
FACTORS
|
|
2
|
|
| |
|
|
|
|
RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
DIVIDENDS
|
|
14
|
|
| |
|
|
|
|
USE
OF PROCEEDS
|
|
14
|
|
| |
|
|
|
|
DESCRIPTION
OF DEBT SECURITIES
|
|
15
|
|
| |
|
|
|
|
DESCRIPTION
OF CAPITAL STOCK
|
|
23
|
|
| |
|
|
|
|
SELLING
SHAREHOLDER
|
|
32
|
|
| |
|
|
|
|
PLAN
OF DISTRIBUTION
|
|
34
|
|
| |
|
|
|
|
LEGAL
MATTERS
|
|
37
|
|
| |
|
|
|
|
EXPERTS
|
|
37
|
|
| |
|
|
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
|
37
|
|
| |
|
|
|
|
INCORPORATION
BY REFERENCE
|
|
38
|
|
FORWARD-LOOKING STATEMENTS
This
prospectus includes forward-looking statements within the meaning of Section
27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of
1934. Words such as
“expects,”“anticipates,”“approximates,”“believes,”“estimates,”“intends” and
“hopes” and variations of such words and similar expressions are intended to
identify such forward-looking statements. We intend such forward-looking
statements, all of which are qualified by this statement, to be covered by
the
safe harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995 and are including this statement
for
purposes of complying with these safe harbor provisions. We have
based
these statements on our current expectations and projections about future
events. These forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties that could cause actual
results to differ materially from those projected in these statements.
These risks and uncertainties include those set forth under “Risk
Factors.” The forward-looking statements contained in this prospectus
include, among others, statements about:
| · |
the
development and commercialization schedule for our fuel cell technology
and products;
|
| · |
future
funding under government research and development
contracts;
|
| · |
the
expected cost competitiveness of our fuel cell technology and
products;
|
| · |
our
intellectual property;
|
| · |
the
timing and availability of our
products;
|
| · |
the
electric power supply industry and the distributed generation
market;
|
| · |
our
business strategy; and
|
| · |
general
economic conditions in the electric power supply industry and our
target
markets.
|
Except
for our ongoing obligations to disclose material information under the federal
securities laws, we are not obligated to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this prospectus might
not
occur.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission, or SEC, using a “shelf” registration process. Under
this shelf registration process, we and the selling shareholder may, from
time
to time, sell the securities as provided in this prospectus, and any applicable
prospectus supplement, in one or more offerings over approximately the next
two
years.
This
prospectus provides you with a general description of the securities that
we and
the selling shareholder may offer. Each time our securities are offered
hereunder, we will provide you with this prospectus and a prospectus supplement,
as applicable, containing more specific information about the terms of that
offering. That prospectus supplement may also add, update or change information
in this prospectus. If there is any inconsistency between the information
in
this prospectus and any prospectus supplement, you should rely on the
information in that prospectus supplement. This prospectus, together with
applicable prospectus supplements, includes all material information relating
to
that offering. You should carefully read both this prospectus and any prospectus
supplement together with the additional information described in the section
entitled “Where You Can Find More Information.”
FUELCELL
ENERGY, INC.
We
are a
leader in the development and manufacture of fuel cell power plants for clean,
efficient and reliable electric power generation. We have been developing
fuel
cell technology since our founding in 1969. We are currently commercializing
our
core carbonate fuel cell products and continuing to develop our next generation
of fuel cell products.
Our
executive offices are located at 3 Great Pasture Road, Danbury, Connecticut
06813. Our telephone number is (203) 825-6000. We maintain a web
site at
the following Internet address: www.fuelcellenergy.com.
The
information on our web site is not part of this prospectus.
Unless
the context otherwise requires, references in this prospectus to
“FuelCell,”“we,”“us” and “our” refer to FuelCell Energy, Inc. Direct
FuelCell®
and
DFC®
are
registered trademarks of FuelCell Energy, Inc.
As
used
in this prospectus, all degrees refer to Fahrenheit (oF),
and
kilowatt and megawatt numbers designate nominal or rated capacity of the
referenced power plant. As used in this prospectus, “kilowatt” (kW) means 1,000
watts; “megawatt” (MW) means 1,000,000 watts; and “kilowatt hour” (kWh) is equal
to 1 kW of power supplied to or taken from an electric circuit steadily for
one
hour. All dollar amounts are in U.S. dollars unless otherwise
noted.
Direct
FuelCell (DFC) Power Plants
Increasing
demand for reliable power worldwide, supplemented by air pollution concerns
caused by older, combustion power generation, and unreliable electrical grid
delivery systems present significant market opportunities for our core
distributed generation products. Our proprietary carbonate DFC power plants
electrochemically produce electricity directly from readily available
hydrocarbon fuels, such as natural gas and wastewater treatment gas.
We
believe our products offer significant advantages compared to other power
generation technologies, including:
| · |
Flexible
siting and permitting requirements;
|
| · |
Ability
to provide electricity and heat for cogeneration applications,
such as
district heating, process steam, hot water and absorption chilling
for air
conditioning;
|
| · |
Potentially
lower operating, maintenance and generation costs than alternative
distributed power generation technologies;
and
|
| · |
Because
our DFC power plants produce hydrogen from readily available fuels
such as
natural gas and wastewater treatment gas, they can be used to
cost-effectively cogenerate hydrogen as well as electricity and
heat.
|
Our
current products, the DFC300MATM,
DFC1500
and DFC3000, are rated in capacity at 250 kW, 1 MW and 2 MW, respectively,
and
are scalable for distributed applications up to 10 MW or larger.
Our
products are designed to meet the base load power requirements of a wide
range
of commercial and industrial customers including wastewater treatment plants
(municipal, such as sewage treatment facilities, and industrial, such as
breweries and food processors), data centers, manufacturing facilities, office
buildings, hospitals, universities, prisons, mail processing facilities and
hotels, as well as in grid support applications for utility customers.
Additional information concerning us is included in our reports and other
documents incorporated by reference in this prospectus.
RISK
FACTORS
Investing
in our securities involves risks. Before investing in our securities, you
should
carefully consider the following risk factors as well as the other information
included and incorporated by reference in this prospectus. If any of the
following risks actually occur, our business, financial condition, or results
of
operations and could be materially and adversely affected. In such cases,
the
trading price of our securities could decline, and you may lose all or part
of
your investment.
We
have recently incurred losses and anticipate continued losses and negative
cash
flow.
We
have
been transitioning from a U.S. government contract research and development
company to a commercial products developer and manufacturer. As such, we
have
not achieved profitability since our fiscal year ended October 31, 1997 and
expect to continue to incur net losses and generate negative cash flow until
we
can produce sufficient revenues to cover our costs.
We
incurred net losses of $86.4 million and $54.7 million for the fiscal year
ended
October 31, 2004 and the nine months ended July 31, 2005, respectively. We
anticipate that we will continue to incur losses and generate negative cash
flow
until we can cost-effectively produce and sell our Direct FuelCell products,
which we do not expect to occur for several years. We may never become
profitable. Even if we do achieve profitability, we may be unable to sustain
or
increase our profitability in the future. For the reasons discussed in more
detail below, there are substantial uncertainties associated with our achieving
and sustaining profitability.
Our
cost reduction strategy may not succeed or may be significantly delayed,
which
may result in our inability to offer our products at competitive prices and
may
adversely affect our sales.
Our
cost
reduction strategy is based on the assumption that a significant increase
in
production will result in economies of scale. In addition, certain aspects
of
our cost reduction strategy rely on advancements in our manufacturing process,
engineering design and technology (including projected power output) that,
to a
large degree, are currently not ascertainable. Our failure to achieve a lower
Direct FuelCell product cost structure through economies of scale, improvements
in the manufacturing process and engineering design and technology maturation
would have a material adverse effect on our commercialization plans and,
therefore, our business, prospects, results of operations and financial
condition.
The
production costs of our initial commercial products are higher than their
sales
prices. We recognize that successfully implementing our strategy and obtaining
a
significant share of the distributed generation market requires that we offer
our Direct FuelCell products at competitive prices, which can only be
accomplished when production costs are cut substantially from current levels.
If
we are unable to produce Direct FuelCell products at competitive prices relative
to alternative technologies and products, our target market customers will
be
unlikely to buy our fuel cell products.
Our
products will compete with products using other energy sources, and if the
prices of the alternative sources are lower than energy sources used by our
products, sales of our products will be adversely
affected.
Our
Direct FuelCell has been operated using a variety of hydrocarbon fuels,
including natural gas, methanol, diesel, biogas, coal gas, coal mine methane
and
propane. If these fuels are not readily available or if their prices increase
such that electricity produced by our products costs more than electricity
provided by other generation sources, our products would be less economically
attractive to potential customers. In addition, we have no control over the
prices of several types of competitive energy sources such as oil, gas or
coal.
Significant decreases in the price of these fuels could also have a material
adverse effect on our business because other generation sources could be
more
economically attractive to consumers than our products.
Commercialization
of our products depends on conducting successful field trials, and any delay,
performance failure or perceived problem with our field trials could have
a
material adverse effect on our business, prospects, results of operations
and
financial condition.
One
key
aspect of our strategy is to leverage the success of our demonstration, field
trial and field follow projects into long-term distributor-type relationships
that will result in these distributors marketing our Direct FuelCell products
directly to energy customers. For example, we are operating fourteen Direct
FuelCell units in the United States and five Direct FuelCell units in Japan
and
MTU CFC Solutions GmbH is currently field-testing eight 250 kW power plants
in
Germany and Spain that incorporate the Direct FuelCell as their fuel cell
components. We believe that our Direct FuelCell commercialization program
depends upon our conducting additional commercial field trials and demonstration
projects of our power plants and completing substantial additional research
and
development.
Our
demonstration, field trial and field follow projects may encounter problems
and/or delays for a number of reasons, including the failure of our technology,
the failure of the technology of others (including our balance of plant
suppliers), the failure to combine these technologies properly (including
control system coordination) and the failure to maintain and service the
test
prototypes properly. Many of these potential problems and delays are beyond
our
control. A failure by us to conduct field trials and demonstration projects
of
our megawatt class products or a failure to site the scheduled sub-megawatt
power plants and complete these commercial field trials and research and
development as currently planned could delay the timetable by which we believe
we can begin to commercially sell our Direct FuelCell products. The failure
of
planned commercial field trials to perform as well as we anticipate could
also
have a material adverse effect on our commercialization plans, including
the
ability to enter into long-term distributor-type relationships for our Direct
FuelCell products. Any delay, performance failure or perceived problem with
our
field trials could hurt our reputation in the distributed generation market
and,
therefore, could have a material adverse effect on our business, prospects,
results of operations and financial condition.
We
currently face and will continue to face significant
competition.
Our
Direct FuelCell currently faces, and will continue to face, significant
competition. We compete on the basis of our products’ reliability, fuel
efficiency, environmental considerations and cost. Technological advances
in
alternative energy products or improvements in the electric grid or other
fuel
cell technologies may negatively affect the development or sale of some or
all
of our products or make our products non-competitive or obsolete prior to
commercialization or afterwards. Other companies, some of which have
substantially greater resources than ours, are currently engaged in the
development of products and technologies that are similar to, or may be
competitive with, our products and technologies.
Many
companies in the United States are involved in fuel cell development, although
we believe we are the only domestic company engaged in significant manufacturing
and commercialization of carbonate fuel cells in the sub-megawatt and megawatt
classes. Emerging fuel cell technologies (and companies developing them)
include
proton exchange membrane fuel cells (Ballard Power Systems, Inc.; United
Technologies Corp. or UTC Fuel Cells; and Plug Power), phosphoric acid fuel
cells (UTC Fuel Cells) and solid oxide fuel cells (Siemens Westinghouse Electric
Company, Sulzer Hexis, McDermott, GE/ Honeywell, Delphi and Accumentrics).
Each
of these competitors has the potential to capture market share in our target
markets.
There
are
other potential carbonate fuel cell competitors internationally. In Asia,
Ishikawajima Harima Heavy Industries is active in developing carbonate fuel
cells. In Europe, a company in Italy, Ansaldo Fuel Cells, is actively engaged
in
carbonate fuel cell development and is a potential competitor. Our licensees
in
Germany, MTU CFC Solutions GmbH, and its partners have been the most active
in
Europe.
Other
than fuel cell developers, we must also compete with such companies as
Caterpillar, Cummins, and Detroit Diesel, which manufacture more mature
combustion-based equipment, including various engines and turbines, and have
well-established manufacturing, distribution, and operating and cost features.
Significant competition may also come from gas turbine companies like General
Electric, Ingersoll Rand, Solar Turbines and Kawasaki, which have recently
made
progress in improving fuel efficiency and reducing pollution in large-size
combined cycle natural gas fueled generators. These companies have also made
efforts to extend these advantages to smaller sizes.
We
may not meet our product development and commercialization milestones, which
may
have a material adverse effect on our operations and stock
price.
We
have
established product development and commercialization milestones that we
use to
assess our progress toward developing commercially viable Direct FuelCell
products. These milestones relate to technology and design improvements as
well
as to dates for achieving development goals. To gauge our progress, we operate,
test and evaluate our Direct FuelCell products under actual conditions. If
our
systems exhibit technical defects or are unable to meet cost or performance
goals, including power output, useful life and reliability, our
commercialization schedule could be delayed and potential purchasers of our
initial commercial Direct FuelCell products may decline to purchase them
or
choose to purchase alternative technologies. We cannot be sure that we will
successfully achieve our milestones in the future or that any failure to
achieve
these milestones will not result in potential competitors gaining advantages
in
our target market. Failure to meet publicly announced milestones might have
a
material adverse effect on our operations and our stock price.
We
have limited experience manufacturing our Direct FuelCell products on a
commercial basis, which may adversely affect our planned increases in production
capacity and our ability to satisfy customer
requirements.
To
date,
we have focused primarily on research and development and conducting
demonstrations and field trials. We have limited experience manufacturing
our
Direct FuelCell products on a commercial basis. We have installed equipment
that
will allow us to produce 50 MW of Direct FuelCell products per year. We expect
that we will then increase our manufacturing capacity based on market demand.
We
believe that we can expand our manufacturing capacity to between 125 and
150 MW
of Direct FuelCell products at our current facility. We cannot be sure that
we
will be able to achieve our planned increases in production capacity. Also,
as
we scale up our production capacity, we cannot be sure that unplanned failures
or other technical problems relating to the manufacturing process will not
occur.
Even
if
we are successful in achieving our planned increases in production capacity,
we
cannot be sure that we will do so in time to meet our product commercialization
schedule or to satisfy the requirements of our customers. Given our dependence
on government research and development contracts and the necessity of providing
government entities with substantial amounts of information, our sales process
has historically been long and time-consuming. We will need to continue to
shorten the time from initial contact to final product delivery if we hope
to
expand production, reach a wider customer base and forecast revenues with
any
degree of certainty. Additionally, we cannot be sure that we will be able
to
develop efficient, low-cost manufacturing capabilities and processes (including
automation) that will enable us to meet our cost goals and profitability
projections. Our failure to shorten the sales cycle for our Direct FuelCell
products or to develop these advanced manufacturing capabilities and processes,
or meet our cost goals, could have a material adverse effect on our business,
prospects, results of operations and financial condition.
Unanticipated
increases or decreases in business growth may result in adverse financial
consequences for us.
If
our
business grows more quickly than we anticipate, our existing and planned
manufacturing facilities may become inadequate and we may need to seek out
new
or additional space, at considerable cost to us. If our business does not
grow
as quickly as we expect, our existing and planned manufacturing facilities
would, in part, represent excess capacity for which we may not recover the
cost;
in that circumstance, our revenues may be inadequate to support our committed
costs and our planned growth and our gross margins and business strategy
would
be adversely affected.
Our
commercialization plans are dependent on market acceptance of our Direct
FuelCell products.
Our
commercialization plans are dependent upon market acceptance of, as well
as
enhancements to, those products. Fuel cell systems represent an emerging
market,
and we cannot be sure that potential customers will accept fuel cells as
a
replacement for traditional power sources. As is typical in a rapidly evolving
industry, demand and market acceptance for recently introduced products and
services are subject to a high level of uncertainty and risk. Since the
distributed generation market is new and evolving, it is difficult to predict
with certainty the size of the market and its growth rate. The development
of a
market for our Direct FuelCell products may be affected by many factors that
are
out of our control, including:
• the
cost
competitiveness of our fuel cell products;
• the
future costs of natural gas and other fuels used by our fuel cell
products;
• consumer
reluctance to try a new product;
• consumer
perceptions of the safety of our fuel cell products;
• the
pace
of utility deregulation nationwide, which could affect the market for
distributed generation;
• local
permitting and environmental requirements; and
• the
emergence of newer, more competitive technologies and products.
If
a
sufficient market fails to develop or develops more slowly than we anticipate,
we may be unable to recover the losses we will have incurred in the development
of Direct FuelCell products and may never achieve profitability.
As
we
continue to commercialize our Direct FuelCell products, we will continue
to
develop warranties, production guarantees and other terms and conditions
relating to our products that will be acceptable to the marketplace, and
continue to develop a service organization that will aid in servicing our
products and obtain self-regulatory certifications, if available, with respect
to our products. Failure to achieve any of these objectives may also slow
the
development of a sufficient market for our products and, therefore, have
a
material adverse effect on our results of operations.
Our
government research and development contracts are subject to the risk of
termination by the contracting party and we may not realize the full amounts
allocated under the contracts due to the lack of Congressional
appropriations.
Our
fuel
cell revenues have been principally derived from contracts and cooperative
agreements with the U.S. Department of Energy (“DOE”), the U.S. Department of
Defense, the U.S. Navy and the National Aeronautics and Space Administration.
These agreements are important to the continued development and
commercialization of our technology and our products.
Generally,
our U.S. government research and development contracts and cooperative
agreements are subject to the risk of termination at the convenience of the
contracting agency. Furthermore, these contracts, irrespective of the amounts
allocated by the contracting agency, are subject to annual congressional
appropriations and the results of government or agency sponsored audits of
our
cost reduction efforts and our cost projections. We can only receive funds
under
these contracts ultimately made available to us annually by Congress as a
result
of the appropriations process. Accordingly, we cannot be sure whether we
will
receive the full amount allocated by the DOE under our DOE cooperative
agreements or the full amounts awarded under our other government research
and
development contracts. Failure to receive the full amounts under any of our
government research and development contracts could materially and adversely
affect our commercialization plans and, therefore, our business, prospects,
results of operations and financial condition.
The
United States government has certain rights relating to our intellectual
property, including restricting or taking title to certain
patents.
Many
of
our United States patents relating to our carbonate fuel cell technology
are the
result of government-funded research and development programs, including
the DOE
cooperative agreement. Three of our patents that were the result of DOE-funded
research prior to January 1988 (the date that we qualified as a “small
business”) are owned by the United States government and have been licensed to
us. This license is revocable only in the limited circumstances where it
has
been demonstrated that we are not making an effort to commercialize the
invention. We own all patents resulting from research funded by our DOE
contracts awarded after January 1988 to date, based on our “small business”
status when each contract was awarded. Under current regulations, patents
resulting from research funded by government agencies other than the DOE
are
owned by us, whether or not we are a “small business.”
Ten
United States patents that we own have resulted from government-funded research
and are subject to the risk of exercise of “march-in” rights by the government.
March-in rights refer to the right of the United States government or a
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.
These
“march-in” rights permit the United States government to take title to these
patents and license the patented technology to third parties if the contractor
fails to utilize the patents. In addition, our DOE-funded research and
development agreements also require us to agree that we will not provide
to a
foreign entity any fuel cell technology subject to that agreement unless
the
fuel cell technology will be substantially manufactured in the U.S. Accordingly,
we could lose some or all of the value of these patents.
A
failure to qualify as a “small business” could adversely affect our rights to
own future patents under DOE-funded contracts.
Qualifying
as a “small business” under DOE contracts allows us to own the patents that we
develop under DOE contracts. A “small business” under applicable government
regulations generally consists of no more than 500 employees. If we continue
to
grow, we will no longer qualify as a “small business” and no longer own future
patents we develop under contracts, grants or cooperative agreements funded
by
the DOE based on such certification, unless we obtain a patent waiver from
the
DOE. As a result of our acquisition of Global, the number of our employees
increased and therefore, we temporarily did not qualify as a “small business.”
Following the sale of Global and its TEG product line on May 27, 2004, we
again
qualified as a “small business”; however, we cannot assure you that we will
continue to qualify as a “small business” in the future.
Our
future success and growth is dependent on our distribution
strategy.
We
do not
plan to establish a direct distribution infrastructure for our Direct FuelCell
products. A key aspect of our strategy is to use multiple third-party
distribution channels to ultimately service our diverse customer base. Depending
on the needs of the customer, our Direct FuelCell products could be distributed
through a value-added distributor who could provide a package of our products
and various other components such as flywheels and battery storage devices;
through an energy services company that could arrange various ancillary services
for the customer; or through power generation equipment suppliers.
We
cannot
assure you that we will enter into distributor relationships that are consistent
with, or sufficient to support, our commercialization plans or our growth
strategy or that these relationships will be on terms favorable to us. Even
if
we enter into these types of relationships, we cannot assure you that the
distributors with which we form relationships will focus adequate resources
on
selling our products or will be successful in selling them. Some of these
distributor arrangements have or will require that we grant exclusive
distribution rights to companies in defined territories. These exclusive
arrangements could result in us being unable to enter into other arrangements
at
a time when the distributor with which we form a relationship is not successful
in selling our products or has reduced its commitment to marketing our products.
In addition, two of our current distributor arrangements include, and some
future distributor arrangements may also include, the issuance of equity
and
warrants to purchase our equity, which may have an adverse effect on our
stock
price. To the extent we enter into distributor relationships, the failure
of
these distributors in assisting us with the marketing and distribution of
our
products may adversely affect our results of operations and financial
condition.
We
cannot
be sure that MTU will continue to, or original equipment manufacturers (“OEMs”)
will, manufacture or package products using our Direct FuelCell components.
In
this area, our success will largely depend upon our ability to make our products
compatible with the power plant products of OEMs and the ability of these
OEMs
to sell their products containing our products. In addition, some OEMs may
need
to redesign or modify their existing power plant products to fully incorporate
our products. Accordingly, any integration, design, manufacturing or marketing
problems encountered by MTU or other OEMs could adversely affect the market
for
our Direct FuelCell products and, therefore, our business, prospects, results
of
operations and financial condition.
We
depend on third party suppliers for the development and supply of key components
for Direct FuelCell products.
We
purchase several key components of our Direct FuelCell products from other
companies and rely on third-party suppliers for the balance-of-plant components
in our Direct FuelCell products. There are a limited number of suppliers
for
some of the key components of Direct FuelCell products. 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 technical specifications
or
our inability to obtain alternative sources of these components on a timely
basis or on terms acceptable to us could harm our ability to manufacture
our
Direct FuelCell products. 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
do not
know when or whether we will secure long-term supply relationships with any
of
our suppliers or whether such relationships will be on terms that will allow
us
to achieve our objectives. Our business, prospects, results of operations
and
financial condition could be harmed if we fail to secure long-term relationships
with entities that will supply the required components for our Direct FuelCell
products.
We
depend on our intellectual property, and our failure to protect that
intellectual property could adversely affect our future growth and
success.
Failure
to protect our existing intellectual property rights may result in the loss
of
our exclusivity or the right to use our technologies. If we do not adequately
ensure our freedom to use certain technology, we may have to pay others for
rights to use their intellectual property, pay damages for infringement or
misappropriation or be enjoined from using such intellectual property. We
do not
currently conduct freedom to operate analyses. We rely on patent, trade secret,
trademark and copyright law to protect our intellectual property. The patents
that we have obtained will expire between 2005 and 2024 and the average
remaining life of our U.S. patents is approximately 10.9 years.
Some
of
our intellectual property is not covered by any patent or patent application
and
includes trade secrets and other know-how that is not patentable, particularly
as it relates to our manufacturing processes and engineering design. In
addition, some of our intellectual property includes technologies and processes
that may be similar to the patented technologies and processes of third parties.
If we are found to be infringing third-party patents, we do not know whether
we
will able to obtain licenses to use such patents on acceptable terms, if
at all.
Our patent position is subject to complex factual and legal issues that may
give
rise to uncertainty as to the validity, scope and enforceability of a particular
patent. Accordingly, we cannot assure you that:
•
any
of
the U.S., Canadian or other foreign patents owned by us or other patents
that
third parties license to us will not be invalidated, circumvented, challenged,
rendered unenforceable or licensed to others; or
•
any
of
our pending or future patent applications will be issued with the breadth
of
claim coverage sought by us, if issued at all.
In
addition, effective patent, trademark, copyright and trade secret protection
may
be unavailable, limited or not applied for in certain foreign
countries.
We
also
seek to protect our proprietary intellectual property, including intellectual
property that may not be patented or patentable, in part by confidentiality
agreements and, if applicable, inventors’ rights agreements with our
subcontractors, vendors, suppliers, consultants, strategic partners and
employees. We cannot assure you that these agreements will not be breached,
that
we will have adequate remedies for any breach or that such persons or
institutions will not assert rights to intellectual property arising out
of
these relationships. Certain of our intellectual property has been licensed
to
us on a non-exclusive basis from third parties that may also license such
intellectual property to others, including our competitors. If our licensors
are
found to be infringing third-party patents, we do not know whether we will
be
able to obtain licenses to use the intellectual property licensed to us on
acceptable terms, if at all.
If
necessary or desirable, we may seek extensions of existing licenses or further
licenses under the patents or other intellectual property rights of others.
However, we can give no assurances that we will obtain such extensions or
further licenses or that the terms of any offered licenses will be acceptable
to
us. The failure to obtain a license from a third party for intellectual property
that we use at present could cause us to incur substantial liabilities, and
to
suspend the manufacture or shipment of products or our use of processes
requiring the use of that intellectual property.
While
we
are not currently engaged in any material intellectual property litigation,
we
could become subject to lawsuits in which it is alleged that we have infringed
the intellectual property rights of others or commence lawsuits against others
who we believe are infringing upon our rights. Our involvement in intellectual
property litigation could result in significant expense to us, adversely
affecting the development of sales of the challenged product or intellectual
property and diverting the efforts of our technical and management personnel,
whether or not that litigation is resolved in our favor.
Our
future success will depend on our ability to attract and retain qualified
management and technical personnel.
Our
future success is substantially dependent on the continued services and on
the
performance of our executive officers and other key management, engineering,
scientific, manufacturing and operating personnel, particularly Jerry Leitman,
our President and Chief Executive Officer. The loss of the services of any
executive officer, including Mr. Leitman, or other key management, engineering,
scientific, manufacturing and operating personnel, could materially adversely
affect our business. Our ability to achieve our development and
commercialization plans will also depend on our ability to attract and retain
additional qualified management and technical personnel. Recruiting personnel
for the fuel cell industry is competitive. We do not know whether we will
be
able to attract or retain additional qualified management and technical
personnel. Our inability to attract and retain additional qualified management
and technical personnel, or the departure of key employees, could materially
and
adversely affect our development and commercialization plans and, therefore,
our
business, prospects, results of operations and financial condition.
Our
management may be unable to manage rapid growth
effectively.
We
expect
to rapidly expand our manufacturing capabilities, accelerate the
commercialization of our products and enter a period of rapid growth, which
will
place a significant strain on our senior management team and our financial
and
other resources. The proposed expansion will expose us to increased competition,
greater overhead, marketing and support costs and other risks associated
with
the commercialization of a new product. Our ability to manage our rapid growth
effectively will require us to continue to improve our operations, to improve
our financial and management information systems and to train, motivate and
manage our employees. Difficulties in effectively managing the budgeting,
forecasting and other process control issues presented by such a rapid expansion
could harm our business, prospects, results of operations and financial
condition.
We
may be affected by environmental and other governmental
regulation.
As
we
begin to commercialize our Direct FuelCell products, we will be subject to
federal, state, provincial or local regulation with respect to, among other
things, emissions and siting. Assuming no co-generation applications are
used in
conjunction with our larger Direct FuelCell plants, they will discharge humid
flue gas at temperatures of approximately 700-800o
F, water
at temperatures of approximately 10-20o
F above
surrounding air temperatures and carbon dioxide. These emissions will require
permits that we expect (but cannot ensure) will be similar to those applicable
to generating units.
In
addition, it is possible that industry-specific laws and regulations will
be
adopted covering matters such as transmission scheduling, distribution and
the
characteristics and quality of our products, including installation and
servicing. This regulation could limit the growth in the use of carbonate
fuel
cell products, decrease the acceptance of fuel cells as a commercial product
and
increase our costs and, therefore, the price of our Direct FuelCell products.
Accordingly, compliance with existing or future laws and regulations as we
begin
to commercialize and site our products could have a material adverse effect
on
our business, prospects, results of operations and financial
condition.
Utility
companies could impose customer fees or interconnection requirements on our
customers that could make our products less
desirable.
Utility
companies commonly charge fees to larger, industrial customers for disconnecting
from the electric grid or for having the capacity to use power from the electric
grid for back up purposes. These fees could increase the cost to our customers
of using our Direct FuelCell products and could make our products less
desirable, thereby harming our business, prospects, results of operations
and
financial condition.
Several
states (Texas, New York, California and others) have created and adopted
or are
in the process of creating their own interconnection regulations covering
both
technical and financial requirements for interconnection to utility grids.
Depending on the complexities of the requirements, installation of our systems
may become burdened with additional costs that might have a negative impact
on
our ability to sell systems. There is also a burden in having to track the
requirements of individual states and design equipment to comply with the
varying standards. The Institute of Electrical and Electronics Engineers
has
been working to create an interconnection standard addressing the technical
requirements for distributed generation to interconnect to utility grids.
Many
parties are hopeful that this standard will be adopted nationally when it
is
completed to help reduce the barriers to deployment of distributed generation
such as fuel cells; however this standard may be delayed or never completed
thereby limiting the commercial prospects and profitability of our fuel cell
systems.
Changes
in government regulations and electric utility industry restructuring may
affect
demand for our Direct FuelCell products.
Our
target market, the distributed generation market, is driven by deregulation
and
restructuring of the electric utility industry in the United States and
elsewhere and by the requirements of utilities, independent power producers
and
end users. Deregulation of the electric utility industry is subject to
government policies that will determine the pace and extent of deregulation.
Many states have recently delayed the implementation of deregulation as a
result
of power disturbances in California several summers ago. Changes in government
and public policy over time could further delay or otherwise affect deregulation
and, therefore, adversely affect our prospects for commercializing our Direct
FuelCell products and our financial results. We cannot predict how the
deregulation and restructuring of the electric utility industry will ultimately
affect the market for our Direct FuelCell products.
We
could be liable for environmental damages resulting from our research,
development or manufacturing operations.
Our
business exposes us to the risk of harmful substances escaping into the
environment, resulting in personal injury or loss of life, damage to or
destruction of property, and natural resource damage. Depending on the nature
of
the claim, our current insurance policies may not adequately reimburse us
for
costs incurred in settling environmental damage claims, and in some instances,
we may not be reimbursed at all. Our business is subject to numerous federal,
state and local laws and regulations that govern environmental protection
and
human health and safety. These laws and regulations have changed frequently
in
the past and it is reasonable to expect additional and more stringent changes
in
the future.
Our
operations may not comply with future laws and regulations and we may be
required to make significant unanticipated capital and operating expenditures.
If we fail to comply with applicable environmental laws and regulations,
governmental authorities may seek to impose fines and penalties on us or
to
revoke or deny the issuance or renewal of operating permits and private parties
may seek damages from us. Under those circumstances, we might be required
to
curtail or cease operations, conduct site remediation or other corrective
action, or pay substantial damage claims.
We
may be required to conduct environmental remediation activities, which could
be
expensive.
We
are
subject to a number of environmental laws and regulations, including those
concerning the handling, treatment, storage and disposal of hazardous materials.
These environmental laws generally impose liability on present and former
owners
and operators, transporters and generators for remediation of contaminated
properties. We believe that our businesses are operating in compliance in
all
material respects with applicable environmental laws, many of which provide
for
substantial penalties for violations. We cannot assure you that future changes
in such laws, interpretations of existing regulations or the discovery of
currently unknown problems or conditions will not require substantial additional
expenditures. Any noncompliance with these laws and regulations could subject
us
to material administrative, civil or criminal penalties or other liabilities.
In
addition, we may be required to incur substantial costs to comply with current
or future environmental and safety laws and regulations.
Our
products use inherently dangerous, flammable fuels, operate at high temperatures
and use corrosive carbonate material, each of which could subject our business
to product liability claims.
Our
business exposes us to potential product liability claims that are inherent
in
hydrogen and products that use hydrogen. Hydrogen is a flammable gas and
therefore a potentially dangerous product. Hydrogen is typically generated
from
gaseous and liquid fuels that are also flammable and dangerous, such as propane,
natural gas or methane, in a process known as reforming. Natural gas and
propane
could leak into a residence or commercial location and combust if ignited
by
another source. In addition, our Direct FuelCell products operate at high
temperatures and our Direct FuelCell products use corrosive carbonate material,
which could expose us to potential liability claims. Any accidents involving
our
products or other hydrogen-using products could materially impede widespread
market acceptance and demand for our Direct FuelCell products. In addition,
we
might be held responsible for damages beyond the scope of our insurance
coverage. We also cannot predict whether we will be able to maintain our
insurance coverage on acceptable terms.
We
are subject to risks inherent in international
operations.
Since
we
plan to market our Direct FuelCell products both inside and outside the United
States and Canada, our success depends, in part, on our ability to secure
international customers and our ability to manufacture products that meet
foreign regulatory and commercial requirements in target markets. We have
limited experience developing and manufacturing our products to comply with
the
commercial and legal requirements of international markets. In addition,
we are
subject to tariff regulations and requirements for export licenses, particularly
with respect to the export of some of our technologies. We face numerous
challenges in our international expansion, including unexpected changes in
regulatory requirements, fluctuations in currency exchange rates, longer
accounts receivable requirements and collections, difficulties in managing
international operations, potentially adverse tax consequences, restrictions
on
repatriation of earnings and the burdens of complying with a wide variety
of
international laws. Any of these factors could adversely affect our operations
and revenues.
We
have large and influential stockholders, which may make it difficult for
a third
party to acquire our common stock.
MTU
currently owns approximately 5.68% of our outstanding common stock (based
upon
the number of shares of our common stock outstanding as of August 29, 2005).
James D. Gerson beneficially owns approximately 2.78% of our outstanding
common
stock. Loeb Investors Co. LXXV and Warren Bagatelle (a managing director
of an
affiliate of Loeb Investors Co. LXXV) collectively beneficially own
approximately 2.27% of
our
outstanding common stock (based upon the number of shares of our common stock
outstanding as of August 29, 2005). These ownership levels could make it
difficult for a third party to acquire our common stock or have input into
the
decisions made by our board of directors, which include Michael Bode (Chief
Executive Officer of MTU CFC Solutions GmbH), James D. Gerson, Warren Bagatelle
and Thomas L. Kempner (Chairman and Chief Executive Officer of an affiliate
of
Loeb Investors Co. LXXV). MTU is also a licensee of our technology and a
purchaser of our Direct FuelCell products. Therefore, it may be in MTU’s
interest to possess substantial influence over matters concerning our overall
strategy and technological and commercial development. In addition, Wellington
Management Company, LLP owns
approximately 13.74% of our outstanding common stock and is therefore in
a
position to substantially influence matters submitted to a vote of our security
holders. Included in above noted percentages are options exercisable within
60
days of August 29, 2005.
MTU
may develop competing technologies for its own
products.
MTU
is
currently developing carbonate fuel cell technologies based on the know-how
that
we have provided to MTU under license. If MTU develops its own carbonate
fuel
cell design before our license expires in 2010, it must use good faith efforts
to license the technology to us. If MTU is successful but does not grant
us a
license, it may be directly competing with us while having a significant
ownership interest in us, and a seat on our board of directors. We have agreed
with MTU to continue developing products with as much commonality as possible.
However, the license agreement between us and MTU provides that each of us
retains the right to independently pursue the development of carbonate fuel
cell
technologies.
Our
stock price has been and could remain volatile.
The
market price for our common stock has been and may continue to be volatile
and
subject to extreme price and volume fluctuations in response to market and
other
factors, including the following, some of which are beyond our
control:
• failure
to meet our product development and commercialization milestones;
• variations
in our quarterly operating results from the expectations of securities analysts
or investors;
• downward
revisions in securities analysts’ estimates or changes in general market
conditions;
• announcements
of technological innovations or new products or services by us or our
competitors;
• announcements
by us or our competitors of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
• additions
or departures of key personnel;
• investor
perception of our industry or our prospects;
• insider
selling or buying;
• demand
for our common stock; and
• general
technological or economic trends.
In
the
past, following periods of volatility in the market price of their stock,
many
companies have been the subjects of securities class action litigation. If
we
became involved in securities class action litigation in the future, it could
result in substantial costs and diversion of management’s attention and
resources and could harm our stock price, business, prospects, results of
operations and financial condition.
Provisions
of Delaware and Connecticut 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 Delaware and Connecticut
corporate law may make it difficult and expensive for a third party to pursue
a
tender offer, change in control or takeover attempt that 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. These
anti-takeover provisions could substantially impede the ability of public
stockholders to benefit from a change in control or change in our management
and
board of directors.
We
depend on relationships with strategic partners, and the terms and
enforceability of many of these relationships are not
certain.
We
have
entered into relationships with strategic partners for design, product
development and distribution of our existing products, and products under
development, some of which may not have been documented by a definitive
agreement. The terms and conditions of many of these agreements allow for
termination by the partners. Termination of any of these agreements could
adversely affect our ability to design, develop and distribute these products
to
the marketplace. We cannot assure you that we will be able to successfully
negotiate and execute definitive agreements with any of these partners, and
failure to do so may effectively terminate the relevant
relationship.
Future
sales of substantial amounts of our common stock could affect the market
price
of our common stock.
Future
sales of substantial amounts of our common stock, or securities convertible
or
exchangeable into shares of our common stock, into the public market, including
shares of our common stock issued upon exercise of options and warrants,
or
perceptions that those sales could occur, could adversely affect the prevailing
market price of our common stock and our ability to raise capital in the
future.
The
rights of the Series 1 preferred shares and Series B preferred shares
could
negatively impact our company.
The
terms
of the Series 1 preferred shares issued by FuelCell Energy, Ltd., our
wholly-owned, indirect subsidiary, provide rights to the holder, Enbridge,
Inc.
(Enbridge), including dividend and conversion rights among others that could
negatively impact us. For example, the terms of the Series 1 preferred shares
provide that the holders are entitled to receive cumulative dividends for
each
calendar quarter for so long as such shares are outstanding. Assuming the
exchange rate for Canadian dollars is Cdn.$1.3104 to U.S.$1.00 at the time
of
the applicable dividend payment date, we could be required to pay a preferred
dividend of approximately $238,477 per calendar quarter, subject to reduction
in
accordance with the terms of the Series 1 preferred shares. The terms of
the
Series 1 preferred shares also require that the holder be paid any accrued
and
unpaid dividends on December 31, 2010. To the extent that there is a significant
amount of accrued dividends that is unpaid as of December 31, 2010 and we
do not
have sufficient working capital at that time to pay the accrued dividends,
our
financial condition could be adversely affected. We have guaranteed these
dividend obligations, including paying a minimum of Cdn.$500,000 in cash
annually to Enbridge for so long as Enbridge holds the Series 1 preferred
shares. We have also guaranteed the liquidation obligations of FuelCell Energy,
Ltd. under the Series 1 preferred shares.
We
are
also required to issue common stock to the holder of the Series 1 preferred
shares if and when the holder exercises its conversion rights. The number
of
shares of common stock that we may issue upon conversion could be significant
and dilutive to our existing stockholders. For example, assuming the holder
of
the Series 1 preferred shares exercises its conversion rights after July
31,
2020, the exchange rate for Canadian dollars is Cdn.$1.3104 to U.S.$1.00
at the
time of such conversion and our common stock price is $14.62 at the time
of such
conversion, we would be required to issue approximately 1,373,615 shares
of our
common stock.
The
terms
of the Series B preferred shares also provide rights to their holders that
could
negatively impact us. Holders of the Series B preferred shares
are
entitled to receive cumulative dividends at the rate of $50 per share per
year,
payable either in cash or in shares of our common stock.
To the
extent the dividend is paid in shares, additional issuances could be dilutive
to
our existing stockholders and the sale of those shares could have a negative
impact on the price of our common stock. The Series B preferred stock
is
also convertible into common stock at a price of $11.75 per share.
Conversion of the Series B preferred stock at a time when the price of our
common stock is greater than $11.75 per share would also have a dilutive
impact
on our existing stockholders. Furthermore, the conversion rate applicable
to the preferred stock is subject to adjustment upon the occurrence of certain
events.
RATIO
OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED DIVIDENDS
The
ratio
of our earnings to fixed charges are set forth below for each of the periods
indicated.
| |
Nine
Months Ended
July
31,
|
Fiscal
Year Ended October 31,
|
| |
2005(1)
|
2004(1)
|
2003(1)
|
2002(1)
|
2001(1)
|
2000(1)
|
|
Ratio
of earnings to fixed charges and preference dividends
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
____________________________
(1)
For
the nine months ended July 31, 2005, and for the fiscal years ended October
31,
2004, 2003, 2002, 2001 and 2000, our earnings were inadequate to cover fixed
charges. The coverage deficiencies were $52.3 million, $88.2 million, $67.4
million, $48.8 million, $15.4 million and $4.4 million,
respectively.
For
purposes of calculating the ratios of earnings to fixed charges, (i) fixed
charges consist of interest on debt, amortization of discount on debt,
capitalized interest, and preferred dividends and (ii) earnings consist of
pre-tax income from operations and fixed charges (excluding capitalized
interest) and include the amortization of capitalized interest.
USE
OF PROCEEDS
Except
as
may be provided in an applicable prospectus supplement, we will use the net
proceeds from the sale of the debt securities, preferred stock and/or common
stock for market and product development, project financing and general
corporate purposes. General corporate purposes may include capital expenditures,
repayment of debt, payment of dividends and any other purposes that we may
specify in any prospectus supplement. We may invest the net proceeds temporarily
until we use them for their stated purpose.
We
will
not receive any of the proceeds from the sale of the shares of our Series
B
preferred stock and shares of our common stock issuable upon conversion of
shares of our Series B preferred stock being offered by the selling shareholder
pursuant to this prospectus.
DESCRIPTION
OF DEBT SECURITIES
We
may
from time to time offer and sell debt securities consisting of debentures,
notes
and/or other unsecured evidences of indebtedness (the "Debt Securities").
The
Debt Securities will be either our unsecured senior debt securities (the
"Senior
Debt Securities") or our unsecured subordinated debt securities (the
"Subordinated Debt Securities"). The Senior Debt Securities will be issued
under
an Indenture (the "Senior Indenture") between us and a trustee that will
be
identified in a prospectus supplement (the "Senior Trustee"). The Senior
Debt
Securities will be our direct, unsecured obligations and will rank equally
with
all of our outstanding unsecured senior indebtedness. The Subordinated Debt
Securities will be issued under a second indenture (the "Subordinated
Indenture") between us and a trustee that will be identified in a prospectus
supplement (the "Subordinated Trustee"), which may be the same as the Senior
Trustee. The Subordinated Debt Securities will be our direct, unsecured
obligations and, unless otherwise specified in the prospectus supplement
relating to a particular series of Subordinated Debt Securities offered by
such
prospectus supplement, will be subject to the subordination provisions set
forth
under the heading "Subordination of the Subordinated Debt Securities" below.
The
Senior Indenture and the Subordinated Indenture are together called the
"Indentures" and the Senior Trustee and the Subordinated Trustee are together
called the "Trustee."
The
following summary of certain provisions of the Indentures is not complete.
You
should refer to the form of each Indenture, copies of which will be filed
as
exhibits to the registration statement of which this prospectus is a
part.
The
following section describes certain general terms and provisions of the Debt
Securities. The Debt Securities may be issued from time to time in one or
more
series. The particular terms of each series of Debt Securities offered by
any
prospectus supplement will be described in that prospectus
supplement.
General.
The
Indentures do not limit the aggregate principal amount of Debt Securities
that
we may issue. Each Indenture provides that Debt Securities of any series
may be
issued under it up to the aggregate principal amount authorized from time
to
time by us and may be denominated in any currency or currency unit that we
designate. We will determine the terms and conditions of each series of Debt
Securities, including the maturity, principal and interest, but those terms
must
be consistent with the Indenture. Unless set forth in the applicable prospectus
supplement, neither the Indentures nor the Debt Securities will limit or
otherwise restrict the amount of other indebtedness that we may incur or
the
other securities that we may issue.
The
prospectus supplement relating to each series of Debt Securities being offered
will specify the particular terms of those Debt Securities. The terms may
include:
| • |
the
title of the Debt Securities and whether they are Senior Debt Securities
or Subordinated Debt Securities;
|
| • |
any
limit on the aggregate principal amount of the Debt
Securities;
|
| • |
the
priority of payment of the Debt Securities, including any subordination
provisions;
|
| • |
the
price or prices (which may be expressed as a percentage of the
aggregate
principal amount thereof) at which the Debt Securities will be
issued;
|
| • |
the
date or dates on which the principal and premium, if any, of the
Debt
Securities are payable;
|
| • |
the
interest rate or rates (which may be fixed or variable) of the
Debt
Securities, if any;
|
| • |
the
interest payment date or dates, if any, or the method or methods
by which
such dates may be determined, if any, the date or dates on which
payment
of interest, if any, will commence, the date or dates from which
interest
will accrue and the regular record dates for such interest payment
dates;
|
| • |
the
extent to which any of the Debt Securities will be issuable in
temporary
or permanent global form, or the manner in which any interest payable
on a
temporary or permanent Global Security (as defined herein) will
be
paid;
|
| • |
each
office or agency where, subject to the terms of the applicable
Indenture,
the Debt Securities may be presented for registration of transfer
or
exchange;
|
| • |
the
place or places where, subject to the terms of the applicable Indenture,
the principal (and premium, if any) and interest, if any, on the
Debt
Securities will be payable;
|
| • |
the
terms and conditions on which we may redeem any Debt Securities,
if at
all;
|
| • |
any
obligation to redeem or purchase any Debt Securities and the terms
and
conditions on which we must do so;
|
| • |
the
denomination or denominations in which the Debt Securities will
be
issuable if other than $1,000 and integral multiples
thereof;
|
| • |
the
currency, currencies or units based on or related to currencies
for which
the Debt Securities may be purchased and the currency, currencies
or
currency units in which the principal of, premium, if any, and
any
interest on such Debt Securities may be
payable;
|
| • |
whether
the Debt Securities will be convertible into shares of our common
stock or
preferred stock, or other securities or property, and, if so, the
terms of
such conversion;
|
| • |
any
index used to determine the amount of payments of principal
of, premium,
if any, and interest on the Debt
Securities;
|
| • |
the
payment of any additional amounts with respect to the Debt
Securities;
|
| • |
whether
any of the Debt Securities will be issued as Original Issue Discount
Securities (as defined below) and the terms and provisions relating
to
these securities;
|
| • |
information
with respect to book-entry procedures relating to Global Securities,
if
any;
|
| • |
if
applicable, that the Debt Securities are
defeasible;
|
| • |
any
additional covenants or Events of Default not set forth in the
applicable
Indenture or changes in the covenants or Events of Default set
forth in
the applicable Indenture; and
|
| • |
any
other terms of the Debt Securities not inconsistent with the provisions
of
the applicable Indenture.
|
Debt
Securities may be issued as original issue discount Debt Securities (bearing
no
interest or interest at a rate that at the time of issuance is below market
rates) ("Original Issue Discount Securities"), to be sold at a substantial
discount below their stated principal amount. There may not be any periodic
payments of interest on Original Issue Discount Securities. In the event
of an
acceleration of the maturity of any Original Issue Discount Security, the
amount
payable to the holder of such Original Issue Discount Security upon such
acceleration will be set forth in the prospectus supplement and determined
in
accordance with the terms of such security and the Indenture, but will be
an
amount less than the amount payable at the maturity of the principal of such
Original Issue Discount Security. The federal income tax considerations with
respect to Original Issue Discount Securities will be explained in the
prospectus supplement we prepare for the Original Issue Discount
Securities.
Conversion
and Exchange Rights. The
prospectus supplement will describe, if applicable, the terms on which you
may
convert Debt Securities into or exchange them for our common stock, our
preferred stock or other securities or property. The conversion or exchange
may
be mandatory or may be at your option. We will describe how the number of
shares
of our common stock, our preferred stock or other securities or property
to be
received upon conversion or exchange would be calculated.
Form,
Exchange and Transfer.
We will
issue Debt Securities only in fully registered form, without coupons, and,
unless otherwise specified in the prospectus supplement, only in denominations
of $1,000 and integral multiples thereof.
The
holder of a Debt Security may elect, subject to the terms of the Indentures
and
the limitations applicable to Global Securities, to exchange them for other
Debt
Securities of the same series of any authorized denomination and of a like
tenor
and aggregate principal amount.
Holders
of Debt Securities may present them for exchange as provided above or for
registration of transfer, duly endorsed or with the form of transfer endorsed
thereon duly executed, at the office of the transfer agent we designate for
the
purpose. We will not impose a service charge for any registration of transfer
or
exchange of Debt Securities, but we may require a payment sufficient to cover
any tax or other governmental charge payable in connection with the transfer
exchange. We will name the transfer agent in the prospectus supplement. We
may
designate additional transfer agents or rescind the designation of any transfer
agent or approve a change in the office through which any transfer agent
acts,
but we must maintain a transfer agent in each place of payment for the Debt
Securities.
If
we
redeem the Debt Securities, we will not be required to issue, register the
transfer of or exchange any Debt Security during a specified period prior
to
mailing a notice of redemption. We are not required to register the transfer
of
or exchange any Debt Security selected for redemption, except the unredeemed
portion of the Debt Security being redeemed.
Payment
and Paying Agents.
Unless
otherwise stated in the prospectus supplement, we will pay principal and
any
premium or interest on a Debt Security to the person in whose name the Debt
Security is registered at the close of business on the regular record date
for
such interest.
Unless
otherwise stated in the prospectus supplement, we will pay principal and
any
premium or interest on the Debt Securities at the office of our designated
paying agent, except we may pay interest by check mailed to the address of
the
person entitled to the payment. Unless we state otherwise in the prospectus
supplement, the corporate trust office of the Trustee will be the paying
agent
for the Debt Securities.
Any
other
paying agents we designate for the Debt Securities of a particular series
will
be named in the prospectus supplement. We may designate additional paying
agents, rescind the designation of any paying agent or approve a change in
the
office through which any paying agent acts, but we must maintain a paying
agent
in each place of payment for the Debt Securities.
The
paying agent will return to us all money we pay to it for the payment of
the
principal, premium or interest on any Debt Security that remains unclaimed
for a
specified period. The holder thereafter may look only to us for
payment.
Global
Securities.
The Debt
Securities of any series may be represented by one or more global securities
(each, a "Global Security" and, together, the "Global Securities") that will
have an aggregate principal amount equal to that of the Debt Securities of
that
series. Each Global Security will be registered in the name of a depositary
identified in the prospectus supplement. We will deposit the Global Security
with the depositary or a custodian, and the Global Security will bear a legend
regarding the restrictions on exchanges and registration of
transfer.
No
Global
Security may be exchanged in whole or in part for Debt Securities registered,
and no transfer of a Global Security in whole or in part may be registered,
in
the name of any person other than the depositary or any nominee of the
depositary unless (1) the depositary has notified us that it is unwilling
or
unable to continue as depositary or (2) an event of default occurs and continues
with respect to the Debt Securities. The depositary will determine how all
securities issued in exchange for a Global Security will be
registered.
As
long
as the depositary or its nominee is the registered holder of a Global Security,
the depositary or the nominee will be considered the sole owner and holder
of
the Global Security and the underlying Debt Securities. Except as stated
above,
owners of beneficial interests in a Global Security will not be entitled
to have
the Global Security or any Debt Security registered in their names, will
not
receive physical delivery of certificated Debt Securities and will not be
considered to be the owners or holders of the Global Security or underlying
Debt
Securities. We will make all payments of principal, premium and interest
on a
Global Security to the depositary or its nominee. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of such
securities in definitive form. These laws may prevent you from transferring
your
beneficial interests in a Global Security.
Only
institutions that have accounts with the depositary or its nominee and persons
that hold beneficial interests through the depositary or its nominee may
own
beneficial interests in a Global Security. The depositary will credit, on
its
book-entry registration and transfer system, the respective principal amounts
of
Debt Securities represented by the Global Security to the accounts of its
participants. Ownership of beneficial interests in a Global Security will
be
shown only on, and the transfer of those ownership interests will be effected
only through, records maintained by the depositary or any such
participant.
The
policies and procedures of the depositary may govern payments, transfers,
exchanges and other matters relating to beneficial interests in a Global
Security. We and the Trustee assume no responsibility or liability for any
aspect of the depositary's or any participant's records relating to, or for
payments made on account of, beneficial interests in a Global
Security.
The
specific terms of the depositary arrangement with respect to any series of
Debt
Securities will be described in the applicable prospectus
supplement.
Consolidation,
Merger and Sale of Assets.
Each
Indenture provides that we may, without the consent of the holders of any
of the
Debt Securities outstanding under the applicable Indenture, consolidate with,
merge into or transfer our assets substantially as an entirety to any person,
provided that:
| • |
any
successor assumes our obligations on the applicable Debt Securities
and
under the applicable Indenture;
|
| • |
after
giving effect to the transaction, there is no Default or Event
of Default
that is continuing; and
|
| • |
certain
other conditions under the applicable Indenture are
met.
|
Accordingly,
such consolidation, merger or transfer of assets substantially as an entirety,
which meets the conditions described above, would not create any Event of
Default which would entitle holders of the Debt Securities, or the Trustee
on
their behalf, to take any of the actions described below under "Events of
Default."
Leveraged
and Other Transactions.
Unless
otherwise specified in the applicable prospectus supplement, the Indentures
and
the Debt Securities will not contain, among other things, provisions that
would
protect holders of the Debt Securities in the event of a highly leveraged
or
other transaction involving us that could adversely affect the holders of
Debt
Securities.
Modification
of the Indentures; Waiver.
Each
Indenture provides that, with the consent of the holders of not less than
a
majority in aggregate principal amount of the outstanding Debt Securities
of
each affected series, modifications and alterations of such Indenture may
be
made that affect the rights of the holders of such Debt Securities. However,
no
such modification or alteration may be made without the consent of the holder
of
each Debt Security so affected which would, among other things:
| • |
change
the maturity of the principal of, or of any installment of interest
(or
premium, if any) on, any Debt Security issued pursuant to such
Indenture;
|
| • |
change
the principal amount thereof, premium thereon, if any, or interest
thereon;
|
| • |
change
the method of calculation of interest or the currency of payment
of
principal or interest (or premium, if any)
thereon;
|
| • |
reduce
the minimum rate of interest
thereon;
|
| • |
impair
the right to bring suit for the enforcement of any such payment
on or with
respect to any such Debt Security;
|
| • |
reduce
the amount of principal of an Original Issue Discount Security
that would
be due and payable upon an acceleration of the maturity
thereof;
|
| • |
reduce
the above-stated percentage in principal amount of outstanding
Debt
Securities of any series required to modify or alter such
Indenture;
|
| • |
in
the case of Subordinated Debt Securities, modify the subordination
provisions in a manner materially adverse to their
holders;
|
| • |
in
the case of Debt Securities that are convertible or exchangeable
into our
other securities, adversely affect the right of holders to convert
or
exchange any of the Debt
Securities;
|
| • |
reduce
the percentage in principal amount of outstanding Debt Securities
of any
series necessary for waiver of compliance with certain provisions
of the
Indentures or for waiver of certain
defaults;
|
| • |
modify
provisions with respect to modification and waiver;
or
|
| • |
change
our obligation to maintain an office or agency as required by the
applicable Indenture.
|
The
holders of a majority in aggregate principal amount of the outstanding Debt
Securities of any series may waive, on behalf of the holders of all Debt
Securities of that series, our compliance with certain restrictive provisions
of
the Indentures. Prior to the acceleration of the maturity of the Debt Securities
of any series outstanding under the Indentures, the holders of a majority
in
aggregate principal amount of the outstanding Debt Securities of any series
may
waive any past default under the Indenture with respect to Debt Securities
of
that series, except a default (1) in the payment of principal, premium
or
interest on any Debt Security of that series or (2) in respect of
a
covenant or provision of the Indenture that cannot be amended without each
holder's consent.
Except
in
certain limited circumstances, we may set any day as a record date for the
purpose of determining the holders of outstanding Debt Securities of any
series
entitled to give or take any direction, notice, consent, waiver or other
action
under the Indentures. In certain limited circumstances, the Trustee may set
a
record date for action by holders. To be effective, the action must be taken
by
holders of the requisite principal amount of such Debt Securities within
a
specified period following the record date.
Events
of Default.
An Event
of Default with respect to the Debt Securities of any series is defined in
the
applicable Indenture as:
•
default
in the payment of principal of or premium, if any, on any Debt Security of
that
series when due, whether or not, in the case of Subordinated Debt Securities,
such payment is prohibited by the Subordinated Indenture;
•
default
in the payment of interest on any Debt Security of that series when due,
which
continues for 30 days, whether or not, in the case of Subordinated Debt
Securities, such payment is prohibited by the Subordinated
Indenture;
•
failure
to deposit any sinking fund payment, when due, in respect of any Debt Security
of that series, whether or not, in the case of Subordinated Debt Securities,
such payment is prohibited by the subordination provisions of the Subordinated
Indenture;
•
default
in the performance by us of any of our other covenants in the applicable
Indenture with respect to the Debt Securities of such series, which continues
for 90 days after written notice by the Trustee or the holders of at least
25%
in aggregate principal amount of the Debt Securities of that
series;
•
certain
events of bankruptcy, insolvency or reorganization affecting us;
and
•
any
other event that may be specified in a prospectus supplement with respect
to any
series of Debt Securities.
If
an
Event of Default (other than an Event of Default relating to events of
bankruptcy, insolvency or reorganization) with respect to any series of Debt
Securities occurs and is continuing, either the Trustee or the holders of
at
least 25% in aggregate principal amount of the Debt Securities of such series
outstanding may declare the principal amount (or if such Debt Securities
are
Original Issue Discount Securities, such portion of the principal amount
as may
be specified in the terms of that series) of all Debt Securities of that
series
to be immediately due and payable. If an Event of Default relating to events
of
bankruptcy, insolvency or reorganization with respect to the Debt Securities
of
any series at the time outstanding shall occur, the principal amount of all
the
Debt Securities of that series (or, in the case of any such Original Issue
Discount Security, such specified amount) will automatically, and without
any
action by the applicable Trustee or any holder, become immediately due and
payable. After any such acceleration, but before a judgment or decree based
on
acceleration, the holders of a majority in principal amount of the outstanding
Debt Securities of that series may, under certain circumstances, rescind
and
annul such acceleration if all Events of Default, other than the non-payment
of
accelerated principal (or other specified amount), have been cured or waived
as
provided in the applicable Indenture. For information as to waiver of defaults,
see "Modification of the Indentures; Waiver."
If
an
Event of Default occurs and is continuing, the Trustee may, in its discretion,
and at the written request of holders of not less than a majority in aggregate
principal amount of the Debt Securities of any series, and upon reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request and subject to certain other conditions set
forth
in the applicable Indenture will, proceed to protect the rights of the holders
of all the Debt Securities of such series.
The
Indentures provide that upon the occurrence of an Event of Default relating
to
payments of principal of, premium, if any, or interest on any Debt Security,
we
will, upon demand of the Trustee, pay to it, for the benefit of the holder
of
any such Debt Security, the whole amount then due and payable on such Debt
Securities for principal, premium, if any, and interest. The Indentures further
provide that that if we fail to pay such amount upon such demand, the Trustee
may, among other things, institute a judicial proceeding for the collection
of
the amount due.
No
holder
of a Debt Security of any series may institute any proceeding with respect
to
the Indentures, or for the appointment of a receiver or a trustee, or for
other
remedy, unless (1) the holder has previously given the Trustee written
notice of a continuing event of default, (2) the holders of at least
25% in
aggregate principal amount of the outstanding Debt Securities of that series
have made a written request, and the holders have offered reasonable indemnity
to the Trustee to institute the proceeding, and (3) the Trustee has
failed
to institute the proceeding, and has not received a direction inconsistent
with
the request within 60 days of such notice. The Indentures also provide that,
notwithstanding any other provision of the applicable Indenture, the holder
of
any Debt Security of any series will have the right to institute suit for
the
enforcement of any payment of principal of, premium, if any, and interest
on
such Debt Securities when due and that such right will not be impaired without
the consent of such holder.
We
are
required to file annually with the applicable Trustee a written statement
as to
the existence or non-existence of defaults under the Indentures or the Debt
Securities.
Subordination
of the Subordinated Debt Securities.
The
Subordinated Debt Securities will be our direct, unsecured obligations and,
unless otherwise specified in the prospectus supplement relating to a particular
series of Subordinated Debt Securities offered by such prospectus supplement,
will be subject to the subordination provisions described in this section.
Upon
any distribution of our assets due to any dissolution, winding up, liquidation
or reorganization, the payment of the principal of, premium, if any, and
interest on the Subordinated Debt Securities is to be subordinated in right
of
payment to all Senior Indebtedness. In certain events of bankruptcy or
insolvency, the payment of the principal of and interest on the Subordinated
Debt Securities will, to the extent provided in the Subordinated Indenture,
also
be effectively subordinated in right of payment to all General Obligations
(as
defined below).
Upon
any
distribution of our assets due to any dissolution, winding up, liquidation
or
reorganization, the holders of Senior Indebtedness will first be entitled
to
receive payment in full of all amounts due or to become due before the holders
of the Subordinated Debt Securities will be entitled to receive any payment
in
respect of the Subordinated Debt Securities. If upon any such payment or
distribution of assets, after giving effect to such subordination provisions
in
favor of the holders of Senior Indebtedness, (i) there remain any amounts
of
cash, property or securities available for payment or distribution in respect
of
the Subordinated Debt Securities ("Excess Proceeds") and (ii) if, at such
time,
any creditors in respect of General Obligations have not received payment
in
full of all amounts due or to become due on or in respect of such General
Obligations, then such Excess Proceeds will first be applied to pay or provide
for the payment in full of such General Obligations before any payment or
distribution may be made in respect of the Subordinated Debt
Securities.
In
addition, no payment may be made on the Subordinated Debt Securities, or
in
respect of any redemption, retirement, purchase or other acquisition of any
of
the Subordinated Debt Securities, at any time in the event:
• there
is
a default in the payment of the principal of, premium, if any, interest on
or
otherwise in respect of any Senior Indebtedness; or
• any
event
of default with respect to any Senior Indebtedness has occurred and is
continuing or would occur as a result of such payment on the Subordinated
Debt
Securities or any redemption, retirement, purchase or other acquisition of
any
of the Subordinated Debt Securities, permitting the holders of such Senior
Indebtedness to accelerate the maturity thereof.
Except
as
described above, our obligation to make payments of the principal of, premium,
if any, or interest on the Subordinated Debt Securities will not be
affected.
By
reason
of the subordination in favor of the holders of Senior Indebtedness, in the
event of a distribution of assets upon any dissolution, winding up, liquidation
or reorganization, our creditors who are not holders of Senior Indebtedness
or
the Subordinated Debt Securities may recover less, proportionately, than
holders
of Senior Indebtedness and may recover more, proportionately, than holders
of
the Subordinated Debt Securities.
Subject
to payment in full of all Senior Indebtedness, the holders of Subordinated
Debt
Securities will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or our
securities applicable to Senior Indebtedness. Subject to payment in full
of all
General Obligations, the holders of the Subordinated Debt Securities will
be
subrogated to the rights of the creditors in respect of General Obligations
to
receive payments or distributions of cash, property or our securities applicable
to such creditors in respect of General Obligations.
"Senior
Indebtedness" for purposes of the Subordinated Indenture is the principal
of,
premium, if any, and interest on:
• all
of
our indebtedness for money borrowed (other than (i) the Subordinated Debt
Securities and (ii) the Junior Subordinated Indebtedness (as defined below))
whether outstanding on the date of execution of the Subordinated Indenture
or
created, assumed or incurred after that date, except such indebtedness as
is by
its terms expressly stated to be not superior in right of payment to the
Subordinated Debt Securities or to rank equally with the Subordinated Debt
Securities; and
• any
deferrals, renewals or extensions of any such Senior Indebtedness.
The
term
"indebtedness for money borrowed" as used in this prospectus includes, without
limitation, any obligation of, or any obligation guaranteed by us for the
repayment of borrowed money, whether or not evidenced by bonds, debentures,
notes or other written instruments, and any deferred obligation for the payment
of the purchase price of property or assets. The Subordinated Indenture does
not
limit our issuance of additional Senior Indebtedness.
The
Subordinated Debt Securities will rank senior in right of payment to our
Junior
Subordinated Indebtedness upon any distribution of our assets due to any
dissolution, winding up, liquidation or reorganization, to the extent provided
in the instruments creating our Junior Subordinated Indebtedness. "Junior
Subordinated Indebtedness" is the principal of, premium, if any, and interest
on:
• all
of
our indebtedness for money borrowed whether outstanding on the date of the
execution of the Subordinated Indenture or created, assumed or incurred after
that date that is by its terms subordinated to the Subordinated Debt Securities;
and
• any
deferrals, renewals or extensions of any of such Junior Subordinated
Indebtedness.
Unless
otherwise specified in the prospectus supplement relating to a particular
series
of Subordinated Debt Securities offered thereby, the term "General Obligations"
means all obligations to make payment on account of claims in respect of
derivative products such as interest and foreign exchange rate contracts,
commodity contracts and similar arrangements, other than:
• obligations
on account of Senior Indebtedness;
• obligations
on account of indebtedness for money borrowed ranking equal with or subordinate
to the Subordinated Debt Securities; and
• obligations
which by their terms are expressly stated not to be senior in right of payment
to the Subordinated Debt Securities or to rank equally with the Subordinated
Debt Securities.
Unless
otherwise specified in the prospectus supplement relating to any series of
Subordinated Debt Securities, payment of principal of the Subordinated Debt
Securities may be accelerated only in case of the bankruptcy, insolvency
or
reorganization of our company.
Defeasance
and Covenant Defeasance.
To the
extent stated in the prospectus supplement, we may elect to apply the provisions
relating to defeasance and discharge of indebtedness, or to defeasance of
certain restrictive covenants in the Indentures, to the Debt Securities of
any
series.
DESCRIPTION
OF CAPITAL STOCK
General
The
following is a summary of the rights of our common stock and preferred
stock and
related provisions of our certificate of incorporation and bylaws. For
more
detailed information, please see our certificate of incorporation and bylaws,
as
amended.
Authorized
and Outstanding Capital Stock
Our
authorized capital stock consists of 150,000,000 shares of common stock,
par
value $.0001 per share, and 250,000 shares of preferred stock, par value
$.01
per share, issuable in one or more series designated by our board of directors,
of which 105,875 shares of our preferred stock have been designated as
5% Series
B Cumulative Convertible Perpetual Preferred Stock. On August 29, 2005,
48,372,216 shares of our common stock were issued and outstanding and 105,875
shares of our Series B preferred stock were issued and outstanding. No
other
shares of our preferred stock are issued and outstanding.
In
addition, as of August 29, 2005, there were outstanding options to purchase
5,862,841 shares of our common stock under our stock options plans, 640,761
shares of our common stock were available for future issuance under our
stock
option plans, 396,171 shares of our common stock were available for future
issuance under our employee stock purchase plan, and there were outstanding
warrants to purchase 1,800,000 shares of our common stock. In addition,
as of
August 29, 2005, we were obligated, if and when the holder exercises its
conversion rights, to issue approximately 225,286 shares of our common
stock
upon conversion of the Series 1 preferred shares. At August 29, 2005, there
were
814 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 shareholders must be approved by a majority,
or,
in the case of the 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 our
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 our common stock will share ratably in any dividends declared by the
board of
directors, subject to the preferential rights of any of our preferred stock
then
outstanding. Dividends consisting of shares of our common stock may be
paid to
holders of shares of our common stock.
Other
Rights
In
the
event of our liquidation, dissolution or winding up, after payment of
liabilities and liquidation preferences on any of our preferred stock then
outstanding, the holders of shares of our common stock are entitled to
share
ratably in all assets available for distribution. Holders of shares of
our
common stock have no preemptive rights or rights to convert their shares
of our
common stock into any other securities. There are no redemption or sinking
fund
provisions applicable to the common stock.
Preferred
Stock
This
section describes the general terms of our preferred stock, $0.01 par value,
to
which any prospectus supplement may relate. Certain terms of any series
of our
preferred stock offered by any prospectus supplement will be described
in such
prospectus supplement. If so indicated in the prospectus supplement, the
terms
of that series may differ from the terms described below. The provisions
of our
preferred stock described below are not complete. You should refer to our
certificate of incorporation and any certificate of amendment to our certificate
of incorporation or certificate of designations filed with the SEC in connection
with the offering of our preferred stock.
Under
our
certificate of incorporation, our board of directors has the authority,
without
further shareholder action, to issue from time to time, preferred stock
in one
or more series and for such consideration as may be fixed from time to
time by
our board of directors. Our board also has the authority to fix and determine,
in the manner provided by law, the relative rights and preferences of
the shares
of any series so established, such as dividend and voting rights. Our
certificate of incorporation authorizes 250,000 shares of preferred stock.
Prior
to the issuance of each series of preferred stock, our board will adopt
resolutions creating and designating the series as a series of preferred
stock.
The board of directors may, without shareholder approval, issue preferred
stock
with voting and other rights that could adversely affect the voting power
and
other rights of the holders of our common stock and could have anti-takeover
effects.
Our
preferred stock will have the dividend, liquidation, redemption, voting
and
conversion rights set forth below unless otherwise specified in the applicable
prospectus supplement. You should read the prospectus supplement relating
to the
particular series of preferred stock offered thereby for specific terms,
including:
|
|
• |
the
designation, stated value and liquidation preference of such
preferred
stock and the number of shares
offered;
|
|
|
• |
the
initial public offering price at which the preferred stock will
be
issued;
|
|
|
• |
the
dividend rate or rates (or method of calculation), the dividend
periods,
the date on which dividends will be payable and whether such
dividends
will be cumulative or noncumulative and, if cumulative, the
dates
from which dividends will begin
to
cumulate;
|
|
|
• |
any
redemption or sinking fund
provisions;
|
|
|
• |
any
conversion provisions; and
|
|
|
• |
any
additional rights, preferences, privileges, qualifications, limitations
and restrictions of the preferred
stock.
|
Unless
otherwise specified in the applicable prospectus supplement, the shares
of each
series of preferred stock will upon issuance rank equally in all respects
with
each other then outstanding series of preferred stock.
Preferred
stock could be issued quickly with terms that could delay or prevent a
change of
control or make the removal of management more difficult. Additionally,
the
issuance of preferred stock may decrease the market price of our common
stock
and may adversely affect the voting and other rights of the holders of
our
common stock.
Ranking
Any
series of our preferred stock will, with respect to dividend rights and
rights
on liquidation, winding up or dissolution, rank:
|
|
• |
senior
to all classes of our common stock and to all equity securities
issued by
us, the terms of which specifically provide that the equity securities
will rank junior to that preferred
stock;
|
|
|
• |
equally
with all equity securities issued by us, the terms of which specifically
provide that the equity securities will rank equally with that
preferred
stock; and
|
|
|
• |
junior
to all equity securities issued by us, the terms of which specifically
provide that the equity securities will rank senior to that preferred
stock.
|
Dividends
The
holders of our preferred stock will be entitled to receive, when, as and
if
declared by our board of directors, dividends at such rates and on such
dates as
will be specified in the applicable prospectus supplement. Such rates may
be
fixed or variable or both. If variable, the formula used for determining
the
dividend rate for each dividend period will be specified in the applicable
prospectus supplement. Dividends will be payable to the holders of record
as
they appear on our stock books on such record dates as will be fixed by
our
board. Dividends may be paid in the form of cash, preferred stock (of the
same
or a different series) or our common stock, in each case as specified in
the
applicable prospectus supplement.
Dividends
on any series of our preferred stock may be cumulative or noncumulative,
as
specified in the applicable prospectus supplement. If the dividends on
a series
of our preferred stock are noncumulative ("Noncumulative Preferred Stock"),
and
our board of directors fails to declare a dividend payable on a dividend
payment
date, then the holders of such preferred stock will have no right to receive
a
dividend in respect to the dividend period relating to such dividend payment
date, and we will not be obligated to pay the dividend accrued for such
period,
whether or not dividends on such preferred stock are declared or paid on
any
future dividend payment dates.
We
will
not declare or pay or set apart for payment any dividends on any series
of our
preferred stock that rank, as to dividends, on a parity with or junior
to the
outstanding preferred stock of any series unless (i) if such outstanding
preferred stock has a cumulative dividend ("Cumulative Preferred Stock"),
full
cumulative dividends have been or contemporaneously are declared and paid
or
declared and a sum sufficient for the payment thereof set apart for such
payment
on such preferred stock for all dividend periods terminating on or prior
to the
date of payment of any such dividends on such other series of the preferred
stock or (ii) if such outstanding preferred stock is Noncumulative Preferred
Stock, full dividends for the then-current dividend period on such preferred
stock have been or contemporaneously are declared and paid or declared
and a sum
sufficient for the payment thereof set apart for such payment.
Until
full dividends are paid (or declared and payment is set aside) on our preferred
stock ranking equal as to dividends, then:
|
|
• |
we
will declare any dividends pro rata among the preferred stock
of each
series and any preferred stock ranking equal to such preferred
stock as to
dividends (i.e., the dividends we declare per share on each series
of such
preferred stock will bear the same relationship to each other
that the
full accrued dividends per share on each such series of the preferred
stock (which will not, if such preferred stock is Noncumulative
Preferred
Stock, include any accumulation in respect to unpaid dividends
for prior
dividend periods) bear to each other);
|
|
|
• |
other
than such pro rata dividends, we will not declare or pay any
dividends or
declare or make any distributions upon any security ranking junior
to or
equal with the preferred stock as to dividends or upon liquidation
(except
dividends on common stock payable in common stock, dividends
or
distributions paid for with securities ranking junior to the
preferred
stock as to dividends and upon liquidation and cash in lieu of
fractional
shares in connection with such dividends);
and
|
|
|
• |
we
will not redeem, purchase or otherwise acquire (or set aside
money for a
sinking fund for) our common stock or any other securities ranking
junior
to or equal with the preferred stock as to dividends or upon
liquidation
(except by conversion into or exchange for stock junior to the
preferred
stock as to dividends and upon liquidation).
|
We
will
not owe any interest, or any money in lieu of interest, on any dividend
payment
on any series of the preferred stock that may be past due.
Redemption
A
series
of our preferred stock may be redeemable, in whole or in part, at our option,
and may be subject to mandatory redemption pursuant to a sinking fund or
otherwise, in each case upon terms, at the times and at the redemption
prices
specified in the applicable prospectus supplement. Redeemed shares of our
preferred stock will become authorized but unissued shares of preferred
stock
that we may issue in the future.
The
prospectus supplement relating to a series of our preferred stock that
is
subject to mandatory redemption will specify the number of shares of such
preferred stock that we will redeem each year and the redemption price
per
share. If shares of our preferred stock are redeemed, we will pay all accrued
and unpaid dividends thereon (which will not, if such preferred stock is
Noncumulative Preferred Stock, include any accumulation in respect of unpaid
dividends for prior dividend periods) up to but excluding the date of
redemption. The redemption price may be payable in cash or other property,
as
specified in the applicable prospectus supplement. If the redemption price
for
our preferred stock of any series is payable only from the net proceeds
of the
issuance of our capital stock, the terms of such preferred stock may provide
that, if no such capital stock will have been issued or to the extent the
net
proceeds from any issuance are insufficient to pay in full the aggregate
redemption price then due, such preferred stock will automatically and
mandatorily be converted into shares of our applicable capital stock pursuant
to
conversion provisions specified in the applicable prospectus supplement.
If
fewer
than all the outstanding shares of our preferred stock of any series are
to be
redeemed, our board will determine the number of shares to be redeemed.
We will
redeem the shares pro rata from the holders of record of such shares in
proportion to the number of such shares held by such holders (with adjustments
to avoid redemption of fractional shares) or by lot or by any other method
as
may be determined by our board.
Even
though the terms of a series of the Cumulative Preferred Stock may permit
redemption of such preferred stock in whole or in part, if any dividends,
including accumulated dividends, on that series are past due:
|
|
• |
we
will not redeem any preferred stock of that series unless we
simultaneously redeem all outstanding preferred stock of that
series;
and
|
|
|
• |
we
will not purchase or otherwise acquire any preferred stock of
that
series.
|
The
prohibition discussed in the preceding sentence will not prohibit us from
purchasing or acquiring preferred stock of that series pursuant to a purchase
or
exchange offer if we make the offer on the same terms to all holders of
that
series.
Conversion
Rights
The
prospectus supplement relating to a series of convertible preferred stock
will
describe the terms on which shares of such series are convertible into
our
common stock.
Rights
Upon Liquidation
Unless
the applicable prospectus supplement states otherwise, if we voluntarily
or
involuntarily liquidate, dissolve or wind up our business, the holders
of our
preferred stock will be entitled to receive out of our assets available
for
distribution to stockholders, before any distribution of assets is made
to
holders of our common stock or any other class or series of shares ranking
junior to such preferred stock upon liquidation, liquidating distributions
in
the amount of the liquidation preference of such preferred stock plus accrued
and unpaid dividends (which will not, if such preferred stock is Noncumulative
Preferred Stock, include any accumulation in respect of unpaid dividends
for
prior dividend periods). If we voluntarily or involuntarily liquidate,
dissolve
or wind up our business and the amounts payable with respect to our preferred
stock of any series and any of our other securities ranking equal as to
any such
distribution are not paid in full, the holders of such preferred stock
and of
such other shares will share ratably in any such distribution of our assets
in
proportion to the full respective preferential amounts to which they are
entitled. After payment of the full amount of the liquidating distribution
to
which they are entitled, the holders of our preferred stock of any series
will
not be entitled to any further participation in any distribution of our
assets.
Voting
Rights
Except
as
described in this section or in the applicable prospectus supplement, or
except
as expressly required by applicable law, the holders of our preferred stock
will
not be entitled to vote. If the holders of a series of our preferred stock
are
entitled to vote and the applicable prospectus supplement does not state
otherwise, each such share will be entitled to one vote on matters on which
holders of such series of preferred stock are entitled to vote. For any
series
of our preferred stock having one vote per share, the voting power of such
series, on matters on which holders of such series and holders of other
series
of our preferred stock are entitled to vote as a single class, will depend
on
the number of shares in such series, not the aggregate stated value, liquidation
preference or initial offering price of the shares of such series of preferred
stock.
Unless
we
receive the consent of the holders of an outstanding series of preferred
stock
and the outstanding shares of all other series of preferred stock which
(i) rank
equal with such series either as to dividends or the distribution of assets
upon
liquidation, dissolution or winding up of our business and (ii) have voting
rights that are exercisable and that are similar to those of such series,
we
will not:
|
|
• |
authorize,
create or issue, or increase the authorized or issued amount
of, any class
or series of stock ranking prior to such outstanding preferred
stock with
respect to payment of dividends or the distribution of assets
upon
liquidation, dissolution or winding up of our business;
or
|
|
|
• |
amend,
alter or repeal, whether by merger, consolidation or otherwise,
the
provisions of our certificate or of the resolutions contained
in any
certificate of designations creating such series of preferred
stock so as
to materially and adversely affect any right, preference privilege
or
voting power of such outstanding preferred stock.
|
This
consent must be given by the holders of a majority of all such outstanding
preferred stock described in the preceding sentence, voting together as
a single
class. We will not be required to obtain this consent with respect to the
actions listed in the second bullet point above, however, if we only (i)
increase the amount of the authorized preferred stock, (ii) create and
issue
another series of preferred stock, or (iii) increase the amount of authorized
shares of any series of preferred stock, if such preferred stock in each
case
ranks equal with or junior to the preferred stock with respect to the payment
of
dividends and the distribution of assets upon liquidation, dissolution
or
winding up of our business.
Series
1 Preferred Shares
On
August
4, 2003, we entered into a combination agreement with Global Thermoelectric
Inc.
to combine Global with us in a share-for-share exchange pursuant to a Plan
of
Arrangement subject to approval by the Court of Queen’s Bench of Alberta,
Canada. On October 31, 2003, our shareholders and the shareholders of Global
approved the combination. On October 31, 2003, the Court of Queen’s Bench of
Alberta issued an order approving the combination. On November 3, 2003,
the
combination transaction was consummated. In the aggregate, we issued
approximately 8.2 million shares of our common stock and exchangeable shares
in
the acquisition. Following our acquisition of Global, Global’s Series 2
preferred shares remained outstanding in Global. At the time of the sale
of our
TEG business, the holder of the Series 2 preferred shares exchanged them
for
Series 1 Class A cumulative redeemable exchangeable preferred shares (which
were
referred to as the Series 1 preferred shares) issued by FuelCell Energy,
Ltd.,
one of our indirect, wholly-owned subsidiaries. We have guaranteed the
obligations of FuelCell Energy, Ltd. under the Series 1 preferred
shares.
Series
1 Preferred Shares
The
Series 1 preferred shares may be converted into shares of our common stock
at
the following “conversion prices”:
|
|
• |
Cdn.$120.22
per share of our common stock until July 31,
2010;
|
|
|
• |
Cdn.$129.46
per share of our common stock after July 31, 2010 until July
31,
2015;
|
|
|
• |
Cdn.$138.71
per share of our common stock after July 31, 2015 until July
31, 2020;
and
|
|
|
• |
at
any time after July 31, 2020, the price equal to 95% of the then
current
market price (converted to Cdn.$ at the time of such calculation)
of
shares of our common stock at the time of
conversion.
|
The
foregoing “conversion prices” are subject to adjustment for certain subsequent
events. As illustrated below, the number of shares of our common stock
issuable
upon conversion of the Series 1 preferred shares after July 31, 2020 may
be
significantly greater than the number of shares issuable prior to that
time.
The
following examples illustrate the number of shares of our common stock
that we
will be required to issue to the holder(s) of the Series 1 preferred shares
if
and when the holder(s) exercise their conversion rights pursuant to the
terms of
the Series 1 preferred shares. The following examples are based upon
Cdn.$25,000,000 of Series 1 preferred shares outstanding (which is the
amount
currently outstanding) and assume that all accrued dividends on the Series
1
preferred shares have been paid through the time of the conversion and,
in the
case of conversions occurring after July 31, 2020, that the exchange rate
for
Canadian dollars is Cdn.$1.3104 to U.S.$1.00 at the time of the
conversion:
|
|
• |
if
the Series 1 preferred shares convert prior to July 31, 2010,
we would be
required to issue approximately 207,952 shares of our common
stock;
|
|
|
• |
if
the Series 1 preferred shares convert after July 31, 2010, but
prior to
July 31, 2015, we would be required to issue approximately 193,110
shares
of our common stock;
|
|
|
• |
if
the Series 1 preferred shares convert after July 31, 2015, but
prior to
July 31, 2020, we would be required to issue approximately 180,232
shares
of our common stock; and
|
|
|
• |
if
the Series 1 preferred shares convert any time after July 31,
2020,
assuming our common stock price is U.S.$14.62 at the time of
conversion,
we would be required to issue approximately 1,373,615 shares
of our common
stock.
|
Subject
to the Business Corporations Act (Alberta), the holder of the Series 1
preferred
shares is not entitled to receive notice of or to attend or vote at any
meeting
of the FuelCell Energy, Ltd. common shareholders. At present, we own all
of the
FuelCell Energy, Ltd. common stock.
Quarterly
dividends of Cdn.$312,500 accrue on the Series 1 preferred shares (subject
to
possible reduction pursuant to the terms of the Series 1 preferred shares
on
account of increases in the price of our common stock). We have agreed
to pay a
minimum of Cdn.$500,000 in cash or common stock annually to Enbridge, the
sole
current holder of the Series 1 preferred shares, as long as Enbridge holds
the
shares. Interest accrues on cumulative unpaid dividends at a 2.45% quarterly
rate, compounded quarterly, until payment thereof. All cumulative unpaid
dividends must be paid by December 31, 2010. From 2010 through 2020, we
would be
required to pay annual dividend amounts totaling Cdn.$1.25 million. Cumulative
unpaid dividends of $2.7 million on the Series 1 preferred shares were
outstanding as of October 31, 2004. We have guaranteed the dividend obligations
of FuelCell Energy, Ltd. under the Series 1 preferred shares.
Subject
to the Business Corporations Act (Alberta), we may redeem the Series 1
preferred
shares, in whole or part, at any time, if on the day that the notice of
redemption is first given, the volume-weighted average price at which our
common
stock is traded on the applicable stock exchange during the 20 consecutive
trading days ending on a date not earlier than the fifth preceding day
on which
the notice of redemption is given was not less than a 20% premium to the
current
conversion price on payment of Cdn.$25.00 per Series 1 Preferred Share
to be
redeemed, together with an amount equal to all accrued and unpaid dividends
to
the date fixed for redemption. On or after July 31, 2010, the Series 1
preferred
shares are redeemable by us at any time on payment of Cdn.$25.00 per Series
1
Preferred Share to be redeemed together with an amount equal to all accrued
and
unpaid dividends to the date fixed for redemption. There are currently
1,000,000
Series 1 preferred shares outstanding.
In
the
event of the liquidation, dissolution or winding up of FuelCell Energy,
Ltd.,
whether voluntary or involuntary, or any other distribution of its assets
among
its shareholders for the purpose of winding up its affairs, the holder
of the
Series 1 preferred shares will be entitled to receive the amount paid on
such
Series 1 preferred shares (currently Cdn.$25,000,000) together with an
amount
equal to all accrued and unpaid dividends thereon, before any amount will
be
paid or any of FuelCell Energy, Ltd.’s property or assets will be distributed to
the holders of FuelCell Energy, Ltd.’s common stock. After payment to the holder
of the Series 1 preferred shares of the amounts so payable to them, the
holder
of the Series 1 preferred shares will not be entitled to share in any other
distribution of FuelCell Energy, Ltd.’s property or assets. We have guaranteed
the liquidation obligations of FuelCell Energy, Ltd. under the Series 1
preferred shares.
Series
B Preferred Stock
On
November 17, 2004, we sold to Citigroup Global Markets Inc., RBC Capital
Markets
Corporation, Adams Harkness, Inc., and Lazard Freres & Co., LLC
(collectively referred to as the “Initial Purchasers”) in a private placement
under Rule 144A, 100,000 shares of our 5% Series B Cumulative Convertible
Perpetual Preferred Stock (Liquidation Preference $1,000) (“Series B preferred
stock”). Under the terms of the purchase agreement with the Initial Purchasers,
the Initial Purchasers were granted an over-allotment option to purchase
up to
an additional 35,000 shares of Series B preferred stock through January
25,
2005.
On
January 14, 2005, we sold an additional 5,875 shares of our Series B preferred
stock to the Initial Purchasers as part of the over-allotment option. Net
proceeds to us was approximately $99 million.
The
following is a summary of certain provisions of our Series B preferred
stock.
The shares of our Series B preferred stock and the shares of our common
stock
issuable upon conversion of the shares of our Series B preferred stock
are
covered
by a registration rights agreement.
Ranking
Shares
of
our Series B preferred stock rank with respect to dividend rights and rights
upon our liquidation, winding up or dissolution:
| · |
senior
to shares of our common stock;
|
| · |
junior
to our debt obligations; and
|
| · |
effectively
junior to our subsidiaries' (i) existing and future liabilities
and (ii)
capital stock held by others.
|
Dividends
The
Series B preferred stock pays cumulative annual dividends of $50 per share
which
are payable quarterly in arrears on February 15, May 15, August 15 and
November
15, when, as and if declared by the board of directors. Dividends will
be paid
on the basis of a 360-day year consisting of twelve 30-day months. Dividends
on
the shares of our Series B preferred stock will accumulate and be cumulative
from the date of original issuance. Accumulated dividends on the shares
of our
Series B preferred stock will not bear any interest.
The
dividend rate on the Series B preferred stock is subject to upward adjustment
as
set forth in the certificate of designation, as amended, of the Series
B
preferred stock if we fail to pay, or to set apart funds to pay, dividends
on
the shares of our Series B preferred stock for any quarterly dividend period.
The dividend rate on the Series B preferred stock is also subject to upward
adjustment as set forth in the registration rights agreement entered into
with
the Initial Purchasers if we fail to satisfy our registration obligations
with
respect to the Series B preferred shares (or the underlying common shares)
set
forth in the registration rights agreement.
No
dividends or other distributions may be paid or set apart for payment upon
our
common shares (other than a dividend payable solely in shares of a like
or
junior ranking) unless all accumulated and unpaid dividends have been paid
or
funds or shares of common stock therefor have been set apart on our Series
B
preferred stock.
We
may
pay dividends on the Series B preferred stock:
| · |
at
the option of the holder, in shares of our common stock, which
shares will
be treated as restricted securities and therefore, will not be
transferable by the holder thereof except pursuant to an effective
registration statement or pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as
amended.
|
Liquidation
The
Series B preferred stock has a liquidation preference of $1,000 per share.
Upon
any voluntary or involuntary liquidation, dissolution or winding up of
our
company resulting in a distribution of assets to the holders of any class
or
series of our capital stock, each holder of shares of our Series B preferred
stock will be entitled to payment out of our assets available for distribution
of an amount equal to the liquidation preference per share of Series B
preferred
stock held by that holder, plus all accumulated and unpaid dividends on
those
shares to the date of that liquidation, dissolution, or winding up, before
any
distribution is made on any junior shares, including shares of our common
stock,
but after any distributions on any of our indebtedness or senior shares
(if
any). After payment in full of the liquidation preference and all accumulated
and unpaid dividends to which holders of shares of our Series B preferred
stock
are entitled, holders of shares of our Series B preferred stock will not
be
entitled to any further participation in any distribution of our assets.
Conversion
A
share
of our Series B preferred stock may be converted at any time, at the option
of
the holder, into 85.1064 shares of our common stock (which is equivalent
to an
initial conversion price of $11.75 per share) plus cash in lieu of fractional
shares. The conversion rate is subject to adjustment upon the occurrence
of
certain events, as described below, but will not be adjusted for accumulated
and
unpaid dividends. Upon conversion, holders of Series B preferred stock
will not
receive a cash payment for any accumulated dividends. Instead accumulated
dividends, if any, will be cancelled.
On
or
after November 20, 2009 we may, at our option, cause shares of our Series
B
preferred stock to be automatically converted into that number of shares
of our
common stock that are issuable at the then prevailing conversion rate.
We may
exercise our conversion right only if the closing price of our common stock
exceeds 150% of the then prevailing conversion price for 20 trading days
during
any consecutive 30 trading day period, as described in the certificate
of
designation, as amended, for the Series B preferred stock.
If
there
is a fundamental change in the ownership or control of FuelCell (as described
in
the certificate of designation, as amended), holders of our Series B preferred
stock may require us to purchase all or part of their shares at a redemption
price equal to 100% of the liquidation preference of the shares of our
Series B
preferred stock to be repurchased, plus accrued and unpaid dividends, if
any, in
the manner set forth in the certificate of designation, as amended.
If
holders of shares of our Series B preferred stock elect to convert their
shares
in connection with certain fundamental changes (as described in the certificate
of designation, as amended), we will in certain circumstances increase
the
conversion rate by a number of additional shares of common stock upon conversion
or, in lieu thereof, we may in certain circumstances elect to adjust the
conversion rate and related conversion obligation so that shares of our
Series B
preferred stock are converted into shares of the acquiring or surviving
company,
in each case as described in the certificate of designation, as
amended.
The
conversion price of the Series B preferred stock is subject to adjustment
in
certain circumstances as set forth in the certificate of designation, as
amended, to prevent dilution of the interests of the holders of the Series
B
preferred shares, including on account of the following:
| · |
issuances
of common stock as a dividend or distribution to holders of our
common
stock;
|
| · |
common
stock share splits or share
combinations;
|
| · |
issuances
to holders of our common stock of any rights, warrants or options
to
purchase our common stock for a period of less than 60 days;
and
|
| · |
distributions
of assets, evidences of indebtedness or other property to holders
of our
common stock.
|
Voting
Holders
of shares of our Series B preferred stock have no voting rights unless
(1)
dividends on any shares of our Series B preferred stock or any other class
or
series of stock ranking on a parity with the shares of our Series B preferred
stock with respect to the payment of dividends shall be in arrears for
dividend
periods, whether or not consecutive, containing in the aggregate a number
of
days equivalent to six calendar quarters or (2) we fail to pay the repurchase
price, plus accrued and unpaid dividends, if any, on the fundamental change
repurchase date for shares of our Series B preferred stock following a
fundamental change (as described in the certificate of designation, as
amended,
for the Series B preferred stock). In each such case, the holders of shares
of
our Series B preferred stock (voting separately as a class with all other
series
of other preferred stock on parity with our Series B preferred stock upon
which
like voting rights have been conferred and are exercisable, if any) will
be
entitled to vote for the election of two directors in addition to those
directors on the board of directors at such time at the next annual meeting
of
shareholders and each subsequent meeting until the repurchase price or
all
dividends accumulated on the shares of our Series B preferred stock have
been
fully paid or set aside for payment. The term of office of all directors
elected
by the holders of shares of our Series B preferred stock will terminate
immediately upon the termination of the right of holders of shares of our
Series
B preferred stock to vote for directors.
So
long
as any shares of our Series B preferred stock remain outstanding, we will
not,
without the consent of the holders of at least two-thirds of the shares
of our
Series B preferred stock outstanding at the time (voting separately as
a class
with all other series of preferred stock, if any, on parity with our Series
B
preferred stock upon which like voting rights have been conferred and are
exercisable) issue or increase the authorized amount of any class or series
of
shares ranking senior to the outstanding shares of our Series B preferred
stock
as to dividends or upon liquidation. In addition, we will not, subject
to
certain conditions, amend, alter or repeal provisions of our certificate
of
incorporation, including the certificate of designation, as amended, relating
to
our Series B preferred stock, whether by merger, consolidation or otherwise,
so
as to adversely amend, alter or affect any power, preference or special
right of
the outstanding shares of our Series B preferred stock or the holders thereof
without the affirmative vote of not less than two-thirds of the issued
and
outstanding shares of our Series B preferred stock.
Anti-Takeover
Provisions
Provisions
of our Certificate of Incorporation and By-Laws
A
number
of provisions of our certificate of incorporation and by-laws concern matters
of
corporate governance and the rights of shareholders. Some of these provisions,
including, but not limited to, the inability of shareholders to take action
by
unanimous written consent, supermajority voting provisions with respect
to any
amendment of voting rights provisions, the filling of vacancies on the
board of
directors by the affirmative vote of a majority of the remaining directors,
and
the ability of the board of directors to issue shares of preferred stock
and to
set the voting rights, preferences and other terms thereof, without further
shareholder action, may be deemed to have anti-takeover effect and may
discourage takeover attempts not first approved by the board of directors,
including takeovers which shareholders may deem to be in their best interests.
If takeover attempts are discouraged, temporary fluctuations in the market
price
of shares of our common stock, which may result from actual or rumored
takeover
attempts, may be inhibited. These provisions, together with the ability
of the
board of directors to issue preferred stock without further shareholder
action,
could also delay or frustrate the removal of incumbent directors or the
assumption of control by shareholders, even if the removal or assumption
would
be beneficial to our shareholders. These provisions could also discourage
or
inhibit a merger, tender offer or proxy contest, even if favorable to the
interests of shareholders, and could depress the market price of our common
stock. The board of directors believes these provisions are appropriate
to
protect our interests and the interests of our shareholders. The board
of
directors has no present plans to adopt any further measures or devices
which
may be deemed to have an “anti-takeover effect.”
Delaware
Anti-Takeover Provisions
We
are
subject to Section 203 of the Delaware General Corporation Law, which prohibits
a publicly-held Delaware corporation from engaging in a “business combination,”
except under certain circumstances, with an “interested shareholder” for a
period of three years following the date such person became an “interested
shareholder” unless:
• before
such person became an interested shareholder, the board of directors of
the
corporation approved either the business combination or the transaction
that
resulted in the interested shareholder becoming an interested
shareholder;
• upon
the
consummation of the transaction that resulted in the interested shareholder
becoming an interested shareholder, the interested shareholder owned at
least 85
percent 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
• at
or
following the time such person became an interested shareholder, the business
combination is approved by the board of directors of the corporation and
authorized at a meeting of shareholders by the affirmative vote of the
holders
of 66 2/3 percent of the outstanding voting stock of the corporation which
is
not owned by the interested shareholder.
The
term
“interested shareholder” generally is defined as a person who, together with
affiliates and associates, owns, or, within the three years prior to the
determination of interested shareholder status, owned, 15 percent or more
of a
corporation’s outstanding voting stock. The term “business combination” includes
mergers, asset or stock sales and other similar transactions resulting
in a
financial benefit to an interested shareholder. Section 203 makes it more
difficult for an “interested shareholder” to effect various business
combinations with a corporation for a three-year period. The existence
of this
provision would be expected to have an anti-takeover effect with respect
to
transactions not approved in advance by the board of directors, including
discouraging attempts that might result in a premium over the market price
for
the shares of our common stock held by shareholders. A Delaware corporation
may
“opt out” of Section 203 with an express provision in its original certificate
of incorporation or any amendment thereto. Our certificate of incorporation
does
not contain any such exclusion.
Connecticut
Anti-Takeover Provisions
The
laws
of the State of Connecticut, where our principal executive offices are
located,
impose restrictions on certain transactions between certain foreign corporations
and significant shareholders. Section 33-840 of the Connecticut Business
Corporation Act prohibits certain publicly-held foreign corporations that
are
based in Connecticut from engaging in a “business combination” (including the
issuance of equity securities which have an aggregate market value of 5
percent
or more of the total market value of the outstanding shares of the company)
with
an “interested shareholder” as defined in the Connecticut Business Corporation
Act for a period of five years from the date of the shareholder’s purchase of
stock, unless approved in a prescribed manner. The application of this
statute
could prevent a change of control. Generally, approval is required by the
board
of directors, by 80 percent of the outstanding voting shares and two-thirds
of
the voting power of the outstanding shares of the voting stock other than
shares
held by the interested shareholder. We can give no assurance that these
provisions would not prevent us from entering into a business combination
that
otherwise would be beneficial to us or to our shareholders.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock and preferred stock is
Continental Stock Transfer & Trust Company, New York, New York.
SELLING
SHAREHOLDER
The
shares of our Series B preferred stock and shares of our common stock that
may
be offered by this prospectus will be offered by the selling shareholder,
which
include its transferees, pledgees or donees or successors. The following
table
sets forth certain information concerning the shares of our Series B preferred
stock and shares of common stock beneficially owned by the selling
shareholder.
We
have
prepared the table below based on information given to us by the selling
shareholder prior to the date of this prospectus. However, any or all of
the
shares of our Series B preferred stock and the shares of our common stock
issuable upon the conversion of our Series B preferred stock listed below
may be
offered for sale with this prospectus by the selling shareholder from time
to
time. Accordingly, no estimate can be given as to the amount of shares
of our
Series B preferred stock or shares of our common stock that will be held
by the
selling shareholder upon consummation of any sales.
|
Name
and Address
|
Number
of Shares Beneficially Owned Before this Offering
|
Number
of Shares Being Offered For Sale in this Offering
|
Number
of Shares Beneficially Owned After this Offering (3)
|
Percentage
Beneficially Owned After this Offering
|
| |
Series
B
Preferred
Stock
|
Common
Stock (1)
|
Series
B
Preferred
Stock
|
Common
Stock (2)
|
Series
B
Preferred
Stock
|
Common
Stock
|
|
| |
|
|
|
|
|
|
|
|
CQS
Convertible and Quantitative Strategies Master Fund Limited
c/o
CQS (UK) LLP
33
Chester Street, 5th
Floor
London,
SW1X 7BL, UK
Attn:
Stuart McLachlan
|
3,500
|
297,872
|
3,500
|
297,872
|
0
|
0
|
0%
|
(1) Includes
shares of common stock issuable upon conversion of shares of Series B preferred
stock held by such selling shareholder.
(2) Shares
of our Series B preferred stock are converted into common stock at a conversion
rate of 85.1064 shares of our common stock for each share of Series B preferred
stock. Cash will be paid in lieu of fractional shares resulting from the
conversion of the shares of our Series B preferred stock.
(3) Assumes
all shares of our Series B referred stock and the shares of our common
stock
issuable upon the conversion of our Series B preferred stock listed in
the above
table will be sold by the selling shareholder.
The
selling shareholder does not have, or within the past three years has not
had,
any position, office or other material relationship with us or any of our
predecessors or affiliates.
Only
the
selling shareholder identified above who beneficially owns the securities
set
forth in the foregoing table, on the effective date of the registration
statement of which this prospectus forms a part, may sell these securities
under
this prospectus. Prior to any use of this prospectus in connection with
an
offering of the Series B preferred stock and/or the common stock by any
holder
not identified above, this prospectus will be supplemented or amended to
set
forth the name and other information about the selling shareholder intending
to
sell such Series B preferred stock and the common stock. The prospectus
supplement or post-effective amendment will also disclose whether any selling
shareholder selling in connection with such prospectus supplement or
post-effective amendment has held any position or office with, been employed
by
or otherwise has had a material relationship with, us or any of our affiliates
during the three years prior to the date of the prospectus supplement or
post-effective amendment if such information has not been disclosed in
this
prospectus.
PLAN
OF DISTRIBUTION
Securities
Offered By FuelCell
General.
We
may
sell debt securities, preferred stock and/or common stock to or through
underwriters, through agents or dealers, directly to one or more purchasers,
or
through a combination of such methods. A prospectus supplement or supplements
will describe the terms of the offering of these securities,
including:
|
|
•
|
the
name or names of any underwriters, agents or dealers, if
any;
|
|
|
|
|
•
|
the
number of securities involved;
|
|
|
| |
|
|
|
|
| |
•
|
the
purchase price of the securities and the proceeds we will receive
from the
sale;
|
|
|
|
|
|
|
•
|
any
over-allotment options under which underwriters may purchase
additional
securities from us;
|
|
|
|
|
|
|
•
|
any
agency fees or underwriting discounts and other items constituting
underwriters’, agents’ or dealers’ compensation;
|
|
|
|
|
|
|
•
|
any
public offering price;
|
|
|
|
|
|
|
•
|
any
discounts or concessions allowed or reallowed or paid to dealers;
and
|
|
|
| |
|
|
|
|
| |
•
|
other
information material to the transaction.
|
|
|
Underwriters.
If
underwriters used in the sale of the securities, we will execute an underwriting
agreement relating to the securities that we will offer. The obligations
of the
underwriters to purchase the securities will be subject to the conditions
set
forth in the applicable underwriting agreement. Unless
otherwise set forth in the applicable prospectus supplement, the underwriting
agreement will provide that the obligations of the underwriters will be
subject
to certain conditions precedent and that the underwriters with respect
to a sale
of the securities will be obligated to purchase all the securities if any
are
purchased.
The
securities subject to the underwriting agreement will be acquired by the
underwriters for their own account and may be resold by them from time
to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
Underwriters may be deemed to have received compensation from us in the
form of
underwriting discounts or commissions and may also receive commissions
from the
purchasers of these securities for whom they may act as agent. Underwriters
may
sell these securities to or through dealers. These dealers may receive
compensation in the form of discounts, concessions or commissions from
the
underwriters or commissions from the purchasers for whom they may act as
agent.
Any initial public offering price and any discounts or concessions allowed
or
reallowed or paid to dealers may be changed from time to time.
We
also
may sell the securities in connection with a remarketing upon their purchase,
in
connection with a redemption or repayment, by a remarketing firm acting
as
principal for its own account or as our agent. Remarketing firms may be
deemed
to be underwriters in connection with the securities that they
remarket.
We
may
authorize underwriters to solicit offers by institutions to purchase the
securities subject to the underwriting or terms agreement from us at the
public
offering price stated in the prospectus supplement under delayed delivery
contracts providing for payment and delivery on a specified date in the
future.
If we sell the securities under these delayed delivery contracts, the prospectus
supplement will state that as well as the conditions to which these delayed
delivery contracts will be subject and the commissions payable for that
solicitation.
During
and after an offering through underwriters, the underwriters may purchase
and
sell the securities in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to convey syndicate
short positions created in connection with the offering. The underwriters
may
also impose a penalty bid, which means that selling concessions allowed
to
syndicate members or other broker-dealers for the offered securities sold
for
their account may be reclaimed by the syndicate if the offered securities
are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price
of the
offered securities, which may be higher than the price that might otherwise
prevail in the open market. If commenced, the underwriters may discontinue
these
activities at any time.
Agents.
We
may
also sell any of the securities through agents designated by us from time
to
time. We will name any agent involved in the offer or sale of these securities
and will list commissions payable by us to these agents in the prospectus
supplement. These agents will be acting on a best efforts basis to solicit
purchases for the period of their appointment, unless we state otherwise
in the
applicable prospectus supplement.
Direct
Sales. We
may
sell any of the securities directly to purchasers. In this case, we will
not
engage underwriters or agents in the offer and sale of these securities.
Indemnification.
We
may
indemnify underwriters, dealers or agents who participate in the distribution
of
the securities against certain liabilities, including liabilities under
the
Securities Act of 1933, as amended (the “Securities Act”), and agree to
contribute to payments which these underwriters, dealers or agents may
be
required to make.
Listing.
Except
as indicated in the applicable prospectus supplement, the securities are
not
expected to be listed on any securities exchange, except for our common
stock,
which is quoted on the Nasdaq National Market under the symbol “FCEL”, and no
underwriters will be obligated to make a market in these securities. We
cannot
predict the activity or liquidity of any trading in these
securities.
Securities
Offered By Selling Shareholder
The
shares of our Series B preferred stock and the shares of our common stock
issuable upon conversion of such Series B preferred stock being offered
for sale
pursuant to this prospectus may be sold by the selling shareholder or by
any
pledgee, donee, transferee or other successor in interest of the selling
shareholder for its own account.
We
will
receive none of the proceeds from the sale of the shares being offered
by the
selling shareholder. We have agreed to bear all of the expenses in connection
with the registration and sale of these shares, except for brokerage commissions
or other charges and expenses incurred in the sale of these shares, and
we will
reimburse the selling shareholder for reasonable disbursements of one counsel,
The
distribution of the shares by the selling shareholder is not subject to
any
underwriting agreement. The shares offered by the selling shareholder may
be
sold from time to time at fixed prices, at market prices prevailing at
the time
of sale, at varying prices determined at the time of sale or at negotiated
prices. In addition, the selling shareholder may sell its shares covered
by this
prospectus through customary brokerage channels, either through broker-dealers
acting as agents or brokers, or through broker-dealers acting as principals,
who
may then resell the shares, or at private sale or otherwise, at fixed prices,
at
market prices prevailing at the time of sale, at varying prices determined
at
the time of sale or at negotiated prices. Such sales may be effected in
one or
more transactions (which may involve block transactions):
|
|
• |
on
any national securities exchange or quotation service on
which the shares
of our Series B preferred stock or shares of our common stock,
as the case
maybe, may be listed or quoted at the time of
sale;
|
|
|
• |
in
the over-the-counter market;
|
|
|
• |
in
transactions otherwise than on exchanges or services or in
the
over-the-counter market;
or
|
|
|
• |
through
the writing of options.
|
The
selling shareholder may effect transactions by selling these shares to
or
through broker-dealers, and the broker-dealers may receive compensation
in the
form of underwriting discounts, concessions, commissions, or fees from
the
selling shareholder and/or purchasers of the shares for whom such broker-dealers
may act as agent or to whom they sell as principal, or both (which compensation
to a particular broker-dealer might be in excess of customary
commissions).
The
selling shareholder may enter into hedging transactions with broker-dealers
in
connection with distributions of these shares or otherwise. In these
transactions, broker-dealers may engage in short sales of these shares
in the
course of hedging the positions they assume with the selling shareholder.
The
selling shareholder may also sell shares short and redeliver these shares
to
close out such short positions. The selling shareholder may enter into
options
or other transactions with broker-dealers that require the delivery to
the
broker-dealer of these shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The selling shareholder
also
may loan or pledge these shares to a broker-dealer. The broker-dealer may
sell
the shares so loaned, or upon default, the broker-dealer may sell the pledged
shares pursuant to this prospectus.
Any
broker-dealers that participate with the selling shareholder in the distribution
of the shares of Series B preferred stock and the common stock issuable
upon
conversion of such Series B preferred stock being offered pursuant to this
prospectus may be deemed to be underwriters and any commissions received
by them
and any profit on the resale of shares positioned by them might be deemed
to be
underwriting discounts and commissions within the meaning of the Securities
Act,
in connection with such sales.
Our
common stock is quoted on the Nasdaq National Market under the symbol “FCEL”. No
public market currently exists for shares of our Series B preferred stock.
Although shares of our Series B preferred stock may be eligible for trading
in
the Portal Market, the National Association of Securities Dealers’ screen-based
automated market for trading of securities eligible for resale under Rule
144A,
there can be no assurance.
Any
shares of Series B preferred stock and the common stock issuable upon conversion
of such Series B preferred stock covered by this prospectus that qualify
for
sale pursuant to Rule 144 under the Securities Act may be sold under Rule
144
rather than pursuant to this prospectus.
Under
a
certain registration rights agreement, we and the selling shareholder will
be
indemnified by the other against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act, or will be
entitled
to contributions in connection with these liabilities. To our knowledge,
the
selling shareholder has not entered into any agreements, understandings
or
arrangements with any underwriters or broker-dealers regarding the sale
of its
shares of our common stock, nor is there an underwriter or coordinating
broker
acting in connection with a proposed sale of shares by the selling shareholder.
If we are notified by the selling shareholder that any material arrangement
has
been entered into with a broker-dealer for the sale of shares offered pursuant
to this prospectus, we will, if required, file a supplement to this prospectus.
If the selling shareholder uses this prospectus for any sale of the shares,
they
will be subject to the prospectus delivery requirements of the Securities
Act.
The
selling shareholder will be subject to applicable provisions of the Exchange
Act
and the associated rules and regulations under the Exchange Act, including
Regulation M, which provisions may limit the timing of purchases and sales
of
shares of our common stock by the selling shareholder.
The
297,872 shares of our common stock offered pursuant to this prospectus
which are
issuable upon the conversion of the Series B preferred stock will be issued
in
accordance with the terms of the Series B preferred stock. Cash will be
paid in
lieu of fractional shares resulting from the conversion of shares of our
Series
B preferred stock.
LEGAL
MATTERS
The
validity of the securities offered hereby has been passed upon for us by
Robinson & Cole LLP, Stamford, Connecticut.
EXPERTS
Our
consolidated financial statements as of October 31, 2004 and 2003, and
for each
of the three years in the period ended October 31, 2004, incorporated by
reference in this prospectus and in the registration statement of which
this
prospectus is a part, from our Annual Report on Form 10-K for the year
ended
October 31, 2004, have been audited by KPMG LLP, independent registered
public
accounting firm, as stated in their report, and have been so incorporated
in
reliance upon the report given on their authority as experts in accounting
and
auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed with the Securities and Exchange Commission (SEC) a registration
statement
on Form S-3 under the Securities Act with respect to our securities offered
hereby. This prospectus, which constitutes a part of the registration statement,
does not contain all of the information set forth in the registration statement
or the exhibits and schedules filed therewith. For further information
about us
and our securities offered hereby, reference is made to the registration
statement and the exhibits and schedules filed therewith. Statements contained
in this prospectus regarding the contents of any contract or any other
document
that is filed as an exhibit to the registration statement are not necessarily
complete, and each such statement is qualified in all respects by reference
to
the full text of such contract or other document filed as an exhibit to
the
registration statement. A copy of the registration statement and the exhibits
and schedules filed therewith may be inspected without charge at the public
reference room maintained by the SEC, located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from such offices upon the payment of the fees
prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference room. The SEC also maintains an
Internet
web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC.
The
address of the site is http://www.sec.gov.
We
are
subject to the informational requirements of the Securities Exchange Act
of 1934
and, therefore, we file annual, quarterly and current reports, proxy statements
and other information with the SEC. Such periodic reports, proxy
statements and other information are available for inspection and copying
at the
public reference room and web site of the SEC referred to above. Our common
stock is quoted on the Nasdaq National Market, and you may also inspect
and copy
our SEC filings at the offices of the National Association of Securities
Dealers, Inc. located at 1735 K Street, N.W., Washington, D.C. 20006.
You
should rely only on the information provided in this prospectus and the
registration statement. We have not authorized anyone else to provide you
with
different information. Our securities are not being offered in
any state
where the offer is not permitted. You should assume that the information
in this prospectus is accurate only as of the dates of those documents.
Our business, financial condition, results of operations and prospects
may have
changed since those dates.
INCORPORATION
BY REFERENCE
The
Securities
and Exchange Commission
(SEC)
allows us to “incorporate by reference” information that we file with it, which
means that we can disclose important information to you by referring you
to
those documents. The information incorporated by reference is an important
part
of this prospectus. Information in this prospectus supersedes information
incorporated by reference that we filed with the SEC prior to the date
of this
prospectus, while information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference into
this
registration statement and prospectus the documents listed below, and any
future
filings we will make with the SEC under Sections 13(a), 13(c), 14
or 15(d)
of the Securities
Exchange Act of 1934:
|
1.
|
Our
Annual Report on Form 10-K for the fiscal year ended October 31,
2004;
|
|
|
|
2.
|
Our
Proxy for our shareholders’ meeting on March 29, 2005, filed on February
25, 2005;
|
|
|
|
|
|
|
3.
|
Our
Quarterly Reports on Form 10-Q for the quarters ended January
31, 2005 and
April 30, 2005;
|
|
|
|
|
|
|
4.
|
Our
Current Reports on Form 8-K filed January 20, 2005, February 18,
2005, March 11, 2005, June 7, 2005, July 12, 2005 and August
31, 2005;
and
|
|
|
|
|
|
|
5.
|
The
description of our common stock set forth in our registration
statement on
Form 8-A, filed with the SEC on June 6, 2000, including any amendments
or
reports filed for the purposes of updating this
description.
|
|
|
|
We
will
furnish without charge to you, on written or oral request, a copy of any
or all
of the documents incorporated by reference, including exhibits to these
documents. You should direct any requests for documents to FuelCell Energy,
Inc., Attention: Corporate Secretary, 3 Great Pasture Road, Danbury, Connecticut
06813, telephone: (203) 825-6000.
__________________________________________________________________________________________________________________________________________________________________________
[LOGO]
$150,000,000
Debt
Securities
Preferred
Stock
Common
Stock
and
3,500
Shares of 5% Series B Cumulative Convertible Perpetual Preferred Stock
and
297,872
Shares of Common Stock, Subject to Adjustment, Issuable Upon Conversion
of 5%
Series B Cumulative Convertible Perpetual Preferred Stock
PROSPECTUS
__________,
2005
_________________________________________________________________________________________________________________________________________________________________________
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
following table sets forth all expenses payable by us in connection with
the
offering of the securities being registered. All such expenses are being
borne
by us.
|
SEC
Registration Fee
|
|
$
|
18,066.95
|
|
|
Accounting
Fees and Expenses*
|
|
$
|
|
|
|
Legal
Fees and Expenses*
|
|
$
|
|
|
|
Miscellaneous
Expenses*
|
|
$
|
|
|
|
|
|
|
|
|
|
Total*
|
|
$
|
|
|
*
Estimated.
Item
15. Indemnification of Directors and Officers
Section
145 of the Delaware General Corporation Law provides that a corporation
may
indemnify any person, including an officer and director, who was or is,
or is
threatened to be made, a party to any threatened, pending or completed
action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason
of the
fact that such person is or was a director, officer, employee or agent
of such
corporation, or is or was serving at the request of such corporation as
a
director, officer, employee or agent of another corporation, partnership,
joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action,
suit or proceeding, provided such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best interests
of
such corporation, and, with respect to any criminal actions and proceedings,
had
no reasonable cause to believe that his conduct was unlawful. A
Delaware
corporation may indemnify any person, including an officer or director,
who was
or is, or is threatened to be made, a party to any threatened, pending
or
contemplated action or suit by or in the right of such corporation, under
the
same conditions, except that no indemnification is permitted without judicial
approval if such person is adjudged to be liable to such corporation.
Where an officer or director of a corporation is successful, on
the merits
or otherwise, in the defense of any action, suit or proceeding referred
to
above, or any claim, issue or matter herein, the corporation must indemnify
such
person against the expenses (including attorneys’ fees) which such officer or
director actually and reasonably incurred in connection therewith.
Our
certificate of incorporation provides that none of our directors will be
personally liable to us or our shareholders for monetary damages for breach
of
fiduciary duty as a director, except to the extent such exemption from
liability
or limitation thereof is not permitted under the Delaware General Corporation
Law.
Our
by-laws provide for indemnification of our officers and directors to the
fullest
extent permitted by applicable law. We also maintain directors’ and officers’
liability insurance policies.
Item
16. Exhibits
|
Exhibit
No. Description
|
| |
|
|
|
1.1
|
Form
of Underwriting Agreement*
|
|
|
4.1
|
Specimen
of Common Share Certificate (incorporated by reference to exhibit
of the
same number contained in the Company's Annual Report on Form
10K for its
fiscal year ended October 31, 1999)
|
|
|
4.2
|
Form
of Senior Indenture*
|
|
|
4.3
|
Form
of Subordinated Indenture*
|
|
|
4.4
|
Form
of Senior Debt Security*
|
|
|
4.5
|
Form
of Subordinated Debt Security*
|
|
|
5.1
|
Opinion
of Robinson & Cole LLP
|
|
|
12
|
Statement
of Computation of Ratio of Earnings to Fixed Charges
|
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm
|
|
|
23.2
|
Consent
of Robinson & Cole LLP (included in Exhibit 5.1)
|
|
|
24.1
|
Power
of Attorney (included on the signature page hereof)
|
|
*To
be
filed by amendment or as an exhibit to a report pursuant to Section 13(a),
13(c)
or 15(d) of the Securities Exchange Act of 1934.
Item
17. Undertakings
The
undersigned Registrant hereby undertakes:
1. To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities
Act
of 1933, as amended;
(ii) To
reflect in the prospectus any facts or events arising after the effective
date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change
in the information set forth in the registration statement. Notwithstanding
the
foregoing, any increase or decrease in volume of securities offered (if
the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum
offering range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if, in
the
aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth
in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) To
include any material information with respect to the plan of distribution
not
previously disclosed in the registration statement or any material change
to
such information in the registration statement;
provided,
however,
that
paragraphs 1(i) and (1)(ii) of this section do not apply if the registration
statement is on Form
S-3, Form
S-8 or
Form
F-3,
and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to
the
Commission by the registrant pursuant to section
13 or
section
15(d) of
the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
2.
That,
for
the purpose of determining any liability under the Securities Act of 1933,
as
amended, each such post-effective amendment 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.
3.
To
remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
4. The
undersigned registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange
Act of
1934) that is incorporated by reference in the registration statement 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.
5.
Insofar
as indemnification for liabilities arising under the Securities Act of
1933, as
amended, 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.
Signatures
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form S-3 and has duly caused this registration statement on Form
S-3
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the
City of Danbury, State of Connecticut, on September 2, 2005.
| |
|
|
| |
FUELCELL
ENERGY, INC. |
|
|
|
| |
By: |
/s/ Joseph
G. Mahler
|
| |
Joseph G. Mahler |
| |
Senior
Vice President and
Chief
Financial Officer
|
Each
such
person whose signature appears below hereby appoints Jerry D. Leitman and
Joseph
G. Mahler, and each of them, each of whom may act without joinder of the
other,
as his or her true and lawful attorney-in-fact and agent, with full power
and
substitution and resubstitution, for him or her and in his or her name,
place
and stead, in any and all capacities, to execute in the name and on behalf
of
such person any amendment or any post-effective amendment to this Registration
Statement, and any registration statement relating to any offering made
in
connection with the offering covered by this Registration Statement that
is to
be effective on filing pursuant to Rule 462(b) under the Securities Act
of 1933,
as amended, and to file the same, with exhibits thereto, and other documents
in
connection therewith, with the Securities and Exchange Commission, granting
unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing appropriate or necessary to be done, as full
and
for all intents and purposes and he or she might or could do in person,
hereby
ratifying and confirming all that said attorneys-in-fact and agents or
their
substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
|
SIGNATURE
|
TITLE
|
DATE
|
|
|
|
|
|
/s/
Jerry D.
Leitman
|
Chairman
of the Board, President and
|
September
2, 2005
|
|
Jerry
D. Leitman
|
Chief
Executive Officer
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
| |
|
|
|
/s/
Joseph G.
Mahler
|
Senior
Vice President, Chief Financial
|
September
2, 2005
|
|
Joseph
G. Mahler
|
Officer,
Corporate Secretary and Treasurer
|
|
|
|
(Principal
Accounting and Financial Officer)
|
|
|
|
|
|
| |
|
|
|
/s/
Warren D.
Bagatelle
|
Director
|
September
2, 2005
|
|
Warren
D. Bagatelle
|
|
|
| |
|
|
|
|
|
|
|
/s/
Michael
Bode
|
Director
|
September
2, 2005
|
|
Michael
Bode
|
|
|
|
|
|
|
|
/s/
James D.
Gerson
|
Director
|
September
2, 2005
|
|
James
D. Gerson
|
|
|
|
|
|
|
|
/s/
Thomas L.
Kempner
|
Director
|
September
2, 2005
|
|
Thomas
L. Kempner
|
|
|
|
|
|
|
|
|
Director
|
__________,
2005
|
|
William
A. Lawson
|
|
|
|
|
|
|
|
/s/
Charles J.
Murphy
|
Director
|
September
2, 2005
|
|
Charles
J. Murphy
|
|
|
|
|
|
|
|
/s/
John A.
Rolls
|
Director
|
September
2, 2005
|
|
John
A. Rolls
|
|
|
|
|
|
|
|
|
Director
|
___________,2005
|
|
Thomas
R. Casten
|
|
|
| |
|
|
|
/s/
George K.
Petty
|
Director
|
September
2, 2005
|
|
George
K. Petty
|
|
|
INDEX
OF
EXHIBITS
| |
|
|
|
| Exhibit
No. |
|
Description
|
|
|
1.1
|
|
Form
of Underwriting Agreement*
|
|
|
4.1
|
|
Specimen
of Common Share Certificate (incorporated by reference to exhibit
of the
same number contained in the Company's Annual Report on Form
10K for its
fiscal year ended October 31, 1999)
|
|
|
4.2
|
|
Form
of Senior Indenture*
|
|
|
4.3
|
|
Form
of Subordinated Indenture*
|
|
|
4.4
|
|
Form
of Senior Debt Security*
|
|
|
4.5
|
|
Form
of Subordinated Debt Security*
|
|
|
5.1
|
|
Opinion
of Robinson & Cole LLP
|
|
|
12
|
|
Statement
of Computation of Ratio of Earnings to Fixed Charges
|
|
|
23.1
|
|
Consent
of Independent Registered Public Accounting Firm
|
|
|
23.2
|
|
Consent
of Robinson & Cole LLP (included in Exhibit 5.1)
|
|
|
24.1
|
|
Power
of Attorney (included on the signature page hereof)
|
|
*To
be
filed by amendment or as an exhibit to a report pursuant to Section 13(a),
13(c)
or 15(d) of the Securities Exchange Act of 1934.