DEF 14A of Fuel Tech, Inc.
Filed Apr 15, 2024 · FY20230001437749-24-012049
AGENDA ITEM NO. 1 ELECTION OF DIRECTORS
AGENDA ITEM NO. 1 ELECTION OF DIRECTORS
The Nominees
The Nominees Our stockholders elect our directors on an annual basis. Vincent J. Arnone, Douglas G. Bailey, Sharon L. Jones, and Dennis L. Zeitler were each Fuel Tech’s directors for its four-member Board of Directors and were elected by our stockholders at Fuel Tech’s 2023 Annual Meeting of Stockholders to serve for a one-year term expiring at the 2024 Annual Meeting. We are asking you to vote for the election of four nominees as directors of Fuel Tech at the 2024 Annual Meeting. All of the nominees were recommended by the Nominating and Corporate Governance Committee of the Board. The term of office of each director is until the next annual meeting or until a successor is duly elected or, if before, when a director resigns, retires or is removed by the stockholders. The nominees are Vincent J. Arnone, Douglas G. Bailey, Sharon L. Jones, and Dennis L. Zeitler. In the opinion of the Board, with the exception of Mr. Arnone, all director nominees satisfy the independence requirements of NASD Rule 5605(a)(2). Detail concerning directors’ compensation is set out below under the captions Executive Compensation and Director Compensation. The following table sets forth certain additional information with respect to the nominees.
The Nominees
| Name | Director Since | Independent | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Gender | Race | LGBQT+ | | Vincent J. Arnone Chairman of the Board and Chief Executive Officer | 2015 | — | — | — | — | Male | White | No | | Douglas G. Bailey | 1998 | X | X | X | Chair | Male | White | No | | Sharon L. Jones | 2018 | X | X | Chair | X | Female | White | No | | Dennis L. Zeitler | 2013 | X | Chair | X | X | Male | White | No |
The Nominees
Each of the nominees identified above are the nominees of the Board for election as directors at the Annual Meeting. Biographical information, including qualifications, regarding each of the nominees is set forth below.
DIRECTORS AND EXECUTIVE OFFICERS OF FUEL TECH
DIRECTORS AND EXECUTIVE OFFICERS OF FUEL TECH Biographical information is presented below concerning nominees to our Board and our “Named Executive Officers” (or NEOs). Our NEO’s are Ellen T. Albrecht, Vincent J. Arnone and William E. Cummings, Jr.
DIRECTORS
DIRECTORS
DIRECTORS
| Vincent J. Arnone | Mr. Bailey’s past leadership and management responsibilities as Executive Chairman, and President and Chief Executive Officer of Fuel Tech informs his judgment and participation as a member of Fuel Tech’s Board. His early career began as an engineer with Foster-Miller, Inc. and at Corning, Inc. in a variety of manufacturing and marketing positions. During his subsequent business career, following the founding of ABC, Mr. Bailey, in addition to being ABC’s CEO, served as the CEO of a number of its affiliated companies, bringing to the Fuel Tech Board management ability at senior and executive management levels in a variety of industrial markets. Over the span of more than 40 years, Mr. Bailey has provided board service to a number of other companies including, for example, from 2001 to 2013, serving as a director and chairman of the compensation committee, along with being a member of the nominating and corporate governance committee, for Endocyte, Inc., a public biotechnology company acquired by Novartis AG in December 2018. Since 2013, Mr. Bailey has served as a director of Nemucore Medical Innovations, Inc. and since mid-2014, chairman of its compensation committee. Mr. Bailey also has previous service on the audit committee and as chairman of the compensation committee for Atlantis Components, Inc. Also, since 2013, he has been a director of the corporate general partner of Great Northern Properties LP and, since 2020, a director of Pocahontas Royalties LLC, affiliated entities that are private owners of substantial U.S. coal mineral rights and surface land. This gives him a broad-based understanding of the role of a board of directors and its committees, and positions him well to continue to serve on the Board. | | Qualifications and Career Highlights: | | | Vincent J. Arnone, 60, was appointed Chairman of the Board of Directors of Fuel Tech, Inc. on September 1, 2017. Mr. Arnone has been President and Chief Executive Officer and a director of Fuel Tech since April 1, 2015; previously he was Executive Vice President and Chief Operating Officer from January 2014 through March 2015; Executive Vice President, Worldwide Operations since September 2010; a consultant to Fuel Tech from time to time from June 2008 through August 2010; Senior Vice President, Treasurer and Chief Financial Officer of Fuel Tech from February 2006 through June 2008; Vice President, Treasurer and Chief Financial Officer from December 2003 through January 2006; and Controller and Financial Director from May 1999 through November 2003. Mr. Arnone’s key leadership roles in the management of Fuel Tech over two decades, his depth of experience regarding the establishment and execution of strategies and operational programs in a multi-national environment along with his experiential knowledge regarding financial matters contribute to the Board’s deliberations regarding the business of Fuel Tech. | | | Douglas G. Bailey | Sharon L. Jones | | Qualifications and Career Highlights: | Qualifications and Career Highlights: | | Douglas G. Bailey, 73, has been a director of Fuel Tech, Inc. since April 1998. From April 2015 until his retirement from the position effective September 1, 2017, he was Executive Chairman of the Board of Fuel Tech, Inc. Also, previously, Mr. Bailey was President and Chief Executive Officer of Fuel Tech from April 2010 through March 2015, Chairman of the Board of Fuel Tech from January 2010 through March 2015, and Deputy Chairman from 2002 through December 2009. He also previously served as an employee of Fuel Tech from January 1, 2004 through December 31, 2009. Mr. Bailey has been the President of American Bailey Corporation, a closely held private equity firm, since 1984 and its Chief Executive Officer since 1996. | Sharon L. Jones, 64, was elected to the Board in March, 2018. Previously, Ms. Jones served as Aircraft Protection Vice President and Site Lead for Orbital ATK in 2014 and 2015. Prior to Orbital ATK’s 2014 merger with Alliant Techsystems, Inc., Ms. Jones held a variety of senior leadership positions for Alliant Techsystems, Inc., a Fortune 500 aerospace and munitions leader, including Technology Vice President (2010-2013), Manufacturing Director (2005-2010), Environmental, Safety and Security Director (2002-2005), Program Director (1998-2001) and various management positions in engineering, quality assurance and employee safety and security (1985-1989). Ms. Jones began her career as a research chemist at Dow Chemical Company in 1982. |
DIRECTORS
| Ms. Jones’ professional affiliations include membership on the board of directors of the Anoka Technical College Foundation, where she served as vice-president and president. Ms. Jones also serves as a Board director for Mallard Creek Polymers, LLC (2020 to present), and is the Chair of the Compensation Committee and a member of the Manufacturing Excellence and Safety Committee. She holds a Master’s of Business Administration degree from the University of St. Thomas, and a Bachelor’s degree in chemistry and a Master’s degree in analytical chemistry from the South Dakota School of Mines and Technology. Ms. Jones has extensive experience in strategic planning, change management and project development, having developed and implemented technical strategies for extending product life cycles and increasing operating efficiency, and collaboratively managing organizational change. Ms. Jones’ combined experience in product development, change management and implementing safety programs makes her an excellent advisor to help inform the Board’s judgment on a variety of matters. | Mr. Zeitler is a highly accomplished Chief Financial Officer and executive manager, serving as MSA’s Chief Financial Officer and Treasurer for thirteen years. MSA is a global leader in the development, manufacture and supply of products that protect people’s health and safety. Mr. Zeitler has a deep understanding of all aspects of global finance for a publicly traded company. During his career with MSA, its global sales volume dramatically increased and the number of countries in which MSA operated expanded substantially. This provided Mr. Zeitler a sophisticated experiential knowledge base regarding financial and Treasury operations and business requirements in a broad array of markets and countries worldwide. In addition to his duties as Chief Financial Officer for MSA, Mr. Zeitler led MSA’s Global Pricing Strategy and Business Development teams, devising and implementing global strategies across all of MSA’s operating elements. He has significant experience dealing with the issues of growing businesses around the world. These experiences and qualifications make Mr. Zeitler an excellent addition to the Fuel Tech Board to help inform the Board’s judgment in these areas. | | Dennis L. Zeitler | | | Qualifications and Career Highlights: | | | Dennis L. Zeitler, 75, has been a director of Fuel Tech since 2013. Mr. Dennis L. Zeitler served as Senior Vice President and Special Advisor of MSA Safety, Inc. (MSA) from September 4, 2013 to January 1, 2014. Mr. Zeitler served as Senior Vice President, Chief Financial Officer and Treasurer of MSA from June 2007 to September 2013. In his tenure at MSA, Mr. Zeitler held ever increasing positions of responsibility. His earlier positions included Treasurer; Assistant Treasurer; and Manager, Financial Services (1989-1998), Vice President and Treasurer (1998-2000), and Vice President, Chief Financial Officer and Treasurer (2000-2007). | |
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on our Board. In setting director compensation, we consider the role of the directors, the amount of time that directors expend in fulfilling their duties as well as the expertise required of Board members, the financial performance of Fuel Tech and the availability of shares under the Fuel Tech, Inc. 2014 Long-Term Incentive Plan.
DIRECTOR COMPENSATION IN FISCAL YEAR 2023
DIRECTOR COMPENSATION IN FISCAL YEAR 2023 The following table shows for the Fuel Tech non-employee directors all compensation paid in 2023 on account of fees and equity awards. Directors employed by Fuel Tech or its subsidiaries receive no compensation for their service as directors, and accordingly, during any time he has been employed by Fuel Tech, Mr. Arnone has not received any cash fees or equity awards for his participation on the Board. Disclosure regarding the compensation of Mr. Arnone for fiscal 2023 is contained under the caption Summary of NEO Compensation below.
DIRECTOR COMPENSATION IN FISCAL YEAR 2023
| (a) | (b) | (c) | (d) | | Name | Fees Earned in Cash ($) | Stock Awards ($) | Total ($) | | Douglas G. Bailey | $53,750 | $20,829 | $74,579 | | Sharon L. Jones | $56,250 | $20,829 | $77,079 | | Dennis L. Zeitler | $58,750 | $20,829 | $79,579 |
Compensation Discussion and Analysis
Compensation Discussion and Analysis The Committee is responsible for reviewing and, to the extent provided for in the Committee’s Charter, approving in advance of implementation, all incentive plans, sales commission plans and salary actions and bonuses for Vice President level and above officers of Fuel Tech or new or incumbent employees that have base salaries in excess of $175,000 per year including the Named Executive Officers (NEOs) listed in the Summary Compensation Table below. In the case of the salary actions described below, the Committee makes recommendations to the Board, and the Board approves or rejects such salary actions. The Committee periodically reviews Fuel Tech compensation practices, including the methodologies for setting total compensation for those employees, including NEOs. As discussed in more detail below, from time to time the Committee also may supplement its exercise of business judgment in compensation matters with market information pertaining to Fuel Tech’s compensation levels against comparable companies in its industry and across multiple industries including the use of peer group data (also see Use of Peer Group section below). However, the Committee exercises its independent judgment when making decisions on compensation matters, including when rewarding individual performance. The responsibilities of the Committee are described more fully in its charter at www.ftek.com.
Compensation Elements
Compensation Elements Our executive compensation program has as a primary purpose to attract, retain and motivate the highly talented individuals whose enterprise will enable us to succeed. Typically, the key components of that program include three elements: base salary, short-term incentives and long-term incentives. Among those three elements, from year to year, when considering its goal of promoting the overall financial performance of Fuel Tech on an annual and long-term basis, the Committee’s use of the short-term and long-term incentives may vary, but when used in the compensation packages for NEOs retain the pay-for-performance characteristics described below.
Base Salary
Base Salary Base salaries requiring review by the Committee under its Charter are reviewed by the Committee on recommendation of the Chief Executive Officer and approved by the Board, except that the base salary of the Chief Executive Officer is reviewed and recommended by the Committee itself without the Chief Executive Officer being present during such deliberations or Committee voting and approved by the Board. In its performance of these activities the Committee acts in its business judgment on what it understands to be fair, reasonable and equitable compensation in view of Fuel Tech’s requirements for recruiting and retention in a highly competitive market. To assist in that determination, the Committee may refer to compensation consultant reports as to general market information and benchmarking data from a peer group of companies approved by the Committee and also:
Short Term Incentives
Short Term Incentives
Corporate Incentive Plan
Corporate Incentive Plan On March 2, 2023 and March 25, 2024, respectively, the Compensation Committee adopted a Corporate Incentive Plan (CIP) to provide all employees (excluding sales personnel such as Mr. Cummings) with the opportunity to earn an annual cash bonus based upon employee performance and Fuel Tech’s achievement of a certain level of operating income as discussed below. As such, Ms. Albrecht and Mr. Arnone were each participants in the CIP. Potential cash awards under the CIP are designed to focus employees on the achievement of both positive earnings growth for Fuel Tech as well as on their own individual performance. Both in 2024 and 2023, the CIP was structured as follows:
Corporate Incentive Plan
| ● | CIP payouts are based on Fuel Tech’s ability to realize Operating Income. For purposes of the CIP, “Operating Income” means Fuel Tech’s operating income before the impact of incentive pay (but including adjustments to reflect the payment of sales commissions), as determined by the Committee in its sole discretion. An “Incentive Pool” may be created dependent on Fuel Tech’s obtaining specified levels of Operating Income during the fiscal year. If the Incentive Pool is created, each participant will be awarded his or her designated portion of the Incentive Pool. The focus on Operating Income provided an objective measurement of Fuel Tech’s financial performance to directly tie any payout to the overall financial performance of Fuel Tech across all business lines. |
Corporate Incentive Plan
| ● | No amounts are payable under the CIP unless Fuel Tech achieves a minimum of $250,000 in Operating Income for applicable fiscal year. Accordingly, if Fuel Tech’s Operating Income financial performance for a fiscal year falls below $250,000, there is no payout under the CIP. |
Corporate Incentive Plan
| ● | If Fuel Tech generates Operating Income equal to or greater than $250,000 in a fiscal year, the percentage of Operating Income funded into the Incentive Pool equals 25% of all Operating Income. |
Corporate Incentive Plan
| ● | The aggregate size of the potential Incentive Pool may not exceed $3 million. |
Corporate Incentive Plan
| ● | The CIP contemplates that incentive payments to individual employees will be based on the amount of the Incentive Pool; the employee’s base wages for the applicable year; the employee’s target bonus factor (a percentage assigned to each employee based on such employee’s job level and contribution) and, for all employees below the level of Vice President, the employee’s achievement percentage (an overall job performance multiplier factor that can range from 0% to 100%, and represents the employee’s achievement of individual objectives in the fiscal year) . |
Corporate Incentive Plan
| ● | The target bonus factor for Mr. Arnone under the CIP is 50% of his base salary and for Ms. Albrecht, 30% of her base salary. In addition, the CIP provides that the achievement percentage assigned to Fuel Tech’s Principal Executive Officer (Mr. Arnone), the Principal Financial Officer (Ms. Albrecht), and any Vice President will automatically equal 100%. |
Corporate Incentive Plan
Because Fuel Tech failed to generate the requisite level of Operating Income, there were no cash bonuses paid under the CIP for 2023 and 2024, respectively. The actual amounts of fiscal 2024 cash bonuses earned, if any, for any 2024 Named Executive Officer who is a participant in the CIP in 2024 will be reported in Fuel Tech’s proxy statement for its 2025 Annual Meeting of Stockholders.
2023 Current Objectives Plan
| ● | If Fuel Tech achieved all four current objectives by the applicable dates set forth below, a total amount of $650,000 would be set aside into the bonus pool. On the other hand, Fuel Tech achieved two of the four current objectives, a total amount of $325,000 would be set aside into the Bonus Pool. If Fuel Tech failed to achieve any of the current objectives, no funds would be set aside into the Bonus Pool. |
2023 Current Objectives Plan
| ● | For the 2023 COP, there were three steps for determining whether, and the extent to which, an annual cash incentive award is payable. First, at the beginning of the fiscal year, the Compensation Committee determined the target annual cash incentive award for such employee based on a percentage of such employee’s annual base salary for that year. Second, at the beginning of the fiscal year, the Compensation Committee established the specific company-wide performance goals that must be met in order for the employee to receive the award and the related weighting of each goal. Third, on March 25, 2024, the Compensation Committee determined whether or not these performance goals were met and the amount of the award. |
2024 Current Objectives Plan
| ● | If Fuel Tech achieves all four current objectives in 2024, a total amount of $650,000 would be set aside into the bonus pool. On the other hand, Fuel Tech achieves two of the four current objectives, a total amount of $325,000 would be set aside into the Bonus Pool. If Fuel Tech fails to achieve any of the current objectives, no funds would be set aside into the Bonus Pool. |
2024 Current Objectives Plan
| ● | For the 2024 COP, there are three steps for determining whether, and the extent to which, an annual cash incentive award is payable. First, at the beginning of the fiscal year, the Compensation Committee determined the target annual cash incentive award for such employee based on a percentage of such employee’s annual base salary for that year. Second, at the beginning of the fiscal year, the Compensation Committee established the specific company-wide performance goals that must be met for the employee to receive the award and the related weighting of each goal. Third, by March 31, 2025, the Compensation Committee will determine whether or not these performance goals were met and the amount of the award. |
Long-Term Incentives
Long-Term Incentives Fuel Tech’s long-term equity incentive awards are made pursuant to the Fuel Tech, Inc. 2014 Long-Term Incentive Plan (2014 LTIP). The purpose of the 2014 LTIP is to further the interests of Fuel Tech and its stockholders by providing long- term incentives (a) to attract and retain employees, consultants and directors who will contribute to our long-range success and (b) that align the interests of 2014 LTIP participants with those of the stockholders of Fuel Tech. The 2014 LTIP allows for a variety of types of awards that may be granted to participants in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, bonuses or other forms of share-based or non-share-based awards or combinations thereof (as each of those types of awards is defined in the 2014 LTIP). Participants in the 2014 LTIP may be Fuel Tech’s directors, officers, employees, consultants or advisors (except consultants or advisors in capital-raising transactions) as the directors determine are key to the success of Fuel Tech’s business. The Company predominantly uses RSUs for equity awards for employees under the 2014 LTIP (all above described stock option awards and restricted stock unit awards collectively referred to as Equity Awards). Except for Equity Awards granted to the CEO, Equity Awards are determined by the Committee based upon recommendations from Fuel Tech’s CEO. Equity Awards for the CEO have been determined by the Committee with no participation of the CEO — the CEO is not present during the Committee’s decisional deliberations or votes pertaining to CEO Equity Awards. Under the 2014 LTIP, all outstanding options that are not vested will become immediately vested in the event that there is with respect to Fuel Tech, a change-in-control. Under the LTIP, a change-in-control generally is defined as taking place if: (a) any person or affiliated group becomes the beneficial owner of 51% or more of Fuel Tech’s outstanding securities, (b) in any two-year period, persons in the majority of the Fuel Tech Board of Directors cease being so unless the nomination of the new directors was approved by a majority of the directors then still in office who were directors at the beginning of such period, (c) a business combination takes place where the shares of Fuel Tech are converted to cash, securities or other property, but not in a transaction in which the stockholders of Fuel Tech have proportionately the same share ownership before and after the transaction, or (d) the stockholders of Fuel Tech approve of a plan of liquidation or dissolution of Fuel Tech. Under the 2014 LTIP, a change-in-control generally is defined as:
Long-Term Incentives
| ● | an acquisition by any person as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 of beneficial ownership of 50% or more of Fuel Tech’s then outstanding common stock or voting power; |
Long-Term Incentives
| ● | a sale, transfer or other disposition of all or substantially all of Fuel Tech’s assets; |
Long-Term Incentives
| ● | the date ten days prior to the liquidation or dissolution of Fuel Tech; |
Long-Term Incentives
| ● | a merger, consolidation, statutory share exchange or similar corporate transaction, unless Fuel Tech stockholders continue to hold, directly or indirectly, more than 50% of Fuel Tech voting power; or |
Long-Term Incentives
| ● | incumbent directors shall cease for any reason to constitute a majority of the board of directors of Fuel Tech unless the election or the nomination for election by stockholders of Fuel Tech, of each new director was approved by a vote of at least a majority of the directors then still in office who were incumbent directors. |
Long-Term Incentives
Under the 2014 LTIP, in the event of a change-in-control, the Committee may take any of the following actions with respect to employee non-executive performance RSU equity awards granted under the 2014 LTIP either by including such terms in the applicable award agreement or by taking such actions in connection with the change-in-control:
Long-Term Incentives
| ● | fully or partially vest some or all of the outstanding awards immediately prior to the change-in-control transaction; |
Long-Term Incentives
| ● | cancel some or all of the outstanding awards (vested or not) in exchange for cash or property representing the value the award recipient would have obtained upon the exercise or settlement of the award in connection with the transaction; |
Long-Term Incentives
| ● | assume existing awards or issue substitute awards in exchange for some or all of the outstanding awards; |
Long-Term Incentives
| ● | fully vest outstanding options and stock appreciation rights combined with a requirement that the award recipient exercise the awards before the closing of the change-in-control transaction or such awards will terminate; or |
Long-Term Incentives
| ● | continue the outstanding awards on their same terms. |
Long-Term Incentives
The Committee is not required to treat all award recipients or awards granted to any individual in the same manner.
Executive Performance RSU Long-Term Incentive
Executive Performance RSU Long-Term Incentive On May 4, 2023, the Committee authorized Fuel Tech to enter into a 2023 Executive Performance RSU Award Agreement (the 2023 Agreement) with certain officers, including its Chief Executive Officer, Chief Financial Officer and Senior Vice President, Sales (each a Participating Executive) pursuant to which each 2023 Participating Executive was provided the opportunity to earn the amount of restricted stock units (RSUs) based on Fuel Tech’s performance in 2023 and 2024 as shown in the table below. The 2023 Agreement provides for four possible RSU awards: Look-Back RSUs, Total Revenue RSUs, New Business Growth RSUs, and Operating Income Growth RSUs. Under the terms of the 2023 Agreement, a target amount of RSUs for each of the four possible RSU award components was set for each Participating Executive for 2023 and 2024, respectively. The amount, if any, of actual RSU awards to be issued is contingent on performance by the Participating Executive and Fuel Tech in the performance areas and for the measurement periods set forth in the Agreement. Look-Back RSUs: Each Participating Executive has the opportunity to earn a targeted amount of “Look-Back RSUs” based upon the Participating Executive’s individual performance during 2023 and 2024. After the completion of applicable calendar year, the Committee, in its business judgment, may approve or not approve Fuel Tech granting to each Participating Executive a number of Look-Back RSUs between zero and the targeted Look-Back RSU amount based on the Committee’s subjective, qualitative assessment of each such executive’s overall performance during the applicable calendar year. No specific, individualized prospective performance goals are associated with the Look-Back RSUs for any of the Participating Executives. All such RSU grants shall otherwise be made subject to the terms of our standard RSU agreement, including a vesting schedule that provides for vesting of one-third of the granted Look-Back RSUs after the first anniversary of the grant determination date, one-third after the second anniversary date and one-third after the third anniversary date. Total Revenue RSUs: Each Participating Executive has the opportunity to earn a targeted amount of Total Revenue RSUs to be granted depending upon Fuel Tech’s revenue performance during 2023 and 2024. After the completion of 2023 and 2024, if Fuel Tech has achieved the targeted amount of total revenue ($34.7 million in 2023 and $36.44 million in 2024), the Participating Executive will be granted 100% of his or her target Total Revenue RSUs for the applicable year. If Fuel Tech achieves 90% of the targeted amount of total revenue in any applicable calendar year, the Participating Executive will be granted 50% of his or her target Total Revenue RSUs for the applicable year. If Fuel Tech achieves revenue in between the targeted Total Revenue for such year and the 90% threshold described above, the amount of RSUs to be granted to the Participating Executive will be interpolated and rounded to the nearest multiple of 100 shares. All such RSU grants shall otherwise be made subject to the terms our standard RSU agreement, including a vesting schedule that provides that 100% of the granted RSUs will vest one year following the grant determination date. New Business Revenue RSUs: Each Participating Executive has the opportunity to earn a targeted amount of New Business RSUs to be granted depending upon Fuel Tech’s revenue in 2023 and 2024 attributable to the sale of new products or services not sold by Fuel Tech prior to January 1, 2023. After the completion of 2023 and 2024, if Fuel Tech has achieved the targeted amount of new business revenue ($1.0 million in 2023 and $3.0 million in 2024), the Participating Executive will be granted 100% of his or her target New Business RSUs for the applicable year. If Fuel Tech achieves 75% of the targeted new business revenue in any applicable calendar year, the Participating Executive will be granted 50% of his or her target New Business RSUs for the applicable year. If Fuel Tech achieves new business revenue in between the targeted new business revenue amount for such year and the 75% threshold described above, the amount of RSUs to be granted to the Participating Executive will be interpolated and rounded to the nearest multiple of 100 shares. All such RSU grants shall otherwise be made subject to the terms of our standard RSU agreement, including a vesting schedule that provides that 100% of the granted RSUs will vest one year following the grant determination date. Operating Income RSUs: Each Participating Executive has the opportunity to earn a targeted amount of Operating Income RSUs to be granted depending upon Fuel Tech’s achievement of specified levels of operating income in 2023 and 2024. After the completion of 2023 and 2024, if Fuel Tech has achieved the target operating income amount ($1.0 million in 2023 and $2.0 million in 2024), the Participating Executive will be granted 100% of his or her target Operating Income RSUs for the applicable year. If Fuel Tech achieves 50% of the target operating income in any applicable calendar year, the Participating Executive will be granted 50% of his or her target Operating Income RSUs for the applicable year. If Fuel Tech achieves operating income in between the target operating income for such year and the 50% threshold described above, the amount of RSUs to be granted to the Participating Executive will be interpolated and rounded to the nearest multiple of 100 shares. All such RSU grants shall otherwise be made subject to the terms of our standard RSU agreement, including a vesting schedule that provides that 100% of the granted RSUs will vest one year following the grant determination date.
Executive Performance RSU Long-Term Incentive
| Participating Executive | Year | Target Look-Back RSUs* | Target Total Revenue RSUs* | Target New Business Revenue RSUs* | Target Operating Income RSUs* | Total Potential RSU Award* | | Vincent J. Arnone | 2023 | 41,700 | 41,700 | 41,700 | 41,700 | 166,800 | | President and Chief Executive Officer | 2024 | 41,700 | 41,700 | 41,700 | 41,700 | 166,800 | | Ellen T. Albrecht | 2023 | 16,700 | 16,700 | 16,700 | 16,700 | 66,800 | | Chief Financial Officer | 2024 | 16,700 | 16,700 | 16,700 | 16,700 | 66,800 | | William E. Cummings, Jr. | 2023 | 12,500 | 12,500 | 12,500 | 12,500 | 50,000 | | Senior Vice President, Sales | 2024 | 12,500 | 12,500 | 12,500 | 12,500 | 50,000 |
Executive Performance RSU Long-Term Incentive
| * The amount of RSUs shown represents “target” number of RSUs to be granted upon full achievement of the targets. The actual amount of RSUs granted for each category will be determined by the Committee following the end of each of 2023 and 2024, respectively. On February 29, 2024, the Committee determined Fuel Tech did not meet the performance metric required for a payout of Total Revenue RSUs, New Business Revenue RSUs and Target Operating Income RSUs, and accordingly, no such RSUs were issued. The Committee did determine, however, that each executive officer would receive 75% of the targeted amount of the Look-Back RSUs for the 2023 performance period. See Material Compensation Actions below. |
Material Compensation Actions
| ● | Determined that the minimum payment threshold for the 2022 CIP had not been met, and, thus, no funds were authorized for payout to any employee under the 2022 CIP; |
Material Compensation Actions
| ● | Determined that three of four objectives under the 2022 COP had been achieved, and authorized the funding of $487,500 into the bonus pool for the 2022 COP; and |
Material Compensation Actions
| ● | Approved an increase in Ms. Albrecht’s base salary from $250,000 to $280,000, and awarded Ms. Albrecht a cash bonus of $25,000 for 2022. The salary increase and cash bonus were made following consultation with CODA Advisors (Fuel Tech’s independent compensation consultant) in order to bring Ms. Albrecht’s base salary more in line with that of other chief financial officers of similarly sized public companies, and to compensate Ms. Albrecht for additional duties undertaken in fulfilling the role of chief financial officer in 2022 without a fully resourced staff; and |
Material Compensation Actions
| ● | approved the 2023 Executive Performance Award Agreements for Ms. Albrecht, Mr. Arnone and Mr. Cummings as described under the heading 2023 Executive Performance Agreements above, which provide each of the named executives with the opportunity to earn RSU awards based on Fuel Tech’s achievement of operational goals as described above under the heading Executive Performance RSU Long-Term Incentive; and |
Material Compensation Actions
| ● | approved Fuel Tech entering into the Change of Control Severance Agreements with Ms. Albrecht, Mr. Arnone and Mr. Cummings as described under the heading Employment Agreements; Potential Payments upon Termination or Change-in-Control below. |
Material Compensation Actions
| ● | Determined that, for 2023, Fuel Tech did not meet the performance metrics required for a payout of Total Revenue RSUs, New Business Revenue RSUs and Target Operating Income RSUs pursuant to the terms of the Executive Performance RSU Agreements, and according, no such RSUs were issued. The Committee did determine, however, that all participating officers (including Fuel Tech’s NEOs) would receive an amount of Look-Back RSUs equal to 75% of the target amount as shown on the table below. As such, the Committee’s decision reflected its view on the performance of the officer team as a whole. |
Material Compensation Actions
| Name and Title | Target Look-Back RSUs | Actual Look-Back RSUs Granted | | Vincent J. Arnone President and Chief Executive Officer | 41,700 | 31,100 | | Ellen T. Albrecht Chief Financial Officer and Treasurer | 16,700 | 12,500 | | William E. Cummings, Jr. Senior Vice President, Sales | 12,500 | 9,400 |
Material Compensation Actions
| ● | Determined that the minimum payment threshold for the 2023 CIP had not been met, and, thus, no funds were authorized for payout to any employee under the 2023 CIP; |
Material Compensation Actions
| ● | Granted Mr. Arnone a one-time cash bonus of $50,000 in recognition of his continued stewardship of the Company and his non-participation in the bonus awards granted to all other eligible Fuel Tech employees under the 2022 and 2023 Corporate Objective Plans. |
BENCHMARKING, CONSULTANTS AND PEER GROUPS
BENCHMARKING, CONSULTANTS AND PEER GROUPS Fuel Tech has from time to time made use of the services of a third-party compensation consultant, CODA Advisors, LLC (Coda), to address matters of compensation and benefits, and to identify peer group companies based on industry, markets and size. Fuel Tech recognizes that compensation practices must be competitive in the marketplace and marketplace information is one of the many factors that are considered in assessing the reasonableness of compensation programs. The Compensation Committee retains the discretion to make all final decisions relative to matters of compensation and benefits. Although the Compensation Committee has relied in the past upon benchmarking the compensation of our NEOs against a pre-established peer group, it elected not to use such benchmarking data in 2023. As a practical matter, the primary reason for this was that all NEOs were under a ten percent wage reduction throughout such periods, and no increases in executive compensation were contemplated. Instead, in determining appropriate compensation levels for the NEOs, the Compensation Committee relied on its knowledge of the competitive market, historical pay practices, internal relationships among positions at Fuel Tech and individual performance of the NEOs. In 2022, the Committee engaged in benchmarking for its NEOs based on the use of 2023 data from the peer group of companies shown below. The overall compensation programs for Fuel Tech’s NEOs are designed to reward achievement of performance and to attract, retain, and motivate them in an increasingly competitive talent market. The Committee examined compensation data for the peer group of companies shown below to stay current with market pay practices and trends and to understand the competitiveness of our overall executive compensation programs and their various elements. The Committee used this benchmarking data for informational purposes. It does not formulaically target a specific percentile or make significant compensation decisions based on market data or peer group benchmarking data alone, which avoids a ratcheting up impact. The Committee uses performance as a primary driver of compensation levels. The 2023 peer group companies consisted of:
BENCHMARKING, CONSULTANTS AND PEER GROUPS
| Advanced Emissions Solutions | Flotek Industries | | Advent Technologies | Gencor Industries | | American Superconductor | Graham Corporation | | Amtech Systems, Inc. | Marrone Bio Innovations | | Broadwind | Northern Technologies Int’l | | Capstone Green Energy | Orion Energy Systems | | Ceco Environmental Corp. | Perma-Fix Environmental | | Consolidated Water Company | Profire Energy | | CPS Technologies | Sunworks | | CVD Equipment | Williams Industrial Services |
BENCHMARKING, CONSULTANTS AND PEER GROUPS
As described above, from time to time, the Committee may supplement its business judgment pertaining to its consideration of Fuel Tech compensation matters, including salary amounts, short-term and long-term incentive plan minimum and incremental payout thresholds and targets, with a variety of market information obtained from a number of different sources including, among other things, the Committee’s general knowledge regarding compensation matters, information from one or more independent compensation consultants, peer company data, benchmarking related to that data, information obtained from independent search firms, available shares under Fuel Tech’s 2014 LTIP, historical and current Fuel Tech compensation data, and historical, current and projected industry and Fuel Tech financial operational performance data and trends.
Equity Grant Practices
Equity Grant Practices As discussed in the Long-Term Incentives portion of the Compensation Elements section above, long-term incentives in the form of stock options or RSUs have been issued by Fuel Tech previously under the LTIP and currently under the 2014 LTIP in accordance with compensation policy as determined by the Committee from time to time. Under current policy, based on the level of the employee position, new employee stock options or RSUs or some combination thereof may be granted at the first Committee meeting following employment. However, from time to time, an option or RSU award may be authorized by the Committee to be granted and effective on a specified date or event, such as on the first date of employment or after a performance measurement time period. The price of all options granted is the mean of the high and low stock prices reported on the NASDAQ Stock Market, Inc. for the effective date of grant. Also, under the current policies of the Committee: typically, all employees’ options have a term of ten years and are subject to a four-year vesting schedule as follows: 50% of the options vest two years from the grant date and 25% vest on each subsequent year on that date. Vesting of an RSU award (RSU Award) is controlled by the terms of the vesting schedule in the RSU Award Agreement. Vesting can vary from RSU Award to RSU Award, and may be based on the passage of time, the achievement of pre-determined performance criteria or any combination of the foregoing. For time-vested RSUs, Fuel Tech’s typical vesting schedule is one-third of the RSU Award after one year, one-third after the second year, and one-third after the third year. Depending on the circumstances, Fuel Tech may use a different vesting schedule whether for time-vested RSUs or other RSU Awards. The committee may grant options or RSU’s to existing employees on a periodic basis based on the level of the employee position and as well as certain of the factors or performance measurement factors enumerated in the Long-Term Incentives portion of the Compensation Elements section above. While there are no mandatory levels established for the quantity of options or RSUs to be granted, Fuel Tech has used historical practice and employee job level as two of the factors it considers.
Employment Agreements; Potential Payments upon Termination or Change-in-Control
Employment Agreements; Potential Payments upon Termination or Change-in-Control Ms. Albrecht and Messrs. Arnone and Cummings, are each party to an employment agreement with Fuel Tech effective as follows: July 8, 1996 for Ms. Albrecht; September 20, 2010 for Mr. Arnone; and October 31, 1998 for Mr. Cummings. These agreements are for indefinite terms, for disclosure and assignment of inventions to Fuel Tech, protection of Fuel Tech proprietary data, covenants against certain competition and arbitration of disputes. These employment agreements are for terms of employment “at will” and do not provide for severance payments. Under Mr. Arnone’s employment agreement, he is entitled to continuation of base salary and benefits, and incentive bonus amounts earned under the applicable short-term incentive plan for the year of termination, for up to one year or sooner on finding comparable employment, after involuntary termination not for cause within one year of a change-in-control as described in the table below. In addition, each of Ms. Albrecht, Mr. Arnone and Mr. Cummings are parties to a change of control severance agreement which provides, among other things, that if, during the 12 month period following a change of control (as defined under the 2014 Plan as described under the heading Long-Term Incentives above), the officer’s employment is terminated without cause or terminated by the officer for good reason (as described below), the officer will receive severance pay (less applicable withholding taxes) in the form of a lump sum payment equivalent to 12 months of the officer’s base salary plus, if the officer elects, reimbursement for COBRA premiums required to extend insurance coverage for a period of six (6) months (or earlier if the officer or his or her dependents obtain alternate coverage). “Good Reason” is defined generally under the severance agreement as the occurrence of any of the following, without the officer’s prior written consent: (i) any material diminution in the officer’s assigned duties, responsibilities and/or authority; (ii) any material reduction in the officer’s base compensation; (iii) Fuel Tech requires the officer to be based at a location that is more than 35 miles further from the officer’s residence than the location of the officer’s principal job location or office immediately prior to the Change in Control; or (iv) any other action or inaction that constitutes a material breach by Fuel Tech of any agreement under which the officer provides services to Fuel Tech. The following table quantifies potential payments that could be made to NEOs under various circumstances involving termination or change-in-control assuming such event occurred on December 31, 2023:
Employment Agreements; Potential Payments upon Termination or Change-in-Control
| Named Executive Officer | Termination Event(1) | Base Salary(2)($) | Bonus(3)($) | Value of Awarded RSUs($)(4) | Value of Awarded Options($) | Benefits(5)($) | Total($) | | Ellen T. Albrecht | Change-in- Control | — | — | 219,826 | — | — | 219,826 | | | Termination without Cause within 1 year of Change-in-Control | 275,000 | — | — | — | 23,239 | 298,239 | | Vincent J. Arnone | Change-in-Control | — | — | 509,370 | — | — | 509,370 | | | Termination without Cause within 1 year of Change-in-Control | 419,688 | — | — | — | 23,445 | 443,133 | | William E. Cummings, Jr. | Change-in- Control | — | — | 172,614 | — | — | 172,614 | | | Termination without Cause within 1 year of Change-in-Control | 237,000 | — | — | — | 35,984 | 272,984 |
Employment Agreements; Potential Payments upon Termination or Change-in-Control
| (1) No payments are due to any Named Executive Officer upon a termination of employment for any other reason. | | (2) Assumes annual base salaries in effect as of January 1, 2024. In the event of a termination of employment without Cause within one year of a change-in-control, each Named Executive Officer is entitled to continuation of base salary and benefits for up to the earlier of one year after such termination or until such officer attains comparable employment with an equivalent salary. For illustrative purposes, a full year of base salary for each Named Executive Officer is shown. | | (3) Amounts shown assume a termination date of December 31, 2023. Neither Mr. Arnone nor Ms. Albrecht received any payout under the 2023 CIP as further described in the 2023 Corporate Incentive Plan portion of the Compensation Elements section above. | | (4) Amounts shown represent the value of all unvested RSUs outstanding on December 29, 2023 determined by using the closing price of Fuel Tech’s Common Stock on the Nasdaq Stock Market on such date, which was $1.05 per share. | | (5) Assumes benefits paid at 2023 levels. |
Summary of NEO Compensation
| ● | Short-Term Incentives: Ms. Albrecht earned no payout under the 2023 CIP as further described in the 2023 Corporate Incentive Plan portion of the Compensation Elements section above. Ms. Albrecht earned a payout of $32,103 under the 2023 COP as described in the 2023 Current Objectives Plan portion of the Compensation Elements section above. |
Summary of NEO Compensation
| ● | In February 2024, Ms. Albrecht received a grant of 12,500 RSUs pursuant to her 2024 Executive Performance RSU Agreement. Such RSUs were issued pursuant to the Company’s standard time vested RSU grant agreement which provides for vesting in three installments over a three-year period. |
Summary of NEO Compensation
| ● | Short-Term Incentives: Mr. Arnone earned no payout under the 2023 CIP as further described in the 2023 Corporate Incentive Plan portion of the Compensation Elements section above. Mr. Arnone was not eligible to participate in the 2023 Current Objectives Plan as described in the 2023 Current Objectives Plan portion of the Compensation Elements section above. On March 26, 2024, Mr. Arnone was awarded a bonus of $50,000 for 2023 performance as described under the heading Material Compensation Actions above. |
Summary of NEO Compensation
| ● | In February 2024, Mr. Arnone received a grant of 31,100 RSUs pursuant to his 2024 Executive Performance RSU Agreement. Such RSUs were issued pursuant to the Company’s standard time vested RSU grant agreement which provides for vesting in three installments over a three-year period. |
Summary of NEO Compensation
| ● | Short-Term Incentives: Mr. Cummings earned $125,018 in sales commissions in fiscal 2023 as further described in the APC Officer and National Sales Manager Commission Plan and FUEL CHEM Officer Commission Plan portions of the Compensation Elements section above. |
Summary of NEO Compensation
| ● | In February 2024, Mr. Cummings received a grant of 9,400 RSUs pursuant to his 2024 Executive Performance RSU Agreement. Such RSUs were issued pursuant to the Company’s standard time vested RSU grant agreement which provides for vesting in three installments over a three year period. |
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE The table below sets forth information concerning fiscal years 2023 and 2022 compensation awarded to, earned by or paid in all capacities to the Named Executive Officers whose total compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
| (a) | (b) | (c) | (e) | (f) | (g) | (i) | (j) | | Name & Principal Position | Year | Salary ($) | Stock Awards(1) ($) | Option Awards(1) ($) | Non-Equity Incentive Plan Compensation(2) ($) | All Other Compensation(3) ($) | Total ($) | | Ellen T. Albrecht. | 2023 | 269,375 | 168,343 | — | 32,103 | 23,239 | 493,060 | | Vice President, Chief Financial Officer and Principal Financial Officer | 2022 | 213,875 | 96,591 | | 53,989 | 19,384 | 383,839 | | Vincent J. Arnone | 2023 | 419,688 | 420,353 | — | 50,000 | 23,445 | 913,486 | | President and Chief Executive Officer | 2022 | 387,813 | 193,182 | — | — | 22,149 | 603,144 | | William E. Cummings, Jr. | 2023 | 237,000 | 126,000 | — | 125,018 | 35,984 | 524,002 | | Senior Vice President, Sales | 2022 | 219,000 | 82,102 | — | 56,585 | 36,105 | 393,792 |
SUMMARY COMPENSATION TABLE
| (1) The amounts in these columns reflect restricted stock unit awards that were granted in 2023 and 2022. For the 2023 grants, all restricted stock units are performance based and will not be granted, if at all, unless Fuel Tech satisfies the conditions precedent to vesting in 2023 and 2024 (see Executive Performance Long-Term Incentive above). On February 29, 2024, the Compensation Committee determined that Fuel Tech did not satisfy the performance thresholds in 2023 required for vesting of Total Revenue RSUs, New Business Revenue RSUs and Target Operating Income RSUs and accordingly, all potential RSUs underlying such grants were forfeited. See Material Compensation Actions above. Amounts shown represent the aggregate grant date fair value of awards granted in each respective year computed in accordance with stock-based compensation accounting rules (FASB ASC Topic 718), excluding the effect of forfeitures (see footnote 8 to the financial statements in our annual report on Form 10-K for a further discussion of the accounting for stock awards). |
SUMMARY COMPENSATION TABLE
| (2) Amounts shown for 2023 reflect: for Ms. Albrecht, a $32,103 bonus payment under the 2023 COP; for Mr. Arnone, a one-time $50,000 bonus awarded by the Compensation Committee on March 26, 2024; and, for Mr. Cummings, $125,018 paid out under the applicable APC Officer and General Sales Manager Commission Plan and Officer FUEL CHEM Commission Plan. |
SUMMARY COMPENSATION TABLE
| (3) “All Other Compensation” includes for each of the Named Executive Officers, matching contributions and profit sharing allocations to the Fuel Tech 401(k) Plan; expense for life, accidental death and dismemberment and long-term disability insurance. |
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2023 TO NAMED EXECUTIVE OFFICERS
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2023 TO NAMED EXECUTIVE OFFICERS
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2023 TO NAMED EXECUTIVE OFFICERS
| (a) | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | Closing Price per Share ($/Sh) on Grant Date (k) | Grant Date Fair Value of Stock Option and Other Stock Awards($) (l) | | Name | Grant Date (b) | Threshold ($)(c) | Target ($)(d) | Maximum ($)(e) | Threshold (#)(f) | Target (#)(g) | Maximum (#)(h) | | | | Ellen T. Albrecht (3) | 3/2/23 | 13,852 | 92,068 | 194,170 | 16,700 | 66,800 | 133,600 | 1.26 | 1.26 | | Vincent J. Arnone | 3/2/23 | 9,477 | 212,500 | 455,175 | 41,700 | 166,800 | 333,600 | 1.26 | 1.26 | | William E. Cummings, Jr.(4) | — | — | — | — | 12,500 | 50,000 | 100,000 | 1.26 | 1.26 |
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2023 TO NAMED EXECUTIVE OFFICERS
| (1) The 2023 CIP was adopted by the Compensation Committee, effective March 2, 2023. As previously discussed, the Registrant failed to achieve the minimum performance threshold for Operating Income, and accordingly, no payouts were made under the 2023 CIP. As described in the 2023 Corporate Incentive Plan portion of the Compensation Elements section above, if a minimum performance threshold for Operating Income had been achieved in 2023, 25% of Operating Income would have been funded into the 2023 CIP. The 2023 CIP did not have a performance “target” or a determinable amount payable if the target is met. Amounts in columns (c), (d) and (e) are representative payout amounts based the achievement of the following varying levels of Operating Income: $250,000 (the minimum funding threshold under the 2023 CIP); $5.6 million (the amount of Operating Income required for the 2023 CIP payout to equal 100% of each employee’s target bonus factor, and $12.0 million (the amount of Operating Income at which point contributions to the 2023 CIP were “capped”). |
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2023 TO NAMED EXECUTIVE OFFICERS
| (2) Amounts shown are based upon the targeted number of Look-Back, Total Revenue, New Business Growth and Operating Income Growth RSUs established under the 2023 Executive Performance RSU Award Agreements between Fuel Tech and each of the NEOs listed above. The amounts in columns (f), (g) and (h) are representative of the number of RSUs to be issued based on the following level of achievement during the 2023-2024 performance period: the achievement of one (12.5%) performance target; the achievement of four (50%) performance targets; and the achievement of eight (100%) performance targets. These RSUs are deemed for reporting purposes to have a grant date of May 4, 2023 even though they will not be granted, if at all, until 2024 or 2025, depending on the type of award. All Look-Back RSUs vest in equal one-third installments over a three-year period following the grant determination date, and all Total Revenue, New Business Growth and Operating Income Growth RSUs vest twelve months after the grant determination date as discussed under the heading Executive Performance RSU Long-Term Incentive under the Compensation Elements section above. As discussed in the Compensation Elements section above, for the 2023 performance period Mr. Arnone, Ms. Albrecht and Mr. Cummings were awarded 31,100, 12,500 and 9,400 Look-Back RSUs, respectively. No Total Revenue RSUs, New Business Revenue RSUs or Operating Income RSUs were granted for 2023 because Fuel Tech failed to achieve the targeted levels of total revenue, new business revenue and operating income |
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2023 TO NAMED EXECUTIVE OFFICERS
| (3) Ms. Albrecht was also a participant in the 2023 COP. As discussed under the heading 2023 Corporate Objectives Plan under the heading Compensation Elements above, pursuant to the 2023 COP Fuel Tech was obligated to set aside an amount equal to $162,500 upon the completion in full of each of the four respective current objectives, with the total bonus pool being capped at $650,000. The amounts shown in columns (b), (c) and (d) for Ms. Albrecht reflect the potential bonus award to be granted to Ms. Albrecht upon the achievement of one (25%), two (50%) and four (100%) of the enumerated objectives under the 2023 COP. In 2023, Fuel Tech achieved three of the four enumerated objectives, and accordingly $487,500 was funded into the 2023 COP bonus pool (of which Ms. Albrecht received a payment of $32,103). The amounts shown in columns (c), (d) and (e) are representative payout amounts based on the achievement of one, two and four objectives, respectively. |
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2023 TO NAMED EXECUTIVE OFFICERS
| (4) Mr. Cummings’ short-term cash compensation during 2023 was contingent upon sales of Fuel Tech’s products and services pursuant to the 2023 APC Officer and General Sales Manager Commission Plan and the 2023 Officer FUEL CHEM Commission Plan. Mr. Cummings earned $125,018 in sales commission under such plans for fiscal 2023. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2023
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2023
FOR NAMED EXECUTIVE OFFICERS
| (a) | Option Exercises and Stock Vested Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#)(b) | Value Realized on Exercise ($)(c) | Number of Shares Acquired on Vesting (#)(d) | Value Realized on Vesting ($)(e) | | Ellen T. Albrecht | — | — | — | — | | Vincent J. Arnone | — | — | — | — | | William E. Cummings, Jr. | — | — | — | — |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END FOR NAMED EXECUTIVE OFFICERS
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END FOR NAMED EXECUTIVE OFFICERS At December 31, 2023 the following RSUs were outstanding. See the text under the caption Equity Grant Practices section in the Compensation Discussion and Analysis above.
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END FOR NAMED EXECUTIVE OFFICERS
| (a) | (g) | (h) | (i) | (j) | | Name | Number of Units of Stock That Have Not Vested (#) | Market Value of Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Units That Have Not Vested (#)(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Units That Have Not Vested ($)(1) | | Ellen T. Albrecht | 75,758 | 79,546 | 133,600 | 140,280 | | Chief Financial Officer | | | | | | Vincent J. Arnone | 151,515 | 159,091 | 333,600 | 350,280 | | President and Chief Executive Officer | | | | | | William E. Cummings, Jr. | 67,614 | 70,994 | 100,000 | 105,000 | | Senior Vice President, Sales | | | | |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END FOR NAMED EXECUTIVE OFFICERS
| (1) Market value reflects a per RSU value of $1.05, the closing price of Fuel Tech’s Common Stock on December 31, 2023. | | (2) Amounts shown include the following targeted number of Look-Back, Total Revenue, New Business Revenue and Operating Income RSUs established in conjunction with the 2023 Executive Performance RSU Award Agreements between Fuel Tech and each NEO as follows: |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END FOR NAMED EXECUTIVE OFFICERS
| Name | Period | Target Look-Back RSUs | Target Total Revenue RSUs | Target New Business Revenue RSUs | Target Operating Income RSUs | | Vincent J. Arnone | 2023 | 41,700 | 41,700 | 41,700 | 41,700 | | | 2024 | 41,700 | 41,700 | 41,700 | 41,700 | | Ellen T. Albrecht | 2023 | 16,700 | 16,700 | 16,700 | 16,700 | | | 2024 | 16,700 | 16,700 | 16,700 | 16,700 | | William E. Cummings, Jr | 2023 | 12,500 | 12,500 | 12,500 | 12,500 | | | 2024 | 12,500 | 12,500 | 12,500 | 12,500 |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END FOR NAMED EXECUTIVE OFFICERS
For the 2023 performance period, Mr. Arnone was granted 31,100 Look Back RSUs, Ms. Albrecht was granted 12,500 Look Back RSUs and Mr. Cummings was granted 9,400 Look Back RSUs. No Total Revenue RSUs, New Business Revenue RSUs or Operating Income RSUs were granted for 2023 because Fuel Tech failed to achieve the targeted levels of total revenue, new business revenue and operating income. All Target Look-Back RSUs, to the extent actually granted, vest in three equal installments over a period of three years. All Target Total Revenue, New Business Revenue and Operating Income RSUs, to the extent actually granted, vest one year following the grant determination date. For further detail, please see the discussion included under the heading Executive Performance RSU Long-Term Incentive under the Compensation Elements section above.
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE We are providing the following information about the relationship between executive compensation actually paid (CAP) and certain financial performance of Fuel Tech as required by SEC rules. Please see Summary of Named Executive Officer Compensation, above for discussion of our compensation program.
PAY VERSUS PERFORMANCE
| Year | Summary Compensation Table Total for CEO(1) | Compensation Actually Paid to CEO(2) | Average Summary Compensation Table Total for Non-CEO NEOs (3) | Average Compensation Actually Paid to Non- CEO NEOs (2) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return($) (4) | Fuel Tech Net Income (Loss) ($) (5) | | 2023 | 913,486 | 469,688 | 508,531 | 331,748 | 82,68 | (1,538,000) | | 2022 | 603,144 | 409,203 | 388,816 | 299,119 | 92.03 | (1,442,000) | | 2021 | 403,009 | 403,009 | 267,755 | 267,755 | 34.86 | 54,000 |
PAY VERSUS PERFORMANCE
| (1) Amounts shown reflect total compensation set forth in the Summary Compensation Table for our PEO, Mr. Arnone, for 2021,2022 and 2023. | | (2) The following table describes the adjustments, each of which is prescribed by SEC rule, to calculate the CAP amounts from the summary compensation table (SCT) amounts. The SCT amounts and the CAP amounts do not reflect the actual amount of compensation earned by or paid to our executives during the applicable years, but rather are amounts determined in accordance with Item 402 of Regulation S-K under the Exchange Act. To determine CAP, adjustments below were made to our executive officer's total compensation. |
PAY VERSUS PERFORMANCE
| | 2021 | | 2022 | | 2023 | | | Adjustments | PEO | Other NEO | PEO | Other NEO | PEO | Other NEO | | SCT Amounts | $403,009 | $267,755 | $603,144 | $388,816 | $913,486 | $508,531 | | Deduction for amounts reported in the “Stock Awards” and “Option Awards” columns in the SCT for applicable FY | — | — | (193,182) | (89,347) | (443,798) | (176,783) | | Increase in fair value of awards granted during the applicable FY that remain unvested as of applicable FY end, determined as of applicable FY end | — | — | — | | — | — | | CAP Amounts | $403,009 | $267,755 | $409,962 | $299,469 | $469,688 | $331,748 |
PAY VERSUS PERFORMANCE
| (3) Amounts shown reflect average total compensation set forth in the Summary Compensation Table for our NEOs, Ms. Albrecht and Mr. Cummings, for fiscal 2021, 2022 and 2023. |
PAY VERSUS PERFORMANCE
| (4) Amounts shown show the value of a fixed investment of $100 on January 1st of the reporting period based on the closing price of Fuel Tech Common stock on such date ($3.95 in 2021, $1.38 in 2022 and $1.27 in 2023) the closing price on December 31st of the reporting period ($1.40 in 2021, $1.27 in 2022 and $1.05 in 2023), each as quoted by the Nasdaq Stock Market. |
PAY VERSUS PERFORMANCE
| (5) The amounts reported in this column represent net income (loss) reflected in the Company's audited financial statements for the applicable year. |
Analysis of Information Presented in the Pay Versus Performance Table
Analysis of Information Presented in the Pay Versus Performance Table We are providing the following descriptions of the relationships between information presented in the Pay Versus Performance table, including CAP, as required by Item 402(v) of Regulation S-K. The Compensation Committee does not use TSR or net income (loss) in its compensation programs. However, we do utilize several other performance measures to align executive compensation with our performance, see Executive Compensation.
Analysis of Information Presented in the Pay Versus Performance Table
| ● | In fiscal 2022, compensation actually paid to the PEO increased by $6,952, or approximately two percent, and compensation actually paid to our non-PEO NEO’s increased by $31,364, or approximately 12%. For the PEO, this increase is reflective of the reduction of the voluntary officer salary reduction program from ten percent to five percent of base salary in the second half of 2022. For the non-PEO NEO’s, the increase is reflective of the reduction of the voluntary officer salary reduction program from ten percent to five percent of base salary, as well as a salary increase and bonus for Ms. Albrecht upon her assumption of the role of Chief Financial Officer in June 2022. During such period, Fuel Tech’s common stock lost approximately eight percent in value and Fuel Tech recorded an operating loss of ($1,442,000). |
Analysis of Information Presented in the Pay Versus Performance Table
| ● | In fiscal 2023, compensation actually paid to the PEO increased by $59,726, or approximately 15 percent, and compensation actually paid to our non-PEO NEO’s increased by $32,279, or approximately 11%. For the PEO, this increase is reflective of the elimination of the voluntary officer salary reduction program in the first half of 2023, and a one-time cash bonus of $50,000. For the non-PEO NEO’s, the increase is reflective of the elimination of the voluntary officer salary reduction program, as well as a salary increase for Ms. Albrecht and higher sales commission levels earned by Mr. Cummings. During such period, Fuel Tech’s common stock lost approximately 17% in value and Fuel Tech recorded an operating loss of ($1,538,000). |
Analysis of Information Presented in the Pay Versus Performance Table
AGENDA ITEM NO. 2 APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK Our Amended and Restated Certificate of Incorporation (Certificate of Incorporation) currently authorizes the issuance of 40,000,000 shares of common stock, par value $0.01 per share (Common Stock). On March 25, 2024, our Board adopted a resolution to amend the Certificate of Incorporation, subject to stockholder approval, by increasing the number of authorized shares of our Common Stock to 60,000,000 shares (the Share Increase Amendment). The additional 20,000,000 shares of Common Stock authorized for issuance pursuant to the proposed Share Increase Amendment would be part of the existing class of Common Stock and, if and when issued, would have the same rights and privileges as the shares of Common Stock presently issued and outstanding. The holders of Common Stock are not entitled to preemptive rights or cumulative voting. The following table illustrates the effect the proposed Share Increase Amendment would have on the number of shares of Common Stock available for issuance, if approved by our stockholders:
Analysis of Information Presented in the Pay Versus Performance Table
| | As of April , 2024 | Upon Effectiveness of Amendment | | Total Authorized Shares Of Common Stock | 40,000,000 | 60,000,000 | | Outstanding Shares Of Common Stock | 30,385,297 | 30,385,297 | | Shares Of Common Stock Authorized For Future Issuance Under The Fuel Tech’s Incentive Plan (1) | 1,106,450 | 1,106,450 | | Shares Of Common Stock Subject To Outstanding Equity Awards Under Fuel Tech’s Incentive Plans (2) | 1,571,948 | 1,571,948 | | Shares Of Common Stock Subject To Outstanding Warrants | 2,850,000 | 2,850,000 | | Total Outstanding Shares Of Common Stock, Shares Of Common Stock Subject To Outstanding Equity Awards And Options, Shares Of Common Stock Authorized For Future Issuance Under Fuel Tech’s Incentive Plan, And Shares Of Common Stock Subject To Outstanding Warrants | 5,528,398 | 5,528,398 | | Shares Of Common Stock Available For Issuance | 4,086,305 | 24,086,305 |
Analysis of Information Presented in the Pay Versus Performance Table
| (1) Includes (i) 645,650 shares of Common Stock available for issuance as of December 31, 2023, plus (ii) 460,800 shares of Common Stock that returned to the pool upon non-fulfillment of certain performance objectives pursuant to the 2023 Executive Performance RSU Agreement entered into with the executive management team. Does not include shares of Common Stock that would be authorized for future issuance under the Fuel Tech, Inc. 2024 Incentive Plan, if approved. |
Analysis of Information Presented in the Pay Versus Performance Table
| (2) Includes (i) 270,500 shares of Common Stock issuable pursuant to stock options with a weighted-average exercise price of $3.09 per share, plus (ii) 1,301,448 shares of Common Stock underlying RSU Awards, of which 566,800 shares will not be issued, if at all, dependent on the Company’s achievement of the performance metrics for 2024 as set forth in the 2023 Executive Performance RSU Agreements. |
Analysis of Information Presented in the Pay Versus Performance Table
As indicated in the table above, 75.9% of our authorized shares are outstanding as of April 8, 2024, and the settlement of all of our currently outstanding equity awards and warrants and grant of new equity awards under our incentive compensation plans up to the full number of shares available under the plans would result in the issuance of 89.8% of our authorized shares of Common Stock. Therefore, our Board believes it is in the best interests of the Company and our stockholders to increase our authorized shares of Common Stock in order to have additional shares available for use as our Board deems appropriate or necessary, including having shares available to settle our outstanding equity awards and warrants and to grant new equity awards using shares authorized under our incentive plans. As such, the primary purpose of the Share Increase Amendment is to provide the Company with greater flexibility with respect to managing its Common Stock in connection with such corporate purposes as may, from time to time, be considered advisable by our Board. These corporate purposes could include, without limitation, financing activities, public or private offerings, stock dividends or splits, conversions of convertible securities, issuance of options and other equity awards pursuant to our employee benefit plans, establishing a strategic relationship with a corporate partner and acquisition transactions. Having an increased number of authorized but unissued shares of Common Stock would allow us to take prompt action with respect to corporate opportunities that develop, without the delay and expense of convening a special meeting of stockholders for the purpose of approving an increase in our capitalization. Our Board will determine whether, when and on what terms the issuance of shares of Common Stock may be warranted in connection with any of the foregoing purposes. Other than shares that will be reserved for issuance under our existing incentive plans and warrants to purchase 2,850,000 shares of our Common Stock, we do not currently have any other arrangements, agreements or understandings that would require the issuance of additional shares of Common Stock. Because our directors and executive officers have outstanding equity awards under our incentive plans, and may be granted additional equity awards under these plans, they may be deemed to have an indirect interest in the Share Increase Amendment, because absent the amendment, the Company may not have sufficient authorized shares to settle or grant such awards. The Share Increase Amendment will not have any immediate effect on the rights of existing stockholders. However, our Board will have the authority to issue authorized Common Stock without requiring future stockholder approval of such issuances, except as may be required by applicable law or rules of the Nasdaq Stock Market. Future issuances of Common Stock or securities convertible into or exchangeable for Common Stock could have a dilutive effect on our earnings per share, book value per share and the voting power and interest of current stockholders. Our Board has not proposed the Share Increase Amendment with the intention of discouraging tender offers or takeover attempts of the Company. However, the availability of additional authorized shares for issuance could, under certain circumstances, discourage or make more difficult efforts to obtain control of our Company. This proposal is not being presented with the intent that it be used to prevent or discourage any acquisition attempt, but nothing would prevent our Board from taking any appropriate actions not inconsistent with its fiduciary duties. We do not have a poison pill plan and have not made any non-shareholder approved repricings of our equity awards. If our stockholders approve this proposal, then the first sentence of Article 5 of our Certificate of Incorporation will be deleted and replaced in its entirety to read as follows: “The total number of shares of capital stock which the Corporation shall have authority to issue is sixty million (60,000,000), all of which shall be a class designated as common stock, par value $0.01 per share (the “Common Stock”).”