SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant ( X )
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted by
( X ) Definitive Proxy Statement Rule 14a-6(e)(2))
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Fuel-Tech N.V.
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( X ) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
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FUEL-TECH N.V.
CASTORWEG 22-24, CURACAO, NETHERLANDS ANTILLES
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 2, 2005
--------------------
To the Shareholders of Fuel-Tech N.V.:
The Annual Meeting (the "Meeting") of Shareholders of Fuel-Tech N.V., a
Netherlands Antilles limited liability company ("Fuel Tech"), will be held
Thursday, June 2, 2005, at the registered office of Fuel Tech, Castorweg 22-
24, Curacao, Netherlands Antilles, at 10:00 a.m. local time, to consider and
vote on the following matters, each of which is explained more fully in the
following Proxy Statement. A proxy card for your use in voting is also
enclosed.
1. To approve the Annual Report of Management to Shareholders of Fuel
Tech for the calendar year ended December 31, 2004 and the Financial
Statements for that calendar year;
2. To elect eight (8) Managing Directors;
3. To ratify the reappointment of Ernst & Young LLP as Fuel Tech's
independent auditors for the year 2005; and
4. To transact any other business that may properly come before the
meeting or at any adjournment thereof.
Only common shareholders of record at the close of business on June 1, 2005
are entitled to vote at the Meeting. The presence in person or by proxy of
shareholders entitled to cast one-third of the total number of votes which may
be cast shall constitute a quorum for the transaction of business at the
Meeting.
The Annual Report is enclosed with this Notice of Meeting and Proxy
Statement.
FUEL-TECH N.V.
Charles W. Grinnell
Secretary
April 21, 2005
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON IT IS REQUESTED THAT
YOU PROMPTLY FILL OUT, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD.
FOR INTERNET OR TELEPHONE VOTING, PLEASE REFER TO THE INSTRUCTIONS ON THE
PROXY CARD OR THE VOTING INSTRUCTION FORM.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON BEING SOLICITED BY
THIS PROXY STATEMENT, UPON WRITTEN REQUEST, A COPY OF THE ANNUAL REPORT OF THE
COMPANY ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. ALL SUCH REQUESTS SHOULD BE DIRECTED TO THE CORPORATE
SECRETARY AT THE ADDRESS OF THE COMPANY SET OUT ABOVE UNDER "SHAREHOLDER
PROPOSALS."
STATEMENTS IN THIS PROXY STATEMENT WHICH ARE NOT HISTORICAL FACTS, SO-CALLED
"FORWARD-LOOKING STATEMENTS" ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS
OF THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
SHAREHOLDERS ARE CAUTIONED THAT ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS
AND UNCERTAINTIES, INCLUDING THOSE DETAILED IN THE COMPANY'S FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION.
FUEL-TECH N.V.
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Managing Directors (the
"Board") of Fuel-Tech N.V., a Netherlands Antilles limited liability company
("Fuel Tech"), in connection with the Annual Meeting of Shareholders of Fuel
Tech (the "Meeting") to be held at the registered offices of Fuel Tech,
Castorweg 22-24, Curacao, Netherlands Antilles, Thursday, June 2, 2005, at
10:00 a.m. local time, and at any adjournments of the Meeting.
The Record Date with respect to mailing this solicitation is April 4, 2005.
Under Netherlands Antilles law, however, all holders of Fuel Tech common stock
as of the close of business on June 1, 2005 are entitled to vote at the
Meeting. As of the Record Date, Fuel Tech had 19,908,529 shares of common
stock outstanding, according to the records of Mellon Investor Services, LLC,
Fuel Tech's transfer agent (the "Transfer Agent"). Each share is entitled to
one vote. Under the rules of The Nasdaq Stock Market, Inc., a quorum of one
third of the votes entitled to be cast is required for action on matters taken
up at the Meeting.
Each shareholder is entitled to appoint a representative at the Meeting
other than those named in the form of proxy. A shareholder desiring to appoint
some other person who need not be a shareholder may do so by completing
another proper form of proxy for use at the Meeting. All completed forms of
proxy should be mailed promptly in the enclosed return envelope for delivery
on or before 5:00 p.m. (local time at New York, N.Y.) June 1, 2005 to the
Transfer Agent.
A shareholder giving a proxy may revoke such proxy by an instrument in
writing signed by the shareholder, by the shareholder's attorney-in-fact
authorized in writing, or, if the shareholder is a corporation, under its
corporate seal or by a duly authorized officer or attorney, and deposited with
the Transfer Agent or with the Chairman of the Meeting at the time of the
Meeting.
If a proxy is signed and not revoked by the shareholder, the shares it
represents will be voted at the Meeting in accordance with the instructions of
the shareholder. Abstentions and broker non-votes are counted as present in
determining whether a quorum is present, but are not counted in the
calculation of the vote. If the proxy is signed and returned without
specifying choices, the shares will be voted in favor of each item on the
agenda in accordance with the recommendations of the Board. Members of the
Board and executive officers of Fuel Tech may solicit shareholders' proxies by
mail, telephone or facsimile. Fuel Tech will bear the cost of proxy
solicitation, if any.
ANNUAL REPORT AND FINANCIAL STATEMENTS
Fuel Tech's Annual Report to Shareholders (the "Report"), contains the
report of Management on the business and administration of Fuel Tech for the
calendar year ended December 31, 2004 and financial statements reflecting the
financial position and results of operations of Fuel Tech for 2004 (the
"Financial Statements"). The Financial Statements are set forth in the Report
in consolidated form and, as required by Netherlands Antilles law, in
unconsolidated form. See Note 11 to the Financial Statements for the
unconsolidated Financial Statements. The Report and this Proxy Statement were
distributed together commencing in the week of April 25, 2005. The Report is
available for inspection at the office of Fuel Tech at the address written on
the Notice of Meeting and will be available for inspection at the Meeting.
Resolutions will be presented at the Meeting for the approval of the Annual
Report and the Financial Statements. Fuel Tech understands that under
Netherlands Antilles law, approval of the Report and the Financial Statements
at the Meeting will have the effect of discharging the Managing Directors from
legal liability for their activities as directors for the year ended
December 31, 2004.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES VOTING IS REQUIRED FOR THE
APPROVAL OF THIS PROPOSAL. THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL.
ELECTION OF DIRECTORS
On recommendation of the Compensation and Nominating Committee, the Board
proposes the election of eight nominees as Managing Directors of Fuel Tech.
The term of office of each Managing Director is until the next Annual Meeting
or until a successor shall have been duly elected. The nominees are Douglas G.
Bailey, Ralph E. Bailey, Miguel Espinosa, Charles W. Grinnell, Thomas L.
Jones, John D. Morrow, Samer S. Khanachet and Thomas S. Shaw. Mr. Jones is
nominated for the first time. In the opinion of the Board, Mr. Espinosa,
Mr. Khanachet, Mr. Jones, Mr. Morrow and Mr. Shaw satisfy the independence
requirements of NASD Rule 4200 (a) (15). Each of the nominees has consented to
act, if elected. Should one or more of these nominees become unavailable to
accept nomination or election, votes will be cast for a substitute nominee, if
any, designated by the Board on recommendation of the Compensation and
Nominating Committee. If no substitute nominee is designated prior to the
Meeting, the individuals named as proxies on the enclosed proxy card will
exercise their discretion in voting the shares that they represent. A motion
will be presented at the Meeting for the election as Managing Directors of the
foregoing eight nominees.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES VOTING IS REQUIRED FOR THE
ELECTION OF DIRECTORS. THE BOARD RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
The following table sets forth certain information with respect to each
person nominated and recommended to be elected as a Managing Director of Fuel
Tech.
NAME AGE DIRECTOR SINCE
- ---- --- --------------
Douglas G. Bailey ...................................... 55 1998
Ralph E. Bailey ........................................ 81 1998
Miguel Espinosa ........................................ 64 2002
Charles W. Grinnell .................................... 68 1989
Thomas L. Jones ........................................ 53 --
Samer S. Khanachet ..................................... 54 2002
John D. Morrow ......................................... 81 2004
Thomas R. Shaw ......................................... 58 2001
SHAREHOLDERS' AGREEMENT
Fuel Tech is party to a Shareholders' Agreement of April 30, 1998, as
amended, (the "Agreement") with certain Investors who in 1998 acquired
4,750,000 shares and warrants to purchase 3,000,000 shares of Company common
stock. During the term of the Agreement the Board shall be comprised of not
more than eight directors and the Investors have the right to nominate three
persons as Managing Directors of Fuel Tech one of whom shall be an independent
director. The Investors are Douglas G. Bailey, Ralph E. Bailey, Nolan R.
Schwartz and other persons who are or were associated with American Bailey
Corporation, a privately owned company of which Mr. Ralph E. Bailey is
Chairman and Mr. Douglas G. Bailey, his son, is President and Chief Executive
Officer. Notwithstanding the Agreement, each of the persons identified above
are the nominees of the Board for election as Managing Directors at the
Meeting, having been recommended by the Compensation and Nominating Committee.
The term of the Agreement is until April 30, 2008, unless before April 30,
2008 the Investors own less than 475,000 shares of Fuel Tech common stock.
DIRECTORS AND EXECUTIVE OFFICERS OF FUEL TECH AND FUEL TECH, INC.
VINCENT M. ALBANESE, 56, has been Vice President - Air Pollution Control,
Sales and Marketing of Fuel Tech, Inc. since April, 1998 and Senior Vice
President since May 1, 2000. He was Vice President Sales and Marketing of
Nalco Fuel Tech, a joint venture between Fuel Tech, Inc. and Nalco Chemical
Company ("Nalco"), prior to joining Fuel Tech, Inc., and had served Nalco Fuel
Tech since 1990. Prior to his service with Nalco Fuel Tech, Mr. Albanese was a
market development specialist with Nalco, his employer since 1975.
STEVEN C. ARGABRIGHT, 62, has been a director and the President and Chief
Operating Officer of Fuel Tech, Inc. since April, 1998. He was President and
Chief Executive Officer of Nalco Fuel Tech from 1996 to April,
2
1998 and Vice President of Nalco Fuel Tech from 1990 to 1996. Prior to the
formation of Nalco Fuel Tech, Mr. Argabright was a Regional Sales Manager of
Nalco, his employer since 1973.
VINCENT J. ARNONE, 41, was Controller of Fuel Tech and Fuel Tech, Inc. from
May 24, 1999 until December 9, 2003 when he was appointed Vice President,
Treasurer and Chief Financial Officer of those companies. Previously Mr. Arnone
was Assistant Controller and Director of Finance for a division of American
National Can Company, now Rexam PLC, a multi-national packing company.
DOUGLAS G. BAILEY has been a director of Fuel Tech and of Fuel Tech, Inc.
since April, 1998 and Deputy Chairman of Fuel Tech and of Fuel Tech, Inc.
since 2002. He became an employee of Fuel Tech Inc. effective January 1, 2004.
Mr. Bailey, who is the son of Ralph E. Bailey, has been President and Chief
Executive Officer of Atlantis, Components, Inc., a medical devices company
since September 1, 2004 and has been the President and Chief Executive Officer
of American Bailey Corporation ("ABC"), a privately owned business acquisition
and development company, since 1984.
RALPH E. BAILEY has been a director and Chairman of the Board and Chief
Executive Officer of Fuel Tech and Chairman and a director of Fuel Tech, Inc.
since April, 1998. He has been a director and Chairman of ABC since 1984.
Mr. Bailey is the former Chairman and Chief Executive Officer of Conoco Inc.,
an energy company, and a former Vice Chairman of E.I. du Pont de Nemours &
Co., a chemical company.
STEPHEN P. BRADY, 48, has been Vice President - Fuel Chem of Fuel Tech, Inc.
since February, 1998 and Senior Vice President since January 1, 2002. Prior to
joining Fuel Tech, Inc., Mr. Brady was a Regional Sales Manager of Nalco, his
employer since 1980.
MIGUEL ESPINOSA has been President and Chief Executive Officer of The
Riverview Group, LLC, a financial consulting company, since 2001. He retired
in 2001 as Treasurer of Conoco Inc., his employer since 1965. In addition to
corporate finance, Mr. Espinosa's responsibilities at Conoco involved the
financing of international operations, mergers and acquisitions and joint
ventures. Mr. Espinosa has a Masters in Business Administration degree from
the University of Texas.
CHARLES W. GRINNELL has been Vice President, General Counsel and Corporate
Secretary of Fuel Tech since 1988 and a director of Fuel Tech and Fuel Tech,
Inc. since September, 1989. Mr. Grinnell is a director of Clean Diesel
Technologies, Inc., a specialty chemical and energy technology company, and
has also been engaged in the private practice of corporate law in Stamford,
Connecticut since 1992.
THOMAS L. JONES has been a Senior Advisor at Credit Suisse First Boston
("CSFB") since 2003 and previously had been Managing Director in the
Telecommunications Group at CSFB since June, 2000. Mr. Jones was a Managing
Director in the Telecommunications and Large Cap Groups at Salomon Smith
Barney from 1996 to June, 2000. Prior to joining Salomon Brothers, Mr. Jones
had been a Managing Director at J. P. Morgan & Co., Inc., which he joined in
1977. Mr. Jones has a Masters of Business Administration degree from the
Kenan-Flagler Business School of the University of North Carolina.
SAMER S. KHANACHET has been President of United Gulf Management, Inc.
("UGM"), an investment management company, since 1991 where his
responsibilities include private equity and real estate investments for UGM's
parent company, Kuwait Projects Company (Holding) and clients. Mr. Khanachet
has a Masters in Business Administration degree from Harvard University.
JOHN D. MORROW, formerly a director of Fuel Tech, Inc. from 1985 to 1987, is
the retired Chief Financial Officer and director of Conoco Inc.
NOLAN R. SCHWARTZ, 54, was a director of Fuel Tech, Inc. from 1998 until
January 1, 2004 when he became Vice President, Corporate Development and an
employee of Fuel Tech, Inc. Previously Mr. Schwartz had been a Principal of
ABC.
THOMAS S. SHAW, JR. has been Executive Vice President of Pepco Holdings,
Inc. ("PHI") since August 1, 2002 when PHI acquired Conectiv, an electric
power generating and distribution company. Mr. Shaw remains as President and
Chief Operating Officer of Conectiv and has been since September, 2000 and
previously had been employed by its predecessor Delmarva Power and Light
Company ("Delmarva") for over 25 years where he had
3
been President of its subsidiary Delmarva Capital Investments, Inc. from 1991
until 1995 and was Executive Vice President of Delmarva and Conectiv from 1997
until September, 2000.
WILLIAM H. SUN, 48, has been Vice President and Chief Technology Officer of
Fuel Tech, Inc. since December 9, 2003. Previously he was Vice President,
Engineering and Technology of Fuel Tech, Inc. since April, 1998 and had been
Director of Process Engineering of Nalco Fuel Tech since 1990.
There are no family relationships between any of the directors or executive
officers, except as stated above.
COMMITTEES OF THE BOARD
The Board has an Audit Committee of which the members are Mr. Espinosa
(Chairman), Mr. Khanachet, Mr. Morrow and Mr. Shaw. Mr. Espinosa,
Mr. Khanachet, Mr. Morrow and Mr. Shaw meet the criteria for independence set
forth in NASD Rule 4200 (a)(15) and also Rule 10A-3(b)(1) under the Securities
Exchange Act of 1934. The Board has also determined that Mr. Espinosa and
Mr. Khanachet are audit committee members who possess "financial
sophistication" as described in NASD Rule 4350(d)(2)(A).
The Board also has a Compensation and Nominating Committee of which the
members are Mr. Shaw (Chairman), Mr. Espinosa, Mr. Khanachet and Mr. Morrow.
Mr. Shaw, Mr. Espinosa, Mr. Khanachet and Mr. Morrow are independent directors
of this committee as defined by NASD Rule 4200(a)(15).
In the event of Mr. Jones' election to the Board, the Board intends to
appoint him to both the Audit and the Compensation and Nominating Committees.
In the opinion of the Board, Mr. Jones will be an independent director within
the meaning of NASD Rule 4200(a)(15) and SEC Rule 10A-3(b)(1).
Audit Committee
The Audit Committee is responsible for review of audits, financial reporting
and compliance, and accounting and internal controls policy. For audit
services, the Audit Committee is responsible for the engagement and
compensation of independent auditors, oversight of their activities and
evaluation of their independence. The Audit Committee has instituted
procedures for receiving reports of improper recordkeeping, accounting or
disclosure. The Board has also constituted the Audit Committee as a Qualified
Legal Compliance Committee in accordance with Securities and Exchange
Commission regulations. A copy of the Audit Committee Charter is available for
inspection on the Fuel Tech web site at www.fueltechnv.com and was printed in
the Proxy Statement for the 2003 Annual Meeting.
Compensation and Nominating Committee
The Compensation and Nominating Committee reviews and approves executive
compensation, stock options and similar awards, and adoption or revision of
benefit, welfare and executive compensation plans and also determines the
identity of director nominees for election to fill a vacancy on the Board of
Managing Directors of Fuel Tech. Nominees are approved by the Board on
recommendation of the Committee.
In evaluating nominees, the Committee particularly seeks candidates of high
ethical character with significant business experience at the senior
management or Board level who have the time and energy to attend to Board
responsibilities. Candidates should also satisfy such other particular
requirements that the Committee may consider important to Fuel Tech's business
at the time. When a vacancy occurs on the Board, the Committee, in
consultation with the Chairman, will consider nominees from all sources,
including shareholders, nominees recommended by other parties, and candidates
known to the Managing Directors or to Fuel Tech management. The Committee may,
if appropriate, make use of a search firm and pay a fee for services in
identifying candidates. The best candidate from all evaluated will be
recommended to the Board to be considered for nomination.
Mr. Jones was recommended as a nominee to the Committee by Mr. Espinosa. No
fee was involved in connection with the nomination.
Shareholders who wish to recommend candidates for consideration as nominees
should before January 1 in each year furnish in writing detailed biographical
information concerning the candidate to the Committee addressed in care of the
Corporate Secretary, Fuel Tech, Inc., 695 East Main Street, Stamford, CT
06901.
4
The Charter of the Compensation and Nominating Committee is available for
viewing on the Fuel Tech web site www.fueltechnnv.com.
CORPORATE GOVERNANCE
Meetings
During the year ended December 31, 2004, there were four meetings of the
Board of Directors of Fuel Tech, four meetings of its Audit Committee and four
meetings of the Compensation and Nominating Committee. Each director of Fuel
Tech attended at least 75% of Board and committee meetings of which he was a
member during the period of his directorship. The Directors did not attend the
annual meeting of Shareholders in 2004 because in satisfaction of Netherlands
Antilles law, that meeting is held annually in Curacao, Netherlands Antilles,
and is conducted by proxy.
Executive Sessions
In 2004 the Fuel Tech Board and its Compensation and Nominating Committee
each held one meeting in executive session and its Audit Committee held four
meetings in executive session.
In 2005 and thereafter the Board will hold not less than two executive
sessions of the independent directors annually in connection with regularly
scheduled meetings. The committees of the Board will hold executive sessions
when appropriate. Members of management and non-independent Managing Directors
will not attend executive sessions. The executive sessions of the Board will
be chaired by the independent Managing Directors in rotation by alphabetical
order.
Code of Business Ethics and Conduct
On the recommendation of the Audit Committee, the Board has adopted a Code
of Business Ethics and Conduct which is available for viewing on the Fuel Tech
web site www.fueltechnv.com. Changes to or waivers of the requirements of the
Code will be posted to the web site.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee has reappointed the firm of Ernst & Young LLP, Certified
Public Accountants ("Ernst & Young"), to be Fuel Tech's auditors for the year
2005 and submits that reappointment to the shareholders for ratification.
Ernst & Young has served in this capacity since 1990 and is knowledgeable
about Fuel Tech's operations and accounting practices and is well qualified to
act in the capacity of independent accountants. In making the appointment, the
Audit Committee reviewed Ernst & Young's performance in prior years along with
its reputation for integrity and overall competence in accounting and
auditing. Representatives of Ernst & Young will not be present in Curacao at
the Meeting.
AUDIT FEES
Fees for professional services provided by Ernst & Young in each of the last
two fiscal years by category were:
2004 2003
-------- --------
Audit Fees ..................................... $244,225 $136,616
Audit-Related Fees ............................. -- --
Tax Fees ....................................... -- --
All Other Fees ................................. 1,500 1,500
-------- --------
$245,725 $138,116
"Audit Fees" include fees associated with both the audit of the consolidated
financial statements and the audit of internal controls. Fees attributable to
the audit of internal controls were $55,600 in 2004 and $24,000 in 2003. "All
Other Fees," approved in advance by the Audit Committee, were for an on-line
accounting newsletter.
5
PRE-APPROVAL POLICIES AND PROCEDURES
Fuel Tech's policy and procedure is that each engagement for an audit or
non-audit service is approved in advance by Audit Committee.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES VOTING IS REQUIRED FOR THE
APPROVAL OF THIS PROPOSAL. THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL.
REPORT OF THE AUDIT COMMITTEE
Management is primarily responsible for Fuel Tech's internal controls and
financial reporting. Ernst & Young, the independent auditors, are responsible
for performing independent audits of Fuel Tech's consolidated financial
statements and its internal control over financial reporting in accordance
with the auditing standards of the Public Company Accounting Oversight Board.
These audits serve as the basis for Ernst & Young's opinions included in
annual reports to stockholders as to whether the financial statements fairly
present Fuel Tech's financial position, results of operations, and cash flows
in conformity with U.S. generally accepted accounting principles, whether
management's assessment of the effectiveness of Fuel Tech's internal control
over financial reporting is fairly stated, and whether Fuel Tech's internal
control over financial reporting was effective. The Committee is responsible
for the review and oversight of these processes.
Management has represented that Fuel Tech's 2004 financial statements were
prepared in accordance with accounting principles generally accepted in the
United States. The Committee has reviewed and discussed with both management
and Ernst & Young the 2004 financial statements, managements report on
internal control over financial reporting and the independent auditors' report
thereon. The Committee has also discussed with the independent auditors the
matters required to be discussed by the Statement on Auditing Standards No. 61
(Communication with Audit Committees), as amended.
The Committee has received the written disclosures and the letter from Ernst
& Young required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), as amended, and has represented that Ernst
& Young is independent from Fuel Tech. The Committee has discussed with Ernst
& Young their independence and concluded that the provision of the services
described above under the caption "Audit Fees" is compatible with maintaining
their independence.
In the audit of Fuel Tech's internal controls for the year ended December 31,
2004, one instance of a material weakness in lease accounting was identified.
This weakness is more particularly described under the caption "Managements
Report on Internal Control Over Financial Reporting" in the accompanying 2004
Annual Report. Management has represented that, in order to remediate this
material weakness, it has implemented additional review procedures over the
factors affecting infrequent or unusual business transactions, including
leases.
The Committee also reviewed its Charter and determined that no changes are
required to the Charter.
Based on the representations, reviews and discussions referred to above, the
Committee recommended to the Board of Managing Directors that the Fuel-Tech
N.V. 2004 audited consolidated financial statements be included in Fuel Tech's
Annual Report on Form 10-K for the year ended December 31, 2004 and filed with
the Securities and Exchange Commission.
By the Audit Committee:
M. Espinosa, Chairman
S. S. Khanachet, J. D. Morrow and T. S. Shaw
6
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Stock as of April 4, 2005 by (i) each person known to own
beneficially more than five percent of the outstanding Common Stock; (ii) each
director or nominee of Fuel Tech; (iii) the Named Executive Officers; and (iv)
all directors and executive officers as a group.
NAME AND ADDRESS(1) NO. OF SHARES(2) PERCENTAGE(3)
- ------------------- ---------------- -------------
Beneficial Owners
Adams Harkness Asset Management/Winslow
Management Company........................ 1,995,900 10.0%
Heartland Advisors, Inc. ................... 1,000,000 5.0%
J. Rothschild Capital Management Limited ... 1,028,882 5.2%
Morgens, Waterfall, Vintiadis & Co., Inc. .. 1,000,000 5.0%
Directors and Named
Executive Officers
Vincent M. Albanese (4) .................... 178,750 *
Steven C. Argabright (4) ................... 345,250 1.7%
Douglas G. Bailey (4) ...................... 1,665,792 7.9%
Ralph E. Bailey (4) ........................ 4,720,000 23.7%
Stephen P. Brady (4) ....................... 148,750 *
Miguel Espinosa (4) ........................ 31,500 *
Charles W. Grinnell (4) .................... 95,364 *
Thomas L. Jones ............................ -- --
Samer S. Khanachet (4) ..................... 30,000 *
John D. Morrow (4) ......................... 13,000 *
Nolan R. Schwartz (4) ...................... 385,000 1.9%
Thomas S. Shaw (4) ......................... 40,000 *
All Directors and Officers as a Group (14
persons)(4)............................... 7,815,406 39.3%
- ---------------
* Less than one percent (1.0%)
(1) The address of Adams Harkness Asset Management/Winslow Management Company
is 99 High Street, Boston, MA 02110; of Heartland Advisors, Inc. is 789
North Water Street, Suite 500, Milwaukee, WI 53202; of Morgens, Waterfall,
Vintiadis & Co., Inc. is 10 East 50th Street, New York, NY 10022; of J.
Rothschild Capital Management Limited is 27 St. James's Place, London,
England SW1A 1NR and of each of the above management beneficial owners is
c/o Fuel Tech, Inc., 695 East Main Street, Stamford, Connecticut 06901.
(2) In addition to the shares indicated above for Morgens, Waterfall, Vintiadis
& Co., Inc., 25,000 shares are held by a partner of that firm. Mr. Bailey
holds 100% of the investment control of the shares indicated for him and
4,650,000 of those shares are owned by a family limited liability company
of which Mr. Bailey and his spouse are each Managers and own 50% of the
interests. Except for 4,000 of the shares indicated for Mr. Argabright,
which are owned by his spouse, the owners of all of the other shares
indicated are believed by Fuel Tech to have sole ownership and investment
control of such shares.
(3) The percentages in each case are of the outstanding common at April 4, 2005
and all warrants or options exercisable within 60 days thereafter.
(4) Includes shares subject to options and warrants exercisable presently and
within 60 days for Mr. Albanese, 175,000 shares; Mr. Argabright, 326,250
shares; Mr. D. G. Bailey, 1,310,000 shares; Mr. R. E. Bailey, 70,000
shares; Mr. Brady, 138,750 shares;Mr. Espinosa 30,000 shares, Mr. Grinnell,
69,275 shares; Mr. Khanachet, 30,000 shares; Mr. Morrow, 10,000 shares;
Mr. Schwartz, 360,000 shares; Mr. Shaw, 40,000 shares; and, for all
Directors and Officers as a group, 2,680,525 shares. These amounts do not
include 147,000 shares owned by Morrow family trusts, as to which Mr. Morrow
disclaims beneficial ownership. Also, the amounts do not include for Mr. R.
E. Bailey 30,319 Units accrued at December 31, 2004 under the Directors
Deferred Compensation Plan.
7
EXECUTIVE COMPENSATION
The table below sets forth for the calendar years ending December 31, 2004,
2003 and 2002, the compensation of Fuel Tech's Chief Executive Officer and the
five most highly compensated executive officers of Fuel Tech during the
calendar year 2004.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
SHARES
ANNUAL COMPENSATION UNDERLYING
------------------------------------ OPTIONS
OTHER GRANTED ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION (#)(3) COMPENSATION(4)
- --------------------------- ---- --------- -------- ------------ ------------ ---------------
Vincent M. Albanese .............................. 2004 $180,732 -- -- 30,000 $ 7,377
Senior Vice President 2003 169,432 -- -- 25,000 7,901
2002 166,000 $19,260 -- 20,000 9,331
Steven C. Argabright ............................. 2004 $250,000 -- -- 50,000 $ 8,222
President and Chief 2003 225,000 -- -- 40,000 8,072
Operating Officer 2002 220,000 40,922 -- 35,000 10,544
Douglas G. Bailey ................................ 2004 $208,333 -- -- 15,000 $ 5,563
Deputy Chairman 2003 -- -- -- 40,000 --
2002 -- -- -- 10,000 --
Ralph E. Bailey .................................. 2004 -- -- -- 10,000 $ 29,600
Chairman and Chief 2003 -- -- -- 10,000 24,000
Executive Officer 2002 -- -- -- 10,000 19,933
Stephen P. Brady ................................. 2004 $182,300 -- -- 40,000 $ 7,608
Senior Vice President 2003 180,049 -- -- 25,000 8,041
2002 168,800 19,188 -- 25,000 9,779
Nolan R. Schwartz ................................ 2004 $200,000 -- -- 20,000 $ 5,500
Vice President 2003 -- -- -- 30,000 --
2002 -- -- -- 10,000 --
- ---------------
(1) Mr. R. E. Bailey is not an employee of Fuel Tech or of Fuel Tech, Inc.
Mr. D. G. Bailey and Mr. Schwartz became employees of Fuel Tech, Inc. on
January 1, 2004. Effective September 1, 2004, Mr. D. G. Bailey became
President and CEO of Atlantis Components, Inc. and reduced thereafter his
services to Fuel Tech to two days per week at which time his $275,000
annual salary was reduced to $75,000.
(2) Bonus payments were pursuant to Fuel Tech's Management Incentive Program
("MIP").
(3) With the exception of Non-Qualified Stock Options granted to Mr. R. E.
Bailey in 2004, 2003 and 2002 and to Mr. D. G. Bailey in 2003 and 2002, the
options granted were Incentive Stock Options.
(4) The amounts designated as "All Other Compensation" were, for Mr. R. E.
Bailey, directors' fees which for 2004, 2003 and 2002, respectively, were
deferred under the Directors' Deferred Compensation Plan as 5,126, 5,839
and 4,225 Units; the amounts for Messrs. Albanese, Argabright, D. G.
Bailey, Brady and Schwartz were company profit sharing and matching
contributions to the Fuel Tech, Inc. 401(k) Plan.
DIRECTORS' COMPENSATION
Directors employed by Fuel Tech or its subsidiaries receive no compensation
for their service as directors.
Non-executive directors of Fuel Tech or of Fuel Tech, Inc. receive annual
cash retainers and meeting fees. The annual retainers, payable in arrears, are
$15,000 for board service and $2,000 for service as a committee chairman.
Meeting fees are $1,200 for a board meeting or otherwise for a day of service
as a director and
8
requested by the Chairman and $600 for a committee meeting. Under the
Directors' Deferred Compensation Plan, non-executive directors are entitled to
defer fees in either cash with interest or share equivalent "Units" until
fixed dates, including the date of retirement from the Board, when the
deferred amounts will be distributed in cash.
Under Fuel Tech's 1993 Incentive Plan, each non-executive director of Fuel
Tech or of Fuel Tech, Inc. is awarded as of the first business day following
the annual meeting, a non-qualified stock option for 10,000 shares of Fuel
Tech common for a term of 10 years vesting immediately. Such 10,000 share
options were awarded to Messrs. R. E. Bailey, Espinosa, Khanachet, Morrow and
Shaw effective June 3, 2004 at the exercise price of $4.565 per share.
INDEMNIFICATION AND INSURANCE
Under the Fuel Tech Articles of Association, indemnification is afforded
Fuel Tech's directors and executive officers to the fullest extent permitted
by the laws of the Netherlands Antilles. Such indemnification also includes
payment of any costs which an indemnitee incurs because of claims against the
indemnitee. Fuel Tech is, however, not obligated to provide indemnity and
costs where it is adjudicated that the indemnitee did not act in good faith in
the reasonable belief that the indemnitee's actions were in the best interests
of Fuel Tech, or, in the case of a settlement of a claim, such determination
is made by the Board of Directors of Fuel Tech.
Fuel Tech carries insurance providing indemnification, under certain
circumstances, to all of its subsidiaries' directors and officers for claims
against them by reason of, among other things, any act or failure to act in
their capacities as directors or officers. The current annual premium for this
policy is $230,000.
No payments have been made for such indemnification to any past or present
director or officer by Fuel Tech or under any insurance policy.
OPTION GRANTS IN THE LAST FISCAL YEAR (1)
TO NAMED EXECUTIVE OFFICERS
POTENTIAL
REALIZABLE
VALUE OF ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SHARES OPTIONS STOCK
UNDERLYING GRANTED TO EXERCISE OR PRICE
NAME OPTIONS EMPLOYEES IN BASE PRICE APPRECIATION FOR
---- GRANTED (#) 2004 ($/SH) EXPIRATION DATE OPTION TERM
----------- ------------ ----------- --------------- -----------------
5% 10%
------- -------
Vincent M. Albanese ........................... 30,000 8.37% $ 4.68 12/7/14 88,297 223,761
Steven C. Argabright .......................... 50,000 13.96% $ 4.68 12/7/14 147,161 372,936
Douglas G. Bailey ............................. 15,000 4.18% $ 4.68 12/7/14 44,148 111,881
Ralph E. Bailey ............................... 10,000 2.79% $4.565 6/4/14 28,709 72,750
Stephen P. Brady .............................. 40,000 11.17% $ 4.68 12/7/14 117,729 298,349
Nolan R. Schwartz ............................. 20,000 5.58% $ 4.68 12/7/14 58,865 149,174
- ---------------
(1) Except the options granted to Mr. R. E. Bailey which are immediately
exercisable, 50% of the above stock option awards are first exercisable on
the second anniversary of grant and 25% of the awards on each of the third
and fourth anniversaries of grant. Fuel Tech has not historically and did
not in 2004 grant stock appreciation rights.
9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
OF NAMED EXECUTIVE OFFICERS
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ON VALUE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
NAME EXERCISE REALIZED YEAR-END AT FISCAL YEAR-END
- ---- -------- -------- --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Vincent M. Albanese .......................... -- -- 163,750 71,250 423,933 41,563
Steven C. Argabright ......................... -- -- 305,000 120,000 797,275 74,425
Douglas G. Bailey ............................ -- -- 60,000 55,000 95,600 34,800
Ralph E. Bailey .............................. -- -- 70,000 -- 96,650 --
Stephen P. Brady ............................. -- -- 142,500 87,500 368,350 53,450
Nolan R. Schwartz ............................ -- -- 60,000 50,000 95,600 26,100
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
Fuel Tech's executive compensation policies are to pay competitive salaries
and annual incentive compensation, if earned, and to grant stock option awards
in appropriate amounts. Competitive salaries are based on Management's
knowledge of market conditions supplemented by salary surveys as well as the
position of each employee within the business, and historical practice.
Incentive compensation, intended to encourage performance, may be in the form
of discretionary bonuses or participation by managers in the Fuel Tech, Inc.
Management Incentive Program ("MIP"). Company stock option awards are made to
provide a long-term incentive to employees and to create a common interest
between the employees and its shareholders generally.
COMPENSATION OF EXECUTIVE OFFICERS -- 2004
The key components of Fuel Tech's executive compensation program during the
last fiscal year were base salary and stock option awards under the 1993 Plan
in the amounts shown above under the caption "Executive Compensation." Base
salaries are fixed by the Board in its discretion based upon historical
levels, performance, ranking within the officer group, amounts being paid by
comparable companies, and Fuel Tech's financial position. Incentive
compensation awards, when earned, are based upon Fuel Tech's achievement of a
minimum level of performance under an annual profit plan and the individual
officer's allocated percentage of an amount determined by the Board to be the
MIP "pool," if minimum financial performance target is achieved. Such
performance was not achieved in 2004 and, accordingly, no 2004 awards were
made. The stock options are designed to provide additional incentives to
executive officers to maximize stockholder value. Through the use of vesting
periods, the option program encourages executives to remain in the employ of
Fuel Tech. In addition, because the exercise prices of such options are set at
the fair market value of the stock on the date of grant of the option,
executives can only benefit from such options if the trading price of Fuel
Tech's shares increases, thus aligning their financial interests with those of
the shareholders.
COMPENSATION OF CHIEF EXECUTIVE OFFICER - 2004
The Chairman and Chief Executive Officer, Ralph E. Bailey, is not an
employee of Fuel Tech or of Fuel Tech, Inc. and received directors' fees and
stock option awards for service in his capacity as a director only.
In 2004, Mr. Argabright, President and Chief Operating Officer of Fuel Tech,
Inc., was paid a competitive base salary. A significant portion of
Mr. Argabright's annual compensation in 2004 was to be based on incentive
10
compensation with a maximum target percentage of 40% of base salary, under the
2004 MIP formula. Because Fuel Tech did not achieve its minimum financial
performance target in 2004, Mr. Argabright did not receive an incentive
compensation award for that year. Mr. Argabright was awarded a stock option
effective December 7, 2004 for 50,000 shares at the exercise price of $4.68
per share.
By the Compensation and Nominating Committee
T. S. Shaw, Chairman
M. Espinosa
S. S. Khanachet
J. D. Morrow
This compensation report and the following performance graph shall not be
deemed incorporated by reference into any filing by Fuel Tech under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent Fuel Tech specifically incorporates such report.
PERFORMANCE GRAPH
The following line graph compares (i) Fuel Tech's total return to
shareholders per share of Common Stock for the five years ended December 31,
2004 to that of (ii) the Russell 2000 index, and (iii) the Dow Jones Pollution
Control Index for the period December 31, 1999 through December 31, 2004.
[LINE CHART OMITTED]
------------------------------------------------------------------
Performance Graph - Actual Values
------------------------------------------------------------------
FTEK Russell 2000 Dow Jones Pol. Cont.
------------------------------------------------------------------
12/31/99 2.19 504.75 50.34
12/29/00 1.69 483.53 70.66
12/31/01 6.05 488.50 79.23
12/31/02 4.19 383.09 62.19
12/31/03 3.55 556.91 82.56
12/31/04 4.67 651.57 84.03
------------------------------------------------------------------
11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIPS WITH AMERICAN BAILEY CORPORATION
Ralph E. Bailey is Chairman and Douglas G. Bailey is President and CEO of
ABC; both are directors and shareholders of ABC. ABC is a sub-lessee under
Fuel Tech's January 29, 2004 lease of its executive offices. The lease expires
in 2010. In 2004, ABC paid or reimbursed Fuel Tech $14,000 for rent and
certain lease related and administrative expenses.
CLEAN DIESEL TECHNOLOGIES, INC. MANAGEMENT SERVICES AGREEMENT
Under an August 3, 1995 Management and Services Agreement with Clean Diesel
Technologies, Inc. ("CDT"), $70,000, $69,000 and $69,000 was paid to Fuel
Tech, Inc. in 2004, 2003 and 2002 by CDT as reimbursement principally for
legal services provided to CDT by Mr. Grinnell, an employee of Fuel Tech, Inc.
and Managing Director of Fuel Tech and a Director and Officer of CDT. Fuel
Tech has a 10.6% equity ownership interest in CDT's issued and outstanding
shares. Mr. Grinnell will recuse himself from consideration of any
transactions between Fuel Tech and Clean Diesel that may be, or may appear to
be, material to either Company.
EMPLOYMENT AGREEMENTS
Messrs. Albanese, Argabright, D.G. Bailey, Brady and Schwartz have
employment agreements with Fuel Tech, Inc. effective March 30, 1998 for
Mr. Albanese, February 6, 1998 for Mr. Argabright, February 1, 1998 for
Mr. Brady and January 1, 2004 for Mr. D. G. Bailey and Mr. Schwartz. These
agreements are for indefinite terms, provide for disclosure and assignment of
inventions to Fuel Tech, Inc., 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.
GENERAL
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Fuel Tech believes that all reports required to be filed under Section 16(a)
of the Securities and Exchange Act of 1934 for the year 2004 were timely filed
except that a Form 4 due December 31, 2004 for Mr. R. E. Bailey was filed
January 3, 2005; Form 4's due December 9, 2004 for Messrs. Albanese,
Argabright, Arnone, D. G. Bailey, Brady, Schwartz and Sun were filed
December 16, 2004 and, for Mr. Grinnell, December 11, 2004; and Form 4's due
June 7, 2004 for Messrs. R. E. Bailey, Espinosa, Morrow and Shaw were filed on
December 16, 2004 and, for Mr. Khanachet, December 17, 2004.
OTHER BUSINESS
Management knows of no other matters that may properly be, or are likely to
be, brought before the meeting other than those described in this proxy
statement.
SHAREHOLDER PROPOSALS
If other proper matters are introduced at the Meeting, the individuals named
as Proxies on the enclosed Proxy Card will vote in their discretion the shares
represented by the Proxy Card. In order to be presented for action at the
Meeting, such matters must, under the Articles of Fuel Tech, be in writing and
received by the Board of Managing Directors at the above address of Fuel Tech
or to the Secretary at Fuel Tech, Inc., 695 East Main Street, Stamford, CT,
06901 USA not later than the close of business on Friday, May 20, 2005 in
order to be presented for consideration at the Meeting.
Proposals of shareholders intended for inclusion in the proxy statement and
proxy to be mailed to all shareholders entitled to vote at the Annual General
Meeting of Shareholders to be held in the year 2006 must be received in
writing addressed to the Board of Directors at the above address of Fuel Tech
or to the Secretary at Fuel Tech, Inc., 695 East Main Street, Stamford CT
06901 USA on or before January 4, 2006 and, if not received by such date, may
be excluded from the proxy materials.
12
COMMUNICATIONS WITH THE BOARD OF MANAGING DIRECTORS
Any shareholder desiring to send a communication to the Board of Managing
Directors, or any individual Managing Director, may forward such communication
to the Corporate Secretary to the address provided above for shareholder
proposals. Under procedures fixed from time to time by the independent
directors, the Corporate Secretary will collect and organize all such
communications and forward them to the Board or individual Managing Director.
FUEL-TECH N.V.
Charles W. Grinnell
Secretary
April 21, 2005
13
PROXY PROXY
SOLICITED BY THE BOARD OF MANAGING DIRECTORS
FUEL-TECH N.V.
ANNUAL MEETING OF SHAREHOLDERS - JUNE 2, 2005
The undersigned hereby appoints Ralph E. Bailey, Charles W. Grinnell or
Tarma Trust Management N.V., acting singly, with full power of substitution,
proxies for the undersigned and authorizes them to represent and vote, as
designated on the reverse side, all of the shares of Common Stock of Fuel-Tech
N.V. (the "Company") which the undersigned may be entitled to vote at the Annual
Meeting of Shareholders of the Company to be held at the office of the Company,
Castorweg 22-24, Curacao, Netherlands Antilles, at 10:00 a.m. on Thursday, June
2, 2005, and at any adjournments or postponements of the meeting, for the
approval of the agenda items set forth below and with discretionary authority as
to any other matters that may properly come before the meeting, all in
accordance with and as described in the Notice of Meeting and accompanying Proxy
Statement. The Board of Directors recommends a vote for election as Managing
Director of each of the nominees and of each other agenda item, and, if no
direction is given, this proxy will be voted for all nominees and for such other
items.
IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE
Fold and Detach Here.
1.
To approve the Annual Report of Management and Financial
Statements of the Company for the year ended December 31, 2004.
FOR AGAINST ABSTAIN
2.
To approve the election as Managing Directors of Douglas G.
Bailey, Ralph E. Bailey, Miguel Espinosa, Charles W. Grinnell, Thomas
L. Jones, Samer S. Khanachet, John D. Morrow, and Thomas S. Shaw.
FOR all nominees WITHHOLD
listed above (except AUTHORITY
as marked to the to vote for all
contrary) nominees listed above
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.)
- --------------------------------------------------------------------------------
3.
To ratify the appointment of Ernst & Young LLP as the
independent auditors for the year 2005.
FOR AGAINST ABSTAIN
Dated ____________________, 2005
--------------------------------
(Signature of Shareholder)
Please sign exactly as name
appears. If acting as
attorney, executor, trustee
or in other representative
capacity, insert name and
title.