Benefit Plans

12 Months Ended

Oct. 31, 2023

Benefit Plans

Benefit Plans

Note 15. Benefit Plans

We have stockholder approved equity incentive plans, a stockholder approved Employee Stock Purchase Plan and an employee tax-deferred savings plan, which are described in more detail below.

Third Amended and Restated 2018 Omnibus Incentive Plan

At the Company’s 2023 Annual Meeting of Stockholders, which was called to order and adjourned on April 6, 2023 and April 27, 2023 and was reconvened and concluded on May 22, 2023 (the “Annual Meeting”), the Company’s stockholders approved the amendment and restatement of the FuelCell Energy, Inc. Second Amended and Restated 2018 Omnibus Incentive Plan (as so amended and restated, the “Third Amended and Restated Incentive Plan”), which had previously been approved by the Company’s Board of Directors (the “Board”), subject to stockholder approval.

The purpose of the amendment and restatement of the Second Amended and Restated 2018 Omnibus Incentive Plan was to authorize the Company to issue up to 6,000,000 additional shares of the Company’s common stock pursuant to awards under the Third Amended and Restated Incentive Plan.

Following the approval of the amendment and restatement (and therefore the Third Amended and Restated Incentive Plan) by the Company’s stockholders at the Annual Meeting, the Third Amended and Restated Incentive Plan provides the Company with the authority to issue a total of 18,333,333 shares of the Company’s common stock. The Third Amended and Restated Incentive Plan authorizes grants of stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), shares, performance shares, performance units, incentive awards and dividend equivalent units to officers, other employees, directors, consultants and advisors.  Up to 1,833,333 shares of the Company’s common stock may be issued pursuant to the exercise of incentive stock options. Stock options, RSAs, RSUs and SARs have restrictions as to transferability. Stock option exercise prices are fixed by the Board but shall not be less than the fair market value of our common stock on the date of the grant. SARs may be granted in conjunction with stock options. The Board or the administrator of the Third Amended and Restated Incentive Plan may terminate the Third Amended and Restated Incentive Plan at any time.  No award may be granted under the Third Amended and Restated Plan after the tenth anniversary of the approval of the Third Amended and Restated Plan by stockholders at the Annual Meeting.

Of the 18,333,333 shares of the Company’s common stock authorized to be issued under the Third Amended and Restated Incentive Plan as of October 31, 2023, 9,069,450 remained available for grant as of October 31, 2023. Of the shares remaining available for grant, the Company had reserved, for potential future grant, up to 1,481,395 performance stock units if maximum performance is achieved.

Amended and Restated 2018 Employee Stock Purchase Plan

At the Annual Meeting, the Company’s stockholders approved the amendment and restatement of the FuelCell Energy, Inc. 2018 Employee Stock Purchase Plan (as so amended and restated, the “Amended and Restated ESPP”), which had previously been approved by the Board, subject to stockholder approval.

The purpose of the amendment and restatement of the 2018 Employee Stock Purchase Plan was to authorize the Company to issue up to 500,000 additional shares of the Company’s common stock under the Amended and Restated ESPP.

Following the approval of the amendment and restatement (and therefore the Amended and Restated ESPP) by the Company’s stockholders at the Annual Meeting, the Amended and Restated ESPP provides the Company with the authority to issue a total of 541,667 shares of the Company’s common stock.  The Amended and Restated ESPP also increases the limit on the number of shares of the Company’s common stock that any individual participant may purchase during an offering period to 1,000 shares.

The Amended and Restated ESPP, which is intended to satisfy the requirements of Section 423 of the Internal Revenue Code of 1986, as amended, allows the Company to provide eligible employees of the Company and of certain designated subsidiaries with the opportunity to voluntarily participate in the Amended and Restated ESPP, enabling such participants to purchase shares of the Company’s common stock at a discount to market price at the time of such purchase.  The Board may, in its sole discretion, terminate the Amended and Restated ESPP at any time.  If the Board does not earlier terminate the Amended and Restated ESPP, the Amended and Restated ESPP will terminate on the date on which all shares of common stock available for issuance have been sold pursuant to purchase rights exercised under the Amended and Restated ESPP.

Under the Amended and Restated ESPP, eligible employees have the right to purchase shares of common stock at the lesser of (i) 85% of the last reported sale price of our common stock on the first business day of the offering period, or (ii) 85% of the last reported sale price of the common stock on the last business day of the offering period, in either case rounded up to avoid impermissible trading fractions. Shares issued pursuant to the ESPP contain a legend restricting the transfer or sale of such common stock for a period of 0.5 year after the date of purchase.

The ESPP activity for the years ended October 31, 2023, 2022 and 2021 was de minimis.

Long-Term Incentive Plans

The Company’s Board of Directors (the “Board”) periodically approves Long Term Incentive Plans which include performance-based awards tied to the Company’s common stock price as well as time-vesting awards. None of the awards granted as part of Long-Term Incentive Plans include any dividend equivalent or other stockholder rights. To the extent the awards are earned, they may be settled in shares or cash of an equivalent value at the Company’s option. These plans are further described below.

Fiscal Year 2023 Long-Term Incentive Plan:

On December 5, 2022, the Board approved a Long-Term Incentive Plan for fiscal year 2023 (the “FY 2023 LTI Plan”) as a sub-plan consisting of awards made under the 2018 Incentive Plan. The participants in the FY 2023 LTI Plan are members of senior management. The FY 2023 LTI Plan consists of two award components:

1) Relative Total Shareholder Return (“TSR”) Performance Share Units (“PSU”). The PSUs granted during the year ended October 31, 2023 will be earned over the performance period ending on October 31, 2025, but will remain subject to a continued service-based vesting requirement until the third anniversary of the date of grant. The performance measure for the relative TSR PSUs is the TSR of the Company relative to the TSR of the Russell 2000 from November 1, 2022 through October 31, 2025. The Compensation Committee of the Board established the performance assessment criteria for the relative TSR PSUs as the TSR of the Company relative to the TSR of the Russell 2000, with the award calibration being 100% plus or minus 0.5x the difference between the Company’s TSR and the Russell 2000 Index composite TSR.  The award is capped at 200% of the target number

of PSUs, and the award is further capped at 100% of the target number of PSUs if the Company’s absolute TSR over the performance period is negative.  The Company’s TSR is calculated by subtracting the Company’s beginning stock price (defined as the average closing price of the Company’s common stock over the 60 consecutive trading days ending on October 31, 2022) from the ending stock price (defined as the average closing price of the Company’s common stock over the 60 consecutive trading days ending on October 31, 2025), adding any dividends during the period, and then dividing the result by the Company’s beginning stock price. Given that the performance period is still open, the Company has reserved shares equal to 200% of the target number of PSUs, subject to performance during the remaining performance period as well as vesting based on continued service until December 5, 2025 (the third anniversary of the grant date).

2) Time-vesting RSUs.  The time-vesting RSUs granted during the year ended October 31, 2023 will vest at a rate of one-third of the total number of RSUs on each of the first three anniversaries of the date of grant. 

Fiscal Year 2022 Long Term Incentive Plan:

On December 10, 2021, the  Board approved a Long-Term Incentive Plan for fiscal year 2022 (the “FY 2022 LTI Plan”) as a sub-plan consisting of awards made under the 2018 Incentive Plan. The participants in the FY 2022 LTI Plan are members of senior management. The FY 2022 LTI Plan consists of two award components:

1) Relative TSR PSU awards. The PSUs granted during the year ended October 31, 2022 will be earned over the performance period ending on October 31, 2024, but will remain subject to a continued service-based vesting requirement until the third anniversary of the date of grant. The performance measure for the relative TSR performance units is the TSR of the Company relative to the TSR of the Russell 2000 from November 1, 2021 through October 31, 2024. The Compensation Committee established the performance assessment criteria for the relative TSR PSUs as the TSR of the Company relative to the TSR of the Russell 2000, with the award calibration being 100% plus or minus 0.5x the difference between the Company’s TSR and the Russell 2000 Index composite TSR.  The award is capped at 200% of the target number of PSUs, and the award is further capped at 100% of the target number of PSUs if the Company’s absolute TSR over the performance period is negative.  The Company’s TSR is calculated by subtracting the Company’s beginning stock price (defined as the average closing price of the Company’s common stock over the 20 consecutive trading days ending on October 31, 2021) from the ending stock price (defined as the average closing price of the Company’s common stock over the 20 consecutive trading days ending on October 31, 2024), adding any dividends during the period, and then dividing the result by the Company’s beginning stock price. Given that the performance period is still open, the Company has reserved shares equal to 200% of the target number of PSUs, subject to performance during the remaining performance period as well as vesting based on continued service until December 10, 2024 (the third anniversary of the grant date).

2) Time-vesting restricted stock units.  The time-vesting RSUs granted during the year ended October 31, 2022 will vest at a rate of one-third of the total number of RSUs on each of the first three anniversaries of the date of grant. 

Fiscal Year 2021 Long Term Incentive Plan:

On November 24, 2020, the Board approved a Long-Term Incentive Plan for fiscal year 2021 (the “FY 2021 LTI Plan”) as a sub-plan consisting of awards made under the 2018 Incentive Plan. The participants in the FY 2021 LTI Plan are members of senior management. The FY 2021 LTI Plan consists of three award components:

1) Relative TSR PSU awards. The PSUs granted during the year ended October 31, 2021 were earned over the performance period ended on October 31, 2023, but remained subject to a continued service-based vesting requirement until the third anniversary of the date of grant (November 24, 2023). The performance measure for the relative TSR PSUs was the TSR of the Company relative to the TSR of the Russell 2000 from November 1, 2020 through October 31, 2023.  The Compensation Committee established the performance assessment criteria for the relative TSR PSUs as the TSR of the Company relative to the TSR of the Russell 2000, with the award calibration being 100% plus or minus 0.5x the difference between the Company’s TSR and the Russell 2000 Index composite TSR.  The award was capped at 200% of the target number of PSUs, and the award was further capped at 100% of the target number of PSUs if the Company’s absolute TSR over the performance period was negative.  The Company’s TSR was calculated by subtracting the Company’s beginning stock price (defined as the average closing price of the Company’s common stock over the 20 consecutive trading days ending on

October 30, 2020) from the ending stock price (defined as the average closing price of the Company’s common stock over the 20 consecutive trading days ending on October 31, 2023), adding any dividends during the period, and then dividing the result by the Company’s beginning stock price. On November 17, 2023, based on the calculations described above, the Compensation Committee certified awards at 73.541% of the target amount, subject to continued service until November 24, 2023 (the third anniversary of the grant date).

2) Absolute TSR PSU awards. The performance measure for the absolute TSR PSUs was an increase in the Company’s stock price during the performance period of November 1, 2020 through October 31, 2023, with the award calibration being based on a specified percentage increase in the price of the Company’s common stock over the average closing price of the Company’s common stock over the 20 consecutive trading days ending on October 30, 2020, which was $2.27.  Specifically, a 25% increase would earn 50% of the target award, a 50% increase would earn 100% of the target award and a 100% increase would earn 200% of the target award.  Each price hurdle was required to be met and was met for 20 consecutive trading days during the performance period. The Compensation Committee certified achievement of a 150% increase during fiscal year 2021, resulting in an award percentage of 200%. As a result, the Company reserved shares equal to 200% of the target number of PSUs, subject to continued service until November 24, 2023 (the third anniversary of the grant date).

3) Time-vesting restricted stock units. The time-vesting RSUs granted during the year ended October 31, 2021 vest at a rate of one-third of the total number of RSUs on each of the first three anniversaries of the date of grant. 

Other Equity Incentive Plans

The Company’s 2006 and 2010 Equity Incentive Plans remain in effect only to the extent of awards outstanding under the plans as of October 31, 2023.

Share-Based Compensation

Share-based compensation was reflected in the Consolidated Statements of Operations and Comprehensive Loss as follows (in thousands):

	Year Ended October 31,
	2023		2022		2021
Cost of revenues	$	1,502	$	706	$	493
Administrative and selling expense		8,657		5,418		3,593
Research and development expense		1,429		456		111
	$	11,588	$	6,580	$	4,197

Restricted Stock Units Including Performance Based Awards

The following table summarizes our RSU and PSU activity for the year ended October 31, 2023:

Restricted Stock Units	Shares	Weighted-Average Fair Value
Outstanding as of October 31, 2022	2,520,881	$	7.93
Granted - PSUs	1,124,953		5.50
Granted - time-vesting RSUs	4,538,236		3.36
Vested	(1,207,881)		5.39
Forfeited	(433,051)		5.01
Outstanding as of October 31, 2023	6,543,138	$	5.06

On December 5, 2022, 2,249,890 RSUs were awarded to senior management under the FY 2023 LTI Plan, which included 1,124,953 PSUs and 1,124,937 time-based vesting RSUs. The PSUs were valued based on a Monte-Carlo Simulation, and the estimated fair value of the relative TSR PSUs was $5.50 per share. The PSUs and time-based vesting RSUs are expensed over the three-year service period.

In addition to the awards granted to senior management, during the year ended October 31, 2023, the Board also granted a total of 3,413,299 time-based vesting RSU awards to certain salaried employees to promote ownership of the Company’s

equity and retention. The time-based vesting RSUs granted during the year ended October 31, 2023 vest at a rate of one-third of the total number of RSUs granted on each of the first three anniversaries of the date of grant. 

PSUs are issued assuming participants achieve 100% target performance. The Company also reserves additional shares assuming the maximum performance targets are met. As of October 31, 2023, the Company had reserved an additional 210,190 shares for potential issuance under the FY 2021 LTI Plan, an additional 175,548 shares for potential issuance under the FY 2022 LTI Plan and an additional 1,095,657 shares for potential issuance under the FY 2023 LTI Plan.

RSU and PSU expense is based on the fair value of the award at the date of grant and is amortized over the vesting period, which is generally over 3 or 4 years.

As of October 31, 2023, total unrecognized compensation cost related to RSUs and PSUs was $17.0 million, which is expected to be recognized over approximately the next two years on a weighted-average basis.

Stock Awards

During the years ended October 31, 2023, 2022 and 2021, we awarded 103,631, 76,848 and 31,889 shares, respectively, of fully vested, unrestricted common stock to the independent members of our Board as a component of Board compensation, which resulted in recognizing $0.2 million, $0.2 million and $0.3 million of expense for the years ended October 31, 2023, 2022 and 2021, respectively.

Employee Tax-Deferred Savings Plans

We offer a 401(k) plan (the “401(k) Plan”) to all full time employees that provides for tax-deferred salary deductions for eligible employees (beginning the first month following an employee’s hire date). Employees may choose to make voluntary contributions of their annual compensation to the 401(k) Plan, limited to an annual maximum amount as set periodically by the U.S. Internal Revenue Service (“IRS”). Employee contributions are fully vested when made. Under the 401(k) Plan, there is no option available to the employee to receive or purchase our common stock. Matching contributions of 2% under the 401(k) Plan aggregated $1.1 million, $0.5 million, and $0.4 million for the years ended October 31, 2023, 2022, and 2021, respectively.