HYDROGEN
ENGINE CENTER, INC.
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
June
11, 2009
To Our
Shareholders:
Notice is
hereby given that the 2009 Annual Meeting of Shareholders of Hydrogen Engine
Center, Inc., a Nevada corporation (the “Company”) will be held on June 11, 2009
at 2:00 PM, CDT, at the Company’s headquarters located at 2502 E. Poplar St.,
Algona, IA 50511.
Shareholders of record as of April 29, 2009 will be entitled to
vote at the meeting.
The
consent will be obtained as permitted Pursuant to Revised Statutes Section
78.320 of the Nevada General Corporation Law and Article II Section 10 of the
Company’s By-Laws.
The
following actions will be considered at the meeting:
|
1.
|
The
election of the following as directors of the Corporation, to serve until
their replacement is elected:
|
Theodore
G. Hollinger
Thomas O.
Trimble
Philip G.
Ruggieri
Stephen
T. Parker
Jan
Rowinski
Michael
A. Schiltz
|
2.
|
The
ratification of the selection of LWBJ, LLP as our Independent Accountants
for 2009.
|
Please be
advised that Mr. Theodore Hollinger owns a majority of the issued and
outstanding shares of common stock of the Company. The Board of
Directors has been advised that Mr. Hollinger, our largest stockholder (holding
51.83% of our common stock), will vote his shares in favor of the election of
the directors named in Proposal One and the ratification of the appointment of
the independent auditors named in Proposal Two.
WE
ARE NOT ASKING YOU FOR A PROXY AND
YOU
ARE REQUESTED NOT TO SEND US A PROXY
THIS
NOTICE IS FOR INFORMATION PURPOSES ONLY.
By Order
of the Board of Directors
Theodore
G. Hollinger, Chairman
April 30,
2009
HYDROGEN
ENGINE CENTER, INC.
INFORMATION
STATEMENT
Table of
Contents
INTRODUCTION
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PAGE
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PROPOSAL
1: Election of Directors
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5
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PROPOSAL
2: Ratification of Accountants
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11
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ADDITIONAL
INFORMATION
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13
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INTRODUCTION
This
Information Statement is furnished by and on behalf of the Board of Directors
(the “Board”) of Hydrogen Engine Center, Inc., a Nevada corporation (“we”, “us”,
“our”, or the “Company”), for use at our Annual Meeting of Stockholders to be
held on June 11, 2009 at 2:00 PM, Central Daylight Time, at the Company’s
headquarters located at 2502 E. Poplar St., Algona,
IA 50511.
WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. THIS NOTICE IS FOR INFORMATION PURPOSES ONLY.
You are
welcome to attend the meeting in person to vote your shares. However,
we have been informed that our largest stockholder intends to vote all of his
shares of Company common stock for the election of directors named in Proposal
One and for the ratification of appointment of independent auditors named in
Proposal Two. Accordingly, these matters are expected to be
approved.
This
Information Statement is being furnished to you solely for the purpose of
informing you and the other stockholders of the matters described herein in
compliance with Regulation 14C of the Securities Exchange Act of 1934, as
amended, and the Nevada General Corporation Law (the “Nevada Law”).
Section
78.320 of the Nevada Law provides that any action which may be taken at any
annual or special meeting of stockholders may be taken without a meeting and
without prior notice if a consent in writing setting forth the action taken is
singed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to take such action. In order
to eliminate the costs and management time involved in obtaining proxies and in
order to effect the above actions as early as possible in order to accomplish
the purposes hereafter described, the Board voted to utilize, and has obtained,
the written consent of the Consenting Stockholder who owns shares representing a
majority of our common stock. Your are urged to read this Information
Statement in its entirety for a description of the action taken by the
Consenting Stockholders.
This
Information Statement will be mailed to shareholders on or about May 18,
2009.
The
complete mailing address of the Company’s principal executive office
is:
2502 E.
Poplar Street, Algona, IA 50511
As of
April 29, 2009 the following voting shares were outstanding:
CLASS
|
SHARES
OUTSTANDING
|
VOTING
|
Common
Shares
|
30,214,902
|
30,214,902
|
Each
common share is entitled to one vote. The common shares are the only
shares of the Company entitled to a vote.
The
holder of 15,661,037 common shares (51.83% of the total outstanding shares) will
vote to approve each of the proposals.
Appraisal
rights are not available to shareholders with respect to any matter
approved.
The
annual report on Form 10-K of the Company for the year ended December 31, 2008
(the “Annual Report”), including the Company’s audited consolidated financial
statements for the year ended December 31, 2008 is being mailed to the Company’s
shareholders with this Information Statement and is hereby incorporated by
reference. The Annual Report is not to be regarded as proxy
soliciting material or as a communication by means of which a solicitation of
proxies is to be made.
THE
COMPANY IS NOT SOLICITING PROXIES IN CONNECTION WITH THE MATTERS DESCRIBED IN
THIS INFORMATION STATEMENT, AND NO VOTE OR OTHER ACTION BY THE COMPANY’S
STOCKHOLDERS IS REQUIRED TO BE TAKEN IN CONNECTION WITH THIS INFORMATION
STATEMENT.
More
specifically, this Information Statement is being furnished to the holders of
record on April 29, 2009, of the outstanding shares of common stock, $.001 par
value, of the Company.
PROPOSAL
1: ELECTION OF OFFICERS
The board
consists of six members, three of whom are independent by the definitions
utilized by the Company. Theodore G. Hollinger, Thomas O. Trimble,
Philip G. Ruggieri, Stephen T. Parker, Jan Rowinski and Mike Schiltz are all
current directors and have each been nominated for
re-election. All directors are elected for a one-year term and
hold office until the next annual meeting of the stockholders and the election
and qualification of their successors. The officers of the company
are elected at the Board’s first meeting following the annual meeting of the
stockholders. Officers hold office until their successors are chosen
and qualified or until their deaths, resignations, or removal.
Name
|
|
Age
|
|
Position with the company
|
|
Held Since
|
Theodore
G. Hollinger
|
|
67
|
|
Director
of the company and HEC Iowa, Chairman of the Board of the
company
|
|
August
30, 2005
|
Thomas
O. Trimble
|
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67
|
|
Director
|
|
August
30, 2005
|
Philip
G. Ruggieri,
|
|
55
|
|
Director
|
|
May
19, 2006
|
Stephen
T. Parker
|
|
59
|
|
Director
|
|
February
8, 2008
|
Jan
Rowinski
|
|
56
|
|
Director
and Chairman HEC Canada
|
|
July
20, 2008
|
Michael
A. Schiltz
|
|
48
|
|
Secretary
and Acting President of the company and HEC Iowa and HEC Canada, Director
of the company, HEC Iowa and HEC Canada
|
|
August
30, 2005
|
The
following persons have been nominated to serve as directors for the ensuing
year.
Theodore G.
Hollinger
, age 67. Ted Hollinger started his career in 1964 at
Fairchild Semiconductor as a digital integrated circuit designer. In
1969, he joined the design team at Advanced Micro Devices where he also designed
integrated circuits. In 1973 he joined Amdahl Computer to head their
computer memory system design effort. In 1975, Mr. Hollinger retired
and served as a consultant on integrated circuit design and processing to
Lockheed Missiles and Space and Linkabit Corp. In 1978, he joined
Siliconix as applications manager for all integrated circuits and in 1979, he
became the Chief VMOS Engineer.
In 1984, Mr. Hollinger founded Advanced
Power Technology (“APT”), a power semiconductor company in Bend,
Oregon. Mr. Hollinger holds several key power device patents now
assigned to APT. In 1988, he founded Advanced Power Controls - ONSITE
as a subsidiary of Pacific Power & Light. He moved the company to
Tennessee in 1991 and incorporated it under the name APC-ONSITE. Over
the course of his career, Mr. Hollinger has been granted more that a dozen
patents. Mr. Hollinger joined Ecostar in November of 2000 as the
director of Power Conversion Engineering, and from 2001 to 2002, he was Vice
President of Power Conversion at Ballard Power Systems. In
2003, Mr. Hollinger founded HEC Iowa and presently serves as its Chairman and
Chief Scientist. Mr. Hollinger has been a director of the company since August
30, 2005.
Thomas O.
Trimble,
age 67. Mr. Trimble has worked in the industrial
engine business for 43 years, and has served in various positions such as parts
and service manager, sales manager, and operations general
manager. Mr. Trimble is retired after 44 years with Engine Center for
North Coast Ford Industrial, most recently serving as a Vice
President. Mr. Trimble holds an Associates Degree in Business
Administration from Wayne County Community College. Mr. Trimble has
been a director of the company since August 30, 2005. He lives in
Woodhaven, Michigan.
Philip G.
Ruggieri
, age 55. Mr. Ruggieri has experience in corporate
executive management, investment banking and venture capital, with concentration
in advanced technology sectors. He has held the position of Chief Executive
Officer of Cyber Operations, Inc since May 2006. Cyber Operations is a security
technology company doing business with the U.S. government and various Fortune
100 companies. Prior to that, he was Managing Partner of Norwich Group
International, an international merchant bank and technology business incubator.
His business focus includes network security, digital media, biometrics, and
advanced technology development. From 2001 to 2004, he was Senior
Vice President of New Business Development for CMH CareGroup in Orlando,
Florida. In that position, Mr. Ruggieri developed new business investments
in the healthcare and travel industries, including new products, international
distribution, and organic growth management. In 2000 and 2001, he was a
partner with Windcrest Partners, a venture capital and corporate-accelerator
firm, with an emphasis on digital media and network technologies. Prior to that,
Mr. Ruggieri spent 28 years with the IBM Corporation, in various management and
executive assignments. Mr. Ruggieri currently serves on the boards
of several organizations, including Cyber Operations Inc., Graftx Inc., and he
is the current Board Chairman of Special Olympics Florida. Past board
positions include IswitchGlobal Inc., PGA/Interactive, and NHL/Interactive. Mr.
Ruggieri received a B.S. in Business Administration, with International Finance
concentration, from Fordham University in New York in 1977. Mr. Ruggieri
currently resides with his wife and family in Orlando, Florida. He has
been a director of the company since May 2006.
Stephen T.
Parker
, age 59. Stephen Parker
is Chairman and CEO of Datacraft
Solutions where he is responsible for strategic planning, financing,
and business operations. Stephen's career spans over twenty five years with
experience in international commerce, executive management, corporate growth
strategies, sales, technology development, and corporate
financing. Prior to Datacraft Solutions Stephen was an
executive at IBM, Eftia, Verizon (GTE/Contel), and Satellite Business
Systems. In his last assignment he was CEO of a technology company with
two separate companies headquartered in Canada and India. He holds patents in
Lean enabling technologies and is one of the principal patent authors
for the first wireless data system G2.5. He is a member of the advisory board
for Silicon Valley based Blacksmith Capital.
Jan Rowinski,
age 56. Mr. Rowinski was elected to the Board of
Directors on July 20, 2009. Mr. Rowinski is the Founder and President
/ CEO of the CSI GROUP AE, a corporate development and management consulting
firm specializing in Business Development, Corporate Strategy, M&A,
Financing, and Performance Improvement. He is the founder or
co-founder of a number of other companies, including GPS Latitude, a provider of
security solutions and tracking for mobile assets; Micro Slate Inc. a leader and
pioneer in design and manufacture of patented, rugged mobile / wireless pen
tablets, handheld and notebook computers; and JYL Logic Inc. a developer and
manufacturer of multilingual computers, instrumentation, multiplexers and
peripherals. Mr. Rowinski is a Lecturer / Chair in numerous
conferences regarding Technology and Mobile / Wireless Computing. He
is also a member of the Canadian Security Association (CANASA). He is a member
of the professional team with BayStream Ventures Inc. Mr. Rowinski
holds an MBA degree from McGill University, B.Sc. in Mathematics, and an
Electrical Engineering (DEC). Mr. Rowinski currently resides in Montréal,
Canada.
Michael A.
Schiltz
age 48
.
Mr.
Schiltz is Acting President and Secretary of the company. He was with
The Merrill Company / Arnold Motor Supply from 1983 to 2005, initially as a
certified machinist from 1983 to 2001. In 2002 he became the division
manager of the cylinder head division and division manager of the engine
components division from 2004 until joining the Company. Mr. Schiltz
was a director of the company and of HEC Iowa from September 2005 until May
2006. He has served as a director of HEC Canada since September
2005.
STRUCTURE
AND PRACTICES OF THE BOARD OF DIRECTORS
Corporate
Structure
Hydrogen
Engine Center, Inc. designs, manufactures, and distributes technologies today
that enable spark-ignited internal combustion engines and power generation
systems to produce clean energy with near-zero carbon emissions, using our
proprietary engine controller and software to efficiently distribute ignition
spark and fuel to injectors. Our business plan is centered on a
growing portfolio of intellectual property that we expect to play an increasing
role in addressing the world’s energy needs as well as its environmental
concerns. Our Common Stock trades on the Bulletin Board under the
symbol “HYEG.OB.”
We have
two subsidiaries, Hydrogen Engine Center, Inc., an Iowa corporation (“HEC Iowa”)
and Hydrogen Engine Centre (HEC) Canada, a Canadian corporation (“HEC
Canada”). The company is a Nevada corporation that, prior to August
30, 2005, was known as Green Mt. Labs, Inc. On that date, a
wholly-owned subsidiary of Green Mt. Labs, Inc. merged with and into HEC Iowa
through the consummation of a merger transaction more completely described in
our Form 10-K.
Corporate
Governance Guidelines
The Board’s audit committee operates
under a written charter adopted by the Board. The Board has also adopted a
written policy on Insider Trading and a Code of Ethics. We have
made available copies of our Audit Committee Charter, Insider Trading Policy and
Code of Ethics on our website at
www.hydrogenenginecenter.com
. Copies
of these documents may also be obtained by sending a request in writing to
Hydrogen Engine Center, Inc., 2502 East Poplar Street, Algona, Iowa 50511, Attn:
Corporate Secretary.
Board
Committees
We have a standing audit committee, a
standing compensation committee and a standing technology
committee. The Board as a whole acts as the nominating committee.
Because the small size of our Board, we have determined that a separate
committee is not needed at this time. The table below shows current
membership for each of the three standing committees.
Audit Committee
|
|
Compensation Committee
|
|
Technology Committee
|
Philip
G. Ruggieri
|
|
Thomas
O. Trimble
|
|
Theodore
G. Hollinger
|
|
|
Stephen
T. Parker
|
|
Jan
Rowinski
|
Audit Committee.
Until May
19, 2006, our entire Board of Directors was acting as the audit committee for
the company. On that date the Board established an audit committee
consisting of two independent directors. Since February 23, 2009 when David
McMaramy resigned from the Board, the audit committee has consisted of only
one independent director. The audit committee is appointed by the
Board of Directors to assist the Board in fulfilling its responsibilities for
oversight of:
|
·
|
The
integrity of the company’s financial statements and financial reporting
process;
|
|
·
|
The
company’s compliance with legal and regulatory
requirements;
|
|
·
|
The
independent auditors' qualifications, independence and performance;
and
|
|
·
|
Communication
among the independent auditors, management and the Board of
Directors.
|
The audit
committee has the authority to conduct any investigation appropriate to
fulfilling its responsibilities, and it has direct access to the independent
auditors as well as anyone in the organization. The Board has
determined that Mr. Ruggieri, the sole member of the audit committee, is an
“audit committee financial expert”, as that term is defined in Item 407(d) of
Regulation SK. During 2009, there were two meetings of the audit committee
involving both Mr. McManamy and Mr. Ruggieri.
Compensation
Committee.
The Board has established a compensation committee
consisting of our two non-employee directors, both of whom we consider to be
independent directors. The compensation committee is charged with determining
compensation for our chief executive officer and making recommendations to the
Board with respect to the compensation of other officers. The
compensation committee held one meeting separate from the board as a whole
during 2008.
Meetings
of the Board
Special meetings of the Board are held
as necessary. In addition, management and the directors communicate
informally on a variety of topics, including suggestions for Board agenda items,
recent developments, and other matters of interest to the
directors. Each director has full access to management.
Directors are expected to attend all
meetings of the Board. During 2008, the Board has held twenty-six
meetings. Each director attended not less than 75% of the aggregate
number of meetings of the Board of Directors. The Board also took
action by unanimous written consent on two occasions during 2008.
We have
no formal policy with respect to director attendance at the annual meeting of
shareholders. All members of the Board of Directors with the
exception of Phil Ruggieri attended the annual meeting held June 4,
2008. We expect all of the members of the Board to attend the annual
meeting scheduled for June 11, 2009.
Communication
with the Board
Shareholders,
or anyone else wishing to contact the Board directly, may send a written
communication to Sandra M. Batt, Chief Financial Officer, 2502 East Poplar
Street, Algona, Iowa 50511. Ms. Batt will forward such correspondence
only to the intended recipients, whether the entire Board or only an individual
Board member. However, prior to forwarding any correspondence, Ms.
Batt will review such correspondence and, in her discretion, may not forward
certain items if they are deemed to be of a commercial nature or sent in bad
faith.
Director
Independence
Directors
Stephen T. Parker and Phillip G. Ruggieri are considered independent, as that
term is defined by the American Stock Exchange listing standards. We
expect to apply to become a listed company on a stock exchange in the
future.
Shareholder
Recommendations and Nominations for Directors
The Board
will consider shareholder recommendations for director nominees for the 2010
annual meeting. A shareholder desiring the Board to consider a
director recommendation should deliver a written submission to the Board in care
of the Corporate Secretary, Hydrogen Engine Center, Inc., 2502 East Poplar
Street, Algona, Iowa 50511. Such submission must include (1) the
name of such nominee, (2) the nominee's written consent to serve if
elected, (3) documentation demonstrating that the nominating shareholder is
indeed a shareholder of the company including the number of shares of stock
owned, (4) a representation whether the nominating shareholder intends, or
is part of a group that intends, to deliver a proxy statement to the company's
shareholders respecting such nominee, or otherwise solicit proxies respecting
such nominee, and (5) any information relating to the nominee and the
nominee's affiliates that would be required to be disclosed in a proxy
solicitation for the election of directors of the company pursuant to Regulation
14A under the Securities Exchange Act of 1934. The Board may require
additional information from the nominee to perform its evaluation.
Shareholder
recommendations for director nominees at the 2010 annual meeting of shareholders
must be received by the Corporate Secretary no earlier than December 1, 2009,
and no later than January 1, 2010. Nominee recommendations that are
made by shareholders in accordance with these procedures will receive the same
consideration as recommendations initiated by the Board.
In its
assessment of each potential nominee, the Board will review the nominee's
judgment, experience, independence, and understanding of the company's business;
the range of talent and experience already represented on the Board; and such
other factors that the Board determines are pertinent in light of the current
needs of the company. The Board will also take into account the
ability of a nominee to devote the time and effort necessary to fulfill the
responsibilities of a company director.
Directors’
Fees
Each of
our directors initially received 20,000 shares of restricted stock or, in the
discretion of the director, options to purchase 20,000 shares of the company;
10,000 of which vested as of the date of grant; 5,000 of which are scheduled one
year after grant; and 5,000 of which are scheduled to vest two years after
grant. On May 30, 2007, Mr. Trimble, and Mr. Ruggieri, as
non-employee directors, each received option to purchase 10,000 shares of Common
Stock exercisable one year after the date of grant. All of these
options carry an exercise price equal to the fair market value of the stock as
of the date of grant. We also compensate non-employee directors
$2,500 per quarter, subject to attendance at quarterly Board
meetings. Commencing in the fourth quarter 2007, non-employee
directors agreed to accept a temporary reduction in compensation, and are
therefore currently receiving compensation of $2,125 per
quarter. Directors began deferring their compensation beginning with
the quarter ending September 30, 2009 through the present time in order to
conserve capital for the Company. We do not pay any additional
compensation for participation in additional Board
meetings. Directors are entitled to be reimbursed for expenses
incurred in attendance at meetings. None of our directors have
received any other compensation for services as a director.
2008
DIRECTOR COMPENSATION
|
|
Name
(a)
|
|
Fees
Earned or
Paid in
Cash
($)
(b)
|
|
|
Stock
Awards
($)
(c)
|
|
|
Option
Awards
($)
(d)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
(e)
|
|
|
Change in
Pension Value
And
Nonqualified
Deferred
Compensation
Earnings
($)
(f)
|
|
|
All
Other
Comp-
ensation
($)
(g)
|
|
|
Total
($)
(h)
|
|
Theodore
G. Hollinger
2
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
2
|
|
|
-
|
|
Thomas
O. Trimble
|
|
$
|
8,500
|
3
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,500
|
|
Philip
G. Ruggieri
|
|
|
8,500
|
3
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,500
|
|
Stephen
T. Parker
|
|
|
7,438
|
3
|
|
|
-
|
|
|
|
3,850
|
4
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,288
|
|
Jan
Rowinski
|
|
|
6,750
|
3
|
|
|
-
|
|
|
|
1,400
|
4
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,150
|
|
Michael
A. Schiltz
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
2
|
|
|
|
|
1
Amounts
shown represent the amount recognized for financial statement reporting purposes
with respect to the fiscal year in accordance with FAS 123R as disclosed in the
Form 10-K for the year ended December 31, 2008.
2
Does not
include executive compensation disclosed above in the Summary Compensation
Table.
3
Commencing May 19, 2007, non-employee directors (Mr. Trimble, Mr.
Ruggieri, Mr. Parker, and Mr. Rowinski) are compensated $2,500 per quarter,
subject to attendance at Board meetings. Commencing in the fourth
quarter 2007, non-employee directors agreed to accept a temporary reduction in
compensation, and are therefore currently receiving compensation of $2,125 per
quarter. Directors began deferring their compensation beginning with
the quarter ending September 30, 2009 through the present time in order to
conserve capital for the Company. Directors are entitled to be reimbursed for
expenses incurred in attendance at meetings. Except as described
above, none of the directors of the company has received any other compensation
for his services as a director.
4
On March
31, 2008 Mr. Parker was granted options to purchase 20,000 shares of stock of
the company. On October 27, 2008, Mr. Rowinski was granted options to purchase
20,000 shares of stock of the company. The amount shown above
represents the amount recognized for financial statement reporting purposes with
respect to the fiscal year 2008 in accordance with FAS 123R.
THE
REQUISITE MAJORITY SHAREHOLDER HAS VOTED IN FAVOR OF THIS
PROPOSAL. NO PROXY IS REQUIRED OR REQUESTED. VERY
SPECIFICALLY, YOU ARE REQUESTED NOT TO SEND US YOUR PROXY. THIS
NOTICE IS FOR INFORMATION PURPOSES ONLY.
PROPOSAL
TWO
TO
RATIFY THE APPOINTMENT OF LWBJ, LLP
AS
OUR INDEPENDENT ACCOUNTANTS FOR 2009
The Board
of Directors has selected LWBJ, LLP as the company’s independent auditor for the
current fiscal year, and the Board is asking shareholders to ratify that
selection. The Board considers the selection of the independent
auditor to be an important matter of shareholder concern and is submitting the
selection of LWBJ, LLP for ratification by shareholders as a matter of good
corporate practice. We expect that a representative of LWBJ, LLP will
be present at the annual meeting. This representative will be
provided an opportunity to make a statement if he or she should desire to do so
and we expect that the representative will be available to respond to
appropriate questions presented at the meeting.
Audit
Fees
Fees
billed by LWBJ, LLP and fees incurred, for professional services are estimated
to be $131,000 for the year ended December 31, 2008 and $142,000 for the year
ended December 31, 2007, including fees associated with the annual audit and
review of the quarterly reports on Form 10-Q. Fees for these services
are billed as incurred and recorded by the company as invoices are
received.
Tax
Fees
$9,450 in
fees were billed by LWBJ, LLP for tax services in 2008 and $9,800 in fees were
billed by LWBJ, LLP for tax services in 2007.
All
other Fees
No fees
were billed by LWBJ, LLP, for professional services rendered during the fiscal
years ended December 31, 2008 and December 31, 2007 other than those specified
above.
On
December 12, 2008 the Board of Directors voted to engage LWBJ, LLP to audit the
company’s financial statements for the year ended December 31,
2008. The entire Board of Directors, acting upon the recommendation
of the audit committee, pre-approved audit engagement terms prior to the
commencement of any audit work.
All
services described above were approved by the Board of Directors acting as the
audit committee pursuant to SEC Regulation S-X, Rule 2-01(c)(7)(i).
The
affirmative vote of holders of a majority of the shares of Common Stock,
including shares of Series B Preferred Stock on an as-converted basis,
represented at the meeting is required to approve the ratification of the
selection of LWBJ, LLP as the company’s independent auditor for the current
fiscal year.
REPORT
OF THE AUDIT COMMITTEE
The audit
committee has provided the following report:
During
2008, we reviewed with the company’s Chief Financial Officer and the company’s
independent registered public accounting firm, LWBJ, LLP (referred to as
“LWBJ”), the scope of the annual audit and audit plans, the results of external
audit examinations, the quality of the company’s financial reporting and the
company’s process for legal and regulatory compliance.
LWBJ is responsible for performing an
integrated audit and issuing reports and opinions on the company’s consolidated
financial statements.
As
provided in our committee charter, our responsibilities include monitoring and
overseeing these processes.
Consistent
with this oversight responsibility, LWBJ reports directly to us. The
Board of Directors appointed LWBJ as the company’s independent registered public
accounting firm and we as a committee have approved the compensation of the
firm. We review and approve all non-audit services performed by LWBJ
and determined that the provision of the services was compatible with
maintaining LWBJ’s independence.
LWBJ
provided to us the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and we
discussed with LWBJ its independence.
We
reviewed and discussed the 2008 consolidated financial statements with
management and LWBJ. We also discussed the certification process with
the Acting President and Chief Financial Officer. Management
represented to us that the company’s consolidated financial statements were
prepared in accordance with accounting principles generally accepted in the
United States of America. We discussed with LWBJ the matters required
to be discussed by Statement on Auditing Standards No. 114 (“The Auditor’s
Communication with those Charged with Governance”).
Based on
these discussions and reviews, we recommended to the Board of Directors that the
audited consolidated financial statements be included in the company’s Annual
Report on Form 10-K for the year ended December 31, 2008 for filing with the
Securities and Exchange Commission.
During
2008 and until February 23, 2009, the audit committee was composed of David F.
McManamy (Chairman) and Philip G. Ruggieri. Mr. McManamy resigned
from the Board on February 23, 2009. Since that date, Mr. Ruggieri
has been the sole member of the audit committee.
T
he Audit Committee
Report will not be deemed to be incorporated by reference into any filing by the
Company under the Securities Act of 1933, as amended, or the Exchange Act,
except to the extent that the Company specifically incorporates the same by
reference.
THE
REQUISITE MAJORITY OF SHAREHOLDERS HAS VOTED IN FAVOR OF THIS
PROPOSAL. NO PROXY IS REQUIRED OR REQUESTED. VERY
SPECIFICALLY, YOU ARE REQUESTED NOT TO SEND US YOUR PROXY. THIS
NOTICE IS FOR INFORMATION PURPOSES ONLY.
ADDITIONAL
INFORMATION
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our
directors and the executive officers, key employees and key consultants of our
operating groups at the time of filing are as follows:
Name
|
|
Age
|
|
Position with the company
|
|
Held Since
|
Theodore
G. Hollinger
|
|
67
|
|
Director
of the company and HEC Iowa., Chairman of the Board of the
company and HEC Iowa
|
|
August
30, 2005
|
Thomas
O. Trimble
|
|
67
|
|
Director
|
|
August
30, 2005
|
Philip
G. Ruggieri,
|
|
55
|
|
Director
|
|
May
19, 2006
|
Stephen
T. Parker
|
|
59
|
|
Director
|
|
February
8, 2008
|
Matthew
Fairlie
|
|
54
|
|
Director
HEC Canada
|
|
January
24, 2007
|
Jan
Rowinski
|
|
56
|
|
Director
HEC Canada
|
|
April
29, 2008
|
Michael
A. Schiltz
|
|
48
|
|
Acting
President and Secretary of the company, HEC Iowa and HEC
Canada, Director of the company, HEC Canada and HEC Iowa
|
|
August
30, 2005
|
Sandra
M. Batt
|
|
56
|
|
Treasurer
and Chief Financial Officer
|
|
December
5,
2005
|
Matthew
Fairlie
, age 54. Mr. Fairlie was elected to the Board of
Directors of HEC Canada on January 24, 2007. Matthew heads an applied
engineering group for Alcan Inc. He was previously a principal with
the Fairfield Group Inc., through which he worked as a consultant for HEC
Canada. From 1999-2004, Mr. Fairlie was Vice President and Chief
Technology Officer for Stuart Energy.
Sandra M.
Batt,
age 56
.
Ms.
Batt joined the company on December 5, 2005 as its Chief Financial
Officer. Prior to that time, she served as Chief Financial Officer
for Golden Grain Energy in Mason City, Iowa from September 2004 to December
2005. She graduated from Briar Cliff University with a B.A. in
accounting. From 1998 to 2003, Ms. Batt was employed as finance
director at Sbemco International, Inc. She is a certified public
accountant.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934 requires our officers and directors, and
persons who own more than 10% of our stock, to file reports of ownership and
changes in ownership with the SEC. Officers, directors, and greater than 10%
stockholders are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file. Based solely upon a review of the
copies of such forms furnished to us, we believe that during our preceding
fiscal year not all Section 16(a) filing requirements applicable to our
officers, directors, and greater than 10% beneficial owners were complied
with. Mr. McManamy was granted options on October 27, 2008, which
were not reported on a Form 3 until January 16, 2009. Mr. Parker and
Mr. Rowinski were granted options on October 27, 2008, which they have failed to
report. Options that were repriced for Messrs. Berg, Trimble,
Vanderbrook and Ruggieri in August 2007 were reported on Form 5 on February 13,
2008.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the
security and beneficial ownership for each class of equity securities of the
Company for any person who is known to be the beneficial owner of more than five
percent (5%) of the Company and for all executive officers and directors of the
Company as of April 29, 2009. Except as described below, the security
ownership of each of the above beneficial owners is also the owner of record for
the like number of shares.
Title of Class
|
|
Name and Address of
Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
|
|
|
Percent
of Class
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Theodore
G. Hollinger
2502
East Poplar Street
Algona,
IA 50511
|
|
|
15,661,037
1
|
|
|
|
51.83
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Thomas
O. Trimble
2341
Hilton Road
Ferndale,
MI 58220-1593
|
|
|
30,000
2
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Stephen
T. Parker
2502
East Poplar Street
Algona,
IA 50511
|
|
|
15,000
3
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Philip
G. Ruggieri
1562
Lake Whitney Dr.
Orlando,
FL 32836
|
|
|
55,000
4
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Sandra
M. Batt
2502
East Poplar Street
Algona,
IA 50511
|
|
|
84,770
5
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Michael
A. Schiltz
2502
East Poplar Street
Algona,
IA 50511
|
|
|
155,520
6
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Jan
Rowinski
6300
Chemin Côte-de-Liesse, Suite 201
Montréal,
Québec, H4T1E3
|
|
|
10,000
7
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
David
F. McManamy
13150
Hidden Creek
Plymouth,
MI 48170
|
|
|
10,000
8
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Matthew
Fairlie
RR4
Shelburne
Ontario,
Canada L0N 1S8
|
|
|
0
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Officers
and directors as a Group (9 Persons)
6
|
|
|
16,021,327
10
|
|
|
|
52.68
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Gabriel
Elias and
Alma
Elias
509
Spring Ave
Elkins
Park, PA 19027
|
|
|
2,311,250
9
|
|
|
|
7.60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
*
= less than 1%
1
Mr.
Hollinger received 16,297,200 shares of the company’s Common Stock as a result
of its acquisition on August 30, 2005 of Hydrogen Engine Center, Inc., an Iowa
corporation. Immediately prior to the acquisition, Mr. Hollinger was
the sole shareholder of HEC Iowa and these shares were issued in exchange for
his shares in HEC Iowa.
Mr. Hollinger received 20,000 shares of
restricted stock on September 1, 2005 under the company’s Incentive Compensation
Plan for his services as a director.
Mr. Hollinger received 200,000 shares
of restricted stock on September 1, 2005 under the company’s Incentive
Compensation Plan for services as an employee. 40,000 of these shares
are subject to forfeiture under the company’s Incentive Compensation
Plan.
Mr. Hollinger received 3,000 shares of
stock which were reserved by the Board of Directors to be granted to his wife,
Dana Hollinger, under the company’s Incentive Compensation Plan for services as
an employee. Mrs. Hollinger is now deceased and these shares have
been issued directly to Mr. Hollinger as her heir.
Mr. Hollinger received 21,601 shares of
stock on September 1, 2005, upon conversion of a promissory note dated September
15, 2003 and issued to Mr. Hollinger in exchange for a loan of $17,280 to the
company. Under the terms of the promissory note, these shares were
issued at a conversion price of $0.80 per share.
On December 16, 2008, Mr. Hollinger
gifted 830,764 shares of stock to his family members and his
church.
On February 23, 2009, Mr. Hollinger
sold 50,000 shares at $.03 per share.
2
Includes
20,000 shares of restricted stock and 10,000 currently exercisable
options.
3
Includes
currently exercisable options to purchase 15,000 shares at $.40.
4
Includes
currently exercisable options to purchase 30,000 shares for $1.34 per share
under the company’s Incentive Compensation Plan.
5
Includes
currently exercisable options to purchase 54,000 shares for $1.34 per share
under the Company’s 2005 Incentive Compensation Plan.
6
Includes
6,000 shares of restricted stock that are subject to forfeiture under the
company’s Incentive Compensation Plan. Also includes currently
exercisable options to purchase 70,000 shares for $1.00 per share under the
company’s Incentive Compensation Plan.
7
Includes
currently exercisable options to purchase 10,000 shares at $.20.
8
Includes
currently exercisable options to purchase 10,000 shares at $.20.
9
Includes
250,000 shares of Common Stock owned by Wholesale Realtors Supply, a partnership
controlled by Mr. Elias and 550,000 shares of Common Stock owned jointly by Mr.
Elias and Alma Elias, his spouse.
10
This
amount represents shares beneficially owned by Messrs. Hollinger, Trimble,
Parker, Ruggieri,
Fairlie,
Rowinski and Schlitz and Ms. Batt, including the options and restricted shares
as described above.
10
Applicable percentage of ownership is based on 30,413,902 shares of
Common Stock outstanding as of April 29, 2009, together with securities
exercisable or convertible into shares of Common Stock within sixty (60) days of
April 29, 2009 for each stockholder. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or investment
power with respect to securities. Shares of Common Stock are deemed to be
beneficially owned by the person holding such securities for the purpose of
computing the percentage of ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person. Note that affiliates are subject to Rule 144 and Insider trading
regulations - percentage computation is for form purposes only.
EXECUTIVE
COMPENSATION
The
following table sets forth all compensation for the last fiscal year awarded to,
earned by, or paid to our Chief Executive Officer and the most highly paid
executive officers serving as such at the end of 2008 whose salary, bonus and
stock awards exceeded $100,000 for the year ended December 31, 2008 (the "Named
Executive Officers").
SUMMARY
COMPENSATION TABLE
Name
and principal position
(a)
|
|
Year
(b)
|
|
Salary
($)
(c)
6
|
|
|
Stock Awards
1
($)
(e)
|
|
|
Option
Awards
1
($)
(f)
|
|
|
Total
($)
(j)
|
|
Theodore
G. Hollinger, Chairman
|
|
2007
|
|
|
123,924
|
|
|
|
42,033
2
|
|
|
|
|
|
|
165,957
|
|
|
|
2008
|
|
|
107,057
|
6
|
|
|
42,431
2
|
|
|
|
|
|
|
149,488
|
|
Sandra
M. Batt, Chief Financial Officer
|
|
2007
|
|
|
87,923
|
|
|
|
|
|
|
|
86,189
3
|
|
|
|
174,112
|
|
|
|
2008
|
|
|
70,946
|
6
|
|
|
|
|
|
|
84,355
3
|
|
|
|
155,301
|
|
Michael
A. Schiltz, Secretary, and
|
|
2007
|
|
|
88,420
|
|
|
|
5,820
4
|
|
|
|
16,813
5
|
|
|
|
111,053
|
|
Acting
President
|
|
2008
|
|
|
68,961
|
6
|
|
|
6,497
4
|
|
|
|
14,000
5
|
|
|
|
89,458
|
|
1
Amounts
shown represent the amount recognized for financial statement reporting purposes
with respect to the fiscal year in accordance with FAS 123R as disclosed in the
Form 10-K for the year ended December 31, 2008.
2
On
September 1, 2005, 220,000 shares of restricted stock were issued to Theodore G.
Hollinger, valued at $1.00 per share, based on the stock price in the First
Private Placement. There was no reported closing price for the date
of grant, September 1, 2005. 20,000 of these shares were granted as
compensation for serving as a director of the company. The total also
includes 3,000 shares initially granted to Dana Hollinger, who is now deceased
and who was the wife of Mr. Hollinger. 53,000 of these shares of
restricted stock vested on September 1, 2005, 10,000 of which were granted as
director compensation. 45,000 of these shares of restricted stock
vested on September 1, 2006, 5,000 of which were granted as director
compensation. 50,000 of these shares of restricted stock vested on
September 1, 2007, 5,000 of which were granted as director compensation. 40,000
of these shares of restricted stock vested on September 1, 2008 as employee
compensation. The remaining shares will vest as to 40,000 shares on
September 1, 2009.
3
These
options carry an exercise price of $1.34, the fair market value of the shares on
the date of grant, August 14, 2007. Options vested as to 18,000
shares on September 29, 2006, 2007 and 2008. Options will vest as to
18,000 shares on September 1, 2009; and as to 18,000 shares on September 1,
2010. Options granted to Ms. Batt during 2005 were cancelled and new
options were issued in September 2006. Those options were cancelled
and new options were issued in August 2007.
4
On
September 1, 2005, 36,000 shares of restricted stock were issued to Michael A.
Schiltz, valued at $1.00 per share, based on the stock price in the First
Private Placement. There was no reported closing price for the date
of grant, September 1, 2005. 30,000 of these shares were granted as
compensation for serving as a director of the company. 12,000 of
these shares of restricted stock vested on September 1, 2005. 6,000
of these shares of restricted stock vested on September 1, 2006, September 1,
2007 and September 1, 2008. 6,000 of the shares are scheduled to vest
on September 1, 2009.
5
These
options carry an exercise price of $1.00 per share, the fair market value of the
shares on the date of grant, September 1, 2005. Options vested as to
18,000 shares on September 1, 2005, as to 19,000 shares on September 1, 2006, as
to 19,000 shares on September 1, 2007 and as to 14,000 shares on September 1,
2008. 14,000 of the shares are scheduled to vest on September 1,
2009.
6
The
salary amount for Mr. Hollinger includes deferred salary of $34,134; the salary
for Ms. Batt includes deferred salary of $24,577 and the salary for Mr. Schiltz
includes deferred salary of $21,807. The salary deferrals were
necessitated by the Company’s inability to pay.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
(a)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
|
|
Option
Exercise
Price
($)
(e)
|
|
|
Option
Expiration Date
(f)
|
|
|
Number of
Shares or Units
of Stock That
Have Not Vested
(#)
(g)
|
|
|
Market Value of
Shares or Units
of Stock That
Have Not Vested
($)
(h)
|
|
Theodore
G. Hollinger, Chairman
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,000
1
|
|
|
$
|
4,800
2
|
|
Sandra
M. Batt, Chief Financial Officer
|
|
|
54,000
3
|
|
|
|
36,000
3
|
|
|
|
1.34
|
|
|
|
8-14-2017
|
|
|
|
-
|
|
|
|
-
|
|
Michael
A. Schiltz, Secretary, VP of Engine Development
|
|
|
70,000
4
|
|
|
|
14,000
4
|
|
|
|
1.00
|
|
|
|
8-14-2017
|
|
|
|
6,000
5
|
|
|
|
720
5
|
|
1
These
shares are scheduled to vest as to 40,000 on September 1, 2009.
2
Market
value of these shares ($0.12 per share) is based on the closing price of the
stock on December 31, 2008.
3
These
options vested as to 18,000 shares on September 29, 2006 and as to 18,000 shares
on September 29, 2007 and as to 18,000 shares on September 29,
2008. The options are scheduled to vest as to on September 29, 2009
and 2010.
4
These
options vested as to 18,000 shares on September 1, 2005; as to 19,000 shares on
September 1, 2006 and 2007 and 14,000 on September 1, 2008. The
options are scheduled to vest as to 14,000 shares on September 1,
2009.
5
These
shares are scheduled to vest as 6,000 shares on September 1,
2009.
Annual
Report, Financial and Additional Information.
The
Annual Financial Statements and Review of Operations of the Company for fiscal
year 2008 can be found in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008.
The
Company’s filings with the SEC are all accessible by following the links to
“Investor Relations” on the Company’s website at
hydrogenenginecenter.com
. The
Company will furnish without charge a copy of the Company’s Annual Report on
Form 10-K, including the financial statements and schedules thereto, to any
person requesting in writing and stating that he or she is the beneficial owner
of the Common Shares of the Company.
Requests
and inquires should be addressed to:
Investor
Relations
Hydrogen
Engine Center, Inc.
2502 E.
Poplar Street
Algona,
IA 50511
By Order
of the Board of Directors
Theodore G. Hollinger
Chairman of the Board
Algona, Iowa
April 30,
2009