<PAGE>
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 240.14a-11(c) or 240.14a-12
Clean Diesel Technologies, 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
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / 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.:
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3) Filing Party:
___________________________________________________________________________
4) Date Filed:
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CLEAN DIESEL TECHNOLOGIES, INC.
300 Atlantic Street, Suite 702
Stamford, CT 06901
---------------------
Notice of Annual Meeting of Stockholders
To be held June 11, 1997
---------------------
To the Stockholders of Clean Diesel Technologies, Inc.:
The Annual Meeting (the "Meeting") of Stockholders of Clean Diesel
Technologies, Inc., a Delaware corporation (the "Company"), will be held
Wednesday, June 11, 1997, at the Stamford Sheraton Hotel, First Stamford Place,
Stamford, Connecticut 06901, at 10:00 a.m. local time to consider and act upon
the following matters, each of which is explained more fully in the following
Proxy Statement. A proxy card for your use in voting on these matters is also
enclosed.
1. To elect six (6) directors;
2. To ratify the appointment of Ernst & Young LLP as independent auditors
for the year 1997;
3. To approve an amendment to the 1994 Incentive Plan of the Company (the
"Plan") to increase the percentage of outstanding shares of the Company
used to determine the maximum number of shares available for the granting
of awards to participants under the Plan from 121/2% to 171/2%; and
4. To transact any other business that may properly come before the meeting
or any adjournment thereof.
Only common stockholders of record at the close of business on April 14,
1997 are entitled to notice of and to vote at the Meeting. The presence in
person or by proxy of stockholders entitled to cast a majority of the total
number of votes which may be cast shall constitute a quorum for the transaction
of business at the Meeting.
Whether or not you plan to attend the Meeting in person, it is requested
that you promptly fill out, date, sign and return the enclosed proxy card.
The Company's Annual Report for 1996 is enclosed with this Notice of
Meeting and Proxy Statement.
By Order of the Board of Directors
Charles W. Grinnell
Secretary
Stamford, Connecticut
April 21, 1997
IF YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING, PLEASE SIGN THE ACCOMPANYING
FORM OF PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
---------------------
Proxy Statement
---------------------
The enclosed proxy is solicited by the Board of Directors (the "Board") of
Clean Diesel Technologies, Inc., a Delaware corporation (the "Company"), in
connection with the Annual Meeting of Stockholders of the Company (the
"Meeting") to be held at the Stamford Sheraton Hotel, First Stamford Place,
Stamford, Connecticut 06901, on Wednesday, June 11, 1997, at 10:00 a.m. local
time and at any adjournments thereof.
The record date with respect to this solicitation is April 14, 1997. All
holders of Company common stock as of the close of business on that date are
entitled to vote at the meeting. As of that date the Company had 2,516,666
shares of common stock outstanding. Each share is entitled to one vote. A proxy
may be revoked by the stockholder at any time prior to its being voted. If a
proxy is properly signed and not revoked by the stockholder, the shares it
represents will be voted at the meeting in accordance with the instructions of
the stockholder. Abstentions and broker non-votes are counted as present in
determining whether a quorum is present, but are not counted in the calculation
of the vote. If the proxy is signed and returned without specifying choices, the
shares will be voted in accordance with the recommendations of the Board.
Members of the Board and Executive Officers of the Company may solicit
stockholders' proxies by mail, telephone or facsimile. The Company shall bear
the cost of proxy solicitation.
The Company's Annual Report to Stockholders, containing financial
statements reflecting the financial position and results of operations of the
Company for 1996, and this Proxy Statement were distributed together commencing
in the week of April 21, 1997.
ELECTION OF DIRECTORS
The Board proposes the election of six directors. The term of office of
each director is until the 1998 Annual Meeting or until a successor shall have
been duly elected. Ralph E. Bailey, John A. de Havilland, Kent D.S. Durr, Jeremy
D. Peter-Hoblyn, Charles W. Grinnell and James M. Valentine, who are each
incumbent directors, are the nominees for election as directors of the Company.
Each of the nominees has consented to act as a director, if elected. Should one
or more of these nominees become unavailable to accept nomination or election as
a director, votes will be cast for a substitute nominee, if any, designated by
the Board. If no substitute nominee is designated prior to the election, the
individuals named as proxies on the enclosed proxy card will exercise their
judgment in voting the shares that they represent, unless the Board reduces the
number of directors.
The affirmative vote of a plurality of the shares voting is required for
the election of directors. The Company recommends a vote FOR each of the
nominees.
The following table sets forth certain information with respect to each
person nominated and recommended to be elected to the Board of Directors of the
Company.
Name Age Director Since
- ------------------------------ ------ ----------------
Ralph E. Bailey ............ 73 1996
John A. de Havilland ...... 59 1994
Kent D.S. Durr ............... 56 1995
Charles W. Grinnell ......... 60 1994
Jeremy D. Peter-Hoblyn ...... 57 1994
James M. Valentine ......... 43 1994
Directors and Executive Officers of the Company
Ralph E. Bailey has been Chairman of the Board and a director of the
Company since July 1996. He has been a director and Chairman of American Bailey
Corporation, a privately owned investment company, since 1983. Mr. Bailey is the
former Chairman and Chief Executive Officer of Conoco, Inc. and a former Vice
Chairman of E.I. du Pont de Nemours & Co. Mr. Bailey is also a director of
General Signal Corporation and Rowan Companies, Inc.
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Eric N. Balles, 38, has been Vice President -- Technology of the Company
since September 1996. Mr. Balles had previously been with Arthur D. Little since
1987 where he was Senior Consultant on combustion technology and emission
controls.
John A. de Havilland has been a director of the Company since its inception
and is Deputy Chairman of the Board of Fuel Tech N.V. ("Fuel Tech") and has been
a Director of that company since 1984. Mr. de Havilland was a Director of J.
Henry Schroder Wagg & Co. Ltd. from 1971 until his retirement in 1990.
Kent D.S. Durr has been a director since February 1995 and acted as
Chairman from February 1995 until July 1996. Mr. Durr has been a director and
Chairman of the Board of Fuel Tech since June 1995 and Chief Executive Officer
of Fuel Tech since February 1996. Mr. Durr served as High Commissioner to the
Court of St. James, United Kingdom, from June 1994 until January 1995 and was
the Ambassador from the Republic of South Africa to the United Kingdom from
April 1991 until May 1994.
Charles W. Grinnell has been Vice President, General Counsel and Corporate
Secretary of the Company since its inception and has held the same positions
with Fuel Tech since 1987. Mr. Grinnell has been a partner in the Stamford,
Connecticut law firm of Huth, Grinnell & Flaherty, LLC since 1992.
Jeremy D. Peter-Hoblyn has been the President and Chief Executive Officer
of the Company since its inception. He also has been a Director of Fuel Tech
since 1984 and Chief Executive Officer of that company from 1993 to February
1996.
Scott M. Schecter, 40, has served as Vice President, Chief Financial
Officer and Treasurer of the Company and of Fuel Tech since January 1994. From
June 1990 through January 1994, Mr. Schecter was Senior Vice President and Chief
Financial Officer of American Vision Centers, Inc. From May 1986 through June
1990 Mr. Schecter served as a corporate development officer of W.R. Grace and
Company.
James M. Valentine has been Executive Vice President and Chief Operating
Officer of the Company since its inception. From the period 1990-1993, Mr.
Valentine was the head of his own energy and environmental consulting firm. Mr.
Valentine was elected a Director and Executive Vice President of Fuel Tech in
1993.
There are no committees of the Board of Directors. During the year ended
December 31, 1996 there were seven meetings of the Board of Directors of the
Company. Each director of the Company attended at least 75% of such meetings
during the period of his directorship. There are no family relationships between
any of the directors or executive officers.
Under the Certificate of Incorporation of the Company indemnification is
afforded the Company's directors and executive officers to the fullest extent
permitted by the provisions of the General Corporation Law of the State of
Delaware. Such indemnification also includes payment of any costs which an
indemnitee incurs because of claims against the indemnitee. The Company is,
however, not obligated to provide indemnity and costs where it is adjudicated
that the indemnitee did not act in good faith in the reasonable belief that the
indemnitee's actions were in the best interest of the Company, or, in the case
of a settlement of a claim such determination is made by the Board of Directors
of the Company.
The Company carries insurance providing indemnification, under certain
circumstances, to all of its directors and officers for claims against them by
reason of, among other things, any act or failure to act in their capacities as
directors or officers. The annual premium for this policy is $99,200. No sums
have been paid for such indemnification to any past or present director or
officer by the Company or under any insurance policy.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP,
Certified Public Accountants ("Ernst & Young"), to be the Company's auditors for
the year 1997 and submits that appointment to stockholders for approval. Ernst &
Young served in that capacity for the year 1996 and is knowledgable about the
Company's operations and accounting practices and is well-qualified to act in
the capacity of independent accountants. A representative of Ernst & Young will
be present at the Meeting and will have an opportunity to make a statement and
be available to respond to appropriate questions.
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The appointment of auditors is approved annually by the Board and
subsequently submitted to the stockholders for ratification. In making the
appointment, the Board reviews Ernst & Young's performance in prior years along
with its reputation for integrity and overall competence in accounting and
auditing. The scope, timing, and fees applicable to the audit of the Company's
consolidated financial statements, as well as non-audit services, are also
reviewed and approved annually by the Board.
If the proposal is not approved, it is contemplated that the appointment
for 1997 will be permitted to stand, unless the Board finds other compelling
reasons for making a change. In view of the difficulty and expense involved in
changing independent accountants on short notice, disapproval of the proposal
will be considered as advice to the Board to select other independent
accountants for the following year.
The affirmative vote of a majority of the shares voting is required for the
approval of this proposal. The Company recommends a vote FOR the proposal.
APPROVAL OF AMENDMENT TO THE 1994 INCENTIVE PLAN
The Plan
In 1994 the Board of Directors adopted and Fuel Tech, the then sole
stockholder of the Company, approved the Company's 1994 Incentive Plan (the
"Plan"). The Plan is intended to provide a flexible structure within which the
Company may utilize various compensation devices to recruit and retain the
services of such key persons as may be required to manage and carry out the
Company's business.
Awards under the Plan may be granted in the form of non-qualified stock
options, stock appreciation rights, restricted stock, performance awards,
bonuses or any other form of share-based or non-share-based award or any
combination of these awards. To date only non-qualified options have been
granted under the Plan, a copy of which, as amemded through August 8, 1996, is
attached as Exhibit A to this Proxy Statement.
Administration; Participation
Under the Plan, the Board of Directors or a Committee thereof appointed by
the Board ("the Administrator") may grant incentive awards to employees,
officers, directors, and consultants of the Company. The Plan is currently being
administered by the Board. The directors, therefore, participate in decisions
regarding their own awards. At the date of this Proxy Statement eighteen persons
are eligible to participate in the Plan.
Available Shares; Limitations
The administrator of the Plan is authorized to grant awards in its
discretion, provided that shares that are the subject of awards shall not in the
aggregate exceed 121/2% of the Company's shares from time to time issued and
outstanding, currently 2,516,666 shares. Shares subject to awards may
appropriately be adjusted as the result of stock splits, recapitalizations and
the like.
Including 85,000 shares granted under awards subject to stockholder
approval of this proposed amendment of the Plan, all available shares have been
granted as awards and no shares are reserved for awards to be granted to
participants under the Plan.
No award may be outstanding for more than ten years. Share-based awards at
the time of grant shall have an exercise price of or be valued at not less than
100% of the fair market value of the shares on the date of the award, as
determined by the Administrator. Awards under the Plan are, unless waived by the
Administrator, subject to certain restrictions on transferability. Awards are
also forfeitable in certain circumstances and are exercisable at such time or
times and during such period as shall be set forth in the agreement evidencing
the award.
Tax Matters
The following summary describes the U.S. Federal income tax consequences of
the Plan.
Stock Options. No income will be recognized by the holder and the Company
will not be entitled to a deduction at the time of grant of a non-qualified
stock option. On exercise of a non-qualified stock option the
3
<PAGE>
amount by which the fair market value of the stock on the date of exercise
exceeds the option price will be taxable to the holder as ordinary income and,
subject to satisfying applicable withholding requirements, and any Internal
Revenue Code Section 162(m) deduction limitation for compensation in excess of
$1 million per person, deductible by the Company. The subsequent disposition of
shares acquired upon exercise of a non-qualified stock option will ordinarily
result in a capital gain or loss.
Stock Appreciation Rights. The amount of any cash or the fair market value
of any stock received upon the exercise of a stock appreciation right under the
Plan will be includible in the employee's ordinary income and, subject to
satisfying applicable withholding requirements and any Section 162(m) deduction
limitation, deductible by the Company.
Other Awards. Under Internal Revenue Code Section 83(b), an employee may
elect to include in ordinary income, as compensation at the time restricted
stock is first issued, the excess of the fair market value of such shares at the
time of issuance over the amount paid, if any, by the employee for such shares.
Unless a Section 83(b) election is made, no taxable income will generally be
recognized by the recipient of a restricted stock award until such shares are no
longer subject to the restrictions or the risk of forfeiture. When either the
restrictions or the risk of forfeiture lapses, the employee will recognize
ordinary income and, subject to satisfying applicable withholding requirements
and any Section 162(m) deduction limitation, the Company will be entitled to a
deduction in the amount equal to the excess of the fair market value of the
stock on the date of lapse over the amount paid, if any, by the employee for
such shares. Absent a Section 83(b) election any cash dividends or other
distributions paid with respect to the restricted stock prior to the lapse of
the restrictions or risk of forfeiture will be included in the employee's
ordinary income as compensation at the time of receipt.
Performance Shares or Units. Generally, an employee will not recognize any
taxable income and the Company will not be entitled to a deduction upon the
award of performance shares or units. When the employee receives a distribution
in respect of the performance shares or units, the fair market value of stock or
cash received in payment for such awards generally is taxable to the employee as
ordinary income and, subject to any Section 162(m) limitation, deductible by the
Company.
Proposed Amendment of the Plan
The Company is an entreprenurial company in the development stage with
limited revenues and products in the process of commercialization. Having to
date made significant progress in securing supply agreements, identifying joint
venture possibilities, establishing patents, and recruiting an executive team
with technology, materials and marketing skills, the Company now requires tools
that will motivate, provide incentives to and retain its executives and key
employees. To successfully attract and retain superior talent with such skills
while minimizing expense, the Company wishes to continue its policy of utilizing
significant non-qualified stock options and other equity-based awards, where
needed, to keep salary and cash bonuses to a minimum.
The Plan, however, has now available to it no shares for the grant of
awards under its current limitation of 121/2% of the shares from time to time
issued and outstanding as approved at the 1996 Annual Meeting. The Company is
advised that such limitation is conservative compared with peer companies.
Competitive practices indicate that stock ownership and shares reserved for
future awards range from 10% to 30% of total shares outstanding for key managers
and senior scientists. The most common measures of central tendency for shares
reserved for stock option awards are in the range of 15% to 20% of shares
outstanding and, typically, the top highest paid executives are granted half the
total shares reserved, i.e. 7.5% to 10%. See the tables below under the captions
"Principal Stockholders and Stock Ownership of Management," "Option Grants in
the Last Fiscal Year," and "Aggregated Option Exercises in the Last Fiscal Year
and FY-End Option Values."
A resolution will be presented at the Meeting for the amendment of the Plan
to increase the limitation in the Plan from 121/2% to 171/2% of shares of the
Company from time to time issued and outstanding. Based on the current
outstanding 2,516,666 shares of the Company, this amendment, if approved, will,
until there shall be further outstanding shares, establish 440,416 shares as the
new limit of shares available for awards under the Plan, including awards
previously granted but unexercised. Accordingly, less the outstanding,
unexercised awards of 380,284 (including 85,000 shares granted under awards
subject to stockholder approval of this proposed amendment of the Plan), the
amendment will make available 60,132 shares for future awards. Since awards are
in the discretion of the Administrator, the benefits in the future to
participants are not determinable.
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The affirmative vote of a majority of the shares voting is required for the
approval of this proposal. The Company recommends a vote FOR this proposal.
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Stock as of March 17, 1997 by (i) each person known to the
Company to own beneficially more than five percent of the outstanding Common
Stock; (ii) each director of the Company; (iii) executive officers of the
Company who earned total compensation in excess of $100,000 during fiscal year
1996 (the "Named Executive Officers"); and (iv) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner (1) No. of Shares Percentage
- ------------------------------------------------------------------ ---------------- ------------
<S> <C> <C>
Fuel-Tech N.V. ................................................... 689,147 27.4
Ralph E. Bailey (2) ............................................. 15,000 *
John A. de Havilland(2) ....................................... 7,500 *
Kent D.S. Durr(2) ............................................. 32,500 1.3
Charles W. Grinnell (2) .......................................... 17,758 *
Jeremy D. Peter-Hoblyn(2) ....................................... 82,753 3.3
James M. Valentine(2) .......................................... 69,272 2.8
All directors and officers as a group (eight persons)(2): ...... 257,413 10.2
</TABLE>
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* Less than one percent (1.0%)
(1) The address of Fuel-Tech N.V. is Castorweg 22-24, Curacao, Netherlands
Antilles and the address of each other beneficial owner is c/o Clean Diesel
Technologies, Inc., Suite 702, 300 Atlantic Street, Stamford, Connecticut
06901.
(2) Includes shares subject to options exercisable presently and within 60 days
for Mr. de Havilland, 7,500 shares; Mr. Durr, 32,500 shares; Mr. Grinnell,
9,916 shares; Mr. Peter-Hoblyn, 53,867 shares; Mr. Valentine, 63,333 shares;
and for all directors and officers as a group, 198,616 shares.
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EXECUTIVE COMPENSATION
The table below sets forth information concerning compensation for services
in all capacities awarded to, earned by or paid to Mr. Jeremy D. Peter-Hoblyn,
the Company's President and Chief Executive Officer, and Mr. James M. Valentine,
the Company's Executive Vice President and Chief Operating Officer, during the
fiscal years ending December 31, 1996, 1995 and 1994, who were the Named
Executive Officers earning total compensation in excess of $100,000 during
fiscal year 1996. Prior to August 1, 1996 for Mr. Valentine and December 1, 1996
for Mr. Peter-Hoblyn, the amounts of annual compensation shown below were paid
by Fuel Tech and allocated to the Company and reimbursed by the Company to Fuel
Tech.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
------------------------ ------------
Shares
Underlying
Options
Granted
Name and Principal Position Year Salary Other(1) (#)
- ----------------------------- ------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Jeremy Peter-Hoblyn ...... 1996 229,667 64,996 --
President and Chief 1995 162,500 35,500 17,200
Executive Officer 1994 118,750 30,725 50,000
James M. Valentine ......... 1996 209,833 26,727 --
Executive Vice President 1995 165,000 24,923 10,000
and Chief Operating Officer 1994 150,000 15,654 50,000
</TABLE>
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(1) The amounts designated "Other" in 1996, 1995 and 1994 include, respectively,
for Mr. Peter-Hoblyn, pension contributions to a purchased annuity of
$45,833, $32,500 and $25,000; and for Mr. Valentine, 401(k) plan
contributions of $8,793, $7,313 and $6,525 and medical insurance premiums of
$11,671, $9,441 and $3,600.
Directors' Compensation
The Company provides an annual retainer of $15,000 and a meeting fee of
$2,000 per Board meeting and $1,000 per diem for services not involving board
meetings plus associated expenses for directors who are not employees of the
Company, except Mr. Bailey who is paid an annual retainer of $15,000 and is
reimbursed for his expenses of attending meetings and for his office expenses as
Chairman of the Company. Where a non-employee director is employed or otherwise
compensated by an affiliated Company, such as Fuel Tech, the retainer and
meeting fees are paid to the affiliated company, unless waived. Fuel Tech was
paid those retainers and fees for 1996. Directors who are employees of the
Company receive no compensation for their service as directors.
Compensation Committee Interlocks and Insider Participation
The Board of Directors of the Company does not have a Compensation
Committee. Accordingly the directors and executive officers of the Company
participated in deliberations and decisions concerning their compensation.
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OPTION GRANTS IN THE LAST FISCAL YEAR
There were no grants of stock options or stock appreciation rights in the
last fiscal year to the Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Number of
Securities Securities Value of Value of
Underlying Underlying Unexercised Unexercised
Unexercised Unexercised in-the-Money in-the-Money
Shares Options at Options at Options at Options at
Acquired Fiscal Year Fiscal Fiscal Fiscal
on Value End/ Year-End/ Year-End/ Year-End/
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------- ----------- ----------- -------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jeremy D. Peter-Hoblyn ...... 0 0 58,866 8,334 $45,624 $18,126
James M. Valentine ......... 0 0 51,666 8,334 $45,624 $18,126
</TABLE>
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OPTIONS GRANTED TO DATE UNDER THE PLAN
The following table sets forth information concerning stock options granted
from the inception of the Plan to date to those persons who are now (i) the
Named Executive Officers, (ii) all executive officers as a group, (iii) each
nominee for director, (iv) all non-executive employees as a group and (v) all
employees, including executive officers, as a group. On April 14, 1997 the
closing price of the Company's Common Stock was $315/16 per share. All stock
options become exercisable upon a change of control as defined in the Plan.
<TABLE>
<CAPTION>
Number of Exercise Expiration
Shares Prices Dates/Vesting
------------ --------------- ------------------
<S> <C> <C> <C>
Ralph E. Bailey ........................... 25,000 $4.50 2006(1)
5,000 $4.625 2007(3)
John A. de Havilland ..................... 7,500 $6.82 2005(2)
5,000 $4.625 2007(3)
Kent D.S. Durr ........................... 25,000 $2.50 2002(2)
7,500 $6.82 2005(2)
5,000 $4.625 2007(3)
Charles W. Grinnell ........................ 6,250 $2.50 2002(1)
5,750 $6.82 2005(2)
10,000 $4.625 2007(3)
Jeremy D. Peter-Hoblyn ..................... 25,000 $0.20 2001(4)
25,000 $2.00 2001(2)
17,200 $6.82 2005(2)
10,000 $4.625 2007(5)
25,000 $4.625 2007(3)
James M. Valentine ........................ 25,000 $0.20 2001(2)
25,000 $2.00 2001(2)
10,000 $6.82 2005(2)
10,000 $4.625 2007(5)
25,000 $4.625 2007(3)
Executive officers as a group (five in num-
ber) .................................... 285,700 $0.20 -$6.82 2001-2007(1)-(5)
All employees, including executive officers,
as a group (eight in number) ............ 308,200 $0.20 -$6.82 2001-2007(1)-(5)
Non-executive employees as a group (three
in number) .............................. 22,500 $4.50 -$6.50 2002-2007 (1)(5)
</TABLE>
- ------------
(1) These options become first exercisable in three equal installments on the
first through the third anniversaries of grant.
(2) These options are now vested and exercisable.
(3) These options become first exercisable in three equal installments on the
grant and on the first and second anniversaries of grant, subject, however
to the approval by stockholders of the proposed amendment of the 1994 Plan
to increase the shares available for grant.
(4) 16,666 of these options were exercised in 1997 and the remaining 8,334
shares are now exercisable.
(5) These options become first exercisable in three equal installments on the
grant and on the first and second anniversaries of grant.
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REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Compensation Policies
Compensation for executives is based on the principles that compensation
must (a) be competitive with other businesses to attract, motivate and retain
the talent needed to lead and grow the Company's business, (b) be linked to the
Company's position as a development stage company requiring strong
entrepreneurial skills to achieve its long and short-term goals and (c)
encourage executive officers to build their holdings of the Company's stock to
align their goals with those of the stockholders.
Compensation of Executive Officers -- 1996
While the key components of the Company's executive compensation program
are based on base salary and non-qualified stock options under the 1994 Plan,
there were not in 1996 sufficient options available to employ options as a major
component of the compensation program in that year. Certain options were,
however, granted principally for recruiting purposes. The cash-based portion of
compensation is fixed by the Board in its discretion based upon historical
levels, performance, ranking within the officer group, and amounts being paid by
comparable companies. Stock options, when employed where sufficient shares are
available, are designed to provide additional incentives to executive officers
to maximize stockholder value. Through the use of vesting periods the option
program encourages executives to remain in the employ of the Company. In
addition, because the exercise prices of such options are set at fair market
value of the stock on the date of grant of the option, executives can only
benefit from such options, if the trading price of the Company's shares
increases, thus aligning their financial interests with those of the
stockholders. More use of options as a compensation tool is anticipated, if the
proposal to amend the 1994 Plan is approved by stockholders.
Compensation of Chief Executive Officer -- 1996
In 1996 the amount of Mr. Peter-Hoblyn's base salary charged to the Company
increased to $229,667 from $162,500 due to increased time devoted by Mr.
Peter-Hoblyn to the affairs of the Company rather than Fuel Tech. Mr.
Peter-Hoblyn did not receive an increase in base salary in 1996. Mr.
Peter-Hoblyn's base salary was fixed in the overall business judgement of the
Board as to the proper competitive level of salary paid by comparable companies.
Mr. Peter-Hoblyn was awarded no stock options in 1996 due to the limited number
of shares available for grant.
This report has been provided by the following members of the Board of
Directors of the Company:
Ralph E. Bailey Charles W. Grinnell
John A. de Havilland Jeremy D. Peter-Hoblyn
Kent D.S. Durr James M. Valentine
9
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This compensation report and the following performance graph shall not be
deemed incorporated by reference in any filing by the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent the Company specifically incorporates such report.
PERFORMANCE GRAPH
The following line graph compares (i) the Company's cumulative total return
to stockholders per share of common stock from January 1, 1996 through the end
of 1996 to that of (ii) the Russell 2000 index, (iii) an index developed by the
Company of a peer group of environmental companies including Catalytica, Inc,
Energy Biosystems Corporation and Molten Metal Technology, Inc. and (iv) the
Standard & Poor's Pollution Control Index. The Company's shares first commenced
trading on December 26, 1995. Information for the few trading days in 1995 is
not reflected in the graph as it is not material.
160|------------------------------------------------------------------|
| |
| |
140|------------------------------------------------------------------|
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120|------------------------------------------------------------------|
| # |
D | @ |
O 100|-------------*&#@-------------------------------------------------|
L | |
L | |
A 80|------------------------------------------------------------------|
R | |
S | |
60|------------------------------------------------------------------|
| |
| & |
40|------------------------------------------------------------------|
| * |
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0|----|----------|---------|-----------|-----------|-----------|----|
1995 1996
*=CDT &=Environmental Index #=Russel 2000 @=S&P Pollution Control
--------------------------------------------------------
--------------------------------------------------------
CDT Environmental Russell S&P
Index 2000 Pollution
Control
--------------------------------------------------------
31-Dec-95 $100.00 $100.00 $100.00 $100.00
--------------------------------------------------------
31-Dec-96 $ 33.93 $ 47.30 $114.76 $104.42
--------------------------------------------------------
10
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management and Services Agreement
Effective July 1995 and amended June 1996, the Company and Fuel Tech have
entered into a Management and Services Agreement (the "Services Agreement")
under which Fuel Tech's corporate staff provides certain administrative
services, including legal advice and services, risk management, tax advice and
preparation of tax returns, centralized cash management and certain technical
and other services to the Company. The Company is assessed fees equal to,
depending on the type of service, 3% or 10% of the Company's fixed reimbursible
costs for these services. The fee may be changed by mutual agreement of the
Company and Fuel Tech. Management believes that the charges under the Services
Agreement are reasonable and that the terms of the Services Agreement are fair
to the Company. The Services Agreement has an initial term expiring December 31,
1997.
License Agreements
The Company's technology is comprised of patents, patent applications,
trade or service marks, data and know-how. A substantial portion of this
technology is held under two license agreements effective as of October 28, 1994
from Fuel Tech, for use outside the U.S. and from Platinum Plus, Inc. a
subsidiary of Fuel Tech, Inc. for use in the U.S. These agreements which expire
in 2008, each provide the Company with an exclusive license, including the right
to sublicense the technology. The licenses provide for running royalties
commencing in 1998 of 2.5% of gross revenues derived from platinum fuel
catalysts. The Company may at any time purchase legal title to the technology
and terminate the licenses by payment of the aggregate amount of $12 million to
the licensors. The licenses require the Company to maintain the technology at
its expense. Either party to either license may terminate the license upon a
material breach by the other party which remains uncured 45 days after notice. A
material breach by the Company would include failure to pay royalties when due
or the bankruptcy or insolvency of the Company.
Loan
At March 31, 1996 the Company owed Fuel Tech $495,000 under a demand note
bearing interest at the rate of 8% per annum. The highest amount of borrowings
under this note in 1996 which were for working capital purposes was $745,000.
Registration Rights Agreement
The Company further agreed under certain circumstances to provide
registration rights to Fuel-Tech N.V. for the sale of Company securities held by
Fuel-Tech N.V. Such registration rights, if exercised by Fuel Tech, will be at
Fuel Tech's cost pro-rata to the number of shares it may sell after exercise.
Relationship with Fuel Tech; Conflicts of Interest
Directors and officers of Fuel Tech and its subsidiaries who are also
directors and officers of the Company and Fuel Tech as the Company's controlling
stockholder, are in positions involving the possibility of conflicts of interest
with respect to transactions involving the Company.
The Company and Fuel Tech have entered into contractual arrangements
governing certain transactions and relationships between them. These agreements
were executed while the Company was a subsidiary or affiliate of Fuel Tech and
were not necessarily the result of arm's-length negotiations. Accordingly, there
is no assurance that the terms and conditions of these agreements are as
favorable to the Company as it could have obtained from independent third
parties.
Six of the Company's officers or directors are employees or directors of
Fuel Tech. These persons are also officers of Fuel Tech and Fuel Tech
subsidiaries.
The Company expects to resolve potential conflicts of interest with Fuel
Tech on a case-by-case basis, taking into consideration relevant factors
including its existing agreements with Fuel Tech, the requirements of
NASDAQ/Small-Cap and prevailing corporate practices. Fuel Tech, however, may
exercise its influence in its own best interests.
11
<PAGE>
GENERAL
Management knows of no other matters that may properly be, or are likely to
be, brought before the meeting. If other proper matters are introduced, the
individuals named as Proxies on the enclosed Proxy Card will vote in their
discretion the shares represented by the Proxy Card.
The Company will provide without charge to each person being solicited by
this Proxy Statement, upon written request, a copy of the Annual Report of the
Company on Form 10-K for the year ended December 31, 1996, including the
financial statements and schedules thereto, as filed with the Securities and
Exchange Commission. All such requests should be directed to the undersigned at
the above address of the Company.
Proposals of stockholders intended for inclusion in the proxy statement and
proxy to be mailed to all stockholders entitled to vote at the 1998 Annual
Meeting of Stockholders of the Company must be received in writing at the above
address of the Company on or before December 22, 1997.
By Order of the Board of Directors
Charles W. Grinnell
Secretary
Stamford Connecticut
April 21, 1997
12
<PAGE>
EXHIBIT A
CLEAN DIESEL TECHNOLOGIES, INC.
1994 INCENTIVE PLAN
As amended through August 8, 1996
1. Purpose and Effective Date
The purpose of this 1994 Incentive Plan of Clean Diesel Technologies, Inc.,
a Delaware corporation ("the Corporation") is to further the interests of the
Corporation and its shareholders by providing incentives in the form of awards
to such directors, officers, employees, consultants or advisors to the
Corporation as the directors shall determine are key to the continued success
and profitability of the Corporation. The Plan is intended to retain
Participants with significant training, experience and ability; to attract new
Participants whose services are considered valuable; and to encourage such
Participants to acquire a proprietary interest in the Corporation. So that the
maximum incentive can be provided each Participant in the Plan by granting to
such participant an Award best suited to the circumstances, the Plan provides
for granting, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Shares, Performance Awards, Bonuses, Other Awards, or any combination of the
foregoing.
This Plan shall become effective upon its adoption by the Board, subject to
approval within one (1) year of such adoption by the Corporation's shareholders,
and shall remain effective until terminated by resolution of the Board.
2. Definitions
As used in this Plan:
(1) "Award" means the grant hereunder, and by consent of the
Participant, awards or options granted previously by the Corporation of any
form of Option, Stock Appreciation Right, Restricted Share, Performance
Award, Other Award, Bonus, or any other form of Share based or non-Share
based Award.
(2) "Award Agreement" means a written agreement between the Corporation
and a Participant that sets forth the terms, conditions and limitations
applicable to an Award.
(3) "Beneficiary" means, where a Participant is with respect to any
Award not forfeitable by its terms on the death of the Participant entitled
to any unpaid portion thereof, such person or persons entitled thereto under
the Participant's will or under the laws of descent and distribution.
(4) "Board" means the Board of Directors of the Corporation.
(5) "Bonus" means any payment under Section 6.5.
(6) "Change in Control" has the meaning set forth in Section 8.
(7) "Code" means the United States Internal Revenue Code of 1986, as
amended and in effect from time to time, or any successor statute.
(8) "Committee" means the Committee of the Board or any successor
committee as described in Section 3.1, or, if there shall be no such
Committee, the Board.
(9) "Corporation" means Clean Diesel Technologies, Inc., a Delaware
corporation, or any successor corporation, and its subsidiaries and
affiliates, incorporated or otherwise, in which the Corporation shall own
directly or indirectly at least fifty percent (50%) of the interests.
(10) "Employee" means any individual who is a salaried employee on the
payroll of the Corporation.
(11) "Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, or any successor statute.
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(12) "Fair Market Value Per Share" in reference to the common stock of
the Corporation means such value as shall be determined by the Board or a
Committee thereof, as the case may be, responsible from time to time for the
administration of the Plan.
(13) "Non-Qualified Stock Option" shall mean a stock option which is not
an Incentive Stock Option within the meaning of Section 422 of the Code.
(14) "Option" means an Award to purchase Shares granted pursuant to
Section 6.1.
(15) "Participant" means any director, officer, employee, consultant or
advisor who is granted an Award under this Plan. Except that consultants and
advisors shall not include those rendering services in connection with the
offer or sale of the Corporation's securities in a capital raising
transaction.
(16) "Performance Award" has the meaning described in Section 6.4.
(17) "Plan" means this 1994 Incentive Plan of Clean Diesel technologies,
Inc., as amended from time to time.
(18) "Restricted Shares" means Shares which have certain restrictions
attached to the ownership thereof, which may be issued under Section 6.3.
(19) "Retirement" means termination of a Participant's employment with
the Corporation by retirement under the normal, mandatory, early and
applicable age plus service or other provision of the applicable retirement
plan of the Corporation or a subsidiary or affiliate of the Corporation, or,
if there shall be no such plan or plans, then under such procedures as the
Company or its subsidiaries and affiliates may from time to time establish.
(20) "Rule 16b-3" means such rule as promulgated by the Securities and
Exchange Commission under the Exchange Act as now in force or as such
regulation or successor regulation shall be hereafter amended.
(21) "Shares" mean shares of common stock of the Corporation.
(22) "Share Unit" means the right to receive a payment equivalent in
value to one Share on the date of payment.
(23) "Stock Appreciation Right" means a right which may be issued under
Section 6.2, the value of which is determined relative to the appreciation in
value of Shares.
(24) "Totally Disabled" means a condition of a Participant found by a
qualified physician selected by the Corporation to be that as described in
Section 22(e)(3) of the Code or as such Section or successor section shall be
hereafter amended.
(25) "Non-Employee Director" means a director as defined in Rule 16b-3.
3. Administration
3.1 Committee
(a) This Plan shall be administered by the Board. The Board may, however,
appoint a Committee to administer the Plan which shall consist of not less
than a sufficient number of Non-Employee Directors so as to qualify the
Committee to administer this Plan as contemplated by Rule 16b-3 and to that
end the Board may limit the participation of Committee members in the Plan to
formula based or other awards. The Board may remove members from or add
members to the Committee. Vacancies on the Committee shall be filled by the
Board.
(b) To the extent permitted by Section 13.3, the Board or Committee is
authorized to (i) determine the persons who shall be Participants in the Plan
and which Awards shall be granted to Participants, (ii) establish, amend and
rescind rules, regulations and guidelines relating to the Plan as it deems
appropriate, (iii) interpret and administer the Plan, Awards and Award
Agreements, (iv) establish, modify and terminate terms and conditions of
Award Agreements, (v) grant waivers and accelerations of Plan, Award and
Award Agreement restrictions and (vi) take any other action necessary for the
proper administration and operation of the Plan.
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(c) The Board or Committee may designate persons and entities other than
its members, including but not limited to, any successor committee, the Chief
Executive officer, and the Corporate Secretary, to carry out any of its
responsibilities under and described in this Plan, under such conditions or
limitations as the Board or Committee may establish, other than its authority
with regard to participants, if any, who are subject to Section 16 of the
Exchange Act.
3.2 Effect of Determinations
Determinations of the Board or Committee and its designees shall be final,
binding and conclusive on the Corporation, its stockholders, Employees and
Participants. No member of the Board or Committee or any of its designees shall
be personally liable for any action or determination made in good faith with
respect to this Plan, any award, or any Award Agreement.
4. Eligibility
Persons eligible for Awards under this Plan shall consist of key managerial
and other directors, officers, employees, consultants or agents who possess
valuable experience and skills and have contributed, or can be expected to
contribute, materially to the success and profitability of the Corporation. The
Board or Committee shall determine which persons shall be Participants, the
types of Awards to be made to Participants and the terms, conditions and
limitations applicable to the Awards.
5. Shares Subject to This Plan
5.1 Maximum Number of Shares
The maximum number of Shares available for Awards under this Plan in each
calendar year during any part of which this Plan shall be in effect shall be
such fixed amount of shares as the Board shall from time to time determine but
not more than twelve and one half percent (12.5%) of the issued and outstanding
shares of the Corporation. Treasury stock shall not be deemed to be issued and
outstanding. Any and all such Shares may be issued in respect of any of the
types of Awards.
5.2 Share Accounting
Shares related to Awards that are forfeited, terminate, expire unexercised,
exchanged, settled in cash in lieu of Shares or settled in such other manner so
that a portion or all of the Shares included in an Award are not issued to a
Participant shall be available for other Awards. Any Shares not so used shall be
available for further Awards; provided, however, that in any calendar year no
more than the amount determined under Section 5.1 above, shall be available for
Awards. Shares issued under this Plan shall be authorized and unissued Shares or
Shares reacquired by the Corporation, as determined by the Committee. No
fractional Shares shall be issued under this Plan.
6. Awards
(a) Awards may include, but are not limited to, those described in this
Section 6. Awards may be granted singly, in combination, or in tandem with other
Awards. Subject to the other provisions of this Plan, Awards may also be made in
combination or in tandem with, in replacement of, or as alternatives to, grants
or rights under this Plan and any other plan of the Corporation, including any
plan of any acquired entity and for the benefit of any present or former
director, officer, consultant or agent of such acquired entity. Subject to the
terms of the Awards described in this Section 6 and the related Award Agreement,
the form of payment for Awards may be in cash, in Shares, in Share Units, or
such other form as determined by the Board or the Committee, and may be made
partly in one form and partly in one or more other forms, all as determined by
the Committee. Except as otherwise provided in this Plan, Awards shall be
evidenced by Award Agreements, the terms of which may be amended or accelerated
by the Board or Committee following the grant of any Award and need not be
uniform among Participants. Except as otherwise provided in this Plan, Awards
shall be granted for such minimum consideration as is required by applicable
law, rules and regulations, including without limitation, the then applicable
Rule 16b-3, and such additional consideration, if any, as may be determined by
the Committee.
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(b) Notwithstanding anything contained in this Plan, if required by the
then applicable Rule 16b-3 or any successor provision, any "equity security"
awarded pursuant to this Plan to any participant who is subject to Section 16 of
the Exchange Act must be held by the Participant for at least six (6) months
after the award thereof. In addition, if required by the then applicable Rule
16b-3 or any successor provision, with respect to any Participant who is subject
to Section 16 of the Exchange Act, at least six (6) months must elapse from the
date of acquisition of a "derivative security" hereunder to the date of
disposition of such security. The terms "equity security" and "derivative
security" shall have the meanings described in the then applicable Rule 16b-3.
6.1 Options
Options may be granted under this Plan from time to time. If Options are
granted they shall be upon the following terms and conditions with such
additional terms and conditions, not inconsistent with the provisions of this
Plan, as the Board or Committee in its discretion shall deem desirable:
(a) Options shall be Non-Qualified Stock Options.
(b) The option price per Share for all Options shall be not less than one
hundred per cent (100%) of the Fair Market Value Per Share on the date the
Option is granted.
(c) Award Agreements for Options shall conform to the requirements of
this Plan, and may contain such other provisions as the Committee shall deem
advisable.
(d) Award Agreements for Options shall specify when an Option may be
exercisable. An option may be exercised, in whole or in part, by giving
written notice of exercise to the Corporation specifying the number of Shares
to be purchased. Shares purchased upon exercise of an Option shall be paid
for in full at the time the Option is exercised in cash or, with the consent
of the Board or Committee, in Shares. Payment may also be made in any other
manner or form approved by the Board or Committee, consistent with applicable
law, regulations and rules.
(e) A holder of an Option shall have no rights as a stockholder with
respect to any Shares covered by such Option unless and until the date of the
issuance of the stock certificate for such Shares.
(f) (i) If, after completion of any required period of continuous
employment or affiliation in order to exercise an Option as provided in an
Award Agreement, a Participant dies while employed by the Corporation, such
Option shall be exercisable by the Beneficiary thereof, but after the date of
death of the Participant only within the period specified in the Award
Agreement which shall not be later than the expiration date of the Option.
(ii) Following the death of a Participant, the Board or Committee may
at its discretion, upon the request of such Participant's Beneficiary who
holds an exercisable Option and in consideration of the surrender of such
Option, pay the amount by which the Fair Market Value per Share on the date
of such request shall exceed the Option price per Share multiplied by the
number of Shares as to which the request was made.
(g) If, after completion of any required period of continuous employment
in order to exercise an Option as provided in an Award Agreement, a
Participant is Totally Disabled or retires, such Option shall be exercisable
by the Participant, but only within the period specified in the Award
Agreement.
6.2 Stock Appreciation Rights
Stock Appreciation Rights may be granted under this Plan from time to time.
If Stock Appreciation Rights are granted they shall be upon the following terms
and conditions, and such additional terms and conditions, not inconsistent with
the provisions of this Plan, as the Board or Committee in its discretion shall
deem desirable:
(a) A Stock Appreciation Right may be granted in tandem with part or all
of, in addition to, or completely independent of, an Option or any other
Award under this Plan. A Stock Appreciation Right issued in tandem with an
Option may be granted at the time of grant of the related Option or at any
time thereafter during the term of the Option.
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(b) Award Agreements for Stock Appreciation Rights shall conform to the
requirements of this Plan and may contain such other provisions (including
but not limited to, the permitted form of payment for the exercise of the
Stock Appreciation Right, the requirement of employment for designated
periods of time prior to exercise and the ability of the Board or Committee
to revoke Stock Appreciation Rights which are issued in tandem with options
without compensation to the Participant) as the Board or Committee shall deem
advisable.
(c) Stock Appreciation Rights issued in tandem with Options shall be
subject to the following:
(i) Stock Appreciation Rights shall be exercisable at such time or
times and to the extent, but only to the extent, that the Option to which
they relate shall be exercisable.
(ii) Upon exercise of Stock Appreciation Rights the holder thereof
shall be entitled to receive a number of Shares equal in aggregate value
to the amount by which the Fair Market Value Per Share on the date of
such exercise shall exceed the option price per Share of the related
Option, multiplied by the number of Shares in respect of which the Stock
Appreciation Rights shall have been exercised.
(iii) All or any part of the obligation arising out of an exercise of
Stock Appreciation Rights may, at the discretion of the Board or
Committee, be settled by the payment of cash equal to the aggregate value
of the Shares (or a fraction of a Share) that would otherwise be
delivered under Section 6.2(c)(ii).
(iv) Upon exercise of Stock Appreciation Rights the unexercised tandem
options of the Participant shall automatically terminate upon the
exercise of such Stock Appreciation Rights.
(v) Stock Appreciation Rights issued in tandem with Options shall
automatically terminate upon the exercise of such Options.
6.3 Restricted Shares
Awards of Restricted Shares may be granted under this Plan from time to
time. If Awards of Restricted Shares are granted they shall be upon the
following terms and conditions and such additional terms and conditions, not
inconsistent with the express provisions of this Plan, as the Committee in its
discretion shall deem desirable:
(a) Restricted Shares are Shares which are subject to such terms,
conditions and restrictions as the Board or Committee deems appropriate,
which may include restrictions upon the sale, assignment, transfer or other
disposition of the Restricted Shares and the requirement of forfeiture of the
Restricted Shares upon termination of employment under certain specified
conditions. The Board or Committee may condition the lapsing of restrictions
on part or all of an Award of Restricted Shares upon the attainment of
specific performance goals or such other factors as the Board or Committee
may determine. Awards of Restricted Shares may be granted for no cash
consideration or for such minimum consideration as may be required by
applicable law.
(b) Award Agreements for Restricted Shares shall conform to the
requirements of this Plan, and may contain such other terms and conditions
(including but not limited to, a description of a period during which the
Participant may not transfer the Restricted Shares and limits on encumbering
the Restricted Shares during such period) as the Board or Committee shall
deem desirable. To the extent permitted by Section 13.3 hereof, the Board or
Committee may provide for the lapse of any such term or condition in
installments and may accelerate or waive any such term or condition in whole
or in part, based on service, performance and/or such other factors or
criteria as the Board or Committee may determine.
(c) Award Agreements for Restricted Shares shall provide that the stock
certificates representing Restricted Shares shall be legended, that such
certificates be held by a custodian or the Corporation, or that there be
other mechanisms for maintaining control by the Corporation of the Restricted
Shares until the restrictions thereon are no longer in effect. After the
lapse, waiver or release of the restrictions imposed pursuant to the Award
Agreement on any Restricted Shares, the Corporation shall cause to be issued
in the Participant's name a stock certificate evidencing the Restricted
Shares with respect to which the restrictions have lapsed or been waived or
released, free of any legend, and shall cause such stock certificate to be
delivered to the Participant.
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(d) Except as otherwise provided in this Plan or in the Award Agreement,
the participant shall have, with respect to Awards of Restricted Shares, all
of the rights of a shareholder of the Corporation, including the right to
vote the Restricted Shares and the right to receive any cash or stock
dividends on such Restricted Shares. The Board or Committee may provide that
the payment of cash dividends shall or may be deferred. Any reinvestment of
deferred cash dividends shall be as determined by the Board or Committee.
Stock dividends issued with respect to restricted Shares shall be Restricted
Shares and shall be subject to the same terms, conditions and restrictions
that apply to the Restricted Shares with respect to which such dividends are
issued. Any additional Shares issued with respect to cash or stock dividends
shall not be counted against the maximum number of Shares for which Awards
may be granted under this Plan as set forth in Section 5.
(e) If the employment of a Participant is terminated prior to the lapse
of restrictions on Restricted Shares because the Participant dies, becomes
Totally Disabled or retires involuntarily the restrictions on all Restricted
Shares awarded to a participant shall lapse on the date of such termination.
6.4 Performance Awards
Performance Awards may be granted under this Plan from time to time. If
Performance Awards are granted they shall be upon the following terms and
conditions and such additional terms and conditions, not inconsistent with the
express provisions of this Plan, as the Board or Committee in its discretion
shall deem advisable:
(a) Performance Awards are Awards which are based upon the long-term
performance of all or a portion of the Corporation or which are based upon
the long-term individual performance of a Participant. Performance Awards may
be in the form of performance units, performance shares and such other forms
of Performance Awards which the Board or Committee shall determine to be
desirable. Performance Awards are Awards which are granted to participants
contingent upon (i) the future performance of all or a portion of the
Corporation which may include, without limitation, performance relative to a
group of companies in the same or related industries, achievement of specific
business objectives, attainment of certain growth rates, profitability goals
and such other measurements as the Board or Committee determines to be
appropriate, (ii) the future performance of a Participant, which may include,
without limitation, attainment of specified goals and objectives and such
other measurements as the Board or Committee determines to be appropriate,
(iii) the future performance of a combination of all or a portion of the
Corporation and a participant, or (iv) such other measurements and criteria
as may be considered appropriate by the Board or Committee. Performance
Awards may contain multiple performance measurements.
(b) Award Agreements for Performance Awards shall conform to the
requirements of this Plan and may contain such other terms and conditions as
the Board or Committee shall deem desirable, including but not limited to,
applicable performance measurements, a description of whether performance
measurements are to be used singly or in combination, a description of
whether different performance measurements may be used for different
performance periods, the length of performance periods, the ability of the
Board or Committee to amend and adjust measurements, payouts and performance
periods of performance Awards and any requirements of employment during
performance periods.
(c) Award Agreements for Performance Awards shall provide for a required
minimum period of continuous employment during a performance period of a
Performance Award. If such minimum period of continuous employment shall have
elapsed, the Award Agreement may provide, or the Board or Committee may
determine, the portion of the payment of the Performance Award which
participant or the Participant's beneficiary, as applicable, is to receive at
the end of the performance period.
6.5 Bonuses
Bonuses may be granted under this Plan from time to time on an annual or
one-time basis. The amount of Bonuses which may be awarded shall be as
determined by the Board or Committee. The Board or Committee may establish a
basis upon which aggregate Bonus expenditures for any year shall be determined,
which may include measurements of financial performance of the Corporation or of
a unit or department thereof, relative performance of the Corporation or of a
department thereof within the same or related industries, competitive
compensation considerations and other measurements and criteria.
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(a) Each Bonus may be made at the discretion of the Board or Committee
either in cash, in Shares, in Share Units, or in another form as determined
by the Board or Committee and may be made partly in one form and partly in
one or more other forms. In the case of an Award of a Bonus in Shares or
Share Units, the number shall be determined by using the Fair Market Value
Per Share on the date of the Award of the Bonus.
(b) The payment of any Bonus shall be subject to such obligations or
conditions as the Board or Committee may specify in making or recommending
the Award of the Bonus, but Bonuses need not be evidenced by Award
Agreements.
(c) When payment of all or part of a Bonus is deferred in the form of
Shares or Share Units, the account of the Participant to whom the Bonus was
made will be credited with an amount per Share equal to the dividends payable
on each issued and outstanding Share ("dividend equivalents"). Amounts thus
credited shall, in the discretion of the Board or Committee, either:
(i) be paid in cash as and when each such credit shall be made, or
(ii) be credited in Shares or Share Units, with the number determined
by using the Fair Market Value Per Share on the date of the dividend
payment and delivered in such form and at such time or times as may be
determined by the Committee.
(d) When payment of all or part of a bonus is deferred in cash, the
Committee may provide that the account of the Participant to whom the Bonus
was made shall be credited with amounts equivalent to interest ("interest
equivalents"). Amounts thus credited shall be at the rate determined by the
Committee.
(e) Any Bonus payable in Shares may, in the discretion of the Board or
Committee, be paid in cash, on each date on which payment in Shares would
otherwise have been made, in an amount equal to the Fair Market Value Per
Share on each such date, multiplied by the number of Shares which would
otherwise have been paid on such date.
(f) Bonuses may be awarded in Share Units in accordance with the
following terms and conditions and such other terms and conditions as the
Board or Committee may impose:
(i) The number of Share Units awarded with respect to any Bonus shall
be the number determined by using the Fair Market Value Per Share on the
date of the Award of the Bonus.
(ii) Any Bonus made in Share Units may, in the discretion or on the
recommendation of the Board or Committee, be paid in Shares on each date
on which payment in cash would otherwise be made.
(g) In lieu of the foregoing forms of payment of Bonuses, the Board or
Committee may specify or recommend any other form of payment which it
determines to be of substantially equivalent economic value to the cash value
of the Bonus including, without limitation, forms involving payments to a
trust or trusts for the benefit of one or more Participants.
(h) Each payment of a Bonus that is to be made in cash shall be from the
general funds of the Corporation or its respective subsidiary or affiliate,
as the case may be.
(i) In the event of the death of a Participant to whom a Bonus is to be
or shall have been made, the Bonus or any portion thereof remaining unpaid
shall be paid to such Participant's Beneficiary under the Participant's will
or pursuant to the relevant laws of descent and distribution.
6.6 Other Awards
(a) The Board or Committee may grant other Share based Awards under this
Plan, including without limitation, those Awards pursuant to which Shares are or
may in the future be acquired, Awards denominated in Share Units, securities
convertible into Shares and dividend equivalents. The Board or Committee shall
determine the terms and conditions of such other Share based Awards. Shares
issued in connection with such other Share based Awards shall be issued for such
minimum consideration as shall be required by applicable law, rules and
regulations, including the then applicable Rule 16b-3, and such additional
consideration, if any, as may be determined by the Board or Committee.
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(b) The Board or Committee may also grant other non-Share based Awards
under this Plan and shall determine the terms and conditions of such other
non-Share based Awards in tandem or combination with other Awards or each other,
in exchange of other Awards, or in tandem or combination with, or as
alternatives to grants or rights under any other employee plan of the
Corporation, including any plan of any acquired entity. The Board or Committee
shall have the authority to determine the Participants for such Awards and all
other terms and conditions of such other Awards. No amendment of this Plan is
required for the creation of another type of Award.
7. Adjustments Upon Changes in Capitalization
(a) Subject to any required action by the Corporation's stockholders, in
the event of a reorganization, recapitalization, stock split, stock dividend,
exchange of Shares, combination of Shares, merger, consolidation or any other
change in corporate structure of the Corporation affecting the Shares, or in the
event of a sale by the Corporation of all or a significant part of its assets,
or any distribution to its shareholders other than a normal cash dividend, the
Board or Committee may make appropriate adjustment in the number, kind, price
and value of Shares authorized by this Plan and any adjustments to outstanding
Awards as it determines appropriate so as to prevent dilution or enlargement of
rights.
(b) The existence of an Award under this Plan shall not affect in any way
the right or power of the Company or its shareholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stocks, ahead of or affecting the Stock or rights thereunder or convertible
thereto, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business or any other corporate act
or proceeding, whether of a similar character or otherwise.
(c) Awards granted hereunder prior to June 30, 1995 with respect to Shares
shall be adjusted as to the number thereof, in the event of the issuance or
reacquisition of Shares for any reason by the Corporation, so as to maintain the
ratio of the number of Shares with respect to such Awards outstanding on June
30, 1995 to the number of the Corporations's issued and outstanding Shares on
such date; provided, however, that (i) where the Corporation shall issue
securities convertible into Shares or options or warrants for purchase of
Shares, no such adjustment shall be required until the conversion of securities
into or the purchase of Shares and (ii) upon any such adjustment the exercise
price of additional Shares upon a Participant's Award shall be the purchase
price (or fair market value of consideration therefor) of Shares issued which
initiated the adjustment and the Shares originally granted by the Award shall
carry the original exercise price therof. This Section 7 (c) shall expire and be
of no further force and effect after the first public offering of common stock
of the Corporation. The adjustments contemplated by this Section, however, shall
be effected with respect to shares issued in such public offering. A "Public
Offering" shall mean shares issued only pursuant to an effective registration
statement filed with the Securities and Exchange Commission.
8. Change in Control
8.1 Definition of Change in Control
A "Change in Control" shall be deemed to have occurred if any one or more
of the events described in paragraphs (a), (b) or (c) below occurs.
(a) Any "person," as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (including any group of persons with which any person or its
affiliates or associates, as such terms are defined in Rule 12b-2 under the
Exchange Act has any agreement, arrangement or understanding, oral or written,
regarding the acquiring, holding, voting or disposing of any of the
Corporation's securities, but excluding a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation) (i) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing fifty one percent
(51%) or more of the combined voting power of the Corporation's then outstanding
securities (hereinafter referred to as an "Acquiring Person"); or
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(b) In any two year period persons being a majority of the Board shall
cease to be so unless the nomination of the new directors during such period was
approved by at least a majority of the directors then still in office who were
directors at the beginning of the period; or
(c) A consolidation or merger or "Business Combination," as that term is
defined as of the effective date of this Plan in Section 203(c)(3) of The
General Corporation Law of Delaware, of the Corporation shall occur (with the
term "interested shareholder" as used in that Section being deemed to refer to
an Acquiring Person) in which the Corporation is not the surviving Corporation
and pursuant to which the Corporation's shares are converted to cash, securities
or other property, but not a business combination where shareholders of the
Corporation prior to the business combination have substantially the same
proportionate ownership in a business entity after the merger; or
(d) The Shareholders of the Corporation shall approve any plan for
liquidation or dissolution of the Corporation not otherwise involving a
transaction where shareholders of the Corporation prior to the transaction have
substantially the same proportionate ownership of a business entity after the
transaction.
(e) In no event, however, shall a Change in Control be deemed to have
occurred with respect to a Participant, if that Participant is part of an
Acquiring Person which consummates the Change in Control transaction. A
Participant shall be deemed "part of an Acquiring Person" for purposes of the
preceding sentence if the Participant is an equity participant or has agreed to
become an equity participant in the Acquiring Person (except for (i) passive
ownership of less than three percent of the securities of the Acquiring Person;
or (ii) ownership of equity participation in the Acquiring Person which is
otherwise not deemed to be significant, as determined prior to the Change in
Control by a majority of the disinterested Continuing Directors).
8.2 Effect of Change in Control
Upon the occurrence of an event of Change in Control, unless otherwise with
respect to any Award specifically prohibited by the terms of the second
paragraph of Section 6:
(a) Any and all Options and Stock Appreciation Rights shall become
immediately exercisable.
(b) Any restriction periods and restrictions imposed on Restricted Shares
(except such as may be required by relevant securities laws) shall lapse, and
within ten (10) business days after the occurrence of a Change in Control,
the stock certificates representing Restricted Shares, without any
restrictions or legend thereon (except a legend as may be required by
relevant securities laws), shall be delivered to the applicable Participants;
(c) The goal, objective, target value or the like, attainable under all
performance Awards shall be deemed to have been fully earned for the entire
performance period as of the effective date of the Change in Control, except
that all performance Awards which shall have been outstanding less than six
(6) months on the effective date of the Change in Control shall not be deemed
to have earned the goal, objective, target value, or the like; and
(d) Subject to Section 14.3 hereof, all such other actions and
modifications to the Awards as determined by the Board or Committee to be
appropriate before the Change in Control of the Corporation shall become
effective.
9. Relationship of the Plan to Benefit Plans
The amount of Bonuses to any Participant under this Plan shall be eligible
for inclusion in the Participant's earnings base for the purpose of determining
the benefits to which the Participant is entitled under retirement, pension,
excess benefit, thrift, savings, profit-sharing, insurance, long-term disability
and other benefit plans, if any, of the Corporation as determined by the Board
or Committee. No other income of a Participant attributable to this Plan shall
be included in the Participant's earnings for purposes of any benefit plan in
which the Participant may be eligible to participate.
10. Effect of the Plan On Right to Continued Employment and Interest in
Particular Property
(a) None of the existence of this Plan, any Awards granted pursuant hereto
or any Award Agreement shall create any right to continued employment of any
Participant by the Corporation. No Participant shall have, under
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any circumstances, any interest whatsoever, vested or contingent, in any
particular property or asset of the Corporation or in any particular Share or
Shares of the Corporation that may be held by the Corporation (other than
Restricted Shares held by a custodian) by virtue of any Award. A Participant may
be granted additional Awards under this Plan under such circumstances and at
such times as the Board or Committee may determine; provided, however, that no
Participant shall be entitled to any Award in the absence of a specific grant by
the Board or Committee of an Award, notwithstanding the prior grant of an Award
to such Participant.
(b) This Plan shall not be deemed a substitute for, and shall not preclude
the establishment or continuation of any other plan, practice or arrangement
that may now or hereafter be provided for the payment of compensation, special
awards or benefits to directors, officer, employees, consultants and agents of
the Corporation and its subsidiaries generally, or to any class or group of
employees, including without limitation, any retirement, pension, excess
benefit, thrift, savings, profit-sharing, insurance, long-term disability,
health care plans or other employee benefit plans. Any such arrangements may be
authorized by the Corporation and payment thereunder made independently of this
Plan.
11. Withholding Taxes and Deferrals
11.1 Cash Withholding
The Corporation and its participating subsidiaries shall have the right to
deduct from any cash payment made under Awards under this Plan any federal,
state, provincial or local income, or other taxes required by law to be withheld
with respect to such payment or to take such other action as may be necessary in
the opinion of the Corporation to satisfy all obligations for the payment of
such taxes.
11.2 Share Withholding
Any Share based Award may provide by the grant thereof that the recipient
of such Award may elect, in accordance with any applicable laws, rules and
regulations, to pay a portion or all of the amount of such minimum required
withholding taxes in Shares. In such event, the Participant shall authorize the
Corporation to withhold, or shall agree to deliver to the Corporation, Shares
owned by such Participant or a portion of the Shares that otherwise would be
distributed to such Participant, having a Fair Market Value equal to the amount
of withholding tax liability.
11.3 Deferrals
The Board or Committee may require or permit a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise, the
satisfaction of any requirements or goals or lapse or waiver of restrictions of
an Award made under this Plan. If any such deferment election is required or
permitted, the Board or Committee shall establish rules and procedures for such
payment deferrals.
12. Compliance With Applicable Legal Requirements
No certificate for Shares distributable pursuant to this Plan shall be
issued and delivered unless the issuance of such certificate complies with all
applicable legal requirements including, without limitation, compliance with the
provisions of applicable state securities laws, the Securities Act of 1933, as
amended from time to time or any successor statute, the Exchange Act and the
requirements of the exchanges on which Shares may, at the time, be listed, and
the provisions of any foreign securities laws or the rules of foreign securities
exchanges, where applicable.
13. Amendments
13.1 Plan Amendments
The Board may, insofar as permitted by law, from time to time, with respect
to any Shares at the time not subject to Awards, suspend or discontinue this
Plan or revise or amend it in any respect whatsoever, provided, however, unless
the Committee or the Board, as appropriate, specifically otherwise provides, any
revision or
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amendment that would cause this Plan to fail to comply with any requirement of
applicable law, regulation or rule if such amendment were not approved by the
stockholders of the Corporation shall not be effective unless and until the
approval of the stockholders of the Corporation is obtained.
13.2 Award Amendments
Subject to the terms and conditions and within the limitations of this
Plan, the Board or Committee may amend, cancel, modify, or extend outstanding
Awards granted under this Plan.
13.3 Rights of Participants
No amendment, suspension or termination of this Plan nor any amendment,
cancellation or modification of any outstanding Award or Award Agreement that
would adversely affect the right of any Participant with respect to an Award
previously granted under this Plan will be effective without the written consent
of the affected participant. Such written consent may be obtained simultaneously
with the grant of any Award.
13.4 Rule 16b-3
This Plan is intended to comply with Rule 16b-3 with respect to
Participants, if any, who are subject to
Section 16 of the Exchange Act and in the event that the Corporation shall
become subject to said Section 16. Should the requirements of Rule 16b-3 change,
the Board or the Committee, as appropriate, may amend the Plan to comply with
the requirements of the amended Rule 16b-3 or its successor provision or
provisions.
14. Miscellaneous Provisions
14.1 Awards in Various Countries
The Board or Committee shall have the authority to adopt such
modifications, procedures and subplans as may be necessary or desirable to
comply with provisions of the laws of various countries in which the Corporation
or its subsidiaries may operate to assure the viability of the benefits of
Awards made to participants employed in such countries and to meet the
objectives of this Plan.
14.2 Transferability
(a) Awards may not be pledged or assigned and may otherwise be transferred
only to the extent provided herein or in an Award Agreement not inconsistent
herewith, provided, however, that an Option or Stock Appreciation Right or any
other benefit or Award hereunder deemed to be a derivative security shall not be
transferable other than by will or the laws of descent and distribution and
shall be exercisable during a Participant's lifetime only by him or by his
guardian or legal representative or pursuant to a "qualified domestic relations
order" as defined by the Code, or such order under the laws of other
jurisdictions as shall be similar in effect to a qualified domestic relations
order.
(b) Notwithstanding the foregoing, however, a Participant may, with the
consent of the Board or Committee and subject to such terms and conditions as
they may impose, assign or transfer an Award to or among immediate family
members, their issue or spouses or to a trust or family partnership of which
such immediate family members, their issue or spouses, are beneficiaries or
partners, as the case may be.
14.3 Cancellation of Awards
Except as otherwise provided in this Plan or in applicable Award
Agreements, the terms of which need not be uniform among Participants, if a
participant to whom an Award is granted ceases to be employed by the Corporation
all of such Participant's unexercised Awards and Awards on which there are
restrictions shall be immediately canceled.
14.4 Arbitration; Governing Law
(a) The Shares are registered in the United States under the Exchange Act
and are listed for trading on the United States stock exchange known as The
NASDAQ Stock Market, Inc. Any and all disputes whatsoever between a Participant
and the Corporation concerning the administration of this Plan, the
interpretation and effect of an Award Agreement or of this Plan or the rights of
a Participant under an Award Agreement shall be finally determined before one
neutral arbitrator in the City of Stamford, Connecticut, U.S.A. under the rules
of
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commercial arbitration of the American Arbitration Association then in effect
and judgment upon any award by such arbitrator may be entered in any Court
having jurisdiction or application may be made to such court for a judicial
acceptance of the award and an order of enforcement, as the case may be. The
arbitrator hereunder shall have no power or authority to award consequential,
punitive or statutory damages.
(b) This Plan, its administration and all Awards granted hereunder, the
terms and provisions of any related Award Agreements and the rights of all
Participants shall be governed and interpreted in accordance with the laws of
Connecticut U.S.A.
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PROXY PROXY
SOLICITED BY THE BOARD OF DIRECTORS
CLEAN DIESEL TECHNOLOGIES, INC.
Annual Meeting of Stockholders - June 11, 1997
The undersigned hereby appoints Ralph E. Baily, Jeremy D. Peter-Hoblyn and
Lee K. Tinto, and each of them, with full power of substitution, proxies for the
undersigned and authorizes them to represent and vote, as designated on the
reverse side, all of the shares of Common Stock of Clean Diesel Technologies,
Inc. (the "Company") which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders to be held at the Stamford Sheraton Hotel, First
Stamford Place, Stamford, Connecticut 06901 at 10:00 a.m., on Wednesday, June
11, 1997, and at any adjournments or postponements of such meeting, for the
following purposes and with discretionary authority as to any other matters that
may properly come before the meeting all in accordance with and as described in
the Notice of Meeting and accompanying Proxy Statement. The Board of Directors
recommends a vote for all nominees for election as director and for proposals 2
and 3 and, if no direction is given, this proxy will be voted for all nominees
and for such proposals.
IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE
- --------------------------------------------------------------------------------
Please mark
your votes as
indicated in [x]
this example.
1. Election as Directors of Ralph E. Baily, John A. de Havilland, Kent D.S.
Durr, Charles W. Grinnell, Jeremy D. Peter-Hoblyn and James M. Valentine.
FOR all nominees WITHHOLD
listed above (except AUTHORITY
as marked to the to vote for all nominees
contrary) listed above
[ ] [ ]
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below:
- -------------------------------------------------------
2. Approve the appointment of Ernst & Young LLP as independent auditors for the
year 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approve the amendment of the 1994 Incentive Plan of the Company ("the Plan")
to increase the percentage of outstanding shares of the Company to 17 1/2% to
determine the number of shares available for the granting of awards to
Participants under the Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated ____________________________, 1997
________________________________________
________________________________________
Signature of Stockholder
Please sign exactly as name appears. If acting as
attorney, executor, trustee or in other representative
capacity, sign name and title.
