SCHEDULE 14A
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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
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Check the appropriate box:
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INTERNATIONAL FUEL TECHNOLOGY, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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INTERNATIONAL FUEL TECHNOLOGY, INC.
7777 BONHOMME AVANUE, SUITE 1920
ST. LOUIS, MISSOURI 63105
(314) 727-3333
May 25, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
International Fuel Technology, Inc., to be held at 9:00 a.m. on Monday, June 25,
2001, at the Renaissance St. Louis Hotel located near Lambert International
Airport, 9801 Natural Bridge Road, St. Louis, Missouri.
At the meeting you will be asked to vote on the election of eight
directors of the Company and the ratification of the selection of BDO Seidman,
LLP as the Company's independent accountants for the year 2001. In addition, we
will be pleased to report on the affairs of the Company and a discussion period
will be provided for questions and comments of general interest to stockholders.
We look forward to greeting personally those stockholders who are able
to be present at the meeting; however, whether or not you plan to be with us at
the meeting, it is important that your shares be represented. Accordingly, you
are requested to sign and date the enclosed proxy and mail it in the envelope
provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
/s/ Jonathan R. Burst
Jonathan R. Burst
Chairman of the Board of Directors
TABLE OF CONTENTS
Notice of Annual Meeting 1
Proxy Solicitation 2
Revocability and Voting Proxy 2
Record Date and Voting Rights 2-3
Stockholder Proposals 3
PROPOSAL NO. 1: ELECTION OF DIRECTORS 4-6
PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS 7
Report of the Audit Committee of the Board of Directors 8
Beneficial Ownership of Common Stock 9
Certain Relationships and Related Transaction 10
Compensation of Directors 10-11
Compensation of Executive Officers 11
Consultant and Employee Stock Compensation Plan 11-12
Employment Agreements 12
Stock Option Awards 12
Report of the Compensation Committee of the Board
Of Directors on Executive Compensation 13-14
Performance Measurement Comparison 14-15
Other Matters 15
Appendix A - International Fuel Technology, Inc. Audit Committee Charter 16-18
INTERNATIONAL FUEL TECHNOLOGY, INC.
-------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 25, 2001
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To the Stockholders of International Fuel Technology, Inc:
Notice is hereby given that the Annual Meeting of the Stockholders of
International Fuel Technology, Inc. (the "Company") will be held on Monday, June
25, 2001 at 9:00 a.m. at the Renaissance St. Louis Hotel located near Lambert
International Airport, 9801 Natural Bridge Road, St. Louis, Missouri, for the
following purposes:
(1) To elect eight directors to serve until the 2002 Annual Meeting of
Stockholders.
(2) To ratify the appointment of BDO Seidman, LLP as independent auditors
for the year ending December 31, 2001.
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 30, 2001,
as the record date for determining the stockholders entitled to notice of and to
vote at this Annual Meeting and at any adjournment or postponement thereof.
Whether or not you expect to attend the annual meeting in person, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope provided to ensure your representation
and the presence of a quorum at the annual meeting. If you send in your proxy
card and then decide to attend the annual meeting to vote your shares in person,
you may still do so. Your proxy is revocable in accordance with the procedures
set forth in the proxy statement.
By Order of the Board of Directors,
/s/ Steven D. Walters
Steven D. Walters
Secretary
St. Louis, Missouri
May 25, 2001
1
INTERNATIONAL FUEL TECHNOLOGY, INC.
7777 BONHOMME AVENUE, SUITE 1920
ST. LOUIS, MISSOURI 63105
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PROXY STATEMENT
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GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to stockholders of International Fuel
Technology, Inc., a Nevada corporation (the "Company") in connection with the
solicitation by the Board of Directors (the "Board") of the Company of proxies
in the accompanying form for use in voting at the Annual Meeting of Stockholders
of the Company to be held on Monday, June 25, 2001 at 9:00 a.m. at the
Renaissance St. Louis Hotel, located near Lambert International Airport, 9801
Natural Bridge Road, St. Louis, Missouri or at any adjournment or postponement
thereof. The purposes of the meeting and the matters to be acted upon are set
forth in the accompanying Notice of Annual Meeting of Stockholders. The Board is
not currently aware of any other matters which will come before the meeting.
Proxies for use at the meeting are being solicited by the Board of the
Company. Proxies will be mailed to stockholders on or about May 25, 2001 and
will be solicited principally by mail. The Company will make arrangements with
Automatic Data Processing Investor Communications Services ("ADP") to send
proxies and proxy material to the shareholders entitled to vote at the meeting,
and we will reimburse them for their expenses in so doing. Should it appear
desirable to do so in order to ensure adequate representation of shares at the
meeting, officers, agents, and employees of the Company may communicate with
stockholders, banks, brokerage houses and others by telephone, facsimile or in
person to request that proxies be furnished. All expenses incurred in connection
with this solicitation will be borne by the Company. The Company has no present
plans to hire special employees or paid solicitors to assist in obtaining
proxies, but reserves the option of doing so if it should appear that a quorum
otherwise might not be obtained.
Revocability and Voting Proxy
A form of proxy for use at the Annual Meeting of Stockholders and a return
envelope for the proxy are enclosed. Stockholders may revoke the authority
granted by their execution of proxies at any time before their effective
exercise by filing with ADP a written notice of revocation or a duly executed
proxy bearing a later date, or by voting in person at the meeting. Shares of the
Company's Common Stock represented by executed and unrevoked proxies will be
voted in accordance with the choice or instructions specified thereon. If no
specifications are given, the proxies intend to vote the shares represented
thereby to approve Proposals No. 1 and No. 2 as set forth in the accompanying
Notice of Annual Meeting of Stockholders and in accordance with their best
judgment on any other matters which may properly come before the meeting.
Record Date and Voting Rights
Only stockholders of record at the close of business on April 30, 2001 are
entitled to notice of and to vote at the Annual Meeting or any and all
adjournments or postponements thereof. On April 30, 2001, there were 27,755,287
shares of Common Stock outstanding, each of which entitles the holder of record
to one vote on each of the matters to be presented at the Annual Meeting.
A majority of the outstanding shares entitled to vote must be represented
in person or by proxy at the meeting in order to conduct the election of
directors and other matters mentioned in this
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Proxy Statement. If such a majority is represented at the meeting, then the
eight nominees for director who receive the highest number of votes cast will be
elected. The other matters require the approving vote of at least a majority of
the votes cast. The holders of a majority of the outstanding shares of Common
Stock, present in person or by proxy and entitled to vote, will constitute a
quorum at the Annual Meeting. Abstentions and broker non-votes will be counted
for purposes of determining the presence or absence of a quorum. "Broker non-
votes" are shares held by brokers or nominees which are present in person or
represented by proxy, but which are not voted on a particular matter because
instructions have not been received from the beneficial owner.
Stockholder Proposals
All stockholder proposals which are intended to be presented at the 2002
Annual Meeting of Stockholders must be received by the Company no later than
December 1, 2001 for inclusion in the Board of Directors' proxy statement and
form of proxy relating to that meeting.
Shareholders of record who do not submit proposals for inclusion in the
proxy statement but who intend to submit a proposal at the 2002 Annual Meeting,
and shareholders of record who intend to submit nominations for directors at the
meeting, must provide written notice. Such notice should be addressed to the
Corporate Secretary and received at the Company's principal executive offices by
January 19, 2002.
3
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
As set by the Board pursuant to the Bylaws of the Company, the authorized
number of directors is currently set at nine. Eight directors (constituting the
entire Board) are to be elected at the Annual Meeting. Unless otherwise
specified, the enclosed proxy will be voted in favor of the persons named below
to serve until the next annual meeting of stockholders and until their
successors shall have been duly elected and shall qualify. In the event any of
these nominees shall be unable to serve as a director, the shares represented by
the proxy will be voted for the person, if any, who is designated by the Board
to replace the nominee. All nominees have consented to be named and have
indicated their intent to serve if elected. The Board has no reason to believe
that any of the nominees will be unable to serve or that any vacancy on the
Board will occur.
Certain information about the director nominees, is furnished below:
Jonathan R. Burst, 42, Mr. Burst has served as Chief Executive Officer of the
Company since February 2000 and as a Director since February 2000. He also
served as the President of the Company from July 1999 to February 2000. Mr.
Burst founded Burcor International in 1998 and has served as President since its
inception. From 1992 to 1998, Mr. Burst served as Executive Vice President and
Managing Director of mergers and acquisitions at Aon Risk Services. Mr. Burst
received his Bachelor of Arts degree in Economics from the University of
Missouri in 1981.
William J. Lindenmayer, 41, Mr. Lindenmayer has served as President of the
Company since February 2000 and as a Director since February 2000. He has also
served as Chief Operating Officer of the Company since July 1999. Mr.
Lindenmayer served as Managing Director of Burcor Capital, LLC from 1999 to
February 2000. Mr. Lindenmayer served as President of DLW Partners, LLC from
1997 to 1999, and as President of WLI Group, Inc. from 1995 to 1997. Mr.
Lindenmayer received his Bachelor of Science degree from Cornell University in
1982 and his Masters of Business Administration from the University of Virginia
in 1988.
David B. Norris, 52, Mr. Norris has served as a Director of the Company
since April 1999. Mr. Norris founded and owns Addicks Services, Inc., a
construction company, and has served as its' President since 1983.
Harry Demetriou, 57, Mr. Demetriou has served as a Director of the Company
since February 2000. Mr. Demetriou is currently the Chairman for Observor
Acceptances, Ltd., an investment company which invests in securities in the
international markets. Mr. Demetriou served as Director and Chairman for United
House Realty until December 1998. Mr. Demetriou was a ship owner of bulk
carriers for over 25 years, however, he has since retired from active management
in the shipping industry.
John P. Stupp, Jr., 51, Mr. Stupp has served as a Director of the Company
since May 2001. Mr. Stupp is the Executive Vice President and Chief Operating
Officer of Stupp Bros., Inc., a diversified holding company. Mr. Stupp has
served in such capacities since 1989 and 1996, respectively. From January 1992
to August 1995 Mr. Stupp also served as President, and since August 1995 he has
served as Chief Executive Officer of Stupp Corporation, the pipe manufacturing
division of Stupp Bros., Inc. Mr. Stupp has been a Director of Atrion
Corporation, a publicly traded medical devices and components company, since
1985 and he is an Advisory Director of Midwest BankCentre. Mr. Stupp holds a
1972 Bachelor of Science degree in Business and Economics from Lehigh
University.
Ian Williamson, 45, Mr. Williamson has served as a Director of the Company since
May 2001. Mr. Williamson has also served as a Director of Interfacial Technology
Limited from May 2000 to 2001. Mr. Williamson commenced his career studying the
design of mechanical services including steam and combustion, particularly
alternatives to oil fired systems. He has worked as an independent design
consultant, designing large-scale heating, air conditioning and waste management
systems. In 1993, Mr. Williamson became involved with the invention and
development of emissions reduction
4
technology and co-founded Interfacial Technology Limited. Mr. Williamson remains
an integral part of Interfacial's ongoing research and development efforts. He
is the author of over 10 patents and applications.
Simon Orange, 33, Mr. Orange has served as a Director the Company since May
2001. Mr. Orange has also served as a director of Interfacial Technology Limited
from May 2000 to 2001. Mr. Orange is a fully qualified financial adviser and has
extensive experience both investing in and managing diversified businesses
including property, retail, finance and software technology. Mr. Orange's
primary role in these businesses has been management at board level and
assistance in raising seed capital. Mr. Orange has been a major shareholder in
Temple Court Independent Limited, an independently authorized financial services
business for the last eight years. He has also served on the board of three
property companies, a software business (recently sold out to a London Stock
Exchange quoted company) and is currently a director of AAE Holding Plc.
Geoff Robinson, 48, Mr. Robinson has served as a director of the Company since
May, 2001. Prior to May 1983, Mr. Robinson held a number of positions with large
multinational corporations including BET Group Plc and Lex Service Group Plc.
Mr. Robinson served as local and regional managers with both companies and ended
up becoming Managing Director of two separate business units of Lex Service
Group. In May 1983, Mr. Robinson became Managing Director of TKLT Limited, an
independent hire company. Between 1987 and 1993, Mr. Robinson formed a holding
company, N R Development Limited, which eventually spawned a total of nine
independent companies. Mr. Robinson sold all these business interests in 1993-
1994 and is currently the owner, or part owner, of 5 businesses and has served,
or is serving, as a Director of a further two companies.
All directors hold office until the next annual meeting of the stockholders
of the Company and until their successors are elected and qualified. At present,
the Company's Articles of Incorporation provide for not less than one nor more
than nine directors. Currently there are eight directors of the Company.
Vote Required
The eight nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy and entitled to vote for them,
a quorum being present, shall be elected as directors. Only votes cast for a
nominee will be counted, except that the accompanying proxy will be voted for
all nominees in the absence of instruction to the contrary. Abstentions, broker
non-votes and instructions on the accompanying proxy card to withhold authority
to vote for one or more nominees will result in the respective nominees
receiving fewer votes. However, the number of votes otherwise received by the
nominee will not be reduced by such action.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF EACH NAMED NOMINEE
Board Committees and Meetings
During the fiscal year ended December 31, 2000, the Board held four
meetings and acted by unanimous written consent one time. The Board has an Audit
Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained;
oversees the independence of the independent auditors; evaluates the independent
auditors' performance; consults with the independent auditors and discusses with
senior management the scope and quality of controls; and receives and considers
the cooperation received by the independent auditors during their audit
examination. The Audit
5
Committee is composed of two non-employee directors: Messrs. Stupp and Norris,
and one employee director: Mr. Lindenmayer. The Audit Committee was established
in the current fiscal year and has met one time. Two members of the Company's
Audit Committee are independent (as independence is defined in Rule 4200(a)(15)
of the NASDAQ listing standards. The Board has adopted a written Audit Committee
Charter that is attached hereto as Appendix A.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock grants to employees and consultants under
the Company's Consultant and Employee Stock Compensation Plan and otherwise
determines compensation levels and performs such other functions regarding
compensation as the Board may delegate. The Compensation Committee is composed
of two non-employee directors: Messrs. Demetriou and Norris, and one employee
director: Mr. Burst. It has met one time during last fiscal year.
During the fiscal year ended December 31, 2000, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he served, held during the period for which he was a director or
committee member, respectively.
6
PROPOSAL NO. 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected BDO Seidman, LLP, St. Louis,
Missouri to audit the financial statements of the Company for 2001 and
recommends that the stockholders ratify such selection. In the event that a
majority of the shares are not voted in favor of ratification, the Board will
reconsider its selection. Unless otherwise instructed, the proxy holders will
vote the proxies they receive for the ratification of BDO Seidman, LLP as the
independent auditors for 2001. A representative of BDO Seidman, LLP will be
present at the Annual Meeting and will have an opportunity to make a statement
if he desires to do so, and will be available to respond to appropriate
questions from stockholders.
Services Provided by the Company's Auditors
For the year ended December 31, 2000, the Company incurred professional
fees to its auditors in the amount of $234,397, of which $56,300 related to
auditing services, and $178,097 related to all other services. A substantial
portion of the fees in the other services category relates to services
traditionally provided by auditors, including work performed in connection with
registration statements, due diligence procedures performed in connection with
mergers and acquisitions, and income tax services.
The Company's audit committee has considered whether the non-audit
services provided by the Company's auditors in connection with the year ended
December 31, 2000 were compatible with the auditors' independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF PROPOSAL 2
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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The following is the report of the audit committee with respect to the
Company's audited financial statements for the fiscal year ended December 31,
2000, which include the balance sheets of the Company as of December 31, 2000
and 1999, and the related statements of operations, stockholders' deficit and
cash flows for the twelve months ended December 31, 2000, nine months ended
December 31, 1999 and the twelve months ended March 31, 1999. The information
contained in this report shall not be deemed to be "soliciting material" or to
be "filed" with the Securities and Exchange Commission, nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as
amended, except to the extent that the Company specifically incorporates it by
reference in such filing.
Review With Management
The audit committee has reviewed and discussed the Company's audited
financial statements with management.
Review and Discussion with Independent Auditors
The audit committee has discussed with BDO Seidman, LLP, the Company's
independent auditors, the matters required to be discussed by SAS 61 and SAS 90
(Codification of Statements on Accounting Standards) that includes, among other
items, matters related to the conduct of the audit of the Company's financial
statements.
The audit committee has also received written disclosures and the letter
from BDO Seidman, LLP required by Independence Standards Board No. 1 (that
relates to the accountant's independence from the Company and its related
entities) and has discussed with BDO Seidman, LLP its independence from the
Company.
Conclusion
Based on the review and discussions referred to above, the audit committee
recommended to the Board of Directors that the Company's audited financial
statements be included in the Company's Annual Report of Form 10-K for the
fiscal year ended December 31, 2000.
Audit Committee
William J. Lindenmayer, Chairman
David B. Norris
John P. Stupp, Jr.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
As of March 7, 2000, the Board of Directors unanimously agreed to engage BDO
Seidman, LLP to be the Company's new principal accountant. At no time during the
past two fiscal years or any subsequent period prior to engagement as principal
auditor did the Company consult with BDO Seidman, LLP regarding either the
application of accounting principles to a specified transaction or type of audit
opinion which might be rendered on the Company's financial statements or any
other matter. The former accountant, McGladrey & Pullen, LLP declined to stand
for re-election for the December 31, 1999 engagement. The independent auditors'
reports for March 31, 1999 and 1998, were modified as to uncertainties about the
entity's ability to continue as a going concern. The Company and its former
accountants had no disagreements during the fiscal years ended March 31, 1999
and 1998, and through the date they declined to stand for re-election.
8
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of April 30, 2001 by: (i) each person known by
the Company to own beneficially more than five percent of the Company's common
stock; (ii) each director and nominee for director of the Company; (iii) each
executive officer named in the Summary Compensation Table (see "Executive
Compensation"); and (iv) all directors and executive officers of the Company as
a group. Except as otherwise specified, the named beneficial owner has sole
voting and investment power over the shares listed.
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership/1/ Common Stock/1/
- ---------------- ----------------------- ---------------
Jonathan R. Burst/2/ 2,541,000 9.2%
William J. Lindenmayer/3/ 1,801,000 6.5%
Steven D. Walters 60,000 0.2%
John P. Stupp, Jr. 59,233 0.2%
David B. Norris 1,096,562 3.9%
Harry F. Demetriou/4/ 1,066,667 3.8%
Ian Williamson 0 0.0%
Simon Orange 271,739 1.0%
Geoff Robinson 0 0.0%
All directors and executive
officers as a group 6,896,201 24.8%
/1/This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D filed with the SEC. Unless otherwise
indicated in the footnotes to this table and subject to community property laws
where applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Unless otherwise indicated, the principal
address of each of the stockholders named in this table is: c/o International
Fuel Technology, Inc., 7777 Bonhomme Avenue, Suite 1920, St. Louis, Missouri,
63105. Applicable percentages are based on 27,755,287 shares outstanding on
April 30, 2001.
/2/Includes 150,000 shares owned by Burcor Capital, L.L.C. of which Mr. Burst is
an executive officer and deemed to be the beneficial owner of such shares.
/3/Includes 150,000 shares owned by Burcor Capital, L.L.C. of which Mr.
Lindenmayer is an executive officer and deemed to be the beneficial owner of
such shares.
/4/Includes 1,066,667 shares owned by Observor Acceptances, Ltd. of which Mr.
Demetriou is the sole owner and deemed to be the beneficial owner of such
shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's executive officers and directors, and persons who
beneficially own more than ten percent of the Company's common stock, to file
initial reports of ownership and reports of changes in ownership with the SEC.
Executive officers, directors and greater than ten percent beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based upon a review of the copies of such forms furnished
to the Company and written representations from the Company's executive officers
and directors, the Company believes that during fiscal 2000 a majority of Forms
3 or 4 were filed on a timely basis for the Company's executive officers and
directors. The Company believes all such delinquent reports have since been
filed.
9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company obtains general and administrative services and rents office space
and equipment from Burcor Capital, LLC, a company related through common
ownership (Mr. Jonathan Burst, executive officer and director of the Company, is
the founder and president of Burcor Capital, LLC), under an agreement requiring
monthly payments of $5,000. Expenses recorded as professional services totaled
$60,000 during the twelve month period ended December 31, 2000 and $32,500
during the nine month period ended December 31, 1999.
On April 26, 1999, at the Annual Shareholders Meeting, the Shareholders of the
Company approved the engagement of Burcor Capital, LLC as the Company's
investment bankers to develop investment and marketing relationships in
connection with a merger or consolidation of the Company with any other business
entity, the sale of all or part of the Company securities for cash or in
exchange for other tangible or intangible consideration ("Potential
Transactions") and the planning and actions taken for the purpose of effecting
one or more Potential Transactions. As of December 31, 2000 no amounts have been
paid related to this agreement.
On October 7, 1999, The Company entered into an Advisory Agreement with Mr.
Harry Demetriou, a director of the Company, on a non-exclusive basis to render
financial advisory services in connection with the possible sale of the Company.
As of December 31, 1999 no payments had been made related to this agreement.
During June 2000 this agreement was canceled and replaced with an agreement that
provided for payment of 250,000 non-registered common shares. These shares were
issued on June 16, 2000 with a value of $218,750.
At December 31, 1999, the Company owed one of its stockholders approximately
$87,000 for legal services performed. Subsequent to December 31, 1999, the
stockholder agreed to accept 27,559 shares of the Company's common stock in lieu
of cash for the amounts due to him.
During June 2000, the Company purchased a Directors and Officers Liability
insurance policy from Burcor Insurance Group, a company owned by Jonathan Burst.
During the year 2000, the Company paid MarketMatch, Inc. $106,293 for
professional services. MarketMatch, Inc. is owned and operated by William
Center. William Center became a director of the Company in October 2000.
During the year 2000, the Company paid Steven D. Walters, CPA $25,168 for
professional services. Steven D. Walters, CPA was owned and operated by Steven
Walters. Steven Walters was appointed as the Chief Financial Officer of the
Company in October 2000.
During the year 2000, the Company received advances from stockholders totaling
$516,000. For $416,000 of the advances each stockholder received a warrant to
purchase from the Company up to 25,000 shares of non-registered common stock at
$.01 per share for each $5,000 in principal advanced to the Company. The Company
issued 2,030,000 non-registered common shares based upon the exercise of the
warrants. In addition, the Company repaid $356,000 of the advances received from
the stockholders by issuing 1,186,669 non-registered common shares and $27,500
of the advances received from stockholders by check disbursement. $132,500 of
the advances received from stockholders is recorded as a liability on the
December 31, 2000 balance sheet.
EXECUTIVE COMPENSATION
Compensation of Directors
Directors do not receive any cash compensation for their services as
members of the Board of Directors, although they are reimbursed for certain
expenses incurred in connection with attendance at Board and committee meetings.
From time to time, certain non-employee directors of the Company have received
grants of non-registered common stock. During the last fiscal year Mr.
10
Norris received a grant of 150,000 non-registered common shares, Mr. Demetriou
received a grant of 100,000 non-registered common shares, and a former director
received a grant of 25,000 non-registered common shares.
On February 23, 2000, the Board of Directors adopted the Director's Stock
Compensation Plan, which provides for an annual award of 10,000 shares of the
Company's common stock to the Board members as reimbursement for attendance at
Company Board meetings. Each Board member will be awarded an additional 1,000
shares of the Company's common stock for every three-telephone conference call
Board meetings attended. During the last fiscal year Mr. Norris and two former
directors of the Company each received a grant of 15,000 non-registered common
shares under the Director's Stock Compensation Plan.
Compensation of Executive Officers
The following table sets forth information concerning all cash and non-cash
compensation paid or to be paid by the Company as well as certain other
compensation awarded, earned by and paid, during the fiscal years indicated, to
the Chief Executive Officer and for each of the Company's other executive
officers whose annual salary and bonus exceeds $100,000 for such period in all
capacities in which they served.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Restricted All
Stock Other
Name and Principal Position Year Salary ($) Bonus Other Awards(1) Compensation
- --------------------------- ---- ---------- ----- ----- --------- ------------
Jonathan R. Burst.......... 2000 $180,000 0 0 $834,067 0
Chief Executive Officer 1999 5,493 0 0 $111,056 0
William J. Lindenmayer..... 2000 180,000 0 0 $716,721 0
President
(1) The stock award shares are 100% vested and their value was calculated based
on the closing trading price of the Company's stock on the applicable stock
award determination date.
Perquisites and other personal benefits are omitted because they do not
exceed either $50,000 or 10% of the total of annual salary and bonus for the
named executive officer.
Consultant and Employee Stock Compensation Plan
The Board of Directors adopted a Consultant and Employee Stock Compensation
Plan that became effective January 14, 2000. The Board of Directors will be
responsible for the administration of this Plan, and will grant Awards under
this Plan. Subject to the express provisions of the Plan, the Board of Directors
shall have full authority and sole and absolute discretion to interpret and
amend this Plan, to prescribe, amend and rescind rules and regulations relating
to it, and to make all other determinations which it believes to be necessary or
advisable in administering this Plan. The determinations of the Board of
Directors on the matters referred to in this Section shall be conclusive. No
member of the Board of Directors shall be liable for any act or omission in
connection with the administration of this Plan unless it resulted from the
member's willful misconduct.
11
The maximum number of shares of common stock as to which awards may be
granted under this Plan, subject to subsequent amendments, is 5,000,000 shares.
The common stock which is issued on grant of awards may be authorized but
unissued shares or shares which have been issued and reacquired by the Company.
The Board of Directors may increase the maximum number of shares of common stock
as to which awards may be granted at such time as it deems advisable. Awards may
be granted to employees or consultants of the Company in their individual
capacity only.
The Board of Directors shall have complete discretion to determine when and
to which employees or consultants awards are to be granted, and the number of
shares of common stock as to which awards granted to each employee or consultant
will relate. No grant will be made if, in the judgment of the Board of
Directors, such a grant would constitute a public distribution within the
meaning of the Securities Act of 1933, as amended (the "Act"), or the rules and
regulations promulgated thereunder. Stock grants totaling 1,847,559 common
shares were made during the last fiscal year.
Employment Agreements
In January 2000, the Company entered into an employment agreement with Mr.
Burst to serve as Chief Executive Officer with an annual base salary of $180,000
and 6,000 non-registered common shares per month, and a bonus award as deemed
appropriate by the Board of Directors. On January 1, 2001 the Company entered
into an employment agreement with its Chief Executive Officer through December
31, 2003. Under this agreement, the Chief Executive Officer will receive an
annual base salary of $200,000, a stock award of 20,834 each month and a bonus
award as deemed appropriate by the Board of Directors. On February 23, 2000, the
Board of Directors granted Mr. Burst 100,000 shares of non-registered common
stock for his appointment as Chief Executive Officer. On March 6, 2000, Mr.
Burst received 10,000 shares of non-registered common stock for reimbursement of
expenses to be incurred as a member of the Company's Board of Directors. On
October 13, 2000, the Board of Directors granted Mr. Burst 475,000 shares of
non-registered common stock for achieving a milestone event.
In January 2000, the Company entered into an employment agreement with Mr.
Lindenmayer to serve as President/Chief Operating Officer with an annual base
salary of $180,000 and 3,000 non-registered common shares per month, and a bonus
award as deemed appropriate by the Board of Directors. On January 1, 2001 the
Company entered into an employment agreement with its President/COO through
December 31, 2003. Under this agreement, the President/COO will receive an
annual base salary of $200,000, a stock award of 20,834 each month and a bonus
award as deemed appropriate by the Board of Directors. On February 23, 2000, the
Board of Directors granted Mr. Lindenmayer 100,000 shares of non-registered
common stock for his appointment as President/Chief Operating Officer. On March
6, 2000, Mr. Lindenmayer received 10,000 shares of non-registered common stock
for reimbursement of expenses to be incurred as a member of the Company's Board
of Directors. On October 13, 2000, the Board of Directors granted Mr.
Lindenmayer 475,000 shares of non-registered common stock for achieving a
milestone event.
Stock Option Awards
The Company currently does not have any plan or agreement related to the
grant of stock option awards for employees or directors.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee is composed of two non-employee
directors: Messrs. Demetriou and Norris, and one employee director: Mr. Burst.
One current member of the Compensation Committee is an officer or employee of
the Company and no executive officer of the Company serves as a member of a
compensation committee of any other entity that has one or more executive
officers serving as a member of the Compensation Committee.
12
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION
Introduction
The Company's executive compensation policies and practices are approved by
the Compensation Committee of the Board of Directors (the "Committee). The
Committee consists of two directors who are not employees of the Company and one
director who is an employee of the Company. The Committee's determinations on
compensation of the Chief Executive Officer and other executive officers are
reviewed with all of the non-employee directors.
Philosophy
The Committee has implemented compensation policies, plans and programs
that seek to enhance stockholder value by aligning the financial interests of
the executive officers with those of its stockholders. Annual base salaries are
generally set at market-based competitive median levels. The Company relies
heavily on annual incentive compensation and non-registered stock grants to
attract, retain, motivate and reward executive officers and other key employees
and the Committee believes that the Chief Executive Officer's equity incentives
should be above the median for Chief Executive Officers of similar companies.
Incentive compensation is variable and tied to corporate performance. The
policies are designed to provide an incentive to management to grow revenues,
provide quality returns on investment, enhance stockholder value and contribute
to the long-term growth of the Company. All incentive compensation policies are
reviewed at least annually to ensure they meet the current strategies and needs
of the business.
Compensation Plans
The Company's executive compensation is based on two components, each of
which is intended to support the overall compensation philosophy.
Base Salary
Salaries for executive officers are reviewed by the Committee on an annual
basis and may be changed based on the individual's performance or a change in
competitive pay levels in the marketplace.
The Committee reviews with the Chief Executive Officer an annual salary
plan for the Company's executive officers. The salary plan is modified as deemed
appropriate and approved by the Committee. The annual salary plan is developed
by the Company's Chief Executive Officer based on publicly available information
on organizations with similar characteristics and on performance judgments as to
the past and expected future contributions of the individual executive. The
Committee reviews and establishes the base salary of the Chief Executive Officer
based on similar competitive compensation data and the Committee's assessment of
his past performance and its expectation as to his future contributions in
directing the long-term success of the Company.
Equity Incentives
Long-term equity incentives are provided through the grants of non-
registered stock to executive officers and other key employees. The stock
component of compensation is intended to retain and motivate employees to
improve long-term stockholder value. The non-registered stock awards are granted
at fair market value and have increased value only if the Company's stock price
increases. The Committee believes this element of the total compensation program
directly links the
13
participant's interests with those of the stockholders and the long-term
performance of the Company.
The Committee believes that the programs described above provide
compensation that is competitive with comparable emerging companies, links
executives and stockholder interests and provides the basis for the Company to
attract and retain qualified executives. The Committee will continue to monitor
the relationship among executive compensation, the Company's performance and
stockholder value.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code denies a deduction for
compensation in excess of $1 million paid to certain executive officers, unless
certain performance, disclosure, and stockholder approval requirements are met.
Non-registered stock grants under the Company's Employee and Consultant Stock
Compensation Plan are intended to qualify as "performance-based" compensation
not subject to the Section 162(m) deduction limitation.
Compensation Committee
Jonathan R. Burst, Chairman
Harry Demetriou
David B. Norris
Performance Measurement Comparison
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or under the Exchange Act,
except to the extent the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
[GRAPH APPEARS HERE]
DATE IFT RUSSELL DIVERSIFIED CHEMICALS
------ ---- ------- ---------------------
DEC-98 7.19 4.31 1.83
MAR-99 2.19 4.06 1.89
JUN-99 2.50 4.58 2.21
SEP-99 3.75 4.28 1.95
DEC-99 3.38 4.88 2.06
MAR-00 2.06 5.42 2.06
JUN-00 .50 5.28 1.67
SEP-00 .75 4.91 1.45
DEC-00 .39 4.63 1.68
14
The above graph compares the performance of the Company from December 1998, the
quarter that the Company's common stock commenced trading on the NASDAQ Bulletin
Board, through December 31, 2000, against the performance of the Russell 2000
Index and the S&P 500 Diversified Chemicals Index for the same period. The S&P
500 Diversified Chemicals Index is comprised of major international chemical
manufacturing companies engaged in diverse chemical and chemical-related
operations. Historical stock price performance is not necessarily indicative of
future stock price performance.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. However, if other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT
CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: INTERNATIONAL FUEL
TECHNOLOGY, INC., ATTENTION: STEVEN D. WALTERS, 7777 BONHOMME AVENUE, SUITE
1920, ST. LOUIS, MISSOURI 63105.
By Order of the Board of Directors,
/s/ Steven D. Walters
Steven D. Walters
Secretary
Dated May 25, 2001
15
APPENDIX A
INTERNATIONAL FUEL TECHNOLOGY, INC.
AUDIT COMMITTEE CHARTER
Committee Role
The committee's role is to act on behalf of the board of directors and oversee
all material aspects of the company's financial reporting, control and audit
functions, except those specifically related to the responsibilities of another
standing committee of the board. The audit committee's role includes a
particular focus on the qualitative aspects of financial reporting to the
shareholders and on company processes for the management of business/financial
risk and for compliance with significant applicable legal, ethical and
regulatory requirements.
The role also includes coordination with other board committees and maintenance
of strong, positive working relationships with management, external auditors,
counsel and other committee advisors.
Committee Membership
The committee shall consist of three board members of which two of the board
members must be independent, non-executive board members. Committee members
shall have: (1) knowledge of the primary industries in which the company
operates; (2) the ability to read and understand fundamental financial
statements, including a company's balance sheet, income statement, statement of
cash flows and key performance indicators; and (3) the ability to understand key
business and financial risks and related controls and control processes. The
committee shall have access to its own counsel and other advisors at the
committee's sole discretion.
At least one member, preferably the chair, should be literate in business and
financial reporting and control, including knowledge of the regulatory
requirements, and should have past employment experience in finance or
accounting or other comparable experience or background. Committee appointments
shall be approved annually by the full board. The committee chairperson shall be
selected by the committee members.
Committee Operating Principles
The committee shall fulfill its responsibilities within the context of the
following overriding principles:
Communications
The chair and others on the committee shall, to the extent appropriate, maintain
an open avenue of contact throughout the year with senior management, other
committee chairs and other key committee advisors (external and internal
auditors, etc.), as applicable, to strengthen the committee's knowledge of
relevant current and prospective business issues.
Education/Orientation
The committee, with management, shall develop and participate in a process for
review of important financial and operating topics that present potential
significant risk to the company. Additionally, the individual committee members
are encouraged to participate in relevant and appropriate self-study education
to ensure understanding of the business and environment in which the company
operates.
Annual Plan
The committee, with input from management and other key committee advisors,
shall develop an annual plan responsive to the "primary committee
responsibilities" detailed herein. The annual plan shall be reviewed and
approved by the full board.
16
Meeting Agenda
Committee meeting agendas shall be the responsibility of the committee chair,
with input from the committee members. It is expected that the chair would also
ask for management and key committee advisors, and perhaps others, to
participate in this process.
Expectations and Information Needs
The committee shall communicate committee expectations and the nature, timing,
and extent of committee information needs to management, internal auditors and
external parties, including external auditors. Written materials, including key
performance indicators and measures related to key business and financial risks,
shall be received from management, auditors and others at least 3 business days
in advance of meeting dates. Meeting conduct will assume committee members have
reviewed written materials in sufficient depth to participate in committee/board
dialogue.
External Resources
The committee shall be authorized to access internal and external resources, as
the committee requires, to carry out its' responsibilities.
Meeting Attendees
The committee shall request members of management, counsel, internal and
external auditors, as applicable, to participate in committee meetings, as
necessary, to carry out the committee's responsibilities. Periodically and at
least annually, the committee shall meet in private session with only the
committee members. It shall be understood that either internal or external
auditors, or counsel, may, at any time, request a meeting with the audit
committee or committee chair with or without management's attendance. In any
case, the committee shall meet in executive session separately with internal and
external auditors, at least annually.
Meeting Frequency
The committee shall meet at least quarterly. Additional meetings shall be
scheduled as considered necessary by the committee or chair.
Reporting to the Board of Directors
The committee, through the committee chair, shall report periodically, as deemed
necessary, but at least semiannually, to the full board. In addition, summarized
minutes from committee meetings, separately identifying monitoring activities
from approvals, shall be available to each board member at least one week prior
to the subsequent board of director's meeting.
Self-Assessment
The committee shall review, discuss and assess its own performance as well as
its role and responsibilities, seeking input from senior management, the full
board and others. Changes in role and/or responsibilities, if any, shall be
recommended to the full board for approval.
Committee Responsibilities
Financial Reporting
. Review and assess the annual and interim financial statements before they
are released to the public or filed with the SEC.
. Review and assess the key financial statement issues and risks, their
impact or potential effect on reported financial information, the processes
used by management to address such matters, related auditors' views, and
the basis for audit conclusions.
. Approve changes in important accounting principles and the application
thereof in both interim and annual financial reports.
. Advise financial management and the external auditors that they are
expected to provide a timely analysis of significant current financial
reporting issues and practices.
17
Risks and Controls
. Review and assess the company's business and financial risk management
process, including the adequacy of the overall control environment and
controls in selected areas representing significant risk.
. Review and assess the company's system of internal controls for detecting
accounting and financial reporting errors, frauds and defalcations, legal
violations, and noncompliance with the corporate code of conduct. In that
regard, review the related findings and recommendations of the external and
internal auditors, together with management's responses.
. Review with legal counsel any regulatory matters that may have a material
impact on the financial statements.
External Auditors
. Recommend the selection of the external auditors for approval by the
board of directors.
. Instruct the external auditors that they are responsible to the board of
directors and the audit committee as representatives of the shareholders.
In that regard, confirm that the external auditors report all relevant
issues to the committee in response to agreed-upon expectations.
. Review the performance of the external and internal auditors.
. Obtain a formal written statement from the external auditors consistent
with standards set by the Independence Standards Board. Additionally,
discuss with the auditors any relationships or on audit services that may
affect their objectivity or independence.
. Consider, in consultation with the external and internal auditors, their
audit scopes and plans to ensure completeness of coverage, reduction of
redundant efforts and the effective use of audit resources.
. Review and approve requests for any consulting services to be performed by
the external auditors, and be advised of any other study undertaken at the
request of management that is beyond the scope of the audit engagement
letter.
. Review with management and the external auditors the results of the annual
audits and related comments in consultation with other committees as deemed
appropriate, including any difficulties or disputes with management, any
significant changes in the audit plans, the rationale behind adoptions and
changes in accounting principles, and accounting estimates requiring
significant judgments.
. Provide a medium for the external auditors to discuss with the audit
committee their judgments about the quality, not just the acceptability, of
accounting principles and financial disclosure practices used or proposed
to be adopted by the company.
Other
. Review and update the committee's charter.
. Review and update the company's code of conduct.
. Review and approve significant conflicts of interest and related party
transactions.
. Conduct or authorize investigations into any matters within the committee's
scope of responsibilities. The committee will be empowered to retain
independent counsel and other professionals to assist in conducting any
investigation.
18