FuelCell Energy, Inc. (referred to in this Proxy Statement as “we,” “FuelCell”, “FuelCell Energy” or the “Company”) is providing you with this Proxy Statement in connection with the solicitation by FuelCell’s Board of Directors (the “Board”) of proxies to be voted at FuelCell’s 2024 Annual Meeting of Stockholders (the “Annual Meeting”) and at any adjournment or postponement thereof. The Annual Meeting will be a completely “virtual meeting” of stockholders to be held on Thursday, April 4, 2024 at 1:00 p.m. Eastern Daylight Time. You will be able to attend the Annual Meeting as well as vote and submit your questions during the live audio webcast of the meeting by visiting www.virtualshareholdermeeting.com/FCEL2024 and entering the 16-digit control number included in our notice of internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials. The Company is a Delaware corporation. The address of our principal executive office is 3 Great Pasture Road, Danbury, Connecticut 06810.
The Board has set the close of business on February 5, 2024 as the record date for the determination of holders of the Company’s common stock, par value $0.0001 per share, who are entitled to notice of, and to vote at, the Annual Meeting.
As of February 5, 2024, there were 450,684,628 shares of common stock outstanding and entitled to vote at the Annual Meeting. Holders of common stock outstanding at the close of business on the record date will be entitled to one vote for each share held on the record date.
We are providing access to our proxy materials online under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result, we are mailing to many of our stockholders a notice instead of a paper copy of this Proxy Statement and our Annual Report. The notice contains instructions on how to access documents online. The notice also contains instructions on how stockholders can receive a paper copy of our materials, including this Proxy Statement, our Annual Report and a form of proxy card or voting instruction card. Those who do not receive a notice, including stockholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy by mail unless they have previously requested delivery of materials electronically.
The Notice of Annual Meeting, Proxy Statement and proxy card are first being distributed and made available to our stockholders on or about February 16, 2024.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on April 4, 2024: The Notice of Annual Meeting, Proxy Statement and Annual Report to Stockholders for the fiscal year ended October 31, 2023 are available at www.proxyvote.com (using the 16-digit control number included in our notice of internet availability of proxy materials, on your proxy card or in the instructions that accompanied your proxy materials), as well as on our website at www.fuelcellenergy.com.
Our Commitment to Sustainability
As a company, we are committed to helping our customers reduce their environmental impact. We are equally committed to reducing our environmental impact and have therefore developed and begun implementing a plan to reduce our carbon emissions to net zero by 2050. As part of this commitment, during fiscal year 2023, we:
| ● | Performed a corporate-level greenhouse gas (“GHG”) emissions inventory for 2020-2023; |
| ● | Conducted product-level life cycle assessments to understand and potentially reduce GHG emissions throughout the value chain, from production through decommissioning; |
| ● | Developed an Environmental, Social and Governance (“ESG”) strategy to prioritize and holistically address our key ESG responsibilities and stakeholders’ needs; and |
| ● | Established an ESG governance model comprised of an ESG cross-functional team, including executive team members and overseen by the Environmental, Social, Governance and Nominating Committee of our Board of Directors. |
Our platforms have a direct impact on reducing our customers’ Scope 1 and Scope 2 emissions, thus lowering the global environmental footprint of baseload, or primary, power generation. However, our platforms are designed to go beyond power generation, delivering hydrogen, carbon recovery, carbon capture, water, and thermal energy in various applications. As a result of our platforms’ ability to deliver multiple value streams, we help our customers reduce their Scope 1 and Scope 2 emissions on-site without buying off-site carbon/environmental offsets, which do not positively impact the local communities’ air quality or emissions. As a company, we are focused on addressing immediate environmental impacts such as nitrogen oxides (“NOx”), sulfur oxides (“SOx”), and particulate emissions and the multi-decade impacts on climate change. In 2023, we delivered our Tri-gen hydrogen platform to Toyota at the Port of Long Beach, California and we commercialized our solid oxide platform, which is capable of utilizing 100% hydrogen as fuel, and our solid oxide electrolysis platform, which converts electricity and water into hydrogen. In the future, we plan to commercialize our long-duration energy storage platform leveraging our reversible solid oxide platform and our carbon capture technologies intended to drive next generation solutions to help customers attain their decarbonization goals and continue to advance decarbonization through the utilization of our products in core industries, such as steel manufacturing, cement production, and glass making.
Our patented products offer a sustainable alternative to traditional internal combustion-based power generation and more reliable baseload, or prime, power compared to intermittent sources such as wind, solar, and run of river hydro power. Traditional power plants create immediate harmful emissions, such as NOx, SOx and particulate matter, that are a serious public health concern and have a direct impact on the communities in which these plants operate. When a fuel is combusted (as in traditional power generation), carbon dioxide is emitted in addition to SOx, NOx, and other particulates. When intermittent power sources go offline because the sun is not shining, the wind is not blowing, or water is not flowing, they rely on traditional fossil-fueled power resources such as coal and internal combustion engine technologies to provide electricity. Our energy platforms use a combustion-free power generation process that is virtually free of pollutants. Our platforms are highly efficient and environmentally friendly products that support the “Triple Bottom Line” concept of sustainability, consisting of environmental, social, and economic considerations. Intermittent sources generally avoid fewer emissions than our fuel cell platforms due to the fact these sources of power typically only operate 15% to 40% of the time, while our platforms operate 24 hours a day. In addition, deploying our platforms as an alternative to traditional combustion power plants allows for
Company Profile
Headquartered in Danbury, Connecticut, FuelCell Energy is a global leader in delivering environmentally responsible distributed baseload energy platform solutions through our proprietary fuel cell technology. Today, we offer commercial technology that produces clean electricity, heat, clean hydrogen, and water and is also capable of recovering and capturing carbon for utilization and/or sequestration, depending on product configuration and application. We also continue to invest in product development and commercializing technologies that are expected to add new capabilities to our platforms’ abilities to deliver hydrogen and long duration hydrogen-based energy storage through our solid oxide technologies, as well as further enhance our existing platforms’ carbon capture solutions.
FuelCell Energy is focused on advancing sustainable clean energy technologies that address some of the world’s most critical challenges around energy access, security, resilience, reliability, affordability, safety and environmental stewardship. As a leading global manufacturer of proprietary fuel cell technology platforms, FuelCell Energy is uniquely positioned to serve customers worldwide with sustainable products and solutions for industrial and commercial businesses, utilities, governments, municipalities, and communities.
Visit us online at www.fuelcellenergy.com and follow us on Twitter @FuelCell_Energy.
2023 FuelCell Energy Business Snapshot
During fiscal year 2023, we achieved a number of significant accomplishments, including advancing the commercialization of our solid oxide platform and the commissioning of our first Tri-gen distributed hydrogen plant. We ended the fiscal year in a strong financial position, with over $400 million in cash, short and long-term restricted cash, cash equivalents and short-term investments. We continued to execute on building out our generation backlog, including 16.8 megawatts (“MW “) of projects that achieved commercial operation subsequent to the end of the fiscal year.
In 2019, we launched our “Powerhouse” strategy to strengthen our business, maximize operational efficiencies and position us for future growth. Having made substantial progress in achieving key initiatives under the original three pillars of our strategy, in fiscal year 2022, we updated the three key pillars of our strategy to “Grow, Scale and Innovate.” We made substantial progress advancing our strategy in fiscal year 2023 and through the date of this Proxy Statement as summarized below:
| ● | Recorded $123.4 million in total revenues for fiscal year 2023; |
| ● | Reported backlog of $1.03 billion as of October 31, 2023; |
| ● | Continued our progress in re-entering the South Korean market with the execution of a long-term service agreement with Noeul Green Energy Co., Ltd. (“Noeul Green Energy”) pursuant to which we are responsible for servicing its 20 MW fuel cell park in South Korea, which is comprised of eight SureSource 3000 fuel cell platforms; |
| ● | Achieved commercial operation of our Tri-gen project at the Port of Long Beach for Toyota. The net 2.3 MW fuel cell platform is producing electricity, hydrogen and water; |
| ● | Continued the expansion of our Calgary, Canada facility, which is expected to increase the manufacturing capacity of the facility from 4 MW per year to 40 MW per year of solid electrolysis cell production in fiscal year 2024. In addition, we have designed in flexibility that would allow us to further increase cell stack manufacturing capacity at our Calgary facility to facilitate the potential annualized production of up to an additional 40 MW of solid oxide electrolysis cells per year by leasing additional space and investing in various process optimizations intended to increase throughput and yield. This approach would allow for the potential to increase our total annualized solid oxide electrolysis cell manufacturing capacity to up to 80 MW per year; |
| ● | Continued to progress toward commercialization of our advanced technologies for carbon capture. We extended the term of our joint development agreement with ExxonMobil Technology and Engineering Company (“EMTEC”) through March 2024. In addition, subsequent to the end of fiscal year 2023, we, in conjunction with Exxon Mobil Corporation, announced that Esso Nederland BV, an affiliate of Exxon Mobil Corporation, plans to build a pilot plant at its Rotterdam Manufacturing Complex to test the carbonate fuel cell technology for carbon capture jointly developed by FuelCell Energy and EMTEC; |
| ● | Continued discussions with domestic hydrogen hubs. The U.S. Department of Energy announced the project recipients selected for negotiation to develop seven regional hydrogen hubs across sixteen U.S. states, which are expected to be supported by $7 billion of funding through the Infrastructure Investment and Jobs Act. We were honored to have our technology named in two of the hydrogen hubs and we are in discussions with all of the hubs as they prepare to make technology decisions; |
| ● | Added 35 new patents to our intellectual property portfolio in fiscal year 2023; |
The Role of the Board
The business affairs of the Company are managed by and under the direction of the Board. The Board and committees of the Board regularly engage with senior management to ensure management accountability, review management succession planning and review and approve the Company’s strategy and mission. The Board is active in reviewing and approving significant corporate actions. The Board also oversees and assesses the effectiveness of the Company’s risk mitigation framework, including controls for financial, regulatory and legal matters, as well as disaster recovery and cybersecurity, environmental, social and governance matters and reviews the process for succession, talent development and employee compensation.
Board Leadership Structure
The Board regularly evaluates its leadership structure in order to ensure that the Company effectively represents the interests of its stockholders. Our second amended and restated by-laws (our “by-laws”) provide the Board flexibility in determining its leadership structure. Currently, the Board maintains separate roles for the Chief Executive Officer and the Chairman of the Board. The Company’s President and Chief Executive Officer (Mr. Jason Few) is responsible for the general supervision of the affairs of the Company and is accountable for achieving the Company’s strategic goals. Mr. Few’s responsibilities include:
| ● | Providing strong ethical leadership; |
| ● | Executing on the Company’s corporate strategy; |
| ● | Reinforcing the Company’s mission, culture and core values; |
| ● | Ensuring complete and accurate disclosure of financial, operational and management matters to the Board; |
| ● | Ensuring compliance and integrity of all financial and regulatory filings and other Company communications; and |
| ● | Communicating with the Board so that it is fully informed with respect to Company, industry and corporate governance matters. |
The Board’s independent Chairman (Mr. James H. England) serves as the principal representative of the Board and as such, presides over all Board meetings. The Board believes that this leadership structure, which separates the Chairman and Chief Executive Officer roles, is optimal at this time because it allows Mr. Few to focus on operating and managing our company, while Mr. England focuses on the leadership of the Board and other strategic business activities. We believe that our governance practices ensure that skilled and experienced independent directors provide independent leadership. Our Board also periodically evaluates our leadership structure to determine if it remains in our best interests based on circumstances existing at the time. In evaluating our leadership structure, our Board seeks to implement a leadership structure that will allow the Board to effectively carry out its responsibilities and best represent our stockholders’ interests, and considers various factors, including our specific business needs, our operating and financial performance, industry conditions, the economic and regulatory environment, Board and committee annual self-evaluations, advantages and disadvantages of alternative leadership structures and our corporate governance practices.
Board Refreshment and Composition
The Board understands the importance of adding diverse, experienced talent to its membership in order to establish an array of experience and strategic views. The Environmental, Social, Governance and Nominating Committee adheres to vigorous Board
refreshment efforts by thoroughly evaluating the backgrounds of potential Board candidates in addition to regularly assessing the contributions and qualifications of current Directors, to ensure that the composition of the Board and each of its committees encompasses a wide range of perspectives and knowledge. The Environmental, Social, Governance and Nominating Committee routinely looks for candidates with skill sets that are relevant to the Company and align with our business strategy and goals.
In 2021, we added three new Directors to the Board, bringing an expansive mix of expertise, diversity and insight to the Board and its committees. We believe that these Directors provide fresh views and new perspectives with regard to the Company, balanced with the continuity and stability of our longer-serving Directors.
Four out of seven of our Director nominees are women and approximately 29 percent of our Director nominees are ethnically diverse. None of our Directors serve on more than three public company boards.
Under the Company’s corporate governance principles, no person who has attained the age of 75 years will be qualified for nomination, election, re-election or appointment to the Board, and a director, upon attaining such age, must retire from the Board on the date of the annual stockholder meeting that next follows his or her 75th birthday and not stand for re-election; provided, however, that the Board, on the recommendation of the Environmental, Social, Governance and Nominating Committee, may, for good cause shown, waive this retirement requirement as to any director if it deems such waiver to be in the best interests of the Company.
In addition, neither the Board nor the Environmental, Social, Governance and Nominating Committee may nominate for re-election any director that has completed 12 years of service as a director of the Company on or prior to the date of election to which such nomination relates; provided, however, that the Board, on the recommendation of the Environmental, Social, Governance and Nominating Committee, may exempt a director from this restriction provided that such director has not completed more than 20 years of service as a director of the Company on or prior to the date of election to which such nomination relates.
In December 2022, the Board, upon the recommendation of the Environmental, Social, Governance and Nominating Committee, voted to utilize the exceptions to the mandatory retirement age and director term limit policies included in the Company’s corporate governance principles to allow Mr. England to stand for re-election at our 2023 and 2024 Annual Meetings despite his having attained the age of 75 and having achieved more than 12 years of Board service, in order to ensure continuity of leadership and in consideration for Mr. England’s leadership and capabilities.
Director Orientation
As part of our Director orientation process, each new Director is provided with orientation materials, attends a presentation by the management team with the opportunity for questions and engagement and participates in a tour of the Company’s manufacturing facility.
Majority Voting Standard in Director Elections
In 2016, the Board approved an amendment to the Company’s by-laws to, among other changes, adopt a majority voting standard in uncontested Director elections, providing that each Director shall be elected by a majority of votes cast. Under our by-laws, a majority of the votes cast standard requires that the number of shares voted “for” a Director must exceed the number of votes cast “against” that Director’s election. Abstentions and broker non-votes are not counted as votes cast with respect to a Director’s election.
In addition, following certification of the stockholder vote in an uncontested election, if any incumbent Director receives a greater number of votes “against” his or her election than votes “for” his or her election, the Director shall promptly tender his or her resignation to the Chairman of the Board. The Environmental, Social, Governance and Nominating Committee shall promptly consider such resignation and recommend to the Board whether to accept the tendered resignation or reject it. In deciding upon its recommendation, the Environmental, Social, Governance and Nominating Committee shall consider all relevant factors including, without limitation, the length of service and qualifications of the Director and the Director’s contributions to the Company and the Board.
Continuing Education and Evaluations
The Board believes that continuing education by the Board and management is critical to supporting the Company’s commitment to enhancing its corporate governance practices. The Board and management are therefore regularly updated on corporate governance matters, including industry and regulatory developments, strategies, operations and external trends and other topics of importance. The Board maintains a policy requiring mandatory participation in an accredited director education program. New directors are required to complete a minimum of four hours of accredited director education within the first 180 days of election to the Board and all Directors are required to complete four hours of accredited director education per fiscal year. All of our Directors elected at the last Annual Meeting met their continuing education requirements in fiscal year 2023. All of our Directors and all of our named executive officers (i.e., those executive officers that are named in the Fiscal Year 2023 Summary Compensation Table) are members of the National Association of Corporate Directors.
As part of the Board’s commitment to improve its performance and effectiveness, assessments of the Board and each of its committees are conducted annually. Results of these assessments are reviewed by the Environmental, Social, Governance and Nominating Committee and the full Board.
Corporate Governance Principles
The Board has adopted Corporate Governance Principles (the “Principles”) which provide the structure for the governance and best practices of the Company, in accordance with applicable statutory and regulatory requirements. The Company is committed to the highest standards of business conduct and integrity in its relationships with employees, customers, suppliers and stockholders. The Principles are reviewed annually by the Environmental, Social, Governance and Nominating Committee and updated as needed. The Corporate Governance Principles can be found in the Corporate Governance sub-section of the section entitled “Investors” on our website at www.fuelcellenergy.com.
Code of Ethics
The Company is committed to high standards of ethical, moral and legal business conduct and to the timely identification and resolution of all such issues that may adversely affect the Company or its clients, employees or stockholders.
The Board has adopted a Code of Ethics (the “Code of Ethics”), which applies to the Board, our named executive officers (including our principal executive officer and our principal financial and accounting officer), and all of our other employees. The Code of Ethics provides a statement of certain fundamental principles and key policies and procedures that govern the conduct of the Company’s business. The Code of Ethics covers all major areas of professional conduct, including employment policies, conflicts of interest, intellectual property and the protection of confidential information, as well as strict adherence to all laws and regulations applicable to the conduct of our business. As required by the Sarbanes-Oxley Act of 2002, our Audit, Finance and Risk Committee has procedures to receive, retain, investigate and resolve complaints received regarding our accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Code of Ethics can be found in the Corporate Governance sub-section of the section entitled “Investors” on our website at www.fuelcellenergy.com.
Whistleblower Policy
The Company’s Whistleblower Policy covers reporting of suspected misconduct, illegal activities or fraud, including questionable accounting, financial control and auditing matters, federal securities violations or other violations of federal and state laws or of the Company’s Code of Ethics.
We have established a written protocol with a third-party vendor to ensure that all complaints received, other than with respect to our named executive officers, will be reported directly to the Company’s General Counsel, who investigates and reports as necessary directly to the Audit, Finance and Risk Committee of the Board. Any complaints received concerning our named executive officers (i.e., those executive officers named in the Fiscal Year 2023 Summary Compensation Table) are reported directly to the General Counsel and Chief Human Resources Officer and to the Chair of the Audit, Finance and Risk Committee of the Board for investigation, if necessary.
The third-party vendor offers anonymity to whistleblowers and assures those who identify themselves that their confidentiality will be maintained, to the extent possible, within the limits proscribed by law. No attempt will be made to identify a whistleblower who requests anonymity.
Anti-Hedging and Anti-Pledging Policies
Under the terms of the Company’s Insider Trading Policy, all Directors, officers (including, but not limited to, all named executive officers) and employees, are prohibited from engaging in any hedging transaction involving shares of the Company’s securities or the securities of the Company’s competitors, such as a put, call or short sale. Our Directors, officers (including, but not limited to, all named executive officers) and employees are also prohibited from pledging any Company securities.
Compensation Recovery Policies
In 2023, the Company adopted two new executive compensation recovery policies. The first policy provides that if the Company is required to prepare a qualifying accounting restatement, the Company will, unless an exception applies, recover reasonably promptly the excess of the amount of erroneously awarded incentive-based compensation, whether cash or equity, provided to a covered executive over the amount that otherwise would have been received by the executive had such compensation been determined based on the restated financials, computed without regard to any taxes paid. This policy applies to incentive-based compensation received by a covered executive on or after October 2, 2023. Under the second policy, the Board may seek recovery of all compensation (other than base salary) awarded to the Company’s executive officers (or any employee reporting directly to such executive officer at the level of vice president or above) for misconduct including conduct constituting a failure to appropriately identify, escalate, monitor or manage risks to the Company which has caused, or might reasonably be expected to cause, significant reputational or financial harm to the Company, committing a material breach of any agreement between such officer and the Company, or such officer being convicted of, or entering a guilty plea or plea of no contest with respect to a felony or the equivalent thereof, having as its predicate element fraud, dishonesty or misappropriation of property, whether or not property of the Company.
The Executive Compensation Recovery Policies can be found in the Corporate Governance sub-section of the section entitled “Investors” on our website at www.fuelcellenergy.com.
Stock Ownership Guidelines and Holding Requirements
To align the interests of our Directors, executive officers and stockholders, we require our non-employee independent Directors and executive officers to own FuelCell Energy common stock and we maintain formal stock ownership guidelines. Our current stock ownership guidelines are shown in the table below:
Position | | Ownership Guideline |
President and Chief Executive Officer | | The lesser of three times base salary or at least 300,000 shares |
All Other Section 16 Executive Officers | | The lesser of one times base salary or at least 60,000 shares |
Non-Employee Independent Directors | | The lesser of three times the annual cash retainer or at least 30,000 shares |
Executives subject to the guidelines must meet the ownership requirement within the later of five years from the date they are appointed to a Section 16 Executive Officer position, or if they were already serving in a Section 16 Executive Officer position, five-years from the date of any change in the minimum stock ownership guidelines (which will be December 2027, as the most recent change to the guidelines was made in December 2022). The non-employee independent Directors are expected to achieve target ownership levels within the later of five years from the date of commencement of service as a Director, or if they were already serving as a Director, five years from the date of any change in the minimum stock ownership guidelines (which will be December 2027, as the most recent change to the guidelines was made in December 2022). For purposes of meeting the applicable ownership guidelines, the following shares and awards may be counted:
| ● | FuelCell Energy common stock owned (i) directly by the executive officer or Director or his or her spouse, (ii) jointly by the executive officer or Director and his or her spouse, and (iii) indirectly by a trust, partnership, limited liability company or other entity for the benefit of the executive officer or Director or his or her spouse; |
| ● | 100 percent of restricted stock and restricted stock unit awards (vested and unvested) issued under the Company’s equity incentive plans, but not performance stock units issued under the Company’s equity incentive plans; |
Communicating with Directors
The Company has established a process by which stockholders or other interested parties can communicate with the Board or any of the Company’s individual Directors, by sending their communications to the following address:
FuelCell Energy, Inc. Board of Directors
c/o Corporate Secretary
3 Great Pasture Road
Danbury, CT 06810
Alternatively, communications can be submitted electronically via the Company website at www.fuelcellenergy.com.
Stockholder communications received by the Company’s Corporate Secretary will be delivered to one or more members of the Board or, in the case of communications sent to an individual Director, to such Director.
Board of Directors and Committees
Independent Directors and Meeting Attendance
The Board currently consists of seven Directors — James H. England, Jason Few, Matthew F. Hilzinger, Natica von Althann, Cynthia Hansen, Donna Sims Wilson and Betsy Bingham, each of whom will stand for re-election at the Annual Meeting.
The Board has determined that the following six of the seven Director nominees are independent Directors in accordance with the director independence standards of the Securities and Exchange Commission (“SEC”) and Nasdaq, including Nasdaq Rule 5605(a)(2): James H. England, Matthew F. Hilzinger, Natica von Althann, Cynthia Hansen, Donna Sims Wilson and Betsy Bingham.
The Board had previously determined that Jason Few, who served as a non-employee Director prior to his appointment as our President and CEO, was an independent Director prior to his appointment as our President and CEO in accordance with the director independence standards of the SEC and Nasdaq, including Nasdaq Rule 5605(a)(2). However, the Board determined that Mr. Few ceased to be independent upon his appointment as President and CEO of the Company on August 26, 2019.
The Board and its committees meet regularly to review and discuss the Company’s progress, strategy and business. The Board meets regularly with management and outside advisors. The independent Directors also hold regular executive sessions without Mr. Few or other members of management. Board members are also kept apprised of Company progress and issues that arise between Board meetings.
All Directors serving at the time of the Company’s 2023 Annual Meeting were in attendance at the meeting. Regular attendance at Board meetings and annual stockholder meetings by each Board member is expected. The Board held 17 meetings in fiscal year 2023. Each incumbent Director serving during fiscal year 2023 attended more than 75 percent of the total number of Board meetings and, if a Director served on a committee, committee meetings held during fiscal year 2023.
| ● | No Compensation Committee member has an affiliate relationship with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company. |
Nasdaq Listing Rules — Compensation Committee Advisor
Upon assessing the independence of, and any potential conflicts of interest of, the Company’s Compensation advisor, Meridian Compensation Partners, LLC (“Meridian”), in accordance with the Nasdaq Listing Rules, the Compensation Committee has determined that Meridian satisfies the following independence criteria:
| ● | Meridian has not provided, in the last completed fiscal year ended October 31, 2023 or any subsequent interim period, any services to the Company or its affiliated companies, other than Meridian’s work as a compensation advisor to the Company’s Compensation Committee; |
| ● | Less than 1 percent of Meridian’s total revenue was derived from fees paid by the Company in the last completed fiscal year ended October 31, 2023 and any subsequent interim period for work on behalf of the Company’s Compensation Committee; |
| ● | Meridian has implemented policies and procedures designed to prevent conflicts of interest; |
| ● | Neither Meridian nor any of its employees or their spouses has any business or personal relationships with any members of the Company’s Compensation Committee or any of the Company’s executive officers; |
| ● | Neither Meridian nor any of its employees or their immediate family members currently owns any Company securities (other than through a mutual fund or similar externally managed investment vehicle); and |
| ● | Meridian is not aware of any relationship not identified in the statements above that could create an actual or potential conflict of interest with the Company or its affiliated entities, any members of the Company’s Compensation Committee or any of the Company’s executive officers. |
Stockholder Outreach
Engagement with our stockholders is a key component of our corporate governance practices and we strongly believe stockholder engagement is of vital importance. Our engagement is designed to maintain an open line of communication between us and our stockholders with respect to (1) our business, strategy and philosophy and (2) our governance and executive compensation practices.
As part of our routine stockholder outreach, our Chief Executive Officer, Chief Financial Officer and other senior members of management conduct regular investor communications, including conferences, non-deal road shows and individual and group conference calls with portfolio managers and industry analysts. Each quarter’s earnings results are reviewed and discussed in open investor conference calls with broad participation and Q&A by the analyst community. Our senior management regularly makes themselves available for such communications, typically focusing on elements of our strategic plans, consolidated business results and capital structure and other topics of interest to stockholders. We believe that management can strengthen its ability to lead the Company and execute on its Powerhouse business strategy by constructively discussing our business and strategy in such settings.
We significantly increased our engagement efforts with our stockholders during the last several fiscal years. As part of our increased outreach campaign, our Chief Executive Officer and Chief Financial Officer, other members of our senior management team and, in certain cases, the Chairman of the Board and the Chair of the Compensation Committee, have met with stockholders and held investor meetings by teleconference or video conference. We endeavor to broadly engage institutions, and many institutions welcome direct communications with management. Additionally, we host our Annual Meetings of Stockholders virtually, allowing for broad participation of stockholders as of the record date, and include the ability for questions to be submitted to management and the Board of Directors.
The Compensation Committee formulates its compensation decisions for the NEOs with input from the CEO (other than with respect to his own compensation), considering such factors as each NEO’s professional experience, job scope, past performance, tenure and retention risk. The Compensation Committee also considers prior fiscal year adjustments to compensation, historical annual incentive award payments and long-term incentive awards. Finally, the Compensation Committee considers current market practices, based on its review of executive compensation data for comparable companies, as well as current compensation trends, to ensure that the compensation of the NEOs is both competitive and reasonable, while also maintaining compensation levels commensurate with our financial and stock performance.
Since 2019, the Compensation Committee has engaged Meridian, an independent compensation consulting firm, to provide research and analysis and to make recommendations on the form and level of executive compensation. The Compensation Committee sought input from Meridian on executive compensation matters for fiscal year 2023, including the design and competitive position of our executive compensation program, our peer group, appropriate compensation levels and evolving compensation trends.
Based on its consideration of the various factors set forth in the rules promulgated by the SEC and the Nasdaq Marketplace Rules, the Compensation Committee has determined that the work performed by Meridian has not raised any conflict of interest.
Competitive Positioning
We periodically perform a competitive market analysis of our executive and Director compensation programs to ensure that the total compensation packages of our executive officers and the non-employee members of our Board are within a reasonably competitive range. In connection with its fiscal year 2023 compensation actions and decisions, the Compensation Committee considered a competitive market analysis that was prepared by Meridian at the end of fiscal year 2022.
Competitive Market Analysis
In September 2022, Meridian conducted a competitive market analysis that was used by the Compensation Committee in connection with its executive and non-employee Director compensation decisions for fiscal year 2023. To develop an understanding of the competitive marketplace, the Compensation Committee reviewed the executive compensation practices of a group of similarly situated publicly-traded companies (the “Peer Group”) based on compensation data gathered from publicly-available filings.
The Compensation Committee and Meridian reviewed and considered factors such as operating size, valuation, margins, growth and shareholder returns alongside business model comparability in determining the Peer Group to be utilized in making compensation decisions for fiscal year 2023. The 2023 Peer Group was selected based on the evaluation of all of these factors, and consisted of the following 14 companies:
| |
American Superconductor Corporation | FTC Solar, Inc. |
Aspen Aerogels, Inc. | Plug Power, Inc. |
Ballard Power Systems, Inc. | Shoals Technologies Group, Inc. |
Blink Charging Co. | Stem, Inc. |
Bloom Energy Corporation | Sunnova Energy International Inc. |
ChargePoint Holdings, Inc. | Thermon Group Holdings |
Clean Energy Fuels Corp. | Vicor Corporation |
Relative to our prior Peer Group roster used for fiscal year 2022, we removed CECO Environmental Corp., Enphase Energy, Inc., Orion Energy Systems, Inc., Park Electrochemical Corp., Vishay Precision Group, Inc. and Westport Fuel Systems Inc., in light of increasing divergence with respect to company valuations or revenue. In addition, in updating our Peer Group for fiscal year 2023, we added Blink Charging Co., ChargePoint Holdings, Inc., FTC Solar, Inc., Shoals Technologies Group, Inc., Stem, Inc. and Sunnova Energy International Inc. to bolster our overall Peer Group roster size and improve our alignment across key financial demographic statistics with Peer Group medians.
The Compensation Committee uses the market analysis as a reference point to ensure that our executive compensation program is competitive with market practice. In the case of each executive officer, the Compensation Committee compares the overall compensation of each individual against the compensation data developed through the market analysis, if his or her position is sufficiently similar to the positions identified in the data to make the comparison meaningful. However, the Compensation Committee
reviews a full array of competitive market data rather than isolating and targeting a particular percentile with respect to any portion of the executives’ pay. Ultimately, the Compensation Committee’s decisions with respect to each executive’s total compensation, and each individual compensation element, are based in large part on its assessment of Company and individual performance as well as other factors, such as internal equity.
Fixed Compensation
Base Salary
The purpose of base salary, from the perspective of the Compensation Committee, is to fairly and competitively compensate our NEOs with a fixed amount of cash for the jobs they perform. In addition, base salaries are used to recognize the experience, skills, knowledge and responsibilities required of our NEOs. Accordingly, we seek to ensure that base salary levels are competitive and consistent with industry practices.
Fiscal Year 2023 Base Salaries
During fiscal year 2023, the Compensation Committee reviewed the base salaries of the executive officers, taking into consideration their qualifications, past performance and expected future contributions, their ongoing roles and responsibilities and the challenges facing the Company. In determining base salaries for our NEOs for fiscal year 2023, the Compensation Committee also reviewed compensation information from the 2023 Peer Group and considered data provided by Meridian as well as the tenure, performance and contribution of each NEO in the prior fiscal year. After considering the foregoing factors and certain additional information, including the roles each of our executive officers played in advancing our strategic objectives, the base salaries of the NEOs for fiscal year 2023 were increased as shown in the table below, and these increases were effective as of January 1, 2023.
| | | | | | | | | |
| | 2023 Base | | 2022 Base | | Increase | | Increase | |
Name | | ($) | | ($) | | ($) | | % | |
Mr. Few | | 567,840 | | 546,000 | | 21,840 | | 4 | |
Mr. Bishop | | 437,237 | | 420,420 | | 16,817 | | 4 | |
Mr. Dolger | | 371,281 | | 357,000 | | 14,281 | | 4 | |
Mr. Lisowski | | 416,272 | | 400,262 | | 16,010 | | 4 | |
Mr. Feasel | | 379,600 | | 365,000 | | 14,600 | | 4 | |
Bonuses
The Compensation Committee may, from time to time, grant discretionary bonuses. In fiscal year 2023, no discretionary bonuses were paid.
Variable Compensation
Annual Incentive Compensation
All salaried exempt employees, including our executive officers, are eligible to participate in our annual cash bonus plan, which we refer to as the Management Incentive Plan or the MIP. The MIP is intended to motivate employee performance in, and align compensation levels with, the achievement of our annual business objectives.
The Compensation Committee periodically reviews and determines the target annual incentive award opportunities (expressed as a percentage of base salary) that each of the executive officers may earn under the MIP. The target annual incentive award opportunities for each NEO (expressed as a percentage of base salary) were originally established in each of their respective employment agreements and are reviewed periodically by the Compensation Committee. For fiscal year 2023, the independent members of the Board, at the recommendation of the Compensation Committee, approved a target annual incentive award opportunity of 100 percent (as a percentage of base salary) for Mr. Few, and the Compensation Committee increased the target annual incentive award opportunities from 65 percent to 70 percent for Messrs. Bishop, Lisowski and Feasel and from 55 percent to 60 percent for Mr. Dolger.
The actual amount of annual cash compensation earned under the MIP each year by our NEOs may be more or less than the target amount depending on our performance against a set of pre-established Company operational milestones (which represent 75 percent
of their target annual incentive award opportunity) and a set of pre-established Company strategic enablers (which represent the remaining 25 percent of their target annual incentive award opportunity). In addition, the Compensation Committee retains the right to exercise its discretion to adjust the size of potential award payments as it deems appropriate to take into account factors that enhance or detract from results achieved relative to the Company’s operational milestones and strategic enablers. In this way, the Compensation Committee does not confine itself to a purely quantitative approach and retains discretion in determining award payments based on its review and assessment of other results for the fiscal year. The Compensation Committee believes that linking the annual incentive awards for the NEOs to Company operational milestones and strategic enablers creates a performance-based compensation opportunity that furthers stockholder interests, but by retaining some discretion, reduces the risk that executives will overemphasize performance on the pre-established objectives to the detriment of the Company’s overall performance. Retaining limited discretion allows the Compensation Committee to ultimately conduct a more fulsome performance assessment that recognizes industry-specific and broader macroeconomic trends that have impacted the business and the Company’s opportunities and performance during the course of the year.
The operational milestones and strategic enablers on which the 2023 MIP awards were based, as well as our performance with respect to such milestones and initiatives, are discussed below.
Fiscal Year 2023 Operational Milestones and Strategic Enablers
For fiscal year 2023, the pre-established Company operational milestones and strategic enablers were intended to further advance our business and strategic objectives.
Operational Milestones
The operational milestones for fiscal year 2023 were consistent with our fiscal year 2023 annual operating plan and were set in consideration of the Company’s prior performance and fiscal year 2023 budget. The operational milestones (and their respective weighting) were: (1) achieve a specified level of total revenue for the fiscal year (20 percent), (2) secure new orders (25 percent), (3) end fiscal year 2023 with a specified level of unrestricted cash (25 percent), (4) achieve Adjusted EBITDA with a zero percent deviation from budget (15 percent) and (5) achieve a total reportable injury rate of < 2.2 (15 percent). (For information regarding the calculation of Adjusted EBITDA, see Annex A to this Proxy Statement.) For each operational milestone, a threshold level was set in order to qualify for 50 percent of the target payout and a maximum was set which capped the bonus potential at 200 percent of the target payout. Between threshold and target and between target and maximum there are additional incremental levels associated with 75 percent and 150 percent of target payouts, respectively.
Strategic Enablers
The Compensation Committee had also established strategic enablers for fiscal year 2023 applicable to all participants including the NEOs. The pre-established Company strategic enablers for fiscal year 2023 (and their respective weighting) were: (a) launch solid oxide power generation and electrolysis product lines to grow the business (33 percent), (b) strengthen position of carbonate technology as the leading platform for carbon capture (33 percent) and (c) create a sustainable business through environmental and social governance and diversity, equity and inclusivity initiatives (34 percent).
Consistent with past practice, the overall operational milestone achievement was weighted 75 percent and the overall strategic enablers achievement was weighted 25 percent.
For fiscal year 2023, our long-term incentive plan for each executive officer was comprised of performance stock units (“PSUs”) and time-based RSUs. The Compensation Committee elected to use PSUs because these awards reflect a balance between substantial upside potential for superior stock price performance, and decline in award size, to zero in the extreme, for performance that is below expectations, and to use RSUs because these awards foster retention through business cycles.
The Compensation Committee exercises its judgment in determining the size of the equity awards granted to executive officers. For each eligible executive, the Committee considers the relative value of equity awards compared to the equity awards held by other executive officers, the desired incentive mix between PSU awards and RSU awards, a compensation analysis performed by Meridian, and the individual experience, skills and performance level of the executive officer.
For fiscal year 2023, the Compensation Committee determined to allocate 50 percent of long-term incentive target shares to PSUs based on total stockholder return (“TSR”), with 100 percent being based on relative TSR, as further described below. The remaining 50 percent of the long-term incentive target shares are allocated to RSUs that vest ratably over a 3-year period from the date of grant, with the number of RSUs being determined by dividing the target fair value by the average closing price of our common stock over the 60 trading days immediately preceding the date of the grant.
For the PSUs granted for fiscal year 2023, the Compensation Committee established the performance period as November 1, 2022 through October 31, 2025.
See the Fiscal Year 2023 Grants of Plan-Based Awards table on page 52 for information regarding the actual grants made to our NEOs during fiscal year 2023.
Additional information regarding our performance-based awards in fiscal years 2023, 2022 and 2021 follows.
Relative TSR PSUs
In each of fiscal years 2021, 2022 and 2023, the Compensation Committee established the performance assessment criteria for the relative TSR PSUs (“Relative TSR PSUs”) as the TSR of the Company relative to the TSR of the Russell 2000 Index, with the award calibration being 100 percent plus or minus 0.5x the difference between the Company’s TSR and the Russell 2000 Index composite TSR. Each of these awards is capped at 200 percent of the target number of PSUs, and the award is further capped at 100 percent of the target number of PSUs if the Company’s absolute TSR over the performance period is negative. For each award, the Company’s TSR is calculated by subtracting the Company’s beginning stock price from the ending stock price, adding any dividends during the period, and then dividing the result by the Company’s beginning stock price.
“Beginning stock price” is defined as: (i) the average closing price of the Company’s common stock over the 20 consecutive trading days ending on October 31, 2020 for the fiscal year 2021 Relative TSR PSUs and ending on October 30, 2021 for the fiscal year 2022 Relative TSR PSUs and (ii) the average closing price of the Company’s common stock over the 60 consecutive trading days ending on November 1, 2022 for the fiscal year 2023 Relative TSR PSUs.
“Ending stock price” is defined as: (i) the average closing price of the Company’s common stock over the 20 consecutive trading days ending on October 31, 2023 for the fiscal year 2021 Relative TSR PSUs and ending on October 31, 2024 for the fiscal year 2022 Relative PSUs, and (ii) the average closing price of the Company’s common stock over the 60 consecutive trading days ending on October 31, 2025 for the fiscal year 2023 Relative TSR PSUs.
Any PSUs that are earned based on performance will be earned on the date that the Compensation Committee certifies the achievement of the applicable level of relative TSR. Any PSUs that are not earned on such date shall be forfeited. PSUs earned on the basis of relative TSR performance remain subject to vesting based on continued service until the third anniversary of the grant date.
The Compensation Committee certified achievement of the 2021 Relative TSR PSUs at 73.541 percent of target based on the criteria above. The 2021 Relative TSR PSUs were subject to vesting based on continued service until November 23, 2023, at which time the awards vested.
Absolute TSR PSUs
The Compensation Committee did not award absolute value TSR PSUs in fiscal year 2022 or fiscal year 2023.
Fiscal Year 2021 Absolute TSR PSU Awards: The Compensation Committee established the performance assessment criteria for the absolute TSR PSUs as the Company’s closing stock price, with the award calibration being based on a specified percentage increase in the price of the Company’s common stock over the average closing price of the Company’s common stock over the 20 consecutive trading days ending on October 30, 2020, which was $2.27. Specifically, a 25 percent increase would earn 50 percent of the target
award, a 50 percent increase would earn 100 percent of the target award and a 100 percent or greater increase would earn 200 percent of the target award. Each price hurdle was required to be met for 20 consecutive trading days, and price hurdles could be met at any time during the performance period. Performance Shares earned based on the closing price of the Company’s common stock remained subject to vesting based on continued service until the third anniversary of the grant date of November 24, 2020.
The Compensation Committee certified achievement of a 150 percent increase during fiscal year 2021, resulting in an earned award percentage of 200 percent. The PSUs earned on the basis of absolute TSR performance remained subject to vesting based on continued service until November 24, 2023 (the third anniversary of the grant date), at which time the awards vested.
Health and Welfare Benefits
Benefits And Perquisites
We offer medical and dental insurance to our executive officers and pay a portion of the premiums for these benefits consistent with the arrangements for non-executive employees. We also provide our executive officers and other eligible employees, at our expense, with group life and accidental death and dismemberment insurance benefits; short-term and long-term disability insurance benefits; paid time off benefits; and other ancillary benefits (for example, flexible spending accounts and an employee assistance program). In fiscal year 2023, we also offered our NEOs executive health screenings which included physicals.
We also offer participation in the 401(k) Plan to our employees, including our executive officers, subject to the terms of the 401(k) Plan. Contributions to the 401(k) Plan are limited to an annual maximum amount as determined by the Internal Revenue Service. For Plan Year 2023, the Compensation Committee approved continuing a matching contribution equal to 25 percent of the first 8 percent of elective salary deferrals, not to exceed 2 percent of eligible earnings. These contributions to the retirement savings accounts of our employees are subject to a five year graded vesting schedule. Participants are not permitted to receive or purchase shares of our common stock through the 401(k) Plan. Our contributions to the retirement savings accounts of the NEOs for fiscal year 2023 are set forth in the Fiscal Year 2023 Summary Compensation Table on page 51 of this Proxy Statement.
Our executive compensation program does not include any of the following pay practices:
| ● | Supplemental executive retirement benefits; or |
| ● | Supplemental health or insurance benefits. |
Compensation Policies
Prohibition on Option Re-Pricing and Backdating
The Compensation Committee does not re-price and has not re-priced options to purchase shares of our common stock, consistent with the Third Amended and Restated 2018 Omnibus Incentive Plan, which prohibits re-pricing of equity awards without stockholder approval. The grant date for each equity award is based on the date the award is approved by the Compensation Committee or the independent members of our Board, as applicable. Options to purchase shares of our common stock are granted with an exercise price equal to the closing market price of our common stock on the date of grant.
Equity Award Grant Policy
We maintain an Equity Award Grant Policy, which is reviewed by the Compensation Committee on an annual basis. This policy includes the following key provisions: (a) all equity awards of more than 40,000 shares must be submitted to the Compensation Committee for approval; (b) all equity awards granted to executives at the level of vice president (or above) must be submitted to the Compensation Committee for approval; (c) the Compensation Committee has authorized a pool of up to 250,000 shares from which the CEO may approve equity awards for special recognition or retention purposes, provided that such grants are limited to a grant date fair value of $100,000 or less, and further provided that no grants may be made from this pool to officers, directors or new hires; and (d) the Compensation Committee has authorized a pool of up to 200,000 shares per year under an “At Choice” program from which the CEO may approve equity awards to facilitate the retention, engagement and recognition of non-management employees (hourly employees). The size of each “At Choice” award is to be determined based on a matrix considering job level.
Compensation Recovery Policies
A description of our Executive Compensation Recovery Policies can be found on page 24 of this Proxy Statement under the heading “Corporate Governance”.
Anti-Hedging Policy
A description of our anti-hedging policy can be found on page 24 of this Proxy Statement under the heading “Corporate Governance.”
Stock Ownership Guidelines
A description of our minimum stock ownership guidelines can be found on page 24 of this Proxy Statement under the heading “Corporate Governance.”
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code, as amended by the Tax Cuts and Jobs Act of 2017, generally limits to $1.0 million the amount of remuneration that the Company may deduct in any calendar year for certain executive officers. While the Compensation Committee will continue to consider the deductibility of compensation as a factor in making compensation decisions, it retains the flexibility to provide compensation that is consistent with the Company’s goals for its executive compensation program, even if such compensation would not be fully tax-deductible.
We follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 for all stock-based awards. ASC Topic 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors, including stock options and full value stock awards, based on the aggregate grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables on pages 20, 51, and 52 of this Proxy Statement. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award.
Compensation Risk Assessment
Our Compensation Committee has reviewed our incentive compensation programs, discussed the concept of risk as it relates to our compensation program, considered various mitigating factors and reviewed these items with its independent compensation consultant, Meridian. In addition, our Compensation Committee asked Meridian to conduct an independent risk assessment of our executive compensation program. Based on these reviews and discussions, the Compensation Committee does not believe our compensation program creates risks that are reasonably likely to have a material adverse effect on our business.
Mr. Few
Effective as of August 26, 2019, we entered into an employment agreement with Mr. Few in connection with his appointment as the President and Chief Executive Officer of the Company (as amended on April 23, 2020 and January 19, 2021, the “CEO Employment Agreement”). The CEO Employment Agreement specifies the reasons pursuant to which his employment may be terminated by our Board and provides him with certain compensation and benefits upon termination of employment (including in connection with a change in control of the Company). We believe that these provisions help ensure the Company’s long-term success. The CEO Employment Agreement also sets forth the terms and conditions of employment for Mr. Few including his initial base salary, which is to be reviewed at least annually by our Board, and target annual incentive award opportunity, which was reviewed and increased by the independent members of our Board from 90 percent to 100 percent for fiscal year 2021 and remained at 100 percent for fiscal year 2022 and fiscal year 2023. Mr. Few is also eligible to participate in the insurance plans and other employee benefits generally available to our other employees. The CEO Employment Agreement contains non-disclosure provisions that apply indefinitely and prohibit Mr. Few from competing with the Company and from soliciting our employees, in each case, during the term of his employment and for a period of two years thereafter.
In the event Mr. Few’s employment is terminated by the Company without cause or he resigns for good reason (as defined in the CEO Employment Agreement), subject to his execution of a general release of claims against the Company, he is eligible to receive a severance payment in an amount equal to (i) his then-current annual base salary as of the date of termination plus (ii) his target bonus for the year of termination plus (iii) a pro-rata portion of the annual bonus amount that would have been paid but for the termination, pro-rated based on the number of days in such fiscal year that Mr. Few was actually employed by the Company plus (iv) reasonable relocation expenses back to Houston, Texas (or such other city in Mr. Few’s discretion, provided that the expense shall not exceed the expense of relocating to Houston, Texas) in an amount not to exceed $200,000, as well as accelerated vesting of all outstanding equity awards and payment for continued health insurance for 12 months. In the event of termination of Mr. Few’s employment by the Company for any other reason (including death or disability), we will only pay Mr. Few any base salary and vacation accrued but as yet unpaid on the effective date of such termination, any earned but unpaid annual bonus with respect to any completed fiscal year immediately preceding the effective date of termination, and reimbursement for unreimbursed business expenses properly incurred. In the event that the termination of Mr. Few’s employment is within the three months prior to or the 18 months following a change in control of the Company, Mr. Few is eligible to receive a severance payment in an amount equal to (i) two times the sum of his then-current annual base salary plus his target bonus for the year of termination plus (ii) a pro-rata portion of the annual bonus amount that would have been paid but for the termination, pro-rated based on the number of days in such fiscal year that Mr. Few was actually employed by the Company plus (iii) reasonable relocation expenses to Houston, Texas (or such other city in Mr. Few’s discretion, provided that the expense shall not exceed the expense of relocating to Houston, Texas) in an amount not to exceed $200,000, as well as accelerated vesting of all outstanding equity awards and payment for continued health insurance for 24 months.
The CEO Employment Agreement further provides that, if Mr. Few receives any payments in connection with a change of control of the Company that would constitute excess parachute payments that are subject to excise taxes under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), then the total severance payment shall be delivered either (a) in full or (b) in an amount such that the value of the aggregate total payments are $1.00 less than the maximum amount Mr. Few may receive without being subject to the tax, whichever results in Mr. Few receiving the greatest after-tax benefit.
The following table sets forth the potential (estimated) payments and benefits that Mr. Few would be eligible to receive upon termination of employment (including in connection with a change in control of the Company), as specified under the CEO Employment Agreement, assuming that the triggering event described below occurred on October 31, 2023.
Potential Payments and Benefits Upon a Termination of Employment or a Change in Control of the Company for Mr. Few
| | | | | | | |
| | Termination without | | | | Following Change | |
| | Cause or Resignation | | Death or | | in Control of | |
| | for Good Reason | | Disability | | the Company | |
Executive Payments and Benefits(1) | | ($)(2) | | ($)(2) | | ($)(2) | |
Accelerated vesting: | | | | | | | |
Restricted Shares/Stock Units(3) | | 693,120 | | — | | 1,294,326 | |
Payment for annual incentive award(4) | | 1,135,680 | | — | | 1,135,680 | |
Continued Health Insurance Premiums(5) | | 36,769 | | — | | 73,537 | |
Severance payment(4) | | 767,840 | | — | | 1,335,680 | |
TOTAL | | 2,633,409 | | — | | 3,839,223 | |
| (1) | For purposes of this analysis, we have assumed that Mr. Few’s base salary is equal to $567,840, Mr. Few’s target annual bonus is $567,840 and the vesting of all of Mr. Few’s outstanding restricted stock unit awards (including RSUs and PSUs) as reflected in the Outstanding Equity Awards at 2023 Fiscal Year-End Table on page 53 of |
| this Proxy Statement accelerated as of October 31, 2023. These amounts reflect the terms of his compensation arrangements as approved by the independent members of our Board. |
| (2) | Assumes Mr. Few’s date of termination of employment was October 31, 2023. The market price of our common stock on October 31, 2023 was $1.09 per share. In addition, we have assumed that the total payments and benefits to Mr. Few in connection with a change in control of the Company would not trigger any excise taxes under Section 4999 of the Code. |
| (3) | In the “Termination without Cause or Resignation for Good Reason” column, the value of the restricted stock unit awards and performance stock units on October 31, 2023 is based on the 418,925 restricted stock units and 79,317 performance stock units that had not vested as of October 31, 2023 at $1.09 per share. In the “Following Change in Control of the Company” column, the value of the restricted stock units and performance stock units on October 31, 2023 is based on the 489,065 restricted stock units and 698,390 performance stock units that had not vested as of October 31, 2023 at $1.09 per share. |
| (4) | In the event Mr. Few’s employment is terminated without cause or he resigns for good reason, he is eligible to receive a severance payment equal to (i) his then-current annual base salary as of the date of termination plus (ii) his target bonus for the year of termination plus (iii) a pro-rata portion of the annual bonus amount that would have been paid but for the termination plus (iv) reasonable relocation expenses in an amount not to exceed $200,000. In the event his employment is terminated without cause or he resigns for good reason in connection with a change in control of the Company, he is eligible to receive a severance payment equal to (i) two times the amount of his then-current annual base salary plus (ii) his target bonus for the year of termination plus (iii) a pro-rata portion of the annual bonus amount that would have been paid but for the termination plus (iv) reasonable relocation expenses in an amount not to exceed $200,000. |
| (5) | Mr. Few is eligible to receive payment of continued health insurance for a period of 12 months upon termination of employment without cause or resignation for good reason and 24 months if termination of employment without cause or resignation for good reason occurs in connection with a change in control of the Company. The value of continued health insurance is based on the medical and dental insurance rates in effect for all employees of the Company as of October 31, 2023. |
Mr. Bishop, Mr. Dolger, Mr. Lisowski and Mr. Feasel
We entered into employment agreements (the “Other NEO Agreements”) with Mr. Bishop (effective January 1, 2012), with Mr. Dolger (effective August 2, 2021), with Mr. Lisowski (effective August 1, 2019), and with Mr. Feasel (effective April 18, 2022), which specify the reasons pursuant to which their employment may be terminated and provide them with certain compensation and benefits upon termination of employment (including in connection with a change in control of the Company). We believe that these provisions help ensure the Company’s long-term success. The Other NEO Agreements set forth the terms and conditions of their employment including the initial annual base salary and target annual incentive award opportunity, which was equal to 50 percent of base salary for Mr. Bishop and Mr. Lisowski but was increased by the Compensation Committee to 55 percent for fiscal year 2021, to 65 percent for fiscal year 2022, and to 70 percent for fiscal year 2023 for Messrs. Bishop and Lisowski. The target annual incentive award opportunity for Mr. Dolger was established at 55 percent pursuant to his employment agreement, but was increased by the Compensation Committee to 60 percent for fiscal year 2023. The target annual incentive award opportunity for Mr. Feasel was established at 65 percent pursuant to his employment agreement, but was increased by the Compensation Committee to 70 percent for fiscal year 2023. The target annual incentive awards are payable in accordance with the terms of the Management Incentive Plan described on page 43 of this Proxy Statement. Our NEOs are also eligible to participate in insurance plans and other employee benefits generally available to our other employees.
In the event that the employment of Messrs. Bishop, Dolger, Lisowski or Feasel is terminated by the Company without cause, or any of them resigns for “good reason” (as defined in his applicable agreement), he is eligible to receive a severance payment in an amount equal to six months of his then-current annual base salary as of the date of termination, as well as payment for continued health insurance for six months. In the event that Mr. Bishop, Mr. Dolger, Mr. Lisowski or Mr. Feasel is terminated by the Company without cause or resigns for good reason in connection with a change in control of the Company, his outstanding and unvested options to purchase shares of our common stock and restricted stock and restricted stock unit awards accelerate and immediately vest. In addition, each of them is eligible to receive a severance payment in an amount equal to one year of his base salary as of the date of termination plus the average of the bonuses paid to him since his appointment as an executive officer of the Company as well as payment for continued health insurance for 12 months. In the event of termination of employment by the Company for any other reason (including death or disability), we will only be required to pay him any base salary and vacation accrued but unpaid as of the effective date of such termination.
Under Mr. Feasel’s employment agreement, he received a one-time cash signing bonus in the amount of $400,000 that is subject to repayment if Mr. Feasel resigns or is terminated for cause (as defined in his employment agreement) during the 24-month period after April 18, 2022 (the effective date of his employment agreement).
The following tables set forth the potential (estimated) payments and benefits which Messrs. Bishop, Dolger, Lisowski, and Feasel would be eligible to receive upon termination of employment (including in connection with a change in control of the Company), as specified under the applicable Other NEO Agreements, assuming that the triggering event described below occurred on October 31, 2023.
CEO Pay Ratio
CEO Pay Ratio — 43:1
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the SEC adopted a rule requiring annual disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer (“PEO”). Our Company’s PEO is Mr. Few. The purpose of this disclosure is to provide a measure of the equitability of pay within the organization.
The Compensation Committee believes its compensation philosophy and program must be fair, competitive and internally equitable to motivate our executives to perform in ways that enhance stockholder value. As a result of the rules under the Dodd-Frank Act, the Compensation Committee monitors the relationship between the pay of our executive officers and the pay of our non-executive employees. The paragraphs that follow describe our methodology and the resulting CEO Pay Ratio.
As permitted under the SEC rules, we are using the same median employee as was identified for purposes of our fiscal year 2022 CEO pay ratio, as we believe the changes in our employee population and compensation arrangements have not significantly impacted our pay ratio disclosure. To identify our median employee in fiscal year 2022, we calculated the annual target total direct compensation for fiscal year 2022 of each employee as of October 31, 2022 (including all employees, whether employed on a full-time, part-time, seasonal or temporary basis). For these purposes, annual target total direct compensation included each employee’s (a) base salary for the fiscal year, (b) target cash incentive opportunity and (c) the grant date value of equity awards received during the fiscal year. We selected this “consistently applied compensation measure,” or CACM, because it reflects our primary compensation elements across our employee population. All amounts were annualized for permanent employees who did not work for the entire fiscal year. We did not apply any cost-of-living adjustment as part of the calculation. Further, in identifying the median employee, we converted compensation amounts paid in foreign currencies based on the applicable exchange rate as of October 31, 2022. To identify our median compensated employee for fiscal year 2022, we: (i) calculated the annual target total direct compensation described above for each of our employees, (ii) ranked all of our employees (other than the CEO) by such compensation from lowest to highest and (iii) identified the employee who ranked number 256 on the list of 513 employees. We then calculated the annual fiscal year 2023 total compensation for our previously-identified median compensated employee using the same methodology used for our CEO as set forth the in the Fiscal Year 2023 Summary Compensation Table.
Next, in accordance with the rules set forth in Item 402(u) of Regulation S-K promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), we calculated the median employee’s annual total compensation for fiscal year 2023 in the same manner as the CEO’s annual total compensation was calculated in the Fiscal Year 2023 Summary Compensation Table. Our median employee’s annual total compensation for fiscal year 2023 was $111,123. Our CEO’s annual total compensation, as reported in the Fiscal Year 2023 Summary Compensation Table, was $4,811,321. Therefore, our CEO Pay Ratio for 2023 was approximately 43 to 1.
The following table provides information regarding, as of February 5, 2024, (1) the number of Shares available for future grants under the Plan (no Shares are available for future grants under any other plan), (2) the number of Shares subject to outstanding awards under the Plan and our other equity-based plans as of February 5, 2024, (3) the additional Shares for which approval is being sought in this Proposal 3, and (4) Shares subject to the Contingent Stock Units, which are the only awards granted contingent upon approval this Proposal 3.
| | |
| Number of Shares | Dilution(1) |
Shares Available for Future Awards under Equity-Based Plans Prior to Amendment of Plan/Approval of Proposal 3 | 3,309,677 | 0.7% |
Shares Subject to Outstanding Stock Options (2) | 18,291 | 0.0% |
Weighted average exercise price: $59.63 | | |
Weighted average remaining term: 1.4 Years | | |
Outstanding Time-Vesting Restricted Stock Units (“RSUs”) | 8,291,471 | 1.8% |
Shares Subject to Outstanding Performance Stock Units (“PSUs”)(3) | 1,271,205 | 0.3% |
Shares Subject to Outstanding Contingent Time-Vesting RSUs | 3,978,496 | 0.9% |
Shares Subject to Outstanding Contingent PSUs(3) | 3,274,384 | 0.7% |
Total Shares Subject to Outstanding RSUs and PSUs(3) | 16,815,556 | 3.7% |
Proposed Additional Shares Available for Future Awards under the Fourth Amended and Restated Plan(4) | 14,472,736 | 3.2% |
Total Available, Outstanding and Proposed Additional Shares(5) | 34,616,260 | 7.7% |
| (1) | Basic dilution calculated by dividing the number of shares by the total number of common shares outstanding as of February 5, 2024. |
| (2) | Includes 13,750 Shares subject to stock options that remain outstanding under our 2010 Equity Incentive Plan and 4,451 Shares subject to stock options under the Plan. |
| (3) | Number of PSUs at 100% of target performance. Does not include the additional shares that would be issuable if maximum performance at 200% is achieved. |
| (4) | 25,000,000 additional Shares requested less 3,978,496 outstanding contingent time-vesting RSUs, 3,274,384 outstanding contingent PSUs at 100% of target performance, and 3,274,384 outstanding contingent PSUs reserved for 200% maximum performance. |
| (5) | This total is the sum of the following items from this table (i) Shares Available for Future Awards under Equity-Based Plans Prior to Amendment of Plan/Approval of Proposal 3 of 3,309,677, (ii) Shares Subject to Outstanding Stock Options of 18,291, (iii)Total Shares Subject to Outstanding RSUs and PSUs of 16,815,556, and (iv) Proposed Additional Shares Available for Future Awards under the Fourth Amended and Restated Plan of 14,472,736. |
The Board believes that this potential equity dilution if the Fourth Amended and Restated Plan is approved constitutes reasonable potential equity dilution.
If the Fourth Amended and Restated Plan is approved, it would bring the total number of Shares available for future grants to 17,782,413, based on the 3,309,677 shares remaining available for future grants under the Plan as of February 5, 2024 and the fact that a total of 10,527,264 shares must be reserved for settlement of the Contingent Stock Units upon approval of the Fourth Amended and Restated Plan. If the Fourth Amended and Restated Plan is not approved, all of the Contingent Stock Units will be immediately cancelled.
If the Fourth Amended and Restated Plan is not approved at the Annual Meeting, then the Plan will remain in effect in accordance with its existing terms. However, the Contingent Stock Units issued to our NEOs and non-executive employees will be cancelled and there may be insufficient shares available under the Plan to make annual or retention awards to executives, key employees and non-employee Directors in the coming years. In this event, the Compensation Committee would be required to pay long-term incentives in cash rather than shares, modify its compensation philosophy and devise other programs to attract, retain and compensate its executives, key employees and non-employee Directors.
The original Plan was approved by the Company’s stockholders on April 5, 2018, and became effective on that date. The first amendment and restatement of the Plan was approved by the Company’s stockholders on May 8, 2020 and became effective on that date. The second amendment and restatement of the Plan was approved by the Company’s stockholders on April 8, 2021 and became effective on that date. The third amendment and restatement of the Plan was approved by the Company’s stockholders on May 22, 2023 and became effective on that date. The Plan includes, and the Fourth Amended and Restated Plan would continue to include, provisions designed to protect stockholder interests and promote effective corporate governance including:
| ● | The number of shares available for issuance does not increase based upon the number of outstanding shares of common stock on an “evergreen” basis; |
| ● | Stock options and stock appreciation rights may not be priced at less than the fair market value of common stock on the grant date; |
| ● | Certain limits on annual awards to non-employee Directors; |
| ● | Re-pricing of stock options and stock appreciation rights is prohibited and any such action would require stockholder approval; |
| ● | A minimum vesting period of one year for all awards (other than awards with respect to 5% of the total Share reserve); |
| ● | Material amendments require stockholder approval; and |
| ● | Administration by an independent committee of our Board of Directors. |
If the Fourth Amended and Restated Plan is approved by our stockholders, the Fourth Amended and Restated Plan will become effective on April 4, 2024 (the “Effective Date”), and we would plan to register the additional 25,000,000 shares reserved under the Fourth Amended and Restated Plan on a Registration Statement on Form S-8.
Historical Equity Granting Practices and Voting Power Dilution
In determining the number of shares to authorize for issuance under the Fourth Amended and Restated Plan, the Board considered, among other factors, historical amounts of equity awards granted and potential future grants over the next several years. As set forth in the table below, our three-year average "burn rate" is 0.58% for fiscal years 2021 through 2023. For purposes of calculating the burn rate, performance stock units are counted in the year in which the units are earned and vested.
| | | |
| 2023 | 2022 | 2021 |
Weighted Average Shares of Common Stock Outstanding | 419,747,796 | 383,139,140 | 334,742,346 |
Stock Options Granted | 103,631 | 76,848 | 31,889 |
Restricted Stock Units Granted | 4,538,236 | 833,512 | 373,030 |
Performance Stock Units Earned and Vested | 792,052 | 278,788 | |
Annual Burn Rate | 1.29% | 0.31% | 0.12% |
Three-Year Average Burn Rate | 0.58% |
Summary of the Material Provisions of the Fourth Amended and Restated Plan
A summary description of the material terms of the Fourth Amended and Restated Plan follows below. The summary description is qualified in its entirety by reference to the full text of the Fourth Amended and Restated Plan, which is attached to this Proxy Statement as Annex B. Any inconsistencies between this summary and the text of the Fourth Amended and Restated Plan will be governed by the text of the Fourth Amended and Restated Plan. The closing price of a share of our common stock on the Nasdaq Global Market on February 5, 2024 was $1.17.
Purpose
The two complementary purposes of the Fourth Amended and Restated Plan are to help us attract and retain our executives and other key employees, Directors, consultants and advisors and to increase stockholder value. The Fourth Amended and Restated Plan accomplishes these purposes by offering participants the opportunity to acquire Shares, receive monetary payments based on the value of such common stock or receive other incentive compensation on the terms that the Fourth Amended and Restated Plan provides.
Eligible Participants
The Compensation Committee or its delegates, as applicable, may grant awards to key employees of the Company or its affiliates and non-employee Directors of the Board. Based on employment levels as of January 31, 2024, approximately 591 employees, and six non-employee Directors would be eligible to participate in the Fourth Amended and Restated Plan, although the number of individuals who are selected to participate in the Fourth Amended and Restated Plan may vary from year to year.
Available Shares
Subject to the adjustment provisions included in the Fourth Amended and Restated Plan, a total of 43,333,333 Shares will be authorized for awards granted under the Fourth Amended and Restated Plan as of the date of stockholder approval. This would represent an increase of 25,000,000 Shares from the number of Shares previously reserved under the Plan, as adjusted for the one-for-
twelve reverse stock split effected by the Company in May 2019. The limit on the number of Shares that may be issued upon the exercise of “incentive stock options” (within the meaning of Section 422 of the Code) is (and will remain under the Fourth Amended and Restated Plan) 1,833,333 Shares. This reserve will be reduced by one Share for every one Share that is subject to an award granted under the Fourth Amended and Restated Plan, including stock options, stock appreciation rights and any full-value awards, such as restricted stock, restricted stock units or performance share grants.
In general, if an award granted under the Fourth Amended and Restated Plan lapses, expires, terminates or is cancelled without the issuance of Shares under the award (whether due currently or on a deferred basis); it is determined during or at the conclusion of the term of an award granted under the Fourth Amended and Restated Plan that all or some portion of the Shares with respect to which the award was granted will not be issuable, or that other compensation with respect to Shares covered by the award will not be payable on the basis that the conditions for such issuance will not be satisfied; Shares are forfeited under an award; an award is actually settled in cash; or Shares are issued under any award and we reacquire them pursuant to rights we reserved upon the issuance of the Shares; then in each and every case such Shares again become available for issuance under the Fourth Amended and Restated Plan.
Award Limits
If the Fourth Amended and Restated Plan is approved by our stockholders, then the limit on the aggregate grant date fair value (determined in accordance with generally accepted accounting principles) of all awards granted to any non-employee Director in a fiscal year, taken together with any cash fees paid during a calendar year to the non-employee Director, will remain $250,000. This limit is doubled in the first year in which an individual serves as a non-employee Director.
Plan Administration
The Fourth Amended and Restated Plan is administered by the Compensation Committee, our Board or another committee (we refer to the applicable committee or our Board, as the case may be, as the “administrator”). The administrator has full discretionary authority to administer the Fourth Amended and Restated Plan, including but not limited to the authority to: (i) interpret the provisions of the Fourth Amended and Restated Plan; (ii) prescribe, amend and rescind rules and regulations relating to the Fourth Amended and Restated Plan; (iii) correct any defect, supply any omission, or reconcile any inconsistency in the Fourth Amended and Restated Plan, any award or any award agreement in the manner and to the extent it deems desirable to carry the Fourth Amended and Restated Plan or such award into effect; and (iv) make all other determinations necessary or advisable for the administration of the Fourth Amended and Restated Plan. All administrator determinations will be made in the sole discretion of the administrator and are final and binding on all interested parties.
Our Board may delegate some or all of its authority under the Fourth Amended and Restated Plan to a committee of the Board, and the Compensation Committee may delegate some or all of its authority under the Fourth Amended and Restated Plan to one or more of our officers, subject in each case to certain limitations specified in the Fourth Amended and Restated Plan.
Adjustments
Under the terms of the Fourth Amended and Restated Plan, if:
| ● | We are involved in a merger or other transaction in which our common stock is changed or exchanged; |
| ● | We subdivide or combine our common stock or we declare a dividend payable in our common stock, other securities (other than stock purchase rights issued pursuant to a stockholder rights agreement) or other property; |
| ● | We effect a cash dividend, the amount of which, on a per share basis, exceeds 10 percent of the fair market value of a share of common stock at the time the dividend is declared, or we effect any other dividend or other distribution on our common stock in the form of cash, or a repurchase of shares of common stock, that our Board determines is special or extraordinary in nature or that is in connection with a transaction that we characterize publicly as a recapitalization or reorganization involving our common stock; or |
| ● | Any other event occurs, which, in the judgment of the administrator necessitates an adjustment to prevent an increase or decrease in the benefits or potential benefits intended to be made available under the Fourth Amended and Restated Plan; then the administrator will, in a manner it deems equitable to prevent an increase or decrease in the benefits or potential benefits intended to be made available under the Fourth Amended and Restated Plan and subject to certain provisions of the Code, adjust the number and type of shares of common stock subject to the Fourth Amended and Restated Plan and which may, after the event, be made the subject of awards; the number and type of shares of common stock subject to outstanding awards; the grant, purchase or exercise price with respect to any award; and the performance goals of an award. |
In any such case, the administrator may also provide for a cash payment to the holder of an outstanding award in exchange for the cancellation of all or a portion of the award. The administrator may, in connection with any merger, consolidation, combination, reorganization, or similar corporate transaction or event, substitute, on an equitable basis, the number and kind of shares of stock, other securities, cash or other property holders of Shares are otherwise entitled to in the transaction.
Change of Control
Under the terms of the Fourth Amended and Restated Plan, if there is a change of control of the Company, then, the following will apply:
If the purchaser, successor or surviving entity (or parent thereof) (the “Surviving Entity”) so agrees, then some or all outstanding awards shall be assumed, or replaced with the same type of award with similar terms and conditions, by the Surviving Entity. If applicable, each award assumed by the Surviving Entity shall be appropriately adjusted, immediately after such change of control, to apply to the number and class of securities which would have been issuable to the participant upon the consummation of such change of control had the award been exercised, vested or earned immediately prior to such change of control. Upon the participant’s termination of employment by the Surviving Entity without cause, or by the participant for good reason (as defined in any employment, retention or similar agreement), in either case within 24 months following the change of control, all of the participant’s awards that are in effect as of the date of such termination will be vested in full or deemed earned in full (assuming the target performance goals provided under such award were met, if applicable) effective on the date of such termination.
To the extent the Surviving Entity in the change of control transaction does not assume the awards or issue replacement awards as provided in the preceding paragraph:
| i. | | Options and stock appreciation rights will become exercisable and we may cancel them for a cash payment (including a payment of zero, if applicable). |
| ii. | | Unvested restricted stock and restricted stock units will fully vest. |
| iii. | | All performance-based awards for which the performance period has not yet expired shall be deemed to have been earned pro rata, based on the period that has elapsed from the beginning of the relevant performance period to the date of the change of control, as if the performance goals are attained as of the effective date of the change of control at the greater of target or actual performance for the period through the date of the change of control, whichever results in the greater amount. |
| iv. | | Each holder of an incentive award, performance share and/or performance unit that has been earned but not yet paid shall receive an amount of cash equal to the value of the incentive award, performance share and/or performance unit so earned. |
| v. | | Dividend equivalent units will be paid out on a pro rata basis. |
| vi. | | Each holder of any type of award not subject to the foregoing provisions shall be entitled to receive a cash payment based on the value of the award as of the date of the change of control. |
The terms of any awards that are subject to Code Section 409A will govern the treatment of such awards upon a change of control to the extent required for such awards to remain compliant with Code Section 409A, as applicable.
“Change of control” under the Fourth Amended and Restated Plan means the occurrence of any one of the following:
| ● | Any person (other than an employee benefit plan of the Company or of any subsidiary of the Company and fiduciaries and certain other parties related to any of these plans) becomes the beneficial owner of securities of the Company representing 50 percent or more of the combined voting power of our then outstanding securities; |
| ● | We are merged or consolidated with any other corporation or other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent at least 50 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or the Company engages in a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires 50 percent or more of the combined voting power of our then outstanding securities. Notwithstanding the foregoing, a merger or consolidation involving the Company will not be considered a change of control if we are the surviving corporation and shares are not converted into or exchanged for stock or securities of any other corporation, cash or any other thing of value, unless persons who beneficially owned shares outstanding immediately prior to such transaction own beneficially less than a majority of the outstanding voting securities of the Company immediately following the merger or consolidation; |
| ● | The Company dissolves and liquidates substantially all of its assets; or |
| ● | At any time when the “continuing directors” cease to constitute a majority of our Board. For this purpose, a “continuing director” means the individuals who, at the original effective date of the Plan, constituted our Board and any new directors (other than directors designated by a person who has entered into an agreement with us to effect a change of control transaction) whose appointment to our Board or nomination for election by our stockholders was approved by a vote of at least two-thirds of the then-serving continuing directors. |
If an award is considered deferred compensation subject to the provisions of Code Section 409A, then the administrator may include an amended definition of “change of control” in the award agreement issued with respect to such award as necessary to comply with, or as necessary to permit a deferral under, Code Section 409A.
The Fourth Amended and Restated Plan does not provide for a “gross-up” for any excise taxes imposed on golden parachute payments under Code Section 4999. Rather, except to the extent the participant has in effect an employment or similar agreement with us or any of our affiliates or is subject to a policy that provides for a more favorable result to the participant, if any payments or benefits paid by us pursuant to the Fourth Amended and Restated Plan would cause some or all of such payments or benefits in conjunction with any other payments or benefits in connection with a change of control to be subject to the tax imposed by Code Section 4999, then these payments will either be cut back to a level below the amount triggering the tax or be delivered in full, whichever will provide the greater after-tax benefit to the participant.
Types of Awards
The Fourth Amended and Restated Plan authorizes grants of a variety of awards described below. The Compensation Committee may grant options to any participant it selects, and determines the terms and conditions of each award at the time of grant, subject to the limitations set forth in the Fourth Amended and Restated Plan, including whether payment of awards may be subject to the achievement of performance goals. The terms and conditions of each award will be set forth in a written agreement.
Options
The administrator has the authority to grant stock options and to determine all terms and conditions of each stock option. A stock option gives the participant the right to purchase Shares at a fixed price, called the “option price,” after the vesting conditions of the option are met and prior to the date the option expires or terminates. The administrator fixes the option price per Share, which may not be less than the fair market value (as defined under the Fourth Amended and Restated Plan) of the common stock on the date of grant. The administrator determines the expiration date of each option, but the expiration date cannot be later than 10 years after the grant date. Options are exercisable at such times and are subject to such restrictions and conditions as the administrator deems necessary or advisable. The stock option exercise price is payable to us in full upon exercise.
Neither the administrator nor any other person may amend the terms of outstanding stock options or stock appreciation rights to reduce the exercise price of such outstanding stock options or stock appreciation rights; cancel outstanding stock options or stock appreciation rights in exchange for stock options or stock appreciation rights with an exercise price that is less than the exercise price of the original options or stock appreciation rights; or cancel outstanding stock options or stock appreciation rights with an exercise price above the current per share price of the common stock in exchange for cash or other securities.
The administrator may not grant a stock option or stock appreciation right with a grant date that is effective prior to the date the administrator takes action to approve such award.
Stock Appreciation Rights
The administrator has the authority to grant stock appreciation rights. A stock appreciation right is the right of a participant to receive cash in an amount, and/or common stock with a fair market value, equal to the appreciation of the fair market value of a share of common stock (called the “grant price”) during a specified period of time. The Fourth Amended and Restated Plan provides that the administrator determines all terms and conditions of each stock appreciation right, including, among other things: whether the stock appreciation right is granted independently of a stock option or relates to a stock option; a grant price that is not less than the fair market value of the common stock subject to the stock appreciation right on the date of grant; a term that must be no later than 10 years after the date of grant; and whether the stock appreciation right will settle in cash, common stock or a combination of the two.
Performance and Stock Awards
The administrator has the authority to grant awards of restricted stock, restricted stock units, performance shares or performance units. Restricted stock means shares of common stock that are subject to a risk of forfeiture, restrictions on transfer or both a risk of forfeiture
and restrictions on transfer. Restricted stock unit means the right to receive a payment equal to the fair market value of one share of common stock. Performance shares means the right to receive shares of common stock to the extent performance goals are achieved. Performance unit means the right to receive a payment valued in relation to a unit that has a designated dollar value or the value of which is equal to the fair market value of one or more shares of common stock, to the extent performance goals are achieved.
The administrator determines all terms and conditions of these types of awards, including, among other things: whether performance goals need to be achieved for the participant to realize any portion of the benefit provided under the award; whether the restrictions imposed on restricted stock or restricted stock units will lapse, and any portion of the performance goals subject to an award will be deemed achieved, upon a participant’s death, disability or retirement; the length of the vesting and/or performance period and, if different, the date on which payment of the benefit provided under the award is made; with respect to performance units, whether to measure the value of each unit in relation to a designated dollar value or the fair market value of one or more shares of common stock; and, with respect to restricted stock units and performance units, whether the awards settle in cash, in shares of common stock, or in a combination of the two.
Incentive Awards
The administrator has the authority to grant annual and long-term incentive awards. An incentive award is the right to receive a cash payment to the extent performance goals are achieved. The administrator will determine all of the terms and conditions of each incentive award, including the performance goals, the performance period, the potential amount payable and the timing of payment, provided that the administrator must require that payment of all or any portion of the amount subject to the award is contingent on the achievement of one or more performance goals during the period the administrator specifies, although the administrator may specify that all or a portion of the goals are deemed achieved upon a participant’s death, disability or retirement, or such other circumstances as the administrator may specify. For long-term incentive awards, the performance period must relate to a period of more than one fiscal year.
Dividend Equivalent Units
The administrator has the authority to grant dividend equivalent units in connection with awards other than options, stock appreciation rights or other stock rights within the meaning of Code Section 409A. A dividend equivalent unit is the right to receive a payment, in cash or shares of common stock, equal to the cash dividends or other distributions that we pay with respect to a share of common stock. No dividend equivalent unit granted in tandem with another award may include vesting provisions more favorable to the participant than the vesting provisions, if any, to which the tandem award is subject.
Other Stock-Based Awards
The administrator has the authority to grant other types of awards, which may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, shares of common stock, either alone or in addition to or in conjunction with other awards, and payable in shares of common stock or cash. Such awards may include unrestricted Shares, which may be awarded, without limitation (except as provided in the Fourth Amended and Restated Plan), as a bonus, in payment of director fees, in lieu of cash compensation, in exchange for cancellation of a compensation right, as a bonus, or upon the attainment of performance goals or otherwise, or rights to acquire Shares from us. The administrator determines all terms and conditions of the award, including but not limited to the time or times at which such award is made and the number of shares of common stock to be granted pursuant to such award or to which such award relates.
Non-Transferability of Awards
No award under the Fourth Amended and Restated Plan may be transferable or assignable other than by will or the laws of descent and distribution, except that an award agreement may provide that a participant may designate a beneficiary, transfer an award to a former spouse pursuant to a domestic relations order, or transfer without consideration therefor.
Recoupment of Awards
All awards granted under the Fourth Amended and Restated Plan, and any share of stock issued or cash paid pursuant to such awards, are subject to any recoupment, clawback, equity holding, stock ownership or similar policies adopted by the Company from time to time and any recoupment, clawback, equity holding, stock ownership, or similar requirements made applicable by law, regulation or listing standards to the Company from time to time.
The administrator may terminate or cause a participant to forfeit an award, and require a participant to disgorge to us any gains attributable to an award, if the participant engages in any action constituting, as determined by the administrator in its discretion, cause for termination, or a breach of any agreement between the participant and us or one of our affiliates concerning noncompetition, non-solicitation, confidentiality, trade secrets, intellectual property, non-disparagement or similar obligations.
Foreign Participation
To assure the viability of awards granted to participants employed or residing in foreign countries, the administrator may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, accounting or custom. Moreover, the administrator may approve such supplements to, or amendments, restatements or alternative versions of, the Fourth Amended and Restated Plan as it determines are necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that the administrator approves for purposes of using the Fourth Amended and Restated Plan in a foreign country will not affect the terms of the Fourth Amended and Restated Plan for any other country.
Term
Awards may be granted under the Fourth Amended and Restated Plan from time to time until the Fourth Amended and Restated Plan is discontinued or terminated by the Board. No award may be granted under the Fourth Amended and Restated Plan after the 10th anniversary of the approval of the Fourth Amended and Restated Plan by stockholders at the Annual Meeting, but awards granted prior to such date may extend beyond that date.
Amendments and Termination
The Board or the administrator may amend, discontinue or terminate the Fourth Amended and Restated Plan at any time, except:
| ● | Our Board must approve any amendment to the Fourth Amended and Restated Plan if we determine such approval is required by prior action of the Board, applicable corporate law or any other applicable law; |
| ● | Stockholders must approve any amendment to the Fourth Amended and Restated Plan if we determine that such approval is required by Section 16 of the Exchange Act, the Code, the listing requirements of any principal securities exchange or market on which our common stock is then traded, or any other applicable law; and |
| ● | Stockholders must approve any amendment to the Fourth Amended and Restated Plan that materially increases the number of shares of common stock reserved under the Fourth Amended and Restated Plan, the incentive stock option award limits or the per participant award limitations set forth in the Fourth Amended and Restated Plan, that shortens the minimum vesting requirements under the Fourth Amended and Restated Plan or that diminishes the provisions prohibiting repricing or backdating stock options and stock appreciation rights. |
The administrator generally may modify, amend or cancel any award or waive any restrictions or conditions applicable to any award or the exercise of the award. Any modification or amendment that materially diminishes the rights of the participant or any other person who may have an interest in the award, or that cancels any award, will be effective only if agreed to by that participant or other person. The administrator does not need to obtain participant or other interested party consent, however, for the adjustment or cancellation of an award pursuant to the adjustment provisions of the Fourth Amended and Restated Plan or the modification of an award to the extent deemed necessary to comply with any applicable law or the listing requirements of any principal securities exchange or market on which the common stock is then traded, to the extent the administrator deems necessary to preserve favorable accounting or tax treatment of any award for the Company, or to the extent the administrator determines that the action does not materially and adversely affect the value of an award or that such action is in the best interest of the affected participant or any other person(s) with an interest in the award.
The authority of the administrator to terminate or modify the Fourth Amended and Restated Plan or awards will extend beyond the termination date of the Fourth Amended and Restated Plan. In addition, termination of the Fourth Amended and Restated Plan will not affect the rights of participants with respect to awards previously granted to them, and all unexpired awards will continue in force after termination of the Fourth Amended and Restated Plan except as they may lapse or be terminated by their own terms and conditions.
New Plan Benefits
As described under the heading “General Description of Proposal,” if the Fourth Amended and Restated Plan is approved by our stockholders, then we will reserve a total of 10,527,264 shares under the Fourth Amended and Restated Plan for the settlement of the Contingent Stock Units.
The approximate number of shares to be issued upon settlement of the Contingent Stock Units, assuming (i) with respect to the contingent performance stock units, that the target level of performance is achieved and (ii) with respect to the 3,978,496 contingent restricted stock units, that all units fully vest, are shown in the following table.
Fourth Amended and Restated Plan
| | |
Name and Position | Dollar Value ($) | Number of Units |
Jason Few, President and Chief Executive Officer | N/A | 2,127,273 |
Michael S. Bishop Executive Vice President, Chief Financial Officer and Treasurer | N/A | 826,446 |
Joshua Dolger Executive Vice President, General Counsel and Corporate Secretary | N/A | 454,545 |
Michael J. Lisowski Executive Vice President and Chief Operating Officer | N/A | 454,545 |
Mark Feasel Executive Vice President and Chief Commercial Officer | N/A | 454,545 |
Executive Group – Total(1) | N/A | 4,565,288 |
Non-Executive Officer Employee Group(1) | N/A | 3,978,496 |
| (1) | The number of units shown for the executive group includes performance stock units that are assumed to be earned at 100% performance. The maximum number of PSUs that may be earned based on performance is 200% of the target amount. Thus, the Company has reserved an additional 3,274,384 shares in the event that maximum performance is achieved. |
All awards granted under the Fourth Amended and Restated Plan are made at the discretion of the Compensation Committee or the Board and, except for the awards disclosed above, the benefits and amounts that will be received or allocated under the Fourth Amended and Restated Plan are not determinable at this time.
Equity Compensation Plan Information
The following table sets forth information with respect to the Company’s equity compensation plans as of the end of the fiscal year ended October 31, 2023.
| | | | | | | | |
| | | | | | Number of securities | |
| | Number of Common | | Weighted-average | | remaining available for | |
| | Shares to be issued upon | | exercise price of | | future issuance under | |
| | exercise of outstanding | | outstanding options and | | equity compensation | |
Plan Category | | options and rights | | rights | | plans | |
Equity compensation plans approved by security holders: | | | | | | | | |
Equity incentive plans(1) | | 18,291 | | | $59.63 | | 9,069,450 | |
Employee stock purchase plan | | — | | | — | | 481,278 | |
Total | | 18,291 | | | $59.63 | | 9,550,728 | |
| (1) | Includes the Company’s 2018 Omnibus Incentive Plan, as amended and restated. |
Certain Federal Income Tax Consequences
The following summarizes certain federal income tax consequences relating to the Fourth Amended and Restated Plan. The summary is based upon the laws and regulations in effect as of the date of this Proxy Statement and does not purport to be a complete statement of the law in this area. Furthermore, the discussion below does not address the tax consequences of the receipt or exercise of awards under foreign, state or local tax laws, and such tax laws may not correspond to the federal income tax treatment described herein. The exact federal income tax treatment of transactions under the Fourth Amended and Restated Plan will vary depending upon the specific facts and circumstances involved and participants are advised to consult their personal tax advisors with regard to all consequences arising from the grant or exercise of awards and the disposition of any acquired shares.
Stock Options
The grant of a stock option under the Fourth Amended and Restated Plan will create no income tax consequences to us or to the recipient. A participant who is granted a non-qualified stock option will generally recognize ordinary compensation income at the time of exercise in an amount equal to the excess of the fair market value of the common stock at such time over the exercise price. We will generally be entitled to a deduction in the same amount and at the same time as the participant recognizes ordinary income. Upon the participant’s subsequent disposition of the shares of common stock received with respect to such stock option, the participant will recognize a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized from the sale differs from the tax basis (i.e., the fair market value of the common stock on the exercise date).
In general, a participant will recognize no income or gain as a result of the exercise of an incentive stock option, except that the alternative minimum tax may apply. Except as described below, the participant will recognize a long-term capital gain or loss on the disposition of the common stock acquired pursuant to the exercise of an incentive stock option and we will not be allowed a deduction. If the participant fails to hold the shares of common stock acquired pursuant to the exercise of an incentive stock option for at least two years from the grant date of the incentive stock option and one year from the exercise date, then the participant will recognize ordinary compensation income at the time of the disposition equal to the lesser of the gain realized on the disposition and the excess of the fair market value of the shares of common stock on the exercise date over the exercise price. We will generally be entitled to a deduction in the same amount and at the same time as the participant recognizes ordinary income. Any additional gain realized by the participant over the fair market value at the time of exercise will be treated as a capital gain.
Stock Appreciation Rights
The grant of a stock appreciation right under the Fourth Amended and Restated Plan will create no income tax consequences to us or to the recipient. A participant who is granted a stock appreciation right will generally recognize ordinary compensation income at the time of exercise in an amount equal to the excess of the fair market value of the common stock at such time over the grant price. We will generally be entitled to a deduction in the same amount and at the same time as the participant recognizes ordinary income. If the stock appreciation right is settled in shares of our common stock, upon the participant’s subsequent disposition of such shares, the participant will recognize a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized from the sale differs from the tax basis (i.e., the fair market value of the common stock on the exercise date).
Restricted Stock
Generally, a participant will not recognize income and we will not be entitled to a deduction at the time an award of restricted stock is made under the Fourth Amended and Restated Plan, unless the participant makes the election described below. A participant who has not made such an election will recognize ordinary income at the time the restrictions on the stock lapse in an amount equal to the fair market value of the restricted stock at such time.
We will generally be entitled to a corresponding deduction in the same amount and at the same time as the participant recognizes income. Any otherwise taxable disposition of the restricted stock after the time the restrictions lapse will result in a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized from the sale differs from the tax basis (i.e., the fair market value of the common stock on the date the restrictions lapse). Dividends paid in cash and received by a participant prior to the time the restrictions lapse will constitute ordinary income to the participant in the year paid and we will generally be entitled to a corresponding deduction for such dividends. Any dividends paid in stock will be treated as an award of additional restricted stock subject to the tax treatment described herein.
A participant may, within 30 days after the date of the award of restricted stock, elect to recognize ordinary income as of the date of the award in an amount equal to the fair market value of such restricted stock on the date of the award (less the amount, if any, the participant paid for such restricted stock). If the participant makes such an election, then we will generally be entitled to a corresponding deduction in the same amount and at the same time as the participant recognizes income. If the participant makes the election, then any cash dividends the participant receives with respect to the restricted stock will be treated as dividend income to the participant in the year of payment and will not be deductible by us. Any otherwise taxable disposition of the restricted stock (other than by forfeiture) will result in a capital gain or loss. If the participant who has made an election subsequently forfeits the restricted stock, then the participant will not be entitled to claim a credit for the tax previously paid. In addition, we would then be required to include as ordinary income the amount of any deduction we originally claimed with respect to such shares.
Restricted Stock Units
A participant will not recognize income and we will not be entitled to a deduction at the time an award of a restricted stock unit is made under the Fourth Amended and Restated Plan. Upon the participant’s receipt of shares (or cash) at the end of the restriction period, the
participant will recognize ordinary income equal to the amount of cash and/or the fair market value of the shares received, and we will be entitled to a corresponding deduction in the same amount and at the same time. If the restricted stock units are settled in whole or in part in shares, upon the participant’s subsequent disposition of the shares the participant will recognize a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized upon disposition differs from the shares’ tax basis (i.e., the fair market value of the shares on the date the participant received the shares).
Performance Shares
The grant of performance shares will create no income tax consequences for us or the participant. Upon the participant’s receipt of shares at the end of the applicable performance period, the participant will recognize ordinary income equal to the fair market value of the shares received, except that if the participant receives shares of restricted stock in payment of performance shares, recognition of income may be deferred in accordance with the rules applicable to restricted stock as described above. In addition, the participant will recognize ordinary compensation income equal to the dividend equivalents paid on performance shares prior to or at the end of the performance period. We will generally be entitled to a deduction in the same amount and at the same time as the participant recognizes income. Upon the participant’s subsequent disposition of the shares, the participant will recognize a capital gain or loss (long-term or short-term depending on the holding period) to the extent the amount realized from the disposition differs from the shares’ tax basis (i.e., the fair market value of the shares on the date the participant received the shares).
Performance Units
The grant of a performance unit will create no income tax consequences to us or the participant. Upon the participant’s receipt of cash and/or shares at the end of the applicable performance period, the participant will recognize ordinary income equal to the amount of cash and/or the fair market value of the shares received, and we will be entitled to a corresponding deduction in the same amount and at the same time. If performance units are settled in whole or in part in shares, upon the participant’s subsequent disposition of the shares the participant will recognize a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized upon disposition differs from the shares’ tax basis (i.e., the fair market value of the shares on the date the participant received the shares).
Dividend Equivalent Units
A participant who is paid a dividend equivalent with respect to an award will recognize ordinary income equal to the value of cash or common stock paid, and we will be entitled to a corresponding deduction in the same amount and at the same time.
Section 162(m) Limit on Deductibility of Compensation
Section 162(m) limits the deduction we can take for compensation we pay to any “covered employee”, generally including our named executive officers, to $1,000,000 per year per individual.
Code Section 409A
We do not guarantee to any participant or any other person with an interest in an award that (i) any award intended to be exempt from Code Section 409A shall be so exempt, (ii) any award intended to comply with Code Section 409A or Code Section 422 shall so comply, or (iii) any award shall otherwise receive a specific tax treatment under any other applicable tax law, nor in any such case will the Company or any of its affiliates indemnify, defend or hold harmless any individual with respect to the tax consequences of any award.
Vote Required
Approval of this Proposal 3 requires the affirmative vote of the holders of a majority of the shares of our common stock casting votes on the matter in person (by attending the virtual Annual Meeting and voting online) or by proxy at the Annual Meeting. This proposal is a “non-routine” matter under New York Stock Exchange Rule 452 on which brokers may not vote without instruction from beneficial owners. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the vote on this proposal.
| |
| THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE FUELCELL ENERGY, INC. THIRD AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN. |
Additional Information and Other Matters
General
Holders of the Company’s common stock as of the close of business on February 5, 2024 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting or any adjournments thereof. As of the Record Date, there were 450,684,628 shares of the Company’s common stock issued and outstanding. Each holder of the Company’s common stock is entitled to one vote for each share held on the Record Date, including common stock:
| ● | Held directly in the stockholder’s name as “stockholder of record” (also referred to as “registered stockholder”); |
| ● | Held for the stockholder in an account with a broker, bank or other nominee (shares held in “street name”). Street name holders are encouraged to instruct their brokerage firm, bank or nominee on how to vote their shares; and |
| ● | Held for the stockholder by the Company as restricted shares (whether vested or non-vested) under any of the Company’s stock incentive plans. |
Stockholder Proposals for the 2025 Annual Meeting
If any stockholder wishes to propose a matter for consideration at our 2025 Annual Meeting of Stockholders, the proposal should be mailed by certified mail return receipt requested, to our Corporate Secretary at FuelCell Energy, Inc., Office of the Corporate Secretary, 3 Great Pasture Road, Danbury, CT 06810. To be eligible under the SEC’s stockholder proposal rule (Rule 14a-8(e) of the Exchange Act) for inclusion in our 2025 Annual Meeting Proxy Statement and form of proxy, a proposal must be received by our Corporate Secretary on or before October 19, 2024. Failure to deliver a proposal in accordance with this procedure may result in it not being deemed timely received.
In addition, our by-laws permit stockholders to nominate directors and present other business for consideration at our Annual Meeting of Stockholders. To make a director nomination or present other business for consideration at the Annual Meeting of Stockholders to be held in 2025, you must submit a timely notice in accordance with the procedures described in our by-laws. To be timely, a stockholder’s notice shall be delivered to the Corporate Secretary at the principal executive offices of our Company not less than 90 days nor more than 120 days prior to the one-year anniversary of the immediately preceding year’s annual meeting. Therefore, to be presented at our Annual Meeting to be held in 2025, such a proposal must be received on or after December 5, 2024, but not later than January 4, 2025. In the event that the date of the Annual Meeting of Stockholders to be held in 2025 is advanced by more than 30 days, or delayed by more than 60 days, from the anniversary date of this year’s Annual Meeting of Stockholders, such notice by the stockholder must be so received no earlier than the 120th day prior to the Annual Meeting of Stockholders to be held in 2025 and not later than the 90th day prior to such Annual Meeting of Stockholders to be held in 2025 or, if later, the 10th day following the day on which public disclosure of the date of such Annual Meeting is first made. Any such proposal will be considered timely only if it is otherwise in compliance with the requirements set forth in our by-laws. In addition, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must also comply with the additional requirements of SEC Rule 14a-19(b).
Householding
Individual stockholders sharing an address with one or more other stockholders may elect to “household” the mailing of the proxy statement, or the notice of internet availability of proxy materials, as applicable. This means that only one proxy statement or notice will be sent to that address unless one or more stockholders at that address specifically elect to receive separate mailings. Stockholders who participate in householding will continue to receive separate proxy cards. We will promptly send a separate Proxy Statement or notice to a stockholder at a shared address on request. Stockholders with a shared address may also request us to send separate Proxy Statements or notices in the future, or to send a single copy in the future if we are currently sending multiple copies to the same address. Requests related to householding should be mailed to Broadridge Householding Department, 51 Mercedes Way, Edgewood, NY 11717, or call Broadridge at 1-800-542-1061.
If you are a stockholder whose shares are held by a bank, broker or other nominee, you can request information about householding from your bank, broker or other nominee.
Quorum and Vote Required
The holders of at least forty percent in voting power of the shares of common stock issued, outstanding and entitled to vote as of the Record Date present, in person (by virtual presence online) or by proxy, will constitute a quorum at the Annual Meeting. Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining a quorum.
With respect to Proposal 1, the affirmative vote of the holders of a majority of the votes cast on the matter at the Annual Meeting (assuming a quorum is present) is required for the election of the Directors. A “majority of the votes cast” means that the number of shares voted “For” a Director must exceed the number of votes cast “Against” that Director’s election. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the voting results for Proposal 1.
With respect to Proposals 2 and 4, such proposals are non-binding but will be deemed to be approved upon the affirmative vote of the holders of a majority of the shares of common stock casting votes on such matters at the Annual Meeting (assuming a quorum is present). Abstentions and broker non-votes are not counted as votes cast and will have no effect on the voting results for Proposals 2 and 4 (although we do not expect there to be any broker non-votes in connection with Proposal 2, as Proposal 2 is a “routine” matter under New York Stock Exchange Rule 452).
Approval of Proposal 3 requires the affirmative vote of the holders of a majority of the shares of common stock casting votes on the proposal at the Annual Meeting (assuming a quorum is present). Abstentions and broker non-votes are not counted as votes cast and will have no effect on the voting results for Proposal 3.
If your shares are held by a broker on your behalf (that is, in “street name”), and you do not instruct the broker as to how to vote your shares on Proposals 1, 3, or 4, the broker may not exercise its discretion to vote your shares on such proposal. If no instruction is given and a broker therefore cannot vote, there is a “broker non-vote” and such shares will not be counted as having been voted on the applicable proposal. Your broker may exercise its discretion to vote your shares on Proposal 2 in the absence of your instruction. Please instruct your bank or broker so your vote can be counted.
While Proposal 4 is advisory in nature and non-binding, the Board will review the voting results and expects to take such results into consideration when making future decisions regarding executive compensation.
Counting Votes
You may vote “FOR”, “AGAINST” or “ABSTAIN” with respect to each of the proposals presented. A vote “FOR” will be counted in favor of the applicable proposal or Director nominee, and a vote “AGAINST” will be counted against the applicable proposal or Director nominee. An “ABSTAIN” vote will have no effect on the voting results for any of the proposals.
All properly executed proxies returned in time to be counted at the Annual Meeting will be voted by the persons identified on the proxy card at the Annual Meeting. Shares represented by a properly executed proxy received prior to the vote at the Annual Meeting and not revoked will be voted at the Annual Meeting as directed on the proxy. If a properly executed proxy is submitted by a stockholder who holds shares directly as the stockholder of record, but such proxy does not include voting instructions, the proxy will be voted “FOR” each Director nominee and “FOR” each of Proposals 2 through 4.
Broadridge Financial Solutions, Inc. will be the tabulator of the votes for the Annual Meeting.
Voting By Proxy
Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you may vote by proxy. You can vote by proxy over the internet, by mail or by telephone by following the instructions provided in the “Proxy Summary” or on your proxy card or notice of internet availability. The persons named as attorneys-in-fact and proxies in the proxy, Jason Few and Joshua Dolger, were selected by our Board.
A stockholder may change its voting instructions and revoke its proxy at any time prior to the vote at the Annual Meeting. A stockholder of record may change its vote by granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), by providing a written notice of revocation to the Corporate Secretary of the Company or by voting in person at the Annual Meeting (by attending the virtual Annual Meeting and voting online). Attendance at the Annual Meeting will not cause a stockholder’s previously granted proxy to be revoked unless such stockholder specifically so requests or such stockholder votes in person at the Annual Meeting (by attending the virtual Annual Meeting and voting online). For stockholders who hold their shares beneficially in street name, such stockholders may change their voting instructions by submitting new voting instructions to their broker, trustee or nominee following the instructions it has provided, or by attending the virtual Annual Meeting and voting online. All expenses incurred in connection with the solicitation of proxies will be borne by the Company. In addition to soliciting proxies through the mail, the Company may solicit proxies through its Directors and employees (for no additional compensation) in person or by telephone. We have also hired Alliance Advisors to assist in the solicitation of proxies. Fees for this service are estimated to be approximately $5,000, plus out-of-pocket expenses. Brokerage firms, nominees, custodians and fiduciaries also may be requested to forward proxy materials to the beneficial owners of shares held of record by them and will be reimbursed for their reasonable expenses.
If you need assistance in completing your proxy card or have questions regarding the Annual Meeting, please contact Alliance Advisors, LLC, the proxy solicitation agent for the Company, by telephone at (888) 490-5067 (toll free) or by email at fcel@allianceadvisors.com.
Annual Report and Form 10-K
Additional copies of the Company’s Annual Report to Stockholders for the fiscal year ended October 31, 2023, and copies of the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2023, as filed with the SEC, are available to stockholders without charge upon written request addressed to: FuelCell Energy, Inc., 3 Great Pasture Road, Danbury, CT 06810, Attn: Investor Relations and are also available in the Investor Relations section of the Company’s website at www.fuelcellenergy.com.
Other Matters
As of the date of this Proxy Statement, the Board knows of no matters which will be presented for consideration at the Annual Meeting other than the proposals set forth in this Proxy Statement. If any other matters properly come before the Annual Meeting, it is intended that the persons named in the proxy will act in respect thereof in accordance with their best judgment.
Information About Attending the Annual Meeting
Admission to the Annual Meeting will be restricted to holders of record and beneficial owners of FuelCell Energy voting securities as of the Record Date, February 5, 2024. The Annual Meeting will be held entirely online to allow greater participation. Stockholders may participate in the Annual Meeting by visiting the following website www.virtualshareholdermeeting.com/FCEL2024. To participate in the Annual Meeting, you will need the 16-digit control number included in your notice of internet availability, on your proxy card, or in the instructions that accompanied your proxy materials. Shares held in your name as the stockholder of record may be voted electronically during the Annual Meeting. Shares for which you are the beneficial owner but not the stockholder of record may also be voted electronically during the Annual Meeting. However, even if you plan to attend the virtual Annual Meeting, the Company recommends that you submit your proxy in advance, so that your vote will be counted if you later decide not to attend the Annual Meeting.
You are entitled to attend the virtual Annual Meeting only if you were a stockholder as of the Record Date for the Annual Meeting, which was February 5, 2024, or you hold a valid proxy for the Annual Meeting. If you were a stockholder as of the Record Date, you may attend the Annual Meeting, vote and submit a question during the Annual Meeting by visiting www.virtualshareholdermeeting.com/FCEL2024 and using your 16-digit control number to enter the Annual Meeting.
9. Performance and Stock Awards
Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each award of Shares, Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, including but not limited to: (a) the number of Shares and/or units to which such Award relates; (b) whether, as a condition for the Participant to realize all or a portion of the benefit provided under the Award, one or more Performance Goals must be achieved during such period as the Administrator specifies; (c) the length of the vesting and/or performance period and, if different, the date on which payment of the benefit provided under the Award will be made; (d) with respect to Performance Units, whether to measure the value of each unit in relation to a designated dollar value or the Fair Market Value of one or more Shares; (e) with respect to Restricted Stock Units and Performance Units, whether to settle such Awards in cash, in Shares (including Restricted Stock), or in a combination of cash and Shares; (f) whether dividends will be paid on Restricted Stock or Performance Shares, provided, however, that any dividends paid on Restricted Stock or Performance Shares will be accumulated and paid if and only to the same extent as the Restricted Stock or Performance Shares vest.
10. Annual Incentive Awards
Subject to the terms of this Plan, the Administrator will determine all terms and conditions of an Annual Incentive Award, including but not limited to the Performance Goals, performance period, the potential amount payable and the timing of payment; provided that the Administrator must require that payment of all or any portion of the amount subject to the Annual Incentive Award is contingent on the achievement or partial achievement of one or more Performance Goals during the period the Administrator specifies, although the Administrator may specify that all or a portion of the Performance Goals subject to an Award are deemed achieved upon a Participant’s death, Disability, retirement, or such other circumstances as the Administrator may specify, if applicable; and provided further that any performance period applicable to an Annual Incentive Award must relate to a period of at least one year. Notwithstanding the foregoing, nothing hereunder shall preclude or limit the Company or the Administrator from granting annual incentive awards that are solely payable in cash outside of the terms of the Plan.
11. Long-Term Incentive Awards
Subject to the terms of this Plan, the Administrator will determine all terms and conditions of a Long-Term Incentive Award, including but not limited to the Performance Goals, performance period (which must be more than one year), the potential amount payable, and the timing of payment; provided that the Administrator must require that payment of all or any portion of the amount subject to the Long-Term Incentive Award is contingent on the achievement or partial achievement of one or more Performance Goals during the period the Administrator specifies, although the Administrator may specify that all or a portion of the Performance Goals subject to an Award are deemed achieved upon a Participant’s death, Disability, retirement, or such other circumstances as the Administrator may specify, if applicable, or such other circumstances as the Administrator may specify. Notwithstanding the foregoing, nothing hereunder shall preclude or limit the Company or the Administrator from granting long-term incentive awards that are solely payable in cash outside of the terms of the Plan.
12. Dividend Equivalent Units
Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each award of Dividend Equivalent Units, including but not limited to whether: (a) such Award will be granted in tandem with another Award; (b) payment of the Award will be made concurrently with dividend payments or credited to an account for the Participant which provides for the deferral of such amounts until a stated time; (c) the Award will be settled in cash or Shares; and (d) as a condition for the Participant to realize all or a portion of the benefit provided under the Award, one or more Performance Goals must be achieved during such period as the Administrator specifies; provided that Dividend Equivalent Units may not be granted in connection with an Option or Stock Appreciation Right; and provided further that no Dividend Equivalent Unit granted in tandem with another Award shall include vesting provisions more favorable to the Participant than the vesting provisions, if any, to which the tandem Award is subject; and provided further that no Dividend Equivalent Unit relating to another Award shall provide for payment with respect to such other Award prior to its vesting.
13. Other Stock-Based Awards
Subject to the terms of this Plan, the Administrator may grant to a Participant shares of unrestricted Stock as replacement for other compensation to which the Participant is entitled, such as in payment of director fees, in lieu of cash compensation, in exchange for cancellation of a compensation right, or as a bonus.
14. Minimum Vesting Periods
Notwithstanding any provision of the Plan to the contrary, all Awards shall have a minimum vesting period of one (1) year from the date of grant, provided that Awards with respect to up to five percent (5%) of the total number of Shares reserved pursuant to Section 6(a) shall not be subject to such minimum vesting period. For purposes of Awards granted to Non-Employee Directors, “one (1) year” may mean the period of time from one annual shareholders meeting to the next annual shareholders meeting, provided that such period of time is not less than 50 weeks.
15. Transferability
Awards are not transferable other than by will or the laws of descent and distribution, unless and to the extent the Administrator allows a Participant to: (a) designate in writing a beneficiary to exercise the Award or receive payment under the Award after the Participant’s death; (b) transfer an Award to the former spouse of the Participant as required by a domestic relations order incident to a divorce; or (c) transfer an Award; provided, however, that with respect to clause (c) above the Participant may not receive consideration for such a transfer of an Award.
16. Termination of Employment
| (a) | Effect of Termination on Awards. Except as otherwise provided in any Award or employment agreement or as determined by the Committee at the time of such termination: |
(i) Upon termination of employment or service for Cause, Participant shall forfeit all outstanding Awards immediately upon such termination. For the avoidance of doubt, Participant will be prohibited from exercising any Stock Options or SARs on his or her termination date.
(ii) If Participant’s employment or service terminates by reason of Participant’s death or Disability (at a time when Participant could not have been terminated for Cause), Participant shall forfeit the unvested portion of any Award, and any vested Options or SARs shall remain exercisable until the earlier of the Award’s original expiration date or twelve (12) months from the date of Participant’s termination.
(iii) If Participant’s employment or service terminates for any reason other than Cause, death or Disability (at a time when Participant could not have been terminated for Cause), then Participant shall forfeit the unvested portion of any Award, and any vested Options or SARs shall remain exercisable until the earlier of the Award’s original expiration date or three (3) months from the date of Participant’s termination.
| (b) | Definition of Termination. Unless determined otherwise by the Administrator or set forth in an Award agreement, for purposes of the Plan and all Awards, the following rules shall apply: |
(i) a Participant who transfers employment between the Company and its Affiliates, or between Affiliates, will not be considered to have terminated employment;
(ii) a Participant who ceases to be a Non-Employee Director because he or she becomes an employee of the Company or an Affiliate shall not be considered to have ceased service as a Director with respect to any Award until such Participant’s termination of employment with the Company and its Affiliates;
(iii) a Participant who ceases to be employed by the Company or an Affiliate and immediately thereafter becomes a Non-Employee Director, a non-employee director of an Affiliate, or a consultant to the Company or any Affiliate shall not be considered to have terminated employment until such Participant’s service as a director of, or consultant to, the Company and its Affiliates has ceased; and
(iv) a Participant employed by an Affiliate will be considered to have terminated employment when such entity ceases to be an Affiliate.
(v) A Participant’s authorized leave of absence shall not constitute termination of employment. However, if a leave of absence exceeds 90 days, vesting of any outstanding Awards under this Plan may be suspended until Participant returns to work, as determined by the Administrator.
Notwithstanding the foregoing, for purposes of an Award that is subject to Code Section 409A, if a Participant’s termination of employment or service triggers the payment of compensation under such Award, then the Participant will be deemed to have
terminated employment or service upon his or her “separation from service” within the meaning of Code Section 409A. Notwithstanding any other provision in this Plan or an Award to the contrary, if any Participant is a “specified employee” within the meaning of Code Section 409A as of the date of his or her “separation from service” within the meaning of Code Section 409A, then, to the extent required by Code Section 409A, any payment made to the Participant on account of such separation from service shall not be made before a date that is six months after the date of the separation from service.
17. Termination and Amendment of Plan; Amendment, Modification or Cancellation of Awards
| (a) | Term of Plan. Unless the Board earlier terminates this Plan pursuant to Section 17(b), this Plan will terminate upon the date that is ten (10) years from the date of its most recent approval by the Company’s shareholders. |
| (b) | Termination and Amendment. The Board or the Administrator may amend, alter, suspend, discontinue or terminate this Plan at any time, subject to the following limitations: |
(i) the Board must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) prior action of the Board, (B) applicable corporate law, or (C) any other applicable law;
(ii) shareholders must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) Section 16 of the Exchange Act, (B) the Code, (C) the listing requirements of any principal securities exchange or market on which the Shares are then traded, or (D) any other applicable law; and
(iii) shareholders must approve any of the following Plan amendments: (A) an amendment to materially increase any number of Shares specified in Section 6(a) (except as permitted by Section 19), or (B) an amendment that would diminish the protections afforded by Section 17(e).
| (c) | Amendment, Modification, Cancellation and Disgorgement of Awards. |
(i) Except as provided in Section 17(e) and subject to the requirements of this Plan, the Administrator may modify, amend or cancel any Award; provided that, except as otherwise provided in the Plan or the Award agreement, any modification or amendment that materially diminishes the rights of the Participant, or the cancellation of an Award, shall be effective only if agreed to by the Participant or any other person(s) as may then have an interest in such Award, but the Administrator need not obtain Participant (or other interested party) consent for the modification, amendment or cancellation of an Award pursuant to the provisions of subsection (ii) or Section 19 or as follows: (A) to the extent the Administrator deems such action necessary to comply with any applicable law or the listing requirements of any principal securities exchange or market on which the Shares are then traded; (B) to the extent the Administrator deems necessary to preserve favorable accounting or tax treatment of any Award for the Company; or (C) to the extent the Administrator determines that such action does not materially and adversely affect the value of an Award or that such action is in the best interest of the affected Participant (or any other person(s) as may then have an interest in the Award). Notwithstanding the foregoing, unless determined otherwise by the Administrator, any such amendment shall be made in a manner that will enable an Award intended to be exempt from Code Section 409A to continue to be so exempt, or to enable an Award intended to comply with Code Section 409A to continue to so comply.
(ii) Notwithstanding anything to the contrary in an Award agreement, the Administrator shall have full power and authority to terminate or cause the Participant to forfeit the Award, and require the Participant to disgorge to the Company any gains attributable to the Award, if the Participant engages in any action constituting, as determined by the Administrator in its discretion, Cause for termination, or a breach of any Award agreement or any other agreement between the Participant and the Company or an Affiliate concerning non-competition, non-solicitation, confidentiality, trade secrets, intellectual property, non-disparagement or similar obligations.
(iii) Any Awards granted pursuant to this Plan, and any Stock issued or cash paid pursuant to an Award, shall be subject to any recoupment or clawback policy that is adopted by, or any recoupment or similar requirement otherwise made applicable by law, regulation or listing standards to, the Company from time to time.
| (d) | Survival of Authority and Awards. Notwithstanding the foregoing, the authority of the Board and the Administrator under this Section 17 and to otherwise administer the Plan with respect to then-outstanding Awards will extend beyond the date of this Plan’s termination. In addition, termination of this Plan will not affect the rights of Participants with respect to Awards previously granted to them, and all unexpired Awards will continue in force and effect after termination of this Plan except as they may lapse or be terminated by their own terms and conditions. |
| Administrator effective at such time as the Administrator specifies (which may be the time such transaction or event is effective). However, in each case, with respect to Awards of incentive stock options, no such adjustment may be authorized to the extent that such authority would cause this Plan to violate Code Section 422(b). Further, the number of Shares subject to any Award payable or denominated in Shares must always be a whole number. In any event, previously granted Options or SARs are subject to only such adjustments as are necessary to maintain the relative proportionate interest the Options and SARs represented immediately prior to any such event and to preserve, without exceeding, the value of such Options or SARs. |
Without limitation, in the event of any reorganization, merger, consolidation, combination or other similar corporate transaction or event, whether or not constituting a Change of Control (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Stock is not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Administrator may substitute, on an equitable basis as the Administrator determines, for each Share then subject to an Award and the Shares subject to this Plan (if the Plan will continue in effect), the number and kind of shares of stock, other securities, cash or other property to which holders of Stock are or will be entitled in respect of each Share pursuant to the transaction.
Notwithstanding the foregoing, in the case of a stock dividend (other than a stock dividend declared in lieu of an ordinary cash dividend) or subdivision or combination of the Shares (including a reverse stock split), if no action is taken by the Administrator, adjustments contemplated by this subsection that are proportionate shall nevertheless automatically be made as of the date of such stock dividend or subdivision or combination of the Shares.
| (b) | Issuance or Assumption. Notwithstanding any other provision of this Plan, and without affecting the number of Shares otherwise reserved or available under this Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, the Administrator may authorize the issuance or assumption of awards under this Plan upon such terms and conditions as it may deem appropriate. |
| (c) | Effect of Change of Control. |
(i) Upon a Change of Control, if the successor or surviving corporation (or parent thereof) so agrees, then, without the consent of any Participant (or other person with rights in an Award), some or all outstanding Awards may be assumed, or replaced with the same type of award with similar terms and conditions, by the successor or surviving corporation (or parent thereof) in the Change of Control transaction. If applicable, each Award which is assumed by the successor or surviving corporation (or parent thereof) shall be appropriately adjusted, immediately after such Change of Control, to apply to the number and class of securities which would have been issuable to the Participant upon the consummation of such Change of Control had the Award been exercised, vested or earned immediately prior to such Change of Control, and such other appropriate adjustments in the terms and conditions of the Award shall be made. Upon the Participant’s termination of employment (A) by the successor or surviving corporation without Cause, (B) by reason of death or Disability, or (C) by the Participant for “good reason,” as defined in any employment, retention, change of control, severance or similar agreement between the Participant and the Company or any Affiliate, if any, in any case within twenty-four (24) months following the Change of Control, all of the Participant’s Awards that are in effect as of the date of such termination shall be vested in full or deemed earned in full (assuming target performance goals provided under such Award were met, if applicable) effective on the date of such termination.
(ii) To the extent the purchaser, successor or surviving entity (or parent thereof) in the Change of Control transaction does not assume the Awards or issue replacement awards as provided in clause (i) (including, for the avoidance of doubt, by reason of Participant’s termination of employment in connection with the Change of Control), then immediately prior to the date of the Change of Control:
| (A) | Each Option or SAR that is then held by a Participant who is employed by or in the service of the Company or an Affiliate shall become immediately and fully vested, and, unless otherwise determined by the Board or Administrator, all Options and SARs shall be cancelled on the date of the Change of Control in exchange for a cash payment equal to the excess of the Change of Control Price (as defined below) of the Shares covered by the Option or SAR that is so cancelled over the purchase or grant price of such Shares under the Award; provided, however, that all Options and SARs that have a purchase or grant price that is less than the Change of Control Price shall be cancelled for no consideration; |
| (B) | Restricted Stock, Restricted Stock Units and Deferred Stock Rights (that are not Performance Awards) that are not then vested shall vest; |
| (C) | All Performance Awards that are earned but not yet paid shall be paid, and all Performance Awards for which the performance period has not expired shall be cancelled in exchange for a cash payment equal to the amount that would have been due under such Award(s), valued at either (i) based on the level of achievement of the Performance Goals that had been met on the date immediately prior to the date of the Change in Control or (ii) assuming that the target Performance Goals had been met at the time of such Change of Control, but prorated based on the elapsed portion of the performance period as of the date of the Change of Control, whichever shall result in the greater amount. |
| (D) | All Dividend Equivalent Units that are not vested shall vest (to the same extent as the Award granted in tandem with the Dividend Equivalent Unit, if applicable) and be paid; and |
| (E) | All other Awards that are not vested shall vest and if an amount is payable under such vested Award, such amount shall be paid in cash based on the value of the Award. |
“Change of Control Price” shall mean the per share price paid or deemed paid in the Change of Control transaction, as determined by the Administrator. For purposes of this clause (ii), if the value of an Award is based on the Fair Market Value of a Share, Fair Market Value shall be deemed to mean the Change of Control Price.
| (d) | Parachute Payment Limitation. |
(i) Except as may be set forth in a written agreement by and between the Company and the holder of an Award, in the event that the Company’s auditors determine that any payment or transfer by the Company under this Plan to or for the benefit of a Participant (a “Payment”) would be nondeductible by the Company for federal income tax purposes because of the provisions concerning “excess parachute payments” in Code Section 280G, then the aggregate present value of all Payments shall be reduced (but not below zero) to the Reduced Amount; provided that the foregoing reduction in the Payments shall not apply if the After-Tax Value to the Participant of the Payments prior to reduction in accordance herewith is greater than the After-Tax Value to the Participant if the Payments are reduced in accordance herewith. For purposes of this Section 19(d), the “Reduced Amount” shall be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by the Company because of Code Section 280G. For purposes of determining the After-Tax Value of the Payments, the Participant shall be deemed to pay federal income taxes and employment taxes at the highest marginal rate of federal income and employment taxation in the calendar year in which the Payments are to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of the Participant’s domicile for income tax purposes on the date the Payments are to be made, net of the maximum reduction in federal income taxes that may be obtained from deduction of such state and local taxes.
(ii) If the Company’s auditors determine that any Payment would be nondeductible by the Company because of Code Section 280G, then the Company shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof and of the Reduced Amount and the After-Tax Value. If the present value of all Payments must be reduced under paragraph (i) to the Reduced Amount, then any such payment or benefit shall be reduced or eliminated by applying the following principles, in order: (1) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Section 409A of the Code, then the reduction shall be made pro rata among the payment or benefits (on the basis of the relative present value of the parachute payments). For purposes of this Section 19(d), present value shall be determined in accordance with Code Section 280G(d)(4). All determinations made by the Company’s auditors under this Section 19(d) shall be binding upon the Company and the Participant and shall be made within sixty (60) days of the date when a Payment becomes payable or transferable. As promptly as practicable following such determination hereunder, the Company shall pay or transfer to or for the benefit of the Participant such amounts as are then due to him or her under this Plan and shall promptly pay or transfer to or for the benefit of the Participant in the future such amounts as become due to him or her under this Plan.
(iii) As a result of uncertainty in the application of Code Section 280G at the time of an initial determination by the Company’s auditors hereunder, it is possible that Payments will have been made by the Company that should not have been made (an “Overpayment”) or that additional Payments that will not have been made by the Company could have been made (an “Underpayment”), consistent in each case with the calculation of the Reduced Amount hereunder. In the event that the Company’s auditors, based upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Participant that the auditors believe has a high probability of success, determine that an Overpayment has been made, such Overpayment shall be treated for all purposes as a loan to the Participant which he or she shall repay to the Company, together with interest at the applicable federal rate provided in Code Section 7872(f)(2); provided that no amount shall be payable by the Participant to the Company if and to the extent that such payment would not reduce the amount subject to taxation under Code Section 4999. In the event that the auditors determine that an Underpayment has occurred, such Underpayment shall promptly be paid or transferred by the Company to or for the benefit of the Participant, together with interest at the applicable federal rate provided in Code Section 7872(f)(2).
(iv) For purposes of this Section 19(d), the term “Company” shall include affiliated corporations to the extent determined by the Company’s auditors in accordance with Code Section 280G(d)(5).
| (e) | Certain Modifications. Notwithstanding anything contained in this Section 19, the Board may, in its sole and absolute discretion, amend, modify or rescind the provisions of this Section 19 if it determines that the operation of this Section 19 may prevent a |
Pay vs Performance Disclosure - USD ($)
|
12 Months Ended |
Oct. 31, 2023 |
Oct. 31, 2022 |
Oct. 31, 2021 |
| Pay vs Performance Disclosure |
|
|
|
| Pay vs Performance Disclosure, Table |
| | | | | | | | | | Value of Initial Fixed $100 | | | | | | | | | | | | | | | | Investment Based On: | | | | | | | | | | | | Average | | | | | | | | | | | | | | | | | | Summary | | Average | | | | | | | | | | | | Summary | | | | Compensation | | Compensation | | | | | | | | | | Fiscal | | Compensation | | Compensation | | Table Total for | | Actually Paid to | | | | Peer | | | | | | Year | | Table Total for | | Actually Paid to | | Non-PEO NEOs | | Non-PEO NEOs | | Company | | Group TSR | | Net Loss ($in | | Revenue ($) | | (a) | | PEO ($) (b) | | PEO ($) (b)(c) | | ($) (d) | | ($) (d)(e) | | TSR ($) (f) | | ($) (g) | | millions) (h) | | (i) | | 2023 | | 4,811,321 | | 1,442,474 | | 1,421,886 | | 660,598 | | 55 | | 71 | | (108,056) | | 123,394 | | 2022 | | 2,458,801 | | (3,687,206) | | 1,393,423 | | 581,404 | | 156 | | 120 | | (147,232) | | 130,484 | | 2021 | | 3,585,248 | | 11,728,338 | | 1,235,462 | | 2,386,582 | | 400 | | 164 | | (101,025) | | 69,585 | |
| (a) | This statement includes three fiscal years (2021, 2022, and 2023) rather than five because this is a transition year for the new regulation. |
| (b) | The principal executive officer (“PEO”) is Jason Few for all years shown. |
| (c) | Compensation actually paid (“CAP”) to our PEO reflects the respective amounts set forth in column (b) of the table above, adjusted as set forth in the table below. The assumptions used to calculate the fair values did not differ materially from the assumptions used to calculate the fair values as of the grant dates. |
| | | | | | | | Fiscal Year | | 2021 | | 2022 | | 2023 | | Summary Compensation Table (“SCT”) Total Compensation ($) | | 3,585,248 | | 2,458,801 | | 4,811,321 | | Less: Stock and Option Award Values Reported in SCT for the Covered Year ($) | | (2,641,264) | | (1,306,250) | | (3,732,622) | | Plus: Fair Value for Stock and Option Awards Granted in the Covered Year that are Outstanding and Unvested at End of Year ($) | | 4,073,169 | | 434,375 | | 900,689 | | Change in Fair Value of Outstanding Unvested Stock and Option Awards from Prior Years ($) | | 6,657,887 | | (1,833,203) | | (142,382) | | Fair Value as of Vesting Date for Awards Granted that Vested in Same Year ($) | | — | | — | | — | | Change in Fair Value of Stock and Option Awards from Prior Years that Vested in the Covered Year ($) | | 53,298 | | (3,440,929) | | (394,532) | | Less: Fair Value of Stock and Option Awards Forfeited during the Covered Year ($) | | — | | — | | — | | Compensation Actually Paid ($) | | 11,728,338 | | (3,687,206) | | 1,442,474 | |
| (d) | The following Non-PEO NEOs are included in the average figures shown: 2023: Mr. Bishop, Mr. Dolger, Mr. Lisowski and Mr. Feasel, 2022: Mr. Bishop, Mr. Dolger, Mr. Lisowski and Mr. Feasel, and 2021: Mr. Bishop, Mr. Dolger, Mr. Lisowski, Mr. Leo and Ms. Arasimowicz. |
| (e) | CAP to our non-PEO NEOs reflects the respective amounts set forth in column (d) of the table above, adjusted as set forth in the table below. The assumptions used to calculate the fair values did not differ materially from the assumptions used to calculate the fair values as of the grant dates. |
| | | | | | | | Fiscal Year | | 2021 | | 2022 | | 2023 | | Non-PEO NEOs | | See column (d) note above | | See column (d) note above | | See column (d) note above | | Average SCT Total Compensation ($) | | 1,235,462 | | 1,393,423 | | 1,421,886 | | Less: Average Stock and Option Award Values Reported in SCT for the Covered Year ($) | | (654,102) | | (697,361) | | (799,382) | | Plus: Average Fair Value for Stock and Option Awards Granted in the Covered Year ($) | | 939,440 | | 256,623 | | 187,271 | | Average Change in Fair Value of Outstanding Unvested Stock and Option Awards from Prior Years ($) | | 777,820 | | (336,736) | | (87,520) | | Average Fair Value as of Vesting Date for Awards Granted that Vested in Same Year ($) | | — | | — | | — | | Average Change in Fair Value of Stock and Option Awards from Prior Years that Vested in the Covered Year ($) | | 87,963 | | (34,544) | | (61,657) | | Less: Average Fair Value of Stock and Option Awards Forfeited during the Covered Year ($) | | — | | — | | — | | Average Compensation Actually Paid ($) | | 2,386,582 | | 581,404 | | 660,598 | |
(f) Represents our TSR calculated from October 31, 2020 for the measurement periods ending October 31 of each of 2021, 2022 and 2023, respectively. (g) Represents the peer group TSR calculated from October 31, 2020 for the measurement periods ending on October 31 of each of 2021, 2022 and 2023, respectively. The peer group used for this purpose is the following published industry index: NASDAQ Clean Edge Green Energy Total Return Index. (h) Reflects “Net Loss” in the Company’s audited financial statements included in the Company’s Annual Reports on Form 10-K for each of the years ended October 31, 2021, 2022 and 2023. (i) The Company-selected measure is “Revenue” in the Company’s audited financial statements included in the Company’s Annual Reports on Form 10-K for each of the years ended October 31, 2021, 2022 and 2023.
|
|
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| Company Selected Measure Name |
Revenue
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|
|
| Named Executive Officers, Footnote |
| (b) | The principal executive officer (“PEO”) is Jason Few for all years shown. |
|
|
|
| Peer Group Issuers, Footnote |
(g) Represents the peer group TSR calculated from October 31, 2020 for the measurement periods ending on October 31 of each of 2021, 2022 and 2023, respectively. The peer group used for this purpose is the following published industry index: NASDAQ Clean Edge Green Energy Total Return Index.
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|
|
| PEO Total Compensation Amount |
$ 4,811,321
|
$ 2,458,801
|
$ 3,585,248
|
| PEO Actually Paid Compensation Amount |
$ 1,442,474
|
(3,687,206)
|
11,728,338
|
| Adjustment To PEO Compensation, Footnote |
| (c) | Compensation actually paid (“CAP”) to our PEO reflects the respective amounts set forth in column (b) of the table above, adjusted as set forth in the table below. The assumptions used to calculate the fair values did not differ materially from the assumptions used to calculate the fair values as of the grant dates. |
| | | | | | | | Fiscal Year | | 2021 | | 2022 | | 2023 | | Summary Compensation Table (“SCT”) Total Compensation ($) | | 3,585,248 | | 2,458,801 | | 4,811,321 | | Less: Stock and Option Award Values Reported in SCT for the Covered Year ($) | | (2,641,264) | | (1,306,250) | | (3,732,622) | | Plus: Fair Value for Stock and Option Awards Granted in the Covered Year that are Outstanding and Unvested at End of Year ($) | | 4,073,169 | | 434,375 | | 900,689 | | Change in Fair Value of Outstanding Unvested Stock and Option Awards from Prior Years ($) | | 6,657,887 | | (1,833,203) | | (142,382) | | Fair Value as of Vesting Date for Awards Granted that Vested in Same Year ($) | | — | | — | | — | | Change in Fair Value of Stock and Option Awards from Prior Years that Vested in the Covered Year ($) | | 53,298 | | (3,440,929) | | (394,532) | | Less: Fair Value of Stock and Option Awards Forfeited during the Covered Year ($) | | — | | — | | — | | Compensation Actually Paid ($) | | 11,728,338 | | (3,687,206) | | 1,442,474 | |
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|
| Non-PEO NEO Average Total Compensation Amount |
$ 1,421,886
|
1,393,423
|
1,235,462
|
| Non-PEO NEO Average Compensation Actually Paid Amount |
$ 660,598
|
581,404
|
2,386,582
|
| Adjustment to Non-PEO NEO Compensation Footnote |
| (d) | The following Non-PEO NEOs are included in the average figures shown: 2023: Mr. Bishop, Mr. Dolger, Mr. Lisowski and Mr. Feasel, 2022: Mr. Bishop, Mr. Dolger, Mr. Lisowski and Mr. Feasel, and 2021: Mr. Bishop, Mr. Dolger, Mr. Lisowski, Mr. Leo and Ms. Arasimowicz. |
| (e) | CAP to our non-PEO NEOs reflects the respective amounts set forth in column (d) of the table above, adjusted as set forth in the table below. The assumptions used to calculate the fair values did not differ materially from the assumptions used to calculate the fair values as of the grant dates. |
| | | | | | | | Fiscal Year | | 2021 | | 2022 | | 2023 | | Non-PEO NEOs | | See column (d) note above | | See column (d) note above | | See column (d) note above | | Average SCT Total Compensation ($) | | 1,235,462 | | 1,393,423 | | 1,421,886 | | Less: Average Stock and Option Award Values Reported in SCT for the Covered Year ($) | | (654,102) | | (697,361) | | (799,382) | | Plus: Average Fair Value for Stock and Option Awards Granted in the Covered Year ($) | | 939,440 | | 256,623 | | 187,271 | | Average Change in Fair Value of Outstanding Unvested Stock and Option Awards from Prior Years ($) | | 777,820 | | (336,736) | | (87,520) | | Average Fair Value as of Vesting Date for Awards Granted that Vested in Same Year ($) | | — | | — | | — | | Average Change in Fair Value of Stock and Option Awards from Prior Years that Vested in the Covered Year ($) | | 87,963 | | (34,544) | | (61,657) | | Less: Average Fair Value of Stock and Option Awards Forfeited during the Covered Year ($) | | — | | — | | — | | Average Compensation Actually Paid ($) | | 2,386,582 | | 581,404 | | 660,598 | |
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| Tabular List, Table |
As described in greater detail in the section above entitled “Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for both our long-term and short-term incentive awards are selected to incentivize our NEOs. The five operating performance measures listed below represent the most important metrics we used to link CAP to financial performance for fiscal year 2023, as further described in the section above entitled “Compensation Discussion and Analysis.” Most Important Performance Measures 1. Total Revenue 2. Order Bookings 3. Total Unrestricted Cash 4. Adjusted EBITDA 5. Total Reportable Injury Rate
|
|
|
| Total Shareholder Return Amount |
$ 55
|
156
|
400
|
| Peer Group Total Shareholder Return Amount |
71
|
120
|
164
|
| Net Income (Loss) |
$ (108,056,000)
|
$ (147,232,000)
|
$ (101,025,000)
|
| Company Selected Measure Amount |
123,394,000
|
130,484,000
|
69,585,000
|
| PEO Name |
Jason Few
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|
|
| Measure:: 1 |
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|
| Pay vs Performance Disclosure |
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|
|
| Name |
Total Revenue
|
|
|
| Non-GAAP Measure Description |
(i) The Company-selected measure is “Revenue” in the Company’s audited financial statements included in the Company’s Annual Reports on Form 10-K for each of the years ended October 31, 2021, 2022 and 2023.
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|
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| Measure:: 2 |
|
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| Pay vs Performance Disclosure |
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|
| Name |
Order Bookings
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|
|
| Measure:: 3 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Total Unrestricted Cash
|
|
|
| Measure:: 4 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Adjusted EBITDA
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|
|
| Measure:: 5 |
|
|
|
| Pay vs Performance Disclosure |
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|
|
| Name |
Total Reportable Injury Rate
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|
|
| PEO | Less: Stock and Option Award Values Reported in SCT for the Covered Year ($) |
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|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
$ (3,732,622)
|
$ (1,306,250)
|
$ (2,641,264)
|
| PEO | Plus: Fair Value for Stock and Option Awards Granted in the Covered Year that are Outstanding and Unvested at End of Year ($) |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
900,689
|
434,375
|
4,073,169
|
| PEO | Change in Fair Value of Outstanding Unvested Stock and Option Awards from Prior Years ($) |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
(142,382)
|
(1,833,203)
|
6,657,887
|
| PEO | Change in Fair Value of Stock and Option Awards from Prior years that Vested in the Covered Year ($) |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
(394,532)
|
(3,440,929)
|
53,298
|
| Non-PEO NEO | Less: Stock and Option Award Values Reported in SCT for the Covered Year ($) |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
(799,382)
|
(697,361)
|
(654,102)
|
| Non-PEO NEO | Plus: Fair Value for Stock and Option Awards Granted in the Covered Year that are Outstanding and Unvested at End of Year ($) |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
187,271
|
256,623
|
939,440
|
| Non-PEO NEO | Change in Fair Value of Outstanding Unvested Stock and Option Awards from Prior Years ($) |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
(87,520)
|
(336,736)
|
777,820
|
| Non-PEO NEO | Change in Fair Value of Stock and Option Awards from Prior years that Vested in the Covered Year ($) |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
$ (61,657)
|
$ (34,544)
|
$ 87,963
|