UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed by
the Registrant
x
Filed by
a Party other than the Registrant
o
Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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x
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to
§240.14a-12
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New
Generation Biofuels Holdings, Inc.
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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x
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No
fee required.
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o
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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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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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o
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Fee
paid previously with preliminary materials.
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o
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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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Filing
Party:
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Date
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NEW
GENERATION BIOFUELS HOLDINGS, INC.
5850 Waterloo Road - Suite
140
Columbia,
MD 21045
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
On behalf of the Board of Directors of
New Generation Biofuels Holdings, Inc., it is my pleasure to invite you to our
2010 Annual Meeting of Shareholders. The annual meeting of shareholders will be
held on Thursday, July 8, 2010, at 9:00 a.m., Eastern Time, at the 5850 Waterloo
Road, Suite 140, Columbia, MD 21045. The annual meeting has been
called:
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1.
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To
elect the five nominees named in the attached proxy statement as directors
to serve on our Board of Directors for a one-year term ending at next
year’s annual meeting;
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2.
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To
ratify the appointment of Reznick Group, P.C. as our independent
registered public accounting firm for
2010;
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3.
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To
amend the Company’s Omnibus Incentive Plan to increase the number of
shares of common stock available for issuance under the plan from
6,400,000 to 10,000,000;
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4.
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For
purposes of complying with Nasdaq Marketplace Rules 5635(b) and 5635(d) in
connection with the potential issuance of securities to a potential
strategic partner from China, Regent Trend Investment Ltd., pursuant to a
non-binding Memorandum of Understanding, authorize the Company to issue up
to 25,000,000 shares of common stock (including preferred stock, options,
warrants, convertible debt or other securities exercisable for or
convertible into common stock) for aggregate consideration of not more
than $20,000,000 in cash and at a price not less than 80% of the market
price of the Company’s common stock at the time of issuance, but not less
than $0.80 per share, with such issuances to occur, if at all, within the
three month period commencing on the date of the approval of this proposal
by the Company’s shareholders, and upon such terms as the Board of
Directors shall deem to be in the best interests of the
Company;
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5.
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For
purposes of complying with Nasdaq Marketplace Rule 5635(d) in connection
with one or more capital raising transactions, authorize the Company to
issue up to 15,000,000 shares of common stock (including preferred stock,
options, warrants, convertible debt or other securities exercisable for or
convertible into common stock) for aggregate consideration of not more
than $15,000,000 in cash and at a price not less than 80% of the market
price of the Company’s common stock at the time of issuance, with such
issuances to occur, if at all, within the three month period commencing on
the date of the approval of this proposal by the Company’s shareholders,
and upon such terms as the Board of Directors shall deem to be in the best
interests of the Company; and
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6.
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Consideration
of any other business properly brought before the meeting, or any
adjournment or postponement.
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Shareholders
of record at the close of business on May 24, 2010 are entitled to notice of,
and to vote at, the annual meeting or any adjournment or
postponement.
This
proxy statement and the enclosed proxy card are first being mailed to our
shareholders on or about June 4, 2010.
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By
Order of the Board of Directors,
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Cary
J. Claiborne
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President
and Chief Executive Officer
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Dated:
June 4, 2010
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Page
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QUESTIONS
AND ANSWERS ABOUT PROXY MATERIALS AND VOTING
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1
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PROPOSALS
REQUIRING YOUR VOTE
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Proposal
1:
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Election
of Directors
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7
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Proposal
2:
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Ratification
of the Appointment Independent Registered Public Accounting
Firm
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9
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Proposal
3:
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Amendment
of the Omnibus Incentive Plan
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11
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Proposal
4:
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Approval
of Private Placement with Proposed Strategic Partner in Accordance with
Nasdaq Marketplace Rules 5635(b) and 5635(d)
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18
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Proposal
5:
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Authorization
of the Company to Issue Common Stock or Securities Convertible into Common
Stock in Connection with Capital Raising Transactions, in Accordance with
Nasdaq Marketplace Rule 5635(d)
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CORPORATE
GOVERNANCE AND THE BOARD OF DIRECTORS
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25
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Independence
of the Board of Directors
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25
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Meetings
of the Board of Directors
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25
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Committees
of the Board of Directors
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25
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Audit
Committee
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Report
of the Audit Committee
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Compensation
Committee
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Nominating
Committee
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Communications
with Board of Directors
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Code
of Business Conduct and Ethics
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EXECUTIVE
OFFICERS
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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34
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SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
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TRANSACTIONS
WITH RELATED PARTIES
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EXECUTIVE
COMPENSATION
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38
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DIRECTOR
COMPENSATION
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43
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HOUSEHOLDING
OF PROXY MATERIALS
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44
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OTHER
MATTERS
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NEW
GENERATION BIOFUELS HOLDINGS, INC.
5850 Waterloo Road - Suite 140
Columbia,
MD 21045
PROXY
STATEMENT
FOR
THE 2010 ANNUAL MEETING OF SHAREHOLDERS
To
Be Held On July 8, 2010
QUESTIONS
AND ANSWERS ABOUT PROXY MATERIALS AND VOTING
Why
am I receiving these materials?
You are
receiving this proxy statement and the enclosed proxy card because the Board of
Directors of New Generation Biofuels Holdings, Inc. (“Company,” “we,” “us,” or
“our”) is soliciting your proxy, as the shareholder of record, to vote at the
2010 Annual Meeting of Shareholders. As of May 20, 2010, you are a shareholder
of record because you own shares of our common stock, our Series A Cumulative
Convertible Preferred Stock (“Series A Preferred Stock”) or our Series B
Cumulative Convertible Preferred Stock (“Series B Preferred Stock” and
collectively with the Series A Preferred Stock, the “Preferred
Stock”).
Who
may vote at the annual meeting?
Only
shareholders of record at the close of business on May 24, 2010 will be entitled
to vote at the annual meeting. As of May 24, 2010, there were a total of
38,271,054 shares of common stock and Preferred Stock outstanding and entitled
to vote (on an as converted basis), including 35,889,160 shares of common stock,
18,400 shares of Series A Preferred Stock (which are convertible into 582,089
shares of common stock including accrued but unissued dividend shares) and
45,785 shares of Series B Preferred Stock (which are convertible into 1,799,805
shares of common stock including accrued but unissued dividend shares). As of
June 8, 2010, all shares of Series A Preferred Stock automatically converted
into common stock and are no longer outstanding.
Shareholder
of Record: Shares Registered in Your Name
If, on May 24, 2010, your shares were
registered directly in your name with our transfer agent, Olde Monmouth Stock
Transfer Co. Inc., then you are a shareholder of record. As a shareholder of
record, you may vote in person at the meeting or vote by proxy. Whether or not
you plan to attend the meeting, we urge you to fill out and return the enclosed
proxy card by mail or vote by proxy over the telephone or the Internet as
instructed below to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If, on May 24, 2010, your shares were
held, not in your name, but rather in an account at a brokerage firm, bank,
dealer, or other similar organization, then you are the beneficial owner of
shares held in “street name,” and these proxy materials are being forwarded to
you by that organization. The organization holding your account is considered to
be the shareholder of record for purposes of voting at the annual meeting. As a
beneficial owner, you have the right to direct your broker or other agent
regarding how to vote the shares in your account. In addition, you may not
vote your shares in person at the meeting unless you request and obtain a valid
proxy from your broker or other agent, and therefore you are encouraged to have
your broker submit a proxy on your behalf.
What
am I voting on?
There are five matters scheduled for a
vote:
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Election
of the five director nominees named in this proxy
statement;
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Ratification
of the appointment of Reznick Group, P.C. as our independent registered
public accounting firm for 2010;
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Amendment
of the Company’s Omnibus Incentive Plan to increase the number of shares
of common stock available for issuance under the plan from 6,400,000 to
10,000,000;
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For
purposes of complying with Nasdaq Marketplace Rules 5635(b) and 5635(d) in
connection with the potential issuance of securities to a potential
strategic partner, authorize the Company to issue up to 25,000,000 shares
of common stock (including preferred stock, options, warrants, convertible
debt or other securities exercisable for or convertible into common stock)
for aggregate consideration of not more than $20,000,000 in cash and at a
price not less than 80% of the market price of the Company’s common stock
at the time of issuance, but not less than $0.80 per share, with such
issuances to occur, if at all, within the three month period commencing on
the date of the approval of this proposal by the Company’s shareholders,
and upon such terms as the Board of Directors shall deem to be in the best
interests of the Company; and
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For
purposes of complying with Nasdaq Marketplace Rule 5635(d) in connection
with one or more capital raising transactions, authorize the Company to
issue up to 15,000,000 shares of common stock (including preferred stock,
options, warrants, convertible debt or other securities exercisable for or
convertible into common stock) for aggregate consideration of not more
than $15,000,000 in cash and at a price not less than 80% of the market
price of the Company’s common stock at the time of issuance, with such
issuances to occur, if at all, within the three month period commencing on
the date of the approval of this proposal by the Company shareholders, and
upon such terms as the Board of Directors shall deem to be in the best
interests of the Company.
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Will
any other matters be voted on?
As of the date of this proxy statement,
we do not know of any other matters that will be presented for consideration at
the annual meeting other than those matters discussed in this proxy
statement. If any other matters properly come before the meeting and call for a
shareholder vote, valid proxies will be voted by the holders of the proxies in
their own discretion.
How
does the Board of Directors recommend that I vote?
The Board
of Directors recommends that you vote:
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“FOR”
the five director nominees named in this proxy
statement;
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“FOR”
the ratification of the appointment of Reznick Group, P.C. as our
independent registered public accounting firm for
2010;
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“FOR”
the amendment of the Company’s Omnibus Incentive Plan to increase the
number of shares of common stock available for issuance under the plan
from 6,400,000 to 10,000,000;
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“FOR”
the proposal to authorize the Company to issue up to 25,000,000 shares of
common stock or convertible securities for aggregate consideration of not
more than $20,000,000 in cash at a price not less than 80% of the market
price at the time of issuance, but not less than $0.80 per share, in
accordance with Nasdaq Marketplace Rules and 5635(b) and 5635(d);
and
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“FOR”
the proposal to authorize the Company to issue up to 15,000,000 shares of
common stock or convertible securities for aggregate consideration of not
more than $15,000,000 in cash at a price not less than 80% of the market
price at the time of issuance in accordance with Nasdaq Marketplace Rule
5635(d).
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Who
is paying for this proxy solicitation?
We will bear the cost of soliciting
proxies, including preparation, assembly, printing and mailing of this proxy
statement, the proxy card and any additional information furnished to
shareholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares of
our common stock beneficially owned by others to forward to such beneficial
owners. We may reimburse persons representing beneficial owners of our common
stock for their costs of forwarding solicitation materials to such beneficial
owners. Original solicitation of proxies by mail may be supplemented by
telephone or personal solicitation by our directors, officers or other
employees. No additional compensation will be paid to directors, officers or
other employees for such services.
How
many shares must be present to hold the annual meeting?
A quorum
of shareholders is necessary to hold a valid meeting. A quorum will be present
if shareholders holding at least a majority of the outstanding shares of common
stock and Preferred Stock (on an as converted basis) are present at the meeting
in person or represented by proxy. The holders of 19,135,528 shares must be
present in person or represented by proxy at the meeting to have a
quorum.
Your shares will be counted towards the
quorum only if you submit a valid proxy (or one is submitted on your behalf by
your broker, bank or other nominee) or if you vote in person at the meeting.
Abstentions and broker non-votes will be counted towards the quorum
requirement.
How
do I vote?
You may either vote “For” all the
nominees to the Board of Directors or you may “Withhold” your vote for any
nominee you specify. For any other matter to be voted on, you may vote “For” or
“Against” or abstain from voting. The procedures for voting are as
follows:
Shareholder
of Record: Shares Registered in Your Name
If you are a shareholder of record, you
may a) vote in person at the annual meeting, b) vote by proxy using the enclosed
proxy card, c) vote by proxy over the telephone, or d) vote by proxy on the
Internet. Whether or not you plan to attend the meeting, we urge you to vote by
proxy to ensure your vote is counted. You may still attend the meeting and vote
in person even if you have already voted by proxy.
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To
vote in person, come to the annual meeting, and we will give you a ballot
when you arrive.
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To
vote using the proxy card, simply complete, sign and date the enclosed
proxy card and return it promptly in the envelope provided. If you return
your signed proxy card to us before the annual meeting, we will vote your
shares as you direct.
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To
vote over the telephone, dial toll-free 1-800-690-6903 using a touch-tone
phone and follow the recorded instructions. You will be asked to provide
the company number and control number from the enclosed proxy card. Your
vote must be received by 11:59 p.m., Eastern Time on July 7, 2010, to be
counted.
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To
vote on the Internet, go to
www.proxyvote.com
to complete an electronic proxy card. You will be asked to provide the
company number and control number from the enclosed proxy card. Your vote
must be received by 11:59 p.m., Eastern Time on July 7, 2010, to be
counted.
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Beneficial
Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner of shares
registered in the name of your broker, bank, or other agent, you should have
received a proxy card and voting instructions with these proxy materials from
that organization rather than from us. Simply complete and mail the proxy card
and voting instructions to ensure that your vote is counted. Alternatively, you
may vote by telephone or over the Internet as instructed by your broker or bank.
To vote in person at the annual meeting, you must obtain a valid proxy from your
broker, bank, or other agent. Follow the instructions from your broker or bank
included with these proxy materials, or contact your broker or bank to request a
proxy form.
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We
provide Internet proxy voting to allow you to vote your shares online,
with procedures designed to ensure the authenticity and correctness of
your proxy vote instructions. However, please be aware that you must bear
any costs associated with your Internet access, such as usage charges from
Internet access providers and telephone
companies.
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How
many votes do I have?
At the annual meeting, holders of our
common and Preferred Stock vote together as a single class, on an as converted
basis. As of the record date, votes per share on each matter scheduled for a
vote are as follows:
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Each
share of Preferred Stock is entitled to one vote for each share of common
stock issuable upon conversion of the Preferred
Stock;
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Each
share of common stock is entitled to one
vote;
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Each
share of Series A Preferred Stock is entitled to 25 votes, plus additional
votes based on accrued but unissued
dividends;
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Each
share of Series B Preferred Stock is entitled to 34 votes plus additional
votes based on accrued but unissued
dividends.
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What
if I return a proxy card but do not make specific choices?
If you return a signed and dated proxy
card without marking any voting selections, your shares will be voted “FOR”
Proposals 1, 2, 3, 4 and 5. In addition, if any other matter is
properly presented at the meeting, your proxyholder (the individuals named on
your proxy card) will vote your shares in his own discretion.
What
does it mean if I receive more than one proxy card?
If you receive more than one proxy
card, your shares are registered in more than one name or are registered in
different accounts. Please complete, sign and return each proxy card to ensure
that all of your shares are voted.
Can
I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any
time before the final vote at the annual meeting. If you are the shareholder of
record, you may revoke your proxy in any one of four ways:
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(1)
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You
may submit another properly completed proxy card with a later
date;
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(2)
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You
may enter a new vote over the Internet or by telephone by 11:59 p.m.,
Eastern Time on July 7, 2010;
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(3)
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You
may send a timely written notice that you are revoking your proxy to New
Generation Biofuels Holdings, Inc., 5850 Waterloo Road - Suite 140,
Columbia, MD 21045, Attention: Cary J. Claiborne;
or
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(4)
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You
may attend the annual meeting and vote in person. Simply attending the
meeting will not, by itself, revoke your
proxy.
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If your shares are held by your broker
or bank as a nominee or agent, you should follow the instructions provided by
your broker or bank.
How
do I vote my shares without attending the annual meeting?
A proxy
for use at the annual meeting and a return envelope are enclosed. Shares of our
common stock and Preferred Stock (on an as converted basis) represented by a
properly executed proxy, if such proxy is received in time and not revoked, will
be voted at the annual meeting according to the instructions indicated in the
proxy. If no instructions are indicated, the shares will be voted “FOR” approval
of each proposal considered at the annual meeting. Discretionary authority is
provided in the proxy as to any matters not specifically referred to in the
proxy. We are not aware of any other matters that are likely to be brought
before the annual meeting. If any other matter is properly presented at the
annual meeting for action, the persons named in the accompanying proxy will vote
on such matter in their own discretion.
How
do I vote my shares in person at the annual meeting?
Even if
you plan to attend the annual meeting, we encourage you to vote by signing,
dating and returning the enclosed proxy card so your vote will be counted if you
are unable to, or later decide not to, attend the annual meeting. If you are a
shareholder of record, you may vote in person by marking and signing the ballot
to be provided at the annual meeting. If you hold your shares in “street name,”
you must obtain a proxy in your name from your bank, broker or other shareholder
of record in order to vote by ballot at the annual meeting.
How
are votes counted?
Votes will be counted by the inspector
of election appointed for the meeting, who will separately count “For” and
“Withhold” and, with respect to proposals other than the election of directors,
“Against” votes, abstentions and broker non-votes.
What
are “broker non-votes”?
Generally, if shares are held in
“street name,” the beneficial owner of the shares is entitled to give voting
instructions to the broker or nominee holding the shares. Broker-dealers who
hold their customers’ shares in “street name” may, under the applicable rules of
the exchange and other self-regulatory organizations of which the broker-dealers
are members, sign and submit proxies for such shares and may vote such shares on
routine matters, which typically include the ratification of the appointment of
our independent registered public accounting firm. Under new rules in effect
this year, the election of directors is no longer considered “routine.”
Broker-dealers may not vote such shares on other “non-routine” matters without
specific instructions from the customers who beneficially own such shares.
Broker non-votes occur when a beneficial owner of shares held in “street name”
does not give instructions to the broker or nominee holding the shares as to how
to vote on matters deemed “non-routine.” If the beneficial owner does not
provide voting instructions, the broker or nominee can still vote the shares
with respect to matters that are considered to be “routine,” but not with
respect to “non-routine” matters. Proposal 2 is considered “routine” and
Proposals 1, 3, 4 and 5 are considered “non-routine” under the Nasdaq
Marketplace Rules.
How
many votes are needed to approve each proposal?
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Election of
Directors
: Directors will be elected by a plurality of votes cast.
Plurality means that the individuals who receive the largest number of
“For” votes cast are elected as directors up to the maximum number of
directors to be chosen at the meeting. Accordingly, the five nominees
receiving the most “For” votes will be elected as directors. Under new
rules in effect this year, brokers do not have discretionary authority to
vote shares on the election of directors without instructions from the
beneficial owner. Abstentions and broker non-votes will not affect the
outcome of the election of
directors.
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Ratification of the
Appointment of Reznick Group, P.C.
: The ratification of Reznick
Group, P.C. as our independent registered public accounting firm for 2010
will require the “For” votes cast to exceed the “Against” votes cast.
Abstentions are not counted as votes cast and will have no effect on the
vote. Similarly, broker non-votes will have no effect on the
vote.
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Amendment of the
Omnibus Incentive Plan
: The approval of the amendment to the
Omnibus Incentive Plan will require the affirmative vote of the holders of
a majority of the votes cast on the proposal. Brokers do not have
discretionary authority to vote shares on this proposal without
instructions from the beneficial owner. Abstentions and broker non-votes
will have no effect on the vote.
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Approval of Private
Placement with Proposed Strategic Partner in Accordance with Nasdaq
Marketplace Rules 5635(b) and 5635(d)
: The approval of the
authorization will require the affirmative vote of the holders of a
majority of the votes cast on the proposal. Abstentions are not counted as
votes cast and will have no effect on the vote. Brokers do not have
discretionary authority to vote shares on this proposal without
instructions from the beneficial owner. Abstentions and broker non-votes
will have no effect on the
vote.
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Authorization of the
Company to Issue Common Stock or Securities Convertible into Common Stock
in Connection with Capital Raising Transactions, in Accordance with Nasdaq
Marketplace Rule 5635(d)
: The approval of the authorization will
require the affirmative vote of the holders of a majority of the votes
cast on the proposal. Abstentions are not counted as votes cast and will
have no effect on the vote. Brokers do not have discretionary authority to
vote shares on this proposal without instructions from the beneficial
owner. Abstentions and broker non-votes will have no effect on the
vote.
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How
can I find out the results of the voting at the annual meeting?
Preliminary voting results will be
announced at the annual meeting. Preliminary voting results will be disclosed in
a Current Report on Form 8-K filed with the Securities and Exchange
Commission no later than
four business days after the annual
meeting.
When
are shareholder proposals due for next year’s annual meeting?
Shareholder proposals for the 2011
Annual Meeting of Shareholders must be received at our principal executive
offices by February 4, 2011 to be considered timely or to be eligible for
inclusion in the proxy materials. A shareholder who wishes to present a proposal
at the 2011 annual meeting, but who does not request that the Company solicit
proxies for the proposal, must submit the proposal to our principal executive
offices by April 5, 2011.
How
do I obtain an Annual Report on Form 10-K?
A copy of our 2010 annual report on
Form 10-K for the year ended December 31, 2009, is enclosed and is
also available through our website at
www.newgenerationbiofuels.com
.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING
TO BE HELD ON JULY 8, 2010.
The Proxy
Statement and the Annual Report on Form 10-K are available at
www.proxyvote.com
.
PROPOSAL 1
ELECTION
OF DIRECTORS
Our bylaws provide for no less than one
and no more than ten directors. Our board of directors currently consists of
five members, each with terms expiring at the 2010 annual meeting. There is
currently one vacancy on our board due to the resignation of Lee S. Rosen in May
2010. Each director to be elected will hold office until the next Annual Meeting
of Shareholders and until his successor is elected, or, if sooner, until the
director’s death, resignation or removal. Each of the nominees listed below is
currently one of our directors and has previously been elected by the
shareholders or appointed by our Board of Directors.
Vote
Required
Directors are elected by a plurality of
the votes. The five nominees receiving the highest number of affirmative votes
will be elected. Shares represented by executed proxies will be voted, if
authority to do so is not withheld, for the election of the five nominees named
below. If at the time of the 2010 annual meeting any of the nominees named below
is unable to serve, the discretionary authority provided in the proxy will be
exercised to vote for the substitute nominee or nominees, if any, as shall be
designated by the Board of Directors. Each nominee has agreed to serve if
elected. Our management has no reason to believe that any nominee will be unable
to serve.
Our
Recommendation
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE FOLLOWING
NOMINEES:
Nominees:
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
|
|
John
E. Mack
|
|
62
|
|
Chairman
of the Board of Directors
|
|
|
|
|
|
|
|
Cary
J. Claiborne
|
|
49
|
|
President,
Chief Executive Officer and Director
|
|
|
|
|
|
|
|
David
H. Goebel, Jr.
|
|
50
|
|
Chief
Operating Officer and Director
|
|
|
|
|
|
|
|
Douglas
S. Perry
|
|
60
|
|
Director
|
|
|
|
|
|
|
|
J.
Robert Sheppard, Jr.
|
|
62
|
|
Director
|
The
following is a brief biography of each nominee for director:
John E. Mack
was appointed
Chairman of the Board of Directors in May 2010 and has served as a Director
since February 2007. Mr. Mack has over 30 years of international banking,
financial business management and mergers and acquisitions experience. From
November 2002 through September 2005, Mr. Mack served as Senior Managing
Executive Officer and Chief Financial Officer of Shinsei Bank, Limited of Tokyo,
Japan. Prior to joining Shinsei Bank and for more than twenty-five years Mr.
Mack served in senior management positions at Bank of America and its
predecessor companies, including twelve years as Corporate Treasurer. Mr. Mack
is also a member of the Board of Directors of Flowers National Bank, Incapital
Holdings LLC, Wilson TurboPower, and is Vice-Chairman and a director of
Islandsbanki hf. Mr. Mack holds an MBA from the University of
Virginia and received his bachelor’s degree in economics from Davidson
College.
Cary J. Claiborne
has served
as our President, Chief Executive Officer and a Director since March 2009 and
served as our Chief Financial Officer until March 2010. Prior to
joining New Generation Biofuels in December 2007, Mr. Claiborne served as the
Chief Financial Officer of Osiris Therapeutics, a publicly traded biotech
company from 2004 to 2007. From 2001 to 2004, Mr. Claiborne was the Vice
President, Financial Planning and Analysis at Constellation Energy. Mr.
Claiborne earned an MBA in Finance from Villanova University and a BA in
business administration from Rutgers University.
David H. Goebel, Jr.
has
served as Director since May 2010 and as our Chief Operating Officer since July
2009. Mr. Goebel previously served as our Vice President of Global Sourcing and
Supply Chain since September 2007 and previously worked at MeadWestvaco, a
packaging solutions and products company, as the acting Vice President of Supply
Chain/Director of Customer Service. He was responsible for redesigning the
corporate order-to-cash processes, strategizing organizational and process
changes in capacity planning, demand forecasting, inventory management/
operations, logistics/distribution, and customer service. Additionally, for
nearly 20 years, Mr. Goebel worked at ExxonMobil and its predecessor, Mobil
Corporation, in many different leadership capacities including manufacturing,
engineering, supply chain, operations, marketing, and sales. Mr. Goebel holds a
bachelor of science degree in microbiology from University of Minnesota along
with graduate studies at both the University of Texas at Dallas and Northeastern
University.
Douglas S. Perry
has served
as a Director since March 2010. Mr. Perry
is currently, and since
2005 has been, President of Davenport Power LLC, a privately-held developer
of geothermal power projects. Since January 1, 2010, Mr. Perry has
been President and Chief Executive Officer of Davenport Newberry Holdings
LLC. From 2003 to 2005, Mr. Perry was a consultant working with
start-up companies and projects to develop technology verification and
commercialization strategies, improve business operations and obtain
funding. Before that he spent 20 years at Constellation Energy Group,
including as President of Constellation Power Development and Vice President and
General Counsel for Constellation Holdings, the holding company for various
businesses including real estate, financial investments and power plant
acquisition, development and operation. Prior to working at Constellation, Mr.
Perry held legal positions, including serving as Special Counsel/Attorney with
the Securities and Exchange Commission’s Divisions of Corporation Finance and
Enforcement. Mr. Perry holds an engineering degree and an MBA from
Duke University and law degrees from Emory University and Georgetown
University.
J. Robert Sheppard, Jr.
has
served as a Director since August 2007. Mr. Sheppard has been the Managing
Director of J.R. Sheppard & Company LLC, a consulting firm, since 2002. One
of Mr. Sheppard’s current assignments, initiated by the Infrastructure Experts
Group, an organization formed under the auspices of the United Nations (UN), is
to arrange capital markets financing for up to two developing-country
infrastructure projects as part of a Demonstration Project financed by the Swiss
Agency for Cooperation and Development. He is also working currently
as a consultant to the United Nations, as an advisor to an agency of the U.S.
Government, and as the financial advisor to a U.S. firm that has developed a new
technology for treating fly ash. In his capacity as Managing
Director, Mr. Sheppard has also worked as a consultant for The World Bank on
projects including advising on structures to mitigate foreign exchange risk for
electric power and water projects in developing countries and concerning
application of partial risk guarantees in the transport sector and local capital
markets financing for infrastructure. He is also an adjunct professor of finance
at the University of South Carolina and an instructor in the Global
Infrastructure Forum at Stanford University. Mr. Sheppard holds a JD
and an MBA from the University of North Carolina at Chapel Hill. He is a member
of the North Carolina Bar and was a member of the Task Force on US Participation
in Multilateral Development Banks, as well as the Financing Project Advisory
Committee for the North Carolina Alternative Energy
Corporation.
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of
Directors has appointed Reznick Group, P.C. (“Reznick Group”) as our independent
registered public accounting firm for 2010, and has further directed that
management submit the selection of independent auditors for ratification by the
shareholders at the annual meeting. Reznick Group has been our principal
independent registered public accounting firm since October 16,
2009. Prior to October 16, 2009, Imowitz Koenig & Co., LLP
(“Imowitz”) was our principal independent registered public accounting firm.
Representatives of Reznick Group are expected to be present by telephone or in
person at the 2010 annual meeting. The representatives will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Shareholder ratification of the
selection of Reznick Group as our independent registered public accounting firm
is not required by law, our bylaws or other governing documents. However, the
Audit Committee is submitting the appointment of Reznick Group to the
shareholders for ratification as a best corporate practice. If the shareholders
fail to ratify the appointment, the Audit Committee will reconsider whether or
not to retain Reznick Group. Even if the appointment is ratified, the Audit
Committee in its discretion may appoint a different independent registered
public accounting firm at any time during the year if the Audit Committee
determines that such a change would be in the best interests of our company and
our shareholders.
As previously reported in a Current
Report on Form 8-K filed with the SEC, on October 16, 2009, Imowitz resigned as
our independent registered public accounting firm, and the Audit Committee
approved the engagement of Reznick Group as our new independent
registered public accounting firm, effective immediately. Imowitz resigned as
our certifying accountant because the firm decided to exit the business of
providing audit services to publicly traded companies. Imowitz’s reports
on our consolidated financial statements for the years ended December 31, 2008
and December 31, 2007 did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles, except that Imowitz’s report for the year ended December
31, 2008 included a paragraph regarding uncertainty about our ability to
continue as a going concern. In connection with its audits for the years ended
December 31, 2008 and December 31, 2007 and for subsequent interim periods
through October 16, 2009, there were (1) no disagreements between us and Imowitz
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to Imowitz’s
satisfaction, would have caused Imowitz to make reference to the subject matter
of such disagreements in connection with the issuance of its reports on our
financial statements and (2) there were no “reportable events” as defined in
Item 304(a)(1)(v) of Regulation S-K.
Vote
Required
The ratification of Reznick Group as
our independent registered public accounting firm for 2010 will require the
“For” votes cast to exceed the “Against” votes cast at the annual
meeting.
Our
Recommendation
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF REZNICK GROUP AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR 2010.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
During the years ended December 31,
2009 and 2008, we were billed or expect to be billed by Reznick Group, P.C., our
independent registered public accounting firm, and Imowitz Koenig & Co., our
former independent registered public accounting firm, the following
fees:
|
|
|
|
|
|
|
|
|
Audit
Fees (1)
|
|
$
|
235,775
|
|
|
$
|
235,000
|
|
|
Audit-Related
Fees (2)
|
|
|
95,092
|
|
|
|
96,996
|
|
|
Tax
Fees (3)
|
|
|
24,194
|
|
|
|
10,685
|
|
|
All
Other Fees (4)
|
|
|
13,525
|
|
|
|
-
|
|
|
Total
|
|
$
|
368,586
|
|
|
$
|
342,681
|
|
|
(1)
|
Audit
fees principally include those for services related to the annual audit of
the consolidated financials statements, SEC registration statements and
other filings and consultation on accounting
matters.
|
|
(2)
|
Audit-related
fees principally include assurance and related services that were
reasonably related to the performance of our independent registered public
accounting firm’s assurance and review of the financial statements and not
reported under the caption “Audit
Fees.”
|
|
(3)
|
Tax
fees principally include services for federal, state and international tax
compliance, tax planning and tax consultation, but excluding tax services
rendered in connection with the
audit.
|
|
(4)
|
Our
independent registered public accounting firm did not perform any services
for us other than those described
above.
|
The Audit
Committee has not adopted procedures for the pre-approval of all audit and
non-audit services rendered by our independent registered public accounting
firm, Reznick Group. Our Audit Committee Charter provides that the Audit
Committee may adopt pre-approval policies and procedures to avoid the need of
the Audit Committee approval of services on an engagement-by-engagement basis.
The policies and procedures must be detailed as to the particular service and
may not involve a delegation of pre-approval responsibility to
management.
All of
the services set forth under the table “Independent Registered Accounting Firm
Fees and Services” above were approved by the Audit Committee.
In connection with the audits of our
financial statements for the years ended December 31, 2009 and 2008, there were
no disagreements with either Reznick Group or Imowitz, respectively, on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, that would have caused either firm to report the
disagreement if it had not been resolved to their satisfaction.
AMENDMENT
TO THE OMNIBUS INCENTIVE PLAN
Description
of Proposed Amendment
On
February 24, 2010, our Board of Directors approved, subject to shareholder
approval, an amendment to the Omnibus Incentive Plan (the “Plan”) to increase
the number of shares reserved for issuance under the Plan from 6,400,000 to
10,000,000 shares. Other than this increase in the number of shares
reserved for issuance and the increase approved by the shareholders in May 2009,
all other provisions of the Plan will remain the same as adopted in October 2007
by our Board of Directors and in November 2007 by our shareholders.
The Board of Directors believes that
the proposed increase in the number of shares reserved for issuance under the
Plan is in the best interests of the Company and its shareholders, consistent
with our compensation strategy and essential to our continued success. As a
small cap, emerging growth public company, we rely significantly on equity
incentives to attract, motivate and retain executive officers and engineering,
marketing, sales and other personnel. The Board may use the proposed increase to
grant equity incentives to Cary J. Claiborne, our Chief Executive Officer, as
well as other employees. Equity awards are a particularly important component of
our compensation mix because they align the interests of our employees with
those of our shareholders and allow us to conserve cash for other uses.
As of May 18, 2010, there were 372,610
shares available for issuance under the Plan, which substantially limits our
ability to issue equity to existing employees or potential new hires or to
implement any further employee compensation shifts to equity to conserve
cash.
Including
the proposed increase in the shares available under the Plan, total employee
stock awards as of May 18, 2010 totaled 18.7% (10.6% on a fully diluted basis)
of our outstanding common stock either issued or reserved, as compared to 36% of
our outstanding common stock (29% on a fully diluted basis) in November
2007.
|
|
·
|
Options
to purchase 100,000 shares at an exercise price of $0.73 per share to Dane
R. Saglio, our Chief Financial Officer, pursuant to his employment
agreement entered into in March
2010;
|
|
|
·
|
Options
to purchase 208,707 shares at an exercise price of $1.05 per share to Mr.
Rosen pursuant to his employment and compensation agreement entered into
in July 2009 and accelerated pursuant to his separation agreement in May
2010; and
|
|
|
·
|
357,605
shares of restricted stock to Mr. Rosen pursuant to his employment and
compensation agreement entered into in July 2009 and accelerated pursuant
to his separation agreement in May
2010.
|
Approval
of Proposal 3 also will constitute shareholder approval of these recent stock
and option grants. If Proposal 3 is approved, after giving effect to these
grants, 3,306,298 shares will be available for issuance under the
Plan.
Vote
Required
The
amendment to the Omnibus Incentive Plan will require the affirmative vote of the
holders of a majority of the votes cast on the proposal.
Our
Recommendation
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE AMENDMENT TO AMEND THE OMNIBUS
INCENTIVE PLAN.
Description
of the Omnibus Incentive Plan
A
description of the provisions of the Omnibus Incentive Plan is set forth below.
This summary is qualified in its entirety by the detailed provisions of the
Omnibus Incentive Plan.
Administration.
The Omnibus
Incentive Plan is administered by the Compensation Committee of the Board of
Directors. Subject to the terms of the plan, the Compensation Committee may
select participants to receive awards, determine the types of awards and terms
and conditions of awards, and interpret provisions of the plan. Members of the
Compensation Committee serve at the pleasure of the Board of
Directors.
Common Stock Reserved for Issuance
under the Plan.
The common stock issued or to be issued under the Omnibus
Incentive Plan consists of authorized but unissued shares and treasury shares.
If any shares covered by an award are not purchased or are forfeited, or if an
award otherwise terminates without delivery of any common stock, then the number
of shares of common stock counted against the aggregate number of shares
available under the plan with respect to the award will, to the extent of any
such forfeiture or termination, again be available for making awards under the
Omnibus Incentive Plan.
Eligibility.
Awards may be
made under the Omnibus Incentive Plan to our employees or consultants or any of
our affiliates, including any such employee who is an officer or director of us
or of any affiliate, and to any other individual whose participation in the plan
is determined by the Board of Directors to be in our best
interests.
Amendment or Termination of the
Plan.
The Board of Directors may terminate or amend the plan at any time
and for any reason. The Omnibus Incentive Plan shall terminate in any event ten
years after its effective date. Amendments will be submitted for shareholder
approval to the extent required by the Internal Revenue Code or other applicable
laws, rules or regulations.
Awards.
The
Compensation Committee may award:
|
|
·
|
restricted
stock, which are shares of common stock subject to
restrictions;
|
|
|
·
|
options
to purchase shares of common stock;
|
|
|
·
|
stock
units, which are common stock units subject to
restrictions;
|
|
|
·
|
dividend
equivalent rights, which are rights entitling the recipient to receive
credits for dividends that would be paid if the recipient had held a
specified number of shares of common
stock;
|
|
|
·
|
stock
appreciation rights, which are a right to receive a number of shares or,
in the discretion of the Compensation Committee, an amount in cash or a
combination of shares and cash, based on the increase in the fair market
value of the shares underlying the right during a stated period specified
by the Compensation Committee;
|
|
|
·
|
performance
and annual incentive awards, ultimately payable in common stock or cash,
as determined by the Compensation Committee. The Compensation
Committee may grant multi-year and annual incentive awards subject to
achievement of specified goals tied to business criteria (described
below). The Compensation Committee may specify the amount of the incentive
award as a percentage of these business criteria, a percentage in excess
of a threshold amount or as another amount which need not bear a strictly
mathematical relationship to these business criteria. The Compensation
Committee may modify, amend or adjust the terms of each award and
performance goal. Awards to individuals who are covered under
Section 162(m) of the Internal Revenue Code, or who the Compensation
Committee designates as likely to be covered in the future, will comply
with the requirement that payments to such employees qualify as
performance-based compensation under Section 162(m) of the Internal
Revenue Code to the extent that the Compensation Committee so designates.
Such employees include the chief executive officer and the three highest
compensated executive officers (other than the chief executive officer)
determined at the end of each year (the covered
employees);
|
|
|
·
|
other
stock-based awards, which are any rights not previously described in the
plan and is an award denominated or payable in, value in whole or in part
by reference to, otherwise based on or related to
shares.
|
The exercise price of each stock option
may not be less than 100% of the fair market value of our common stock on the
date of grant. The fair market value is generally determined as the closing
price of the common stock on the grant date or other determination date. In the
case of 10% shareholders who receive incentive stock options, the exercise price
may not be less than 110% of the fair market value of the common stock on the
date of grant. An exception to these requirements is made for options that we
grant in substitution for options held by employees of companies that we
acquire. In such a case the exercise price is adjusted to preserve the economic
value of the employees stock option from his or her former
employer.
The term
of each stock option is fixed by the Compensation Committee and may not exceed
10 years from the date of grant. The Compensation Committee determines at what
time or times each option may be exercised and the period of time, if any, after
retirement, death, disability or termination of employment during which options
may be exercised. Options may be made exercisable in installments. The
exercisability of options may be accelerated by the Compensation
Committee.
In general, an optionee may pay the
exercise price of an option by cash, certified check, by tendering shares of
common stock, or by means of a broker-assisted cashless exercise.
Stock
options granted under the Omnibus Incentive Plan may not be sold, transferred,
pledged or assigned other than by will or under applicable laws of descent and
distribution. However, we may permit limited transfers of non-qualified options
for the benefit of immediate family members of grantees to help with estate
planning concerns.
Effect of Certain Corporate
Transactions.
Certain change of control transactions
involving us, such as a sale of the Company, may cause awards granted under the
Omnibus Incentive Plan to vest, unless the awards are continued or substituted
for in connection with the change of control transaction.
Adjustments for Stock Dividends and
Similar Events.
The Compensation Committee will make appropriate
adjustments in outstanding awards and the number of shares available for
issuance under the Omnibus Incentive Plan, including the individual limitations
on awards, to reflect stock splits and other similar events.
Section 162(m) of the Internal
Revenue Code.
Section 162(m) of the Internal Revenue Code limits
publicly-held companies such as us to an annual deduction for federal income tax
purposes of $1 million for compensation paid to their covered employees.
However, performance-based compensation is excluded from this limitation. The
Omnibus Incentive Plan is designed to permit the Compensation Committee to grant
awards that qualify as performance-based for purposes of satisfying the
conditions of Section 162(m).
To
qualify as performance-based:
(i) the
compensation must be paid solely on account of the attainment of one or more
pre-established, objective performance goals;
(ii) the
performance goal under which compensation is paid must be established by a
compensation committee comprised solely of two or more directors who qualify as
outside directors for purposes of the exception;
(iii) the
material terms under which the compensation is to be paid must be disclosed to
and subsequently approved by shareholders of the corporation before payment is
made in a separate vote; and
(iv) the
compensation committee must certify in writing before payment of the
compensation that the performance goals and any other material terms were in
fact satisfied.
In the
case of compensation attributable to stock options, the performance goal
requirement (summarized in (i) above) is deemed satisfied, and the
certification requirement (summarized in (iv) above) is inapplicable, if the
grant or award is made by the Compensation Committee; the plan under which the
option is granted states the maximum number of shares with respect to which
options may be granted during a specified period to an employee; and under the
terms of the option, the amount of compensation is based solely on an increase
in the value of the common stock after the date of grant.
Under the
Omnibus Incentive Plan, one or more of the following business criteria, on a
consolidated basis, and/or with respect to specified subsidiaries or business
units (except with respect to the total shareholder return and earnings per
share criteria), are used exclusively by the Compensation Committee in
establishing performance goals:
|
|
|
net
earnings or net income;
|
|
|
·
|
share
price, including growth measures and total shareholder
return;
|
|
|
·
|
earnings
before interest and taxes;
|
|
|
·
|
earnings
before interest, taxes, depreciation and/or
amortization;
|
|
|
·
|
sales
or revenue growth, whether in general, by type of product or service, or
by type of customer;
|
|
|
·
|
gross
or operating margins;
|
|
|
·
|
return
measures, including return on assets, capital, investment, equity, sales
or revenue;
|
|
|
·
|
cash
flow, including operating cash flow, free cash flow, cash flow return on
equity and cash flow return on
investment;
|
|
|
·
|
financial
ratios as provided in credit agreements of the Company and its
subsidiaries;
|
|
|
·
|
working
capital targets;
|
|
|
·
|
completion
of acquisitions of business or
companies;
|
|
|
·
|
completion
of divestitures and asset sales;
|
|
|
·
|
achievement
of specific project and business development
milestones;
|
|
|
·
|
achievement
of capital raising targets;
|
|
|
·
|
achievement
of specific legislative or regulatory objectives regarding tax incentives
or other government policies; and
|
|
|
·
|
any
combination of any of the foregoing business
criteria.
|
Business
criteria may be measured on a GAAP or non-GAAP basis.
Under the
Internal Revenue Code, a director is an outside director of the Company if he or
she is not a current employee of the Company; is not a former employee who
receives compensation for prior services (other than under a qualified
retirement plan); has not been an officer of the Company; and does not receive,
directly or indirectly (including amounts paid to an entity that employs the
director or in which the director has at least a five percent ownership
interest), remuneration from the Company in any capacity other than as a
director.
The
maximum number of shares of common stock subject to options that can be awarded
under the Omnibus Incentive Plan to any person is one million (1,000,000)
per year. The maximum number of shares of common stock that can be awarded under
the Omnibus Incentive Plan to any person, other than pursuant to an option, is
one million (1,000,000) per year. The maximum amount that may be earned as an
annual incentive award or other cash award in any fiscal year by any one person
is $500,000 and the maximum amount that may be earned as a performance award or
other cash award in respect of a performance period by any one person is
$500,000.
Federal
Income Tax Consequences
Incentive Stock Options.
The
grant of an option will not be a taxable event for the grantee or for us. A
grantee will not recognize taxable income upon exercise of an incentive stock
option (except that the alternative minimum tax may apply), and any gain
realized upon a disposition of our common stock received pursuant to the
exercise of an incentive stock option will be taxed as long-term capital gain if
the grantee holds the shares of common stock for at least two years after the
date of grant and for one year after the date of exercise (the holding period
requirement). We will not be entitled to any business expense deduction with
respect to the exercise of an incentive stock option, except as discussed
below.
For the
exercise of an option to qualify for the foregoing tax treatment, the grantee
generally must be our employee or an employee of our subsidiary from the date
the option is granted through a date within three months before the date of
exercise of the option.
If all of
the foregoing requirements are met except the holding period requirement
mentioned above, the grantee will recognize ordinary income upon the disposition
of the common stock in an amount generally equal to the excess of the fair
market value of the common stock at the time the option was exercised over the
option exercise price (but not in excess of the gain realized on the sale). The
balance of the realized gain, if any, will be capital gain. We will be allowed a
business expense deduction to the extent the grantee recognizes ordinary income,
subject to our compliance with Section 162(m) of the Internal Revenue Code
and to certain reporting requirements.
Non-Qualified Options.
The
grant of an option will not be a taxable event for the grantee or us. Upon
exercising a non-qualified option, a grantee will recognize ordinary income in
an amount equal to the difference between the exercise price and the fair market
value of the common stock on the date of exercise. Upon a subsequent sale or
exchange of shares acquired pursuant to the exercise of a non-qualified option,
the grantee will have taxable capital gain or loss, measured by the difference
between the amount realized on the disposition and the tax basis of the
shares of common stock (generally, the amount paid for the shares plus the
amount treated as ordinary income at the time the option was
exercised).
If we
comply with applicable reporting requirements and with the restrictions of
Section 162(m) of the Internal Revenue Code, we will be entitled to a
business expense deduction in the same amount and generally at the same time as
the grantee recognizes ordinary income.
A grantee
who has transferred a non-qualified stock option to a family member by gift will
realize taxable income at the time the non-qualified stock option is exercised
by the family member. The grantee will be subject to withholding of income and
employment taxes at that time. The family members tax basis in the shares of
common stock will be the fair market value of the shares of common stock on the
date the option is exercised. The transfer of vested non-qualified stock options
will be treated as a completed gift for gift and estate tax purposes. Once the
gift is completed, neither the transferred options nor the shares acquired
on exercise of the transferred options will be includable in the grantees estate
for estate tax purposes.
In the event a grantee transfers a
non-qualified stock option to his or her ex-spouse incident to the grantees
divorce, neither the grantee nor the ex-spouse will recognize any taxable income
at the time of the transfer. In general, a transfer is made incident to divorce
if the transfer occurs within one year after the marriage ends or if it is
related to the end of the marriage (for example, if the transfer is made
pursuant to a divorce order or settlement agreement). Upon the subsequent
exercise of such option by the ex-spouse, the ex-spouse will recognize taxable
income in an amount equal to the difference between the exercise price and the
fair market value of the shares of common stock at the time of exercise. Any
distribution to the ex-spouse as a result of the exercise of the option will be
subject to employment and income tax withholding at this time.
Restricted Stock.
A grantee
who is awarded restricted stock will not recognize any taxable income for
federal income tax purposes in the year of the award, provided that the shares
of common stock are subject to restrictions (that is, the restricted stock is
nontransferable and subject to a substantial risk of forfeiture). However, the
grantee may elect under Section 83(b) of the Internal Revenue Code to
recognize compensation income in the year of the award in an amount equal to the
fair market value of the common stock on the date of the award (less the
purchase price, if any), determined without regard to the restrictions. If the
grantee does not make such a Section 83(b) election, the fair market value
of the common stock on the date the restrictions lapse (less the purchase price,
if any) will be treated as compensation income to the grantee and will be
taxable in the year the restrictions lapse and dividends paid while the common
stock is subject to restrictions will be subject to withholding taxes. If we
comply with applicable reporting requirements and with the restrictions of
Section 162(m) of the Internal Revenue Code, we will be entitled to a
business expense deduction in the same amount and generally at the same time as
the grantee recognizes ordinary income.
Stock Units.
There are no
immediate tax consequences of receiving an award of stock units under the
Omnibus Incentive Plan. A grantee who is awarded stock units will be required to
recognize ordinary income in an amount equal to the fair market value of shares
issued to such grantee at the end of the restriction period or, if later, the
payment date. If we comply with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, we will be
entitled to a business expense deduction in the same amount and generally at the
same time as the grantee recognizes ordinary income.
Dividend Equivalent Rights.
Participants who receive dividend equivalent rights will be required to
recognize ordinary income in an amount distributed to the grantee pursuant to
the award. If we comply with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, we will be
entitled to a business expense deduction in the same amount and generally at the
same time as the grantee recognizes ordinary income.
Stock Appreciation Rights.
There are no immediate tax consequences of receiving an award of stock
appreciation rights that is settled in common stock under the Omnibus Incentive
Plan. Upon exercising a stock appreciation right that is settled in common
stock, a grantee will recognize ordinary income in an amount equal to the
difference between the exercise price and the fair market value of the common
stock on the date of exercise. We do not currently intend to grant cash-settled
stock appreciation rights. If we comply with applicable reporting requirements
and with the restrictions of Section 162(m) of the Internal
Revenue
Code, we will be
entitled to a business expense deduction in the same amount and generally at the
same time as the grantee recognizes ordinary income.
Performance and Annual Incentive
Awards.
The award of a performance or annual incentive award will have no
federal income tax consequences for us or for the grantee. The payment of the
award is taxable to a grantee as ordinary income. If we comply with applicable
reporting requirements and with the restrictions of Section 162(m) of the
Internal Revenue Code, we will be entitled to a business expense deduction in
the same amount and generally at the same time as the grantee recognizes
ordinary income.
Unrestricted Common Stock
.
Participants who are awarded unrestricted common stock will be required to
recognize ordinary income in an amount equal to the fair market value of the
shares of common stock on the date of the award, reduced by the amount, if any,
paid for such shares. If we comply with applicable reporting requirements and
with the restrictions of Section 162(m) of the Internal Revenue Code, we will be
entitled to a business expense deduction in the same amount and generally at the
same time as the grantee recognizes ordinary income.
Section 280(G).
To the
extent payments which are contingent on a change in control are determined to
exceed certain Code limitations, they may be subject to a 20% nondeductible
excise tax and our deduction with respect to the associated compensation expense
may be disallowed in whole or in part.
Section 409A.
We intend for
awards granted under the plan to comply with Section 409A of the Code. To the
extent a grantee would be subject to the additional 20% excise tax imposed on
certain nonqualified deferred compensation plans as a result of a provision of
an award under the plan, the provision will be deemed amended to the minimum
extent necessary to avoid application of the 20% excise tax.
New
Plan Benefits Table
As described above, a significant
portion of the compensatory grants recently made by our Compensation Committee
are subject to shareholder approval (“Excess Shares”). The following
table, required by SEC rules, shows the dollar value and the number of
Excess Shares, which are the only awards that are contingent on shareholder
approval of Proposal 3.
Name
and Principal Position
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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David
A. Gillespie
Former
President and Chief Executive Officer
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Lee
S. Rosen (2)
Chairman
of the Board
|
|
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551,737
|
|
|
|
566,312
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|
|
|
|
|
|
|
|
|
|
|
|
Cary
J. Claiborne
President
and Chief Executive Officer
|
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–
|
|
|
|
–
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|
|
|
|
|
|
|
|
|
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|
Dane
R. Saglio (3)
Chief
Financial Officer and Secretary
|
|
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57,960
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|
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100,000
|
|
|
|
|
|
|
|
|
|
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David
H. Goebel, Jr.
Chief
Operating Officer
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–
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|
|
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–
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|
|
|
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|
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|
|
|
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Executive
Group
|
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609,697
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|
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666,312
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|
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|
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Non-Executive
Director Group
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–
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–
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|
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|
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Non-Executive
Officer Employee Group
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–
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–
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(1)
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Amounts
in this column represent the grant date fair value of the restricted stock
and stock option awards in 2009 and 2010, as computed in accordance with
FASB ASC Topic 718.
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(2)
|
Pursuant
to Mr. Rosen’s separation agreement, 357,605 shares of restricted stock
and 208,707 options are subject to shareholder
approval.
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(3)
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On
March 29, 2010, in connection with his employment agreement, Mr. Saglio
was granted 400,000 stock options with an exercise price of $0.73, with
100,000 options to vest immediately, 120,000 time-based options that vest
equally on each of March 29, 2011, March 29, 2012 and March 29, 2013, and
180,000 performance-based options that vest equally over three years if
certain performance targets are met for the fiscal years ending December
31, 2010, 2011 and 2012. Of these 400,000 options comprising
the award, 100,000 options are subject to shareholder
approval.
|
PROPOSAL 4
APPROVAL
OF PRIVATE PLACEMENT WITH PROPOSED STRATEGIC PARTNER
IN
ACCORDANCE WITH NASDAQ MARKETPLACE RULES 5635(b) AND 5635(d)
In
compliance with Nasdaq Marketplace Rules 5635(b) and 5635(d), we are seeking
shareholder approval for the potential issuance of securities to a potential
strategic partner from China, Regent Trend Investment Ltd. (soon to be re-named
Milestone Biofuels Limited) or its affiliates, referred to collectively as
our “Proposed Strategic Partner”, which entered into a non-binding
Memorandum of Understanding, or MOU, with us on March 12, 2010. If
the transaction with Milestone is completed following shareholder approval, we
do not intend to complete the transactions contemplated by Proposal
5.
The
indicative terms of the MOU call for our Proposed Strategic Partner to invest
$20 million in our company and for us to issue the following (as described more
fully below):
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·
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25
million shares of our common stock at a price of $0.80 per share;
or
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·
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12,500,000
shares of our common stock at a price of $0.80 per share, 100,000 shares
of convertible preferred stock with a conversion price of $1.50 per share
and a 15% annual dividend and warrants exercisable for 2 million shares of
common stock with an exercise price of $1.50 per
share.
|
Shareholder
approval of this proposal would constitute approval of these securities
issuances. In addition, even though the terms of the MOU are fully
negotiated, the MOU is not binding and the terms are subject to change following
negotiations among the parties. To avoid having to seek additional shareholder
approval in the event any terms do change, we are seeking shareholder approval
for the flexibility to issue securities to our Proposed Strategic Partner that
may differ from those of the MOU, subject to the following limitations
prescribed by Nasdaq rules:
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|
·
|
Maximum
number of shares: up to 25,000,000 shares of our common stock (including
pursuant to warrants or other securities exercisable for or convertible
into common stock);
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·
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Maximum
dollar amount: total aggregate consideration of not more than $20,000,000
in cash;
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|
·
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Maximum
discount to market: at a price or prices not less than 80% of the market
price of our common stock at the time of issuance, but in no case less
than $0.80 per share;
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·
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Time
period: per Nasdaq rules such issuances must occur, if at all, within the
three month period commencing on the date of approval of this proposal by
the shareholders; and
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·
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Upon
such other terms as the Board of Directors shall deem to be in our best
interests.
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Vote
Required
This
proposed authorization will require the affirmative vote of the holders of a
majority of the votes cast on the proposal.
Our
Recommendation
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 4, FOR PURPOSES OF COMPLYING
WITH NASDAQ MARKETPLACE RULES 5635(b) AND 5635(d).
Description
of Proposal
Proposed
Transaction
Overview.
On March
12, 2010, we executed a non-binding MOU with our Proposed Strategic Partner,
under which our partner would invest $20 million in our equity securities and we
would collaborate with them to form a joint venture to develop and operate
biofuel production plants in the continental United States with a total
aggregate capacity of 250 million gallons per year. Our partner would fund all
of the capital requirements for the joint venture, and we would provide the
technology and operate the plants. We would earn a minimum royalty on all
sales from the joint venture and would share in a percentage of profits above
the minimum royalty.
Securities
Offered
. The indicative terms and conditions of the proposed
$20 million private placement are set forth in a financial term sheet included
as part of the executed MOU. A summary is provided
here. For the first $10 million investment, we would issue to our
Proposed Strategic Partner 12,500,000 shares of our common stock at a price of
$0.80 per share and no warrants. For the second $10 million
investment, we would issue, at the option of our Proposed Strategic Partner,
either 12,500,000 shares of our common stock at a price of $0.80 per share, or
100,000 shares of convertible preferred stock and warrants exercisable for 2
million shares of our common stock. The proposed terms of the
preferred stock and warrants are summarized below:
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Convertible
Preferred Stock
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Share
Price/Stated Value:
|
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$100.00
per share plus accrued dividends
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Conversion
Price:
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$1.50
per share
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Dividends:
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Payable
semi-annually at annual rate of 15% in cash, shares of preferred stock or
common stock, at the Company’s election. Dividends will accrue and be
added to the Stated Value to the extent that dividends are not declared or
cannot be paid.
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Ranking:
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Junior
to the Series A preferred stock (which will automatically convert into
common stock in May and June 2010) and
pari passu
to the
Series B preferred stock (which will automatically convert into common
stock in March 2011), and senior to the common stock with respect to
dividends, liquidation, dissolution or winding up.
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Automatic
Conversion:
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3
years
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Optional
Conversion:
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At
any time at option of the preferred shareholder
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Voting:
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Entitled
to vote on all matters submitted to the shareholders for a vote, together
with the holders of Series A Preferred Stock and Series B Preferred Stock
on an as-converted basis and the Common Stock voting together as a single
class.
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Redemption:
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Non-redeemable
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Warrants
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Exercise
Price:
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$1.50
per share
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Exercise
Period:
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Exercisable
from six (6) months after date of issuance until five (5) years after date
of issuance
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Ownership
Restrictions
. The MOU provides that as a result of the private
placement, no single investor or affiliated group of investors may own, or have
the right to acquire, 20% or more of our outstanding shares of common stock or
voting power and be the largest shareholder, other than our largest shareholder
prior to the private placement.
Board
Membership
. Our Proposed Strategic Partner will have the
option to nominate up to three directors to serve until our next annual meeting
of shareholders, of which at least two must be independent under Nasdaq
rules. The number of director slots allocated to any single investor
or investor group is subject to negotiation. Investors will enter
into a separate shareholder agreement with us that obligates the Investor to
vote as recommended by our Board of Directors on all matters to come before the
shareholders for the two years following the closing.
The
foregoing description of the potential private placement is included for
informational purposes only to shareholders in connection with this proxy
solicitation and do not constitute an offer to sell or a solicitation of an
offer to buy any of our securities. We cannot guarantee that any transaction
will be completed on the proposed terms or at all, and no such transaction will
go forward unless our board of directors approves the final terms and
conditions.
Reasons for Proposed
Transaction
Current Capital
Needs
. As disclosed in our SEC filings, based on our current
projections, we believe our current cash resources may be sufficient to fund our
operations through mid-June 2010, although we may need additional capital sooner
if we experience unforeseen costs or expenses, unanticipated liabilities or
delays in implementing our business plan. Given the existing credit environment,
our board of directors believes that issuing equity or equity-linked securities
remains the most likely approach to capital raising for us. This
transaction could result in a substantial capital raise and address our cash
needs for some time.
Ability to Construct Additional
Plants
. This transaction also would provide the potential to
finance additional plants to manufacture our biofuel. Such financing
could enable us to significantly expand our production capacity over the next
few years and enable us to pursue more and larger customers for our
biofuel.
Strategic Partner
Relationship
. We also believe that having a significant
strategic partner could enhance growth prospects for our
business. The renewable fuels industry is intensely competitive and
support from a strategic partner providing financing for our business could make
a significant difference in achieving our strategic objectives.
Possible Negative Effects of
the Proposed Transaction
Dilution
. Any
transaction requiring approval by shareholders under these Nasdaq Marketplace
Rules would likely result in a significant increase in the number of shares of
our common stock outstanding, and current shareholders will own a smaller
percentage of our outstanding common stock.
Possible Control by the Proposed
Strategic Partner
. If we issue a large number of shares to our
Proposed Strategic Partner, it would be our largest shareholder, possibly with
representatives on our board of directors. As a result, even though
the Proposed Strategic Partner would not hold a majority of our shares and would
not have a designated majority of our directors, the Proposed Strategic Partner
could be in a position to exert substantial influence over matters considered by
our board of directors and any matter requiring shareholder approval, including
the election of directors.
Possible Anti-takeover
Effects
. The increase in the number of shares of common stock
in connection with this transaction also may have an incidental anti-takeover
effect. The increased number of shares could dilute the stock ownership of
parties that may seek to obtain control of us and discourage, or render more
difficult, certain mergers, tender offers, proxy contests or other change of
control transactions. As described in more detail under “Florida
Anti-Takeover and Related Statutes” elsewhere in this proxy statement, certain
anti-takeover provisions of Florida law also could impact our ability to engage
in certain transactions. If the proposed transaction is completed,
our Proposed Strategic Partner likely would be considered an “interested
shareholder” because they would beneficially own more than 10% of our
outstanding voting shares. Under Florida’s “affiliated transactions”
statute, an “affiliated transaction” with our Proposed Strategic Partner must be
approved by the affirmative vote of the holders of two-thirds of our outstanding
voting shares, other than the shares beneficially owned by our Proposed
Strategic Partner. Under Florida’s “control share acquisition”
statute, without prior board approval, a potential acquiror that acquires shares
in excess of certain thresholds generally will not have any voting rights with
respect to such shares unless such voting rights are approved by a majority of
the votes of each class entitled to vote separately, excluding shares held or
controlled by the potential acquiror. If the proposed transaction is
completed, the Proposed Strategic Partner may be able to exert its influence
through its board seats and voting power to block potential control share
acquisitions using this statute.
Applicable Nasdaq
Rules
Change in
Control
. Nasdaq Marketplace Rule 5635(b) requires that a
listed company obtain shareholder approval prior to an issuance or potential
issuance which will result in a “change in control” of an
issuer. Nasdaq has not adopted any rule on what constitutes a “change
in control” for purposes of Marketplace Rule 5635(b). However, Nasdaq
has previously indicated that a transaction where an investor or group of
investors acquires, or obtains the right to acquire, 20% of more of common stock
(or securities convertible into or exercisable for common stock) or voting power
of an issuer on a post-transaction basis may be characterized as a “change in
control” for purposes of Nasdaq Marketplace Rule 5635(b).
Issuance Over
20%
. Nasdaq Marketplace Rule 5635(d) requires shareholder
approval prior to the sale or issuance or potential issuance of shares, in a
transaction other than a public offering, equal to 20% or more of the company’s
outstanding common stock or 20% or more of the voting power of the company
outstanding before the issuance, if the sale price of the common stock is less
than the greater of the book or market value of the common stock. Shares of a
company’s common stock issuable upon the exercise or conversion of warrants,
options, debt instruments, preferred stock or other equity securities issued or
granted in such a capital raising transaction are considered shares issued in
such a transaction in determining whether the 20% limit has been reached, except
in certain circumstances such as issuing warrants that are not exercisable for
six months and have an exercise price that exceeds the market
value.
PROPOSAL
5
AUTHORIZATION
OF THE COMPANY, TO ISSUE COMMON STOCK OR SECURITIES CONVERTIBLE
INTO
COMMON STOCK IN CONNECTION WITH CAPITAL RAISING TRANSACTIONS IN
ACCORDANCE
WITH
NASDAQ MARKETPLACE RULE 5635(d)
We are seeking shareholder approval to
issue shares of common stock or securities convertible into common stock in one
or more capital raising transactions in order to comply with the Nasdaq
Marketplace Rules and to provide the Board of Directors with the flexibility to
enter into and close such capital raising transactions on a timely basis. We
expect that the transactions contemplated by this Proposal 5 will need to be
completed prior to the transaction with Milestone in Proposal 4 to furnish
working capital to fund operating costs.
Specifically, we are seeking
shareholder approval, for the purpose of compliance with Nasdaq Marketplace Rule
5635(d), for the potential issuance of shares subject to the following
limitations approved by our Board of Directors:
|
|
·
|
potential
issuance not to exceed 15,000,000 shares of our common stock (including
pursuant to preferred stock, options, warrants, convertible debt or other
securities exercisable for or convertible into common
stock);
|
|
|
·
|
total
aggregate consideration of not more than $15,000,000 in
cash;
|
|
|
·
|
at
a price or prices not less than 80% of the market price of our common
stock at the time of issuance;
|
|
|
·
|
per
the Nasdaq rule, such issuances must occur, if at all, within the three
month period commencing on the date of the approval by the shareholders;
and
|
|
|
·
|
upon
such other terms as the Board of Directors shall deem to be in our best
interests.
|
Vote
Required
This
proposed authorization will require the affirmative vote of the holders of a
majority of the votes cast on the proposal.
Our
Recommendation
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL NO. 5, FOR PURPOSES OF
COMPLYING WITH NASDAQ MARKETPLACE RULE 5635(d).
Description
of Proposal
After closing private placements
of common stock and warrants at a discount (as defined under Nasdaq
rules) to market value in December 2009 and February 2010, we have issued
slightly less than 20% of our outstanding common stock on a pre-transaction
basis, which is the maximum number of shares that we may issue at a discount
under Nasdaq rules without shareholder approval. We are seeking
shareholder approval of this Proposal 5 to give us flexibility in structuring
the terms of future financings without creating risks that these financings
would not be in compliance with the Nasdaq shareholder approval rule or
potentially subjecting these financings to future shareholder
approvals.
As disclosed in our SEC filings, we
intend to seek additional capital to implement our business strategy. Based on
our current projections, we believe our current cash resources may be sufficient
to fund our operations through mid-June 2010, although we may need additional
capital sooner if we experience unforeseen costs or expenses, unanticipated
liabilities or delays in implementing our business plan. Given the existing
credit environment, the Board of Directors believes that issuing equity or
equity-linked securities remains the most likely approach to capital raising for
us. An inability to raise equity capital could materially and adversely affect
our business, financial results, or prospects, including the possibility of
discontinuing our business.
Nasdaq Marketplace Rule 5635(d)
requires shareholder approval prior to the sale or issuance or potential
issuance of shares, in a transaction other than a public offering, equal to 20%
or more of the company’s outstanding common stock or 20% or more of the voting
power of the company outstanding before the issuance, if the sale price of the
common stock is less than the greater of the book or market value of the common
stock. Shares of a company’s common stock issuable upon the exercise or
conversion of warrants, options, debt instruments, preferred stock or other
equity securities issued or granted in such a capital raising transaction are
considered shares issued in such a transaction in determining whether the 20%
limit has been reached, except in certain circumstances such as issuing warrants
that are not exercisable for six months and have an exercise price that exceeds
the market value. Since we may seek additional capital in the short term, we are
seeking shareholder approval at this stage to provide additional flexibility in
raising financing if an appropriate opportunity arises.
Since we have already issued shares
equal to almost 20% of our outstanding common stock, we are seeking
shareholder approval for the potential issuance and sale of shares of common
stock in one or more capital raising transactions so that the Board of Directors
will have flexibility to enter into and close such capital raising transactions
on a timely and current basis. If we arranged for an equity issuance but then
had to hold a shareholders meeting to approve the transaction, we could delay
and possibly jeopardize the closing of such a transaction. The shareholder
approval being sought does not apply to issuances with respect to prior
transactions as to which there are outstanding rights to receive additional
shares.
Generally, under published Nasdaq
interpretative guidance, general authorizations by the shareholders for purposes
of Nasdaq Marketplace Rule 5635(d) will be effective only if limited to
transactions which are completed within three months of the approval. The three
month requirement only applies to the initial issuance of the shares of common
stock or other securities exercisable for or convertible into common stock and
not the subsequent exercise or conversion of any such securities. Nasdaq
interpretative guidance also requires us to include a maximum potential discount
in shareholder proposals such as this one. The actual discount, if any, subject
to the maximum discount, will be determined by the Board of Directors and will
depend upon market conditions at the time of the financing or financings.
Therefore, we are seeking approval for up to a 20% discount from “market value”
(as defined by the Nasdaq Marketplace Rules) of our common stock.
As of the date of this proxy statement,
other than as described in Proposal 4, we do not have any specific plans,
arrangements or contracts with any third party, which alone or when aggregated
with subsequent transactions, would contemplate or require us to issue shares of
our common stock or other securities exercisable for or convertible into common
stock in excess of 20% of our outstanding common stock or voting power and at a
price that would be less than the book or market value of our common stock as of
such date. If any material plans, arrangements or contracts regarding securities
issuances subject to this proposal arise after the date of this proxy statement
and prior to the actual vote on this proposal, we will notify our shareholders
and distribute revised proxy solicitation materials. These materials will
include a new proxy card, if necessary.
We are asking shareholders only to
approve the sale, issuance or potential issuance of common stock or other
securities exercisable for or convertible into common stock for purposes of
compliance with Nasdaq Marketplace Rule 5635(d). If securities exercisable for
or convertible into common stock are issued and such securities, at the time of
issuance, constitute 20% or more of our securities or 20% or more of our voting
power outstanding prior to such issuance, then shareholder approval of this
proposal also will constitute approval of the issuance of shares of common stock
upon conversion or exercise of such securities, and no additional approval will
be solicited. Under Nasdaq rules, we also are not permitted (without risk of
de-listing) to undertake a transaction that could result in a change in control
of us as defined by Nasdaq Marketplace Rule 5635(b) without obtaining separate
shareholder approval of that transaction.
The foregoing description of various
forms of financings and the reasons for the financing are included for
informational purposes to shareholders in connection with this proxy
solicitation and do not constitute an offer to sell or a solicitation of an
offer to buy any of our securities. We cannot guarantee that any financing will
be completed (or, if so, what the terms or timing may be) and, accordingly,
cannot be certain that we will receive any amount of proceeds from the
financings. No financing will go forward unless the Board of Directors approves
the proposed terms and conditions at the time. The types of securities to be
sold and price at which they would be sold would be subject to market conditions
and negotiations with investors.
Possible
Negative Effects of the Proposed Transaction
Dilution
. Any
transaction requiring approval by shareholders under these Nasdaq Marketplace
Rules would likely result in a significant increase in the number of shares of
our common stock outstanding, and current shareholders will own a smaller
percentage of our outstanding common stock. Moreover, we might, as part of any
sale of securities, be required to provide the purchaser with securities that
are registered or whose resale will be registered. The issuance of these
securities could cause a significant reduction in the percentage interests of
current shareholders in the voting power, liquidation value, and book and market
value of us, and in our future earnings. The sale or resale of these securities
could cause the market price of the common stock to decline.
Possible Anti-takeover
Effects
. The increase in the number of shares of common stock in
connection with this transaction also may have an incidental anti-takeover
effect. The increased number of shares could dilute the stock ownership of
parties that may seek to obtain control of us and discourage, or render more
difficult, certain mergers, tender offers, proxy contests or other change of
control transactions. As described in more detail under “Florida
Anti-Takeover and Related Statutes” elsewhere in this proxy statement, certain
anti-takeover provisions of Florida law also could impact our ability to engage
in certain transactions. If the proposed transaction is completed,
our Proposed Strategic Partner likely would be considered an “interested
shareholder” because they would beneficially own more than 10% of our
outstanding voting shares. Under Florida’s “affiliated transactions”
statute, an “affiliated transaction” with our Proposed Strategic Partner must be
approved by the affirmative vote of the holders of two-thirds of our outstanding
voting shares, other than the shares beneficially owned by our Proposed
Strategic Partner. Under Florida’s “control share acquisition”
statute, without prior board approval, a potential acquiror that acquires shares
in excess of certain thresholds generally will not have any voting rights with
respect to such shares unless such voting rights are approved by a majority of
the votes of each class entitled to vote separately, excluding shares held or
controlled by the potential acquiror. If the proposed transaction is
completed, the Proposed Strategic Partner may be able to exert its influence
through its board seats and voting power to block potential control share
acquisitions using this statute.
CORPORATE
GOVERNANCE
INDEPENDENCE
OF THE BOARD OF DIRECTORS
Our common stock is listed on the
Nasdaq Capital Market (“Nasdaq”). Nasdaq listing standards require a majority of
our Board of Directors to be “independent.” For a director to be “independent”
under these standards, the Board must affirmatively determine that the director
has no material relationship with us, either directly or as a partner,
shareholder, or officer of an organization that has a relationship with us. In
addition, the Nasdaq rules specify certain relationships between a director, or
an immediate family member of a director, and the company which would preclude
the Board from determining a director to be independent. Applying the
Nasdaq corporate governance standards, and all other applicable laws, rules and
regulations, the Board of Directors has determined that all of our directors
presently in office are independent, except for Cary J. Claiborne, our President
and Chief Executive Officer, and David H. Goebel, Jr, our Chief Operating
Officer.
MEETINGS
OF THE BOARD OF DIRECTORS
The Board
of Directors met 19 times during 2009, in person or by phone. All of the
directors attended at least 75% or more of the aggregate of the meetings of the
Board and of the committees on which each director served. In accordance with
our policy on director attendance at annual meetings, all of our directors
attended the 2009 Annual Meeting of Shareholders.
COMMITTEES
OF THE BOARD OF DIRECTORS
The Board has three committees: an
Audit Committee, a Compensation Committee and a Nominating Committee. The
following table provides membership and meeting information for 2009 for each of
the Board committees:
|
|
|
|
|
|
|
|
|
Steven
F. Gilliland
|
|
X
|
|
X
|
|
X
|
|
John
E. Mack
|
|
X
*
|
|
X
|
|
X
|
|
Phillip
E. Pearce
|
|
X
|
|
X
*
|
|
X
|
|
J.
Robert Sheppard, Jr.
|
|
X
|
|
X
|
|
X
*
|
|
Total
meetings in 2009
|
|
8
|
|
11
|
|
2
|
|
*
Committee Chairman
|
|
|
|
|
|
|
In October 2009, a vacancy occurred on
our Board of Directors due to the death of Phillip E. Pearce, a director since
November 2006. He was also chairman of the Compensation Committee and a member
of the Audit and Nominating Committees. We appreciate Mr. Pearce’s service on
the board and his contributions to the Company, and will miss his participation.
The Board of Directors appointed J. Robert Sheppard, Jr. to succeed Mr. Pearce
as chairman of the Compensation Committee. On May 7, 2010, the Board
appointed David H. Goebel, Jr. as a director to fill the vacancy resulting from
Mr. Pearce’s death.
On February 25, 2010, Steven F.
Gilliland resigned from the Board and all committees of the Board.
We appreciate Mr.
Gilliland’s Board service and his contributions as an independent director
during his tenure. On March 2, 2010, the Board appointed Douglas S.
Perry as a director to fill the vacancy resulting from Mr. Gilliland’s
resignation.
On May 7, 2010, Lee S. Rosen resigned
as Chairman of the Board, a position Mr. Rosen has held since February
2006. We appreciate Mr. Rosen’s service as Chairman of our Board of
Directors and his contributions to the Company during his tenure, and note that
he remains one of our large shareholders with a strong interest in our business
plan being successful. The Board subsequently appointed John E. Mack
as non-executive Chairman of the Board.
Below is a description of each
committee of the Board of Directors. The Board of Directors has determined that
each member of each committee meets the applicable Nasdaq rules and regulations
regarding “independence” and that each member is free of any relationship that
would impair his or her individual exercise of independent judgment with regard
to the company.
Audit
Committee
The Board
of Directors established an Audit Committee to oversee our accounting and
financial reporting processes and audits of its financial statements. The Audit
Committee consists of three members, Messrs. Mack, Perry and Sheppard. The Board
has determined that Mr. Mack is the “audit committee financial expert” and
serves as the Chairman of the Audit Committee. The Audit Committee
met eight times during 2009. The Audit Committee adopted a written charter
which is available to shareholders on our website at
www.newgenerationbiofuels.com
.
As set
forth in the Audit Committee Charter, among other responsibilities, the Audit
Committee performs several oversight functions, including:
|
|
·
|
resolves
any disagreements between management and the outside independent
registered public accounting firm regarding financial
reporting;
|
|
|
·
|
serves
as an independent and objective body to monitor and assess our compliance
with legal and regulatory requirements, our financial reporting processes
and related internal control systems and the performance, generally, of
our internal audit function;
|
|
|
·
|
oversees
the audit and other services of our independent registered public
accounting firm and is directly responsible for the appointment,
independence, qualifications, compensation and oversight of the outside
independent registered public accounting firm, who reports directly to the
Audit Committee;
|
|
|
·
|
periodically
meets with management and the independent accountants about significant
risks or exposures, including financial statement risks, our processes for
identifying, assessing and disclosing such risks, the steps management has
taken to minimize such risks and the disclosures made regarding such
risks;
|
|
|
·
|
provides
an open avenue of communication among the outside independent registered
public accounting firm, accountants, financial and senior management and
our Board; and
|
|
|
·
|
considers
and approves transactions between the Company and our directors, executive
officers, nominees for directors or 5% or greater beneficial owners, any
of their immediate family members or certain entities affiliated with
them.
|
Report
of the Audit Committee Of The Board of Directors (1)
The
following is the report of the Audit Committee with respect to our audited
financial statements for the year ended December 31, 2009:
The Audit
Committee has reviewed and discussed the audited financial statements for the
year ended December 31, 2009 with the management of New Generation Biofuels
Holdings, Inc. The Audit Committee has discussed with the independent registered
public accounting firm the matters required to be discussed by the Statement on
Auditing Standards No. 61, as amended (AICPA,
Professional Standards
, Vol.
1. AU section 380), as adopted by the Public Company Accounting Oversight Board
(“PCAOB”) in Rule 3200T. The Audit Committee has also received the written
disclosures and the letter from the independent accountant required by
applicable requirements of the PCAOB regarding the independent accountant’s
communications with the audit committee concerning independence, and has
discussed with the independent accountant the independent accountant’s
independence. Based on the foregoing, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in New
Generation Biofuels Holdings, Inc.’s Annual Report in Form 10-K for the
year ended December 31, 2009 for filing with the SEC.
John E.
Mack, Chairman
Douglas
S. Perry
J. Robert
Sheppard, Jr.
|
(1)
|
The
material in this report is not “soliciting material,” is not deemed
“filed” with the SEC and is not to be incorporated by reference in any
filing we make under the Securities Act of 1933 or the Exchange Act,
whether made before or after the date hereof and irrespective of any
general incorporation language in any such
filing.
|
Compensation
Committee
The Compensation Committee consists of
three members, Messrs. Sheppard, Perry and Mack. Mr. Sheppard is Chairman of the
Compensation Committee. The Compensation Committee met eleven times during 2009.
The Compensation Committee adopted a written charter which is available to our
shareholders on our website at
www.newgenerationbiofuels.com
.
Compensation
Committee Processes and Procedures
Pursuant to its charter, the
Compensation Committee is responsible for discharging the Board’s
responsibilities relating to compensation of our directors and executive
officers and administering our incentive compensation and equity-based plans.
The Compensation Committee’s assigned duties include:
|
|
·
|
annually
reviewing and approving corporate goals and objectives for the Chief
Executive Officer (“CEO”), evaluating the CEO’s performance in light of
those goals and objectives and reviewing and approving (subject to the
ratification of the full Board of Directors) the CEO’s compensation each
year;
|
|
|
·
|
annually
reviewing and approving compensation for our executive officers, including
our executive chairman;
|
|
|
·
|
retaining
and terminating any compensation
consultant;
|
|
|
·
|
periodically
reviewing and making recommendations to the Board regarding compensation
to be paid to our non-employee directors;
and
|
|
|
·
|
administering
our incentive compensation plans including approving options and
restricted stock awards, determining the rules and regulations of the
plans, and imposing limitations, restrictions or conditions on any grant
or award.
|
The
Compensation Committee believes executive compensation should reflect our status
as an emerging growth company. The Compensation Committee considers the
recommendations of the CEO when setting each component of executive compensation
but retains ultimate decision making authority. The Compensation Committee is
solely responsible for CEO compensation. The Compensation Committee does not
currently engage the services of a compensation consultant. Additional
information regarding annual performance targets and our Management Equity
Compensation Plan is set forth under the caption “Executive
Compensation.”
Nominating
Committee
The Nominating Committee consists of
three members, Messrs. Sheppard, Perry and Mack. Mr. Sheppard is Chairman of the
Nominating Committee. The Nominating Committee met twice during 2009. The
Nominating Committee adopted a written charter which is available to our
shareholders on our website at
www.newgenerationbiofuels.com
.
Under
the Nominating Committee Charter, the primary functions of the Nominating
Committee are to:
|
|
·
|
identify
individuals qualified to become directors and recommend to our Board
candidates for election or re-election to the
Board;
|
|
|
·
|
consider
and make recommendations to our Board concerning the size and composition
of our Board, committee structure and makeup, retirement policies and
procedures affecting Board members;
|
|
|
·
|
make
recommendations to the Board regarding management succession planning;
and
|
|
|
·
|
take
a leadership role with respect to the development, implementation and
review of our principles of corporate governance and
practices.
|
The Nominating Committee considers
candidates suggested by its members, other directors, senior management and
shareholders in anticipation of upcoming elections and actual or expected board
vacancies. All candidates, including those recommended by shareholders, are
evaluated on the same basis in light of the entirety of their credentials and
the needs of the Board and us. Of particular importance are the candidate’s
integrity and judgment, professional achievements and experience relevant to our
business and strategic challenges, his or her potential contribution to the
diversity and business judgment of the Board and his or her
willingness to devote adequate time to fulfill duties as a
director. Shareholders may submit their candidate recommendations to
the attention of our Secretary at our principal executive
office.
In addition to the criteria listed
above, the Board believes it operates best when its membership reflects a
diverse range of experiences and areas of expertise. To this end, the
following list of experience, qualifications, attributes or skills of each
director nominee contributed to the Nominating Committee’s conclusion that each
nominee is qualified to serve on the Board in light of our business and
structure:
|
|
|
|
|
John
E. Mack
|
|
·
Management experience, including asset/liability management,
corporate investments, insurable risk management, corporate governance and
shareholder relations due to various positions with Bank of America and
predecessor companies, NationsBank Corporation and NCNB
Corporation
·
Expertise in public company accounting, disclosure and financial
system management due to roles as Senior Managing Executive Officer and
Chief Financial Officer of Shinsei Bank, Limited
|
|
|
|
|
|
Cary
J. Claiborne
|
|
·
President, Chief Executive Officer and former Chief Financial
Officer of the Company
·
Expertise in public company accounting, disclosure and corporate
finance due to roles as Chief Financial Officer of Osiris Therapeutics and
as Vice President of Financial Planning and Analysis at Constellation
Energy, Home Depot Corp. and MCI
·
Experience
in senior management of a startup public companies
|
|
|
|
|
|
David
H. Goebel, Jr.
|
|
·
Chief Operating Officer of the Company
·
Held various leadership capacities at ExxonMobil and Mobil
Corporation in various areas, including manufacturing engineering, supply
chain, operations, marketing and sales
·
Experience
in supply chain management, strategizing organizational and process
changes, logistics, distribution and customer service
|
|
|
|
|
|
Douglas
S. Perry
|
|
·
President of Davenport Power LLC, a privately-held developer
of geothermal power projects
·
Experience working with start-up companies in the energy industry
and projects to develop technology verification and commercialization
strategies, improve business operations and obtain funding
·
Legal experience, including serving as Special Counsel/Attorney
with the Securities and Exchange Commission’s Divisions of Corporation
Finance and Enforcement
|
|
|
|
|
|
J.
Robert Sheppard, Jr.
|
|
·
Experience in the energy industry and in financing energy-related
projects companies due to positions with Bank of America, Nations Banc
Capital Markets, Inc. and NationsBank Investment Banking
·
Managing Director of J.R. Sheppard & Company, LLC which
provides consulting services relating to international infrastructure,
capital markets, financing and risk management
·
Adjunct professor of finance teaching international project finance
at the Moore School of Business at the University of South
Carolina
|
COMMUNICATIONS
WITH THE BOARD
We have not implemented a formal
process relating to communications by shareholders and other interested parties
with the Board. Nevertheless, we invite shareholders and other interested
parties to communicate any concerns they may have about our company directly and
confidentially with the non-management directors as a group by writing to the
Independent Directors, c/o John E. Mack, New Generation Biofuels Holdings, Inc.,
5850 Waterloo Road - Suite 140, Columbia, MD 21045.
CODE
OF BUSINESS CONDUCT AND ETHICS
The Board and Audit Committee adopted a
Code of Business Conduct and Ethics (the “Code”) that applies to each of our
directors, officers and employees. The Code is available to our shareholders on
our website at
www.newgenerationbiofuels.com
.
The Code sets forth our policies and expectations on a number of topics,
including:
|
|
·
|
compliance
with laws, including insider
trading;
|
|
|
·
|
preservation
of confidential information relating to our business and that of our
clients;
|
|
|
·
|
reporting
of illegal or unethical behavior or concerns regarding accounting or
auditing practices;
|
|
|
·
|
corporate
opportunities; and
|
|
|
·
|
the
protection and proper use of our
assets.
|
We have also established and
implemented formal “whistleblower” procedures for receiving and handling
complaints from employees. As discussed in the Code, we encourage our employees
to promptly report illegal or unethical behavior as well as questionable
accounting or auditing matters and other accounting, internal accounting
controls or auditing matters on a confidential, anonymous basis to their
supervisors. Any concerns regarding accounting or auditing matters reported will
be communicated to the Audit Committee. The Audit Committee intends to review
the Code on an annual basis, and the Board will review and act upon any proposed
additions or amendments to the Code as appropriate.
BOARD
LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT
Board
Leadership Structure
The Board does not have a formal policy
on separating the roles of Chairman of the Board and Chief Executive Officer
and, if separate, whether the Chairman of the Board should be a non-employee
director or an employee. The Board believes that no single, one-size fits all,
board leadership model is universally or permanently appropriate. The
Board prefers to retain the flexibility to structure its leadership from time to
time in any manner that is in the best interests of the Company and its
shareholders.
We currently separate the roles of
Chairman of the Board and Chief Executive Officer in recognition of the
differences between the two roles and in the individuals serving in each role.
The Chief Executive Officer is responsible for setting the strategic direction
for the Company, and the non-executive Chairman of the Board leads board
meetings and provides general strategic advice to the Board, Chief Executive
Officer and management team. In recognition of Mr. Claiborne’s experience and
expertise in management positions in small, emerging growth companies and Mr.
Mack’s independence and management and financial experience in various public
companies, they serve as our Chief Executive Officer and non-executive Chairman,
respectively.
Board’s
Role in Risk Oversight
The Board is responsible for
consideration and oversight of risks facing the Company, and is responsible for
ensuring that material risks are identified and managed appropriately. As set
forth in the audit committee charter, the Audit Committee periodically meets
with management and the independent accountants about significant risks or
exposures, including financial statement risks, the Company’s processes for
identifying, assessing and disclosing such risks, the steps management has taken
to minimize such risk to the Company and the disclosures made regarding such
risks. The Audit Committee also oversees related party
transactions.
EXECUTIVE OFFICERS
The following table sets forth
information concerning our executive officers. Officers are elected by and serve
at the discretion of our Board of Directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
Cary
J. Claiborne
|
|
49
|
|
President,
Chief Executive Officer and Director
|
|
|
|
|
|
|
|
Dane
R. Saglio
|
|
52
|
|
Chief
Financial Officer and Secretary
|
|
|
|
|
|
|
|
Andrea
Festuccia
|
|
38
|
|
Chief
Technology Officer
|
|
|
|
|
|
|
|
David
H. Goebel, Jr.
|
|
50
|
|
Chief
Operating Officer and Director
|
|
|
|
|
|
|
|
Connie
L. Lausten, P.E.
|
|
42
|
|
Vice
President, Regulatory and Legislative Affairs
|
|
|
|
|
|
|
|
Philip
R. Cherry, Jr.
|
|
47
|
|
Vice
President, Engineering and
Operations
|
Set forth below are the descriptions of
the backgrounds of each of our executive officers, other than Mr. Claiborne and
Mr. Goebel, whose positions and backgrounds are described above under “Proposal
1 – Election of Directors.”
Dane R. Saglio
has served as
our Chief Financial Officer since March 2010. Mr. Saglio previously
owned his own consulting firm which provided business and management advisory
services to emerging private companies in the areas of strategic planning,
including exit strategies, transaction evaluation, capital structure, corporate
governance, and financial and business operations evaluation. Prior to
that, Mr. Saglio was the Chief Financial Officer of EntreMed, Inc. having joined
the company in April 2000 as Corporate Controller and then served as Chief
Financial Offer from February 2003 through December 2008. Mr. Saglio holds
a bachelor of science degree in business administration from the University of
Maryland. Mr. Saglio is also a Certified Public
Accountant.
Andrea Festuccia
has served
as Chief Technology Officer since April 2006. Currently, Mr. Festuccia is
Partner, Technical Director and member of the Board of Directors of IGEAM S.r.l.
(since February 2009), a private Italian company with about 100 employees
engaged in consulting environmental and safety problems where he has worked
since June 1999. Prior to his current position with IGEAM S.r.l., Mr. Festuccia
was the Director of the B.U. “Environment and Territory” at IGEAM S.r.l.. Mr.
Festuccia was Adjunct Professor of General and Inorganic Chemistry with the
University of “La Tuscia” of Viterbo from 1999 to 2000. Mr. Festuccia was a
former Technical Director and member of the Board of Directors of 3TI Progetti
Italia (from July 2004 to January 2009). Mr. Festuccia is currently an external
consultant with the University “La Sapienza” of Rome, a position that he has
held since 2001. He also worked as an external expert for the Minister of
Foreign Affairs of Italy-Farnesina from 2002-2004 and as Technical Director of
Ecosystems S.r.l. from 2002 to present. He is the Chairman of the Board of
Directors of OPT SENSOR, a private Italian company dealing with R&D for
electronic equipments to measure chemical/physical parameters, a spin-off
company of University “La Sapienza” of Rome. He is also the CEO of
BART-Biotechnology and Recovery Technologies, a small private Italian company
engaged in biotechnology. In October 1996, he received a degree in chemical
engineering and subsequently, in 2007, his doctor of philosophy degree in
chemical engineering from the University of Rome - “La Sapienza”.
Connie L. Lausten, P.E.
has
served as our Vice President of Regulatory and Legislative Affairs since May
2007. From 2003 to 2007, Ms. Lausten served as Manager of Federal Affairs for
National Grid USA, one of the world's largest utilities. Ms. Lausten
also has served at the Federal Energy Regulatory Commission and in the United
States House of Representatives Government Reform Committee, subcommittee for
Energy Policy, Natural Resources & Regulatory Affairs. Ms. Lausten is a
Licensed Professional Engineer and received a master of science degree and a
bachelor of science degree in mechanical engineering from the University of
Minnesota.
Philip R. Cherry, Jr.
has
served as our Vice President of Engineering and Operations since June 2008. Mr.
Cherry was previously employed by the ethanol producer VeraSun Energy from 2007
through May 2008 as Director of Operations, Start-Up / Shut Down Support Systems
where he was responsible for the commissioning, initial operation and annual
maintenance shutdowns of a fleet of ethanol facilities. Prior to joining
VeraSun, Mr. Cherry worked for U.S. BioEnergy providing contract management to
ethanol facility owners. Mr. Cherry was also President of The O-H Group from
2003 through 2006, providing project management and technical consulting
services to renewable fuel producers. Additionally, for nine years Mr. Cherry
worked for Mobil Oil Corporation in a variety of process and scientific roles.
Mr. Cherry holds a bachelor of science degree in chemistry from Chapman
University. He is a member of the American Chemical Society, American Coalition
for Ethanol, and the California Biomass Collaborative.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth
information regarding the beneficial ownership of shares of our capital stock as
of May 18, 2010 by:
|
|
·
|
Each
of our named executive officers;
|
|
|
·
|
All
of our directors and executive officers as a group;
and
|
|
|
·
|
Each
person known by us to beneficially own more than 5% of our outstanding
common stock.
|
Under SEC rules, beneficial ownership
includes any shares of common stock which a person has sole or shared voting
power or investment power and any shares of common stock which the person has
the right to acquire within 60 days through the exercise of any option, warrant
or right, through conversion of any security or pursuant to the automatic
termination of a power of attorney or revocation of a trust, discretionary
account or similar arrangement. Percentage of beneficial ownership is calculated
based on 35,889,160 shares of our common stock outstanding as of May 18,
2010. In calculating the number of shares beneficially owned and the percentage
ownership, shares of common stock subject to Preferred Stock conversion rights
(including accrued dividends), options or warrants held by that person that are
currently exercisable or convertible or become exercisable or convertible within
60 days after May 18, 2010 are deemed outstanding even if they have not actually
been exercised or converted. The shares issuable under these securities are
treated as outstanding for computing the percentage ownership of the person
holding these securities but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person. Unless otherwise
indicated, we believe that all persons named in this table have sole voting
power and investment power over all the shares beneficially owned by
them.
Security
Ownership of Management and Directors:
|
|
|
|
|
Amount and Nature of
|
|
|
|
|
|
Common
Stock
|
|
Lee
S. Rosen
|
|
|
2,595,272
|
(2)
|
|
|
6.9
|
|
|
Common
Stock
|
|
Cary
J. Claiborne
|
|
|
1,058,177
|
(3)
|
|
|
2.9
|
|
|
Common
Stock
|
|
David
A. Gillespie
|
|
|
1,378,712
|
(4)
|
|
|
3.7
|
|
|
Common
Stock
|
|
David
H. Goebel, Jr.
|
|
|
572,452
|
(5)
|
|
|
1.6
|
|
|
Common
Stock
|
|
Steven
F. Gilliland
|
|
|
200,000
|
(6)
|
|
|
**
|
|
|
Common
Stock
|
|
John
E. Mack
|
|
|
211,051
|
(7)
|
|
|
**
|
|
|
Common
Stock
|
|
Douglas
S. Perry
|
|
|
–
|
|
|
|
**
|
|
|
Common
Stock
|
|
J.
Robert Sheppard, Jr.
|
|
|
200,000
|
(8)
|
|
|
**
|
|
|
Common
Stock
|
|
Directors
and executive officers as a group (12 people)
|
|
|
8,139,188
|
|
|
|
19.6
|
|
Other
Shareholders:
|
Title of Class
|
|
Name and Address of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership (1)
|
|
|
Percentage of
Class (2)
|
|
|
Common
Stock
|
|
Ferdinando
Petrucci
Via
Stazione, 133A,
Arce
Frosinone, Italy
|
|
|
2,874,812
|
(9)
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Robbins
Capital Partners, L.P.
T.
Robbins Capital Management, LLC
Todd
B. Robbins
100
First Stamford Place, 6th Floor East
Stamford,
Connecticut 06902
|
|
|
2,935,000
|
(10)
|
|
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
2020
Energy, LLC
Abraham
Jacobi
2600
N. Central Avenue
Phoenix,
Arizona 85004
|
|
|
9,501,300
|
(11)
|
|
|
24.9
|
|
(footnotes
continue on following page)
|
|
(1)
|
Unless
otherwise indicated, includes shares owned by a spouse, minor children and
relatives sharing the same home, as well as entities owned or controlled
by the named person. Also includes shares if the named person has the
right to acquire those shares within 60 days after May 18, 2010, by the
exercise of any warrant, stock option or other right. Unless otherwise
noted, shares are owned of record and beneficially by the named
person.
|
|
|
(2)
|
Consists
of: a) 723,711 shares of common stock as to which Mr. Rosen has sole
voting and investment power, b) 12,500 shares of common stock issuable
upon the conversion of 500 shares of Series A Preferred Stock, c) 6,250
shares common stock issuable upon the exercise of 6,250 warrants, d) 3,352
shares of common stock from accrued but unissued dividends on Series A
Preferred Stock and e) 1,849,459 shares issuable pursuant to options
exercisable within 60 days of May 18, 2010. Excludes 2,090,000
shares of common stock owned by the Lee Rosen 2006 Irrevocable Trust I as
to which Mr. Rosen holds no sole or shared voting or investment power and
disclaims beneficial ownership.
|
|
|
(3)
|
Consists
of: a) 121,609 shares of common stock as to which Mr. Claiborne has sole
voting and investment power, b) 273,178 shares of unvested restricted
stock as to which Mr. Claiborne has sole voting power, c) 17,000 shares of
common stock issuable upon the conversion of 510 shares of Series B
Preferred Stock, d) 4,250 shares common stock issuable upon the
exercise of 4,250 warrants, e) 3,126 shares of common stock
from accrued but unissued dividends on Series B Preferred Stock as to
which Mr. Claiborne has sole voting and investment power and f) 639,014
shares issuable pursuant to options exercisable within 60 days of May 18,
2010.
|
|
|
(4)
|
Consists
of: a) 100,000 shares of common stock as to which Mr. Gillespie has sole
voting and investment power, b) 6,250 shares of common stock issuable upon
the initial conversion of 250 shares of Series A Preferred Stock, c) 3,125
shares of common stock issuable upon the exercise of 3,125 warrants,
d) 4,711 shares of common stock from accrued but unissued dividends on
Series A Preferred Stock as to which Mr. Gillespie has sole voting and
investment power and e) 1,267,711 shares issuable pursuant to options
exercisable within 60 days of April 1, 2010. These holdings are
based on the Company’s stock records for Mr. Gillespie as of the date of
his separation agreement, or March 24,
2009.
|
|
|
(5)
|
Consists
of: a) 25,782 shares of common stock as to which Mr. Goebel has sole
voting and investment power, b) 267,657 shares of unvested restricted
stock as to which Mr. Goebel has sole voting power, and c) 279,013 shares
issuable pursuant to options exercisable within 60 days of May 18,
2010.
|
|
|
(6)
|
Consists
of: 200,000 shares issuable pursuant to options exercisable within 60 days
of May 18, 2010.
|
|
|
(7)
|
Consists
of: a) 200,000 shares issuable pursuant to options exercisable within 60
days of April 1, 2010, b) 6,250 shares of common stock issuable upon the
initial conversion of 250 shares of Series A Preferred Stock, c) 3,125
shares of common stock issuable upon the exercise of 3,125 warrants
and d) 1,636 shares from accrued but unissued dividends on Series A
Preferred Stock as to which Mr. Mack has sole voting and investment
power.
|
|
|
(8)
|
Consists
of: 200,000 shares issuable pursuant to options exercisable within 60 days
of May 18, 2010.
|
|
|
(9)
|
Consists
of: 2,874,812 shares of common stock of which Mr. Petrucci has sole voting
and investment power. Mr. Petrucci has partnered with Mr.
Jacobi to form PTJ Bioenergy Holdings, Ltd., an entity that is the
licensor (by assignment from Mr. Petrucci) under our Exclusive License
Agreement for our biofuel
technology.
|
|
|
(10)
|
Based
upon the Schedule 13G/A filed with the SEC on February 16, 2010, Robbins
Capital Partners, L.P., T. Robbins Capital Management, LLC and Todd B.
Robbins (collectively, the “Reporting Persons”), are the beneficial owners
of 2,935,000 shares of our common stock consisting of: a) 2,125,000 shares
of common stock and b) 810,000 shares of common stock issuable upon the
exercise of 810,000 warrants. The Reporting Persons together
have shared power to vote or direct the vote and shared power of
disposition of 2,935,000 shares.
|
|
|
(11)
|
2020
Energy LLC is the record owner of 9,501,300 shares of our common stock,
including 7,301,300 shares of common stock and 2,200,000 shares of common
stock issuable upon the exercise of 2,200,000 warrants. As the
sole member, Abraham Jacobi has sole power to vote or to direct the vote
and sole power to dispose or to direct the disposition of the
securities. Mr. Jacobi has partnered with Mr. Petrucci to form
PTJ Bioenergy Holdings, Ltd., an entity that is the licensor (by
assignment from Mr. Petrucci) under our Exclusive License Agreement for
our biofuel technology.
|
** Less
than 1%
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities
Exchange Act of 1934 requires our directors and executive officers and persons
who own more than 10% of a registered class of our equity securities to file
initial reports of ownership and reports of changes in ownership with the SEC.
Such reporting persons are required by rules of the SEC to furnish us with
copies of all Section 16(a) reports they file.
All Section 16(a) filings required by
any directors and executive officers and holders of more than 10% of the
Company’s common stock during the fiscal year ended December 31, 2009 were filed
on time except for the following:
|
|
·
|
a
Form 4 was filed by Mr. Claiborne which reported common stock issued
on December 1, 2009, pursuant to Mr. Claiborne’s employment
agreement;
|
|
|
·
|
a
Form 4 was filed by Mr. Claiborne which reported the issuance of common
stock and options on March 18, 2009 and the subsequent partial
cancellation of the common stock and options on August 7, 2009 pursuant to
the terms of the Employee Compensation Restructuring
Plan;
|
|
|
·
|
a
Form 4 was filed by Mr. Claiborne which reported restricted stock issued
on April 9, 2009 and approved by the shareholders on May 27,
2009;
|
|
|
·
|
a
Form 4 was filed by Mr. Rosen which reported the issuance of common stock
and options on March 18, 2009, the subsequent partial cancellation of the
common stock and options on August 7, 2009 pursuant to the terms of the
Employee Compensation Restructuring Plan and the time-based and
performance-based options issued pursuant to Mr. Rosen’s employment
agreement executed on July 23,
2009;
|
|
|
·
|
a
Form 3 was filed by Mr. Goebel on September 15, 2009, which reporting his
initial holdings;
|
|
|
·
|
a
Form 4 was filed by Mr. Goebel which reported the issuance of common stock
and options on March 18, 2009, the subsequent partial cancellation of the
common stock and options on August 7, 2009 pursuant to the terms of the
Employee Compensation Restructuring Plan and the issuance of stock options
on September 9, 2009.
|
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
|
|
|
Number of securities 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 (excluding securities
reflected in column (a))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
4,361,585
|
(1)
|
|
$
|
1.90
|
|
|
|
959,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
6,334,260
|
(2)
|
|
$
|
3.55
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,695,845
|
|
|
$
|
2.88
|
|
|
|
959,160
|
|
|
(1)
|
Consists
of, as of December 31, 2009: (i) an aggregate of 761,013 presently
exercisable and 1,538,907 presently unexercisable options issued to our
named executive officers and directors under individual written option
agreements, (ii) an aggregate of 767,165 presently exercisable and
1,084,500 presently unexercisable options issued to our employees under
individual written option agreements, and (iii) an aggregate of 60,000
presently exercisable and 150,000 presently unexercisable non-employee
options issued to consultants of the
Company.
|
|
(2)
|
Consists
of, as of December 31, 2009: (i) an aggregate of 3,561,371 presently
exercisable and 315,000 presently unexercisable options issued to our
named executive officers and directors under individual written employment
and/or option agreements, (ii), an aggregate of 841,889 presently
exercisable and 85,000 presently unexercisable employee options issued to
our employees under individual written option agreements and (iii) an
aggregate of 81,000 presently exercisable and 1,450,000 presently
unexercisable non-employee options issued to consultants of the
Company.
|
TRANSACTIONS
WITH RELATED PARTIES
CERTAIN
RELATED PARTY TRANSACTIONS
There have been no material
transactions, series of similar transactions or currently proposed transactions
during 2009 in which we or our subsidiary was or is to be a party, in which the
amount involved exceeded the lesser of $120,000 or 1% of the average of our
total assets at year end for the last two completed fiscal years and in which
any director or executive officer or any security holder who is known to us to
own of record or beneficially more than 5% of our common stock, or any member of
the immediate family or sharing the household (other than a tenant or employee)
of any of the foregoing persons, had a direct or indirect material interest,
other than the following:
2020 Energy,
LLC
In March 2009, the Board of Directors
unanimously approved an investment by our largest shareholder, 2020 Energy, LLC
(“2020 Energy”), on the same terms offered to other investors in our March 2009
private placement of common stock and warrants. In this private
placement, 2020 Energy invested $1,600,000 to purchase 2,000,000 shares of our
common stock at a price of $0.80 per share and warrants, exercisable after six
months, to purchase 2,000,000 shares at an exercise price of $0.90 per share.
Before this investment, 2020 Energy had purchased 5,301,300 shares of our common
stock from Global Energy Holdings Group, Inc. (formerly Xethanol
Corporation).
On April 30, 2010, we completed a
private placement of 90-day secured convertible notes and warrants, raising
approximately $700,000 in gross proceeds and approximately $630,000 in net
proceeds, after deducting finders’ fees. The securities were
issued pursuant to a Note and Warrant Purchase Agreement, dated April 30, 2010,
between the Company and two purchasers. The Notes are secured by (1)
a first-priority security interest in our assets at our leased Baltimore biofuel
production plant and (2) a pledge of a number of shares of our common stock held
by 2020 Energy LLC, our largest shareholder, equal to 120% of the maximum
aggregate principal amount of the Notes divided by the consolidated closing bid
price of our common stock on the Nasdaq Capital Market immediately prior to
entering into binding agreements for this transaction. Pursuant to a
Reimbursement Agreement between us and 2020 Energy, if an event of default
occurs under the Notes and remains uncured and the noteholders exercise their
rights against the pledged shares from 2020 Energy, we have agreed to reimburse
2020 Energy by issuing to 2020 Energy a number of shares equal to the pledged
shares, to the extent permissible by Nasdaq rules. The transaction
was reviewed by our independent directors and unanimously approved by the Board.
See our Current Report on Form 8-K dated May 6, 2010 for additional details
relating to this private placement.
2020 Energy now owns 7,301,300 shares
of our common stock, representing approximately 20.3% of our outstanding shares
as of May 18, 2010. Abraham Jacobi, the sole member of 2020 Energy, has
partnered with Ferdinando Petrucci, the inventor of our proprietary biofuel
technology, to form PTJ Bioenergy Holdings, the licensor (by assignment from Mr.
Petrucci) of our technology. Mr. Petrucci owns approximately 8.0% of our
outstanding common stock, as of May 18, 2010.
Separation
Agreement of Lee S. Rosen
In connection with Lee S. Rosen’s
resignation on May 7, 2010, the board of directors negotiated and executed a
Separation Agreement, between the Company and Mr. Rosen (the “Separation
Agreement”). The Separation Agreement was unanimously approved by the
Compensation Committee. Under the Separation Agreement, Mr. Rosen is entitled to
the following:
|
|
·
|
$95,000
in cash, less standard deductions and
withholding;
|
|
|
·
|
the
right to receive an additional $105,000, at the election of Mr. Rosen, in
the form of (i) a note issued by the Company with a maturity date of three
years from date of issuance and an interest rate equal to the interest
rate of a three-year United States Treasury Note plus 2.0% on the date of
issuance and other customary terms and conditions; or (ii) a number of
shares of the Company’s common stock equal to the amount of the cash
election divided by the closing price of the Company’s common stock on the
Nasdaq Capital Market on the election date. Mr. Rosen may make
this election before one (1) business day following the Release Effective
Date under the Separation Agreement, which will be no earlier than May 14,
2010;
|
|
|
·
|
accelerated
vesting on certain time-based stock options and stock grants under Mr.
Rosen’s previous Amended and Restated Employment Agreement with the
Company, dated July 23, 2009 (the “Employment
Agreement”), consisting of (1) options to purchase 104,353
shares of the Company’s common stock; and (2) 260,833 shares of the
Company’s common stock;
|
|
|
·
|
accelerated
vesting on a certain previously granted three-year restricted stock
grants, consisting of 226,316 shares of the Company’s common
stock;
|
|
|
·
|
upon
receipt of shareholder approval to issue sufficient available shares under
the Company’s Omnibus Incentive Plan, (i) accelerated vesting on
additional time-based options to purchase 208,707 shares of the Company’s
common stock (the “Conditional Options”) and (ii) issuance of additional
common stock grants consisting of 521,677 shares of the Company common
Stock less the number of shares equal to $105,000 divided by the closing
price of the Company’s common stock on the Nasdaq Capital Market on the
election date (the “Conditional Stock Grant”). The Conditional
Options and Conditional Stock Grant were granted under Mr. Rosen’s
previous Employment Agreement;
|
|
|
·
|
18
months of reimbursement for COBRA premiums in order to provide health and
life insurance benefits at least equal to those provided at the time of
separation; and
|
|
|
·
|
other
accrued amounts under the Employment Agreement, as of May 7,
2010.
|
The Company has not registered, and is
under no obligation to register, the stock grants or the shares underlying the
stock options provided under the Separation Agreement.
Separation
Agreement of David A. Gillespie
In connection with the resignation of
David A. Gillespie as President, Chief Executive Officer and a Director in March
2009, the Compensation Committee and the Board unanimously approved a separation
agreement with Mr. Gillespie that included the following material
terms:
|
|
·
|
we
paid Mr. Gillespie $50,000 in cash upon execution of the separation
agreement (after the expiration of any required waiting periods) and an
additional $50,000 in cash after raising $1.5 million in additional
financing, in lieu of certain other cash amounts that may have been owed
to Mr. Gillespie;
|
|
|
·
|
we
issued Mr. Gillespie 100,000 shares of restricted common
stock;
|
|
|
·
|
we
deemed 67% of Mr. Gillespie’s 400,000 performance-based options for 2008
to be vested (which reflects the percentage of the 2008 Performance Goals
met by all employees); and
|
|
|
·
|
both
parties signed certain customary
releases.
|
INDEBTEDNESS
OF MANAGEMENT
No
officer, director or security holder known to us to own of record or
beneficially more than 5% of our common stock or any member of the immediate
family or sharing the household (other than a tenant or employee) of any of the
foregoing persons is indebted to us.
TRANSACTIONS
WITH PROMOTERS
We did
not expressly engage a promoter at the time of its formation. We have used
selling agents and consultants from time to time. The terms of those
arrangements have been disclosed in previous filings with the Securities and
Exchange Commission.
EXECUTIVE
COMPENSATION
SUMMARY
COMPENSATION TABLE
The
following table presents information concerning compensation for each of our
named executive officers for services in all capacities during the years
indicated:
|
Name
and Principal
Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)(1)
|
|
Option
Awards
($)(1)
|
|
Nonequity
Incentive
Plan
Compensation
($)(2)
|
|
All
Other Compensation
($)(3)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
A. Gillespie (4)
|
|
2009
|
|
|
75,537
|
|
–
|
|
|
87,000
|
|
–
|
|
|
–
|
|
100,000
|
|
262,537
|
|
|
Former
President &
|
|
2008
|
|
|
240,000
|
|
–
|
|
|
240,000
|
|
–
|
|
|
80,313
|
|
–
|
|
560,313
|
|
|
Chief
Executive Officer
|
|
2007
|
|
|
240,000
|
|
–
|
|
|
–
|
|
–
|
|
|
120,000
|
|
–
|
|
360,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lee
S. Rosen
|
|
2009
|
|
|
156,000
|
|
190,000
|
|
|
1,001,475
|
|
916,819
|
|
|
–
|
|
7,302
|
|
2,272,086
|
|
|
Chairman
of the Board
|
|
2008
|
|
|
180,000
|
|
–
|
|
|
–
|
|
–
|
|
|
–
|
|
–
|
|
180,000
|
|
|
|
|
2007
|
|
|
180,000
|
|
–
|
|
|
–
|
|
–
|
|
|
120,000
|
|
–
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cary
Claiborne (4)
|
|
2009
|
|
|
211,716
|
|
–
|
|
|
262,114
|
|
1,109,912
|
|
|
27,405
|
|
10,105
|
|
1,621,252
|
|
|
President
and CEO
|
|
2008
|
|
|
225,000
|
|
–
|
|
|
44,110
|
|
–
|
|
|
75,294
|
|
–
|
|
344,404
|
|
|
|
|
2007
|
|
|
18,750
|
|
–
|
|
|
25,000
|
|
2,265,675
|
|
|
4,204
|
|
–
|
|
2,313,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
H. Goebel (5)
|
|
2009
|
|
|
173,230
|
|
–
|
|
|
100,321
|
|
296,581
|
|
|
32,480
|
|
8,062
|
|
610,674
|
|
|
Chief
Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects
the aggregate grant date fair value computed in accordance with FASB ASC
Topic 718 with respect to restricted stock and stock option awards granted
to our Named Executive Officers. For more information concerning the
assumptions used for these calculations, please refer to the notes to the
financial statements contained in the 2007, 2008 and 2009 Annual Reports
on Form 10-K.
|
|
(2)
|
Represents
the performance-based cash bonuses earned by each Named Executive Officer
in each respective year.
|
|
(3)
|
Represents
the “gross-up” amount we paid on behalf of each Named Executive Officer
for the payment of employment taxes due upon the vesting of their
restricted stock. The amount for Mr. Gillespie represents the severance
payment paid to him pursuant to his separation
agreement.
|
|
(4)
|
Mr.
Gillespie resigned as President, Chief Executive Officer and Director,
effective March 16, 2009. Mr. Gillespie was replaced by Mr.
Claiborne, who was appointed by the board of directors to President, Chief
Executive Officer and Director and who retained his role as Chief
Financial Officer until March 2010.
|
|
(5)
|
Mr.
Goebel was appointed as Chief Operating Officer in July
2009.
|
Performance
Goals
The Compensation Committee sets
performance goals each year to prospectively align financial rewards for
management with overall corporate and shareholder objectives. The
performance goals provide a basis for the Compensation Committee and management
to objectively measure achievement of these objectives and to pay or
grant performance-based incentive compensation under various employment
agreements and our Management Equity Compensation Plan. Each
performance goal is assigned a weighting based on its relative importance, and
some goals were assigned minimum thresholds below which no credit for
performance is recognized. Some performance goals apply collectively
to all our employees, and some goals apply only to our Chairman and our Chief
Executive Officer.
2009
Performance Goals
For fiscal year 2009, the Compensation
Committee adopted performance goals relating to:
Management
Team
|
|
·
|
Executing
signed sales contracts for a minimum quantity of gallons of biofuel;
and
|
|
|
·
|
achieving
customer satisfaction shown through reorders, responses to customer
surveys and other feedback.
|
Chairman and Chief Executive
Officer
|
|
·
|
achieving
management team’s performance goals;
and
|
|
|
·
|
raising
sufficient capital to execute our business
plan.
|
In February 2010, the Compensation
Committee reviewed the 2009 performance goals and determined that 46.4% of the
2009 performance goals were met for the management team and 23.2% of the
performance goals were met for the Chairman and Chief Executive Officer. See the
“Summary Compensation Table” for further information on the non-equity incentive
compensation earned in 2009. The following table sets forth the
equity grants based on the 2009 performance goals which were approved on March
6, 2010:
|
|
|
|
|
|
|
|
|
|
|
“Target”
|
|
|
|
|
|
|
|
|
|
|
|
David
A. Gillespie
|
|
|
–
|
|
|
|
–
|
|
|
|
-
|
|
|
|
–
|
|
|
Lee
S. Rosen
|
|
|
427,713
|
|
|
|
36,303
|
|
|
|
62,926
|
|
|
|
99,229
|
|
|
Cary
J. Claiborne
|
|
|
602,432
|
|
|
|
64,682
|
|
|
|
75,082
|
|
|
|
139,764
|
|
|
David
H. Goebel
|
|
|
315,479
|
|
|
|
51,040
|
|
|
|
95,342
|
|
|
|
146,382
|
|
Management
Equity Compensation Plan
In May 2008, the Compensation Committee
approved a Management Equity Compensation Plan (the “Equity Compensation Plan”)
to ensure that equity remains a significant component of management
compensation, to align employee and shareholder interests by providing
opportunities for employees to own our common stock and to motivate and retain
key employees with multi-year equity incentives. The Equity Compensation Plan
generally contemplates annual restricted stock and option grants based on
achieving certain performance targets and vesting annually over three years. The
amount of each award is relative to an employee’s total compensation and based
on the individual’s ability to affect our results, with higher level positions
generally receiving grants equal to a greater percentage of their compensation
than lower level positions. In 2010, we issued 744,781 restricted shares and
options under the Equity Compensation Plan to certain employees based on
achieving certain 2009 performance targets. The number of restricted shares
granted was calculated based on the dollar value of the award divided by the
closing price of our common stock on the Nasdaq Stock Market on the date the
grant was approved by the Compensation Committee.
Employment
and Separation Agreements
Cary
J. Claiborne
Effective December 1, 2007, we entered
into an employment agreement with Cary J. Claiborne to serve as our Chief
Financial Officer. This agreement is similar to the employment agreements with
our other senior executive officers. Under the employment agreement, Mr.
Claiborne receives an initial salary of $18,750 per month and options to
purchase 750,000 shares of our common stock at an exercise price of $4.00 per
share, the fair market value of the our common stock on the grant date of
December 1, 2007 and restricted stock in the amount of $75,000. The stock
options consist of 300,000 time based options and 450,000 performance based
options. The stock options and the restricted stock will vest incrementally
through 2010. The options expire on December 1, 2017. The employment agreement
provides for a relocation expense reimbursement of up to $50,000 and for
participation in our executive bonus plan, with a maximum eligible bonus of 50%
of base salary, subject to achieving certain performance targets. The agreement
includes other customary terms, including participation in any incentive and
benefit plans made available to executive officers. The employment agreement
will automatically renew for successive one year periods unless we elect to
terminate the agreement upon not less than 270 days notice prior to the
expiration of the then current term.
Mr. Claiborne’s employment agreement
provides that his employment may be terminated by the company upon death,
disability, for “cause,” and “without cause” and that he can resign from us with
or without good reason or retire. Upon Mr. Claiborne’s death, his employment
will automatically terminate and (i) any vested options may be exercised on or
before the expiration date of such options (payments made under this subsection
(i) are referred to as “Equity Compensation”); and (ii) his legal
representatives shall receive (A) his compensation that is earned but unpaid and
(B) any other amounts or benefits owing to him under an employee benefit plan,
long term incentive plan or equity plan (payments made under this subsection
(ii) are collectively referred to as, the “Accrued Amounts”). If Mr. Claiborne’s
employment is terminated without cause or by Mr. Claiborne for good reason, then
he shall receive (i) his base salary and bonus, if any (with the achievement of
bonus targets presumed), for the time period that is remaining under his
employment agreement or 12 months, whichever amount is less; (ii) his Equity
Compensation, including all unvested time vesting options and the next unvested
tranche of performance vesting options; and (iii) his Accrued Amounts. If Mr.
Claiborne’s employment is terminated because he is disabled, then he shall
receive (i) his base salary, for the time period that is remaining under his
employment agreement or six months, whichever amount is less; (ii) his Equity
Compensation, including the next unvested tranche of performance vesting
options; and (iii) his Accrued Amounts. If Mr. Claiborne’s employment is
terminated by the company for “cause,” then he shall receive the Accrued Amounts
and may exercise his vested options for a period of thirty days. If Mr.
Claiborne resigns without good reason or retires then he shall receive the
Accrued Amounts.
Mr.
Claiborne’s employment agreement also provide that in the event that a “Change
of Control” (as defined in the agreement) of the company shall occur during the
term of his employment agreement, and within 12 months thereafter his employment
is terminated without cause or by him for good reason, then (1) his severance
compensation will be as set forth above for termination without cause or by him
for good reason, as the case may be, and (2) all his unvested time vesting
options and performance vesting options will vest and remain exercisable for the
balance of the option term.
Andrea
Festuccia
On September 19, 2006, we entered into
an amended and restated employment agreement with Dr. Festuccia to serve as the
Chief Technology Officer for a term expiring on April 1, 2009, which is
automatically extended for additional one-year terms unless notice of
termination is given at least ninety days prior to the end of the term by either
Dr. Festuccia or us.
The employment agreement of Dr.
Festuccia provides that he will initially receive a fixed base salary at an
annual rate of $150,000 and customary employee benefits. Dr. Festuccia’s
employment agreement also provides that if the board of directors establishes an
incentive compensation plan or a bonus plan, he will be eligible to participate
in such incentive compensation plan and bonus plan. Dr. Festuccia’s agreement
provides for a grant of 500,000 stock options at a price of $1.50 per share, of
which 100,000 vest immediately and the balance vest, in two annual
installments.
The employment agreement for Dr.
Festuccia provides that such executive’s employment may be terminated by us upon
death, disability, for “cause,” and “without cause” and that such executive can
resign from with or without good reason or retire. Upon the executive’s death,
his employment will automatically terminate and (i) any unvested equity
compensation granted to such executive shall immediately vest and any vested
options may be exercised on or before the earlier of (A) the expiration date of
such options and (B) twelve months after such executive’s death (payments made
under this subsection (i) are referred to as “Equity Compensation”); and (ii)
the executive’s legal representatives shall receive (A) such executive’s
compensation that is earned but unpaid and (B) any other amounts or benefits
owing to such executive under an employee benefit plan, long term incentive plan
or equity plan (payments made under this subsection (ii) are collectively
referred to as, the “Accrued Amounts”). If Dr. Festuccia’s employment is
terminated without cause, because such executive is disabled or if such
executive resigns for good reason, then such executive shall receive (i) such
executive’s base salary for the time period that is remaining under such
executive’s employment agreement or six months, whichever amount is less; (ii)
such executive’s Equity Compensation; and (iii) such executive’s Accrued
Amounts. If Dr. Festuccia is terminated by us for “cause,” resigns without good
reason or retires, then such executive shall receive the Accrued
Amounts.
Each employment agreement requires the
executive to adhere to our policy that (a) prohibits an executive from
disclosing confidential information regarding us, and (b) confirms that all
intellectual property developed by an executive and relating to our business
constitutes the sole and exclusive property of us.
Lee
S. Rosen
On July 23, 2009, we entered into an
employment agreement with Mr. Rosen to serve as our Chairman of the Board. Under
the employment agreement, Mr. Rosen received an initial annual base salary of
$198,000, was eligible to earn an annual performance-based cash bonus of up to
50% of his annual salary and a special cash bonus of up to $160,000 for
assistance and support in raising equity capital for the Company. The
Compensation Committee awarded $100,000 of the special cash bonus in July 2009,
and such amount has been subtracted from any cash compensation payable based on
the achievement of 2009 performance goals. The Compensation Committee
awarded the remaining $60,000 of such special cash bonus in February
2010.
In
addition, Mr. Rosen’s employment agreement provided for a grant of 932,500 stock
options at a price of $1.05, of which 150,000 vested immediately, 104,353
time-based options that vest on each of July 23, 2010 and July 23, 2011, 104,354
time-based options that vest on July 23, 2012 and 469,440 performance-based
options that vest equally over three years beginning on December 31, 2009, if
certain performance targets for such years are met. Mr. Rosen’s
agreement also provided for the grant of 782,500 shares of restricted stock, of
which 260,833 shares vest on each of July 23, 2010 and July 23, 2011 and 260,834
that vest on July 23, 2012. Of the 932,500 options and 782,500 shares
of restricted stock granted under the employment agreement, 521,667 options and
521,667 shares are subject to shareholder approval of additional shares
available under the Omnibus Incentive Plan.
Mr. Rosen resigned as our Chairman of
the Board, effective May 7, 2010, and we entered into a separation agreement
with Mr. Rosen under which his employment agreement was terminated, which
included the following material terms:
|
|
·
|
$95,000
in cash, less standard deductions and
withholding;
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|
|
·
|
the
right to receive an additional $105,000, at the election of Mr. Rosen, in
the form of (i) a note issued by the Company with a maturity date of three
years from date of issuance and an interest rate equal to the interest
rate of a three-year United States Treasury Note plus 2.0% on the date of
issuance and other customary terms and conditions; or (ii) a number of
shares of the Company’s common stock equal to the amount of the cash
election divided by the closing price of the Company’s common stock on the
Nasdaq Capital Market on the election date. Mr. Rosen elected
to receive stock on May 17, 2010;
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|
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·
|
accelerated
vesting on certain time-based stock options and stock grants under Mr.
Rosen’s previous Amended and Restated Employment Agreement with the
Company, dated July 23, 2009 (the “Employment
Agreement”), consisting of (1) options to purchase 104,353
shares of the Company’s common stock; and (2) 260,833 shares of the
Company’s common stock;
|
|
|
·
|
accelerated
vesting on a certain previously granted three-year restricted stock
grants, consisting of 226,316 shares of the Company’s common
stock;
|
|
|
·
|
upon
receipt of shareholder approval to issue sufficient available shares under
the Company’s Omnibus Incentive Plan, (i) accelerated vesting on
additional time-based options to purchase 208,707 shares of the Company’s
common stock (the “Conditional Options”) and (ii) issuance of additional
common stock grants consisting of 521,677 shares of the Company common
Stock less the number of shares equal to $105,000 divided by the closing
price of the Company’s common stock on the Nasdaq Capital Market on the
election date (the “Conditional Stock Grant”). The Conditional
Options and Conditional Stock Grant were granted under Mr. Rosen’s
previous Employment Agreement;
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·
|
18
months of reimbursement for COBRA premiums in order to provide health and
life insurance benefits at least equal to those provided at the time of
separation; and
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|
·
|
other
accrued amounts under the Employment Agreement, as of May 7,
2010.
|
David
A Gillespie
Mr. Gillespie resigned as our
President, Chief Executive Officer and Director, effective March 16, 2009. On
March 24, 2009, we entered into a separation agreement with Mr. Gillespie under
which his employment agreement was terminated, which included the following
material terms:
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·
|
we
paid Mr. Gillespie $50,000 in cash upon execution of the separation
agreement (after the expiration of any required waiting periods) and an
additional $50,000 in cash after raising $1.5 million in additional
financing, in lieu of certain other cash amounts that may have been owed
to Mr. Gillespie;
|
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·
|
we
issued Mr. Gillespie 100,000 shares of restricted common
stock;
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·
|
we
deemed 67% of Mr. Gillespie’s 400,000 performance-based options for 2008
vested (which reflects the percentage of the 2008 Performance Goals met by
all employees); and
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·
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both
parties signed certain customary
releases.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END TABLE
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|
|
|
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|
|
Name
and Principal Position
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Option
Exercise
Price
|
|
|
|
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
|
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
(2)
|
|
|
David
A. Gillespie (3)
President
& Chief Executive Officer
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lee
S. Rosen
|
|
|
1,500,000
|
|
|
|
-
|
|
|
|
1.50
|
|
|
9/15/2016
|
|
|
|
150,000
|
|
|
|
118,500
|
|
|
Chairman
of the Board
|
|
|
150,000
|
|
|
|
260,833
|
(4)
|
|
|
1.05
|
|
|
7/22/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
|
|
–
|
|
|
|
0.90
|
|
|
3/17/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cary
J. Claiborne (3)
|
|
|
393,660
|
|
|
|
315,000
|
(5)
|
|
|
4.00
|
|
|
11/30/2017
|
|
|
|
122,461
|
|
|
|
96,744
|
|
|
President,
Chief Executive Officer &
|
|
|
–
|
|
|
|
911,406
|
(6)
|
|
|
1.25
|
|
|
05/26/2019
|
|
|
|
|
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
30,672
|
|
|
|
–
|
|
|
|
0.90
|
|
|
3/17/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
H. Goebel, Jr.
|
|
|
183,464
|
|
|
_
|
|
|
|
6.00
|
|
|
9/16/2017
|
|
|
|
48,697
|
|
|
|
38,471
|
|
|
Chief
Operating Officer
|
|
|
24,509
|
|
|
|
–
|
|
|
|
0.90
|
|
|
3/17/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
|
|
|
|
300,000
|
(7)
|
|
|
0.91
|
|
|
9/8/2019
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For
Messrs. Rosen and Goebel, the 150,000 and 48,697 shares of unvested
restricted stock, respectively, vests equally on April 9, 2010, 2011 and
2012. For Mr. Claiborne, the 1,991 shares of unvested
restricted stock vests equally on May 2010 and 2011 and 120,470 shares
vest equally on April 9, 2010, 2011 and
2012.
|
|
(2)
|
Market
value based on $0.79, the closing price of our common stock on the Nasdaq
Capital Market on December 31,
2009.
|
|
(3)
|
Mr.
Gillespie resigned as President, Chief Executive Officer and Director,
effective March 16, 2009. The Board of Directors has appointed
Mr. Claiborne as President, Chief Executive Officer and Director and he
has retained his role as Chief Financial
Officer.
|
|
(4)
|
Of
the 260,833 options to purchase common stock, 104,353 are time-based
options which vest on July 23, 2010 and 156,480 are performance based
options which vest contingent upon the achievement of certain performance
targets determined at the end of December 31,
2009.
|
|
(5)
|
Of
the 315,000 options to purchase common stock, 65,000 are time-based
options and 250,000 are performance based options. The time
based options vest on December 1, 2010 and the 125,000 performance based
options vest upon the achievement of certain financial targets determined
at the end of December 31, 2009 and December 31,
2010.
|
|
(6)
|
Of
the 911,406 options to purchase common stock, 450,000 are time-based
options vest in three equal installments on each o f April 9, 2010, April
9, 2011 and April 9, 2012 and 461,406 are performance-based options which
vest equally, contingent upon the achievement of certain financial targets
determined at the end of December 31, 2009, December 31, 2010 and December
31, 2011.
|
|
(7)
|
The
300,000 options to purchase common stock include 120,000 time-based
options which vest in three equal installments beginning on September 9,
2010 and 180,000 performance-based options which vest equally over three
years, contingent upon the achievement of certain financial
targets.
|
DIRECTOR
COMPENSATION
We pay
our directors for their attendance and participation at board and committee
meetings. We pay cash compensation to the non-executive directors
according to the following schedule. In addition, we reimburse our directors for
their out-of-pocket expenses.
|
Description
|
|
Compensation
|
|
|
Annual
retainer for board membership
|
|
$
|
20,000
|
|
|
Annual
retainer for committee membership
(retainer
paid for each committee membership held)
|
|
$
|
3,000
|
|
|
Annual
retainer for serving as committee chairman (other than Audit)
1
(retainer
paid for each chair position held)
|
|
$
|
5,000
|
|
|
Annual
retainer for Audit Committee chairman
1
|
|
$
|
10,000
|
|
|
Meeting
fee for board and committee meeting attendance (including in person and
telephonic meetings but not board consents)
|
|
$1,000
per meeting
|
|
|
(1)
|
Directors
who are paid a committee chair retainer are not also paid a committee
membership retainer.
|
The
following table summarizes the compensation earned by our non-executive
directors for their service as members of the Board of Directors during
2009.
|
Name and Principal
Position
|
|
Fees Earned
or
Paid in Cash
($)(1)
|
|
|
Option Awards
($)(2)
|
|
|
Total
($)
|
|
|
Phillip
E. Pearce (3)
|
|
|
57,833
|
|
|
|
115,264
|
|
|
|
173,097
|
|
|
John
E. Mack
|
|
|
75,000
|
|
|
|
115,264
|
|
|
|
190,264
|
|
|
J.
Robert Sheppard, Jr.
|
|
|
67,583
|
|
|
|
115,264
|
|
|
|
182,847
|
|
|
Steven
Gilliland (4)
|
|
|
68,250
|
|
|
|
115,264
|
|
|
|
183,514
|
|
|
(1)
|
Includes
annual retainers for board and committee membership earned or paid during
fiscal year 2009.
|
|
(2)
|
Represents
the aggregate grant date fair value computed in accordance with FASB ASC
Topic 718.
|
|
(3)
|
Represents
the amount earned or paid prior to Mr. Pearce’s death on October 22,
2009.
|
|
(4)
|
Mr.
Gilliland resigned as a director on February 25,
2010.
|
HOUSEHOLDING
OF PROXY MATERIALS
The SEC has adopted rules that
permit companies and intermediaries (e.g., brokers) to satisfy the delivery
requirements for proxy statements and annual reports with respect to two or more
shareholders sharing the same address by delivering a single proxy statement
addressed to those shareholders. This process, which is commonly referred to as
“householding,” potentially means extra convenience for shareholders and cost
savings for companies.
This year, some brokers with account
holders who are our shareholders will be “householding” our proxy materials. A
single proxy statement will be delivered to multiple shareholders sharing an
address unless contrary instructions have been received from the affected
shareholders. Once you have received notice from your broker that they will be
“householding” communications to your address, “householding” will continue
until you are notified otherwise or until you revoke your consent. If, at any
time, you no longer wish to participate in “householding” and would prefer to
receive a separate proxy statement and annual report, please notify your
broker.
You may also request an additional
proxy statement and annual report by sending a written request to:
New
Generation Biofuels Holdings, Inc.
5850
Waterloo Road - Suite 140
Columbia,
MD 21045
Shareholders
who currently receive multiple copies of the proxy statement at their addresses
and would like to request “householding” of their communications should contact
their brokers.
OTHER
MATTERS
The Board of Directors does not intend
to present to the annual meeting any other matters not referred to above and
does not presently know of any matters that may be presented to the meeting by
others. If other matters are properly brought before the meeting, the persons
named in the enclosed proxy will vote on such matters in their own
discretion.
|
|
By
Order of the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
Cary
J. Claiborne
|
|
|
|
President
and Chief Executive Officer
|
|
Dated:
June 4, 2010
|
NEW
GENERATION BIOFUELS HOLDINGS, INC.
|
|
VOTE BY INTERNET -
www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time on July 7, 2010.
Have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting
instruction form.
|
5850
Waterloo Road - Suite 140
|
|
|
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|
ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER
COMMUNICATIONS
|
|
|
|
If
you would like to reduce the costs incurred by NEW GENERATION BIOFUELS
HOLDINGS, INC. in mailing proxy materials, you can consent to receiving
all future proxy statements, proxy cards and annual reports electronically
via e-mail or the Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access shareholder
communications electronically in future
years.
|
|
|
|
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|
VOTE
BY PHONE - 1-800-690-6903
|
|
|
|
Use
any touch-tone telephone to transmit your voting instructions up until
11:59
P.M. Eastern Time on July 7, 2010. Have your proxy card in hand when you
call and then follow the
instructions.
|
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|
Mark,
sign and date your proxy card and return it in the postage-paid envelope
we have provided or return it to NEW GENERATION BIOFUELS HOLDINGS, INC.,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
|
|
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
NGENB1
|
KEEP
THIS PORTION FOR YOUR RECORDS
|
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— — — — —
— — — — — — — — — — — — — — — — — — — — — — — — — — —
— — — — — — — — — — — — — — — — — — — — — — — — —
— — — — — — — —
—
|
|
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED ..
|
DETACH
AND RETURN THIS PORTION
ONLY
|
|
|
NEW
GENERATION BIOFUELS HOLDINGS, INC.
|
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1.
|
Election
of Five Directors
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For
|
Withhold
|
For
All
|
|
To
withhold authority to vote for any individual
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All
|
All
|
Except
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nominee(s),
mark “For All Except” and write the
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number(s) of the
nominee(s) on the line below.
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(01) John E.
Mack (04)
Douglas
S.
Perry
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(02)
Cary J. Claiborne
(05)
James R. Sheppard,
Jr
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O
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(03)
David H. Goebel, Jr.
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For
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Against
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Abstain
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2.
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Ratify
the appointment of Reznick Group, P.C. as independent registered public
accounting firm.
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3.
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Amend
the Company’s Omnibus Incentive Plan to increase the number of shares of
common stock available for issuance under the plan from 6,400,000 to
10,000,000.
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4.
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Authorize
the Company to issue to a strategic partner from China, Regent Trend
Investment Ltd., up to 25,000,000 million shares of common stock or
convertible securities for aggregate consideration of not more than
$20,000,000 in cash at a price not less than 80%, but not less than $0.80
per share, of the market price at the time of issuance in accordance with
Nasdaq Marketplace Rules 5635(b) and 5635(d).
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5.
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Authorize
the Company to issue up to 15,000,000 million shares of common stock or
convertible securities for aggregate consideration of not more than
$15,000,000 in cash at a price not less than 80% of the market price at
the time of issuance in accordance with Nasdaq Marketplace Rule
5635(d).
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NOTE
:
In their discretion, the
proxies are authorized to vote upon any other business that may properly
come before the
meeting.
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Please
sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should
give full title as such. If signing for a corporation, please sign in full
corporate name by a duly authorized officer.
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For
address changes and/or comments, please check this box and w
rite
them on the back where indicated.
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PLEASE
MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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Signature
[PLEASE SIGN WITHIN BOX]
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Date
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Signature
(Joint Owners)
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Date
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— — — — — — — — — — — — — —
— — — — — — — — — — — — — — — — — — — — — — — —
—
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PROXY
NEW
GENERATION
BIOFUELS HOLDINGS,
INC.
5850
WATERLOO ROAD - SUITE 140, COLUMBIA, MD 21045
SOLICITED
BY THE BOARD OF DIRECTORS
FOR
THE 2010 ANNUAL MEETING OF SHAREHOLDERS
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The
undersigned hereby appoints Joseph N. Fasciglione and Dane R. Saglio, with
the power to appoint his substitute, and hereby authorizes him to
represent and to vote, as designated on the reverse side, all shares of
common stock, Series A Preferred Stock and Series B Preferred Stock (on an
as converted basis) of New Generation Biofuels Holdings, Inc. held of
record by the undersigned on May 24, 2010 at the 2010 Annual Meeting of
Shareholders to be held on July 8, 2010 and any adjournments
thereof.
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THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR
SUCH PROPOSAL.
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Address
change/comments:
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(If
you noted any Address Changes/Comments above, please mark corresponding
box on the reverse side.)
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New Gen Biofuels (MM) (NASDAQ:NGBF)
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