FCELB FuelCell Energy Inc (PK)

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, as amended (“Certificate of Incorporation”), and our Amended and Restated By-laws (“By-laws”). This summary does not purport to be complete and is subject to, and qualified in its entirety by, the Certificate of Incorporation (including applicable Certificates of Designation) and the By-laws.

Authorized and Outstanding Capital Stock

Under our Certificate of Incorporation, we are authorized to issue 337,500,000 shares of common stock, par value $0.0001 per share, and 250,000 shares of preferred stock, par value $0.01 per share, 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 (“Series B Preferred Stock” and, such shares, the “Series B Preferred Shares”). Pursuant to our Certificate of Incorporation, our undesignated shares of preferred stock include all of our shares of preferred stock that were previously designated as Series C Convertible Preferred Stock and Series D Convertible Preferred Stock, as all such shares have been retired and therefore have the status of authorized and unissued shares of preferred stock undesignated as to series.

As of June 24, 2020, 217,907,336 shares of our common stock were issued and outstanding and 64,020 shares of our Series B Preferred Stock were issued and outstanding. No other shares of our preferred stock were issued and outstanding.

As of June 24, 2020, we were obligated, if and when the holders exercise their conversion rights, to issue approximately 37,837 shares of our common stock upon conversion of the Series B Preferred Stock.

As of June 24, 2020, there were outstanding options to purchase 23,891 shares of our common stock under our equity incentive plan, 697,889 shares of our common stock were reserved for issuance upon vesting of outstanding restricted stock units granted under our equity incentive plan, 3,490,197 shares of our common stock were available for future grants of awards under our equity incentive plan, 32,047 shares of our common stock were reserved for future issuance under our employee stock purchase plan, and 500,000 shares of our common stock were reserved for potential issuance in settlement of restricted stock units to be granted to our Chief Executive Officer.

As of June 24, 2020, the selling stockholders held warrants to purchase up to 8,000,000 shares of our common stock. The exercise price of these warrants is $0.242 per share, and the expiration date of such warrants is November 22, 2028.

As of June 24, 2020, there were also other outstanding warrants (the Series C Warrants dated May 3, 2017) to purchase up to 964,114 shares of our common stock. The exercise price of these warrants is $19.20, and the expiration date of such warrants is May 2, 2022.

As of June 24, 2020, there were 110 holders of record of our common stock.

Common Stock

Voting Rights.   The holders of our common stock have one vote per share. Holders of our common stock are not entitled to vote cumulatively for the election of directors. Generally, all matters to be voted on by stockholders (including the election of directors in uncontested elections) must be approved by a majority of the votes properly cast on the matter at a meeting at which a quorum is present, subject to any voting rights granted to holders of any then-outstanding preferred stock, which rights are described below under “Series B Preferred Stock.” A plurality voting standard applies in contested director elections (i.e., when the number of nominees for election as directors exceeds the number of directors to be elected at such meeting).

Dividends.   Holders of our common stock will share ratably in any dividends declared by our board of directors, subject to the preferential rights of any of our preferred stock then outstanding, which rights are described below under “Series B Preferred Stock.” Dividends consisting of shares of our common stock may be paid to holders of shares of our common stock. We have never paid a cash dividend on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Liquidation 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 (which is described below under “Series B Preferred Stock”), the holders of shares of our common stock are entitled to share ratably in all assets available for distribution.

Other Rights. Holders of shares of our common stock (solely in their capacity as 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 our common stock.

Listing on The Nasdaq Global Market.  Our common stock is listed on The Nasdaq Global Market under the symbol “FCEL”.

Transfer Agent and Registrar.  The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, New York.

Dividends.   The Series B Preferred Stock pays cumulative annual dividends of $50.00 per share, which are payable quarterly in arrears on February 15, May 15, August 15 and November 15. Dividends accumulate and are cumulative from the date of original issuance. Unpaid accumulated dividends do not bear interest.

The dividend rate is subject to upward adjustment as set forth in the Amended Certificate of Designation for the Series B Preferred Stock (the “Series B Certificate of Designation”) if we fail to pay, or to set apart funds to pay, any quarterly dividend on the Series B Preferred Stock. The dividend rate is also subject to upward adjustment as set forth in the Registration Rights Agreement entered into with the initial purchasers of the Series B Preferred Stock (the “Registration Rights Agreement”) if we fail to satisfy our registration obligations with respect to the Series B Preferred Stock (or the underlying common shares) under the Registration Rights Agreement.

No dividends or other distributions may be paid or set apart for payment on our common stock (other than a dividend payable solely in shares of a like or junior ranking), nor may any stock junior to or on parity with the Series B Preferred Stock be redeemed, purchased or otherwise acquired for any consideration (or any money paid to or made available for a sinking fund for such stock) by us or on our behalf  (except by conversion into or exchange for shares of a like or junior ranking), unless all accumulated and unpaid Series B Preferred Stock dividends have been paid or funds or shares of common stock have been set aside for payment of accumulated and unpaid Series B Preferred Stock dividends.

The dividend on the Series B Preferred Stock may be paid in cash or, at the option of the holder, in shares of our common stock, which will be registered pursuant to a registration statement to allow for the immediate sale of these shares of common stock in the public market.

Liquidation.   The holders of Series B Preferred Shares are entitled to receive, in the event that our Company is liquidated, dissolved or wound up, whether voluntarily or involuntarily, $1,000.00 per share plus all accumulated and unpaid dividends up to but excluding the date of that liquidation, dissolution, or winding up (the “Liquidation Preference”). Until the holders of Series B Preferred Shares receive their Liquidation Preference in full, no payment will be made on any junior shares, including shares of our common stock. After the Liquidation Preference is paid in full, holders of the Series B Preferred Stock will not be entitled to receive any further distribution of our assets. As of April 30, 2020, the Series B Preferred Stock had a Liquidation Preference of $64.0 million.

Conversion Rights.   Each Series B Preferred Share may be converted at any time, at the option of the holder, into 0.5910 shares of our common stock (which is equivalent to an initial conversion price of $1,692 per share) plus cash in lieu of fractional shares. The conversion rate is subject to adjustment upon the occurrence of certain events, as described in the Series B Certificate of Designation. The conversion rate is not adjusted for accumulated and unpaid dividends. If converted, holders of Series B Preferred Shares do not receive a cash payment for all accumulated and unpaid dividends; rather, all accumulated and unpaid dividends are canceled.

We may, at our option, cause Series B Preferred Shares 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 ($1,692 per share as of April 30, 2020) for 20 trading days during any consecutive 30 trading day period, as described in the Series B Certificate of Designation.

If the holders of Series B Preferred Stock elect to convert their shares in connection with certain fundamental changes, as defined in the Series B Certificate of Designation, 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 Series B Preferred Stock are converted into shares of the acquiring or surviving company, in each case as described in the Series B Certificate of Designation.

The adjustment of the conversion price is to prevent dilution of the interests of the holders of the Series B Preferred Stock from certain dilutive transactions with holders of common stock.

Redemption.   We do not have the option to redeem the Series B Preferred Stock. However, holders of the Series B Preferred Shares can require us to redeem all or part of their shares at a redemption price equal to the Liquidation Preference of the shares to be redeemed in the case of a “fundamental change” (as described in the Series B Certificate of Designation). A fundamental change will be deemed to have occurred if any of the following occurs:

Notwithstanding the foregoing, holders of Series B Preferred Shares will not have the right to require us to redeem their shares if:

Moreover, we will not be required to redeem any Series B Preferred Shares upon the occurrence of a fundamental change if a third party makes an offer to purchase the Series B Preferred Shares in the manner, at the price, at the times and otherwise in compliance with the requirements set forth above and such third party purchases all Series B Preferred Shares validly tendered and not withdrawn.

We may, at our option, elect to pay the redemption price in cash, in shares of our common stock valued at a discount of 5% from the market price of shares of our common stock, or in any combination thereof. Notwithstanding the foregoing, we may only pay such redemption price in shares of our common stock that are registered under the Securities Act of 1933, as amended (the “Securities Act”), and eligible for immediate sale in the public market by non-affiliates of our Company.

Voting Rights.   Holders of Series B Preferred Stock currently have no voting rights; however, holders may receive certain voting rights, as described in the Series B Certificate of Designation, if  (a) dividends on any Series B Preferred Shares, or any other class or series of stock ranking on parity with the 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 (b) we fail to pay the redemption price, plus accrued and unpaid dividends, if any, on the redemption date for Series B Preferred Shares following a fundamental change.

So long as any Series B Preferred Shares remain outstanding, we will not, without the consent of the holders of at least two-thirds of the Series B Preferred Shares 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 Series B Preferred Shares 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 Series B Certificate of Designation, whether by merger, consolidation or otherwise, so as to adversely amend, alter or affect any power, preference or special right of the outstanding Series B Preferred Shares or the holders thereof without the affirmative vote of not less than two-thirds of the issued and outstanding Series B Preferred Shares.

Warrants Issued in Connection with the Credit Facility

The following summary of the terms of the warrants does not purport to be complete and is qualified in its entirety by reference to the full text of the form of warrant, which is incorporated herein by reference.

This prospectus relates to the offer and sale from time to time by the selling stockholders named in this prospectus of up to 17,396,320 shares of our common stock, of which (i) 8,000,000 shares are issuable upon the exercise of outstanding warrants that were issued in connection with and pursuant to our Credit Facility and (ii) 9,396,320 shares were issued upon the cashless exercise of certain additional warrants that were issued in connection with and pursuant to our Credit Facility. The outstanding warrants are exercisable to purchase up to 8,000,000 shares of our common stock at an initial exercise price of $0.242 per share.

The warrants have an eight-year term from the date of issuance, are and were exercisable immediately beginning on the date of issuance, and include provisions permitting cashless exercises in certain circumstances. The outstanding warrants were issued on November 22, 2019.

A warrant holder will not have the right to exercise any portion of a warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately after the exercise; provided, however, that the holder may increase or decrease this limitation at any time, although any increase shall not be effective until the 61st day following the notice of increase. Except as otherwise expressly provided in the warrants, prior to the exercise of a warrant, the holder of such warrant will not have any of the rights of a stockholder of the Company, and will not be entitled to, among other things, vote or receive dividend payments or similar distributions on the shares of common stock purchasable upon exercise of such warrant.

The warrants contain customary provisions regarding adjustment to their exercise prices and the type or class of security issuable upon exercise, including, without limitation, adjustments as a result of us undertaking or effectuating (a) a stock dividend or dividend of other securities or property, (b) a stock split, subdivision or combination, (c) a reclassification, (d) the distribution to substantially all of the holders of our common stock (or other securities issuable upon exercise of a warrant) of rights, options or warrants entitling such holders to subscribe for or purchase common stock (or other securities issuable upon exercise of a warrant) at a price per share that is less than the average of the closing sales price per share of our common stock for the 10 consecutive trading days ending on and including the trading day before such distribution is publicly announced, and (e) a Fundamental Transaction (as defined below) or Change of Control (as defined in the Credit Facility), as explained further below.

If, while a warrant or any portion thereof is outstanding and unexpired, there is (a) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for in such warrant), (b) a merger or consolidation of the Company with or into another corporation in which we are not the surviving entity, or a reverse triangular merger in which we are the surviving entity but the shares of our capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (c) a sale or transfer of our properties and assets as, or substantially as, an entirety to any other person (any such event, a “Fundamental Transaction”), then, except in the event of a Fundamental Transaction that constitutes a Change of Control, as part of such Fundamental Transaction, the successor corporation or entity must assume in writing all of the obligations of the Company under such warrant, such that the holder of such warrant shall thereafter be entitled to receive, upon exercise of such warrant, the shares of stock or other securities or property of the successor corporation or entity that the holder would have been entitled to receive if such warrant had been exercised immediately prior to such Fundamental Transaction.

Notwithstanding the foregoing, at the request of a holder of a warrant delivered at any time during the period commencing on the earliest to occur of (A) the public disclosure of (1) any Fundamental Transaction in which the successor corporation or entity is not a publicly traded entity whose common equity or ordinary shares, as the case may be, is quoted on or listed for trading on an Eligible Board or Market (as defined in the warrant) or (2) any Change of Control, as applicable, (B) the consummation of any such Fundamental Transaction or any Change of Control, and (C) such holder first becoming aware of any such Fundamental Transaction or any Change of Control, and ending on the date that is 90 days after the public disclosure of the consummation of such Fundamental Transaction or Change of Control, the Company or the successor corporation or entity (as the case may be) must purchase such warrant from such holder. The price payable to a holder for a warrant with respect to which notice is delivered in accordance with the preceding sentence is an amount equal to: (i) in the event that such payment date is on or prior to the second anniversary of the date of issuance of such warrant, the Black Scholes Value (as defined in the warrant) of the unexercised portion of such warrant, or (ii) in the event that such payment date is after the second anniversary of the date of issuance of such warrant, the difference of (x) the product of (I) the remaining amount of shares of common stock issuable upon the exercise of such warrant, multiplied by (II) the consideration per share of common stock paid or payable to each holder of common stock in connection with such Fundamental Transaction or Change of Control, minus (y) the aggregate exercise price of such warrant.

In addition, the warrants provide that, if while a warrant, or any portion thereof, remains outstanding and unexpired, common stockholders shall have received, or become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then such warrant shall represent the right to acquire, in addition to the number of shares of the security receivable upon exercise of such warrant, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Company that such holder would have been entitled to as if such warrant had been exercised (without regard to any limitations on exercise set forth therein).

In addition, we have granted to the holders of the warrants certain registration rights. Specifically, we have agreed to use commercially reasonable efforts to effect, as soon as practicable after issuance of the warrants, but in no event later than March 16, 2020 (which date has been effectively waived by the holders of the warrants), the registration of resales of all shares of common stock issuable upon exercise of the warrants on a delayed or continuous basis at then-prevailing market prices.

We have agreed to keep the registration statement effective until the earlier of (i) the date as of which the holders of the warrants may sell all of the shares of common stock issuable upon exercise of the warrants without restriction pursuant to Rule 144 as promulgated under the Securities Act (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as promulgated under the Securities Act or (ii) the date on which the holders shall have sold all of the shares of common stock issuable upon exercise of the warrants.

In the event that (a) such a registration statement is not declared effective by the SEC on or before March 16, 2020 (which date has been effectively waived by the holders of the warrants), including if a final prospectus is not filed under Rule 424(b) on or prior to the fifth business day immediately following the effective date for such registration statement (an “Effectiveness Failure”), (b) on any day after the effective date of such a registration statement, sales of common stock cannot be made pursuant to such registration statement or the prospectus contained therein is not available for use for any reason (a “Maintenance Failure”), or (c) such a registration statement is not effective for any reason or the prospectus contained therein is not available for use for any reason, and either (i) we fail to satisfy Rule 144(c)(1), or (ii) we have ever been an issuer under Rule 144(i)(1)(i) or become such an issuer in the future, and we shall fail to satisfy any condition set forth in Rule 144(i)(2) (a “Current Public Information Failure”), such that a holder is unable to sell all of the shares of stock issuable upon exercise of the warrant without restriction under Rule 144, then, as partial relief to the holder for damages caused by the delay in, or reduction of, its ability to sell all of such shares (and not exclusive of any other remedies available in equity), we shall pay to the holder $25,000 in cash on the date of such Effectiveness Failure, Maintenance Failure, or Current Public Information Failure, as applicable, and on every subsequent 30-day anniversary of (I) an Effectiveness Failure until such Effectiveness Failure is cured; (II) a Maintenance Failure until such Maintenance Failure is cured; and (III) a Current Public Information Failure until the earlier of (i) the date such Current Public Information Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144 (in each case, pro-rated for periods totaling less than 30 days). In the event that any such payment is not timely made, such payment shall bear interest at the rate of 1.0% per month, prorated for partial months, until paid in full.

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 stockholders. Some of these provisions, including, but not limited to, the inability of stockholders to take action by unanimous written consent, certain advance notice requirements for stockholder proposals and director nominations, 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 stockholder action, may be deemed to have an anti-takeover effect and may discourage takeover attempts not first approved by the board of directors, including takeovers which stockholders may deem to be in their best interests. If takeover attempts are discouraged, temporary fluctuations in the market price of 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 stockholder action, could also delay or frustrate the removal of incumbent directors or the assumption of control by stockholders, even if the removal or assumption would be beneficial to our stockholders. These provisions could also discourage or inhibit a merger, tender offer or proxy contest, even if favorable to the interests of stockholders, and could depress the market price of our common stock. The board of directors believes these provisions are appropriate to protect our interests and the interests of our stockholders. 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 (“DGCL”), which prohibits a publicly-held Delaware corporation from engaging in a “business combination,” except under certain circumstances, with an “interested stockholder” for a period of three years following the date such person became an “interested stockholder” unless:

The term “interested stockholder” generally is defined as a person who, together with affiliates and associates, owns, or, within the three years prior to the determination of interested stockholder status, owned, 15% 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 stockholder. Section 203 makes it more difficult for an “interested stockholder” 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 stockholders. 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.

Exclusive Forum

Our By-laws provide that unless we consent in writing to an alternative forum, a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers or other employees to us or our stockholders; (iii) any action asserting a claim against us or any of our directors or officers or other employees arising pursuant to any provision of the DGCL or our Certificate of Incorporation or our By-laws (as either may be amended from time to time); or (iv) any action asserting a claim against us or any of our directors or officers or other employees which claim is governed by the internal affairs doctrine.

Limitations of Directors’ Liability

Our Certificate of Incorporation provides that none of our directors will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability:

The effect of these provisions is to eliminate our rights and the rights of our stockholders (through stockholders’ derivatives suits on behalf of us) to recover monetary damages against a director for breach of fiduciary duty as a director (including breaches resulting from grossly negligent behavior), except in the situations described above. These provisions do not limit the liability of directors under federal securities laws and do not affect the availability of equitable remedies such as an injunction or rescission based upon a director’s breach of his duty of care.

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

Our Certificate of Incorporation provides that none of our directors will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent described above. Our By-laws provide for indemnification of our officers and directors to the fullest extent permitted by applicable law. Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or controlling persons of the Company pursuant to our Certificate of Incorporation, our By-laws, applicable law, or otherwise, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.