UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant (X) Filed by a Party other than the
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CLEAN DIESEL TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)
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CLEAN DIESEL TECHNOLOGIES, INC.
300 ATLANTIC STREET, SUITE 702
STAMFORD CT 06901
__________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 2003
__________________________
To the Stockholders of Clean Diesel Technologies, Inc.:
The Annual Meeting (the "Meeting") of Stockholders of Clean Diesel
Technologies, Inc., a Delaware corporation (the "Company"), will be held
Wednesday, June 11, 2003, at the Sofitel St. James London Hotel, 6 Waterloo
Place, London SW1Y 4AN U.K. at 11:00 a.m. to consider and act upon the following
matters, each of which is explained more fully in the following Proxy Statement.
A proxy card for your use in voting on these matters is also enclosed.
1. To elect five (5) directors;
2. To ratify the reappointment of Ernst & Young LLP as independent
auditors for the year 2003; and
3. To transact any other business that may properly come before the
meeting or any adjournment thereof.
Only holders of Common Stock of record at the close of business on April
15, 2003 are entitled to notice of and to vote at the Meeting. The presence in
person or by proxy of stockholders entitled to cast a majority of the total
number of votes which may be cast shall constitute a quorum for the transaction
of business at the Meeting.
The Company's Annual Report for 2002 is enclosed with this Notice of
Meeting and Proxy Statement.
By Order of the Board of Directors
Charles W. Grinnell
Secretary
Stamford, Connecticut
April 21, 2003
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 OR VOTING
INSTRUCTION FORM TO THE SENDER IN THE ENCLOSED RETURN ENVELOPE.
FOR INTERNET VOTING, PLEASE REFER TO THE INSTRUCTIONS ON THE PROXY CARD OR THE
VOTING INSTRUCTION FORM.
CLEAN DIESEL TECHNOLOGIES, INC.
__________________________
PROXY STATEMENT
__________________________
The enclosed proxy is solicited by the Board of Directors (the "Board") of
Clean Diesel Technologies, Inc., a Delaware corporation (the "Company"), in
connection with the Annual Meeting of Stockholders of the Company (the
"Meeting") to be held at the Sofitel St. James London Hotel, 6 Waterloo Place,
London SW1Y 4AN U.K., on Wednesday, June 11, 2003, at 11:00 a.m. and at any
adjournments thereof.
The record date with respect to this solicitation is April 15, 2003. All
holders of the Company's common shares, $.05 par, as of the close of business on
that date are entitled to vote at the Meeting. The common shares are the only
outstanding securities of the Company. According to the records of the Company's
transfer agent, as of the record date the Company had 11,968,387 common shares
outstanding and eligible to vote. A stockholders list as of the record date is
available for inspection at the office of the Company set out in the Notice of
Meeting and will be available for inspection at the Meeting.
The quorum for the Meeting is that number of common shares representing a
majority of the votes entitled to be cast. Each stockholder is entitled as of
the record date to cast one vote per common share held.
A proxy may be revoked by a stockholder at any time prior to its being
voted. If a proxy is properly signed and not revoked by the stockholder, the
shares it represents will be voted at the Meeting in accordance with the
instructions of the stockholder. Abstentions and broker non-votes are counted 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 accordance with the recommendations of the Board.
Members of the Board and Executive Officers of the Company may solicit
stockholders' proxies. The Company shall bear the cost of proxy solicitation, if
any.
The Company's Annual Report to Stockholders, containing financial
statements reflecting the financial position and results of operations of the
Company for 2002 (the "Financial Statements"), and this Proxy Statement were
distributed together commencing in the week of April 28, 2003.
ELECTION OF DIRECTORS
The Board proposes the election of five directors. The term of office of
each director is until the 2004 Annual Meeting or until a successor shall have
been duly elected or the director shall sooner resign, retire or be removed.
John A. de Havilland, Derek R. Gray, Charles W. Grinnell, Jeremy D. Peter-Hoblyn
and James M. Valentine, who are each incumbent directors, are the management
nominees for election as directors of the Company. Each of the nominees has
consented to act as a director, if elected. Should one or more of these nominees
become unavailable to accept nomination or election as a director, votes will be
cast for a substitute nominee, if any, designated by the Board. If no substitute
nominee is designated prior to the election, the individuals named as proxies on
the enclosed proxy card will exercise their judgment in voting the shares that
they represent, unless the Board reduces the number of directors.
THE AFFIRMATIVE VOTE OF A PLURALITY OF THE AGGREGATE VOTES CAST OF THE
STOCKHOLDERS VOTING SHALL ELECT THE NOMINEES AS DIRECTORS. THE COMPANY
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 directors of the Company.
Name Age Director Since
---- --- --------------
John A. de Havilland 65 1994
Derek R. Gray 69 1998
Charles W. Grinnell 66 1994
Jeremy D. Peter-Hoblyn 63 1994
James M. Valentine 49 1994
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
JOHN A. DE HAVILLAND has been a director of the Company since its
inception. Mr. de Havilland was a director of J. Henry Schroder Wagg & Co.
Ltd., a merchant bank, from 1972 until his retirement in 1989. Except for the
period of April through December 1998, Mr. de Havilland was a Managing Director
of Fuel-Tech N.V., a pollution control company, from 1987 through March 1, 2002.
DEREK R. GRAY has been a director of the Company since 1998. Mr. Gray has
been Managing Director of S G Associates Limited, a United Kingdom fiscal
advisory firm since 1971 and a director of Velcro Industries N.V., a
manufacturing company, since 1974.
CHARLES W. GRINNELL has been Vice President, General Counsel and Corporate
Secretary of the Company since its inception and has held the same positions
with Fuel-Tech N.V. since 1987. Mr. Grinnell, a Managing Director of Fuel-Tech
N.V., is engaged in the private practice of corporate law in Stamford,
Connecticut.
JEREMY D. PETER-HOBLYN has been the President and Chief Executive Officer
of the Company since its inception until March 12, 2002, when he was appointed
Chairman and Chief Executive Officer. Mr. Peter-Hoblyn was a Managing Director
of Fuel-Tech N.V. from 1987 through March 1, 2002.
DAVID W. WHITWELL, 37, has served as Vice President, Chief Financial
Officer and Treasurer of the Company since 1999. Mr. Whitwell had previously
been Vice President and Chief Financial Officer of Primedia, Inc.'s Special
Interest Magazine Division since 1996 and prior to that position had been
Manager of Planning and Analysis at the Health Care Products Division of
Schering Plough, Inc. since 1991.
JAMES M. VALENTINE has been Executive Vice President and Chief Operating
Officer of the Company since its inception until March 12, 2002, when he was
appointed President and Chief Operating Officer. From the period 1990 through
1993, Mr. Valentine was the head of his own energy and environmental consulting
firm. Mr. Valentine was a Managing Director of Fuel-Tech N.V. from 1993 through
March 1, 2002.
There are no family relationships between any of the directors or executive
officers. Please also see the text below under the captions "Certain
Relationships and Related Transactions."
COMMITTEES OF THE BOARD
The standing Committees of the Board are an Audit Committee and a
Compensation Committee. Messrs. Gray, de Havilland and Peter-Hoblyn are members
of both committees. Mr. Gray is Chairman of the Audit Committee and Mr. de
Havilland is Chairman of the Compensation Committee. Mr. Gray and Mr. de
Havilland are independent directors. Mr. Peter-Hoblyn is an ex officio member of
these committees and as such does not vote or attend executive sessions of the
Committees.
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
Charter of the Audit Committee, as amended, is included as Schedule I to this
proxy statement.
In the opinion of the Board each of the voting members of the Audit
Committee has both business experience and an understanding of generally
accepted accounting principles and financial statements enabling them to
effectively discharge their responsibilities as members of that Committee.
Moreover, the Board has determined that Mr. Gray is a Financial Expert within
the meaning of Securities and Exchange Commission regulations. In making this
determination the Board considered Mr. Gray's formal training and long
experience in accounting and auditing and his former service for many years as
the Chairman of the Audit Committee of another reporting Company under the
Securities Exchange Act.
The Compensation Committee is responsible for establishing executive
compensation and administering the Company's Incentive Compensation Plan.
MEETINGS
During 2002 there were five meetings of the Board of Directors of the
Company, one meeting of the Compensation Committee, and two meetings of the
Audit Committee. Each director of the Company attended at least 75% of Board
and committee meetings of which he was a member during 2002.
INDEMNIFICATION
Under the Certificate of Incorporation of the Company, indemnification is
afforded the Company's directors and executive officers to the fullest extent
permitted by the provisions of the General Corporation Law of the State of
Delaware. Such indemnification also includes payment of any costs which an
indemnitee incurs because of claims against the indemnitee. The Company 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 the Company, or, in the case
of a settlement of a claim, such determination is made by the Board of Directors
of the Company.
The Company carries insurance providing indemnification, under certain
circumstances, to all of its 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 annual premium for this policy is $82,500. No sums
have been paid for such indemnification to any past or present director or
officer by the Company or under any insurance policy.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee has reappointed the firm of Ernst & Young LLP,
Certified Public Accountants ("Ernst & Young"), to be the Company's independent
auditors for the year 2003 and submits that reappointment to stockholders for
ratification. Ernst & Young has served in that capacity since 1994. A
representative of Ernst & Young is not expected to be present at the London
Meeting.
AUDIT FEES
In 2002, Ernst & Young accepted $62,000 for fees for professional services
for the audit of the Company's 2002 financial statements and the reviews of the
Company's financial statements included in quarterly reports on Securities and
Exchange Commission Form 10-Q filed in 2002.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
In 2002, Ernst & Young did not perform any professional services for the
Company in connection with financial information systems design and
implementation.
ALL OTHER FEES
In 2002, Ernst & Young performed no non-audit services for the Company.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES VOTING IS REQUIRED FOR THE
APPROVAL OF THIS PROPOSAL. THE COMPANY RECOMMENDS A VOTE FOR THIS PROPOSAL.
REPORT OF THE AUDIT COMMITTEE
Management is responsible for the Company's internal controls and its
financial reporting. The independent auditors are responsible for performing an
audit of the Company's financial statements in accordance with auditing
standards generally accepted in the United States and for expressing an opinion
on those financial statements based on their audit. The Audit Committee reviews
these processes. In such context, the Committee has reviewed and discussed the
audited financial statements contained in the 2002 Annual Report on Form 10-K
with the Company's management and its independent auditors.
The Committee has 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 the
independent auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), as amended, and has discussed
with the independent auditors their independence. The Committee has also
considered whether the provision of the services described above under the
captions "Financial Information Systems Design and Implementation" and "All
Other Fees" is compatible with maintaining the independence of the independent
auditors.
Based on the review and discussions referred to above. The Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2002 filed with the Securities and Exchange Commission.
This report has been provided by the following members of the Audit
Committee: D. R. Gray, Chairman and J. A. de Havilland.
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of common stock as of April 15, 2003 by (i) each person known to the
Company to own beneficially more than three percent of the outstanding Common;
(ii) each director of the Company; (iii) the Named Executive Officers; and (iv)
all directors and executive officers as a group.
NAME AND ADDRESS(1) NO. OF SHARES(2)(3) PERCENTAGE(4)
--------------------------------- ------------------- -------------
Beneficial Owners-Common Stock
Fuel-Tech N.V.(2)(5) 1,849,972 15.4%
Waltham Forest Friendly Society 1,062,598 8.9%
Positive Securities Limited 1,100,554 9.2%
Cadogan Settled Estates
Shareholding Company Limited(5) 1,059,453 8.8%
Ruffer Investment management Ltd 700,000 5.8%
J.A. Kanis 414,400 3.5%
Management Owners
John A. de Havilland (2) 150,261 1.3%
Derek R. Gray (2) 405,835 3.4%
Charles W. Grinnell (2) 131,788 1.1%
Jeremy D. Peter-Hoblyn(2) 371,619 3.1%
James M. Valentine(2) 334,356 2.8%
David W. Whitwell(2) 165,695 1.4%
All Directors and Officers 1,564,587 13.1%
as a Group (6 persons)(2)
(1) The address of Fuel-Tech N.V. is Castorweg 22-24, Curacao, Netherlands
Antilles. The address of the other beneficial owners is c/o S G Associates
Limited, 45 Queen Anne Street, London W1G 9JF U.K. The address of the Management
Owners is c/o Clean Diesel Technologies, Inc., Suite 702, 300 Atlantic Street,
Stamford, Connecticut 06901.
(2) In addition to shares issued and outstanding, includes shares subject to
options or warrants exercisable within 60 days for Fuel-Tech N.V., 25,000
shares; Mr. Kanis, 10,000 shares; Mr. de Havilland, 133,817 shares; Mr. Gray,
146,008 shares; Mr. Grinnell, 116,584 shares; Mr. Peter-Hoblyn, 321,366 shares;
Mr. Valentine, 314,166 shares; Mr. Whitwell, 153,333 shares; and, for all
directors and officers as a group, 1,185,274 shares. The amount for Mr. de
Havilland and for directors and officers as a group does not include 23,599
shares owned by his adult children as to which he disclaims beneficial
ownership.
(3) To the knowledge of the Company the owners of all shares hold sole
beneficial ownership and investment power over the shares reported.
(4) The percentages are percentages of outstanding stock and have been
calculated by including, warrants and options exercisable within 60 days. In
addition 3% rather than 5% is presented in accordance with standard U.K.
practice due to the Company's listing on the Alternative Investment Market of
the London Stock Exchange.
(5) The shares indicated for Fuel-Tech N.V. include shares held by its
wholly-owned subsidiary, Platinum Plus Inc. Mr. de Havilland is a director of
Cadogan Settled Estates Shareholding Company Limited and disclaims beneficial
ownership of the shares held by that company.
EXECUTIVE COMPENSATION
The table below sets forth information concerning compensation for services
in all capacities awarded to, earned by or paid to Mr. Jeremy D. Peter-Hoblyn,
Chairman and Chief Executive Officer, Mr. David W. Whitwell, Vice President,
Treasurer and Chief Financial Officer and Mr. James M. Valentine, President and
Chief Operating Officer, during the fiscal years ended December 31, 2002, 2001
and 2000, the only executive officers of the Company who earned total
compensation in excess of $100,000 during fiscal year 2002 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
Annual Long-Term
------------------------- -----------
Shares
Underlying All
Options Other
Name and Principal Granted Compensation
Position Year Salary(1) Other(2) (#)(3) (4)
------------------------ ---- --------- -------- ----------- -------------
Jeremy Peter-Hoblyn 2002 289,600 50,000 100,000
Chairman and Chief 2001 247,500 50,000 60,000 -
Executive Officer 2000 240,000 50,000 75,000 -
David W. Whitwell 2002 184,300 - 80,000 5,375
Vice President and Chief 2001 159,167 - 40,000 4,775
Financial Officer 2000 130,000 - - 3,900
James M. Valentine 2002 289,100 100,000 9,500
President and Chief 2001 239,133 - 60,000 9,450
Operating Officer 2000 210,800 - 75,000 9,400
(1) For 2001 and 2000, $62,500 and $10,000, respectively, of Mr. Peter-Hoblyn's
salary was deferred until the Company attains gross annual revenues of $5
million.
(2)The amounts designated "Other" were amounts accrued for the premiums on an
annuity for Mr. Peter-Hoblyn.
(3) Options granted were Non-Qualified Stock Options without stock appreciation
rights.
(4) The amounts designated "All other" were Company matching 401(k) or profit
sharing contributions and auto allowance.
DIRECTORS' COMPENSATION
From April 1, 2002 the Company will provide an annual retainer of $30,000
plus associated expenses for directors who are not employees of the Company. The
Chairman of the Audit Committee receives an additional $10,000 for acting in
that capacity. Directors who are employees of the Company will receive no
compensation for their service as directors. Also for 2002, 13,276 shares of
restricted Common in lieu of cash were issued on account of Mr. Gray's
directors' fees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Peter-Hoblyn, Chief Executive Officer, is a non-voting ex-officio
member of the Compensation Committee.
OPTION GRANTS IN THE LAST FISCAL YEAR
TO NAMED EXECUTIVE OFFICERS
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE
SHARES OPTIONS VALUE OF ASSUMED
UNDERLYING GRANTED TO EXERCISE OR ANNUAL RATES OF STOCK
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRICE APPRECIATION
NAME GRANTED (#) 2001 ($/SH) DATE FOR OPTION TERM
---------------------- ----------- ------------- ------------ ------------ -----------------------------
5% 10%
-------------- --------------
Jeremy D. Peter-Hoblyn 100,000 24% $ 2.9 3/13/12 $ 182,379 $ 313,170
David W. Whitwell 80,000 17% $ 2.9 3/13/12 $ 145,904 $ 250,536
James M. Valentine 100,000 24% $ 2.9 3/13/12 $ 182,379 $ 313,170
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
OF NAMED EXECUTIVE OFFICERS
NUMBER OF NUMBER OF
SECURITIES SECURITIES VALUE OF VALUE OF
UNDERLYING UNDERLYING UNEXERCISED UNEXERCISED
UNEXERCISED UNEXERCISED IN-THE-MONEY IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT OPTIONS AT OPTIONS AT
ACQUIRED FISCAL YEAR FISCAL FISCAL FISCAL
ON VALUE END/ YEAR-END/ YEAR-END/ YEAR-END/
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------- -------- -------- ----------- ------------- ------------- --------------
Jeremy D. Peter-Hoblyn - - 321,366 33,334 $ 36,000 $ 0
David W. Whitwell - - 153,333 26,667 $ 0 $ 0
James M. Valentine - - 321,366 33,334 $ 36,000 $ 0
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION POLICIES
Compensation for executives is based on the philosophy that compensation
must (a) be competitive with other businesses to attract, motivate and retain
the talent needed to lead and grow the Company's business, (b) be linked to the
Company's needs for strong entrepreneurial skills to commercialize and promote
its products, (c) encourage executive officers to build their holdings of the
Company's stock to align their goals with those of the stockholders and (d) to
conserve cash.
COMPENSATION OF EXECUTIVE OFFICERS - 2002
The key components of the Company's executive compensation program during
the last fiscal year were base salary and non qualified stock option awards
under the 1994 Plan. The cash based portion of compensation is fixed by the
Board in its discretion based upon historical levels, performance, ranking
within the officer group, amounts being paid by comparable companies and the
Company's financial position. 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 the Company. 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
the Company's shares increases, thus aligning their financial interests with
those of the stockholders. Finally, stock options minimize the Company's cash
compensation requirements.
COMPENSATION OF CHIEF EXECUTIVE OFFICER - 2002
The compensation of the Chief Executive Officer, Mr. Peter-Hoblyn, in 2002
was made up of base salary and stock options. (See the Summary Compensation
Table above.) An accrual on account of an annuity to be purchased was also
provided. The amount of base salary was fixed in 2002 in the overall business
judgment of the Board considering the proper competitive level of salary to be
paid in view of the Company's position and salaries paid by comparable
companies. Also, in 2002 Mr. Peter-Hoblyn was awarded an incentive stock option
for 100,000 shares under the Plan in accordance with the Company's philosophy of
providing to management incentives aligned with the interests of the
stockholders.
Mr. Peter-Hoblyn's base salary for 2002 was raised to $300,000 effective
March 15, 2002.
This report has been provided by the following members of the Compensation
Committee of the Board of Directors of the Company: D. R. Gray and J. A. de
Havilland, Chairman.
PERFORMANCE GRAPH
The following line graph compares (i) the Company's cumulative total return to
stockholders per share of Common Stock for the five year period ending December
31, 2002 to that of (ii) the Russell 2000 index and (iii) the Standard and
Poor's 1500 Supercomposite Specialty Chemicals Index.
[GRAPHIC OMITTED]
S&P 1500
Supercomposite
Specialty
Russell 2000 Chemicals Index CDT
------------- ---------------- -------
12/29/1995 $ 100.00 $ 100.00 $100.00
12/31/1996 $ 114.76 $ 109.80 $ 34.00
12/31/1997 $ 138.31 $ 129.66 $ 34.86
12/31/1998 $ 133.54 $ 112.64 $ 16.07
12/31/1999 $ 159.75 $ 114.58 $ 25.00
12/31/2000 $ 153.03 $ 103.43 $ 13.43
12/31/2001 $ 154.60 $ 113.39 $ 30.71
12/31/2002 $ 121.24 $ 112.45 $ 21.43
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EMPLOYMENT AGREEMENTS
Messrs. Peter-Hoblyn, Whitwell and Valentine have employment agreements
with the Company, effective August 1, 1995 for Messrs. Peter-Hoblyn and
Valentine, and March 1, 2001 for Mr. Whitwell. These agreements are for
indefinite terms. If canceled by the Company under circumstances that are "at
will" as defined in the agreements, the Company shall continue the employee's
then base salary and benefits until the employee finds other comparable
employment but not for a period in excess of one year for Messrs. Peter-Hoblyn
and Valentine and nine months for Mr. Whitwell. The agreements also contain
provisions relating to the employees' obligations to maintain the
confidentiality of the Company's proprietary information and to protect such
information from competitors and to assign certain inventions to the Company.
MANAGEMENT AND SERVICES AGREEMENT
Effective July 1995 and amended June 1996, the Company and Fuel Tech, Inc.,
a wholly-owned subsidiary of Fuel-Tech N.V., have entered into a Management and
Services Agreement (the "Services Agreement") under which Fuel Tech Inc.'s
corporate staff provide certain administrative services. The Company is assessed
fees of 3% of the Company's fixed reimbursable costs for these services. The
Services Agreement may be canceled by either party on or before May 15 in any
year. The fee may be changed by mutual agreement of the Company and Fuel Tech,
Inc. In 2002 a total of $69,000 was paid by the Company to Fuel Tech, Inc. on
account of reimbursable costs and the fee, of which costs $67,000 was for legal
services provided by Mr. Grinnell, who is an employee of Fuel Tech, Inc. and a
director both of the Company and Fuel-Tech N.V. Mr. Grinnell will recuse
himself from consideration of any transactions that may be, or may appear to be,
material to either company.
TECHNOLOGY ASSIGNMENTS
The Company's technology is comprised of patents, patent applications,
trade or service marks, data and know-how. A substantial portion of this
technology is held under assignments of technology from Fuel Tech, Inc. and Fuel
Tech affiliates. The assignments provide for running royalties payable to Fuel
Tech, Inc. commencing in 1998 of 2.5% of gross revenues derived from platinum
fuel catalysts. The Company paid royalties of $800 to Fuel Tech, Inc. under
these assignments in 2002. The Company may at any time terminate the royalty
obligation by payment to Fuel Tech, Inc. in any year from 2003 through 2008 of
amounts, depending on the year, declining from $6,545,455 in 2003 to $1,090,910
in 2008.
GENERAL
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that all officers and directors of the Company were in
timely compliance in 2002 with filing requirements relating to beneficial
ownership reports under Section 16(a) of the Securities Exchange Act of 1934.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement and
proxy to be mailed to all stockholders entitled to vote at the 2004 Annual
Meeting of Stockholders of the Company must be received in writing at the above
address of the Company on or before December 22, 2003 and, if received
thereafter, may be excluded by the Company.
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.
By Order of the Board of Directors
Charles W. Grinnell
Secretary
Stamford Connecticut
April 21, 2003
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, 2002, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. ALL SUCH REQUESTS SHOULD BE DIRECTED TO THE UNDERSIGNED AT
THE ABOVE ADDRESS OF THE COMPANY.
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. STOCKHOLDERS
ARE CAUTIONED THAT ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING THOSE DETAILED IN THE COMPANY'S FILINGS WITH THE
SECURITIES EXCHANGE COMMISSION AND ALSO SET OUT UNDER THE CAPTION "RISK FACTORS"
IN THE ANNUAL REPORT ACCOMPANYING THIS PROXY STATEMENT.
Schedule I
CLEAN DIESEL TECHNOLOGIES, INC.
Audit Committee of the Board of Directors
Charter
(As Amended March 13, 2003)
The Board of Directors (the "Board") of Clean Diesel Technologies, Inc. (the
"Company") has established from among its members an Audit Committee (the
"Committee") with the composition, responsibilities and duties described below:
Composition
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The Committee shall be comprised of not less than that number of independent
directors and Financial Experts as shall satisfy applicable law and regulations
and the requirements of any stock exchange on which the Company may be listed
from time to time. "Ex Officio" members of the Committee shall not be included
in the number of required independent directors or financial experts, shall not
attend executive sessions of the Committee and shall not vote. Appointment to
the Committee or designation as a Financial Expert is not intended and shall not
be construed as imposing on the appointee or designee a higher degree of
individual responsibility, obligation, or liability or that the duties,
obligations or liabilities of the other directors, or members of the Committee,
are decreased because of such appointment or designation.
Responsibility
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The Committee's responsibility is to assist the Board in fulfilling its
fiduciary responsibilities as to accounting policies and reporting practices of
the Company. The Committee is authorized to retain and fix the compensation of
persons having a special competence as necessary to assist the Committee in
fulfilling such responsibility. Notwithstanding the terms of this Charter, it
shall not be the duty of the Committee to plan or conduct audits or to determine
that the Company's financial statements are complete and accurate and are in
accordance with generally accepted accounting principles, that being the
responsibility of Management and the Independent Accountant. The Independent
Accountant shall report directly to the Committee in connection with issuing an
audit report or related work.
Attendance
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At all meetings of the Committee two independent members, shall constitute a
quorum. As necessary, the Chairman of the Committee may request members of
Management and representatives of the Independent Accountant to be present at
meetings.
Minutes
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Minutes of the meetings of the Committee shall be prepared by the Corporate
Secretary, shall be sent to both Committee members and to directors who are not
Committee members and, after approval by the Committee, shall be kept with the
minutes of the meetings of the Board.
Duties & Responsibilities
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The Committee shall:
1. For purposes of issuing an audit report or related work, have sole authority
to appoint the Independent Accountant; oversee and evaluate the work of the
Independent Accountant; approve the compensation of the Independent Accountant;
review and approve in advance all matters concerning audit and non-audit
services proposed to be performed by the Independent Accountant; and review and
approve any discharge of the Independent Accountant.
2. Receive periodic written statements from the Independent Accountant regarding
its independence and delineating all relationships between it and the Company,
including fees for audit and non-audit services, consistent with applicable
Independence Standards Board Standards; discuss such statements with the
Independent Accountant to review in detail any disclosed relationship or service
that may impact the objectivity and independence of the Independent Accountant;
and, if the Committee shall so determine, take appropriate action to preserve
the independence of the Independent Accountant.
3. Review with Management and the Independent Accountant, prior to the annual
audit, the scope and general extent of the Independent Accountant's audit
examinations and, to the extent appropriate, the Independent Accountant's review
of the Company's interim financial statements.
4. Review with Management and the Independent Accountant, upon completion of the
annual audit, and prior to public release, the Company's financial results and
financial statements for the year proposed for inclusion in the Company's report
to the Securities and Exchange Commission on Form 10-K and annual report to
stockholders (the "Annual Reports"). Discuss with the Independent Accountant
matters required to be discussed by applicable Statements on Auditing Standards
and the applicable requirements of law and regulations relating to the annual
audit.
5. Review with Management and the Independent Accountant the Company's policies
and procedures, as appropriate, to reasonably assess the adequacy of internal
accounting and financial reporting and disclosure controls and receive from the
Independent Accountant, as may be required by applicable law and regulations,
reports on such controls for inclusion in the Company's Annual Reports.
6. Discuss with the Independent Accountant the quality of the Company's
financial accounting personnel and any relevant recommendations of the
Independent Accountant.
7. Prepare the report of the Committee required by the rules of the Securities
and Exchange Commission to be included in the Company's annual proxy statement.
8. Review and approve all related party transactions regardless of amount.
9. Establish procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting or disclosure
controls, or auditing matters; and the confidential, anonymous submission by
employees of the Company of concerns regarding questionable accounting or
auditing matters.
10. Act, by the non-ex officio members, as the Qualified Legal Compliance
Committee of the Company to receive reports of material violations of the
securities laws, breaches of fiduciary duty or similar material violations, from
legal counsel representing the Company and practicing before the Securities and
Exchange Commission.
11. Review this Charter annually with a view toward recommending revisions to
the Board.
12. Perform such other duties as may be required by law, the Company's governing
documents or the rules of any stock exchange on which the Company may be listed.