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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
/X/ Definitive Additional Materials
/ / Soliciting Material Under Rule 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:
----------------------------------------------------------------------
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:
___________________________________________________________________________
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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 7, 2000
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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 7, 2000, at the Holiday Inn Select Stamford, 700 East Main
Street, Stamford, Connecticut, 06901, at 10:00 a.m. 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 seven (7) directors;
2. To ratify the appointment of Ernst & Young LLP as independent
auditors for the year 2000;
3. To transact any other business that may properly come before the
meeting or any adjournment thereof.
Only holders of Common Stock and Series A Convertible Preferred Stock
of record at the close of business on April 19, 2000 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.
The Company's Annual Report for 1999 is enclosed with this Notice of
Meeting and Proxy Statement.
By Order of the Board of Directors
Charles W. Grinnell
Secretary
Stamford, Connecticut
April 24, 2000
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. YOU MAY ALSO
SEND YOUR COMPLETED PROXY CARD BY FACSIMILE TO THE TRANSFER AGENT IN THE UNITED
STATES AT (718) 921-8310.
AN INFORMATION MEETING WILL BE HELD ON JUNE 14, 2000 FROM 2:00 P.M. TO 3:30 P.M.
AT THE CADOGAN THISTLE HOTEL, 75 SLOANE STREET, LONDON SW1, U.K.
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CLEAN DIESEL TECHNOLOGIES, INC.
-------------------------------------------
Proxy Statement
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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 Holiday Inn Select Stamford, 700 Main Street,
Stamford, Connecticut 06901, on Wednesday, June 7, 2000, at 10:00 a.m. and at
any adjournments thereof.
The record date with respect to this solicitation is April 19, 2000.
All holders of Company Common Stock ("Common") and of Series A Convertible
Preferred Stock ("Preferred")as of the close of business on that date are
entitled to vote at the meeting. As of that date the Company had 2,633,945
shares of Common and 11,082 shares of Preferred stock outstanding according to
the records of the Transfer Agent. The number of shares of Common on that date
into which the Preferred is convertible is 3,951,960. A stockholders list of the
Common and Preferred stockholders as of the record date is available for
inspection at the office of the Company set out in the Notice of Meeting.
As of the record date, each Common stockholder is entitled to one vote
per share of common and each Preferred stockholder is entitled to a number of
votes per share of Preferred equal to the number of votes per share of Common
into which such stockholder's Preferred is convertible. Except for the election
of directors as to which the Preferred is entitled to vote as a separate class
for two directors, the Common and Preferred shall vote as a single class.
The quorum for the Meeting is the number of Common and Preferred shares
which together as a single class represent a majority of the votes entitled to
be cast, except, however, for the election of the two director-nominees of the
Preferred stockholders for which a separate quorum of a majority of the
Preferred shares is required.
A proxy may be revoked by a 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.
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Members of the Board and Executive Officers of the Company may solicit
stockholders' proxies. The Company shall bear the cost of proxy solicitation, if
any.
The Company's Annual Report to Stockholders, containing financial
statements reflecting the financial position and results of operations of the
Company for 1999 (the "Financial Statements"), and this Proxy Statement were
distributed together commencing in the week of April 24, 2000.
ELECTION OF DIRECTORS
The Board proposes the election of seven directors. The term of office
of each director is until the 2001 Annual Meeting or until a successor shall
have been duly elected. Douglas G. Bailey, Ralph E. Bailey,, John A. de
Havilland, Derek R. Gray, Charles W. Grinnell, Jeremy D. Peter-Hoblyn and James
M. Valentine, who are each incumbent directors, are the management nominees for
election as directors of the Company. Messrs. de Havilland and Gray are also
management nominees to represent the Preferred stockholders who are entitled to
elect two directors. 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, or, in the case of the Preferred
nominees, the current director or directors who are Preferred nominees. 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 aggregate votes cast of the
Common and Preferred stockholders voting together as a single class shall elect
the nominees as directors, except, however, for Messrs. Gray and de Havilland
who additionally as representatives of the Preferred shall be elected separately
by a plurality only of the votes entitled to be cast by the Preferred
stockholders voting. 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 76 1996
Douglas G. Bailey 50 1998
John A. de Havilland 62 1994
Derek R. Gray 66 1998
Charles W. Grinnell 63 1994
Jeremy D. Peter-Hoblyn 60 1994
James M. Valentine 46 1994
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Directors and Executive Officers of the Company
Douglas G. Bailey has been a director of the Company since March 31,
1998. Mr. Bailey, who is the son of Ralph E. Bailey, has been the President and
Chief Executive Officer of American Bailey Corporation ("ABC"), a privately
owned business acquisition and development company, since 1984. Mr. Bailey is
Chairman and Chief Executive officer of Golden Casting Corporation a foundry
company and an affiliate of ABC. Mr. Bailey is also a director of Fuel-Tech
N.V., an air pollution control 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 ABC since 1984.
Mr. Bailey is the former Chairman and Chief Executive Officer of Conoco, Inc.,
an energy company, and a former Vice Chairman of E.I. du Pont de Nemours & Co.,
a chemical company. Mr. Bailey is also a director of Rowan Companies, Inc., an
oil and gas services company, and a Managing Director of Fuel-Tech N.V.
John A. de Havilland has been a director of the Company since its
inception. Mr. de Havilland was a director of J. Henry Schroder Wagg & Co. Ltd.
from 1971 until his retirement in 1990. He is a Managing Director of Fuel-Tech
N.V.
Derek R. Gray was elected a director of the Company by the Board of
Directors effective November 11, 1998. Mr. Gray has been Managing Director of S.
G. Associates Limited, a United Kingdom fiscal advisory firm since 1971 and a
director of Velcro Industries N.V. since 1974. Mr Gray was a director of
Fuel-Tech N.V. from 1987 to 1990.
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 N.V. since 1987. Mr. Grinnell has been a partner in the
Stamford, Connecticut law firm of Huth & Grinnell, LLC since 1992.
Jeremy D. Peter-Hoblyn has been the President and Chief Executive
Officer of the Company since its inception. He is a director of Fuel-Tech N.V.
David W. Whitwell, 34, has served as Vice President, Chief Financial
Officer and Treasurer of the Company since November 15, 1999. Mr. Whitwell had
previously been Vice President and Chief Financial Officer of Primedia, Inc.'s
Special Interest Magazine Division since January 1996 and prior to that position
had been Manager of Planning and Analysis at the Health Care Products Division
of Schering Plough, Inc. since June 1991.
James M. Valentine has been Executive Vice President and Chief
Operating Officer of the Company since its inception. From the period 1990
through 1993, Mr. Valentine was the head of his own energy and environmental
consulting firm. Mr. Valentine is a Managing Director of Fuel-Tech N.V.
Please also see the text below under the captions "Certain
Relationships and Related Transactions -- Relationship with Fuel Tech; Conflicts
of Interest."
3
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Mr. Scott M. Schecter, formerly Vice President, Chief Financial Officer
and Treasurer resigned November 15, 1999. There are no family relationships
between any of the directors or executive officers except as stated above.
The Board has an Audit Committee and a Compensation Committee. Messrs.
D. G. Bailey, Gray, de Havilland and Peter-Hoblyn are members of both
committees. Mr. Gray is Chairman of the Audit Committee and Mr. Bailey Chairman
of the Compensation Committee. Mr. Peter-Hoblyn is an ex officio, non-voting
member of these committees.
The Audit Committee is responsible for review of audits, financial
reporting and compliance, accounting and internal controls policy, and
recommendations to the Board regarding independent auditors and oversight of
their activities.
The Compensation Committee is responsible for establishing executive
compensation and administering the Company's Incentive Compensation Plan.
During 1999 there were five meetings of the Board of Directors of the
Company, three meetings of the Compensation Committee and no meetings of the
Audit Committee, which was not constituted until November, 1999 and held its
first meeting on March 15, 2000. Each director of the Company attended at least
75% of Board and committee meetings of which he was a member during 1999.
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 interests 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 $61,730. 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 on the recommendation of the Audit Committee has
appointed the firm of Ernst & Young LLP, Certified Public Accountants ("Ernst &
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Young"), to be the Company's independent auditors for the year 2000 and submits
that appointment to stockholders for approval. Ernst & Young has served in that
capacity since 1994. 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.
The appointment of auditors is approved annually by the Audit Committee
and subsequently submitted to Board and the stockholders for ratification. The
Audit Committee reviews Ernst & Young's performance in prior years along with
its reputation for integrity, independence 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 Audit Committee and the Board.
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 and Preferred stock as of April 19, 2000 by (i) each person
known to the Company to own beneficially more than five percent of the
outstanding Common or Preferred; (ii) each director of the Company; (iii) the
Named Executive Officers; and (iv) all directors and executive officers as a
group.
Percentage
Name and Address (1) No. of Shares(2)(3) of Class(4)
- - - - - - -------------------- ------------- --------
Common Stock
Beneficial Owners
Fuel-Tech N.V.(5) 689,147 21.3%
Management Owners
Douglas G. Bailey (2) 36,718 1.2%*
Ralph E. Bailey (2) 75,636 2.3%
Derek R. Gray (2) 99,668 3.1%
John A. de Havilland (2) 103,611 3.2%
Charles W. Grinnell (2) 50,642 1.6%
Jeremy D. Peter-Hoblyn(2) 214,677 6.6%
James M. Valentine(2) 170,439 5.3%
All Directors and Officers
as a Group (8 persons)(2) 775,891 24.0%
Preferred Stock
Beneficial Owners
Platinum Plus, Inc. (5) 2,358 18.8%
Positive Securities Limited (5) 1,849 14.6%
Cadogan Settled Estates Shareholding
Company Limited (5) 1,651 13.2%
Waltham Forest Friendly Society 1,098 8.8%
Management Owners
D. R. Gray 166 *
- - - - - - ----------
* Less than one percent (1.0%)
5
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(1) The address of Fuel-Tech N.V. is Castorweg 22-24, Curacao,
Netherlands Antilles. The address of the Management Owners is c/o Clean Diesel
Technologies, Inc., Suite 702, 300 Atlantic Street, Stamford, Connecticut 06901.
The address of the beneficial owners of the Preferred is c/o S G Associates
Limited, 45 Queen Anne Street, London W1M 9FA.
(2) Includes shares subject to options or warrants exercisable within
60 days for Mr. D. G. Bailey, 21,666 shares; Mr. R. E. Bailey, 36,666 shares;
Mr. de Havilland, 83,667 shares; Mr. Gray, 78,333 shares; Mr. Grinnell, 42,800
shares; Mr. Peter-Hoblyn, 149,700 shares; Mr. Valentine, 167,500 shares; and for
all directors and officers as a group,593,332 shares. The amount for Mr. de
Havilland and for directors and officers as a group does not include 11,036
shares owned by his children as to which he disclaims beneficial ownership.
(3) To the knowledge of the Company the owners of all shares of each
class hold sole beneficial ownership and investment power over the shares
reported, except 100 shares of Preferred held jointly by Mr. Gray and his
spouse. The conversion ratio of Preferred to Common is 333.33.
(4) The percentages have been calculated by including, for the Common,
warrants and options exercisable within 60 days and, for the Preferred, accrued
stock dividends through April 1, 2000 of 1,447 shares.
(5) Platinum Plus, Inc. is a wholly-owned subsidiary of Fuel-Tech N.V.
Mr. de Havilland is a director of Cadogan Settled Estates Shareholding Company
Limited and disclaims beneficial ownership of the shares reported for that
entity. The 166 shares reported for Mr. Gray is the total also for the Preferred
holdings of the directors and officers as a group.
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, President and Chief Executive Officer and Mr. James M. Valentine,
Executive Vice President and Chief Operating Officer, during the fiscal years
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ending December 31, 1999, 1998 and 1997, the only executive officers of the
Company who earned total compensation in excess of $100,000 during fiscal year
1999 (the "Named Executive Officers").
Summary Compensation Table
Annual Long-Term
---------------- ---------
Shares
Underlying
Name and Principal Options All
Compensation Granted Other
Position Year Salary(1) Other(2) (#)(3) (4)
- - - - - - -------- ---- --------- -------- ---------- -----
Jeremy Peter-Hoblyn 1999 240,000 50,000 60,000 -
President and Chief 1998 221,563 50,000 7,500 -
Executive Officer 1997 250,000 45,200 35,000 4,800
James M. Valentine 1999 215,000 - 60,000 4,800
Executive Vice President 1998 215,000 - 7,500 4,800
and Chief Operating Officer 1997 220,000 - 35,000 9,550
- - - - - - ----------
(1) For 1999, $62,500 of Mr. Peter-Hoblyn's salary was deferred until the
Company attains gross annual revenues of $5 million. For 1998, $31,250 of
Mr. Peter-Hoblyns salary was paid in the form of 27,777 shares of the
Company's restricted common stock awarded by the directors and valued at
$1.125 per share on December 31, 1998.
(2) The amounts designated "other" in 1999, 1998 and 1997 for Mr. Peter-Hoblyn
are accruals toward a purchased annuity of $50,000, $50,000 and $45,200.
(3) Options granted were Non-Qualified Stock Options without stock appreciation
rights.
(4) The amounts designated "All other Compensation" were Company matching 401(k)
or profit sharing contributions.
Directors' Compensation
The Company provides an annual retainer of $10,000 and a meeting fee of
$1,000 per day for Board or committee meetings in excess of five days plus
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associated expenses for directors who are not employees of the Company. Mr.
Ralph E. Bailey is also reimbursed for his office expenses as Chairman in the
amount of $15,000 per year. Directors who are employees of the Company receive
no compensation for their service as directors. For 1999, shares of restricted
Common in lieu of cash fees were issued on account of these non-employee
directors services in the following amounts: D. G. Bailey, 8,830 shares; R. E.
Bailey, 9,526 shares; de Havilland, 11,036 shares; and Gray, 10,098 shares.
In addition to the foregoing and in consideration for services in 1999
involving the issue and sale of the Preferred, Mr. de Havilland received a fee
of $8,750 and warrants to purchase 29,167 Common shares and S.G. Associates,
Ltd, of which Mr. Gray is a director, received a fee of $17,500 and Mr. Gray
received warrants to purchase 58,333 Common shares. The warrants have an
exercise price of $1.50 per share and a term of 10 years. Mr. de Havilland is
also paid a $2,500 per month consulting fee for financial and investor relations
advice cancelable on one month's notice.
Compensation Committee Interlocks and Insider Participation
Mr. Peter-Hoblyn, Chief Executive Officer, is a non-voting ex-officio
member of the Compensation Committee. Messrs. D. G. Bailey, de Havilland and
Peter-Hoblyn are directors of Fuel-Tech N.V. Fuel-Tech N.V. owns 21.8% of the
equity of the Company and is a party to a Management Services Agreement with the
Company. See the text below under the caption "Certain Relationships and Related
Transactions."
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value of Assumed
Number of % of Total Annual Rates of Stock
Shares Options Price Appreciation for
Underlying Granted to Exercise or Option Term
Options Employees in Base Price ----------------------
Name Granted (#) 1998 ($/Sh) Expiration Date 5% 10%
- - - - - - ---- ----------- ------------ ------------ --------------- --- ---
<S> <C> <C> <C> <C> <C> <C>
Jeremy D.
Peter-Hoblyn 60,000 20.3% $0.90 6/9/09 $33,960 $86,062
James M.
Valentine 60,000 20.3% $0.90 6/9/09 $33,960 $86,062
</TABLE>
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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 8,334 $6,146 127,200 42,500 $17,000 $34,000
James M.
Valentine - - 145,000 42,500 $55,750 $34,000
</TABLE>
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Compensation Policies
Compensation for executives is based on the philosophy that
compensation must (a) be competitive with other businesses to attract, motivate
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and retain the talent needed to lead and grow the Company's business, (b) be
linked to the Company's needs for strong entrepreneurial skills to commercialize
and promote its products, (c) encourage executive officers to build their
holdings of the Company's stock to align their goals with those of the
stockholders\ and (d) to conserve cash.
Compensation of Executive Officers - 1999
The key components of the Company's executive compensation program
during the last fiscal year were base salary and Non Qualified Stock Option
awards under the 1994 Plan. The cash based portion of compensation is fixed by
the Board in its discretion based upon historical levels, performance, ranking
within the officer group, amounts being paid by comparable companies, and the
Company's financial position. Stock options 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 the 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. Finally, stock options minimize the Company's cash
compensation requirements.
Compensation of Chief Executive Officer - 1999
The compensation of the Chief Executive Officer, Mr. Peter-Hoblyn, is
made up of base salary, stock options and a purchased annuity. (See the Summary
Compensation Table above.) Of Mr. Peter-Hoblyn's base salary in 1999 of $240,00,
$62,500 has been deferred until the Company attains annual gross revenues of $5
million in order to conserve cash. This amount of base salary was fixed in 1999
in the overall business judgement of the Board as to the proper competitive
level of salary paid by comparable companies. Also, Mr. Peter-Hoblyn was awarded
60,000 Non-Qualified Stock Options under the Plan in 1999 in accordance with the
Company's philosophy of providing incentives to management aligned with the
interests of the stockholders.
This report has been provided by the following members of the
Compensation Committee of the Board of Directors of the Company:
D. G. Bailey D. R. Gray
J. A. de Havilland
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.
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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
1999 to that of (ii) the Russell 2000 index and (iii) the Standard and Poor's
Specialty Chemicals Index and (iv) an index developed by the Company of a peer
group of companies including American Technologies Group, Inc., Energy
Biosystems Corporation, Environmental Elements Corp. and Fuel-Tech N.V. 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.
<TABLE>
<CAPTION>
12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Russell 2000 100 114 138 133 159
S&P Specialty Chemicals Index 100 107 130 146 168
Environmental/Specialty Chemicals Index 100 73 45 13 14
CDT 100 34 34 16 25
</TABLE>
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Employment Agreements
Messrs. Peter-Hoblyn and Valentine have employment agreements with the
Company effective August 1, 1995 for indefinite terms unless canceled in writing
by either the employee or the Company. If canceled by the employee twelve months
notice is required. If canceled by the Company for reasons other than "just
cause" as defined in the agreements, the Company shall continue the employee's
then base salary and benefits until he finds other comparable employment but not
for a period in excess of one year. The agreements also contain provisions
relating to the employees' obligations to maintain the confidentiality of the
Company's proprietary information and to protect such information from
competitors and to assign certain inventions to the Company.
Management and Services Agreement
Effective July 1995 and amended June 1996, the Company and Fuel Tech,
Inc., a wholly-owned subsidiary of Fuel-Tech N.V., 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 and certain technical and other services to the Company. The
Company is assessed fees equal to 3% of the Company's fixed reimbursable costs
for these services. The fee may be changed by mutual agreement of the Company
and Fuel Tech, Inc. In 1999 a total of $106,000 on account of reimbursable costs
and the fee was paid by the Company to Fuel Tech, Inc. of which costs $66,000
was on account of legal services provided by Mr. Grinnell, a director of the
Company and of Fuel-Tech N.V. 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 may be canceled by either party
on or before May 15 in any year.
Technology Assignments
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 assignments of technology from Fuel Tech, Inc. and Fuel
Tech affiliates. The assignments provide for running royalties payable to Fuel
Tech commencing in 1998 of 2.5% of gross revenues derived from platinum fuel
catalysts. The Company may at any time terminate the royalty obligation by
payment to Fuel Tech in any year from 1998 through 2008 of amounts, depending on
the year, declining from $9,818,180 in 2000 to $1,090,910 in 2008.
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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 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 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 might have been obtained from independent third parties.
Six of the Company's officers or directors are officers or directors of
Fuel Tech. Although these persons seek to devote such time to the affairs of the
Company as the Company's needs require, they must balance the Company's need for
their time with the needs of Fuel Tech and its 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, applicable stock exchange
rules and prevailing corporate practices. Fuel Tech, however, may exercise its
influence in its own best interests.
GENERAL
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that all officers and directors of the Company
were in compliance in 1999 with filing requirements relating to beneficial
ownership reports under Section 16(a) of the Securities Exchange Act of 1934,
except that the reports by Messrs. Gray and de Havilland for September 1999 were
filed after the due date.
Stockholder Proposals
Proposals of stockholders intended for inclusion in the proxy statement
and proxy to be mailed to all stockholders entitled to vote at the 2001 Annual
meeting of Stockholders of the Company must be received in writing at the above
address of the Company on or before December 26, 2000.
Other Business
Management knows of no other matters that may properly be, or are
likely to be, brought before the meeting other than those described in this
proxy statement.
By Order of the Board of Directors
Charles W. Grinnell
Secretary
Stamford Connecticut
April 24, 2000
13
<PAGE>
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, 1997, 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.
Statements in this Proxy Statement which are not historical facts, so-called
"forward-looking statements" are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Stockholders are cautioned
that all forward-looking statements involve risks and uncertainties, including
those detailed in the Company's filings with the Securities Exchange Commission
and also set out under the caption "Risk Factors" in the Annual Report
accompanying this proxy statement.
14
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PROXY PROXY
Solicited by the Board of Directors
CLEAN DIESEL TECHNOLOGIES, INC.
Annual Meeting of Stockholders - June 7, 2000
The undersigned hereby appoints Ralph E. Bailey, Jeremy D. Peter-Hoblyn
or Charles W. Grinnell, acting singly, 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 or of Series A Convertible
Preferred 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 Holiday Inn Select Stamford, 700 Main Street, Stamford, Connecticut
06901 at 10:00 a.m., on Wednesday June 7, 2000, and at any adjournments or
postponements of such meeting, for the following agenda items 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. If no direction is
given, this proxy will be voted for all nominees and for such proposals.
IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE
Fold and Detach Here
<PAGE>
1. Election as directors of Douglas G. Bailey, Ralph E. Bailey, John A. de
Havilland, Derek R. Gray, Charles W. Grinnell, Jeremy D. Peter-Hoblyn and James
M. Valentine, including approval by the holders of Series A Convertible
Preferred Stock of John A. de Havilland and Derek R. Gray as representatives of
such Preferred Stock.
FOR all nominees WITHHOLD
listed above (except AUTHORITY
as marked to the to vote for all
contrary) nominees 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 2000.
FOR AGAINST ABSTAIN
Dated ____________________, 2000
________________________________
________________________________
(Signature of Stockholder)
Please sign exactly as name
appears. If acting as attorney,
executor, trustee or in other
representative capacity, sign
name and title.
