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1. To elect five directors to serve until the 2022 Annual Meeting of Stockholders and until their successors are duly elected and qualified; 2. To ratify the selection of KPMG LLP as FuelCell Energy, Inc.’s independent registered public accounting firm for the fiscal year ending October 31, 2021; 3. To approve, on a non-binding advisory basis, the compensation of FuelCell Energy, Inc.’s named executive officers as set forth in the “Executive Compensation” section of the accompanying Proxy Statement; 4. To approve the amendment of the FuelCell Energy, Inc. Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock of FuelCell Energy, Inc. from 337,500,000 shares to 500,000,000 shares (the “Increase Authorized Shares Proposal”); 5. To approve the amendment and restatement of the FuelCell Energy, Inc. 2018 Omnibus Incentive Plan, as amended and restated; and 6. To transact such other business as may properly come before the Annual Meeting or any adjournment thereof. |
RECORD DATE
ADMISSION TO THE 2021 ANNUAL MEETING
| | REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS: | | | |||||||||
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Visit the website on Or scan the following QR Code | | | Call the telephone number on your proxy card | | | Sign, date and return your proxy card in the enclosed envelope | | | Attend the virtual Annual Meeting See page 5 for instructions on how to attend | | | ||
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| | Please refer to the proxy materials or the information forwarded by your bank, broker or other holder of record to see which voting methods are available to you. | | |
5 5 5 5 5 5 6 6 6 7 8 PROXY STATEMENTPROPOSAL 1 ELECTION OF DIRECTORS 9 9 13 CORPORATE GOVERNANCE12 1213 1213 1213 1314 1314 1314 1314 1314 1415 1415 1415 1415 1516 1516 1617 2122 24 EXECUTIVE COMPENSATION23 2324 2324 3536 3637 3738 3839 45 DIRECTOR COMPENSATION44 4445 4546 4546 4546 4546 47 46 4748 4748 FUELCELL ENERGY, INC. | PROXY STATEMENT 3
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THE INCREASE AUTHORIZED SHARES PROPOSAL | | | | | 53 | | ||
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THE AMENDMENT AND RESTATEMENT OF THE 2018 OMNIBUS INCENTIVE PLAN PROPOSAL | | | | | 55 | | ||
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FUELCELL ENERGY, INC. SECOND AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN |
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| | Online at www.proxyvote.com | | | | By telephone at 1-800-690-6903 | |||||
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| | Online using your mobile device by scanning the QR Code | | | | By mail by voting, signing and timely mailing your Proxy Card | |
| Time and Date: | | | Thursday, April 8, 2021 at 10:00 a.m. (EDT) | |
| Virtual Meeting Address: | | | www.virtualshareholdermeeting.com/FCEL2021 | |
Board & Management Recommendation | Page Reference (for more detail) | ||||
1. | To elect five directors to serve until the 2022 Annual Meeting of Stockholders and until their successors are duly elected and qualified | FOR each Director Nominee | 9 | ||
2. | To ratify the selection of KPMG LLP as FuelCell Energy, Inc.’s independent registered public accounting firm for the fiscal year ending October 31, 2021 | FOR | 50 | ||
3. | To approve, on a non-binding advisory basis, the compensation of FuelCell Energy, Inc.’s named executive officers as set forth in the “Executive Compensation” section of the accompanying Proxy Statement | FOR | 50 | ||
4. | To approve the amendment of FuelCell Energy, Inc. Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock of FuelCell Energy, Inc. from 337,500,000 shares to 500,000,000 shares (the “Increase Authorized Shares Proposal”) |
FOR | 51 | ||
5. | To approve the amendment and restatement of the FuelCell Energy, Inc. 2018 Omnibus Incentive Plan, as amended and restated | FOR | 53 | ||
| | | | Board & Management Recommendation | | | Page Reference (for more detail) | | |||
| 1. To elect five directors to serve until the 2022 Annual Meeting of Stockholders and until their successors are duly elected and qualified | | | FOR each Director Nominee | | | | | 9 | | |
| 2. To ratify the selection of KPMG LLP as FuelCell Energy, Inc.’s independent registered public accounting firm for the fiscal year ending October 31, 2021 | | | FOR | | | | | 51 | | |
| 3. To approve, on a non-binding advisory basis, the compensation of FuelCell Energy, Inc.’s named executive officers as set forth in the “Executive Compensation” section of the accompanying Proxy Statement | | | FOR | | | | | 52 | | |
| 4. To approve the amendment of the FuelCell Energy, Inc. Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock of FuelCell Energy, Inc. from 337,500,000 shares to 500,000,000 shares (the “Increase Authorized Shares Proposal”) | | | FOR | | | | | 53 | | |
| 5. To approve the amendment and restatement of the FuelCell Energy, Inc. 2018 Omnibus Incentive Plan, as amended and restated | | | FOR | | | | | 55 | | |
Name | Age | Director Since | Primary Occupation | |||
James H. England*† | 74 | 2008 | Chief Executive Officer of Stahlman-England Irrigation, Inc. | |||
Jason Few | 54 | 2018 | President, Chief Executive Officer and Chief Commercial Officer of FuelCell Energy, Inc. | |||
Chris Groobey* | 55 | 2019 | Former Partner, Wilson Sonsini Goodrich & Rosati | |||
Matthew F. Hilzinger* | 58 | 2015 | Former Executive Vice President and Chief Financial Officer of USG Corporation | |||
Natica von Althann* | 70 | 2015 | Former Financial Executive at Bank of America and Citigroup |
| Name | | | Age | | | Director Since | | | Primary Occupation | |
| James H. England*† | | | 74 | | | 2008 | | | Chief Executive Officer of Stahlman-England Irrigation, Inc. | |
| Jason Few | | | 54 | | | 2018 | | | President, Chief Executive Officer and Chief Commercial Officer of FuelCell Energy, Inc. | |
| Chris Groobey* | | | 55 | | | 2019 | | | Former Partner, Wilson Sonsini Goodrich & Rosati | |
| Matthew F. Hilzinger* | | | 58 | | | 2015 | | | Former Executive Vice President and Chief Financial Officer of USG Corporation | |
| Natica von Althann* | | | 70 | | | 2015 | | | Former Financial Executive at Bank of America and Citigroup | |
FuelCell Energy’s clean, efficient and reliable fuel cell power platforms assist our customers in achieving their environmental and sustainability goals. Our patented technologies offer sustainable alternatives to traditional internal combustion-based power generation. Traditional power plants typically produce harmful emissions, such as nitrogen oxides, sulfur oxides and particulate matter, that are a serious public health concern. In contrast, FuelCell Energy power 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. The following table illustrates our view of some of the key attributes and benefits of our power platforms.
| | Director Nominee Key Characteristics and Experience include: | | | |||
| | ■ Technology Commercialization | | | ■ Leadership | | |
| | ■ Corporate & International Finance | | | ■ Manufacturing | | |
| | ■ Financial Management | | | ■ Regulatory | | |
| | ■ Global Power Project Development | | | ■ Legal | | |
| | ■ Government Affairs | | | ■ Risk Management | | |
| | ■ Energy & Utility Sectors | | | ■ Strategic Planning | | |
| | ■ Project Finance |
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DIRECTOR NOMINEES
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JAMES H. ENGLAND | | |||||||
| Age 74 Director since: 2008 INDEPENDENT Chairman of the Board of Directors since 2018 | | | | ||||
| BIOGRAPHY: Mr. England is a Corporate Director and has been the CEO of Stahlman-England Irrigation, Inc. since 2000. Prior to that, Mr. England spent 4 years as Chairman, President and CEO of Sweet Ripe Drinks, Ltd., a fruit beverage company. Prior to that, he spent 18 years at John Labatt Ltd. and served as that company’s CFO from 1990-1993, during which time John Labatt Ltd. was a public company with a market capitalization of over $5 billion. Mr. England started his career with Arthur Andersen & Co. in Toronto after serving in the Canadian infantry. Mr. England is a director of Enbridge Inc., and is a past member of the board of directors of John Labatt, Ltd., Canada Malting Co., Ltd., and the St. Clair Paint and Wallpaper Corporation. | | ||||||
| SKILLS AND QUALIFICATIONS INCLUDE: ■ Board and Executive Level Leadership ■ Broad International Exposure ■ High Level of Financial Expertise ■ Extensive Energy Industry Experience ■ Extensive Knowledge of the Company | | | PRINCIPAL OCCUPATION: ■ Chief Executive Officer of Stahlman-England Irrigation Inc. |
| JASON FEW | | ||||||
| Age 54 Director since: 2018 | | | | ||||
| BIOGRAPHY: Mr. Few was appointed President and Chief Executive Officer in August 2019 and Chief Commercial Officer in September 2019. Prior to joining FuelCell Energy, Mr. Few served as the President of Sustayn Analytics LLC, a cloud-based software waste and recycling optimization company, since 2018, and as the Founder and Senior Managing Partner of BJF Partners, LLC, a privately held strategic consulting firm, since 2016. Mr. Few has over 30 years of experience increasing enterprise value for Global Fortune 500 and privately held technology, telecommunication, and energy firms. Mr. Few has overseen transformational opportunities across the technology and industrial energy sectors, including with Continuum Energy, an energy products and services company, where Mr. Few served as President and Chief Executive Officer from 2013 to 2016, NRG Energy, Inc., an integrated energy company, where he served in various roles including Executive Vice President and Chief Customer Officer from 2009 to 2012, Reliant Energy, a retail electricity provider, where he was President from 2009 to 2012, and Smart Energy, a retail electricity provider, where he was Senior Vice President from 2008 to 2009. Mr. Few also has served as a Senior Advisor to Verve Industrial Protection, an industrial cybersecurity software company, since 2016. Mr. Few was elected to the board of Marathon Oil (NYSE: MRO) effective April 1, 2019, and is a member of Marathon Oil’s Audit and Finance and Corporate Governance and Nominating Committees. Mr. Few is active in his community serving on the board of Memorial Hermann Hospital and formerly the American Heart Association. He earned a | | ||||||
| SKILLS AND QUALIFICATIONS INCLUDE: ■ Board and Executive Level Leadership ■ Broad Understanding of Advanced Technologies ■ Extensive Energy Industry Experience ■ Experience with Global Publicly Traded Companies ■ Risk Management / Oversight | | | PRINCIPAL OCCUPATION: ■ President, Chief Executive Officer & Chief Commercial Officer | |
| CHRIS GROOBEY | | ||||||
| Age 55 Director since: 2019 INDEPENDENT | |
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| BIOGRAPHY: Mr. Groobey joined the Board of the Company following a twenty-year career as a leading lawyer in the renewable energy industry. He was most recently a partner from 2009-2015 at the technology-focused law firm Wilson Sonsini Goodrich & Rosati and previously was a partner with the international law firm Baker & McKenzie from 2004-2009. He also practiced with the law firms Chadbourne & Parke from 1995-1999 and from 2001-2004 and Perkins Coie from 1991-1995. During Mr. Groobey’s legal career, he represented established and emerging renewable energy and energy technology companies, and the institutions that finance them, in transactions around the globe. He led numerous first-of-a-kind and deal-of-the-year transactions and was regularly selected as a leading lawyer in national and global publications. Mr. Groobey brings to the board extensive experience in corporate law and finance, project development and finance, and the development and commercialization of new energy technologies. He earned his Juris Doctor from the University of Chicago Law School and a Bachelor of Arts from Hampshire College. | | |||
| SKILLS AND QUALIFICATIONS INCLUDE: ■ Executive Leadership ■ Financial Expertise ■ Energy Project Finance and Structuring Experience ■ Extensive Energy Industry Experience ■ Experience with Global Transactions ■ High Level of Legal Experience | | | PRINCIPAL OCCUPATION: ■ Former Partner at Wilson Sonsini, Goodrich & Rosati | |
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MATTHEW F. HILZINGER | | |||||||
| Age 58 Director since: 2015 INDEPENDENT | | | | ||||
| BIOGRAPHY: Mr. Hilzinger was the Executive Vice President and Chief Financial Officer of USG Corporation, an international building products company, from 2012-2019. In that position, he oversaw all financial activities as well as strategic planning. From March 2002 to 2012, Mr. Hilzinger was with Exelon Corporation, where he served as Chief Financial Officer from 2008 to 2012 responsible for finance and risk management, and as Corporate Controller from 2002 to 2008. Prior to joining Exelon, Mr. Hilzinger was Chief Financial Officer at Credit Acceptance Corporation in 2001. From 1997 to 2001, Mr. Hilzinger was at Kmart Corporation, where he last served as Vice President, Corporate Controller. From 1990 to 1997, Mr. Hilzinger was at Handleman Company, where he last served as Vice President, International Operations. Mr. Hilzinger started his career at Arthur Andersen & Co. from 1985 to 1990. Mr. Hilzinger is a graduate of the University of Michigan, with a BBA in accounting. | | ||||||
| SKILLS AND QUALIFICATIONS INCLUDE: ■ Executive Leadership ■ High Level of Financial Expertise ■ Extensive Energy Industry Experience ■ Experience with Global Publicly Traded Companies ■ Risk Management / Oversight | | | PRINCIPAL OCCUPATION: ■ Former Executive Vice President and Chief Financial Officer of USG Corporation | |
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NATICA VON ALTHANN | | |||||||
| Age 70 Director since: 2015 INDEPENDENT | | | | ||||
| BIOGRAPHY: Ms. von Althann has served as a Director of PPL Corporation, one of the largest investor-owned utilities in the U.S. with approximately 18,000 megawatts of power generation, since December 1, 2009 and as a Director of TD Bank US Holding Company and its two bank subsidiaries, TD Bank, N.A. and TD Bank USA, N.A., since 2009. She was a founding partner of C&A Advisors, a consulting firm for financial services and risk management from 2009 to 2013, following her retirement in 2008 as the Senior Credit Risk Management Executive for Bank of America and Chief Credit Officer of U.S. Trust, an investment management company owned by Bank of America. Previously, she spent 26 years with Citigroup in various leadership roles, including Division Executive | | ||||||
| SKILLS AND QUALIFICATIONS INCLUDE: ■ Board and Executive Level Leadership Experience ■ High Level of Banking and Financial Expertise ■ Broad International Exposure ■ Risk Management / Oversight ■ Exposure to Energy and Utility Sectors ■ Strong Focus on Strategy Development and Implementation | | | PRINCIPAL OCCUPATION: ■ Former Financial Executive at Bank of America and Citigroup | ||||
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In December, 2020, the Board, upon the recommendation of the Nominating and Corporate Governance Committee, voted to utilize the exception to the director term limit policy to allow Mr. England to stand for re-election at the 2021 Annual Meeting despite his having
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
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 | |
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.
Director | | | Audit and Finance | Compensation | | | Executive | | | Nominating and Corporate Governance | | |||
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James H. England (Chairman of the Board) | | | | | | | | | ||||||
| Jason Few | | | | | | | | | | | | ||
| Chris Groobey | | | | | | | |||||||
| Matthew F. Hilzinger | | | | | | | |||||||
| Natica von Althann | | | | | | |
Audit and Finance Committee | | | ||
| | ■ Current Members: Matthew F. Hilzinger, James H. England, Chris Groobey and Natica von Althann Current Chair: Matthew F. Hilzinger Our Committee structure changed on November 20, 2019 with the appointment of Mr. Groobey to the Board. The members of the Audit and Finance Committee in fiscal year 2020 were James H. England, Matthew F. Hilzinger, Natica von Althann and Chris Groobey (from the date of his appointment on November 20, 2019). Mr. Hilzinger was Chair of the Audit and Finance Committee throughout fiscal year 2020. Each of the Audit and Finance Committee members satisfies the definition of independent director and is financially literate under the applicable Nasdaq and SEC rules (including those specifically applicable to audit committee members). In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, the Board has designated Mr. Hilzinger and Mr. England as the Audit and Finance Committee’s “Audit Committee Financial Experts.” | | |
| | The Audit and Finance Committee represents and provides assistance to the Board with respect to matters involving the accounting, auditing, financial reporting, internal controls, and legal compliance functions of the Company and its subsidiaries, including assisting the Board in its oversight of the integrity of the Company’s financial statements, compliance with legal and regulatory requirements, the qualifications, independence, and performance of the Company’s independent auditors, the performance of the Company’s service firm used to assist management in its assessment of internal controls, and effectiveness of the Company’s financial risk management. The Audit and Finance Committee routinely holds executive sessions with the Company’s independent registered public accounting firm without the presence of management. Responsibilities of the Audit and Finance Committee include: ■ Overseeing management’s conduct of the Company’s financial reporting process, including reviewing the financial reports and other financial information provided by the Company, and reviewing the Company’s systems of internal accounting and financial controls; ■ Overseeing the Company’s independent auditors’ qualifications and independence and the audit and non-audit services provided to the Company; ■ Overseeing the performance of the Company’s independent auditors as well as parties engaged to assist the Company with its assessment of internal controls; ■ Reviewing potential financing proposals and referring them to the Board as necessary; and ■ Overseeing the Company’s analysis and mitigation strategies for enterprise risk (reporting any findings to the Board as necessary). The Audit and Finance Committee held 9 meetings during fiscal year 2020. The complete Audit and Finance Committee charter can be found in the Corporate Governance sub-section of the section entitled “Investors” on our website at www.fuelcellenergy.com. The Audit and Finance Committee’s report appears on page | | |
| | Compensation Committee | | |
| | ■ Current Members: Matthew F. Hilzinger, Chris Groobey and Natica von Althann Current Chair: Matthew F. Hilzinger Our Committee structure changed on November 20, 2019 with the appointment of Chris Groobey as a Director. The members of the Compensation Committee in fiscal year 2020 were Matthew F. Hilzinger, Natica von Althann and Chris Groobey (from the date of his appointment on November 20, 2019). Mr. Hilzinger served as Chair of the Compensation Committee throughout fiscal year 2020. Each of the current Compensation Committee members is an independent Director under applicable Nasdaq and SEC rules (including the rules applicable to compensation committee members), and the Compensation Committee is governed by a Board-approved charter stating its responsibilities. Members of the Compensation Committee are appointed by the Board. The Compensation Committee is responsible for reviewing and approving the compensation plans, policies and programs of the Company to compensate the officers and Directors in a reasonable and cost-effective manner. The Compensation Committee’s overall objectives are to ensure the attraction and retention of superior talent, to motivate the performance of the executive officers in the achievement of the Company’s business objectives and to align the interests of the officers and Directors with the long-term interests of the Company’s stockholders. To that end, it is the responsibility of the |
Compensation Committee to develop, approve and periodically review a general compensation policy and salary structure for executive officers of the Company, which considers business and financial objectives, industry and market pay practices and/or such other information as may be deemed appropriate. | | | ||
| | Responsibilities of the Compensation Committee include: ■ Reviewing and recommending for approval by the independent Directors of the Board the compensation (salary, bonus and other | | |
| | incentive compensation) of the Chief Executive Officer of the Company; ■ Reviewing and approving the compensation (salary, bonus and other incentive compensation) of the other executive officers of the Company; ■ Reviewing and approving milestones and strategic initiatives relevant to the compensation of executive officers of the Company and evaluating performance in light of those goals and objectives; ■ Reviewing and approving all employment, retention and severance agreements for executive officers of the Company; and ■ Reviewing the management succession program for the Chief Executive Officer, the named executive officers and other selected executives of the Company. The Compensation Committee acts on behalf of the Board in administering compensation plans approved by the Board in a manner consistent with the terms of such plans (including, as applicable, the granting of stock options, restricted stock, stock units and other awards, the review of performance goals established before the start of the relevant plan year, and the determination of performance compared to the goals at the end of the plan year). The Committee reviews and makes recommendations to the Board with respect to new compensation incentive plans and equity-based plans; reviews and recommends the compensation (annual retainer, committee fees and other compensation) of the Directors to the full Board for approval; and reviews and makes recommendations to the Board on changes in major benefit programs of the Company. Compensation Committee agendas are established in consultation with the Committee chair. The Compensation Committee meets in executive session at each Committee meeting. The Compensation Committee held 13 meetings during fiscal year 2020. The complete Compensation Committee charter can be found in the Corporate Governance sub-section of the section entitled “Investors” on our website at www.fuelcellenergy.com. The Compensation Committee’s report appears on page | | |
| | Executive Committee | | |
| | ■ Current Members: Jason Few, James H. England, Matthew F. Hilzinger, Chris Groobey and Natica von Althann Current Chair: Jason Few | | |
| | During the intervals between Board meetings, the Executive Committee has and may exercise all the powers of the Board in the management of the business and affairs of the Company, in such manner as the Committee deems in the best interests of the Company, in all cases in which specific instructions have not been given by the Board. Mr. England, Mr. Hilzinger, Mr. Groobey and Ms. von Althann are independent directors under applicable Nasdaq rules. The current members of the Executive Committee were also members of the Executive Committee in fiscal year 2020, including Mr. Groobey, who joined the Committee upon his appointment to the Board on November 20, 2019. | | |
| | The Executive Committee held 9 meetings during fiscal year 2020. | | |
| | Nominating and Corporate Governance Committee | | |
| | ■ Current Members: Natica von Althann, Matthew F. Hilzinger, James H. England and Chris Groobey Current Chair: Natica von Althann Our Committee structure changed on November 20, 2019 with the appointment of Chris Groobey as a Director. The members of the Nominating and Corporate Governance Committee in fiscal year 2020 were Matthew F. Hilzinger, James H. England, Natica von Althann and Chris Groobey (from the date of his appointment on November 20, 2019). Ms. von Althann was Chair of the Nominating and Corporate Governance Committee throughout fiscal year 2020. Each of the current members of the Nominating and Corporate Governance Committee is an independent director under applicable Nasdaq rules. Members of the Nominating and Corporate Governance Committee are appointed by the Board. Responsibilities of the Nominating and Corporate Governance Committee include: |
■ Identifying individuals qualified to become members of the Board and recommending the persons to be nominated by the Board for election as Directors at the annual meeting of stockholders or elected as Directors to fill vacancies; ■ Reviewing the Company’s corporate governance principles, assessing and recommending to the Board any changes deemed appropriate; ■ Periodically reviewing, discussing and assessing the performance of the Board and the committees of the Board; ■ Reviewing the Board’s committee structure and making recommendations to the full Board concerning the number and responsibilities of Board committees and committee assignments; and ■ Periodically reviewing and reporting to the Board any questions of possible conflicts of interest or related party transactions involving Board members or members of senior management of the Company. The Nominating and Corporate Governance Committee will consider nominees for the Board recommended by stockholders. Nominations by stockholders must be in writing, and must include the full name of the proposed nominee, a brief description of the proposed nominee’s business experience for at least the previous five years, and a representation that the nominating stockholder is | | |
| | a beneficial or record owner of the Company’s common stock. Any such submission must also be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as Director if elected. All recommendations for nomination received by the Corporate Secretary that satisfy our amended and restated by-law requirements relating to such Director nominations will be presented to the Nominating and Corporate Governance Committee for its consideration. Stockholders must also satisfy the notification, timeliness, consent and information requirements set forth in our amended and restated by-laws. Nominations must be delivered to the Nominating and Corporate Governance Committee at the following address: Nominating and Corporate Governance Committee FuelCell Energy, Inc. Office of the Corporate Secretary 3 Great Pasture Road Danbury, CT 06810 The Nominating and Corporate Governance Committee weighs the characteristics, experience, independence and skills of potential candidates for election to the Board and recommends nominees for Director to the Board for election (without regard to whether a nominee has been recommended by stockholders). In considering candidates for the Board, the Nominating and Corporate Governance Committee also assesses the size, composition and combined expertise of the Board. As the application of these factors involves the exercise of judgment, the Nominating and Corporate Governance Committee does not have a standard set of fixed qualifications that is applicable to all Director candidates, although the Nominating and Corporate Governance Committee does at a minimum assess each candidate’s strength of character, mature judgment, industry knowledge or experience, ability to work collegially with the other members of the Board and ability to satisfy any applicable legal requirements or listing standards. The Nominating and Corporate Governance Committee is committed to actively seeking highly qualified individuals, and requires a diverse candidate pool, including individuals of diverse gender and ethnicity, from which Board nominees are selected. In identifying prospective Director candidates, the Nominating and Corporate Governance Committee may seek referrals from other members of the Board, management, stockholders and other sources. The Nominating and Corporate Governance Committee also may, but need not, retain a search firm in order to assist it in identifying candidates to serve as Directors of the Company. The Nominating and Corporate Governance Committee utilizes the same criteria for evaluating candidates regardless of the source of the referral. When considering Director candidates, the Nominating and Corporate Governance Committee seeks individuals with backgrounds and qualities that, when combined with those of our incumbent Directors, provide a blend of skills and experience to further enhance the Board’s effectiveness. In connection with its annual recommendation of a slate of Director nominees, the Nominating and Corporate Governance Committee may also assess the contributions of those Directors recommended for re-election in the context of the Board evaluation process and other perceived needs of the Board. The Nominating and Corporate Governance Committee held 5 meetings during fiscal year 2020. The complete Nominating and Corporate Governance Committee charter, which includes the general criteria for nomination as a Director, can be found in the Corporate Governance subsection of the section entitled “Investors” on our website at www.fuelcellenergy.com. | | |
| MICHAEL S. BISHOP | | |||
| Age 53 | | | Mr. Bishop was appointed Executive Vice President in June 2019 and has served as the Company’s Chief Financial Officer and Treasurer since June 2011. Mr. Bishop previously served as Senior Vice President of the Company from June 2011 to June 2019. He has more than 20 years of experience in financial operations and management with public high growth technology companies with a focus on capital raising, project finance, debt/treasury management, investor relations, strategic planning, internal controls, and organizational development. Since joining the Company in 2003, Mr. Bishop has held a succession of financial leadership roles, including Assistant Controller, Corporate Controller and Vice President and Controller. Prior to joining FuelCell Energy, Mr. Bishop held finance and accounting positions at TranSwitch Corporation, Cyberian Outpost, Inc. and United Technologies, Inc. He is a certified public accountant and began his professional career at McGladrey and Pullen, LLP (now RSM US LLP). Mr. Bishop also served four years in the United States Marine Corps. Mr. Bishop received a Bachelor of Science in Accounting from Boston University and a MBA from the University of Connecticut. | |
| | | | PRINCIPAL : ■ Executive Vice President, Chief Financial Officer and Treasurer | |
| JENNIFER D. ARASIMOWICZ | | |||
| Age 49 | | | Ms. Arasimowicz was appointed Chief Administrative Officer in September 2019 and has served as Executive Vice President since June 2019, and General Counsel and Corporate Secretary since April 2017. In her current position (and in her prior positions), Ms. Arasimowicz, a licensed attorney in Connecticut, New York and Massachusetts, is (and was) the chief legal officer, chief administrative officer, and chief compliance officer of the Company, having responsibility for oversight of all of the Company’s legal, administrative and government affairs, and providing leadership in all aspects of the Company’s business, including compliance, corporate governance and board activities. Ms. Arasimowicz joined the Company in 2012 as Associate Counsel and was promoted to Vice President in 2014 and Senior Vice President in 2016. Ms. Arasimowicz also previously served as Interim President from June 2019 to August 2019 and as Chief Commercial Officer from June 2019 to September 2019. Prior to joining the Company, Ms. Arasimowicz served as General Counsel of Total Energy Corporation, a New York based diversified energy products and services company providing a broad range of specialized services to utilities and industrial companies. Previously, Ms. Arasimowicz was a partner at Shipman & Goodwin, LLP in Hartford, Connecticut, chairing the Utility Law Practice Group and began her legal career as an associate at Murtha Cullina, LLP. Ms. Arasimowicz earned her Juris Doctor at Boston University School of Law and holds a bachelor’s degree in English from Boston University. | |
| | | | PRINCIPAL OCCUPATION: ■ Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary | |
| MICHAEL J. LISOWSKI | | |||
| Age 51 | | | Mr. Lisowski was appointed Executive Vice President and Chief Operating Officer in June 2019. Mr. Lisowski has served as the Company’s Vice President of Global Operations since 2018, and, from 2001 to 2018, held various other positions within the Company, including Vice President of Supply Chain from 2010 to 2018. Mr. Lisowski is a senior global operations leader with 28 years of progressive operations experience in technology-driven businesses. In his position as the Company’s Chief Operating Officer (and in his prior position as the Company’s Vice President of Global Operations), Mr. Lisowksi is (and was) responsible for the Supply Chain, Manufacturing, Quality, Project Management, Environmental Health and Safety, and Plant Engineering functions of the Company. Additionally, Mr. Lisowski and his team are responsible for the development and qualification of strategic suppliers for critical direct materials, as well as procurement of capital equipment in support of operations. Mr. Lisowski earned his Bachelor’s Degree in Communications and Business Administration at Western New England University and a Master’s Degree in Management, Global Supply Chain Integrations from Rensselaer Polytechnic Institute. | |
| | | | PRINCIPAL OCCUPATION: ■ Executive Vice President and Chief Operating Officer |
| ANTHONY J. LEO | | |||
| Age 63 | | | Mr. Leo was appointed Executive Vice President and Chief Technology Officer in June 2019 and, prior to that, served as Vice President of Applications and Advanced Technologies since 2014. From 1978 to 2014, Mr. Leo has held various other positions with the Company, including Vice President of Application Engineering and Advanced Technology Development, Vice President of Applications and OEM Engineering, and Vice President of Product Engineering. Mr. Leo has held key leadership roles in the Company’s research, development, and commercialization of stationary fuel cell power plants for more than 30 years. In his current position and in his position as the Company’s Vice President of Applications and Advanced Technologies, Mr. Leo is and has been responsible for Applications and Advanced Technology Development. In Mr. Leo’s other positions with the Company, he has been responsible for managing advanced research and development of rechargeable batteries and fuel cells, managing the first large-scale demonstration stationary fuel cell project, and establishing the Product Engineering Group. Mr. Leo earned his Bachelor of Science Degree in Chemical Engineering from Rensselaer Polytechnic Institute and has served on the U.S. Department of Energy Hydrogen and Fuel Cell Technical Advisory Committee. | |
| | | | PRINCIPAL OCCUPATION: ■ Executive Vice President and Chief Technology Officer |
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| JASON FEW | | | President, Chief Executive Officer and Chief Commercial Officer (the “CEO”) | |
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| MICHAEL S. BISHOP | | | Executive Vice President, Chief Financial Officer and Treasurer (the “CFO”) | |
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| JENNIFER D. ARASIMOWICZ | | | Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary (the | |
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MICHAEL J. LISOWSKI
| | | Executive Vice President and Chief Operating Officer (the “COO”) | | |
| ANTHONY J. LEO | | | Executive Vice President and Chief Technology Officer (the “CTO”) | |
Our compensation program is intended to motivate and incentivize our executive officers to achieve our corporate objectives and increase stockholder value. The Compensation Committee continues to evaluate how best to structure our compensation program to ensure that our executives are being appropriately and competitively compensated while also maintaining compensation levels commensurate with our business performance. During fiscal year 2020, as part of our effort to better align our compensation program with best practices, we utilized the services of our new compensation consultant, Meridian Compensation Partners, LLC (“Meridian”), to evaluate our executive compensation programs. Additionally, we engaged in a stockholder outreach campaign as further described below. Our fiscal year 2020 compensation program was informed by these efforts.
| | | | Compensation Component | | | Purpose | |
FIXED | | | Base Salary Paid in cash | | | √ Provide a competitive fixed rate of pay relative to similar positions in the market. | | |
| | | | | | | √ Enable the Company to attract and retain critical executive talent. | |
| AT RISK | | | Annual or Short-Term Incentives Paid | | | √ Focus executive officers on achieving progressively challenging short-term performance goals that align with the Company’s annual operating plan and result in long-term value creation. | |
| AT RISK | | | Long-Term Incentives Paid | | | √ Historically, when long-term incentive equity awards were granted, they were granted as time-based restricted stock awards or restricted stock units. √ In fiscal year 2020, the Compensation Committee with the assistance of its independent compensation consultant, implemented a new Long-Term Incentive Plan with a balanced mix of performance-based restricted stock units and time-based restricted stock units that focus our executive officers on longer-term relative and absolute performance goals that strongly align with and drive stockholder value creation, as well as support the Company’s leadership retention strategy. | |
Chairman of the Compensation Committee, met with stockholders and held investor meetings by teleconference or video conference. In total, during the last nine months of fiscal year 2020, management invited our top 150 stockholders to meet. These stockholders represented approximately 32% of our outstanding shares as of the date of our reconvened 2020 Annual Meeting on May 8, 2020. Of those contacted, management and Board members spoke with 77 stockholders and institutions, including 10 of our largest 20 stockholders as of the date of our reconvened 2020 Annual Meeting. Also during fiscal year 2020, the Company participated in 3 investor conferences and non-deal road shows in order to make its management team accessible to investors.
competitive market analysis that was prepared by Meridian at the beginning of fiscal year 2020. In sum, the Meridian analysis demonstrated that the Company’s overall compensation programs were generally aligned with typical market practices, although Meridian recommended changes to the Company’s long-term incentive program to better align pay with performance.
| American Superconductor | | | Orion Energy Systems | |
| Amyris | | | Park Electrochemical | |
| Ballard Power Systems | | | Plug Power | |
| Broadwind Energy | | | Thermon Group Holdings | |
| Capstone Turbine | | | Ultralife | |
| CECO Environmental | | | Vicor | |
| Clean Energy Fuels | | | Vishay Precision Group | |
| Digi International | | | Westport Fuel Systems | |
| EMCORE | | | | |
| | | | Base Salaries | | |||||||||||||||||||||
| Name | | | 2019 Base ($) | | | 2020 Base ($) | | | Increase ($) | | | Increase % | | ||||||||||||
| Mr. Few | | | | | 475,000 | | | | | | 475,000 | | | | | | 0 | | | | | | 0 | | |
| Mr. Bishop | | | | | 385,000 | | | | | | 385,000 | | | | | | 0 | | | | | | 0 | | |
| Ms. Arasimowicz | | | | | 365,000 | | | | | | 365,000 | | | | | | 0 | | | | | | 0 | | |
| Mr. Lisowski | | | | | 325,000 | | | | | | 325,000 | | | | | | 0 | | | | | | 0 | | |
| Mr. Leo | | | | | 275,000 | | | | | | 275,000 | | | | | | 0 | | | | | | 0 | | |
Base Salaries | |||||||||
Name | 2019 Base ($) | 2020 Base ($) | Increase ($) | Increase % | |||||
Mr. Few | 475,000 | 475,000 | 0 | 0 | |||||
Mr. Bishop | 385,000 | 385,000 | 0 | 0 | |||||
Ms. Arasimowicz | 365,000 | 365,000 | 0 | 0 | |||||
Mr. Lisowski | 325,000 | 325,000 | 0 | 0 | |||||
Mr. Leo | 275,000 | 275,000 | 0 | 0 |
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% of their target annual incentive award opportunity) and a set of pre-established Company strategic or operational initiatives (which represent the remaining 25% 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 operational milestones and strategic or operational initiatives. 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 or operational initiatives creates a performance-based compensation
Fiscal Year 2020 Original Operational Milestones | |||||
Category | Target Achievement | ||||
Milestone | Weighting | 125% | 100% | 75% | 50% |
Achieve FY Revenue Target | 20% | $107M | $82M | $75M | $70M |
Secure New Orders | 25% | 45MW | 20MW | 15MW | 10MW |
Achieve Gross Margin Targets | 20% | 18% | 14% | 12% | 10% |
Operating Expenses | 20% | $32.9M | $34.4M | $35.4M | $36.4M |
New Generation MW Fleet Performance Improved | 15% | 92% | 91% | 90% | 88% |
Fiscal Year 2020 Original Strategic Initiatives
FUELCELLENERGY, INC. | PROXY STATEMENT 31 Executive Compensation
The revised operational milestones and strategic initiatives and their respective weighting as determined by the Compensation Committee, and the Company’s forecasted achievement were:
Fiscal Year 2020 Revised Operational Milestones
Fiscal Year 2020 Revised Strategic Initiatives
(1) Payouts were based on forecasted achievement based on information available at the time of performance achievement evaluation at the close of the fiscal year, prior to completion of the Company’s audited financials and release of the Annual Report on Form 10-K for the fiscal year ended October 31, 2020. Payouts were not adjusted based on the completed audited financials. 32 FUELCELLENERGY, INC. | PROXY STATEMENT Executive Compensation PERFORMANCE RESULTS AND ANNUAL INCENTIVE AWARD PAYMENTS FOR FISCAL YEAR 2020 At the end of fiscal year 2020, the Compensation Committee reviewed the Company’s performance as measured against the Company’s revised operational milestones and strategic initiatives, which resulted in an annual incentive award achievement percentage of 69% of the target award levels, determined as follows. Comparing the Company’s performance against the range of pre-established target levels for these revised operational milestones, the Compensation Committee calculated a weighted achievement percentage for each milestone, the sum of which yielded a total weighted achievement percentage. The Company’s overall performance with respect to the revised operational milestones for fiscal year 2020 resulted in a calculated aggregate weighted achievement percentage of 62%. With respect to the fiscal year 2020 Company revised strategic initiatives, the Compensation Committee compared the Company’s performance against the pre-established target objectives for these initiatives, and calculated a weighted achievement percentage for each strategic initiative, the sum of which yielded a total weighted achievement percentage. Our overall performance with respect to the revised strategic initiatives for fiscal year 2020 resulted in a calculated weighted achievement percentage of 90%. Applying the relative weighting of each performance category (75% for the operational milestones and 25% for the strategic initiatives), the Compensation Committee determined that the blended annual incentive award achievement percentage was equal to 69% of the target award levels. In determining the annual incentive award payments to be made for fiscal year 2020, the Compensation Committee also considered the progress made by the Company over the fiscal year in executing on its business plan despite the COVID-19 pandemic and determined to adjust the annual incentive award payment percentage for fiscal year 2020 to 70%. After reviewing the blended annual incentive award achievement percentage, evaluating the Company’s performance, financial position, stock performance, and response to the unanticipated and significant challenges posed by the COVID-19 pandemic, and considering the recommendations of the CEO (with respect to the executive officers other than himself), the Compensation Committee determined to adjust the annual incentive award payment percentages for fiscal year 2020 for certain members of senior management in the Company, including Mr. Bishop, Ms. Arasimowicz, Mr. Lisowski and Mr. Leo to 100% of targeted awards, with the specific cash amounts paid to each NEO as set forth in the Fiscal Year 2020 Summary Compensation Table on page The determination to adjust the annual incentive awards for the executive officers was based on (a) the high level of achievement of the operational milestones and strategic initiatives despite the challenges of the coronavirus pandemic and the manufacturing facility shutdown and reopening, (b) successful capital raises during fiscal year 2020 totaling gross proceeds of approximately $175 million to fund the Company’s business plan, (c) arrangements to fund legal fees and costs associated with the POSCO Energy arbitration and the termination of the POSCO Energy license agreements, (d) substantial shareholder outreach and restructuring of the long-term incentive plan to a performance-based plan in response to prior years’ say-on-pay votes, (e) successful management of the COVID-19 pandemic, including the shut down and restart of manufacturing operations, retention of employees with full pay and benefits, deferral of compensation by the NEOs and the continuation of essential services and plant construction, and (f) the substantial increase in the Company’s stock price. Based on all of the foregoing, the Compensation Committee and the Board determined that adjustment of the annual incentive award percentages was warranted. FISCAL YEAR 2021 OPERATIONAL MILESTONES AND OPERATIONAL INITIATIVES UNDER THE MIP For fiscal year 2021, the pre-established Company operational milestones and operational initiatives have been updated to further advance our business objectives. The operational milestones for fiscal year 2021 are consistent with our fiscal year 2021 annual operating plan and were set in consideration of the Company’s prior performance and fiscal year 2021 budget. The operational milestones (and their respective weighting) are: (1) achieve a specified level of total revenue for the fiscal year (33.3%), (2) secure new orders (33.3%), and (3) achieve a specified adjusted EBITDA (33.4%). The Compensation Committee has also established operational initiatives for fiscal year 2021 applicable to all participants including the NEOs. The pre-established Company operational initiatives for fiscal year 2021 (which are equally weighted) are as follows: (a) implement an operating performance model based on objectives and key results, known as “OKRs”; (b) expand project financing, tax equity, and permanent financing partners; (c) implement ESG best practices/operational measurement system; (d) implement key plant performance improvements identified by breakthrough teams; and (e) implement and execute on a hydrogen product / commercialization / financing roadmap. Consistent with past practice, the overall operational milestone achievement will be weighted 75% and the overall operational initiative achievement will be weighted 25%. LONG TERM INCENTIVE COMPENSATION We use long-term incentive compensation, in the form of equity awards, to motivate and reward executive officers for effectively executing longer-term strategic and operational objectives. The value of these equity awards is based on the value of our common stock, and these awards help align the interests of our executive officers with those of the Company’s stockholders. FUELCELLENERGY, INC. | PROXY STATEMENT 33 Executive Compensation Subsequent to the end of fiscal year 2019, in response to stockholder concerns as expressed in prior say-on-pay votes, the Compensation Committee retained Meridian to evaluate our long-term incentive compensation for fiscal year 2020 as part of our efforts to better align our long-term incentive compensation program with the interests of our stockholders and market practices. With the help of Meridian, the Compensation Committee established a new long-term incentive plan comprised of performance stock units (“PSUs”) and time-based restricted stock units (“RSUs”). The Compensation Committee elected to use PSUs as the primary equity vehicle for the executive officers because these awards reflect a balance between significant upside potential for superior stock price performance, and decline in award size, to zero in the extreme, for performance that is below expectations. 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 2020, the Compensation Committee determined to allocate 80% of long-term incentive awards to PSUs based on total stockholder return (“TSR”), with 40% being based on absolute TSR and 40% being based on relative TSR, as further described below. The remaining 20% of the long-term incentive award is allocated to RSUs that vest ratably over a 3 year period from the date of grant, with a grant date fair value of the average closing stock price over the 20 trading days immediately preceding the date of the grant. For the PSUs granted for fiscal year 2020, the Compensation Committee established the performance period as May 8, 2020 (the date of the reconvened 2020 Annual Meeting at which our stockholders approved an increase in the number of shares authorized to be issued under our 2018 Omnibus Incentive Plan and the amendment and restatement of our 2018 Omnibus Incentive Plan) through October 31, 2022. The Compensation Committee established the performance assessment criteria for the relative TSR PSUs as the TSR of the Company relative to the TSR of the Russell 2000, with the payout calibration being 100% plus or minus 0.5x the difference between the Company’s TSR and the Russell 2000 Index composite TSR. Payout is capped at 200% of the target number of PSUs, and payout is further capped at 100% of the target number of PSUs if the Company’s absolute TSR over the performance period is negative. The Company’s TSR is calculated by subtracting the Company’s beginning stock price (defined as the average closing price of the Company’s common stock over the 20 consecutive trading days ending on the last trading day immediately prior to May 8, 2020) from the ending stock price (defined as the average closing price of the Company’s common stock over the 20 consecutive trading days ending on October 31, 2022), adding any dividends during the period, and then dividing the result by the Company’s beginning stock price. PSUs earned on the basis of relative TSR performance remain subject to vesting based on continued service until August 24, 2023 (the third anniversary of the grant date). The Compensation Committee established the performance assessment criteria for the absolute TSR PSUs as the Company’s closing stock price, with the payout 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 the last trading day immediately prior to May 8, 2020, which was $1.8765. Specifically, a 50% increase earns 50% of the target award, a 100% increase earns 100% of the target award and a 150% increase earns 200% of the target award. Each price hurdle must be met for 20 consecutive trading days, and price hurdles may be met at any time during the performance period. PSUs earned on the basis of absolute TSR performance remain subject to vesting based on continued service until August 24, 2023 (the third anniversary of the grant date). See the Fiscal Year 2020 Grants of Plan-Based Awards Table on page 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 2018 Omnibus Incentive Plan, as amended and restated, 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 was most recently amended in December 2018. 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; and (c) the Compensation Committee has authorized a pool of up to 100,000 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 $40,000 or less, and further provided that no grants may be made from this pool to employees at the level of vice president or above. 34 FUELCELLENERGY, INC. | PROXY STATEMENT Executive Compensation COMPENSATION RECOVERY POLICY We maintain an Executive Compensation Recovery Policy. A description of this policy can be found on page ANTI-HEDGING POLICY A description of our anti-hedging policy can be found on page STOCK OWNERSHIP GUIDELINES We maintain minimum stock ownership guidelines which were updated in December 2018, and, after being adjusted for the one-for-twelve reverse stock split effected by the Company in May 2019, amended again in February 2020. A description of these guidelines can be found on pages 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 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 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. FUELCELLENERGY, INC. | PROXY STATEMENT 35 Executive Compensation FISCAL YEAR 2020 SUMMARY COMPENSATION TABLE The following table presents summary information regarding the total compensation awarded to, earned by or paid to the NEOs for the fiscal years ended October 31, 2020, 2019, and 2018 (except for Messrs. Few, Lisowski and Leo for whom information is provided only with respect to the fiscal years ended October 31, 2020 and 2019 as they were not NEOs prior to fiscal year 2019).
(1) The amounts reported in the “Bonus” column represent, for Mr. Few, for fiscal year 2019, the one-time signing bonus pursuant to his employment agreement, which was paid 50% during fiscal year 2019 and 50% during fiscal year 2020, and for Messrs. Bishop, Lisowski and Leo and Ms. Arasimowicz, for fiscal year 2019, the payments made pursuant to the cash incentive plan adopted by the Board on July 15, 2019 to retain certain key executives, of which the first two payments (totaling $27,778 for each of Mr. Bishop and Ms. Arasimowicz and $16,667 for each of Messrs. Lisowski and Leo) were paid in fiscal year 2019 and the second two payments (totaling $22,222 for each of Mr. Bishop and Ms. Arasimowicz and $13,333 for each of Messrs. Lisowski and Leo) were paid in fiscal year 2020. (2) The amounts reported in the “Stock Awards” column reflect the aggregate grant date fair value of stock awards granted during each of the fiscal years 2020, 2019, and 2018, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“ASC Topic 718”). These values have been determined under the principles used to calculate the grant date fair value of equity awards for purposes of our financial statements. For a discussion of the assumptions and methodologies used to value the awards reported in this column, please see the discussion of stock awards contained in Note 18 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended October 31, 2020. The maximum values of the fiscal year 2020 PSU awards at the grant date assuming that the highest level of performance conditions are attained, are as follows: Mr. Few — $674,028; Mr. Bishop — $337,014; Ms. Arasimowicz — $316,792; Mr. Lisowski — $296,570; and Mr. Leo — $148,284. (3) The amounts reported in the “Non-Equity Incentive Plan Compensation” column represent the value of the annual incentive award payment earned by each NEO for fiscal years 2020, 2019, and 2018 under our Management Incentive Plan. The amounts reported for fiscal years 2020, 2019, and 2018 were paid in cash and the amounts reported for fiscal year 2020 were paid in fiscal year 2021. (4) The amount reported under “All Other Compensation” for Mr. Few for fiscal year 2020 includes $38,440 in apartment rental expenses, $143,000 in commuting expenses, $8,442 in tax preparation fee reimbursement and $10,200 in membership fee reimbursement. The amount reported for fiscal year 2019 includes $4,740 in apartment rental expense, $28,517 in commuting expenses, and $25,000 in reimbursement of legal fees to Mr. Few for negotiation of his employment agreement with the Company. 36 FUELCELLENERGY, INC. | PROXY STATEMENT Executive Compensation FISCAL YEAR 2020 GRANTS OF PLAN-BASED AWARDS The following table sets forth certain information with respect to the annual incentive and stock-based awards granted to our named executive officers in fiscal year 2020 under the 2018 Omnibus Incentive Plan, as amended and restated. The material terms of these awards are described above in the sections titled “Annual Incentive Compensation” and “Long Term Incentive Compensation” on pages
(1) Amounts reported in this column are based on the grant date fair value of awards computed in accordance with FASB ASC Topic 718. FUELCELLENERGY, INC. | PROXY STATEMENT 37 Executive Compensation OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR-END TABLE The following table presents, for each of the NEOs, information with respect to the outstanding equity awards held at October 31, 2020. All grant amounts have been adjusted to reflect the one-for-twelve reverse stock split effected by the Company in May 2019.
(1) The restricted stock unit award granted to Mr. Few on June 3, 2020 will vest on August 26, 2022. The restricted stock unit awards granted to all NEOs on August 24, 2020 vest ratably over 3 years from the grant date. The restricted stock unit awards granted to Ms. Arasimowicz in 2017 vest at a rate of 25% per year beginning on the first anniversary of the date of the grant. The restricted stock unit awards granted to Mr. Bishop and Ms. Arasimowicz in 2018 vest 100% on the third anniversary of the grant date. (2) The fair market value of unvested restricted stock, restricted stock unit and performance stock unit awards is based on the per share closing price of our common stock on October 30, 2020, which was $2.00. (3) The performance-vesting restricted stock units granted on June 3, 2020 to Mr. Few were granted in connection with Mr. Few’s August 26, 2019 employment agreement, and they are eligible to be earned on the third anniversary of Mr. Few’s employment agreement based on stock price performance. (4) The performance stock units granted to all NEOs on August 24, 2020 are eligible to be earned over a three-year performance period based on absolute or relative TSR. The performance stock units are shown in the table above at the target level, which is the next level above the level of performance through the end of fiscal year 2020. Performance stock units granted on June 3, 2020 to Mr. Few were granted in connection with Mr. Few’s August 26, 2019 employment agreement, and they are eligible to be earned on the third anniversary of Mr. Few’s employment agreement based on stock price performance. 38 FUELCELLENERGY, INC. | PROXY STATEMENT Executive Compensation FISCAL YEAR 2020 OPTION EXERCISES AND STOCK VESTED TABLE The following table presents, for each of the NEOs, the number of shares of our common stock acquired upon the vesting of restricted stock awards and restricted stock units during fiscal year 2020, and the aggregate value realized upon the vesting of such awards. Our NEOs did not exercise any options to purchase shares of our common stock during fiscal year 2020. For purposes of this table, the value realized is based upon the fair market value of our common stock on each vesting date. The number of shares included in the following table has been adjusted to reflect the one-for-twelve reverse stock split effected by the Company in May 2019.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL AND SEVERANCE Each of the NEOs has an employment agreement with the Company, under which such NEO is eligible to receive certain severance payments and benefits in connection with a termination of employment under various circumstances, including following a change of control of the Company. In reporting the estimated potential payments and benefits payable to each NEO in the event of termination of employment as of October 31, 2020, we assumed that the terms of such NEOs’ employment agreements were applicable. The actual amounts that would be paid or distributed to the NEOs as a result of one of the termination events occurring in the future may be different than those presented below as many factors will affect the amount of any payments and benefits upon a termination of employment. For example, some of the factors that could affect the amounts payable include the NEO’s base salary and the market price of our common stock at the time of termination. In addition, although we have entered into written arrangements to provide severance payments and benefits to the NEOs in connection with a termination of employment under particular circumstances, we may mutually agree with the NEOs on severance terms that vary from those provided in these pre-existing agreements. Finally, in addition to the amounts presented below, each NEO would also be able to exercise any previously-vested options to purchase shares of our common stock that s/he held (if applicable). For more information about the NEOs’ outstanding equity awards as of October 31, 2020, see the Outstanding Equity Awards at 2020 Fiscal Year-End Table above. In addition to the severance payments and benefits described in each NEO’s individual employment agreement, the NEOs are eligible to receive any benefits accrued under our broad-based benefit plans, such as accrued vacation pay, in accordance with those plans. 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 (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 FUELCELLENERGY, INC. | PROXY STATEMENT 39 Executive Compensation Mr. Few including his initial base salary, which is to be reviewed at least annually by our Board, and target annual incentive award opportunity. 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 3 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) 2 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 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, 2020. POTENTIAL PAYMENTS AND BENEFITS UPON A TERMINATION OF EMPLOYMENT OR A CHANGE IN CONTROL OF THE COMPANY FOR MR. FEW
(1)
MR. BISHOP, MS. ARASIMOWICZ, MR. LISOWSKI AND MR. LEO We entered into employment agreements (the “Other NEO Agreements”) with Mr. Bishop (effective January 1, 2012), with Ms. Arasimowicz (effective April 6, 2017), and with Mr. Lisowski and Mr. Leo (each effective August 1, 2019) 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 is equal to 50% of base salary and payable in accordance with the terms of the Management Incentive Plan described on page In the event that the employment of Ms. Arasimowicz or Messrs. Bishop, Lisowski or Leo is terminated by the Company without cause, or any of them resigns for “good reason” The following tables set forth the potential (estimated) payments and benefits which Ms. Arasimowicz and Messrs. Bishop, Lisowski and Leo 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, 2020. POTENTIAL PAYMENTS AND BENEFITS UPON A TERMINATION OF EMPLOYMENT OR A CHANGE IN CONTROL OF THE COMPANY FOR MR. BISHOP
(1)
POTENTIAL PAYMENTS AND BENEFITS UPON A TERMINATION OF EMPLOYMENT OR A CHANGE IN CONTROL OF THE COMPANY FOR MS. ARASIMOWICZ
(1) For purposes of this analysis, we have assumed that Ms. Arasimowicz’s compensation is as follows: a base salary equal to $365,000 and annual incentive award payments paid for fiscal year 2017 in the amount of $115,500, for fiscal year 2018 in the amount of $0 and for fiscal year 2019 in the amount of $191,250 and that Ms. Arasimowicz had outstanding restricted stock and restricted stock unit awards as reflected in the Outstanding Equity Awards at 2020 Fiscal Year-End Table on page 38 of this Proxy Statement and target performance stock unit awards as reflected in the Fiscal Year 2020 Grants of Plan-Based Awards table on page 37 of this Proxy Statement. These amounts reflect the terms of her compensation arrangements as approved by the Compensation Committee, effective April 6, 2017. (2) Assumes Ms. Arasimowicz’s date of termination of employment was October 31, 2020. The market price of our common stock on October 30, 2020 was $2.00 per share. (3) Assuming termination of employment without cause or resignation for good reason in connection with a change in control of the Company, Ms. Arasimowicz is to receive accelerated vesting of her outstanding and unvested restricted stock unit awards and it is deemed that the target performance goals of Ms. Arasimowicz’s performance stock units had been met at the time of a change in control and that such performance stock units were prorated based on the elapsed portion of the performance period. As of October 31, 2020, Ms. Arasimowicz held 105,179 unvested restricted stock units and 70,338 performance stock units, which for purposes of this table were prorated based on the elapsed portion of the performance period, which as of October 31, 2020 was one year. As of October 31, 2020, Ms. Arasimowicz did not hold any options to purchase shares of our common stock. (4) The value of the restricted stock unit awards and the prorated performance stock units on October 31, 2020 is based on 105,179 restricted stock units and 23,446 performance stock units at $2.00 per share. (5) Ms. Arasimowicz is eligible to receive payment of continued health insurance for a period of six months in the event her employment is terminated without cause or she resigns for good reason and 12 months if her employment is terminated without cause or she resigns for good reason 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, 2020. (6) In the event Ms. Arasimowicz’s employment is terminated without cause or she resigns for good reason, she is eligible to receive a severance payment equal to six months of her base salary. In the event her employment is terminated without cause or she resigns for good reason in connection with a change in control of the Company, she is eligible for 12 months of her base salary plus a bonus payment for the severance period equal to the average of the bonuses awarded to her since her promotion to General Counsel and Corporate Secretary. POTENTIAL PAYMENTS AND BENEFITS UPON A TERMINATION OF EMPLOYMENT OR A CHANGE IN CONTROL OF THE COMPANY FOR MR. LISOWSKI
POTENTIAL PAYMENTS AND BENEFITS UPON A TERMINATION OF EMPLOYMENT OR A CHANGE IN CONTROL OF THE COMPANY FOR MR. LEO
(1) For purposes of this analysis, we have assumed that Mr. Leo’s compensation is as follows: a base salary equal to $275,000 and a $138,750 annual incentive award payment in fiscal year 2019, the year of his appointment as an executive officer of the Company and that Mr. Leo has outstanding restricted stock and restricted stock unit awards as reflected in the Outstanding Equity Awards at 2020 Fiscal Year-End Table, on page 38 of this Proxy Statement and target performance stock unit awards as reflected in the Fiscal Year 2020 Grants of Plan-Based Awards table on page 37 of this Proxy Statement.. These amounts reflect the terms of his compensation package approved by the Compensation Committee, effective August 1, 2019. (2) Assumes Mr. Leo’s date of termination of employment was October 31, 2020. The market price of our common stock on October 30, 2020 was $2.00 per share. (3) Assuming termination without cause or resignation for good reason in connection with a change in control of the Company, Mr. Leo is to receive accelerated vesting of his outstanding and unvested restricted stock and restricted stock unit awards and it is deemed that the target performance goals of Mr. Leo’s performance stock units had been met at the time of a change in control and that such performance stock units were prorated based on the elapsed portion of the performance period. As of October 31, 2020, Mr. Leo held 42,891 unvested restricted stock units and 32,952 performance stock units, which for purposes of this table were prorated based on the elapsed portion of the performance period, which as of October 31, 2020 was one year. As of October 31, 2020, Mr. Leo did not hold options to purchase shares of our common stock. (4) The value of the restricted stock and restricted stock unit awards on October 31, 2020 is based on 42,891 restricted stock units and 10,984 performance stock units at $2.00 per share. (5) Mr. Leo is eligible to receive payment of continued health insurance for a period of six months in the event his employment is terminated without cause or he resigns for good reason and 12 months if his employment is terminated without cause or he resigns for good reason 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, 2020. (6) In the event Mr. Leo’s employment is terminated without cause or he resigns for good reason, he is eligible to receive a severance payment equal to six months of his base salary. 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 for 12 months of his base salary plus a bonus payment for the severance period equal to the average of the bonuses awarded to him since his appointment as our Chief Technology Officer. CEO PAY RATIO CEO Pay Ratio Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd 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. FUELCELLENERGY, INC. | PROXY STATEMENT 43 Executive Compensation Following the close of fiscal year 2020, the Company reviewed a comparison of Mr. Few’s annual total compensation, including perquisites, to that of all other employees for the same period. The calculation of annual total compensation of all employees was determined in the same manner as the “Total Compensation” shown for our CEO in the “Fiscal Year 2020 Summary Compensation Table” on page ■ salary received in fiscal year 2020; ■ annual incentive award payment received for performance in fiscal year 2020 (paid in fiscal year 2021); ■ grant date fair value of restricted stock unit awards granted in fiscal year 2020; ■ payments made for overtime work, shift differentials, and other supplemental forms of pay received in fiscal year 2020; and ■ Company contributions to the 401(k) Plan (or the RRSP, for Canadian employees) made during fiscal year 2020. Our calculation included all active employees as of October 31, 2020. We annualized the wages and salaries for any employees who worked less than twelve months during the fiscal year, and we excluded those who took an unpaid leave of absence during the measurement period. We applied a Canadian to U.S. dollar exchange rate (0.750463) as of October 31, 2020 to the compensation elements paid in Canadian currency, and we excluded our employees in Germany (9 employees), South Korea (4 employees), the UK (1 employee) and Spain (1 employee), the total number of which is less than 5% of our total workforce (316 employees). We determined the compensation of our median employee by: (i) calculating the annual total compensation described above for each of our employees, (ii) ranking the annual total compensation of all U.S. and Canadian employees except for the CEO from lowest to highest (a list of 300 employees), and (iii) identifying the employee who ranked number 150 on the list (the “Median Employee”). As of October 31, 2020, the Company employed 301 employees in the U.S. and Canada, consisting of 281 employees in the U.S. and 20 employees in Canada. The total compensation for fiscal year 2020 for our CEO, Mr. Few, was $3,795,525 and for the Median Employee was $87,702. The resulting ratio of our CEO’s pay to the pay of our Median Employee for fiscal year 2020 is 43 to 1. 44 FUELCELLENERGY, INC. | PROXY STATEMENT DIRECTOR COMPENSATION The Compensation Committee periodically reviews Director compensation. In evaluating our Director compensation program, the Compensation Committee is guided by the following principles: compensation should fairly pay the non-employee Directors, compensation should align the interests of our non-employee Directors with the long-term interests of our stockholders and the structure of the compensation program should be simple, transparent and easy for stockholders to understand. The compensation of the non-employee Directors includes both a cash and an equity component. Our non-employee Directors receive an annual retainer and committee member and chair fees. They may elect to receive these fees in cash or, assuming that the stockholders approve the amendment and restatement of the 2018 Omnibus Incentive Plan, as amended and restated, as described in Proposal 5 beginning on page FISCAL YEAR 2020 ANNUAL DIRECTOR COMPENSATION At the commencement of fiscal year 2020, our annual non-employee Director compensation consisted of: ■ a retainer of $35,000 per year for service as a Director; ■ an annual equity award valued at $50,000 for service as a Director; and ■ non-chair committee fees of $5,000 for the first committee on which a non-employee Director is a member and $2,500 for each additional committee on which he or she is a member. In addition, the non-employee Chairman of the Board received an annual fee of $20,000, and Chair committee fees were $12,500 for each of the Compensation, Audit and Finance and Nominating and Corporate Governance Committees. A Director will receive pro-rated fees if he or she does not finish his or her then-current term as a Director. The annual equity award of $50,000 granted to non-employee Directors described above is granted on the date of the Company’s annual stockholder meeting, is awarded in the form of restricted stock units, and vests over the course of the twelve-month service period commencing with the date of each annual stockholder meeting. Fiscal year 2019 was one of extraordinary Board engagement as we worked to restructure our management team and our operations. During fiscal year 2019, our Board held 56 Board meetings and 27 separate committee meetings. This is almost 5 times the average number of meetings among our Peer Group. In light of the extraordinary effort undertaken by our Board, at the end of fiscal year 2019, we engaged Meridian to review our Board compensation and make recommendations as to how we could fairly compensate our Board for the time and effort expended during fiscal year 2019, and to ensure that our Board compensation going forward was fair, aligned with the long-term interests of our stockholders, and positioned the Company to attract and retain qualified non-employee Directors. The findings of Meridian reflected that the level of Board activity for our Company has been, and will likely continue to be, exceptional, as reflected by the 30 Board meetings and 36 Committee meetings held during fiscal year 2020, and we believe and Meridian agrees that it would be appropriate to compensate our Directors for that level of activity. Accordingly, on August 24, 2020, the Compensation Committee recommended and the Board determined to increase annual non-employee Director fees as follows: ■ increase the retainer to $50,000 per year for service as a Director; ■ increase the annual equity award to a value of $75,000 for service as a Director; and ■ increase non-chair committee fees to $10,000 for Audit and Finance Committee membership and $7,500 each for Compensation Committee and Nominating and Corporate Governance Committee membership. In addition, the non-employee Chairman of the Board annual fee was increased to $50,000, and Chair committee fees were increased to $20,000 for the Audit and Finance Committee and $15,000 for each of the Nominating and Corporate Governance and Compensation Committees. A Director will still receive pro-rated fees if he or she does not finish his or her then-current term as a Director. All fee increases were pro-rated for the remainder of the annual Director service year, which runs from annual meeting to annual meeting. We believe that the foregoing adjustments more fairly compensate our non-employee Directors for their level of activity and effort and better position the Company to attract and retain non-employee Directors, all of which is in the best interest of our stockholders. FUELCELLENERGY, INC. | PROXY STATEMENT 45 DIRECTOR COMPENSATION NEW BOARD MEMBERS Upon election to the Board, a non-employee Director will be granted an equity award in the form of restricted stock units (also referred to herein as RSUs) valued at $50,000, pro-rated from the date of his or her initial appointment to the end of the service year (which ends at the annual stockholder meeting). The per share fair market value of each award is based upon the closing market price of the Company’s common stock on the date of grant. DIRECTORS DEFERRED COMPENSATION PLAN Pursuant to our Directors Deferred Compensation Plan, non-employee Directors may elect to defer, until a predetermined date or until they leave the Board, receipt of all or a portion of their fees, whether paid in cash or common stock. The election to defer receipt of all or a portion of his or her fees must be made by a non-employee Director prior to December 31stof each calendar year or, with respect to a newly-eligible Director, within 30 days after he or she becomes eligible to participate in the Directors Deferred Compensation Plan. REIMBURSEMENT OF EXPENSES We reimburse the non-employee Directors for reasonable expenses incurred in connection with the performance of their duties as members of the Board. FISCAL YEAR 2020 NON-EMPLOYEE DIRECTOR COMPENSATION The following table sets forth the total compensation earned by our non-employee Directors during the fiscal year ended October 31, 2020.
The following table describes the total compensation earned by our non-employee Directors during the fiscal year ended October 31, 2020, categorized by type of consideration earned.
(1) The amounts reported represent the aggregate grant date fair value of the stock awards granted in fiscal year 2020 determined in accordance with FASB ASC Topic 718. Additional information about the assumptions that we used in valuing these awards is set forth in our Annual Report on Form 10-K in Note 18 of the Notes to Consolidated Financial Statements for our fiscal year ended October 31, 2020. Stock awards to directors for payment of fees are unrestricted shares of common stock that are not subject to any vesting provisions. The annual equity award vests at the earlier of one year from the date of grant or the next annual meeting of stockholders. (2) The amount reported represents the aggregate dollar amount of all fees and other remuneration earned for services as a non-employee Director, including annual retainer fees, committee and/or chair fees and equity awards. 46 FUELCELLENERGY, INC. | PROXY STATEMENT SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information as of February 12, 2021 with respect to: (a) each of our Directors; (b) each of our named executive officers named in the Fiscal Year 2020 Summary Compensation Table under the heading “Executive Compensation” on page We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and dispositive power with respect to all shares of common stock they beneficially own. Applicable percentage ownership is based on Unless indicated otherwise, the address of each holder is in care of FuelCell Energy, Inc., 3 Great Pasture Road, Danbury, CT 06810.
* Less than one percent. (1) Unless otherwise noted, each person identified possesses sole voting and investment power with respect to the shares listed. (2) Mr. Bishop’s shareholdings include 13,015 restricted stock units that vest within 60 days of the record date, February 12, 2021. (3) Ms. Arasimowicz’s shareholdings include 17,182 restricted stock units that vest within 60 days of the record date, February 12, 2021. (4) Mr. Leo’s shareholdings include 1,701 restricted stock units that vest within 60 days of the record date, February 12, 2021. (5) Mr. England’s shareholdings include options to purchase 8,698 shares of common stock, which are currently exercisable. His shareholdings as reported do not include 62,280 vested deferred stock units and 32,803 unvested deferred stock units. (6) Mr. Groobey was appointed to the Board on November 20, 2019. His shareholdings include 32,803 restricted stock units that vest within 60 days of the record date, February 12, 2021. (7) Mr. Hilzinger’s shareholdings include options to purchase 277 shares of common stock, which are currently exercisable. His shareholdings do not include 42,926 vested deferred stock units and 32,803 unvested deferred stock units. (8) Ms. von Althann’s shareholdings include options to purchase 277 shares of common stock, which are currently exercisable. Her shareholdings do not include 33,331 vested deferred stock units and 32,803 unvested deferred stock units. (9) The number of shares beneficially owned set forth in the table is as of December 31, 2020, as reported by BlackRock, Inc. in a Schedule 13G filed with the SEC on February 2, 2021. The address for BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. BlackRock, Inc. has sole voting power to vote or direct the vote with respect to 20,716,365 of these shares and sole power to dispose or to direct the disposition of all of these shares. FUELCELLENERGY, INC. | PROXY STATEMENT 47 DELINQUENT SECTION 16(A) REPORTS Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires the Company’s officers, Directors and persons who own more than 10% of the issued and outstanding shares of the Company’s common stock to file reports of beneficial ownership and changes in beneficial ownership with the SEC and to furnish copies of all Section 16(a) forms to the Company. To our knowledge, based solely on a review of the copies of such reports furnished to us and on written representations that no other reports were required, all filings for the fiscal year ended October 31, 2020 were made on a timely basis, except for the following filings: Ms. von Althann’s Form 4 for August 24, 2020, which was filed October 20, 2020; Mr. Hilzinger’s Form 4 for August 24, 2020, which was filed October 20, 2020; Mr. Groobey’s Form 4 for November 20, 2019, which was filed December 2, 2019, his Form 4 for July 15, 2020, which was filed January 20, 2021, his Form 4 for August 24, 2020, which was filed October 20, 2020, and his October 15, 2020 Form 4, which was filed October 20, 2020; Mr. England’s Form 4 for July 15, 2020, which was filed January 20, 2021, his Form 4 for August 24, 2020, which was filed October 20, 2020 and his Form 4 for October 15, 2020, which was filed October 20, 2020; and Mr. Few’s Form 4 for February 10, 2020, which was filed February 21, 2020 and his Form 4 for May 11, 2020, which was filed May 15, 2020. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Audit and Finance Committee reviews and, as appropriate, approves and ratifies “related person” transactions, defined as any transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness), or any series of similar transactions, arrangements or relationships, in which (a) the aggregate amount involved exceeds or will or may be expected to exceed the lesser of $120,000 or one percent of the average of the Company’s total assets at year end for the last two completed fiscal years, (b) the Company is a participant, and (c) any Related Person has or will have a direct or indirect material interest (other than solely as a result of being a less than 10% beneficial owner of another entity). A “Related Person” is any (a) person who is an executive officer, Director or nominee for election as a Director of FuelCell Energy, (b) greater than 5% beneficial owner of our outstanding common stock, or (c) Immediate Family Member of any of the foregoing. An “Immediate Family Member” is any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and any person (other than a tenant or employee) sharing the household of a person. We do not have written policies or procedures for related person transactions but rely on the Audit and Finance Committee’s exercise of business judgment, consistent with Delaware law, in reviewing such transactions. ENBRIDGE INC. Mr. England, the Chairman of the Board, is a director of Enbridge Inc. (“Enbridge”). Enbridge transports and distributes energy across North America through the employment of more than 6,000 people in Canada and the United States. Enbridge is headquartered in Toronto, Canada and is publicly held, trading on the Canadian stock exchange under the symbol “ENB”. In connection with our acquisition of Global Thermoelectric Inc. in November 2003, we acquired a preferred share obligation relating to 1,000,000 Class A Cumulative Redeemable Exchangeable Preferred Shares (the “Series 1 Preferred Shares”) held by Enbridge, which were issued by our Canadian subsidiary, FCE FuelCell Energy Ltd. (“FCE Ltd.”). On March 31, 2011 and April 1, 2011, the Company entered into agreements with Enbridge to modify the provisions of the Series 1 Preferred Shares of FCE Ltd. Consistent with the previous Series 1 Preferred Share agreement, the Company continued to guarantee the return of principal and dividend obligations of FCE Ltd. to Enbridge, as the holder of the Series 1 Preferred Shares under the modified agreement. Prior to January 20, 2020, FCE Ltd. or the Company, as the guarantor of FCE Ltd.’s payment obligations with respect to the Series 1 Preferred Shares, was obligated to pay, on or before December 31, 2020, all accrued and unpaid dividends on the Series 1 Preferred Shares and the balance of the principal redemption price with respect to all of the Series 1 Preferred Shares. Interest under the Series 1 Preferred Shares accrued at an annual rate of 5%. In addition, the holder of the Series 1 Preferred Shares had the right to exchange such shares for fully paid and non-assessable shares of common stock of the Company at certain specified prices, and FCE Ltd. had the option of making dividend payments in the form of common stock of the Company or cash. As of October 31, 2019, the Company did not have sufficient shares available to satisfy these obligations. On January 20, 2020, the Company, FCE Ltd. and Enbridge entered into a letter agreement (the “January 2020 Letter Agreement”), pursuant to which they agreed to amend the articles of FCE Ltd. relating to and setting forth the terms of the Series 1 Preferred Shares to: (i) remove the provisions of the articles permitting or requiring the issuance of shares of the Company’s common stock in exchange for the Series 1 Preferred Shares or as payment of amounts due to the holders of the Series 1 Preferred Shares, (ii) remove certain provisions of the articles relating to the redemption of the Series 1 Preferred Shares, (iii) increase the annual dividend rate, commencing on January 1, 2020, to 15%, (iv) extend the final payment date for all accrued and unpaid dividends and all return of capital payments (i.e., payments of the principal redemption price) from December 31, 2020 to December 31, 2021, (v) clarify when dividend and return of capital payments are to be made in the future and extend the quarterly dividend and return of capital payments through December 31, 2021 (which were previously to be paid each quarter through December 31, 2020), (vi) remove certain terms and provisions of the articles that are no longer applicable, 48 FUELCELLENERGY, INC. | PROXY STATEMENT and (vii) make other conforming changes to the articles. In addition, the parties agreed to amend the Company’s guarantee in favor of Enbridge as necessary or as the parties may mutually agree, in either case, in order to be consistent with such amended articles and to maintain the Company’s guarantee of FCE Ltd.’s obligations under the Series 1 Preferred Shares. The articles of FCE Ltd. were amended and filed in accordance with the provisions of the January 2020 Letter Agreement on March 26, 2020. Under the amended articles, FCE Ltd. continued to be required to make (a) annual dividend payments of Cdn. $500,000 and (b) annual return of capital payments of Cdn. $750,000. The Company made its scheduled payments for (i) annual dividend payments of Cdn. $500,000 and (ii) annual return of capital payments of Cdn. $750,000 to Enbridge during fiscal year 2020. The Company recorded interest expense, which reflects the amortization of the fair value discount of approximately Cdn. $4.0 million and Cdn. $3.0 million in the fiscal years ended October 31, 2020 and 2019, respectively. As of October 31, 2020 and 2019, the carrying value of the Series 1 Preferred Shares was Cdn. $25.6 million ($19.2 million) and Cdn. $22.7 million ($17.2 million), respectively, and was classified as preferred stock obligation of the subsidiary on the Consolidated Balance Sheets. During fiscal years 2020 and 2019, the Company did not recognize any revenue from Enbridge. On December 16, 2020, the Company and FCE Ltd. delivered a payoff letter (the “Payoff Letter”) to Enbridge pursuant to which the Company confirmed its intent to pay the amounts owed to Enbridge under the terms of the Series 1 Preferred Shares (the “Obligation”) on or before December 31, 2020 in accordance with its obligations under its guarantee because FCE Ltd. did not have sufficient cash to pay the Obligation. As of December 31, 2020, the amount owed to Enbridge under the Series 1 Preferred Shares totaled Cdn. $27.4 million, which included Cdn. $4.3 million of principal and Cdn. $23.1 million of accrued dividends. Under the terms of the Payoff Letter, each of the parties, on behalf of itself and each of its affiliates and subsidiaries, agreed that, upon the payoff of the Obligation, each of the parties, on behalf of itself and each of its affiliates and subsidiaries, unconditionally released each of the other parties and their respective affiliates and subsidiaries and their respective officers, directors, managers, employees, shareholders, members, agents, attorneys and representatives as well as their respective successors and assigns from any and all claims, obligations, rights, causes of action, and liabilities of whatever kind or nature, whether known or unknown, whether foreseen or unforeseen, arising on or before the date of the Payoff Letter, which are based upon, arise under or are related to the Series 1 Preferred Shares, the guarantee or the January 2020 Letter Agreement or any documents, agreements, dealings or other matters connected with any of the foregoing. On December 18, 2020, the Company remitted payment totaling Cdn. $27.4 million to Enbridge. The foregoing payment amount in U.S. dollars totaled approximately $21.5 million. Concurrent with receipt of the payment from the Company, Enbridge surrendered its Series 1 Preferred Shares in FCE Ltd., and the guarantee and the January 2020 Letter Agreement were terminated. Pursuant to the Payoff Letter, the transaction is deemed to have occurred on December 31, 2020. FUELCELLENERGY, INC. | PROXY STATEMENT 49 AUDIT AND FINANCE COMMITTEE REPORT During fiscal year 2020, the Audit and Finance Committee of the Board reviewed the quality and integrity of the Company’s consolidated financial statements, the effectiveness of its system of internal control over financial reporting, its compliance with legal and regulatory requirements, the qualifications and independence of KPMG LLP, its independent registered public accounting firm, the performance of KPMG LLP and other significant audit matters. In performing its responsibilities, the Audit and Finance Committee has reviewed and discussed with management and KPMG LLP the audited consolidated financial statements for the year ended October 31, 2020. The Audit and Finance Committee has also discussed with KPMG LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the U.S. Securities and Exchange Commission. Pursuant to the applicable requirements of the PCAOB regarding the independent auditors’ communication with the Audit and Finance Committee concerning independence, the Audit and Finance Committee received written disclosure from the independent registered public accounting firm, and discussed with the auditors their independence. The Audit and Finance Committee has concluded that KPMG LLP is independent. Based on the review and discussions noted above, the Audit and Finance Committee recommended to the Board that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2020 and be filed with the U.S. Securities and Exchange Commission. Submitted by: Audit and Finance Committee Matthew F. Hilzinger (Chair) James H. England Chris Groobey Natica von Althann INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES KPMG LLP
AUDIT FEES Audit fees include the aggregate fees billed for the audit of the Company’s annual consolidated financial statements, reviews of each of the quarterly consolidated financial statements included in the Company’s Forms 10-Q, and services related to SEC filing matters. The amount shown for fiscal year 2020 included $1,391 of out-of-pocket expenses. AUDIT-RELATED FEES Audit-related fees billed to the Company by KPMG LLP for the fiscal year ended October 31, 2020 relate to services provided in connection with SEC registration statements and equity offerings. The audit-related fees billed to the Company by KPMG LLP for the fiscal year ended October 31, 2019 were related to services provided in connection with SEC registration statements and equity offerings. As set forth in its charter, it is the policy of our Audit and Finance Committee to pre-approve all audit and non-audit services provided by KPMG LLP. 50 FUELCELLENERGY, INC. | PROXY STATEMENT OTHER PROPOSALS
The Audit and Finance Committee of the Board has selected KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending October 31, 2021 and is requesting ratification by the stockholders of the selection of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending October 31, 2021. KPMG LLP was our independent registered public accounting firm for the fiscal year ended October 31, 2020 and has served as our independent registered public accounting firm since 1995. KPMG LLP representatives are expected to attend the virtual Annual Meeting. They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions. The Audit and Finance Committee of the Board considered a number of factors in determining whether to re-engage KPMG LLP as the Company’s independent registered public accounting firm, including the length of time the firm has served in this role, the firm’s professional qualifications and resources, the firm’s past performance and the firm’s capabilities in handling the breadth and complexity of our business, as well as the potential impact of changing independent registered public accounting firms. The Board and the Audit and Finance Committee believe that the continued retention of KPMG LLP as our independent registered public accounting firm is in the best interests of the Company and its stockholders. Accordingly, we are asking our stockholders to ratify the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2021. Although ratification is not required by our amended and restated by-laws or otherwise, the Board is submitting the selection of KPMG LLP to our stockholders for ratification as a matter of good corporate practice. If stockholders do not ratify the selection of KPMG LLP, the Audit and Finance Committee will evaluate the stockholder vote when considering the selection of an independent registered public accounting firm for the 2022 fiscal year. In addition, if stockholders ratify the selection of KPMG LLP, the Audit and Finance Committee may nevertheless periodically request proposals from other independent registered public accounting firms and as a result of such process may select KPMG LLP or another firm as our independent registered public accounting firm.
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, we are providing our stockholders with the option to cast a non-binding advisory vote on the compensation of our named executive officers or NEOs. This advisory stockholder vote, commonly known as a “say-on-pay” vote, provides stockholders with the opportunity to endorse or not endorse the Company’s fiscal year 2020 executive compensation programs and policies and the compensation paid to our NEOs as discussed in the Compensation Discussion and Analysis beginning on page As discussed in the Compensation Discussion and Analysis section of this Proxy Statement, our compensation principles and underlying programs are designed to ensure the attraction and retention of executive officers in a reasonable and cost-effective manner, to motivate their performance in the achievement of the Company’s business objectives and to align the interests of the executive officers with the long-term interests of the Company’s stockholders. We believe our compensation policies and procedures demonstrate a transparent link between pay and performance. Because say-on-pay votes are advisory and non-binding, voting results cannot overrule any decisions made by the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future compensation arrangements for our NEOs.
GENERAL DESCRIPTION OF PROPOSAL The Board has approved a proposed amendment, subject to stockholder approval, to Article FOURTH of the Certificate of Incorporation of the Company, as amended (the “Certificate”), that increases the number of authorized shares of common stock from 337,500,000 shares to 500,000,000 shares. An increase in the number of authorized shares will not have a dilutive effect on the value of our stockholders’ common stock; only the actual issuance of additional common stock would have such an effect. This proposal is referred to in this Proxy Statement as the “Increase Authorized Shares Proposal” or “Proposal 4.” CURRENT CAPITALIZATION As of February 12, 2021, we were authorized to issue up to 337,500,000 shares of our common stock,
(1) See discussion under Long Term Incentive Compensation on page 33 of this Proxy Statement for a discussion of the circumstances under which the performance stock units would be issued. In addition to the authorized shares of common stock, the Company is authorized to issue up to 250,000 shares of preferred stock, par value $0.01 per share, in one or more series designated by our Board, of which 105,875 shares have been designated as 5% Series B Cumulative Convertible Perpetual Preferred Stock (“Series B Preferred Stock”). Pursuant to our Certificate, our undesignated shares of preferred stock include all of our shares of preferred stock that were previously designated as Series C Convertible Preferred Stock and Series D Convertible Preferred Stock, as all such shares have been retired and therefore have the status of authorized and unissued shares of preferred stock undesignated as to series. On February 12, 2021, 64,020 shares of Series B Preferred Stock were issued and outstanding. Neither the number of shares of preferred stock that the Company is authorized to issue, nor the preferences, rights or other characteristics of any preferred stock, would be changed by this Increase Authorized Shares Proposal. PURPOSE OF THE AMENDMENT The Board is recommending the increase in authorized shares of common stock for future corporate needs. The Board believes that these additional shares will provide the Company with needed flexibility to issue shares in the future to take advantage of market conditions or favorable opportunities without the potential expense or delay incident to obtaining stockholder approval for a particular issuance. The Shares authorized may be issued by the Board in its discretion, subject to any further stockholder action required in the case of any particular issuance by applicable law, by regulatory agency, or under the rules of The Nasdaq Stock Market (“Nasdaq”) or any stock exchange on which our common stock may then be listed. The newly authorized shares of common stock would be issuable for any proper corporate purpose, including but not limited to future acquisitions, investment opportunities, raising capital for commercialization of our advanced technologies, project advancement and financing, the establishment of collaboration or other strategic agreements, capital raising transactions of equity or convertible debt securities, future at the market or other offerings of common stock, stock splits, stock dividends, issuance under current or future employee equity plans or for other corporate purposes. Currently, there are no immediate plans, arrangements, commitments or understandings with respect to the issuance of any of the additional shares of common stock which would be authorized by the proposed amendment to the Certificate described in this Increase Authorized Shares Proposal. FUELCELLENERGY, INC. | PROXY STATEMENT 53 OTHER PROPOSALS RIGHTS OF ADDITIONAL AUTHORIZED SHARES The additional authorized shares of common stock, when issued, would be part of the existing class of common stock and would have the same rights and privileges as the shares of common stock presently outstanding. Holders of shares of our common stock (solely in their capacity as holders of shares of our common stock) have no preemptive rights or rights to convert their shares of our common stock into any other securities. Accordingly, should the Board elect to issue additional shares of our common stock, existing holders of shares of our common stock would not have any preferential rights to purchase the shares. POTENTIAL ADVERSE EFFECTS OF THE AMENDMENT Future issuance of common stock or securities convertible into our common stock could have a dilutive effect on the earnings per share, book value per share, voting power and percentage interest of holdings of current stockholders. In addition, the availability of additional shares of our common stock for issuance could, under certain circumstances, discourage or make more difficult efforts to obtain control of the Company under a possible take-over scenario. The Board is not aware of any attempt, or contemplated attempt, to acquire control of the Company. This Increase Authorized Shares Proposal is not being presented with the intent that it be used to prevent or discourage any acquisition attempt, but nothing would prevent the Board from taking any appropriate actions not inconsistent with its fiduciary duties. EFFECTIVENESS OF THE AMENDMENT If the proposed amendment to the Certificate described in this Increase Authorized Shares Proposal is approved by our stockholders, it will become effective upon the filing of a Certificate of Amendment to the Certificate of the Company with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”). RISKS TO STOCKHOLDERS OF NON-APPROVAL If the proposed amendment to the Certificate described in this Increase Authorized Shares Proposal is not approved by our stockholders, it will impede the Company’s ability to raise equity capital should the need arise. If the Company is not able to raise equity capital, it may cause the loss of significant business opportunities, prevent the commercialization of our advanced technologies or completion of projects and limit our ability to execute on our business plan, any of which could adversely affect our financial performance, growth and ability to continue our operations. The Board is not aware of any attempt, or contemplated attempt, to acquire control of the Company, and the Board does not intend or view the proposed increase in authorized common stock to be an anti-takeover measure. VOTE REQUIRED Approval of this Proposal 4 (otherwise referred to as the Increase Authorized Shares Proposal) requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding as of the record date for the Annual Meeting. This proposal is a “routine” matter under NYSE Rule 452 on which brokers may vote without instruction from beneficial owners. Therefore, there will be no broker non-votes with respect to this proposal. Abstentions will have the effect of a vote THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE INCREASE AUTHORIZED SHARES PROPOSAL. 54 FUELCELLENERGY, INC. | PROXY STATEMENT OTHER PROPOSALS PROPOSAL 5THE AMENDMENT AND RESTATEMENT OF THE 2018 OMNIBUS INCENTIVE PLAN PROPOSAL GENERAL DESCRIPTION OF PROPOSAL The Board is asking stockholders to approve the amendment and restatement of the FuelCell Energy, Inc. 2018 Omnibus Incentive Plan, as amended and restated effective as of May 8, 2020 (the “Plan”), including the authority to issue 8,000,000 additional shares of our common stock (the “Shares”) under the Plan. On February 5, 2021, the Board approved the amendment and restatement of the Plan (the “Second Amended and Restated Plan”), subject to stockholder approval of the Second Amended and Restated Plan at the Annual Meeting. We believe that adoption of the Second Amended and Restated Plan is necessary in order to allow us to continue to use equity awards as part of our ongoing compensation strategy for our executives, non-employee Directors and other employees. Awards under the Second Amended and Restated Plan will support the creation of long-term value and returns for our stockholders. The purpose of the Second Amended and Restated Plan is to promote the best interests of the Company and our stockholders by providing key employees, consultants and non-employee Directors with an opportunity to acquire Shares or receive monetary payments. The Second Amended and Restated Plan is intended to promote management continuity and increased incentive and personal interest in the welfare of the Company by those key employees who are primarily responsible for shaping and carrying out our long-range plans and securing our continued growth and financial success. In addition, by encouraging stock ownership by non-employee Directors, we seek to attract and retain highly competent Board members and to provide a further incentive to serve as a Director. If the Second Amended and Restated Plan is approved, it would bring the total number of Shares available for future grants under the Plan to a total of 7,946,203, based on the fact that there are no Shares remaining available for future grants under the Plan as of February 12, 2021, and the total number of Shares required to be reserved under the Plan to account for a potential 200% earn out of the PSUs that are scheduled to vest in fiscal year 2023. If the Second Amended and Restated Plan is not approved, and the 200% target PSUs granted for fiscal year 2020 and fiscal year 2021 are all earned and vest, the Company will be required to use cash to satisfy at least 53,797 of such PSUs. As of February 12, 2021, the following equity awards were outstanding under the Plan: 23,891 stock options, with a weighted average exercise price of $91.23 and an average remaining term of 5.9 years, and 4,080,166 Shares of restricted stock or restricted stock units. The Shares subject to these awards represented approximately 1.27% of our issued and outstanding shares on February 12, 2021. If the Second Amended and Restated Plan is approved, an additional 8,000,000 Shares will be available for future grants, including the 53,797 shares required to reserve for 200% of the target PSU awards granted in fiscal years 2020 and 2021, representing approximately an additional 2.48% of our issued and outstanding Shares as of February 12, 2021. The total number of Shares remaining available for future grants and the total number of Shares subject to outstanding awards if the Second Amended and Restated Plan is approved is expected to represent total potential equity dilution of approximately 2.46% which represents the new total number of Shares available for future grants under the Second Amended and Restated Plan of 7,946,203 divided by our issued and outstanding shares as of February 12, 2021. The Board believes that this potential equity dilution if the Second Amended and Restated Plan is approved constitutes reasonable potential equity dilution. If the Second Amended and Restated Plan is not approved, then the Plan will remain in effect in accordance with its existing terms. However, there may be insufficient shares available under the Plan to settle all of the PSU Awards in shares if the 200% target is achieved for both fiscal year 2020 and fiscal year 2021, to make annual or retention awards to executives, key employees and non-employee Directors or to provide grants to new hires in the coming years. In this event, the Compensation Committee may 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 amendment and restatement of the Plan was approved by the Company’s stockholders on May 8, 2020 and became effective on that date. The Plan includes, and the Second 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 under the Second Amended and Restated Plan does not adjust based upon the number of outstanding shares of common stock; ■ 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; ■ The Second Amended and Restated Plan requires a vesting period of one year for all awards granted under the Second Amended and Restated Plan; ■ Material amendments to the Second Amended and Restated Plan require stockholder approval; and ■ The Second Amended and Restated Plan is administered by an independent committee of our Board of Directors. FUELCELLENERGY, INC. | PROXY STATEMENT 55 OTHER PROPOSALS If the Second Amended and Restated Plan is approved by our stockholders, the Second Amended and Restated Plan will become effective on April 8, 2021 (the “Effective Date”), and we would plan to register the additional 8,000,000 shares reserved under the Second Amended and Restated Plan on a Registration Statement on Form S-8. If our stockholders do not approve the Second Amended and Restated Plan, then the Plan will remain in effect in accordance with its existing terms. However, there will be insufficient shares available under the Plan to make the PSU awards if all are earned at the 200% target level, to make annual or retention awards to executives, key employees and non-employee Directors or to provide grants to new hires in the coming years. In this event, the Compensation Committee would be required to modify its compensation philosophy and devise other programs to attract, retain and compensate its executives, key employees and non-employee Directors. SUMMARY OF THE MATERIAL PROVISIONS OF THE SECOND AMENDED AND RESTATED PLAN A summary description of the material terms of the Second Amended and Restated Plan follows below. The summary description is qualified in its entirety by reference to the full text of the Second Amended and Restated Plan, which is attached to this Proxy Statement as Annex A. Any inconsistencies between this summary and the text of the Second Amended and Restated Plan will be governed by the text of the Second Amended and Restated Plan. The closing price of a share of our common stock on the Nasdaq Global Market on February 12, 2021 was $26.20. Purpose The two complementary purposes of the Second 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 Second 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 Second 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 February 12, 2021, approximately 342 employees, and 4 non-employee Directors would be eligible to participate in the Second Amended and Restated Plan, although the number of individuals who are selected to participate in the Second Amended and Restated Plan may vary from year to year. Available Shares Subject to the adjustment provisions included in the Second Amended and Restated Plan, a total of 12,333,333 Shares will be authorized for awards granted under the Second Amended and Restated Plan as of the date of stockholder approval. This would represent an increase of 8,000,000 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. If the Second Amended and Restated Plan is approved, the limit on the number of Shares that may be issued upon the exercise of “incentive stock options” In general, if an award granted under the Second 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 Second 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 Second Amended and Restated Plan. Award Limits If the Second 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 Second 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 56 FUELCELLENERGY, INC. | PROXY STATEMENT OTHER PROPOSALS administer the Second Amended and Restated Plan, including but not limited to the authority to: (i) interpret the provisions of the Second Amended and Restated Plan; (ii) prescribe, amend and rescind rules and regulations relating to the Second Amended and Restated Plan; (iii) correct any defect, supply any omission, or reconcile any inconsistency in the Second Amended and Restated Plan, any award or any award agreement in the manner and to the extent it deems desirable to carry the Second Amended and Restated Plan or such award into effect; and (iv) make all other determinations necessary or advisable for the administration of the Second 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 Second Amended and Restated Plan to a committee of the Board, and the Compensation Committee may delegate some or all of its authority under the Second Amended and Restated Plan to one or more of our officers, subject in each case to certain limitations specified in the Second Amended and Restated Plan. Adjustments Under the terms of the Second 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% 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 Second 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 Second 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 Second 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 Second 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 twenty-four 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. FUELCELLENERGY, INC. | PROXY STATEMENT 57 OTHER PROPOSALS (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 Second 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% 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% 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% 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 Second 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 Second 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 Second 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 Second 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 Second 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. 58 FUELCELLENERGY, INC. | PROXY STATEMENT OTHER PROPOSALS 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 Second 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 Second 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 Second 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. FUELCELLENERGY, INC. | PROXY STATEMENT 59 OTHER PROPOSALS Recoupment of Awards All awards granted under the Second 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 Second 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 Second Amended and Restated Plan in a foreign country will not affect the terms of the Second Amended and Restated Plan for any other country. Term Awards may be granted under the Second Amended and Restated Plan from time to time until the Second Amended and Restated Plan is discontinued or terminated by the Board. No award may be granted under the Second Amended and Restated Plan after the tenth anniversary of the approval of the Second 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 Second Amended and Restated Plan at any time, except: ■ our Board must approve any amendment to the Second 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 Second 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 Second Amended and Restated Plan that materially increases the number of shares of common stock reserved under the Second Amended and Restated Plan, the incentive stock option award limits or the per participant award limitations set forth in the Second Amended and Restated Plan, that shortens the minimum vesting requirements under the Second 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 Second 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 Second Amended and Restated Plan or awards will extend beyond the termination date of the Second Amended and Restated Plan. In addition, termination of the Second 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 Second 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 Second Amended and Restated Plan is approved by our stockholders, then we expect to reserve 60 FUELCELLENERGY, INC. | PROXY STATEMENT OTHER PROPOSALS 200% target PSU awards are earned for both fiscal year 2020 and fiscal year 2021. In addition, as described under the heading “Director Compensation,” our non-employee Director annual compensation consists in part of a retainer paid in the form of a $75,000 per Director annual equity award. If the Second Amended and Restated Plan is approved, we expect to reserve the
(1) Dollar value will depend on the stock price at the time of vesting (assuming that the 200% target is met). All awards granted under the Second Amended and Restated Plan are made at the discretion of the Compensation Committee and, except for the awards disclosed above, the benefits and amounts that will be received or allocated under the Second 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, 2020.
(1) Includes the Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following summarizes certain federal income tax consequences relating to the Second 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 Second 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 Second 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 FUELCELLENERGY, INC. | PROXY STATEMENT 61 OTHER PROPOSALS 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 Second 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 Second 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 Second 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). 62 FUELCELLENERGY, INC. | PROXY STATEMENT OTHER PROPOSALS 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 5 requires the affirmative vote of the holders of a majority of the shares of our common stock casting votes on the matter in person or by proxy at the Annual Meeting. This proposal is a “non-routine” matter under NYSE 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 “ FUELCELLENERGY, INC. | PROXY STATEMENT 63 ADDITIONALINFORMATION AND GENERAL Holders of the Company’s common stock as of the close of business on February 12, 2021 (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 ■ 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 generally cannot vote their shares directly and instead must instruct their brokerage firm, bank or nominee 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 2022 ANNUAL MEETING If any stockholder wishes to propose a matter for consideration at our 2022 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 2022 Annual Meeting Proxy Statement and form of proxy, a proposal must be received by our Corporate Secretary on or before October 22, 2021. Failure to deliver a proposal in accordance with this procedure may result in it not being deemed timely received. In addition, our amended and restated 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 2022, you must submit a timely notice in accordance with the procedures described in our amended and restated 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 2022, such a proposal must be received on or after December 9, 2021, but not later than January 8, 2022. In the event that the date of the Annual Meeting of Stockholders to be held in 2022 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 120thday prior to the Annual Meeting of Stockholders to be held in 2022 and not later than the 90thday prior to such Annual Meeting of Stockholders to be held in 2022 or, if later, the 10thday 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 amended and restated by-laws. 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. The holders of a majority of the shares of common stock 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. 64 FUELCELLENERGY, INC. | PROXY STATEMENT ADDITIONAL INFORMATION AND OTHER MATTERS 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 3, 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 3 (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 NYSE Rule 452). With respect to Proposal 4, approval of such proposal requires the affirmative vote of the holders of a majority of the shares of common stock outstanding as of the Record Date for the Annual Meeting. This proposal is a “routine” matter under NYSE Rule 452 on which brokers may vote without instruction from beneficial owners. Therefore, there will be no broker non-votes with respect to Proposal 4. Abstentions will have the effect of a vote “AGAINST” Proposal 4. With respect to Proposals 5, approval of such proposal requires the affirmative vote of the holders of a majority of the shares of common stock casting votes on the matter at the Annual Meeting. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the voting results for Proposal 5. 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 5, 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. With respect to Proposals 2 and 4, the broker may exercise its discretion to vote your shares on Proposals 2 and 4 in the absence of your instruction. Please instruct your bank or broker so your vote can be counted. While Proposal 3 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. As noted above, an “ABSTAIN” vote will have the effect of a vote “AGAINST” for Proposal 4 and will have no effect on the voting results for Proposals 1, 2, 3, or 5. 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 of the proposals described in this Proxy Statement. 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 the proxy card. The persons named as attorneys-in-fact in the proxy, Jason Few and Jennifer D. Arasimowicz, were selected by our Board. A stockholder may change its vote 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. Attendance at the Annual Meeting will not cause a stockholder’s previously granted proxy to be revoked unless such stockholder specifically so requests. For stockholders who hold their shares beneficially in street name, such stockholders may change their vote by submitting new voting instructions to their broker, trustee or nominee following the instructions it has provided, or, if such stockholder has obtained a legal proxy from its broker or nominee giving it the right to vote its shares, by attending the Annual Meeting and voting. 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 MacKenzie Partners to assist in the solicitation of proxies. Fees for this service are estimated to be approximately FUELCELLENERGY, INC. | PROXY STATEMENT 65 ADDITIONAL INFORMATION AND OTHER MATTERS $15,000, plus out-of-pocket expenses, to assist in the solicitation. 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 MacKenzie Partners, Inc., the proxy solicitation agent for the Company, by telephone at (800) 322-2885 (toll free) or (212) 929-5500 (collect), or by email at proxy@mackenziepartners.com. ANNUAL REPORT AND FORM 10-K Additional copies of the Company’s Annual Report to Stockholders for the fiscal year ended October 31, 2020 and copies of the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2020 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 In accordance with the Company’s security procedures, 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 12, 2021. This year’s 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/FCEL2021. To participate in the Annual Meeting, you will need the 16-digit control number included on your notice, on your proxy card or on 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 vote your shares 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 of record as of the Record Date for the Annual Meeting, which was February 12, 2021, or you hold a valid proxy for the Annual Meeting. You may attend the Annual Meeting, vote and submit a question during the Annual Meeting by visiting www.virtualshareholdermeeting.com/FCEL2021and using your 16-digit control number to enter the Annual Meeting. If you are not a stockholder of record but hold shares as a beneficial owner in street name, you may be required to provide proof of beneficial ownership, such as your most recent account statement as of the Record Date, a copy of the voting instruction form provided by your broker, bank, trustee, or nominee, or other similar evidence of ownership. If you do not comply with the procedures outlined above, you will not be admitted to the virtual Annual Meeting. 66 FUELCELLENERGY, INC. | PROXY STATEMENT ADDITIONAL INFORMATION AND OTHER MATTERS If you have questions regarding admission to the Annual Meeting you may contact the office of the Corporate Secretary at: FuelCell Energy, Inc. Office of the Corporate Secretary 3 Great Pasture Road Danbury, CT 06810 (203) 825-6000
corporatesecretary@fce.com Please include the following information with your inquiry: ■ Your name and complete mailing address; ■ Your email address; and ■ Proof that you own FuelCell Energy shares (such as a letter from your bank or broker or a photocopy of a current brokerage or other account statement). FUELCELLENERGY, INC. | PROXY STATEMENT 67 ANNEX A FUELCELL ENERGY, INC. SECOND AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN
Capitalized terms used and not otherwise defined in this Plan or in any Award agreement have the following meanings: (a) “Act” means the Securities Act of 1933, as amended from time to time. Any reference to a specific provision of the Act shall include any successor provision thereto. (b) “Administrator” means the Committee; provided that, to the extent the Committee has delegated authority and responsibility as an Administrator of the Plan to one or more officers of the Company as permitted by Section 3(b), the term “Administrator” shall also mean such officer or officers. (c) “Affiliate” has the meaning ascribed to such term in Rule 12b-2 under the Exchange Act. Notwithstanding the foregoing, for purposes of determining those individuals to whom an Option or a Stock Appreciation Right may be granted, the term “Affiliate” means any entity that, directly or through one or more intermediaries, is controlled by or is under common control with, the Company within the meaning of Code Sections 414(b) or (c); provided that, in applying such provisions, the phrase “at least 20 percent” shall be used in place of “at least 80 percent” each place it appears therein. (d) “Award” means a grant of Options, Stock Appreciation Rights, Performance Shares, Performance Units, Stock, Restricted Stock, Restricted Stock Units, an Incentive Award, Dividend Equivalent Units or any other type of award permitted under this Plan. Any Award granted under this Plan shall be provided or made in such manner and at such time as complies with the applicable requirements of Code Section 409A to avoid a plan failure described in Code Section 409A(a)(1), including, without limitation, deferring payment to a specified employee or until a specified distribution event, as provided in Code Section 409A(a)(2), and the provisions of Code Section 409A are incorporated into this Plan to the extent necessary for any Award that is subject to Code Section 409A to comply therewith. (e) “Beneficial Owner” means a Person, with respect to any securities which: (i) such Person or any of such Person’s Affiliates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner A-1 ANNEX A FUELCELL ENERGY, INC. SECOND AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates until such tendered securities are accepted for purchase; (ii) such Person or any of such Person’s Affiliates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Act), including pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this clause (ii) as a result of an agreement, arrangement or understanding to vote such security if the agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Act and (B) is not also then reportable on a Schedule 13D under the Act (or any comparable or successor report); or (iii) are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in clause (ii) above) or disposing of any voting securities of the Company. (f) “Board” means the Board of Directors of the Company.
(i) any Person (other than (A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under any employee benefit plan of the Company or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities or (D) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock in the Company (“ Excluded Persons”)) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the Effective Date, pursuant to express authorization by the Board that refers to this exception) representing fifty percent (50%) or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or(ii) the following individuals cease for any reason to constitute a majority of the number of directors of the Company then serving: (A) individuals who, on the Effective Date, constituted the Board and (B) any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Act) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the Effective Date, or whose appointment, election or nomination for election was previously so approved (collectively the “Continuing Directors”); provided, however, that individuals who are appointed to the Board pursuant to or in accordance with the terms of an agreement relating to a merger, consolidation, or share exchange involving the Company (or any direct or indirect subsidiary of the Company) shall not be Continuing Directors for purposes of this Agreement until after such individuals are first nominated for election by a vote of at least two-thirds (2/3) of the then Continuing Directors and are thereafter elected as directors by the shareholders of the Company at a meeting of shareholders held following consummation of such merger, consolidation, or share exchange; and, provided further, that in the event the failure of any such persons appointed to the Board to be Continuing Directors results in a Change of Control, the subsequent qualification of such persons as Continuing Directors shall not alter the fact that a Change of Control occurred; or (iii) the consummation of a merger, consolidation or share exchange of the Company with any other corporation or the issuance of voting securities of the Company in connection with a merger, consolidation or share exchange of the Company (or any direct or indirect subsidiary of the Company), in each case, which requires approval of the shareholders of the Company, other than (A) a merger, consolidation or share exchange which would result in the voting securities of the Company outstanding immediately prior to such merger, consolidation or share exchange continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger, consolidation or share exchange, or (B) a merger, consolidation or share exchange effected to implement a recapitalization of the Company (or similar transaction) in which no Person (other than an Excluded Person) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the Effective Date, pursuant to express authorization by the Board that refers to this exception) representing fifty percent (50%) or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or A-2 ANNEX A FUELCELL ENERGY, INC. SECOND AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN (iv) the consummation of a plan of complete liquidation or dissolution of the Company or a sale or disposition by the Company of all or substantially all of the Company’s assets (in one transaction or a series of related transactions within any period of 24 consecutive months), in each case, which requires approval of the shareholders of the Company, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity at least seventy-five percent (75%) of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, no “Change of Control” shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to own, directly or indirectly, in the same proportions as their ownership in the Company, an entity that owns all or substantially all of the assets or voting securities of the Company immediately following such transaction or series of transactions. Notwithstanding the foregoing, if an Award is considered deferred compensation subject to the provisions of Code Section 409A, and if a payment under such Award is triggered upon a “Change of Control,” then the foregoing definition shall be deemed amended as necessary to comply with Code Section 409A. (k) “Company” means FuelCell Energy, Inc., a Delaware corporation, or any successor thereto.
The Administrator may designate any of the following as a Participant from time to time, to the extent of the Administrator’s authority: any officer or other employee of the Company or its Affiliates; any individual that the Company or an Affiliate has engaged to become an officer or employee; any consultant or advisor who provides services to the Company or its Affiliates; or any Director, including a Non-Employee Director. The Administrator’s designation of, or granting of an Award to, a Participant will not require the Administrator to designate such individual as a Participant or grant an Award to such individual at any future time. The Administrator’s granting of a particular type of Award to a Participant will not require the Administrator to grant any other type of Award to such individual.
Subject to the terms of this Plan, the Administrator may grant any type of Award to any Participant it selects, but only employees of the Company or a Subsidiary may receive grants of incentive stock options within the meaning of Code Section 422. Awards may be granted alone or in addition to, in tandem with, or (subject to the prohibition on repricing set forth in Section 17(e)) in substitution for any other Award (or any other award granted under another plan of the Company or any Affiliate, including the plan of an acquired entity). Each Award shall be evidenced by an Award agreement, which may include such other provisions (whether or not applicable to the Award granted to any other Participant) as the Administrator determines appropriate to the extent not otherwise prohibited by the terms of the Plan. 6. Shares Reserved under this Plan. (a) Plan Reserve. Subject to adjustment as provided in Section 19, an aggregate of 12,333,333 Shares, are reserved for issuance under this Plan; provided that only 1,233,333 of such Shares may be issued pursuant to the exercise of incentive stock options. The Shares reserved for issuance may be either authorized and unissued Shares or Shares reacquired at any time and now or hereafter held as treasury stock.
(c) Replenishment of Shares Under this Plan. If (i) an Award lapses, expires, terminates or is cancelled without the issuance of Shares under the Award (whether due currently or on a deferred basis), (ii) it is determined during or at the conclusion of the term of an Award that all or some portion of the Shares with respect to which the Award was granted will not be issuable on the basis that the conditions for such issuance will not be satisfied, (iii) Shares are forfeited under an Award, (iv) Shares are issued under any Award and the Company subsequently reacquires them pursuant to rights reserved upon the issuance of the Shares, or (v) an Award or a portion thereof is settled in Cash, then such Shares shall be recredited to the Plan’s reserve and may again be used for new Awards under this Plan, but Shares recredited to the Plan’s reserve pursuant to clause (iv) may not be issued pursuant to incentive stock options. Notwithstanding the foregoing, in no event shall the following Shares be recredited to the Plan’s reserve: (i) Shares purchased by the Company using proceeds from Option exercises; (ii) Shares tendered or withheld in payment of the exercise price of an Option or as a result of the net settlement of an outstanding Stock Appreciation Right; or (iii) Shares tendered or withheld to satisfy federal, state or local tax withholding obligations.
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.
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; providedthat 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 A-6 ANNEX A FUELCELL ENERGY, INC. SECOND AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN 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.
(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. A-7 ANNEX A FUELCELL ENERGY, INC. SECOND AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN (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; providedthat, 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. A-8 ANNEX A FUELCELL ENERGY, INC. SECOND AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN (e) Repricing and Backdating Prohibited.Notwithstanding anything in this Plan to the contrary, and except for the adjustments provided for in Section 19, neither the Administrator nor any other person may (i) amend the terms of outstanding Options or SARs to reduce the exercise or grant price of such outstanding Options or SARs; (ii) cancel outstanding Options or SARs in exchange for Options or SARs with an exercise or grant price that is less than the exercise or grant price of the original Options or SARs; or (iii) cancel outstanding Options or SARs with an exercise or grant price above the current Fair Market Value of a Share in exchange for cash or other securities. In addition, the Administrator may not make a grant of an Option or SAR with a grant date that is effective prior to the date the Administrator takes action to approve such Award. (f) 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, this Plan as it determines is necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that the Administrator approves for purposes of using this Plan in a foreign country will not affect the terms of this Plan for any other country. In addition, all such supplements, amendments, restatements or alternative versions must comply with the provisions of Section 17(b)(ii). 18. Taxes. (a) Withholding.In the event the Company or one of its Affiliates is required to withhold any Federal, state or local taxes or other amounts in respect of any income recognized by a Participant as a result of the grant, vesting, payment or settlement of an Award or disposition of any Shares acquired under an Award, the Company may deduct (or require an Affiliate to deduct) from any payments of any kind otherwise due the Participant cash, or with the consent of the Administrator, Shares otherwise deliverable or vesting under an Award, to satisfy such tax or other obligations. Alternatively, the Company or its Affiliate may require such Participant to pay to the Company or its Affiliate, in cash, promptly on demand, or make other arrangements satisfactory to the Company or its Affiliate regarding the payment to the Company or its Affiliate of the aggregate amount of any such taxes and other amounts. If Shares are deliverable upon exercise or payment of an Award, then the Administrator may permit a Participant to satisfy all or a portion of the Federal, state and local withholding tax obligations arising in connection with such Award by electing to (i) have the Company or its Affiliate withhold Shares otherwise issuable under the Award, (ii) tender back Shares received in connection with such Award or (iii) deliver other previously owned Shares, in each case having a Fair Market Value equal to the amount to be withheld; provided that the amount to be withheld in Shares may not exceed the total maximum statutory tax withholding obligations associated with the transaction to the extent needed for the Company and its Affiliates to avoid an accounting charge. If an election is provided, the election must be made on or before the date as of which the amount of tax to be withheld is determined and otherwise as the Administrator requires. In any case, the Company and its Affiliates may defer making payment or delivery under any Award if any such tax may be pending unless and until indemnified to its satisfaction. (b) No Guarantee of Tax Treatment.Notwithstanding any provisions of this Plan to the contrary, the Company does 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 Affiliate be required to indemnify, defend or hold harmless any individual with respect to the tax consequences of any Award. 19. Adjustment and Change of Control Provisions. (a) Adjustment of Shares.If (i) the Company shall at any time be involved in a merger or other transaction in which the Shares are changed or exchanged; (ii) the Company shall subdivide or combine the Shares or the Company shall declare a dividend payable in Shares, other securities (other than stock purchase rights issued pursuant to a shareholder rights agreement) or other property; (iii) the Company shall effect a cash dividend the amount of which, on a per Share basis, exceeds ten percent (10%) of the Fair Market Value of a Share at the time the dividend is declared, or the Company shall effect any other dividend or other distribution on the Shares in the form of cash, or a repurchase of Shares, that the Board determines by resolution is special or extraordinary in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving the Shares; or (iv) any other event shall occur, which, in the case of this clause (iv), in the judgment of the Administrator necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Administrator shall, in such manner as it may deem equitable to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, adjust any or all of: (A) the number and type of Shares subject to this Plan (including the number and type of Shares described in Sections 6(a) and (c)) and which may after the event be made the subject of Awards; (B) the number and type of Shares subject to outstanding Awards; (C) the grant, purchase, or exercise price with respect to any Award; and (D) the Performance Goals of an Award. In any such case, the Administrator may also (or in lieu of the foregoing) make provision for a cash payment to the holder of an outstanding Award in exchange for the cancellation of all or a portion of the Award (without the consent of the holder of an Award) in an amount determined by the 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-9 ANNEX A FUELCELL ENERGY, INC. SECOND AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN 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. A-10 ANNEX A FUELCELL ENERGY, INC. SECOND AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN “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); providedthat 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 transaction in which the Company, a Subsidiary or any Affiliate is a party from receiving desired tax treatment, including without limitation requiring that each Participant receive a replacement or substitute Award issued by the surviving or acquiring corporation. 20. Miscellaneous. (a) Code Section 409A.Any Award granted under this Plan shall be provided or made in such manner and at such time as complies with the applicable requirements of Code Section 409A to avoid a plan failure described in Code Section 409A(a)(1), including, without limitation, deferring payment to a specified employee or until a specified distribution event, as provided in Code Section 409A(a)(2), and the provisions of Code Section 409A are incorporated into this Plan to the extent necessary for any Award that is subject to Code Section 409A to comply therewith. A-11 ANNEX A FUELCELL ENERGY, INC. SECOND AMENDED AND RESTATED 2018 OMNIBUS INCENTIVE PLAN (b) No Right to Employment.The issuance of an Award shall not confer upon a Participant any right with respect to continued employment or service with the Company or any Affiliate, or the right to continue as a Director. (c) No Fractional Shares.No fractional Shares or other securities may be issued or delivered pursuant to this Plan, and the Administrator may determine whether cash, other securities or other property will be paid or transferred in lieu of any fractional Shares or other securities, or whether such fractional Shares or other securities or any rights to fractional Shares or other securities will be canceled, terminated or otherwise eliminated. (d) Unfunded Plan; Awards Not Includable for Benefits Purposes.This Plan is unfunded and does not create, and should not be construed to create, a trust or separate fund with respect to this Plan’s benefits. This Plan does not establish any fiduciary relationship between the Company and any Participant or other person. To the extent any person holds any rights by virtue of an Award granted under this Plan, such rights are no greater than the rights of the Company’s general unsecured creditors. Income recognized by a Participant pursuant to an Award shall not be included in the determination of benefits under any employee pension benefit plan (as such term is defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) or group insurance or other benefit plans applicable to the Participant which are maintained by the Company or any Affiliate, except as may be provided under the terms of such plans or determined by resolution of the Board. (e) Requirements of Law and Securities Exchange.The granting of Awards and the issuance of Shares in connection with an Award are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision of this Plan or any award agreement, the Company has no liability to deliver any Shares under this Plan or make any payment unless such delivery or payment would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity, and unless and until the Participant has taken all actions required by the Company in connection therewith. The Company may impose such restrictions on any Shares issued under the Plan as the Company determines necessary or desirable to comply with all applicable laws, rules and regulations or the requirements of any national securities exchanges. (f) Governing Law; Venue.This Plan, and all agreements under this Plan, will be construed in accordance with and governed by the laws of the State of Delaware, without reference to any conflict of law principles. Any legal action or proceeding with respect to this Plan, any Award or any award agreement, or for recognition and enforcement of any judgment in respect of this Plan, any Award or any award agreement, may only be brought and determined in a court sitting in Fairfield County, CT. (g) Limitations on Actions.Any legal action or proceeding with respect to this Plan, any Award or any award agreement, must be brought within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint. (h) Construction.Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used in the singular or plural, they shall be construed as though they were used in the plural or singular, as the case may be, in all cases where they would so apply. Titles of sections are for general information only, and this Plan is not to be construed with reference to such titles. The title, label or characterization of an Award in an award agreement or in the Company’s public filings or other disclosures shall not be determinative as to which specific Award type is represented by the award agreement. Instead, the Administrator may determine which specific type(s) of Award(s) is (are) represented by any award agreement, at the time such Award is granted or at any time thereafter. (i) Severability.If any provision of this Plan or any award agreement or any Award (a) is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any person or Award, or (b) would cause this Plan, any award agreement or any Award to violate or be disqualified under any law the Administrator deems applicable, then such provision should be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Administrator, materially altering the intent of this Plan, award agreement or Award, then such provision should be stricken as to such jurisdiction, person or Award, and the remainder of this Plan, such award agreement and such Award will remain in full force and effect. A-12
ONLINE ACCESS TO PROXY MATERIALS To view this Proxy Statement and the Annual Report, visit www.fuelcellenergy.com and click on the “Investors” tab on the top on the page, visit www.proxyvote.com, or scan the following QR code. VIEW MATERIALS & VOTE w SCAN TO FUELCELL ENERGY, INC. 3 GREAT PASTURE ROAD DANBURY, CT 06810 ATTN: CORPORATE SECRETARY VOTE BY INTERNET Before The Meeting — Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting — Go to www.virtualshareholdermeeting.com/FCEL2021 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE — 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D32883-P49429 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. FUELCELL ENERGY, INC. The Board of Directors recommends you vote FOR each of the nominees listed in Proposal 1 below and FOR each of the following proposals: 1. Election of Directors For Against Abstain Nominees: ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1a. James H. England For Against Abstain ! ! ! 4. To approve the amendment of the FuelCell Energy, Inc. Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock of FuelCell Energy, Inc. from 337,500,000 shares to 500,000,000 shares 1b. Jason Few 1c. Chris Groobey ! ! ! 1d. Matthew F. Hilzinger 5. To approve the amendment and restatement of the FuelCell Energy, Inc. 2018 Omnibus Incentive Plan, as amended and restated 1e. Natica von Althann NOTE: Such other business as may properly come before the meeting or any adjournment thereof. 2. To ratify the selection of KPMG LLP as FuelCell Energy, Inc.’s independent registered public accounting firm for the fiscal year ending October 31, 2021 3. To approve, on a non-binding advisory basis, the compensation of FuelCell Energy, Inc.’s named executive officers as set forth in the “Executive Compensation” section of the proxy statement ! ! ! Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on Thursday, April 8, 2021: The Notice, Proxy Statement and Annual Report are available at www.proxyvote.com. D32884-P49429 FUELCELL ENERGY, INC. PROXY FOR THE APRIL 8, 2021 ANNUAL MEETING OF STOCKHOLDERS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Jason Few and Jennifer D. Arasimowicz, and each of them, as proxies and attorneys-in-fact, with full power of substitution, to vote as directed on the reverse side all shares of Common Stock of FuelCell Energy, Inc. registered in the name of the undersigned, or which the undersigned may be entitled to vote, at the Annual Meeting of Stockholders to be held on Thursday, April 8, 2021, at 10:00 a.m. Eastern Daylight Time and at any adjournment or postponement thereof. This proxy, when properly executed will be voted as directed, or if no direction is given, will be voted “FOR” each of the nominees listed in Proposal 1, “FOR” Proposals 2 through 5, and in the discretion of the proxies on any other matter that properly comes before the meeting or any adjournments or postponements thereof. This proxy may be used by stockholders of record as of February 12, 2021. Continued and to be signed on reverse side |