Unassociated Document
UNITED
STATES
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
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 Rule 14a-12
FUELCELL ENERGY,
INC.
(Name
of Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:______________________
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(2)
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Aggregate
number of securities to which transaction
applies:______________________
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(3)
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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)
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Proposed
maximum aggregate value of
transaction: ___________________________
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(5)
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Total
Fee
paid:_______________________________
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¨
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Fee
paid previously with preliminary
materials.
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¨
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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.
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(1)
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Amount
Previously Paid:
______________________
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(2)
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Form,
Schedule or Registration Statement No.:
___________________________
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(3)
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Filing
Party:
________________________________
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(4)
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Date
Filed:
__________________________________
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3 Great
Pasture Road
Danbury,
CT 06813
203-825-6000
February
10,
2009
Dear
Shareholder:
You are cordially invited to attend the
Annual Meeting of Shareholders of FuelCell Energy, Inc. (“FuelCell”), which will
be held on Thursday, March 26, 2009 at 10:00 a.m. Eastern Standard Time, at the
Danbury Plaza Hotel & Conference Center located at 18 Old Ridgebury Road,
Danbury, Connecticut. The formal Notice of Annual Meeting and Proxy
Statement, fully describing the matters to be acted upon at the meeting, appear
on the following pages.
The Board of Directors recommends the
approval of the proposals being presented at the Annual Meeting of Shareholders
as being in the best interest of FuelCell. We urge you to read the
Proxy Statement and give these proposals your careful attention.
Shareholders
can help avoid the necessity and expense of further solicitation to ensure that
a quorum is present at the Annual Meeting by promptly voting their
shares.
Your vote
is important regardless of the number of shares you own. Whether or
not you plan to attend the meeting, please take the time to vote in one of these
ways:
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1.
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Vote
by Internet: Go to WWW.PROXYVOTE.COM. Have your 12-Digit Control Number
when you access the web site and follow the simple
instructions.
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2.
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Vote
by Telephone: Call toll-free 1-800-690-6903. Have your 12-Digit Control
Number when you call and follow the simple
instructions.
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3.
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Vote
by Mail: If you received a proxy card, please vote, sign, date and mail it
without delay to ensure its receipt by 11:59 P.M. (Eastern Daylight Time)
on March 25, 2009.
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You may
attend the meeting and vote in person even if you have previously voted by proxy
in one of the three ways listed above.
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Sincerely
yours,
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R.
Daniel Brdar
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Chairman,
President and
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Chief
Executive Officer
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CONTENTS
Section
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Page
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Notice
of 2009 Annual Meeting of Shareholders
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Proxy
Statement
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1
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§ Proposal No. 1 –
Election of Directors
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2
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Biographies
for Executive Officers who are not Directors
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6
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Board
of Directors and Committees
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7
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Executive
Compensation
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10
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Compensation
Discussion and Analysis
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10
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Compensation
Committee Report
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16
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Summary
Compensation Table
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17
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Grant
of Plan-based Awards Table
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18
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Outstanding
Equity Awards at Fiscal Year-End Table
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19
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Option
Exercises and Stock Vested
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20
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Director
Compensation
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20
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Non-Employee
Director Compensation Table for Fiscal 2008
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22
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Security
Ownership of Certain Beneficial Owners and Management
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23
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Audit
and Finance Committee Report
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26
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Independent
Registered Public Accounting Firm Fees
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27
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§ Proposal No. 2 –
Ratification of Selection of Independent
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Registered
Public Accounting Firm
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28
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Equity Compensation Plan and
Warrant Information
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28
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Additional
Information and Other Matters
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29
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• Item
will be voted on at the meeting
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FUELCELL
ENERGY, INC.
NOTICE
OF 2009 ANNUAL MEETING OF SHAREHOLDERS
TO THE
SHAREHOLDERS OF FUELCELL ENERGY, INC.:
NOTICE IS HEREBY GIVEN that the Annual
Shareholders’ Meeting of FuelCell Energy, Inc. (the “Company” or “FuelCell”),
will be held at the Danbury Plaza Hotel & Conference Center located at 18
Old Ridgebury Road, Danbury, Connecticut on Thursday, March 26, 2009 at 10:00
a.m. Eastern Standard Time for the following purposes:
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1.
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To
elect eleven (11) directors to serve for the ensuing year and until their
successors are duly elected and
qualified;
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2.
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To
ratify the selection of the independent registered public accounting firm
for fiscal year 2009; and
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3.
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To
transact such other business as may properly come before the Meeting or
any adjournment thereof.
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Shareholders of record at the close of
business on February 4, 2009 are entitled to vote at the meeting.
If you plan on attending the meeting,
please call FuelCell at (203) 825-6102. Directions to the Danbury
Plaza Hotel & Conference Center are available on the Company’s web site at
www.fuelcellenergy.com.
Your attention is directed to the
attached Proxy Statement. If you do not expect to be present at the
meeting, please vote your shares according to the instructions on your Notice of
Internet Availability of Proxy Materials (NOIA) or proxy card.
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BY
ORDER OF THE BOARD OF DIRECTORS
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JOSEPH
G. MAHLER
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CORPORATE
SECRETARY
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Danbury,
Connecticut
February
10, 2009
FUELCELL
ENERGY, INC.
3
Great Pasture Road
Danbury,
CT 06813
This Proxy Statement is furnished to
the shareholders of FuelCell Energy, Inc. (the “Company”) in connection with the
solicitation of proxies by the Board of Directors of the Company to be voted at
the 2009 Annual Meeting of Shareholders (the “Annual Meeting”) and at any
adjournment thereof. The Annual Meeting will be held at the Danbury
Plaza Hotel & Conference Center located at 18 Old Ridgebury Road, Danbury,
Connecticut on Thursday, March 26, 2009 at 10:00 a.m. Eastern Standard
Time. The Company is a Delaware corporation.
The
approximate date on which this Proxy Statement and the accompanying proxy card
are first being sent or given to shareholders is February 13, 2009.
PROPOSAL
NO. 1 - ELECTION OF DIRECTORS
Eleven
directors are to be elected at the Annual Meeting, each to hold office until the
next annual meeting of shareholders and until a successor is elected and
qualified. It is the intention of the persons named in the enclosed
form of proxy to vote, if authorized, for the election of the eleven nominees
named below as directors. All of the nominees are present directors
of the Company. If any nominee declines or is unable to serve as a
director (which is not anticipated), the persons named as proxies reserve full
discretion to vote for any other person who may be nominated.
Vote
Required
The affirmative vote of a majority of
holders of the Common Stock present in person or by proxy at the Meeting is
required to elect each nominee as director of the Company for Proposal No.
1.
THE
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE PROPOSAL TO ELECT
THE ELEVEN NOMINEES LISTED BELOW AS DIRECTORS OF THE COMPANY.
The
following table sets forth certain information for each nominee for election as
a director.
NAME
PRINCIPAL OCCUPATION
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AGE
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BIOGRAPHY
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DIRECTOR
SINCE
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R.
Daniel Brdar
President,
Chief Executive Officer and Chairman of the Board of
Directors
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49
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Mr.
Brdar has been Chairman of the Board of Directors since January 2007,
Chief Executive Officer since January 2006 and President since August
2005. Mr. Brdar, previously FuelCell Energy's Executive Vice President and
Chief Operating Officer, joined the Company in 2000. Mr. Brdar held
management positions at General Electric Power Systems from 1997 to 2000
where he focused on new product introduction programs and was product
manager for its gas turbine technology. Mr. Brdar was Associate Director,
Office of Power Systems Product Management at the U.S. Department of
Energy where he held a variety of positions from 1988 to 1997 including
directing the research, development and demonstration of advanced power
systems including gas turbines, gasification systems and fuel cells. Mr.
Brdar received a B.S. in Engineering from the University of Pittsburgh in
1981.
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2005
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NAME
PRINCIPAL OCCUPATION
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AGE
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BIOGRAPHY
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DIRECTOR
SINCE
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Richard
A. Bromley
Retired Vice President - Law
and Government for AT&T
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74
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Mr.
Bromley recently retired as Vice President - Law and Government Affairs at
AT&T. During his 38-year career at AT&T, he served as an attorney
for Pacific Northwest Bell, Western Electric, Bell Labs, and as a general
attorney in AT&T's New York headquarters. As VP-Law and Government
Affairs, Mr. Bromley was responsible for all of AT&T's legal,
regulatory and governmental matters west of the Mississippi. He is a
member of the bar in California, New York, Washington, and Oregon, as well
as the United States Supreme Court.
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2007
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James
Herbert England
Chief
Executive Officer of Stahlman-England Irrigation Inc.
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62
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Mr.
England is an independent business consultant and the CEO and a director
of Stahlman-England Irrigation Inc. and HEMS, LLC, an investment
partnership. Previously, Mr. England was Chairman, President and CEO of
Sweet Ripe Drinks, Ltd., a fruit beverage company. Prior to that, he spent
18 years at John Labatt Ltd., a $5 billon public company, and served as
the company's CFO from 1990-1993. Mr. England started his career with
Arthur Anderson & Co. in Toronto after serving in the Canadian
infantry. Mr. England is a director of Enbridge Inc. and is a past member
of the board of directors of John Labatt Ltd., Canada Malting Co., Ltd.,
and the St. Clair Paint and Wallpaper Corporation.
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2008
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Glenn
H. Epstein
Former Chairman and Chief
Executive Officer of Intermagnetics General
Corporation
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50
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Mr.
Epstein was the Chairman and CEO of Intermagnetics General Corporation. He
began his career as an engineer at General Electric before moving to the
U.K. to take on progressive management roles with Oxford Instruments plc.
Mr. Epstein joined Intermagnetics in 1997 as President and COO, took over
as CEO in 1999 and was elected Chairman in 2002. Mr. Epstein led
Intermagnetics through multiple years of high growth and expansion until
negotiating the sale of Intermagnetics to Royal Philips for $1.3 billion.
He recently left Philips after leading an integration of both companies MR
imaging businesses.
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2007
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NAME
PRINCIPAL OCCUPATION
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AGE
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BIOGRAPHY
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DIRECTOR
SINCE
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James
D. Gerson
Private
Investor
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65
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Mr.
Gerson is a member of the Board of several public and private companies
and civic organizations including I-Light Technologies, Zipcar, Inc. and
VE Enterprises. He is also Chairman of the Board of Evercel, Inc. Prior to
its 2007 merger with Schneider Electric, Mr. Gerson served as a Director
of American Power Conversion Corp. Mr. Gerson was previously a Vice
President of Fahnestock & Co., Inc. (now Oppenheimer & Co.), where
he held a variety of positions in corporate finance, research and
portfolio management.
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1992
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Thomas
L. Kempner
Chairman
and Chief Executive Officer of Loeb Partners Corporation
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81
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Mr.
Kempner has been Chairman and Chief Executive Officer of Loeb Partners
Corporation since 1979 and a general partner of Loeb Investors Co. LXXV,
an investment partnership and an affiliate of Loeb Partners
Corporation. Mr. Kempner is a Director of IGENE BioTechnology,
Inc., Dyax Corporation, Intersections, Inc. and Director Emeritus of
Northwest Airlines, Inc.
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1988
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William
A. Lawson
Retired
Chairman of the Board of Newcor, Inc.
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75
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Mr.
Lawson was the Chairman of the Board of Newcor, which designed and
manufactured products principally for the automotive, heavy-duty,
agricultural and industrial markets and focused on two core competencies:
precision machined components and molded rubber and plastic products.
Newcor operated six companies with 1,000 employees and now operates as
part of EXX, Inc. Mr. Lawson was also President of W. A. Lawson
Associates, an industrial and financial consulting firm.
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1988
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George
K. Petty
Former
President and Chief Executive Officer of Telus Corporation
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67
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Mr.
Petty was the President and Chief Executive Officer of Telus Corporation,
which is Canada’s second largest telecommunications
company. Previously, Mr. Petty was Vice President of Global
Business Service for AT&T and Chairman of the Board of World Partners,
the Global Telecom Alliance. Mr. Petty is a Director of
Enbridge Inc., Enbridge Energy Partners, LLC, Enbridge Energy Management,
LLC and Enbridge Energy Company, Inc. Enbridge is a global
energy transportation and distribution company with $12 billion (Canadian)
in sales and 4,900 employees.
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2003
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NAME
PRINCIPAL OCCUPATION
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AGE
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BIOGRAPHY
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DIRECTOR
SINCE
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John
A. Rolls
Managing
Partner Core Capital Group, a private investment
partnership
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67
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Mr.
Rolls is Managing Partner of Core Capital Group, a private investment
partnership. Previously, Mr. Rolls was the President and Chief
Executive Officer of Deutsche Bank North America Executive Vice President
and Chief Financial Officer of United Technologies, Senior Vice President
and Chief Financial Officer of RCA and Treasurer, Monsanto
Company. Mr. Rolls is a Director of AbitibiBowater Inc. and of
MBIA Corporation.
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2000
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Christof
von Branconi
Executive
Vice President and Chief Operating Officer of Tognum’s Onsite Energy
Systems & Components Division
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48
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Mr.
von Branconi is Executive Vice President and Chief Operating Officer of
Tognum AG's Onsite Energy Systems & Components Division. Prior to
Tognum AG, Mr. von Branconi was the Chief Operating Officer for Lurgi AG,
a Frankfurt, Germany company specializing in chemical plant engineering,
including renewables, synthesis gas, hydrogen, carbon monoxide as well as
sulfur recovery. Mr. von Branconi's prior roles at Lurgi included Manager
of Controlling and Business Development. He was a regional director for
ThyssenKrupp HiServe in Oberhausen, Germany as well as Chief Operating
Officer and Chief Financial Officer on the Executive Board for Technology
and Commercial at Polyamid 2000 in Brandenburg, Germany.
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2007
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Togo
Dennis West, Jr.
Chairman
of Noblis, Inc. and the TLI Leadership Group
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66
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Mr.
West was U.S. Secretary of the Army from 1993-1998 and U.S. Secretary of
Veterans Affairs from 1998-2000. He has practiced law as a partner in
the New York law firm of Patterson, Belknap, Webb and Tyler and was of
counsel to the D.C. based law firm of Covington & Burling. Mr.
West also served as General Counsel to the Departments of Defense and of
the Navy. Prior to his appointment with the Army, he was Senior Vice
President for Government Affairs with Northrop Corporation. More recently,
he was President and CEO of the Joint Center for Political and Economic
Studies. Mr. West serves on the boards of Krispy Kreme Doughnuts, Inc.,
AbitibiBowater Inc. and Bristol-Myers Squibb.
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2008
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BIOGRAPHIES
OF EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
NAME
PRINCIPAL OCCUPATION
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AGE
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BIOGRAPHY
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Christopher
R. Bentley
Executive
Vice President, Government R&D Operations, Strategic Manufacturing
Development
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66
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Mr.
Bentley has been responsible for Government Research and Development
Operations and Strategic Manufacturing Development since January of 2005.
He joined the Company in 1990 to develop manufacturing and operations
capability in support of the DFC commercialization initiative. He served
on the Board of Directors from 1993 to 2004. Prior to joining the Company,
he was Director of Manufacturing (1985), Vice-President and General
Manager (1985-1988) and President (1989) of the Turbine Airfoils Division
of Chromalloy Gas Turbine Corporation, a major manufacturer of gas turbine
hardware. From 1960 to 1985 he was with the General Electric
Company. Mr. Bentley received a B.S. in Mechanical Engineering
from Tufts University in 1966.
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Bruce
A. Ludemann
Senior
Vice President of Sales & Marketing
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49
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Mr.
Ludemann joined the Company in April 2006. His responsibilities
encompass the Company’s business development activities across global
markets. Prior to joining the Company, Mr. Ludemann was a senior marketing
and sales executive with Siemens for eight years, where he oversaw sales
and marketing efforts for the firm’s Power Generation and Transmission
& Distribution business units. Earlier, he was with ABB Power
Transmission & Distribution Inc. for 13 years; the industrial control
firm Square D; and Swiss electrical equipment manufacturer BBC Brown
Boveri. He also served four years in the U.S. Navy specializing in
electric power generation and distribution systems. Mr. Ludemann holds an
Executive MBA from the University of Pittsburgh.
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Joseph
G. Mahler
Senior
Vice President, Chief Financial Officer, Corporate Secretary, Treasurer,
Corporate Strategy
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56
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Mr.
Mahler joined the Company in October 1998 as Vice President, Chief
Financial Officer, Corporate Secretary, and Treasurer. Mr. Mahler’s
responsibilities include finance, accounting, corporate governance,
strategy, treasury, information systems and human resources. Mr. Mahler
was Vice President-Chief Financial Officer at Earthgro, Inc. from 1993 to
1998 and worked at Ernst & Young in the New York and Hartford offices
from 1974 to 1992. Mr. Mahler was a partner in the Hartford office’s
Entrepreneurial Services Group. Mr. Mahler received a B.S. in
Accounting from Boston College in
1974.
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BOARD
OF DIRECTORS AND COMMITTEES
The Board
of Directors held nine meetings during the fiscal year ended October 31,
2008. During fiscal year 2008, each director attended at least 85% of
the meetings of the Board of Directors and Board committees of which he was a
member during the period he served as director.
Lead
Independent Director
The Board
of Directors established the role of Lead Independent Director and appointed
John Rolls to the position in January 2007.
Independent
Directors
The Board
of Directors has determined that the following members of the Board are
independent directors, as such term is defined in Nasdaq Rule 4200(a)(15):
Richard A. Bromley, James Herbert England, Glenn H. Epstein, James D.
Gerson, Thomas L. Kempner, William A. Lawson, George K. Petty, John A. Rolls and
Secretary Togo Dennis West Jr. The independent directors meet from time to time
in executive session.
Executive
Committee
The Board
of Directors has an Executive Committee comprised of Messrs. Brdar (Chairman),
Petty and Kempner. The Executive Committee, which held no meetings
during fiscal 2008, is authorized to exercise the general powers of the Board
between meetings of the Board of Directors.
Nominating
and Corporate Governance Committee
The Board
of Directors has a Nominating and Corporate Governance Committee (the
“Nominating Committee”) comprised of Messrs. Kempner (Chairman), Gerson, Lawson
and Rolls. The members of the Nominating Committee are all
independent directors under applicable Nasdaq rules. Members of the
Nominating Committee are appointed by the Board of Directors. The principal
duties of the Nominating Committee, in its capacity as a committee of the Board
of Directors, are (i) to identify individuals qualified to become members of the
Board of Directors and recommend the persons to be nominated by the Board of
Directors for election as directors at the annual meeting of shareholders, (ii)
to review the Company’s corporate governance principles, assess and recommend to
the Board any changes deemed appropriate, (iii) to periodically review, discuss
and assess the performance of the Board and the Committees of the Board, (iv) to
review the Board’s committee structure and make recommendations to the full
Board concerning the number and responsibilities of Board committees and
committee assignments, (v) to periodically review and report to the Board any
questions of possible conflicts of interest or related party transactions
involving Board members or members of senior management of the Company and other
matters required by its charter. The Nominating and Corporate
Governance Committee has a charter, a copy of which is available on the
Company’s website at www.fuelcellenergy.com.
The
Nominating Committee will consider nominees for the Board of Directors
recommended by stockholders. Nominations by shareholders must be in
writing, and must include the full name of the proposed nominee, a brief
description of the proposed nominee’s business experience for at least the
previous five years, and a representation that the nominating stockholder is a
beneficial or record owner of the Company’s common stock. Any such
submission must also be accompanied by the written consent of the proposed
nominee to be named as a nominee and to serve as director if
elected. Nominations must be delivered to the Nominating Committee at
the following address:
Nominating
and Corporate Governance Committee
FuelCell
Energy, Inc.
c/o
Corporate Secretary
3 Great
Pasture Road
Danbury,
CT 06813
The
Nominating Committee is required to review the qualifications and backgrounds of
all directors and nominees (without regard to whether a nominee has been
recommended by shareholders), as well as the overall composition of the Board of
Directors, and recommend a slate of directors to be nominated for election at
the annual meeting of shareholders, or, in the case of a vacancy on the Board of
Directors, recommend a director to be elected by the Board to fill such
vacancy. The Nominating Committee held three meetings during fiscal
2008.
Audit
and Finance Committee
The Board
of Directors has an Audit and Finance Committee comprised of Messrs. Gerson
(Chairman), Bromley, England, and Rolls. The principal duties of the
Audit and Finance Committee are to oversee (i) management’s conduct of the
Company’s financial reporting process, including reviewing the financial reports
and other financial information provided by the Company, and the Company’s
systems of internal accounting and financial controls, (ii) the Company’s
independent auditors’ qualifications and independence and the audit and
non-audit services provided to the Company, and (iii) the performance of the
Company’s independent auditors. The Audit and Finance Committee shall also
assist the Board in providing oversight as to the Company’s financial and
related activities, including capital market transactions and other matters
required by its charter. The Audit and Finance Committee has a
charter, a copy of which is available on the Company’s website at
www.fuelcellenergy.com. The Audit and Finance Committee held ten
meetings during fiscal 2008. The Audit and Finance Committee’s report appears on
page 26.
Each of
the Audit and Finance Committee members satisfies the definition of independent
director and is financially literate as established in the NASDAQ Listing
Standards. In accordance with Section 407 of the Sarbanes-Oxley Act of
2002, the Board has identified Herbert England and John Rolls as the Audit and
Finance Committee's "Independent Financial Experts."
Compensation
Committee
The Board
of Directors has a Compensation Committee comprised of Messrs. Petty (Chairman),
Epstein, Lawson and West. The members of the Committee are all
independent directors under applicable Nasdaq rules. Members of the
Compensation Committee are appointed by the Board of Directors.
The
Compensation Committee is responsible for implementing and reviewing executive
compensation plans, policies and programs in an effort to ensure the attraction
and retention of executive officers in a reasonable and cost-effective manner,
to motivate their performance in the achievement of the Company’s business
objectives and to align the interests of executive officers with the long-term
interests of the Company’s shareholders. To that end, it is the responsibility
of the Compensation Committee to develop, approve and periodically review a
general compensation policy and salary structure for executive officers of the
Company, which considers business and financial objectives, industry and market
pay practices and/or such other information as may be deemed
appropriate. It is also the responsibility of the Compensation
Committee to review and recommend for approval by the independent directors of
the Board the compensation (salary, bonus and other incentive compensation) of
the Chief Executive Officer of the Company and review and approve the
compensation (salary, bonus and other incentive compensation) of the other
executive officers of the Company; review and approve perquisites offered to
executive officers of the Company; review and approve corporate goals and
objectives relevant to the compensation of executive officers of the Company and
evaluate performance in light of the goals and objectives; and review and
approve all employment, retention and severance agreements for executive
officers of the Company. The Compensation Committee reviews the
management succession program for the Chief Executive Officer and selected
executive officers of the Company.
The
Compensation Committee acts on behalf of the Board in administering compensation
plans approved by the Board, in a manner consistent with the terms of such plans
(including, as applicable, the granting of stock options, restricted stock,
stock units and other awards, and the review of performance target goals
established before the start of the relevant plan year and determination of when
performance goals have been achieved at the end of the plan year); the Committee
also reviews and makes recommendations to the Board with respect to new
compensation incentive plans and equity-based plans; reviews and recommends the
compensation (annual retainer, committee fees and other compensation) of the
Directors of the Board to the full Board for approval; and reviews and makes
recommendations to the Board on changes in major benefit programs of executive
officers of the Company and other matters required by its
charter. The Compensation Committee has a charter, a copy of which is
available on the Company’s website at www.fuelcellenergy.com. The
Compensation Committee held five meetings during fiscal 2008. The
Compensation Committee’s report appears on page 16.
Compensation
Committee Interlocks and Insider Participation
No member
of the Compensation Committee was an officer or employee of the Company during
the fiscal year ended October 31, 2008. No executive officer or
director of the Company had a relationship with the Company or any other company
during fiscal 2008, which the SEC defines as a compensation committee interlock
and requires disclosure to shareholders.
Mr.
Petty, Chairman of the Compensation Committee, is a member of the Board of
Directors of Enbridge Inc. (“Enbridge”), a distributor for the
Company.
During
fiscal year 2008, the Company recognized revenue of approximately $0.2 million
for power plant sales to Enbridge. The Company believes that the
terms of its transactions with Enbridge are no less favorable to the Company
than it could have obtained from an unaffiliated third party.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The
intent of this Compensation Discussion and Analysis (“CD&A”) is to identify
and discuss in detail all components within the Company’s executive compensation
policy and to explain the objectives and practices of the
policy. Executive compensation tables are presented beginning on page
17 with respect to the executive compensation of the following Named Executive
Officers (“NEOs”).
|
·
|
R.
Daniel Brdar - Chairman, Chief Executive Officer and
President
|
|
·
|
Joseph
G. Mahler - Senior Vice President, Chief Financial Officer, Corporate
Secretary, Treasurer, Corporate
Strategy
|
|
·
|
Christopher
R. Bentley - Executive Vice President, Government R&D Operations,
Strategic Manufacturing Development
|
|
·
|
Bruce
A. Ludemann - Senior Vice President of Sales and
Marketing
|
Design of Compensation
Package
Recruitment
and retention of leadership to manage the Company requires a competitive
compensation package. The Compensation Committee is responsible for
implementing and reviewing executive compensation plans, policies and programs
in an effort to ensure the attraction and retention of executive officers in a
reasonable and cost-effective manner, to motivate their performance in the
achievement of the Company’s business objectives and to align the interest of
executive officers with the long-term interests of the Company’s
shareholders. The Compensation Committee reviews the Company's
executive compensation on an annual basis and analyzes the various long-term
incentive tools including stock options, restricted stock, restricted stock
units, performance-based equity and other alternatives that might be
available.
The
Compensation Committee’s compensation approach emphasizes (i) a fixed component,
which includes a competitive base salary and health and retirement benefits and
(ii) a variable component, which consists of an annual bonus award
(based on a percentage of base salary and typically paid in cash and common
stock), long-term incentive stock option awards used to align a portion of the
executive’s compensation with the long-term success of the Company’s
shareholders, restricted stock units and an Employee Stock Purchase Plan
(“ESPP”).
To ensure
competitiveness of the Company’s executive compensation, the Compensation
Committee relies on benchmarking data. Ernst & Young LLP
performed a compensation study for the Company in 2003 and the Company has
consulted with them since this date to update the benchmarking
data. The Company has used various other resources for executive
compensation benchmarking data, including information from Equilar Inc., as well
as subscriptions to internet-based or other forms of executive compensation
information. The Company also uses Mercer HR Consulting, primarily to
assist with structuring the Company’s health, life and disability benefits
offered to employees and has used compensation benchmarking data provided by
Mercer.
The
Compensation Committee considers benchmarking data of executive compensation
values from a compensation peer group (“CPG”) of companies in the energy
industry, primarily alternative energy companies. Actual compensation
for NEOs will vary based on performance, job scope, abilities, tenure and
retention risk. The CPG consists of the following companies: Active
Power, Inc., Advanced Energy Industries, Inc., Ballard Power Systems Inc.,
Beacon Power Corp., American Superconductor Corp., Capstone Turbine Corp.,
Dionex Corp., Energy Conversion Devices, Inc., Plug Power Inc, Satcon Technology
Corp. and Zygo Corp. The Compensation Committee periodically reviews and adjusts
the compensation peer group.
The
Compensation Committee uses information provided by management, including
primarily the Chief Executive Officer, Chief Financial Officer and Vice
President of Human Resources. Management assists with gathering
benchmarking data and also provides information to the Compensation Committee
relating to Company performance against annual milestones including product
orders, cash use, product field performance and product cost-reduction. The
Chief Executive Officer makes recommendations to the Compensation Committee for
annual merit increases, bonus pools and long-term incentive awards for other
NEOs. The Compensation Committee determines annual merit increases,
bonus pools and long-term incentive awards for the Chief Executive
Officer.
Fixed
Compensation
Principal
elements of fixed compensation not directly linked to individual or Company
performance include a base salary and benefits (e.g., 401(k), health, life and
disability insurance).
Base
Salary
Base
salaries are used to recognize the experience, skills, knowledge and
responsibilities required of all of our employees, including our executive
officers. Fiscal 2008 base salaries for the Company’s executive officers were
determined by the Compensation Committee after considering the base salary level
of NEO’s in the prior year. Increases in base salary are based on an annual
review and evaluation of the performance of the operation or function for which
the executive has responsibility, and is measured against defined performance
criteria. The Compensation Committee has historically reviewed benchmarking data
showing an average executive compensation in the 25th to
75th
percentile of the market median from the CPG, with individual variations based
on job scope, tenure, retention risk and other factors considered relevant by
The Compensation Committee. Base salaries for the Company’s NEOs for
2008 are consistent with this targeted range.
Benefits
The
Company offers a 401(k) Plan as well as health, life and disability insurance to
its NEOs. The level of benefits and premiums under these programs are
offered on the same basis as those offered to the Company’s non-executive
employees. All 401(k) contributions are limited to an annual maximum
amount as set annually by the Internal Revenue Service. During fiscal
2008 the Company provided matching contributions equal to the employee’s
deferred compensation, up to a maximum of 6 percent of annual compensation,
subject to limitations imposed by the IRS. Participants are required
to contribute a minimum of 3 percent in order to be eligible to participate and
receive a Company match. Company contributions begin vesting after
one year and are fully vested after five years. Effective March 2009, the
Company will be suspending matching contributions. There is no option available
in the 401(k) plan for the employee to receive or purchase the Company’s common
stock. The Company also offers medical and dental insurance and pays
a portion of the premiums for these benefits consistent with other non-executive
employees. Executive officers and non-executive employees also
receive group life insurance and accidental death and dismemberment benefits;
premiums for these benefits are paid by the Company. The Company also
pays short-term disability premiums and supplemental long-term disability
premiums for its executive officers and other eligible employees.
Variable
Compensation
Annual
Bonus
NEOs are
eligible to participate in an annual bonus plan. The baseline bonus
percentages for the NEOs as well as all salary grade levels within the Company
are based on benchmarking data for the Company’s CPG. The
Compensation Committee has historically reviewed benchmarking data showing an
executive annual bonus between the 50th and
75th
percentile of the market median from the CPG. The Compensation Committee
determines the level of awards under the bonus plan and considers input of the
Chief Executive Officer with respect to the bonus to be awarded to the other
executive officers. The size of the Company’s overall bonus pool as
well as each individual NEO’s bonus reflects (i) baseline bonus percentages,
(ii) performance against pre-established Company milestones, and (iii)
adjustments for individual performance. The Compensation Committee
retains the right to adjust the size of awards as it deems appropriate to take
into account other factors that enhance or detract from results achieved
relative to the established milestones, as well as unforeseen factors beyond
management’s control that affected performance. In this way, the
Compensation Committee does not confine itself to a purely quantitative approach
and retains discretion in determining awards based on its review of and
assessment of results for the year. The Compensation Committee
believes that linking bonus awards to pre-established milestones creates a
performance-based compensation strategy consistent with shareholder
interests.
Baseline
bonus targets as a percentage of base salary for each NEO are as
follows:
|
-
|
Chief
Executive Officer – 50 percent
|
|
-
|
Other
Named Executive Officers – 30
percent.
|
Each of
the Company’s milestones include pre-established levels of performance to obtain
scores ranging from 0 percent to 125 percent. The threshold
performance level of satisfactory is intended to be reasonable based on
historical performance while performance measures above the threshold are
intended as stretch goals to improve the Company’s operating results or product
performance. The Compensation Committee has the authority to review
extraordinary events that impact the Company's performance and may adjust the
final calculation. Each milestone is also assigned a weighting or level of
importance of that milestone against the Company’s other
milestones. The aggregate weighted score (milestone weight multiplied
by milestone score) for all milestones is used to determine the overall pool
payout percentage using the following scale:
Scale
|
|
Weighted Score
|
|
Percentage
Payout
|
|
|
|
|
|
Satisfactory
|
|
50%
- 69%
|
|
75%
|
|
|
|
|
|
Commendable
|
|
70%
- 89%
|
|
100%
|
|
|
|
|
|
Outstanding
|
|
Greater
than 90%
|
|
125%
|
The milestones for fiscal 2007 (paid in
2008) were to (1) secure product orders, (2) reduce product cost of the DFC300MA
and DFC1500MA power plants, (3) achieve technology improvements, (4) limit cash
use, and (5) increase research and development revenue. The five
milestones were weighted at 25 percent, 25 percent, 15 percent, 25 percent and
10 percent, respectively. The Company’s performance for each of the 2007
milestones was (i) secured power plant orders of 62 percent of the order target,
(ii) achieved approximately 95% of target for reducing product costs of the
DFC300MA and DFC1500MA (iii) achieved 3 percent better than target for increased
stack power output and achieved the increase to a 5 year stack-life but missed
the targeted completion date, (iv) used approximately 2 percent higher cash than
target, and (v) increased research and development revenue 23 percent better
than target.
Each
milestone performance was applied to a sliding scale to calculate the weighted
score. The overall performance against the milestones for 2007 resulted in a
weighted score of 75%, yielding a commendable rating and a percentage payout of
100%.
The Chief
Executive Officer recommended, and the Compensation Committee approved, a bonus
pool of 100 percent of baseline target bonuses. Bonuses were paid 50
percent in cash and 50 percent in shares of Company stock equal to the bonus
award amount divided by the fair market value of the stock on date of
award. Bonus awards for each of the NEOs shown in the Summary
Compensation Table on page 17 reflect the approved bonus pool percentage,
adjusted for tenure, retention goals and individual performance.
Long-Term
Incentive Compensation
Each of
the NEOs are eligible to receive awards under the Company’s Equity Incentive
Plans. These Plans are used to align a portion of the NEO’s
compensation with shareholders' interest and the long-term success of the
Company by providing a direct link to future earnings potential and the
Company’s stock price. The Compensation Committee does not and has
not permitted backdating or re-pricing of stock options. Grant dates
are the date The Compensation Committee approves the awards. Stock
option exercise prices equal the closing price for the Company’s common stock on
the grant date and have a ten year term. These options provide value
to the executive only if the Company’s stock price increases after the grants
are made.
The
number of stock options granted annually to NEOs is based on pre-established
grant guidelines calibrated to competitive standards and approved by the
Compensation Committee. The Compensation Committee considers benchmarking data,
peer group comparisons, as well as cost implications, in determining long-term
incentive awards. The Compensation Committee has historically reviewed executive
officer benchmarking data showing long-term incentive awards ranging from 75
percent to 400 percent of base salary for the CPG with option values determined
using the Black-Scholes model. The Compensation Committee considers
benchmarking data when determining the total number of options granted to
Company employees, including NEOs, based on a percentage of the Company’s common
stock outstanding targeting between the 50th and
75th
percentile of Russell 2000 companies according to market data provided by
Equilar Inc. For the shares granted in 2008, the run rate percentage of new
options granted during the period divided by total outstanding common shares was
1.86 percent. This percentage was within the targeted percentiles.
The
number of options granted to each NEO during 2008 is consistent with the
benchmarking data discussed above, adjusted for tenure with the Company,
retention goals and individual performance. As a percent of base salary, the
value of long-term incentive awards in fiscal 2008 ranged from 50 percent to 289
percent of base salary for the NEOs. As a percent of base salary, the value of
long-term incentive awards in fiscal 2007 ranged from 36 percent to 146 percent
of base salary for the NEOs. The increase in long-term incentive awards as a
percentage of base salary from 2007 to 2008 is primarily attributed to Mr.
Brdar’s grant of 200,000 stock options on January 30, 2008, compared to 100,000
stock options granted in 2007. The Compensation Committee considered
Mr. Brdar’s total option grant history, including his new-hire grant
on October 12, 2000 with a grant price of $38 per share in determining his 2008
award. Stock option awards for each of the NEOs are shown in the
Summary Compensation Table on page 17.
Employee
Stock Purchase Plan
NEOs can
participate in the Company’s shareholder approved Section 423 Stock Purchase
Plan on the same terms as eligible non-executive employees, subject to legal
limitations on contribution amounts or payments to executive officers under
these plans. NEOs can participate in the Company’s shareholder
approved Section 423 Stock Purchase Plan (ESPP) on the same terms as eligible
non-executive employees, subject to legal and plan limitations on contribution
amounts and share limitations. Under the ESPP, eligible employees
have the right to purchase shares of common stock at an exercise price for each
offering period equal to the lesser of (i) 85 percent of the last reported sale
price of the Company’s common stock on the first business day of the offering
period, or (ii) 85 percent of the last reported sale price of the common stock
on the last business day of the offering period, in either case rounded up to
avoid impermissible trading fractions.
Any
shares issued pursuant to the ESPP shall contain a legend restricting the
transfer or sale of such common stock for a period of six months after the date
of purchase.
Chief Executive Officer
Compensation
The
compensation paid by the Company to its Chief Executive Officer, Mr. Brdar, who
became Chief Executive Officer in January 2006, was based upon an employment
agreement. The Compensation Committee conducts surveys of
compensation packages of Chief Executive Officers in comparable companies, and
believes, based upon the individual experience of its members that the
compensation package for Mr. Brdar for fiscal 2008 was reasonable based upon
Mr. Brdar’s experience, his level of responsibility and the contributions
made and expected to be made by him to the Company. See the following
section for a description of Mr. Brdar’s employment agreement.
Employment Agreements and
Change of Control and Severance
R.
Daniel Brdar
On
January 12, 2006, the Company entered into an employment agreement (the
“Agreement”) with Mr. Brdar upon his promotion to President and Chief Executive
Officer. This Agreement supersedes Mr. Brdar’s prior employment
arrangement dated February 2005. Under the Agreement, which is
terminable by either party upon 30 days notice, Mr. Brdar is entitled to an
initial annual base salary of $350,000, to be reviewed at least annually by the
Board of Directors, and a bonus of up to 50% of Mr. Brdar’s base salary also to
be determined and approved by the Board of Directors. Mr. Brdar
retained options to purchase 250,000 shares of Common Stock granted under the
February 2005 employment arrangement and was granted options to purchase an
additional 250,000 shares of Common Stock in December 2005. The
Agreement also provides Mr. Brdar with the opportunity to participate in
insurance plans and other employee benefits as may be generally available to
other employees of the Company. The Agreement also contains
non-disclosure provisions and prohibits Mr. Brdar from competing with the
Company during the term of his employment and for a period of two years
thereafter.
In the
event of change in control of the Company resulting in voluntary termination by
Mr. Brdar or, in the event of termination of Mr. Brdar’s employment by the
Company without cause, he is entitled to a severance payment in an amount equal
to two years of his base salary as of the date of termination plus the average
of the bonuses paid to him since the inception of his employment agreement. In
the event of termination of Mr. Brdar’s employment by the Company for cause, the
Company shall pay Mr. Brdar any base salary and vacation accrued but as yet
unpaid on the effective date of such termination. Mr. Brdar's stock options and
restricted stock granted shall accelerate and immediately vest upon a change of
control.
Should
Mr. Brdar be unable to fulfill his duties as a result of incapacity or
disability, the Company may terminate his employment. In the event of such
incapacity or disability, the Company shall continue to pay full compensation to
Mr. Brdar in accordance with the terms of his employment agreement until the
date of such termination. In the event of death, the Company shall pay Mr.
Brdar’s estate any base salary and other compensation or benefits accrued but as
yet unpaid on the date of death.
Joseph
G. Mahler
In
October 1998, the Company entered into an employment agreement with Mr. Mahler
upon hiring him as its Chief Financial Officer, Treasurer and Corporate
Secretary. Under the agreement, which is terminable by either party
upon 30 days notice, Mr. Mahler is entitled to a minimum annual salary and a
bonus. In addition, upon entering into the agreement, the Company
granted Mr. Mahler options to purchase 300,000 shares of Common
Stock. The agreement also provides Mr. Mahler with the opportunity to
participate in insurance plans and other employee benefits as may be generally
available to other employees of the Company. The agreement also
contains non-disclosure provisions and prohibits Mr. Mahler from competing with
the Company during the term of his employment and for a period of two years
thereafter.
In the
event of change in control of the Company resulting in voluntary termination by
Mr. Mahler, he is entitled to a severance payment in an amount equal to one year
of his base salary as of the date of termination plus an amount equal to his
bonus if any, for the immediately preceding year and any incentive compensation
awarded to him but not yet paid.
In the
event of termination of Mr. Mahler’s employment by the Company without cause,
Mr. Mahler shall be entitled to a severance payment in an amount equal to one
year of his base salary as of the date of termination plus an amount equal to
his bonus if any, for the immediately preceding year. In the event of
termination of Mr. Mahler’s employment by the Company for cause, the Company
shall pay Mr. Mahler any base salary accrued but as yet unpaid on the effective
date of such termination plus any incentive compensation awarded to him but not
yet paid.
Should
Mr. Mahler be unable to fulfill his duties as a result of incapacity of
disability, the Company may terminate his employment. Mr. Mahler shall receive
his base salary through the date of termination, provided, however, that to the
extent of Mr. Mahler is receiving disability benefits pursuant to the Company’s
disability insurance policy, the amount of such benefits shall be credited
against Mr. Mahler’s base salary during the period prior to the date of
termination. In addition, upon any termination based upon disability, the
Company shall pay Mr. Mahler any incentive compensation awarded to him but not
yet paid. In the event of death, the Company shall pay Mr. Mahler’s
estate any base salary through the last day of the calendar month plus any
incentive compensation awarded to Mr. Mahler but not yet paid.
Messrs.
Bentley and Ludemann do not have employment agreements.
Stock Ownership
Guidelines
The
Compensation Committee believes that the elements of compensation for NEOs
discussed above provides for an appropriate level of correlation with
shareholder interests and therefore the Compensation Committee does not require
named executives officers or other senior executives to own specified amounts of
FuelCell Energy common stock.
Tax and Accounting
Considerations
Section 162(m)
of the Internal Revenue Code of 1986, as amended, generally prohibits public
companies from taking a tax deduction for compensation in excess of $1,000,000
paid to its named executive officers at the end of the year. Qualifying
performance-based compensation is not subject to the deduction limitation if
specified requirements are met. The Company structures its equity awards to
comply with exemptions in Section 162(m) in order to ensure that the
compensation remains tax deductible. The Company periodically reviews the
potential consequences of Section 162(m) on the other components of its
executive compensation program. Executive Compensation paid during 2008 complied
with the Section 162(m) to the extent it was applicable.
Conclusion
The
Compensation Committee believes that the elements of compensation delivered to
each NEO is reasonable and appropriate and is in the best interest of the
Company and its shareholders and that its decisions with respect to compensation
paid to NEOs are in line with the goals and objectives as defined in this
Compensation Discussion and Analysis.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee has reviewed the Compensation Discussion and Analysis and
has discussed it with management. Based on the review of the
Compensation Discussion and Analysis, the Compensation Committee has recommended
to the Board its inclusion in the Company’s Annual Report on Form 10-K for its
fiscal year ended October 31, 2008 and its 2009 Proxy Statement filed in
connection with the Company’s 2009 Annual Meeting of Shareholders.
The Compensation
Committee
George
Petty (Chairman)
Togo
West, Jr.
William
Lawson
Glenn
Epstein
Named
Executive Officer Compensation
The
following narrative, tables and footnotes set forth the annual and long-term
compensation for services in all capacities to the Company for the fiscal year
ended October 31, 2008 of those persons who were the chief executive officer
during fiscal 2008 and all of the other most highly compensated executive
officers (“Named Executive Officers” or “NEOs”) of the Company at October 31,
2008. Each component of the total compensation paid to NEOs during fiscal year
2008 is described below:
Salary – Mr. Brdar’s and Mr.
Mahler’s base salaries were set pursuant to the terms of their employment
agreements with the Company. For further information see employment agreements
on page 14. Mr. Bentley and Mr. Ludemann do not have employment
agreements with the Company. Salaries are commensurate with position
level, job responsibilities and benchmarking data as described on page
11.
Bonus –The value of the annual
bonus for each NEO in fiscal year 2008 was paid 50% in cash and 50% in shares of
common stock. The “Bonus” column of the Summary Compensation Table
represents the cash portion of the bonus.
Stock Awards - The value of
the annual bonus for each NEO in fiscal year 2008 was paid 50% in cash and 50%
in shares of common stock. The “Stock Awards” column of the Summary
Compensation Table represents the common stock value of the bonus. Shares were
issued at their fair market value on the date of award. These amounts are
included in the Summary Compensation Table on page 17 of this Proxy
Statement.
Option Awards – The option
awards disclosed in the Summary Compensation Table consist of options granted to
each NEO during fiscal year 2008. The value of option awards is based
on Statement of Financial Accounting Standard No. 123R, “Share-Based Payments”
(SFAS 123R) as required by the Securities and Exchange Commission. As
a result, this amount does not reflect what was paid to the Company’s
executives; rather it reflects the amount we must include as an expense on the
Company’s financial statements.
All Other Compensation – The
“All Other Compensation” column of the Summary Compensation Table includes
employer contributions to the Section 401(k) Plan and relocation expenses paid
during fiscal 2007.
Summary
Compensation Table
Name
and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)(1)
|
|
|
Stock
Awards
($) (1)
|
|
|
Option
Awards
($)
|
|
|
All Other
Compensation
($)(3)
|
|
|
Total ($)
|
|
R.
Daniel Brdar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman,
President and Chief Executive Officer
|
|
|
2008
2007
|
|
|
$
|
382,801
364,130
|
|
|
$
|
100,000
87,500
|
|
|
$
|
100,000
87,500
|
|
|
$
|
1,105,160
400,644
|
|
|
$
|
13,500
13,500
|
|
|
$
|
1,701,461
953,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
G. Mahler
Senior
Vice President, Chief Financial Officer, Corporate
Secretary, Treasurer, Corporate Strategy
|
|
|
2008
2007
|
|
|
|
276,191
263,240
|
|
|
|
45,000
38,250
|
|
|
|
45,000
38,250
|
|
|
|
303,919
160,257
|
|
|
|
13,500
13,724
|
|
|
|
683,610
513,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
R. Bentley
Executive
Vice President, Government R&D Operations, Strategic Manufacturing
Development
|
|
|
2008
2007
|
|
|
|
274,997
274,997
|
|
|
|
41,250
34,500
|
|
|
|
41,250
34,500
|
|
|
|
138,145
100,161
|
|
|
|
13,500
13,500
|
|
|
|
509,142
457,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce
A. Ludemann
Senior Vice President of Sales and
Marketing
|
|
|
2008
2007
|
|
|
|
218,337
206,464
|
|
|
|
35,000
25,000
|
|
|
|
35,000
25,000
|
|
|
|
414,435
300,483
|
|
|
|
13,115
16,098
|
(2) |
|
|
715,887
573,045
|
|
|
(1)
|
The
value of the 2008 and 2007 annual bonus was paid 50% in cash and 50% in
shares of common stock.
|
|
(2)
|
Includes
reimbursement of $3,710 to Mr. Ludemann for relocation
expenses.
|
|
(3)
|
Represents
employer contributions to the Section 401(k)
Plan.
|
For
further information on each compensation component of the Summary Compensation
Table, refer to the CD&A beginning on page 10.
Grants
of Plan-based Awards
Options
granted to NEOs in fiscal year 2008 as detailed in the table below were granted
pursuant to the Company’s 2006 Equity Incentive Plan. These options
were made on the same terms as options granted to all other eligible
employees. Material terms of stock options granted are as
follows:
|
-
|
Stock
options vest at a rate of 25% per year beginning on the first anniversary
of the date of grant.
|
|
-
|
Stock
options expire on the tenth anniversary of the date of grant providing
that the NEO remains actively employed. The Board shall determine the
effect on an Award of the disability, death, retirement or other
termination of employment of a Participant and the extent to which, and
the period during which, the NEOs legal representative, guardian or
Designated Beneficiary may receive payment of an Award or exercise rights
thereunder.
|
|
-
|
The
stock option price is 100 percent of the Fair Market Value of the Common
Stock on the date of grant.
|
For
further information on the stock option grants included in the Grants of Plan
Based Award Table, refer to the CD&A beginning on page 10.
Grants
of Plan-based Awards Table
Name
|
|
Grant Date (1)
|
|
All Other Stock
Awards:
Number of
Shares of Stock
or Units
(#) (2)
|
|
|
All Other Option
Awards: Number of
Securities Underlying
Options
(#) (1)
|
|
|
Exercise or Base
Price of Option
Awards ($/Sh) (1)
|
|
R.
Daniel Brdar
|
|
1/30/2008
|
|
|
13,352 |
|
|
|
200,000 |
|
|
$ |
8.74 |
|
Joseph
G. Mahler
|
|
1/30/2008
|
|
|
6,009 |
|
|
|
55,000 |
|
|
|
8.74 |
|
Christopher
R. Bentley
|
|
1/30/2008
|
|
|
5,508 |
|
|
|
25,000 |
|
|
|
8.74 |
|
Bruce
A. Ludemann
|
|
1/30/2008
|
|
|
4,673 |
|
|
|
75,000 |
|
|
|
8.74 |
|
|
(1)
|
Option Awards -
On January 30, 2008, the 2008 long-term incentive grants were approved by
the Board of Directors for the Chief Executive Officer and by the
Compensation Committee for the other NEOs at an option exercise price of
100% of the closing price of the Company’s common stock on the NASDAQ on
that date. For more information regarding the Company’s option
grant practices, see the Long-Term Incentive Compensation section of the
CD&A beginning
on page 10 of this document.
|
|
(2)
|
Stock Awards –
On February 26, 2008 the stock portion of annual bonuses (50
percent of total annual bonus is paid in stock) were paid to NEO’s in
shares of Company stock equal to the stock bonus award amount divided by
the fair market value of the closing price of the Company’s common stock
on the date of the award.
|
Outstanding
Equity Awards at Fiscal 2008 Year-End
The
following table sets forth the outstanding equity awards held by the Company’s
Named Executive Officers as of October 31, 2008.
|
|
Option Awards
|
Name
|
|
Number
of
Securities Underlying
Unexercised Options
(#)
Exercisable
(1)
|
|
|
Number of Securities
Underlying Unexercised
Options
(#)
Un-exercisable
|
|
|
Option Exercise
Price
($)(2)
|
|
Option Expiration
Date
|
R. Daniel Brdar
|
|
|
60,000 |
|
|
|
— |
|
|
$ |
38.00 |
|
10/12/2010
|
|
|
|
34,000 |
|
|
|
— |
|
|
|
13.76 |
|
12/19/2011
|
|
|
|
50,000 |
|
|
|
— |
|
|
|
5.45 |
|
2/11/2013
|
|
|
|
35,000 |
|
|
|
— |
|
|
|
13.78 |
|
3/30/2014
|
|
|
|
187,500 |
|
|
|
62,500 |
|
|
|
9.42 |
|
2/11/2015
|
|
|
|
125,000 |
|
|
|
125,000 |
|
|
|
8.65 |
|
12/19/2015
|
|
|
|
25,000 |
|
|
|
75,000 |
|
|
|
6.49 |
|
3/13/2017
|
|
|
|
— |
|
|
|
200,000 |
|
|
|
8.74 |
|
1/30/2018
|
Joseph
G. Mahler
|
|
|
9,000 |
|
|
|
— |
|
|
|
6.69 |
|
12/23/2009
|
|
|
|
32,000 |
|
|
|
— |
|
|
|
23.00 |
|
4/06/2011
|
|
|
|
42,000 |
|
|
|
— |
|
|
|
13.76 |
|
12/19/2011
|
|
|
|
10,000 |
|
|
|
— |
|
|
|
5.45 |
|
2/11/2013
|
|
|
|
20,000 |
|
|
|
— |
|
|
|
13.78 |
|
3/30/2014
|
|
|
|
30,000 |
|
|
|
10,000 |
|
|
|
9.57 |
|
3/29/2015
|
|
|
|
20,000 |
|
|
|
20,000 |
|
|
|
10.45 |
|
3/14/2016
|
|
|
|
10,000 |
|
|
|
30,000 |
|
|
|
6.49 |
|
3/13/2017
|
|
|
|
— |
|
|
|
55,000 |
|
|
|
8.74 |
|
1/30/2018
|
Christopher
R. Bentley
|
|
|
40,000 |
|
|
|
— |
|
|
|
1.63 |
|
3/30/2009
|
|
|
|
24,000 |
|
|
|
— |
|
|
|
6.69 |
|
12/23/2009
|
|
|
|
32,000 |
|
|
|
— |
|
|
|
23.00 |
|
4/06/2011
|
|
|
|
45,000 |
|
|
|
— |
|
|
|
13.76 |
|
12/19/2011
|
|
|
|
10,000 |
|
|
|
— |
|
|
|
5.45 |
|
2/11/2013
|
|
|
|
20,000 |
|
|
|
— |
|
|
|
13.78 |
|
3/30/2014
|
|
|
|
18,750 |
|
|
|
6,250 |
|
|
|
9.57 |
|
3/29/2015
|
|
|
|
12,500 |
|
|
|
12,500 |
|
|
|
10.45 |
|
3/14/2016
|
|
|
|
6,250 |
|
|
|
18,750 |
|
|
|
6.49 |
|
3/13/2007
|
|
|
|
— |
|
|
|
25,000 |
|
|
|
8.74 |
|
1/30/2018
|
Bruce
A. Ludemann
|
|
|
16,250 |
|
|
|
16,250 |
|
|
|
12.86 |
|
4/17/2016
|
|
|
|
16,250 |
|
|
|
16,250 |
|
|
|
8.63 |
|
7/17/2016
|
|
|
|
18,750 |
|
|
|
56,250 |
|
|
|
6.49 |
|
3/13/2017
|
|
|
|
— |
|
|
|
75,000 |
|
|
|
8.74 |
|
1/30/2018
|
|
(1)
|
Options
vest at a rate of 25% per year beginning on the first anniversary of the
date of grant which is ten years prior to the expiration
date.
|
|
(2)
|
Option
exercise price is 100% of the closing price of the Company’s common stock
on the date of grant as reported on the NASDAQ
exchange.
|
Option
Exercises and Stock Vested
The
following table provides information, for the named executives, on stock option
awards exercised during fiscal year 2008, including the number of shares
acquired upon exercise and the value realized, before payment of any applicable
withholding tax and brokerage commission. The exercise prices reported in the
notes below indicate rounding, since grant prices may extend to three decimal
points.
|
|
Option
Awards
|
|
Name
|
|
Number of
Shares
Acquired
on Exercise
(#)
|
|
|
Value Realized
on Exercise
($)
|
|
Joseph
G. Mahler (1), (2)
|
|
|
157,800 |
|
|
$ |
1,440,764 |
|
Christopher
R. Bentley (3)
|
|
|
80,000 |
|
|
|
870,431 |
|
|
(1)
|
Mr. Mahler
exercised 5,491 stock options on December 14, 2007 with an exercise price
of $1.82 and market price of $12.50; 18,533 stock options on December 20,
2007 with an exercise price of $1.82 and market price of $12.51; 35,976
stock options on December 21, 2007 with an exercise price of $1.82 and
market price of $12.51. Mr. Mahler sold all these shares
(60,000 shares) after the payment of the exercise price and
taxes.
|
|
(2)
|
Mr. Mahler
exercised 97,800 stock options on January 7, 2008 with an exercise price
of $1.82 and market price of $9.99. Mr. Mahler retained all these
shares.
|
|
(3)
|
Mr. Bentley
exercised 7,280 stock options on December 14, 2007 with an exercise price
of $1.63 and market price of $12.50; 24,567 stock options on December 20,
2007 with an exercise price of $1.63 and market price of $12.51; 48,153
stock options on December 21, 2007 with an exercise price of $1.63 and
market price of $12.51. Mr. Bentley sold all these shares
(80,000 shares) after the payment of the exercise price and
taxes.
|
DIRECTOR
COMPENSATION
The Board
of Directors periodically reviews director compensation. The Board compensation
and benefit program for non-employee directors described below was approved by
the Board and went into effect in fiscal 2005 and was amended by the Board in
fiscal 2008. In recommending this program to the Board, the
Compensation Committee was guided by the following goals: compensation should
fairly pay directors; compensation should align directors’ interests with the
long-term interests of shareholders; and the structure of the compensation
should be simple, transparent and easy for shareholders to
understand.
The
Company uses a combination of an annual cash retainer and committee member and
chair fees. The Directors can make a choice of cash, shares of the
Company’s common stock or stock options. An equity long-term incentive grant is
also included in the annual Director Compensation package. Following is a
description of the components of director compensation. For further information
on director compensation, refer to The Non-Employee Director Compensation Table
on page 22.
New
Board Members
New Board
members, not employed by the Company or an affiliate, are granted 40,000
non-qualified stock options upon acceptance to the Board.
Annual
Director Compensation
Each
Board member not employed by the Company or its affiliates, is paid a retainer
fee of $30,000 per annum. In addition, committee fees have been
established based upon expected level of meetings and activity during the year.
Non-Chairman committee fees are $5,000 for the first committee of which the
director is a member and $2,500 for each additional committee of which the
director is a member. Chairman fees are $12,500 for the Compensation, Audit and
Finance and Executive committees. The Chairman of the Nominating and Corporate
Governance Committee receives a fee of $7,500. The Lead Independent Director
receives a fee of $12,500.
All Board
and Committee fees are payable, at the option of the Board member, in cash,
shares of the Company’s common stock or options to purchase shares of the
Company’s common stock. If payments are made in the form of stock
options, the number of stock options granted is calculated based on an annual
Black-Scholes calculation as calculated on or about the date of the annual
shareholders meeting. Stock options vest at the rate of 25% per
quarter from the date of grant.
Directors
also receive an equity long-term incentive grant in the form of shares of the
Company’s common stock valued at $28,000 per annum. The equity grant can be
received, at the choice of the Board member, in options to purchase shares of
the Company’s common stock, which is calculated based on a Black-Scholes
calculation as calculated on or about the date of the annual shareholders
meeting. Stock options vest at the rate of 25% per quarter from the date of
grant and have restrictions as to transferability.
Cristof
von Branconi is employed by Tognum AG, parent company of MTU Onsite Energy GmbH
Fuel Cell Systems (“MTU Onsite Energy”), a distributor of the Company (see
“Certain Relationships and Related Transactions” on page
25). As a result of Mr. von Branconi’s affiliation with Tognum AG, he
receives no director compensation.
Directors
Deferred Compensation Plan
Pursuant
to the Company’s Directors Deferred Compensation Plan, directors may elect to
defer until they leave the Board of Directors, receipt of all or a portion of
fees paid in cash or common stock. The election to defer fees paid in cash or
common stock must be made by the director prior to the beginning of a fiscal
year or with respect to a newly eligible director within (30) days after such
director becomes eligible to participate in the Plan.
Reimbursement
of Expenses
The
Company reimburses directors for reasonable expenses incurred in connection with
the performance of their duties as directors.
Non-Employee
Director Compensation Table for Fiscal 2008
Directors
|
|
Fees Earned
or
Paid in
Cash
($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Option
Awards
($)(1)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)(2)
|
|
Richard
Bromley
|
|
|
—
|
|
|
|
—
|
|
|
$ |
61,424 |
|
|
|
— |
|
|
$ |
61,424 |
|
James
Herbert England
|
|
|
—
|
|
|
|
—
|
|
|
|
224,084 |
(3) |
|
|
—
|
|
|
|
224,084 |
|
Glenn
Epstein
|
|
|
—
|
|
|
|
—
|
|
|
|
61,424 |
|
|
|
— |
|
|
|
61,424 |
|
James
Gerson
|
|
|
—
|
|
|
|
— |
|
|
|
71,171 |
|
|
|
— |
|
|
|
71,171 |
|
Thomas
Kempner
|
|
|
— |
|
|
|
— |
|
|
|
66,297 |
|
|
|
— |
|
|
|
66,297 |
|
William
Lawson
|
|
|
— |
|
|
|
70,496 |
|
|
|
— |
|
|
|
— |
|
|
|
70,496 |
|
George
K. Petty
|
|
|
— |
|
|
|
— |
|
|
|
73,612 |
|
|
|
— |
|
|
|
73,612 |
|
John
A. Rolls
|
|
|
— |
|
|
|
— |
|
|
|
73,612 |
|
|
|
— |
|
|
|
73,612 |
|
Togo
West
|
|
|
32,500 |
|
|
|
— |
|
|
|
248,332 |
(3) |
|
|
— |
|
|
|
280,832 |
|
|
(1)
|
The
values of stock awards and option awards were calculated by using grant
date fair values computed in accordance with SFAS
123R.
|
|
(2)
|
The
aggregate dollar amount of all fees earned or paid in cash for services as
a director, including annual retainer fees, committee and/or chairman
fees.
|
|
(3)
|
Mr.
England and Secretary West both joined the Board of Directors in Fiscal
2008 and each received the initial director grant of 40,000 non-qualified
stock options.
|
Security
Ownership of Certain Beneficial Owners and Management
The following table sets forth certain
information as of February 10, 2009 with respect to: (a) the shareholders known
to management to own beneficially more than 5% of the outstanding common stock
of FuelCell; (b) each of FuelCell’s directors; (c) each of the executive
officers of FuelCell named in the Summary Compensation Table under the heading
“Executive Compensation”; and (d) in summary, all of FuelCell’s directors
and executive officers as a group.
Unless
indicated otherwise the address of each holder is in care of FuelCell Energy,
Inc., 3 Great Pasture Road, Danbury, Connecticut 06813-1305.
Name
|
|
Shares of
Common
Stock owned
Beneficially (1)
|
|
|
Percentage of
Outstanding
Common
Stock (1)
|
|
R.
Daniel Brdar
|
|
|
814,356 |
(2) |
|
|
1.17 |
|
Christopher
R. Bentley
|
|
|
430,144 |
(3) |
|
|
* |
|
Richard
A. Bromley
|
|
|
22,629 |
(4) |
|
|
* |
|
James
Herbert England
|
|
|
212,975 |
(5)
(6) |
|
|
* |
|
Glenn
H. Epstein
|
|
|
32,629 |
(7) |
|
|
* |
|
James
D. Gerson
|
|
|
1,296,618 |
(8) |
|
|
1.88 |
|
Thomas
L. Kempner
|
|
|
618,624 |
(9) |
|
|
* |
|
William
A. Lawson
|
|
|
147,113 |
(10) |
|
|
* |
|
Bruce
A Ludemann
|
|
|
98,595 |
(11) |
|
|
* |
|
Joseph
G. Mahler
|
|
|
378,502 |
(12) |
|
|
* |
|
George
K. Petty
|
|
|
311,180 |
(5)
(13) |
|
|
* |
|
John
A. Rolls
|
|
|
124,538 |
(14) |
|
|
* |
|
Christof
von Branconi
c/o MTU Onsite Energy GmbH Fuel Cell Systems
Postfach
D-81663
München, Germany
|
|
|
2,746,548 |
(15) |
|
|
3.98
|
|
Togo
Dennis West, Jr.
|
|
|
15,613 |
(16) |
|
|
*
|
|
Invesco
Ltd.
1360
Peachtree Street NE
Atlanta,
GA 30309
|
|
|
4,221,400
|
(17) |
|
|
6.12 |
|
POSCO
Power
DACOM
Building, 10th Floor
706-1
Yeoksam-dong, Gangnam-gu
Seoul
135-987, Korea
|
|
|
3,822,630 |
(18) |
|
|
5.54 |
|
Sound
Energy Partners, Inc.
354
Pequot Avenue
Southport,
CT 06890-1345
|
|
|
3,684,521 |
(19) |
|
|
5.34 |
|
|
|
|
|
|
|
|
|
|
All
Directors and Executive Officers as a Group
(14
persons)
|
|
|
4,295,564 |
(20) |
|
|
6.50 |
|
(1)
|
Unless
otherwise noted, each person identified possesses sole voting and
investment power with respect to the shares
listed.
|
(2)
|
Mr.
Brdar’s shareholdings include options to purchase 779,000 shares of Common
Stock, which are currently exercisable or are exercisable within 60
days.
|
(3)
|
Mr.
Bentley’s shareholdings include options to purchase 233,500 shares of
Common Stock, which are currently exercisable or are exercisable within 60
days. Mr. Bentley’s shareholdings also include 100 shares held
by his wife, Karen Bentley. Mr. Bentley disclaims beneficial
ownership of the securities held by his
wife.
|
(4)
|
Mr.
Bromley’s shareholdings include options to purchase 22,629 shares of
Common Stock, which are currently
exercisable.
|
(5)
|
Mr.
England and Mr. Petty, by virtue of being directors of Enbridge Inc., may
each be deemed to beneficially own 207,952 shares of common stock which
are issuable upon conversion of the FuelCell Energy, Inc. Ltd. Series 1
Preferred stock held by Enbridge Inc. Mr. England is the authorized
designee of Enbridge Inc. to the Board of Directors of FuelCell Energy,
Inc.
|
(6)
|
Mr.
England’s shareholdings include options to purchase 5,023 shares of Common
Stock, which are currently
exercisable.
|
(7)
|
Mr.
Epstein’s shareholdings include options to purchase 22,629 shares of
Common Stock, which are currently
exercisable.
|
(8)
|
Mr.
Gerson’s shareholdings include 241,800 shares held by a private
foundation, of which Mr. Gerson is President and a Director.
Mr. Gerson disclaims beneficial ownership of the securities held by
the private foundation. Mr. Gerson’s shareholdings also include options to
purchase 78,829 shares of Common Stock, which are currently exercisable or
are exercisable within 60 days.
|
(9)
|
Mr.
Kempner’s shareholdings include options to purchase 85,790 shares of
Common Stock, which are currently exercisable or are exercisable within 60
days, 40,934 shares held by Loeb Holding Corporation of which Mr. Kempner
is a control person, 241,900 shares held by Thomas Kempner & William
Perlmuth Trustees Carl Loeb Trust FBO Thomas Kempner of which Mr. Kempner
is beneficiary and 250,000 shares owned by Loeb Partners
Corporation.
|
(10)
|
Mr.
Lawson’s shareholdings include options to purchase 43,009 shares of Common
Stock, which are currently
exercisable.
|
(11)
|
Mr.
Ludemann’s shareholdings include options to purchase 88,750 shares of
Common Stock, which are currently exercisable or are exercisable within 60
days.
|
(12)
|
Mr.
Mahler’s shareholdings include options to purchase 216,750 shares of
Common Stock, which are currently exercisable or are exercisable within 60
days.
|
(13)
|
Mr.
Petty’s shareholdings include options to purchase 101,742 shares of Common
Stock, which are currently exercisable or are exercisable within 60
days.
|
(14)
|
Mr.
Roll’s shareholdings include options to purchase 116,538 shares of Common
Stock, which are currently exercisable or are exercisable within 60
days.
|
(15)
|
These
shares are held by MTU Friedrichshafen GmbH, a wholly owned subsidiary of
Tognum AG of which Mr. von Branconi is Executive Vice President and Chief
Operating Officer.
|
(16)
|
Secretary
West’s shareholdings represent options to purchase 15,613 shares of Common
Stock, which are currently exercisable or are exercisable within 60
days.
|
(17)
|
Based
upon information contained in Schedule 13F filed on September 30,
2008
|
(18)
|
Based
upon information contained in Schedule 13F filed on June 30,
2008
|
(19)
|
Based
upon information contained in Schedule 13F filed on September 30,
2008
|
(20)
|
Includes
options to purchase 1,809,802 shares of Common Stock, which are currently
exercisable or are exercisable within 60 days and 207,952 shares of Common
Stock issuable upon conversion of the FuelCell Energy, Ltd. Series I
Preferred Stock.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Securities Exchange Act of 1934 requires the Company’s officers,
directors and persons who own more than ten percent of the issued and
outstanding shares of Common Stock to file reports of beneficial ownership and
changes in beneficial ownership with the SEC and to furnish copies of all
Section 16(a) forms to the Company. All filings for 2008 were made on
a timely basis except for one late Form 4 filing for Thomas L.
Kempner.
Certain
Relationships and Related Transactions
It is the
Company’s policy that related-party transactions are reviewed to ensure that the
terms of such transactions are no less favorable to the Company than it could
have obtained from an unaffiliated third party. The Audit and Finance Committee
has responsibility for reviewing related party transactions.
The above
information is to the Company's knowledge, based solely on a review of copies of
reports furnished to the Company and representations of certain officers,
directors and shareholders owning more than 5% of the Company's Common
Stock.
Enbridge
Inc.
Enbridge
is a global leader in energy transportation and distribution. We have a market
development agreement for North America that includes current DFC product
distribution and the new DFC-ERG™ power plant that they co-developed with
us. A 2.2 MW DFC-ERG unit was installed at Enbridge’s headquarters in
Toronto during the fiscal fourth quarter of 2008. We have also been selected by
the Connecticut Department of Public Utility Control (DPUC) for a 9 MW DFC-ERG
installation at a natural gas let-down station in Milford, CT under the
Connecticut Project 150 Round 2 projects that are in final negotiations. Under a
draft decision, the DPUC approved a 3.4 MW DFC-ERG project in Round
3. Upon final decision by the DPUC, project developers can proceed to
negotiate power purchase agreements with the utilities and complete their
financing.
During
fiscal year 2008, the Company recognized revenue of approximately $0.2 million
for power plant sales to Enbridge. The Company believes that the
terms of its transactions with Enbridge are no less favorable to the Company
than it could have obtained from an unaffiliated third party.
Mr. England is the authorized
designee of Enbridge to the Board of Directors of FuelCell Energy, Inc. and Mr.
Petty is a director of Enbridge.
MTU Friedrichshafen
GmbH
MTU
Friedrichshafen GmbH, a subsidiary of Tognum AG, owns 2,746,548 shares of
FuelCell Energy common stock. Tognum AG, through its subsidiary MTU
Onsite Energy, is a licensee of our technology and a purchaser of Direct
FuelCell® products. Christof von Branconi, a member of the Board of Directors of
the Company, is an Executive Vice President and Chief Operating Officer of
Tognum’s Onsite Energy Systems and Components Division.
We have a Cell License Agreement in
place with MTU Onsite Energy. Under this agreement, which has been extended
through December 2009, we license our DFC technology to MTU Onsite Energy for
use exclusively in Europe and the Middle East and non-exclusively in Africa and
South America. We also sell our DFC components and stacks to MTU Onsite
Energy under this agreement. MTU Onsite Energy also granted us an
exclusive, royalty-free license to use any of its existing improvements to our
Direct FuelCell that MTU Onsite Energy developed as of December 1999 under a
previous license agreement. In addition, MTU Onsite Energy has agreed to
negotiate a license grant of any separate carbonate fuel cell know-how it
develops during the term of the current Cell License once it is ready for
commercialization. We had a BOP Cross Licensing and
Cross-Selling Agreement in place with MTU Onsite Energy that expired in July
2008. Under this agreement, we could sell MW-class modules to MTU Onsite Energy
and MTU Onsite Energy could sell their sub-MW class modules to us.
During
fiscal year 2008, the Company recognized revenue of approximately $2.9 million
for fuel cell components sold to MTU Onsite Energy. The Company
believes that the terms of its transactions with MTU Onsite Energy are no less
favorable to the Company than it could have obtained from an unaffiliated third
party.
POSCO
Power
POSCO
Power, a subsidiary of our South Korean strategic distribution partner, POSCO,
holds 3,822,630 shares of the Company’s common stock that it acquired in
February 2007. In addition, the Company entered into a 10-year
manufacturing and distribution agreement with POSCO Power. For the
first two years of the agreement, the Company will sell complete DFC power
plants to POSCO Power. Beginning in year three, POSCO Power will buy
fuel cell modules manufactured by us in Connecticut and build its own BOPs in
South Korea using its design, procurement and manufacturing expertise to achieve
further cost savings. Under the terms of the agreement, the Company
will receive a 4.1 percent royalty on sales made by POSCO Power payable in a
combination of cash and common stock.
During
fiscal year 2008, the Company recognized revenue of approximately $46.2 million
for power plant sales and long-term service agreements with
POSCO. The Company believes that the terms of its transactions with
POSCO are no less favorable to the Company than it could have obtained from an
unaffiliated third party.
AUDIT
AND FINANCE COMMITTEE REPORT
During
fiscal year 2008, the Audit and Finance Committee of the Board reviewed the
quality and integrity of the Company’s consolidated financial statements, the
effectiveness of its system of internal control over financial reporting, its
compliance with legal and regulatory requirements, the qualifications and
independence of KPMG LLP, its independent registered public accounting firm, the
performance of KPMG LLP and other significant audit matters as required by the
Company.
The Audit
and Finance Committee has discussed with KPMG, during the 2008 fiscal year, the
matters required to be discussed by Statement of Auditing Standards No. 114
(The Auditors Communication with Those Charged with Governance), as
amended. The Audit and Finance Committee has received and reviewed
the written disclosures and the letter from KPMG required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit
Committees). The Committee also concluded that KPMG’s provision of
audit and non-audit services is compatible with KPMG’s independence. Based on
the review and discussions noted above, the Audit and Finance Committee
recommended to the Board that the Company’s audited consolidated financial
statements be included in the Company’s Annual Report on Form 10-K for the
fiscal year ended October 31, 2008 and be filed with the U.S. Securities and
Exchange Commission.
Submitted
by:
Audit and Finance
Committee
James D.
Gerson (Chairman)
Richard
A. Bromley
J. H.
England
John A.
Rolls
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FEES
Audit
Fees
Audit
fees include the aggregate fees billed for the audit of the Company's annual
consolidated financial statements, the effectiveness of internal controls over
financial reporting and the reviews of each of the quarterly consolidated
financial statements included in the Company's Forms 10-Q. The aggregate
audit fees billed to the Company by KPMG LLP for the fiscal year ended October
31, 2008 were $365,000. The aggregate audit fees billed to the Company by KPMG
LLP for the fiscal year ended October 31, 2007 were $350,000.
Audit-Related
Fees
Audit-related
fees represent accounting advisory services related to the audit of the
Company's employee benefit plans and work performed in connection with SEC
registration statements. The aggregate audit-related fees billed to the Company
by KPMG for the fiscal year ended October 31, 2008 were $22,764 related to
employee benefit plans. The aggregate audit-related fees billed to the Company
by KPMG for the fiscal year ended October 31, 2007 were $61,634 which included
$39,700 related to registration statements.
Tax
Fees
Fees paid
to KPMG LLP for tax services for 2008 were approximately $10,000. The Company
did not use the tax services of KPMG LLP and no fees were paid to KPMG LLP for
fiscal 2007.
Other
Fees
Other
than fees relating to the services described above under Audit Fees,
Audit-Related Fees and Tax Fees, there were no additional fees billed by KPMG
LLP for services rendered to the Company for the fiscal year ended October 31,
2008 or the fiscal year ended October 31, 2007.
As set
forth in its charter, it is the policy of our Audit and Finance Committee to
pre-approve all audit and non-audit services provided by KPMG. Our Audit
and Finance Committee has considered whether the provision of KPMG LLP's
services other than for the annual audit and quarterly reviews is compatible
with its independence and has concluded that it is.
PROPOSAL
NO. 2 – RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit
and Finance Committee of the Board has selected KPMG LLP as the independent
registered public accounting firm to perform the audit of our consolidated
financial statements for 2009. KPMG LLP was our independent
registered public accounting firm for the fiscal year ended October 31,
2008.
KPMG representatives are expected to
attend the 2009 Annual Meeting. They will have an opportunity to make
a statement if they desire to do so and will be available to respond to
appropriate shareholder questions.
We are asking our shareholders to
ratify the selection of KPMG LLP as our independent registered public accounting
firm. Although ratification is not required by our by-laws or
otherwise, the Board is submitting the selection of KPMG LLP to our shareholders
for ratification as a matter of good corporate practice. Even if the
selection is ratified, the Audit and Finance Committee in its discretion may
select a different independent registered public accounting firm at any time
during the year if it determines that such a change would be in the best
interests of the Company and its shareholders.
Vote
Required
The
affirmative vote of a majority of the votes of holders of the Common Stock
present in person or by proxy at the Meeting is required for adoption of
Proposal No. 2.
THE
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL
OF PROPOSAL NO. 2
|
EQUITY
COMPENSATION PLAN AND WARRANT
INFORMATION
|
The
following table sets forth certain information with respect to the Company’s
equity compensation plans and warrants as of the end of the fiscal year ended
October 31, 2008.
Plan
Category
|
|
Number of
Common Shares
to be issued upon
exercise of
outstanding
options, warrants
and rights
|
|
Weighted-
average
exercise price of
outstanding
options,
warrants and
rights
|
|
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
|
|
Plans
approved by shareholders:
|
|
|
|
|
|
|
|
Equity
incentive plans
|
|
|
5,967,213
|
|
10.99
|
|
|
866,302
|
|
Employee
stock purchase plan
|
|
|
24,834
|
|
4.06
|
|
|
242,383
|
|
Plans
not approved by shareholders:
|
|
|
|
|
|
|
|
|
|
Warrants
issued to business partners
|
|
|
7,500
|
|
9.89
|
|
|
-
|
|
Total
|
|
|
5,999,547
|
|
10.96
|
|
|
1,108,685
|
|
|
ADDITIONAL
INFORMATION AND OTHER MATTERS
|
General
The
record date for the Annual Meeting is February 4, 2009. Holders of
shares of the Company’s common stock, par value $.0001 per share (“Common
Stock”), as of the close of business on the record date, are entitled to notice
of, and to vote at, the Annual Meeting or any adjournments thereof. Each holder
of Common Stock is entitled to one vote for each share held on the record
date.
Code
of Ethics
The
Company has a code of ethics, which applies to the Company’s Chief Executive
Officer, Chief Financial Officer and Controller. The code of ethics
provides a statement of certain fundamental principles and key policies and
procedures that govern the conduct of the Company’s business. The
code of ethics can be found on the Company’s website at
www.fuelcellenergy.com.
Shareholder
Proposals for the 2010 Annual Meeting
Shareholders
who wish to present proposals for inclusion in the Company's proxy materials and
for consideration at the 2010 Annual Meeting of Shareholders should submit the
proposals in writing to the Secretary of the Company in accordance with all
applicable rules and regulations of the SEC no later than October 16,
2009.
Quorum
and Vote Required
As of the
record date, there were issued and outstanding 69,017,330 shares of Common
Stock. The holders of a majority of the shares of Common Stock
entitled to vote as of the record date present in person or by proxy will
constitute a quorum at the meeting. Under the Delaware General
Corporation Law, any stockholder who submits a proxy and abstains from voting on
a particular matter described herein will still be counted for purposes of
determining a quorum. Broker non-votes will be treated as not
represented at the meeting.
Voting
by Proxy
In voting by proxy with regard to the
election of directors, shareholders may vote in favor of all nominees, withhold
their votes as to all nominees or withhold their votes as to specific nominees.
Shareholders should specify their choices via Internet, by telephone, or on the
accompanying proxy card.
All properly executed proxies delivered
by shareholders to the Company and not revoked will be voted at the Annual
Meeting in accordance with the directions given. If no specific
instructions are given, the shares represented by a proxy will be voted “FOR”
the election of all directors and “FOR” the ratification of the selection of
KPMG as the independent registered public accounting firm for fiscal year
2009. Abstentions and broker non-votes will have the effect of a vote
against each proposal. If any other matters properly come before the Annual
Meeting, the persons named as proxies will vote upon such matters according to
their best judgment.
Any shareholder delivering a proxy has
the power to revoke it at any time before it is voted by giving written notice
to the Secretary of the Company, by executing and delivering to the Secretary a
proxy card bearing a later date or by voting in person at the Annual
Meeting.
In
addition to soliciting proxies through the mail, the Company may solicit proxies
through its directors and employees in person or by
telephone. Brokerage firms, nominees, custodians and fiduciaries also
may be requested to forward proxy materials to the beneficial owners of shares
held of record by them. All expenses incurred in connection with the
solicitation of proxies will be borne by the Company.
Stockholder
Communications with Directors
The
Company has established a process by which shareholders can communicate with the
Company’s Board of Directors. Shareholders may communicate with the
Board of Directors, or any of the Company’s individual directors, by sending
their communications to the Board of Directors, or to any individual director,
at the following address:
Board of
Directors of
FuelCell
Energy, Inc.
c/o
Corporate Secretary
3 Great
Pasture Road
Danbury,
CT 06813
All
stockholder communications received by the Company’s Corporate Secretary will be
delivered to one or more members of the Board of Directors or, in the case of
communications sent to an individual director, to such director.
Director
Attendance at the Annual Meeting
The
Company does not have a formal policy with respect to director attendance at
annual meetings. In fiscal 2008, all directors attended the Company’s
annual meeting.
Annual
Report and Form 10-K
ADDITIONAL
COPIES OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED
OCTOBER 31, 2008 AND COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED OCTOBER 31, 2008 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ARE AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST
ADDRESSED TO: FUELCELL ENERGY, INC., 3 GREAT PASTURE ROAD, DANBURY, CONNECTICUT
06813 ATTN: SHAREHOLDER RELATIONS OR ARE ALSO AVAILABLE THROUGH THE
COMPANY’S WEBSITE AT WWW.FUELCELLENERGY.COM.
Other
Matters
As
of the date of this proxy statement, the Board of Directors knows of no matters
which will be presented for consideration at the Annual Meeting other than the
proposals set forth in this Proxy Statement. If any other matters
properly come before the meeting, it is intended that the persons named in the
proxy will act in respect thereof in accordance with their best
judgment.
By
Order of the Board of Directors
|
|
Joseph
G. Mahler
|
Corporate
Secretary
|
Danbury,
CT
February
10, 2009
PROXY
FORM
|
FUELCELL
ENERGY, INC.
|
PROXY
FORM
|
PROXY
FOR THE MARCH 26, 2009 ANNUAL MEETING OF SHAREHOLDERS
SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints R. Daniel Brdar and Joseph G. Mahler, and each of
them, attorneys with full power of substitution, to vote as directed below all
shares of Common Stock of FuelCell Energy, Inc. registered in the name of the
undersigned, or which the undersigned may be entitled to vote, at the Annual
Meeting of Shareholders to be held at the Danbury Plaza Hotel & Conference
Center located at 18 Old Ridgebury Road, Danbury, Connecticut on Thursday, March
26, 2009 at 10:00 a.m. Eastern Standard Time and at any adjournment or
postponement thereof.
1. Election
of Directors
|
|
¨
|
FOR all nominees listed
below (except as marked to the contrary below)
|
¨
|
WITHHOLD AUTHORITY to
vote for all nominees listed
below
|
(Instruction: To
withhold authority to vote for any individual nominee strike a line through the
nominee's name in the list below.)
R. Daniel
Brdar, Christof von Branconi, Richard A. Bromley, James Herbert England, Glenn
H. Epstein, James D. Gerson, Thomas L. Kempner, William A.
Lawson, George K. Petty, John A. Rolls, Togo Dennis West,
Jr.
2. Ratification
of Selection of KPMG LLP as Independent Registered Public Accounting
Firm
|
|
|
¨ FOR
|
¨ AGAINST
|
3. As
such proxies may in their discretion determine in respect of any other business
properly to come before said meeting (the Board of Directors knowing of no such
other business).
The
directors recommend a vote FOR items 1 and 2.
UNLESS
THE SHAREHOLDER DIRECTS OTHERWISE, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2 AS
PROPOSED. PLEASE DATE, SIGN AND RETURN IN THE ENVELOPE
PROVIDED.
|
|
|
Signature
of Shareholder
(s)
|
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD MARCH 26, 2009.
|
|
(Please
sign in the same form as name appears hereon. Executors and
other fiduciaries should indicate their titles. If signed on
behalf of a corporation, give title of officer
signing).
|