In February 1999, Plug Power partnered with General Electric and formed GE Fuel Cell Systems, LLC, which was dedicated to providing marketing, distribution, service and installation and maintenance of residential fuel cells through GE's global network. The action alleged that Plug Power's contract with GE was a material, if not the most important, asset of the company. Plug Power allegedly failed to disclose that it was unable to produce fuel cells in conformance with the contractual specifications in the GE contract and that, as a result, its relationship with GE was subject to increased risk and uncertainty-- GE would be able to terminate its agreement with it without having to purchase Plug Power fuel cells. The complaint further alleges that the company failed to disclose that (1) its fuel cell technology was not commercially viable and its plans to refine the technology were not meeting with success and (2) it would experience greater operating losses than anticipated on the market and therefore would not be profitable in the near future.

On August 2, 2000, Plug Power issued a press release disclosing that: (1) it would cut its fuel cell systems manufacturing schedule to 125 systems for the year; (2) it would have operating losses which would continue through the year 2003; and (3) that its fuel cells would not become commercially available until 2002 at the earliest. Prior to the disclosure of the true facts about the Company, certain company insiders sold personally-held Plug Power common stock to the public, generating proceeds of $9 million.

The terms of the settlement had not yet been publicly disclosed as of May 29, 2004. The settlement will not be effective until the court grants it final approval. The court has not yet scheduled a hearing on the matter.