SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
FUELCELL ENERGY, INC.
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------
Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:________________________
(2) Aggregate number of securities to which transaction
applies:____________ ___________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was
determined):__________________
(4) Proposed maximum aggregate value of transaction:
___________________________
(5) Total Fee paid:_______________________________
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:______________________
(2) Form, Schedule or Registration Statement No. ________________________
(3) Filing Party:________________________________
(4) Date Filed:__________________________________
<PAGE>
FUELCELL ENERGY, INC.
3 Great Pasture Road, Danbury, CT 06813
203-825-6000
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL SHAREHOLDERS' MEETING
TO BE HELD MARCH 22, 2000
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF FUELCELL ENERGY, INC.:
NOTICE IS HEREBY GIVEN that the Annual Shareholders' Meeting of FuelCell
Energy, Inc. (formerly known as Energy Research Corporation) (the "Company"),
will be held at the principal executive offices of the Company located at 3
Great Pasture Road, Danbury, Connecticut 06813 on March 22, 2000 at 10:00 a.m.
Eastern Standard Time for the following purposes:
1. To elect ten (10) directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. Such other business as may properly come before the Meeting or any
adjournment thereof.
Shareholders of record at the close of business on February 16, 2000 are
entitled to notice of and to vote at the meeting.
Your attention is directed to the attached Proxy Statement. If you do not
expect to be present at the meeting, please fill in, sign, date and mail the
enclosed Proxy as promptly as possible in order to save the Company further
solicitation expense. There is enclosed with the Proxy an addressed envelope for
which no postage is required if mailed in the United States.
BY ORDER OF THE BOARD OF DIRECTORS
JOSEPH G. MAHLER
CORPORATE SECRETARY
Danbury, Connecticut
February 28, 2000
<PAGE>
FUELCELL ENERGY, INC.
3 Great Pasture Road, Danbury, CT 06813
203-825-6000
- --------------------------------------------------------------------------------
PROXY STATEMENT
FUELCELL ENERGY, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 22, 2000
- --------------------------------------------------------------------------------
This Proxy Statement is furnished to the shareholders of FuelCell Energy,
Inc. (formerly known as Energy Research Corporation) (the "Company") in
connection with the solicitation of proxies by the Board of Directors of the
Company to be voted at the 2000 Annual Meeting of Shareholders (the "Annual
Meeting") and at any adjournments thereof. The Annual Meeting will be held on
March 22, 2000 at the principal executive offices of the Company located at 3
Great Pasture Road, Danbury, Connecticut 06813, at 10:00 a.m. Eastern Standard
Time. The Company is a Delaware corporation.
The approximate date on which this Proxy Statement and the accompanying
proxy card are first being sent or given to shareholders is February 28, 2000.
VOTING
General
The securities which can be voted at the Annual Meeting consist of Common
Stock of the Company, $.0001 par value per share, with each share entitling its
owner to one vote on each matter submitted to the shareholders. The record date
for determining the holders of Common Stock who are entitled to notice of and to
vote at the Annual Meeting is February 16, 2000. On the record date, 6,378,757
shares of Common Stock were outstanding and eligible to be voted at the Annual
Meeting.
Quorum and Vote Required
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock of the Company is necessary to constitute a quorum at the
Annual Meeting. The affirmative vote of the holders of a plurality of the shares
of Common Stock represented in person or by proxy at the Annual Meeting is
required to elect the directors. Abstentions, including broker non-votes, will
have no effect on the outcome of this matter.
Voting by Proxy
In voting by proxy with regard to the election of directors, shareholders
may vote in favor of all nominees, withhold their votes as to all nominees or
withhold their votes as to specific nominees. Shareholders should specify their
choices on the accompanying proxy card. All properly executed proxy cards
delivered by shareholders to the Company and not revoked will be voted at the
Annual Meeting in accordance with the directions given. If no specific
instructions are given with regard to the matters to be voted upon, the shares
represented by a signed proxy card will be voted "FOR" the election of all
directors. If any other matters properly come before the Annual Meeting, the
persons named as proxies will vote upon such matters according to their best
judgment.
3
<PAGE>
Any shareholder delivering a proxy has the power to revoke it at any time
before it is voted by giving written notice to the Secretary of the Corporation,
by executing and delivering to the Secretary a proxy card bearing a later date
or by voting in person at the Annual Meeting.
In addition to soliciting proxies through the mail, the Company may solicit
proxies through its directors and employees in person and by telephone.
Brokerage firms, nominees, custodians and fiduciaries also may be requested to
forward proxy materials to the beneficial owners of shares held of record by
them. All expenses incurred in connection with the solicitation of proxies will
be borne by the Company.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Ten directors are to be elected at the Annual Meeting, each to hold office
until the next annual meeting of shareholders and until a successor is elected
and qualified. It is the intention of the persons named in the enclosed form of
proxy to vote, if authorized, the proxies for the election as directors of the
ten persons named below as nominees. All of the nominees are at present
directors of the Company. If any nominee declines or is unable to serve as a
director (which is not anticipated), the persons named as proxies reserve full
discretion to vote for any other person who may be nominated.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO
ELECT THE TEN NOMINEES LISTED BELOW AS DIRECTORS OF THE COMPANY.
The following table sets forth certain information for each nominee for
election as a director.
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
Jerry D. Leitman 57 Jerry D. Leitman has been President and 1997
Chief Executive Officer of the Company
since August 1997. Mr. Leitman was
previously President of ABB, Asea Brown
Boveri's global air pollution control
businesses from 1992 to 1995. Prior to
joining ABB Mr. Leitman was Group
Executive Vice President of FLAKT AB, a
Swedish multinational, responsible for
FLAKT`s worldwide industrial businesses
from 1989 to 1992. Mr. Leitman is also a
Director and a member of the Audit
Committee of Esterline Technologies,
Inc., and Mr. Leitman received both a BS
and MS in Mechanical Engineering from
Georgia Institute of Technology in 1965
and 1967, respectively and serves as
Chairman of the Board of Evercel, Inc.
4
<PAGE>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
Bernard S. Baker 63 Dr. Bernard S. Baker joined the Company 1970
in 1970 and was President from 1973 to
August 1997 when he became Chairman of
the Board of Directors of the Company.
He was Chief Executive Officer of the
Company from March 1992 to August 1997.
Dr. Baker was a part-time employee of
the Company from August 1997 to May 31,
1998 and is currently a consultant for
the Company. He received a Ph.D from the
Illinois Institute of Technology in
1969, and was a Fulbright Fellow at the
Laboratory for Electrochemistry at the
University of Amsterdam subsequent to
receiving his Master of Science in
Chemical Engineering from the University
of Pennsylvania in 1959. Dr. Baker also
serves on the Evercel, Inc. Board of
Directors.
Hansraj C. Maru 55 Dr. Hansraj C. Maru has been Executive 1992
Vice President since December 1992. Dr.
Maru joined the Company in 1977 and was
Chief Operating Officer from December
1992 through December 1997. Dr. Maru
received a Ph.D. in Chemical Engineering
from the Illinois Institute of
Technology in 1975.
Christopher R. Bentley 57 Christopher R. Bentley has been 1993
Executive Vice President since joining
the Company in September 1990. Mr.
Bentley was President of Fuel Cell
Manufacturing Corporation from September
1990 to December 1997. From 1985 through
1989 he was Director of Manufacturing
(1985), Vice President and General
Manager (1985-1988) and President
(1988-1989) of the Turbine Airfoils
Division of Chromalloy Gas Turbine
Corporation, a major manufacturer of gas
turbine hardware. Mr. Bentley received a
BSME from Tufts University in 1966.
5
<PAGE>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
Thomas L. Kempner 72 Thomas L. Kempner has been Chairman and 1988
Chief Executive Officer of Loeb Partners
Corporation since 1979 and a general
partner of Loeb Investors Co. LXXV, an
affiliate of Loeb Partners Corporation
and an investment partnership. Mr.
Kempner was the Chairman of the Board of
Directors of the Company from March 1992
to August 1997. Mr. Kempner is a
director of Alcide Corporation, IGENE
Biotechnology, Inc, Intermagnetics
General Corporation, CCC Information
Services Group, Inc., Roper Starch
Worldwide, Inc., Evercel, Inc. and
director emeritus of Northwest Airlines,
Inc.
William A. Lawson 66 William A. Lawson has been President 1988
since 1987 of W.A. Lawson Associates, an
industrial and financial consulting
firm. Mr. Lawson has been Chairman of
the Board of Directors of Newcor, Inc.
since March 1991. Mr. Lawson was a
director of Old Kent-Central Bank from
1981 to 1997. Mr. Kempner also serves on
the Evercel, Inc. Board of Directors.
Warren D. Bagatelle 61 Warren D. Bagatelle has been a Managing 1988
Director of Loeb Partners Corporation
since 1988. Mr. Bagatelle serves on the
Evercel, Inc. Board of Directors.
Michael Bode 54 Michael Bode joined Messerschmitt- 1993
Bolkow-Blohm GmbH in 1974, where he had
held a variety of positions since that
time. He became Vice President and
Director of the New Technology group of
the Space Transportation and Propulsion
Systems division of Deutsche Aerospace
AG, a subsidiary of Daimler-Benz Corp.
in 1990. Since July 1993, Mr. Bode has
been Vice President and Director of the
New Technology group of Daimler Benz
affiliate MTU-Friedrichshafen GmbH.
6
<PAGE>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
James D. Gerson 56 James D. Gerson has been a Vice 1992
President of Fahnestock & Co., Inc.
since March 1993. Mr. Gerson is also a
director and Chairman of the Audit
Committee of Ag Services of America,
Inc. and American Power Conversion Corp.
Mr. Gerson also serves on the Evercel,
Inc. Board of Directors.
John A. Rolls 58 John A. Rolls has been President, Chief 2000
Executive Officer of Thermion Systems
International since February 1996. From
1992 to 1996, Mr. Rolls was President
and Chief Executive Officer of Deutsche
Bank North America. From 1986 to 1992,
Mr. Rolls was Executive Vice President
and Chief Financial Officer of United
Technologies Corp. Mr. Rolls is a
director in VivaScan Corporation and is
a director and Chairman of the Finance
Committee of both Bowater Incorporated
and MBIA Corporation.
7
<PAGE>
Jerry D. Leitman has been nominated as a director pursuant to his
employment agreement. See "Employment Agreement." Michael Bode has been
nominated as a director at the request of MTU-Friedrichshafen GmbH ("MTU").
Certain shareholders of the Company have agreed to vote their shares in favor of
a nominee of MTU for so long as MTU owns at least 10% of the Common Stock of the
Company. See "Certain Transactions".
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held seven meetings during the fiscal year ended
October 31, 1999. All incumbent directors attended at least 75% of the meetings
of the Board of Directors and Board committees of which they were members during
the period they served as directors. The Company does not have a standing
nominating committee.
Executive Committee
The Board of Directors has an Executive Committee comprised of Richard M.
H. Thompson (Chairman, until February 16, 2000), Warren Bagatelle, William
Lawson, Jerry Leitman and Bernard Baker, which held two meetings during fiscal
1999. The Executive Committee has and exercises the powers of the Board in
monitoring the management of the business of the Company between meetings of the
Board of Directors.
Audit Committee
The Company has an Audit Committee consisting of Messrs. Bagatelle
(Chairman), Thompson (until February 16, 2000), and Lawson. The Audit Committee
had two meetings in fiscal 1999 and has responsibility for consulting with the
Company's officers regarding the appointment of independent public accountants
as auditors, discussing the scope of the auditors' examination and reviewing
annual financial statements.
Compensation Committee
The Company has a Compensation Committee consisting of Messrs. Lawson
(Chairman), Gerson and Thompson (until February 16, 2000). The Compensation
Committee had three meetings in fiscal 1999. The functions of the Compensation
Committee are to review, approve and recommend to the Board of Directors the
terms and conditions of incentive bonus plans applicable to corporate officers
and key management personnel, to review and approve the annual salary of the
chief executive officer, and to administer the FuelCell Energy, Inc. Section 423
Stock Purchase Plan, the FuelCell Energy, Inc. 1988 Stock Option Plan, as
amended (the "1988 Plan"), and the FuelCell Energy, Inc. 1998 Equity Incentive
Plan (the "1998 Plan").
DIRECTOR COMPENSATION
Each Board member not employed by the Company receives $10,000 per annum
and was granted 4,000 nonqualified stock options on February 16, 2000. The stock
options were granted pursuant to the Company's 1998 Stock Option Plan. The
options are exercisable at $54.625 per share, commencing one year after grant,
vest at the rate of 25% of the shares per year and have restrictions as to
transferability. An additional $4,000 per annum will be paid to the Chairman and
$2,000 per annum will be paid to each member of the Executive, Compensation and
Audit Committees.
In recognition of his service, the Chairman of the Board received an
additional 10,000 nonqualified stock options pursuant to the Company's 1998
Stock Option Plan. The options are fully exercisable at $54.625 beginning
February 2001, and have restrictions as to transferability.
8
<PAGE>
Prior to February 16, 2000, the Company paid a director's fee of $1,500 per
month to Bernard Baker in connection with his duties as Chairman of the Board
and his activities on the Executive Committee. The Company also paid a director
fee of $1,250 per month to Warren Bagatelle in connection with his duties as
Chairman of the Audit Committee. The Company also paid a director fee of $1,250
per month to Thomas Kempner. The Company also paid a director's fee of $1,500
per month to William Lawson in connection with his duties as Chairman of the
Compensation Committee and his activities on the Audit and Executive Committees.
Mr. Gerson was paid $1,000 each month in connection with his duties as a
director of the Company. Mr. Thompson was paid $2,000 each month in connection
with his duties as Chairman of the Executive Committee, and his activities on
the Audit and Compensation Committees. The Company reimburses certain directors
for reasonable expenses incurred in connection with the performance of their
duties as directors. Mr. Thompson resigned as director on February 16, 2000.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 16, 2000 by each person
or group that is known by the Company to be the beneficial owner of more than 5%
of its outstanding Common Stock, each director of the Company, each of the
executive officers named under the heading "Executive Compensation" below and
all directors and executive officers of the Company as a group (11 persons).
This information is based upon information received from or on behalf of the
named individuals.
AMOUNT AND NATURE
OF BENEFICIAL
NAME OWNERSHIP (1) PERCENT OF CLASS
- --------------------------------------------------------------------------------
Warren D. Bagatelle 658,100 (2) 10.32
c/o Loeb Partners Corp.
61 Broadway
New York, NY 10006
Thomas L. Kempner 468,200 (2) 7.34
c/o Loeb Partners Corp.
61 Broadway
New York, NY 10006
Loeb Investors Co., LXXV 468,200 (2) 7.34
61 Broadway
New York, NY 10006
Daimler Benz affiliate 686,637 10.76
MTU-Friedrichshafen
GmbH ("MTU")
Neue Technologien, Gebaude 6.1
Zimmer 102A D-85521 Ottobrunn
Germany
James D. Gerson 315,500 (3) 4.95
c/o Fahnestock and Co.
780 3rd Avenue
New York, NY 10017
Jerry D. Leitman 225,450 (4) 3.53
Bernard S. Baker 2,750 (5) *
William A. Lawson 25,000 *
Christopher R. Bentley 81,570 (6) 1.28
Hansraj C. Maru 57,499 (7) *
Joseph G. Mahler 18,750 (8) *
Michael Bode -- (9) *
10
<PAGE>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OWNERSHIP (1) PERCENT OF CLASS
- --------------------------------------------------------------------------------
John A. Rolls -- *
All Directors and Executive 1,384,619 (10) 21.71
Officers as a Group
(11 persons)
- --------------------------------------------------------------------------------
* Less than one percent.
(1) Unless otherwise noted, each person identified possesses sole voting and
investment power with respect to the shares listed.
(2) Warren Bagatelle and Thomas L. Kempner, by virtue of being general partners
of Loeb Investors Co. LXXV, may each be deemed to beneficially own the
shares of Loeb Investors Co. LXXV. Each of Mr. Kempner and Mr. Bagatelle is
a member of a group, as that term is used in Section 13(d) of the Exchange
Act, which group, in the aggregate, owns 658,100 shares of Common Stock.
(3) Mr. Gerson's shareholdings include 54,600 shares held by his wife, Barbara
Gerson, as Custodian for two children and also includes 23,700 shares held
by a private foundation, of which Mr. Gerson is President and a Director.
Mr. Gerson disclaims beneficial ownership of the securities held by his
wife and by the private foundation.
(4) Mr. Leitman's shareholdings include currently exercisable options to
purchase 225,000 shares of Common Stock.
(5) Includes 2,750 shares owned jointly by Dr. Baker and his wife, Cornelia
Baker.
(6) Mr. Bentley's shareholdings include exercisable options to purchase 18,225
shares of Common Stock, which include options that will vest within 60
days.
(7) Dr. Maru's shareholdings include currently exercisable options to purchase
36,099 shares of Common Stock, which include options that will vest within
60 days.
(8) Mr. Mahler's shareholdings include currently exercisable options to
purchase 18,750 shares of Common Stock.
(9) Michael Bode is an executive officer of MTU.
(10) Includes currently exercisable options to purchase 298,074 shares of Common
Stock, which are currently exercisable or are exercisable within 60 days of
February 16, 2000.
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EXECUTIVE COMPENSATION
The following two tables set forth certain information with respect to (i)
option grants to the named executive officers of the Company during the fiscal
year ended October 31, 1999, and (ii) the aggregated number and value of options
exercisable and unexercisable by the named executive officers as of October 31,
1999.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
---------------------- ------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL SALARY BONUS OPTIONS COMPENSATION(3)
POSITION YEAR ($) ($) # ($)
- --------------------------------------------------------------------------------
Jerry D. Leitman (1) 1999 330,361 80,000 -0- 17,303
President, Chief Executive 1998 320,008 -0- -0- 6,217
Officer 1997 73,848 -0- 375,000 -0-
Hansraj C. Maru 1999 178,222 38,000 30,000 16,521
Executive Vice President 1998 171,885 27,000 -0- 16,105
1997 163,220 27,000 -0- 14,400
Christopher R. Bentley 1999 215,020 45,000 30,000 16,524
Executive Vice 1998 205,536 32,000 -0- 17,190
President 1997 195,514 32,000 -0- 14,400
Joseph G. Mahler (2) 1999 185,016 -0- -0- 660
Senior Vice President 1998 14,232 -0- 75,000 -0-
Chief Financial Officer
Corporate Secretary and
Treasurer
(1) Mr. Leitman joined the Company as President and Chief Executive Officer on
August 4, 1997.
(2) Mr. Mahler joined the Company as Senior Vice President, Chief Financial
Officer, Corporate Secretary and Treasurer on October 5, 1998.
(3) Represents employer contributions to the Defined Contribution Pension Plan,
employer contributions to the Section 401(k) Plan, and life insurance
premiums.
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OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
NUMBER OF PERCENT OF THE ASSUMED ANNUAL
SECURITIES TOTAL OPTIONS/SARs RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE OR APPRECIATION FOR
OPTIONS/SARs EMPLOYEES IN BASE PRICE EXPIRATION OPTION TERM (2)
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Christopher Bentley 30,000 25% $6.50 3/30/09 122,600 310,800
Hansraj C. Maru 30,000 25% $6.50 3/30/09 122,600 310,800
</TABLE>
(1) The options were granted under the Company's 1998 Equity Incentive
Plan. These options become exercisable in four equal annual installments on each
anniversary date of the date of grant. Options that have been issued may not be
exercised beyond the earlier of (a) ten years from the date of grant, or (b)
three months after the holder ceases to be employed by the Company, except in
the event of termination by reason of death or permanent disability, in which
event the option may be exercised for up to one year following termination.
(2) The assumed rates are compounded annually for the full term of the
options.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-
SHARES OPTIONS AT THE-MONEY
ACQUIRED 10/31/99 OPTIONS AT 10/31/99
ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
NAME (#) ($) (#) ($)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jerry D. Leitman -0- -0- 225,000 (2) 2,362,500 (2)
150,000 (3) 1,575,000 (3)
Hansraj C. Maru -0- -0- 25,918 (2) 289,906 (2)
32,681 (3) 344,800 (3)
Christopher R. Bentley 14,004 186,253 53,886 (2) 749,669 (2)
32,681 (3) 344,800 (3)
Joseph G. Mahler -0- -0- 18,750 (2) 183,938 (2)
56,250 (3) 551,813 (3)
</TABLE>
(1) Based upon the closing price of $17.08 on October 31, 1999 of the Company's
Common Stock on The American Stock Exchange minus the respective option
exercise price.
(2) Exercisable.
(3) Unexercisable.
EMPLOYMENT AGREEMENT
In August 1997, the Company entered into an employment agreement with Mr.
Leitman upon hiring him as its President and Chief Executive Officer. Under the
agreement, which is terminable by either party upon 30 days notice, Mr. Leitman
is entitled to a minimum annual salary of $320,000 and a bonus based upon an
incentive compensation plan to be developed by Mr. Leitman with the Compensation
Committee. In addition, upon entering into the agreement, the Company granted
Mr. Leitman options to purchase 375,000 shares of Common Stock. The agreement
also provides Mr. Leitman with the opportunity to participate in insurance plans
and other employment benefits as may be generally available to other employees
of the Company. In certain circumstances, if Mr. Leitman's employment is
terminated during the first five years of his employment, including a
termination by Mr. Leitman upon a change of control, Mr. Leitman will be
entitled to a severance benefit equal to (i) two times his then base salary,
plus (ii) an amount equal to Mr. Leitman's bonus from the Company for the
immediately preceding year. The agreement also contains non-disclosure
provisions and prohibits Mr. Leitman from competing with the Company during the
term of his employment and for a period of two years thereafter. Under the
Agreement, the Company has agreed to use its best efforts to cause Mr. Leitman
to be elected to the Board
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of Directors and to appoint Mr. Leitman as a member of the Executive Committee
of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions regarding certain executive compensation are made by the
Compensation Committee, which is composed of William A. Lawson, James Gerson,
and Richard M.H. Thompson (until February 16, 2000). Decisions with respect to
the salary and bonus of the Chief Executive Officer are made by the Compensation
Committee. The Chief Executive Officer is responsible for the salary
administration of the remaining executive officers. The Company has an informal
incentive compensation plan. The Compensation Committee is responsible for
approval of the incentive awards with significant reliance on the
recommendations of the Chief Executive Officer.
Stock option awards under the 1988 Plan and the 1998 Plan are approved by
either the Compensation Committee or the Board of Directors with reliance upon
the recommendations of the Compensation Committee. No member of the Compensation
Committee was an officer or employee of the Company during the fiscal year ended
October 31, 1999.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's primary objectives in developing executive compensation
policies are to attract, motivate and retain superior talent to enable the
Company to achieve its business objectives and to align the financial interests
of the executive officers with the shareholders of the Company.
The compensation of executive officers consists of base compensation,
bonus, periodic grants of options and participation in benefit plans generally
available to employees. In setting compensation, the Compensation Committee and
the Chief Executive Officer strive to maintain base compensation for the
Company's executive officers at levels which the Compensation Committee and the
Chief Executive Officer, based on their experience, believe are competitive with
the compensation of comparable executive officers in similarly situated
companies while relying upon stock options and the informal bonus plan to
provide significant performance incentives.
Executive officers are eligible to participate in an informal bonus plan.
Awards under the informal bonus plan are determined by the Compensation
Committee. The Compensation Committee relies significantly upon the
recommendation of the Chief Executive Officer with respect to the bonus to be
awarded to the other executive officers. The executive officers, as well as
other key employees, may receive discretionary bonuses based upon a subjective
evaluation of the performance of the Company and their contributions to the
Company.
Each of the executive officers and certain key employees are eligible to
receive awards under the 1998 Plan. The 1998 Plan will be used to align a
portion of the officers' compensation with the shareholders' interest and the
long-term success of the Company. In determining the number of options to be
granted to each executive officer, the Compensation Committee reviews the
recommendations provided by the Chief Executive Officer with respect to the
executive officers other than the Chief Executive Officer and makes a subjective
determination regarding those recommendations.
The compensation paid by the Company to its chief executive officer for
fiscal 1999 was based upon an employment agreement negotiated with Mr. Leitman.
The Compensation Committee has not conducted any surveys of compensation
packages of chief executive officers in comparable companies, but believes,
based upon the individual experience of its members, that the compensation
package for
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Mr. Leitman for fiscal 1999 was reasonable based upon Mr. Leitman's experience,
his level of responsibility and the contributions made and expected to be made
by him to the Company. See "Employment Agreement" for a description of Mr.
Leitman's employment agreement.
Compensation Committee
- --------------------------------------------------------------------------------
William Lawson
James Gerson
Richard Thompson (until February 16, 2000)
16
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PERFORMANCE GRAPH
The following graph compares the annual change in FuelCell Energy's
cumulative total shareholder return on the Company's Common Stock for the five
fiscal years ended October 31 1999 with the cumulative total return on the
Russell 2000 and a peer group consisting of SIC Group Code 369 companies listed
on The American Stock Exchange, Nasdaq Stock Market and New York Stock Exchange
for that period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
COMPANY/INDEX/MARKET 10/31/94 10/31/95 10/31/96 10/31/97 10/30/98 10/30/99
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<S> <C> <C> <C> <C> <C> <C>
FuelCell Energy, Inc. 100.00 113.75 121.25 160.00 132.50 384.18
Misc Electric Equip, Supplies 100.00 116.17 123.99 220.08 156.50 213.34
Russell 2000 Index 100.00 118.33 138.11 178.59 157.44 178.37
</TABLE>
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Securities Exchange Act of 1934 requires the Company's executive
officers and directors, and any persons owning more than 10% of a class of the
Company's stock to file certain reports of ownership and changes in ownership
with the Securities and Exchange Commission (the "SEC"). All filings for fiscal
1999 were made on a timely basis.
The above information is to the Company's knowledge, based solely on a
review of copies of reports furnished to the Company and representations of
certain officers, directors and shareholders owning more than 10% of the
Company's Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1999, the Company sold to Daimler Benz affiliate
MTU-Friedrichshafen GmbH ("MTU") fuel cell components for approximately
$2,579,000.
In November, 1989 the Company entered into a license agreement with MTU,
which license was originally with Messerschmitt-Bolkow-Blohm GmbH, that granted
to MTU an exclusive license, with certain exceptions, to develop the Company's
carbonate fuel cell technology in Europe, and a non-exclusive license for the
Middle East, Africa and South America. Pursuant to the MTU Agreement, the
Company receives annual license fees and has the right to receive royalties upon
commercial sales. Concurrent with the entering into of the MTU Agreement, MTU
purchased 360,000 shares of Common Stock of the Company at a purchase price of
$7.00 per share and made loans to the manufacturing subsidiary of the Company,
which were secured by the stock of that subsidiary, in the aggregate principal
amount of $1,980,000. During fiscal 1996, $877,000 of this loan was converted
into 97,397 shares of common stock of the Company. MTU extended the maturity of
$630,000 of the loan to November 30, 1997 with the right to convert principal
and accrued interest to common stock of the Company at $9 per share. During
December 1996 and December 1997, the Company paid to MTU $1,296,000 and
$673,000, respectively, of principal and interest in full repayment of the loans
from MTU. The Subscription Agreement between the Company and MTU also grants to
all shareholders of the Company preemptive rights on sales of the Common Stock
of the Company at a price less than $7.00 per share. As a condition to MTU
entering into its agreements with the Company, substantially all of the then
shareholders of the Company agreed to vote their shares in favor of one nominee
of MTU to the Board of Directors of the Company for so long as MTU owns at least
10% of the Common Stock of the Company.
17
<PAGE>
In July 1998, the Company entered into a Cross-Licensing and Cross-Selling
Agreement with MTU pursuant to which MTU and the Company have granted to each
other the right to manufacture and sell each other's stationary power fuel cell
products in their respective regions. Each company will pay the other royalties
based upon sales.
The 1989 MTU Agreement was replaced in December of 1999 with a revised MTU
Agreement. Pursuant to the terms of the new MTU Agreement, the Company has
granted to MTU an exclusive license to use the Company's DFC(TM) patent rights
and know how in Europe and the Middle East and a non-exclusive license in South
America and Africa subject to certain rights of the Company and others. MTU has
agreed to make any improvements to the Company's DFC(TM) available to the
Company. MTU plans to conduct further research, development, manufacturing and
marketing programs in the area of carbonate fuel cell technology and has agreed
to negotiate a license grant of the results to the Company. In addition, MTU has
agreed to pay a royalty based on kilowatts of electrical generating capacity
using the Company's DFC(TM) made or sold by MTU or its permitted licensees,
including a minimum annual royalty commencing in 2000.
Mr. Bode is affiliated with MTU, and MTU is a shareholder of the Company.
The Company believes that the terms of its transactions with MTU are no less
favorable to the Company than it could have obtained from an unaffiliated third
party.
The Company entered into an agreement with Loeb Partners Corporation
pursuant to which Loeb Partners Corporation served as the lead standby
underwriter for the rights offering conducted by Evercel, Inc., a former
subsidiary of the Company ("Evercel"). The Company effected a spin-off of
Evercel by means of a distribution to its stockholders of 100% of the shares of
Common Stock of Evercel. Mr. Bagatelle, a member of the Compensation Committee
of the Company, is a Managing Director of Loeb Partners Corporation.
The Company has also entered into a consulting agreement with Bernard Baker
for $5,000 per month. The consulting agreement lasts for two years, and Mr.
Baker is entitled to additional compensation if he consults for more than 48
days per year.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed KPMG LLP, certified public accountants
to audit the consolidated financial statements of the Company for the fiscal
year ending October 31, 2000.
A representative of KPMG LLP will be present at the Annual Meeting to make
a statement if such representative desires to do so and to respond to
appropriate questions.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Shareholders who may wish to present proposals for inclusion in the
Company's proxy materials and for consideration at the 2001 Annual Meeting of
Shareholders should submit the proposals in writing to the Secretary of the
Company in accordance with all applicable rules and regulations of the SEC no
later than October 31, 2000.
18
<PAGE>
ANNUAL REPORT AND FORM 10-K/A
ADDITIONAL COPIES OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL
YEAR ENDED OCTOBER 31, 1999 AND COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K/A FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999 AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION ARE AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON
WRITTEN REQUEST ADDRESSED TO: FUELCELL ENERGY, INC., 3 GREAT PASTURE ROAD,
DANBURY, CONNECTICUT 06813 ATTN: SHAREHOLDER RELATIONS.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors knows of no
matters which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. If any other matters
properly come before the meeting, it is intended that the persons named in the
proxy will act in respect thereof in accordance with their best judgment.
By Order of the Board of Directors
Joseph G. Mahler
Corporate Secretary
Danbury, CT
February 28, 2000
19
<PAGE>
PROXY BY MAIL
This Proxy, when properly executed, will be voted in the Please mark
manner directed herein by the undersigned shareholder. IF NO your votes [X]
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION like this
OF ALL NOMINEES LISTED BELOW.
1. Election of ten directors. FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the right
[_] [_]
01 Jerry D. Leitman, 02 Bernard S. Baker, 03 Hansraj C. Maru, 04 Christopher R.
Bentley, 05 Thomas L. Kempner, 06 Warren D. Bagatelle, 07 Michael Bode, 08 James
D. Gerson, 09 William A. Lawson, 10 John A. Rolls
(Instruction: To withhold authority to vote for any individual nominee or
nominees, write that nominee's name(s) in the space provided below.)
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2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
PLEASE MARK, SIGN, DATE AND RETURN
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
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IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW
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========================
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
========================
Signature_____________________ Signature_____________________ Date____________
Please sign exactly as name appears on this card. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
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FOLD AND DETACH HERE AND READ THE REVERSE SIDE
---------------------------------------------------------
VOTE BY TELEPHONE OR INTERNET
[GRAPHIC] [GRAPHIC]
QUICK +++ EASY +++ IMMEDIATE
---------------------------------------------------------
FUELCELL ENERGY, INC.
o You can now vote your shares electronically through the Internet or the
telephone.
o This eliminates the need to return the proxy card.
o Your electronic vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned the proxy
card.
TO VOTE YOUR PROXY BY INTERNET
www.continentalstock.com
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to create
an electronic ballot. Follow the prompts to vote your shares.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE
1-800-293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter the company number, proxy number
and account number. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED
ELECTRONICALLY
<PAGE>
FUELCELL ENERGY, INC.
3 GREAT PASTURE ROAD
DANBURY, CT 06813
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Jerry D. Leitman and Joseph G. Mahler as
Proxies, and each of them, each with power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side, all
of the shares of Common Stock of FuelCell Energy, Inc. (the "Company") held by
the undersigned of record on February 16, 2000, at the annual meeting of the
shareholders of the Company to held on March 22, 2000 and at any and all
adjournments thereof, and hereby revokes all former proxies:
(sign on reverse side)
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FOLD AND DETACH HERE
