PLUG POWER INC.
 
                      1999 STOCK OPTION AND INCENTIVE PLAN
 
 
SECTION 1.  GENERAL PURPOSE OF THE PLAN; DEFINITIONS
            ----------------------------------------
 
     The name of the plan is the Plug Power Inc. 1999 Stock Option and Incentive
Plan (the "Plan").  The purpose of the Plan is to encourage and enable the
officers, employees, Independent Directors and other key persons (including
consultants) of Plug Power Inc. (the "Company") and its Subsidiaries upon whose
judgment, initiative and efforts the Company largely depends for the successful
conduct of its business to acquire a proprietary interest in the Company.  It is
anticipated that providing such persons with a direct stake in the Company's
welfare will assure a closer identification of their interests with those of the
Company, thereby stimulating their efforts on the Company's behalf and
strengthening their desire to remain with the Company.
 
     The following terms shall be defined as set forth below:
 
     "Act" means the Securities Exchange Act of 1934, as amended.
 
     "Administrator" is defined in Section 2(a).
 
     "Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock
Awards, Unrestricted Stock Awards, Performance Share Awards and Dividend
Equivalent Rights.
 
     "Board" means the Board of Directors of the Company.
 
     "Cause" means, except as provided in an individual agreement or by the
Committee, a vote of the Board of Directors resolving that the participant
should be dismissed as a result of (i) any material breach by the participant of
any agreement to which the participant and the Company are parties, (ii) any act
(other than retirement) or omission to act by the participant which may have a
material and adverse effect on the business of the Company or any Subsidiary or
on the participant's ability to perform services for the Company or any
Subsidiary, including, without limitation, the commission of any crime (other
than ordinary traffic violations), or (iii) any material misconduct or neglect
of duties by the participant in connection with the business or affairs of the
Company or any Subsidiary.
 
     "Change of Control" is defined in Section 17.
 
     "Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
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     "Committee" means the Committee of the Board referred to in Section 2.
 
     "Covered Employee" means an employee who is a "Covered Employee" within the
meaning of Section 162(m) of the Code.
 
     "Deferred Stock Award" means Awards granted pursuant to Section 8.
 
     "Dividend Equivalent Right" means Awards granted pursuant to Section 12.
 
     "Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 19.
 
     "Fair Market Value" of the Stock on any given date means the fair market
value of the Stock determined in good faith by the Administrator; provided,
                                                                  --------
however, that if the Stock is admitted to quotation on the National Association
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of Securities Dealers Automated Quotation System ("NASDAQ"), NASDAQ National
System or national securities exchange, the determination shall be made by
reference to market quotations.  If there are no market quotations for such
date, the determination shall be made by reference to the last date preceding
such date for which there are market quotations.  Notwithstanding the foregoing,
if the date for which Fair Market Value is determined is the first day when
trading prices for the Stock are reported on NASDAQ or trading on a national
securities exchange, the Fair Market Value shall be the "Price to the Public"
(or equivalent) set forth on the cover page for the final prospectus relating to
the Company's Initial Public Offering.
 
     "Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
 
     "Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
 
     "Initial Public Offering" means the first fully underwritten, firm
commitment public offering pursuant to an effective registration statement under
the Act, other than on Forms S-4 or S-8 or their then equivalents, covering the
offer and sale by the Company of its Stock.
 
     "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
 
     "Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
 
     "Performance Share Award" means Awards granted pursuant to Section 10.
 
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     "Performance Cycle" means one or more periods of time, which may be of
varying and overlapping durations, as the Administrator may select, over which
the attainment of one or more performance criteria will be measured for the
purpose of determining a participant's right to and the payment of a Performance
Share Award, Restricted Stock Award or Deferred Stock Award.
 
     "Restricted Stock Award" means Awards granted pursuant to Section 7.
 
     "Stock" means the Common Stock, par value $0.01 per share, of the Company,
subject to adjustments pursuant to Section 3.
 
     "Stock Appreciation Right" means any Award granted pursuant to Section 6.
 
     "Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities beginning with the
Company if each of the corporations or entities (other than the last corporation
or entity in the unbroken chain) owns stock or other interests possessing 50
percent or more of the economic interest or the total combined voting power of
all classes of stock or other interests in one of the other corporations or
entities in the chain.
 
     "Unrestricted Stock Award" means any Award granted pursuant to Section 9.
 
SECTION 2.  ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT
            ---------------------------------------------------------
            PARTICIPANTS AND DETERMINE AWARDS
            ---------------------------------
 
     (a) Committee.  The Plan shall be administered by either the Board or a
         ---------
committee of not less than two Independent Directors (in either case, the
"Administrator").
 
     (b) Powers of Administrator.  The Administrator shall have the power and
         -----------------------
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
 
          (i) to select the individuals to whom Awards may from time to time be
     granted;
 
          (ii  to determine the time or times of grant, and the extent, if any,
     of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation
     Rights, Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock
     Awards, Performance Share Awards and Dividend Equivalent Rights, or any
     combination of the foregoing, granted to any one or more participants;
 
          (iii)  to determine the number of shares of Stock to be covered by any
     Award;
 
          (iv)  to determine and modify from time to time the terms and
     conditions, including restrictions, not inconsistent with the terms of the
     Plan, of any Award, which
 
                                       3
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     terms and conditions may differ among individual Awards and participants,
     and to approve the form of written instruments evidencing the Awards;
 
          (v) to accelerate at any time the exercisability or vesting of all or
     any portion of any Award;
 
          (vi)  subject to the provisions of Section 5(a)(ii), to extend at any
     time the period in which Stock Options may be exercised;
 
          (vii) to determine at any time whether, to what extent, and under what
     circumstances distribution or the receipt of Stock and other amounts
     payable with respect to an Award shall be deferred either automatically or
     at the election of the participant and whether and to what extent the
     Company shall pay or credit amounts constituting interest (at rates
     determined by the Administrator) or dividends or deemed dividends on such
     deferrals; and
 
          (viii) at any time to adopt, alter and repeal such rules, guidelines
     and practices for administration of the Plan and for its own acts and
     proceedings as it shall deem advisable; to interpret the terms and
     provisions of the Plan and any Award (including related written
     instruments); to make all determinations it deems advisable for the
     administration of the Plan; to decide all disputes arising in connection
     with the Plan; and to otherwise supervise the administration of the Plan.
 
     All decisions and interpretations of the Administrator shall be binding on
all persons, including the Company and Plan participants.
 
     (c) Delegation of Authority to Grant Awards.  The Administrator, in its
         ---------------------------------------
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator's authority and duties with respect to the granting of
Awards at Fair Market Value, to individuals who are not subject to the reporting
and other provisions of Section 16 of the Act or "covered employees" within the
meaning of Section 162(m) of the Code.  Any such delegation by the Administrator
shall include a limitation as to the amount of Awards that may be granted during
the period of the delegation and shall contain guidelines as to the
determination of the exercise price of any Stock Option or Stock Appreciation
Right, the conversion ratio or price of other Awards and the vesting criteria.
The Administrator may revoke or amend the terms of a delegation at any time but
such action shall not invalidate any prior actions of the Administrator's
delegate or delegates that were consistent with the terms of the Plan.
 
SECTION 3.  STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
            ----------------------------------------------------
 
     (a) Stock Issuable.  The maximum number of shares of Stock reserved and
         --------------
available for issuance under the Plan shall be such aggregate number of shares
of Stock as does not exceed the sum of (i) 2,561,002 shares; plus (ii) as of the
first day of each January 1 and July 1
 
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<PAGE>
 
thereafter, 16.4 percent of any net increase since the preceding July 1 or
January 1, as the case may be, in the total number of shares of Stock actually
outstanding; plus (iii) shares of Stock underlying awards under the Plug Power,
L.L.C. Membership Option Plan which are forfeited, cancelled, reacquired by the
Company, satisfied without the issuance of Stock or otherwise terminated (other
than be exercise) from time to time. Notwithstanding the foregoing, the maximum
number of shares of Stock for which Incentive Stock Options may be issued under
the Plan shall not exceed 2,561,002. For purposes of this limitation, the shares
of Stock underlying any Awards which are forfeited, cancelled, reacquired by the
Company, satisfied without the issuance of Stock or otherwise terminated (other
than by exercise) shall be added back to the shares of Stock available for
issuance under the Plan. Subject to such overall limitation, shares of Stock may
be issued up to such maximum number pursuant to any type or types of Award;
provided, however, that from and after the date the Company becomes subject to
the provisions of Section 162(m) of the Code, Stock Options or Stock
Appreciation Rights with respect to no more than 500,000 shares of Stock may be
granted to any one individual participant during any one calendar year period.
The shares available for issuance under the Plan may be authorized but unissued
shares of Stock or shares of Stock reacquired by the Company and held in its
treasury.
 
     (b) Changes in Stock.  If, as a result of any reorganization,
         ----------------
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company's capital stock, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company, or additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Stock or other
securities, or, if, as a result of any merger or consolidation, sale of all or
substantially all of the assets of the Company, the outstanding shares of Stock
are converted into or exchanged for a different number or kind of securities of
the Company or any successor entity (or a parent or Subsidiary thereof), the
Administrator shall make an appropriate or proportionate adjustment in (i) the
maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options or Stock Appreciation Rights that can be granted to any one
individual participant, (iii) the number and kind of shares or other securities
subject to any then outstanding Awards under the Plan, (iv) the repurchase price
per share subject to each outstanding Restricted Stock Award, and (v) the price
for each share subject to any then outstanding Stock Options and Stock
Appreciation Rights under the Plan, without changing the aggregate exercise
price (i.e., the exercise price multiplied by the number of Stock Options and
Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation
Rights remain exercisable.  The adjustment by the Administrator shall be final,
binding and conclusive.  No fractional shares of Stock shall be issued under the
Plan resulting from any such adjustment, but the Administrator in its discretion
may make a cash payment in lieu of fractional shares.
 
     The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Administrator
 
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<PAGE>
 
that such adjustment is appropriate to avoid distortion in the operation of the
Plan, provided that no such adjustment shall be made in the case of an Incentive
Stock Option, without the consent of the participant, if it would constitute a
modification, extension or renewal of the Option within the meaning of Section
424(h) of the Code.
 
     (c) Mergers and Other Transactions.  In the case of and subject to the
         ------------------------------
consummation of (i) the dissolution or liquidation of the Company, (ii) the sale
of all or substantially all of the assets of the Company on a consolidated basis
to an unrelated person or entity, (iii) a merger, reorganization or
consolidation in which the outstanding shares of Stock are converted into or
exchanged for a different kind of securities of the successor entity and the
holders of the Company's outstanding voting power immediately prior to such
transaction do not own a majority of the outstanding voting power of the
successor entity immediately upon completion of such transaction, or (iv) the
sale of all of the Stock of the Company to an unrelated person or entity (in
each case, a "Covered Transaction"), all Options and Stock Appreciation Rights
that are not exercisable immediately prior to the effective date of the Covered
Transaction shall become fully exercisable as of the effective date of the
Covered Transaction and all other Awards with conditions and restrictions
relating solely to the passage of time and continued employment shall become
fully vested and nonforfeitable as of the effective date of the Covered
Transaction, except as the Administrator may otherwise specify with respect to
particular Awards.  Upon the consummation of the Covered Transaction, the Plan
and all outstanding Awards granted hereunder shall terminate, unless provision
is made in connection with the Covered Transaction for the assumption of Awards
heretofore granted, or the substitution of such Awards with new Awards of the
successor entity or parent thereof, with appropriate adjustment as to the number
and kind of shares and, if appropriate, the per share exercise prices, as
provided in Section 3(b) above.  In the event of such termination, each optionee
shall be permitted, within a specified period of time determined by the
Administrator prior to consummation of the Covered Transaction, to exercise all
outstanding Options and Stock Appreciation Rights held by such optionee,
including those that will become exercisable upon the effectiveness of the
Covered Transaction; provided, however, that the exercise of Options and Stock
Appreciation Rights not exercisable prior to the effectiveness of the Covered
Transaction shall be subject to the consummation of the Covered Transaction.
 
     (d) Substitute Awards.  The Administrator may grant Awards under the Plan
         -----------------
in substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation.  The Administrator may direct that the
substitute awards be granted on such terms and conditions as the Administrator
considers appropriate in the circumstances.  Any substitute Awards granted under
the Plan shall not count against the share limitation set forth in Section 3(a).
 
                                       6
<PAGE>
 
SECTION 4.  ELIGIBILITY
            -----------
 
     Participants in the Plan will be such full or part-time officers and other
employees, Independent Directors and key persons (including consultants and
prospective employees) of the Company and its Subsidiaries as are selected from
time to time by the Administrator in its sole discretion.
 
SECTION 5.  STOCK OPTIONS
            -------------
 
     Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
 
     Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options.  Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code.  To the extent that any Option
does not qualify as an Incentive Stock Option, it shall be deemed a Non-
Qualified Stock Option.
 
     No Incentive Stock Option shall be granted under the Plan after August 16,
2009.
 
     (a) Stock Options Granted to Employees and Key Persons.  The Administrator
         --------------------------------------------------
in its discretion may grant Stock Options to eligible employees and key persons
of the Company or any Subsidiary.  Stock Options granted pursuant to this
Section 5(a) shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Administrator shall deem desirable.  If the Administrator so
determines, Stock Options may be granted in lieu of cash compensation at the
participant's election, subject to such terms and conditions as the
Administrator may establish.
 
          (i) Exercise Price.  The exercise price per share for the Stock
              --------------
     covered by a Stock Option granted pursuant to this Section 5(a) shall be
     determined by the Administrator at the time of grant but shall not be less
     than 100 percent of the Fair Market Value on the date of grant in the case
     of Incentive Stock Options, or 85 percent of the Fair Market Value on the
     date of grant, in the case of Non-Qualified Stock Options (other than
     options granted in lieu of cash compensation).  If an employee owns or is
     deemed to own (by reason of the attribution rules of Section 424(d) of the
     Code) more than 10 percent of the combined voting power of all classes of
     stock of the Company or any parent or subsidiary corporation and an
     Incentive Stock Option is granted to such employee, the option price of
     such Incentive Stock Option shall be not less than 110 percent of the Fair
     Market Value on the grant date.
 
          (ii)  Option Term.  The term of each Stock Option shall be fixed by
                -----------
     the Administrator, but no Stock Option shall be exercisable more than ten
     years after the date the option is granted. Notwithstanding the foregoing,
     the rights of an employee, who at the time the option is granted is a
     member of the Board, in an Option granted
 
                                       7
<PAGE>
 
     under this Section 5(a) shall terminate ten years from the date of grant
     (subject to the five year limitation in the next sentence); provided,
     however, that if such employee ceases to be an employee for Cause, such
     rights shall terminate immediately on the date on which he ceases to be an
     employee. If an employee owns or is deemed to own (by reason of the
     attribution rules of Section 424(d) of the Code) more than 10 percent of
     the combined voting power of all classes of stock of the Company or any
     parent or subsidiary corporation and an Incentive Stock Option is granted
     to such employee, the term of such option shall be no more than five years
     from the date of grant.
 
          (iii)  Exercisability; Rights of a Stockholder.  Stock Options shall
                 ---------------------------------------
     become exercisable at such time or times, whether or not in installments,
     as shall be determined by the Administrator at or after the grant date;
     provided, however, that Stock Options granted in lieu of compensation shall
     be exercisable in full as of the grant date.  The Administrator may at any
     time accelerate the exercisability of all or any portion of any Stock
     Option.  An optionee shall have the rights of a stockholder only as to
     shares acquired upon the exercise of a Stock Option and not as to
     unexercised Stock Options.
 
          (iv)  Method of Exercise.  Stock Options may be exercised in whole or
                ------------------
     in part, by giving written notice of exercise to the Company, specifying
     the number of shares to be purchased.  Payment of the purchase price may be
     made by one or more of the following methods to the extent provided in the
     Option Award agreement:
 
               (A) In cash, by certified or bank check or other instrument
          acceptable to the Administrator;
 
               (B) Through the delivery (or attestation to the ownership) of
          shares of Stock that have been purchased by the optionee on the open
          market or that have been beneficially owned by the optionee for at
          least six months and are not then subject to restrictions under any
          Company plan.  Such surrendered shares shall be valued at Fair Market
          Value on the exercise date;
 
               (C) By the optionee delivering to the Company a properly executed
          exercise notice together with irrevocable instructions to a broker to
          promptly deliver to the Company cash or a check payable and acceptable
          to the Company for the purchase price; provided that in the event the
          optionee chooses to pay the purchase price as so provided, the
          optionee and the broker shall comply with such procedures and enter
          into such agreements of indemnity and other agreements as the
          Administrator shall prescribe as a condition of such payment
          procedure; or
 
               (D) By the optionee delivering to the Company a promissory note
          if the Board has expressly authorized the loan of funds to the
          optionee for the purpose of enabling or assisting the optionee to
          effect the exercise of his Stock
 
                                       8
<PAGE>
 
          Option; provided that at least so much of the exercise price as
          represents the par value of the Stock shall be paid other than with a
          promissory note.
 
     Payment instruments will be received subject to collection.  The delivery
     of certificates representing the shares of Stock to be purchased pursuant
     to the exercise of a Stock Option will be contingent upon receipt from the
     optionee (or a purchaser acting in his stead in accordance with the
     provisions of the Stock Option) by the Company of the full purchase price
     for such shares and the fulfillment of any other requirements contained in
     the Stock Option or applicable provisions of laws.  In the event an
     optionee chooses to pay the purchase price by previously-owned shares of
     Stock through the attestation method, the number of shares of Stock
     transferred to the optionee upon the exercise of the Stock Option shall be
     net of the number of shares attested to.
 
          (v) Annual Limit on Incentive Stock Options.  To the extent required
              ---------------------------------------
     for "incentive stock option" treatment under Section 422 of the Code, the
     aggregate Fair Market Value (determined as of the time of grant) of the
     shares of Stock with respect to which Incentive Stock Options granted under
     this Plan and any other plan of the Company or its parent and subsidiary
     corporations become exercisable for the first time by an optionee during
     any calendar year shall not exceed $100,000.  To the extent that any Stock
     Option exceeds this limit, it shall constitute a Non-Qualified Stock
     Option.
 
     (b) Reload Options.  At the discretion of the Administrator, Options
         --------------
granted under the Plan may include a "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with such other terms as
the Administrator may provide) to purchase that number of shares of Stock equal
to the sum of (i) the number delivered to exercise the original Option and (ii)
the number withheld to satisfy tax liabilities, with an Option term equal to the
remainder of the original Option term unless the Administrator otherwise
determines in the Award agreement for the original Option grant.
 
     (c) Stock Options Granted to Independent Directors.
         ----------------------------------------------
 
          (i) Grant of Options.  The Administrator, in its discretion, may grant
              ----------------
     Non-Qualified Stock Options to Independent Directors.  Any such grant may
     vary among individual Independent Directors.
 
          (ii)  Exercise; Termination.
                ---------------------
 
               (A) Unless otherwise determined by the Administrator, an Option
          granted under Section 5(c) shall be exercisable in full as of the
          grant date.  The rights of an Independent Director in an Option
          granted under this Section 5(c) shall terminate ten years from the
          date of grant; provided, however, that if the
 
                                       9
<PAGE>
 
          Independent Director ceases to be a member of the Board for Cause,
          such rights shall terminate immediately on the date on which he ceases
          to be a member of the Board.
 
               (B) Options granted under this Section 5(c) may be exercised only
          by written notice to the Company specifying the number of shares to be
          purchased. Payment of the full purchase price of the shares to be
          purchased may be made by one or more of the methods specified in
          Section 5(a)(iv).  An optionee shall have the rights of a stockholder
          only as to shares acquired upon the exercise of a Stock Option and not
          as to unexercised Stock Options.
 
     (d) Non-transferability of Options.  No Stock Option shall be transferable
         ------------------------------
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee, or by the optionee's legal representative or
guardian in the event of the optionee's incapacity.  Notwithstanding the
foregoing, the Administrator, in its sole discretion, may provide in the Award
agreement regarding a given Option that the optionee may transfer his Non-
Qualified Stock Options to members of his immediate family, to trusts for the
benefit of such family members, or to partnerships in which such family members
are the only partners, provided that the transferee agrees in writing with the
Company to be bound by all of the terms and conditions of this Plan and the
applicable Option.
 
SECTION 6.  STOCK APPRECIATION RIGHTS.
            -------------------------
 
     (a) Nature of Stock Appreciation Rights.  A Stock Appreciation Right is an
         -----------------------------------
Award entitling the recipient to receive an amount in cash or shares of Stock or
a combination thereof having a value equal to the excess of the Fair Market
Value of the Stock on the date of exercise over the exercise price Stock
Appreciation Right, which price shall not be less than 85 percent of the Fair
Market Value of the Stock on the date of grant (or more than the option exercise
price per share, if the Stock Appreciation Right was granted in tandem with a
Stock Option) multiplied by the number of shares of Stock with respect to which
the Stock Appreciation Right shall have been exercised, with the Administrator
having the right to determine the form of payment.
 
     (b) Grant and Exercise of Stock Appreciation Rights.  Stock Appreciation
         -----------------------------------------------
Rights may be granted by the Administrator in tandem with, or independently of,
any Stock Option granted pursuant to Section 5 of the Plan.  In the case of a
Stock Appreciation Right granted in tandem with a Non-Qualified Stock Option,
such Stock Appreciation Right may be granted either at or after the time of the
grant of such Option.  In the case of a Stock Appreciation Right granted in
tandem with an Incentive Stock Option, such Stock Appreciation Right may be
granted only at the time of the grant of the Option.
 
                                       10
<PAGE>
 
     A Stock Appreciation Right or applicable portion thereof granted in tandem
with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.
 
     (c) Terms and Conditions of Stock Appreciation Rights.  Stock Appreciation
         -------------------------------------------------
Rights shall be subject to such terms and conditions as shall be determined from
time to time by the Administrator, subject to the following:
 
          (i) Stock Appreciation Rights granted in tandem with Options shall be
     exercisable at such time or times and to the extent that the related Stock
     Options shall be exercisable.
 
          (ii)  Upon exercise of a Stock Appreciation Right, the applicable
     portion of any related Option shall be surrendered.
 
          (iii)  All Stock Appreciation Rights shall be exercisable during the
     participant's lifetime only by the participant or the participant's legal
     representative.
 
SECTION 7.  RESTRICTED STOCK AWARDS
            -----------------------
 
     (a) Nature of Restricted Stock Awards.  A Restricted Stock Award is an
         ---------------------------------
Award entitling the recipient to acquire, at par value or such other higher
purchase price determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of
grant ("Restricted Stock").  Conditions may be based on continuing employment
(or other business relationship) and/or achievement of pre-established
performance goals and objectives.  The grant of a Restricted Stock Award is
contingent on the participant executing the Restricted Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual Awards
and participants.
 
     (b) Rights as a Stockholder.  Upon execution of a written instrument
         -----------------------
setting forth the Restricted Stock Award and payment of any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the
Administrator shall otherwise determine, certificates evidencing the Restricted
Stock shall remain in the possession of the Company until such Restricted Stock
is vested as provided in Section 7(d) below, and the participant shall be
required, as a condition of the grant, to deliver to the Company a stock power
endorsed in blank.
 
     (c) Restrictions.  Restricted Stock may not be sold, assigned, transferred,
         ------------
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award agreement.  If a participant's
employment (or other business relationship) with the Company and its
Subsidiaries terminates for any reason, the Company
 
                                       11
<PAGE>
 
shall have the right to repurchase Restricted Stock that has not vested at the
time of termination at its original purchase price, from the participant or the
participant's legal representative.
 
     (d) Vesting of Restricted Stock.  The Administrator at the time of grant
         ---------------------------
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-
transferability of the Restricted Stock and the Company's right of repurchase or
forfeiture shall lapse.  Subsequent to such date or dates and/or the attainment
of such pre-established performance goals, objectives and other conditions, the
shares on which all restrictions have lapsed shall no longer be Restricted Stock
and shall be deemed "vested."  Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 15 below, in
writing after the Award agreement is issued, a participant's rights in any
shares of Restricted Stock that have not vested shall automatically terminate
upon the participant's termination of employment (or other business
relationship) with the Company and its Subsidiaries and such shares shall be
subject to the Company's right of repurchase as provided in Section 7(c) above.
 
     (e) Waiver, Deferral and Reinvestment of Dividends.  The Restricted Stock
         ----------------------------------------------
Award agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.
 
SECTION 8.  DEFERRED STOCK AWARDS
            ---------------------
 
     (a) Nature of Deferred Stock Awards.   A Deferred Stock Award is an Award
         -------------------------------
of phantom stock units to a participant, subject to restrictions and conditions
as the Administrator may determine at the time of grant.  Conditions may be
based on continuing employment (or other business relationship) and/or
achievement of pre-established performance goals and objectives.  The grant of a
Deferred Stock Award is contingent on the participant executing the Deferred
Stock Award agreement.  The terms and conditions of each such agreement shall be
determined by the Administrator, and such terms and conditions may differ among
individual Awards and participants.  At the end of the deferral period, the
Deferred Stock Award, to the extent vested, shall be paid to the participant in
the form of shares of Stock.
 
     (b) Election to Receive Deferred Stock Awards in Lieu of Compensation.  The
         -----------------------------------------------------------------
Administrator may, in its sole discretion, permit a participant to elect to
receive a portion of the cash compensation or Restricted Stock Award otherwise
due to such participant in the form of a Deferred Stock Award.  Any such
election shall be made in writing and shall be delivered to the Company no later
than the date specified by the Administrator and in accordance with rules and
procedures established by the Administrator.  The Administrator shall have the
sole right to determine whether and under what circumstances to permit such
elections and to impose such limitations and other terms and conditions thereon
as the Administrator deems appropriate.
 
     (c) Rights as a Stockholder.  During the deferral period, a participant
         -----------------------
shall have no rights as a stockholder; provided, however, that the participant
may be credited with Dividend
 
                                       12
<PAGE>
 
Equivalent Rights with respect to the phantom stock units underlying his
Deferred Stock Award, subject to such terms and conditions as the Administrator
may determine.
 
     (d) Restrictions.  A Deferred Stock Award may not be sold, assigned,
         ------------
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.
 
     (e) Termination.  Except as may otherwise be provided by the Administrator
         -----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a participant's right in all Deferred Stock
Awards that have not vested shall automatically terminate upon the participant's
termination of employment (or cessation of business relationship) with the
Company and its Subsidiaries for any reason.
 
SECTION 9.  UNRESTRICTED STOCK AWARDS
            -------------------------
 
     Grant or Sale of Unrestricted Stock.  The Administrator may, in its sole
     -----------------------------------
discretion, grant (or sell at par value or such higher purchase price determined
by the Administrator) an Unrestricted Stock Award to any participant pursuant to
which such participant may receive shares of Stock free of any restrictions
("Unrestricted Stock") under the Plan.  Unrestricted Stock Awards may be granted
or sold as described in the preceding sentence in respect of past services or
other valid consideration, or in lieu of cash compensation due to such
participant.
 
SECTION 10. PERFORMANCE SHARE AWARDS
            ------------------------
 
     (a) Nature of Performance Share Awards.  A Performance Share Award is an
         ----------------------------------
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals.  The Administrator may make Performance Share
Awards independent of or in connection with the granting of any other Award
under the Plan.  The Administrator in its sole discretion shall determine
whether and to whom Performance Share Awards shall be made, the performance
goals, the periods during which performance is to be measured, and all other
limitations and conditions.
 
     (b) Rights as a Stockholder.  A participant receiving a Performance Share
         -----------------------
Award shall have the rights of a stockholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant.  A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the Performance Share Award agreement (or in a performance plan
adopted by the Administrator).
 
     (c) Termination.  Except as may otherwise be provided by the Administrator
         -----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a participant's rights in all Performance Share
Awards shall automatically terminate upon the participant's termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
 
                                       13
<PAGE>
 
     (d) Acceleration, Waiver, Etc.  At any time prior to the participant's
         -------------------------
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Administrator may in its sole discretion accelerate, waive
or, subject to Section 15, amend any or all of the goals, restrictions or
conditions applicable to a Performance Share Award.
 
SECTION 11.  PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
             ---------------------------------------------
 
     Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award, Deferred Stock Award or Performance Share Award granted
to a Covered Employee is intended to qualify as "Performance-based Compensation"
under Section 162(m) of the Code and the regulations promulgated thereunder (a
"Performance-based Award"), such Award shall comply with the provisions set
forth below:
 
     (a) Performance Criteria.  The performance criteria used in performance
         --------------------
goals governing Performance-based Awards granted to Covered Employees may
include any or all of the following:  (i) the Company's return on equity,
assets, capital or investment, (ii) pre-tax or after-tax profit levels of the
Company or any Subsidiary, a division, an operating unit or a business segment
of the Company, or any combination of the foregoing; (iii) cash flow, funds from
operations or similar measure; (iv) total shareholder return; (v) changes in the
market price of the Stock; (vi) sales or market share; (vii) earnings per share,
(viii) the Company's achievement of project development milestones; or (ix) any
other performance criteria determined by the Committee at any time and in its
sole discretion.
 
     (b) Grant of Performance-based Awards.  With respect to each Performance-
         ---------------------------------
based Award granted to a Covered Employee, the Committee shall select, within
the first 90 days of a Performance Cycle (or, if shorter, within the maximum
period allowed under Section 162(m) of the Code) the performance criteria for
such grant, and the achievement targets with respect to each performance
criterion (including a threshold level of performance below which no amount will
become payable with respect to such Award).  Each Performance-based Award will
specify the amount payable, or the formula for determining the amount payable,
upon achievement of the various applicable performance targets.  The performance
criteria established by the Committee may be (but need not be) different for
each Performance Cycle and different goals may be applicable to Performance-
based Awards to different Covered Employees.
 
     (c) Payment of Performance-based Awards.  Following the completion of a
         -----------------------------------
Performance Cycle, the Committee shall meet to review and certify in writing
whether, and to what extent, the performance criteria for the Performance Cycle
have been achieved and, if so, to also calculate and certify in writing the
amount of the Performance-based Awards earned for the Performance Cycle.  The
Committee shall then determine the actual size of each Covered Employee's
Performance-based Award, and, in doing so, may reduce or eliminate the amount of
the Performance-based Award for a Covered Employee if, in its sole judgment,
such reduction or elimination is appropriate.
 
                                       14
<PAGE>
 
     (d) Maximum Award Payable.  The maximum Performance-based Award payable to
         ---------------------
any one Covered Employee under the Plan for a Performance Cycle is 500,000
Shares (subject to adjustment as provided in Section 3(b) hereof).
 
SECTION 12.  DIVIDEND EQUIVALENT RIGHTS
             --------------------------
 
     (a) Dividend Equivalent Rights.  A Dividend Equivalent Right is an Award
         --------------------------
entitling the recipient to receive credits based on cash dividends that would
have been paid on the shares of Stock specified in the Dividend Equivalent Right
(or other award to which it relates) if such shares had been issued to and held
by the recipient.  A Dividend Equivalent Right may be granted hereunder to any
participant as a component of another Award or as a freestanding award.  The
terms and conditions of Dividend Equivalent Rights shall be specified in the
grant. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
shares of Stock, which may thereafter accrue additional equivalents.  Any such
reinvestment shall be at Fair Market Value on the date of reinvestment or such
other price as may then apply under a dividend reinvestment plan sponsored by
the Company, if any.  Dividend Equivalent Rights may be settled in cash or
shares of Stock or a combination thereof, in a single installment or
installments.  A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement, or payment of, or lapse of restrictions on, such other
award, and that such Dividend Equivalent Right shall expire or be forfeited or
annulled under the same conditions as such other award. A Dividend Equivalent
Right granted as a component of another Award may also contain terms and
conditions different from such other award.
 
     (b) Interest Equivalents.  Any Award under this Plan that is settled in
         --------------------
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment.  Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
 
     (c) Termination.  Except as may otherwise be provided by the Administrator
         -----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a participant's rights in all Dividend Equivalent
Rights or interest equivalents shall automatically terminate upon the
participant's termination of employment (or cessation of business relationship)
with the Company and its Subsidiaries for any reason.
 
SECTION 13.  TAX WITHHOLDING
             ---------------
 
     (a) Payment by Participant.  Each participant shall, no later than the date
         ----------------------
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld with respect to such
income.  The Company and its Subsidiaries shall, to the extent permitted by law,
have the
 
                                       15
<PAGE>
 
right to deduct any such taxes from any payment of any kind otherwise due to the
participant. The Company's obligation to deliver stock certificates to any
participant is subject to and conditioned on tax obligations being satisfied by
the participant.
 
     (b) Payment in Stock.  Subject to approval by the Administrator, a
         ----------------
participant may elect to have the required minimum tax withholding obligation
satisfied, in whole or in part, by (i) authorizing the Company to withhold from
shares of Stock to be issued pursuant to any Award a number of shares with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due, or (ii) transferring to the Company
shares of Stock owned by the participant with an aggregate Fair Market Value (as
of the date the withholding is effected) that would satisfy the withholding
amount due.
 
SECTION 14.  TRANSFER, LEAVE OF ABSENCE, ETC.
             -------------------------------
 
     For purposes of the Plan, the following events shall not be deemed a
termination of employment:
 
     (a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
 
     (b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to re-
employment is guaranteed either by a statute or by contract or under the policy
pursuant to which the leave of absence was granted or if the Administrator
otherwise so provides in writing.
 
SECTION 15.  AMENDMENTS AND TERMINATION
             --------------------------
 
     The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent.  If and to the extent determined by the Administrator to
be required by the Code to ensure that Incentive Stock Options granted under the
Plan are qualified under Section 422 of the Code or to ensure that compensation
earned under Awards qualifies as performance-based compensation under Section
162(m) of the Code, if and to the extent intended to so qualify, Plan amendments
shall be subject to approval by the Company stockholders entitled to vote at a
meeting of stockholders.  Nothing in this Section 15 shall limit the
Administrator's authority to take any action permitted pursuant to Section 3(c).
 
SECTION 16.  STATUS OF PLAN
             --------------
 
     With respect to the portion of any Award that has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Administrator shall otherwise expressly
determine in connection with any Award or Awards.  In its sole discretion,
 
                                       16
<PAGE>
 
the Administrator may authorize the creation of trusts or other arrangements to
meet the Company's obligations to deliver Stock or make payments with respect to
Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the foregoing sentence.
 
SECTION 17.  CHANGE OF CONTROL PROVISIONS
             ----------------------------
 
     Upon the occurrence of a Change of Control as defined in this Section 17:
 
     (a) Except as otherwise provided in the applicable Award agreement, each
outstanding Stock Option and Stock Appreciation Right shall automatically become
fully exercisable.
 
     (b) Except as otherwise provided in the applicable Award Agreement,
conditions and restrictions on each outstanding Restricted Stock Award, Deferred
Stock Award and Performance Share Award which relate solely to the passage of
time and continued employment will be removed.  Performance or other conditions
(other than conditions and restrictions relating solely to the passage of time
and continued employment) will continue to apply unless otherwise provided in
the applicable Award Agreement.
 
     (c) "Change of Control" shall mean the occurrence of any one of the
following events:
 
          (i) any "Person," as such term is used in Sections 13(d) and 14(d) of
     the Act (other than (w) the Company, (x) any of its Subsidiaries, (y) any
     trustee, fiduciary or other person or entity holding securities under any
     employee benefit plan or trust of the Company or any of its Subsidiaries,
     or (z) either of Edison Development Corporation, a Michigan corporation or
     Mechanical Technology Incorporated, a New York corporation), together with
     all "affiliates" and "associates" (as such terms are defined in Rule 12b-2
     under the Act) of such person, shall become the "beneficial owner" (as such
     term is defined in Rule 13d-3 under the Act), directly or indirectly, of
     securities of the Company representing 25 percent or more of the combined
     voting power of the Company's then outstanding securities having the right
     to vote in an election of the Company's Board of Directors ("Voting
     Securities") (in such case other than as a result of an acquisition of
     securities directly from the Company); or
 
          (ii)  persons who, as of the Effective Date, constitute the Company's
     Board of Directors (the "Incumbent Directors") cease for any reason,
     including, without limitation, as a result of a tender offer, proxy
     contest, merger or similar transaction, to constitute at least a majority
     of the Board, provided that any person becoming a director of the Company
     subsequent to the Effective Date shall be considered an Incumbent Director
     if such person's election was approved by or such person was nominated for
     election by either (A) a vote of at least a majority of the Incumbent
     Directors or (B) a vote of at least a majority of the Incumbent Directors
     who are members of a nominating
 
                                       17
<PAGE>
 
     committee comprised, in the majority, of Incumbent Directors; but provided
     further, that any such person whose initial assumption of office is in
     connection with an actual or threatened election contest relating to the
     election of members of the Board of Directors or other actual or threatened
     solicitation of proxies or consents by or on behalf of a Person other than
     the Board, including by reason of agreement intended to avoid or settle any
     such actual or threatened contest or solicitation, shall not be considered
     an Incumbent Director; or
 
          (iii)  the stockholders of the Company shall approve (A) any
     consolidation or merger of the Company where the stockholders of the
     Company, immediately prior to the consolidation or merger, would not,
     immediately after the consolidation or merger, beneficially own (as such
     term is defined in Rule 13d-3 under the Act), directly or indirectly,
     shares representing in the aggregate more than 50 percent of the voting
     shares of the corporation issuing cash or securities in the consolidation
     or merger (or of its ultimate parent corporation, if any) (other than the
     merger of Plug Power, L.L.C. with and into the Company), (B) any sale,
     lease, exchange or other transfer (in one transaction or a series of
     transactions contemplated or arranged by any party as a single plan) of all
     or substantially all of the assets of the Company or (C) any plan or
     proposal for the liquidation or dissolution of the Company.
 
     Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Voting Securities outstanding, increases the proportionate number of
shares of Voting Securities beneficially owned by any person to 25 percent or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in this sentence shall
- --------  -------
thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction or as a result of an acquisition of securities directly from the
Company) and immediately thereafter beneficially owns 25 percent or more of the
combined voting power of all then outstanding Voting Securities, then a "Change
of Control" shall be deemed to have occurred for purposes of the foregoing
clause (i).
 
SECTION 18.  GENERAL PROVISIONS
             ------------------
 
     (a) No Distribution; Compliance with Legal Requirements.  The Administrator
         ---------------------------------------------------
may require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
 
     No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied.  The Administrator may require the placing of
such stop-orders and restrictive legends on certificates for Stock and Awards as
it deems appropriate.
 
                                       18
<PAGE>
 
     (b) Delivery of Stock Certificates.  Stock certificates to participants
         ------------------------------
under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the
United States mail, addressed to the participant, at the participant's last
known address on file with the Company.
 
     (c) Other Compensation Arrangements; No Employment Rights.  Nothing
         -----------------------------------------------------
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases.  The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
 
     (d) Trading Policy Restrictions.  Option exercises and other Awards under
         ---------------------------
the Plan shall be subject to such Company's insider trading policy, as in effect
from time to time.
 
SECTION 19.  EFFECTIVE DATE OF PLAN
             ----------------------
 
     This Plan shall become effective upon approval by the holders of a majority
of the votes cast at a meeting of stockholders at which a quorum is present or
by written consent of stockholders.  Subject to such approval by the
stockholders and to the requirement that no Stock may be issued hereunder prior
to such approval, Stock Options and other Awards may be granted hereunder on and
after adoption of this Plan by the Board.
 
SECTION 20.  GOVERNING LAW
             -------------
 
     This Plan and all Awards and actions taken thereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
 
 
DATE APPROVED BY BOARD OF DIRECTORS:     August 16, 1999
 
DATE APPROVED BY STOCKHOLDERS:           August 16, 1999
 
                                       19