-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UJKTtackjcaPg/ssUgs2ESWSC0G8FZtyZo4UAPp3DEUZCYOQhf9GEigoFw09/8q5 VTppsfnR64TSb5LL3MPezA== 0000886128-97-000005.txt : 19970303 0000886128-97-000005.hdr.sgml : 19970303 ACCESSION NUMBER: 0000886128-97-000005 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970415 FILED AS OF DATE: 19970228 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENERGY RESEARCH CORP /NY/ CENTRAL INDEX KEY: 0000886128 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 060853042 STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-14204 FILM NUMBER: 97546707 BUSINESS ADDRESS: STREET 1: 3 GREAT PASTURE RD CITY: DANBURY STATE: CT ZIP: 06813 BUSINESS PHONE: 203-825-6047 MAIL ADDRESS: STREET 1: 3 GREAT PASTURE ROAD CITY: DANBURY STATE: CT ZIP: 06813 DEF 14A 1 DEFINITATIVE NOTICE & PROXY SCHEDULE 14A INFORMATION 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 Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12 ENERGY RESEARCH CORPORATION ----------------------------- (Name of Registrant as Specified In Its Charter) --------------------------------------------------- Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [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:______________________________________ (2) Aggregate number of securities to which transaction applies:______________________________________ (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and how it was determined):__________________________________ (4) Proposed maximum aggregate value of transaction: ______________________________________________ (5) Total Fee paid:_______________________________ [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid:______________________ (2) Form, Schedule or Registration Statement No.: _____________________________________________ (3) Filing Party:________________________________ (4) Date Filed:__________________________________ NOTICE OF ANNUAL SHAREHOLDERS' MEETING TO BE HELD APRIL 15, 1997 TO THE SHAREHOLDERS OF ENERGY RESEARCH CORPORATION: NOTICE IS HEREBY GIVEN that the Annual Shareholders' Meeting of Energy Research Corporation (the "Company") will be held at The Penn Club of New York, 30 West 44th Street, New York, New York, 10036 on April 15, 1997 at 10:00 a.m. Eastern Daylight Savings Time for the purpose of considering and voting upon: 1. A proposal to elect nine directors of the Company to serve until the next Annual Meeting of Shareholders and until their successors are duly elected and qualified. 2. Such other business as may properly come before the meeting and any adjournments thereof. Shareholders of record at the close of business on February 26, 1997, are entitled to notice of and to vote at the meeting. Your attention is directed to the attached Proxy Statement. If you do not expect to be present at the meeting, please fill in, sign, date and mail the enclosed Proxy as promptly as possible in order to save the Company further solicitation expense. There is enclosed with the Proxy an addressed envelope for which no postage is required if mailed in the United States. BY ORDER OF THE BOARD OF DIRECTORS LOUIS P. BARTH CORPORATE SECRETARY Danbury, Connecticut March 13, 1997 PROXY STATEMENT ENERGY RESEARCH CORPORATION FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 15, 1997 This Proxy Statement is furnished to the shareholders of Energy Research Corporation (the "Company") in connection with the solicitation of proxies by the Board of Directors of the Company to be voted at the 1997 Annual Meeting of Shareholders (the "Annual Meeting") and at any adjournments thereof. The Annual Meeting will be held on April 15, 1997 at The Penn Club of New York, 30 West 44th Street, New York, New York, 10036 at 10:00 a.m. Eastern Daylight Savings Time. The Company is a New York corporation with its principal executive offices at 3 Great Pasture Road, Danbury, CT 06813. The approximate date on which this Proxy Statement and the accompanying proxy card are first being sent or given to shareholders is March 13, 1997. VOTING General The securities which can be voted at the Annual Meeting consist of Common Stock of the Company, $.0001 par value per share, with each share entitling its owner to one vote on each matter submitted to the shareholders. The record date for determining the holders of Common Stock who are entitled to notice of and to vote at the Annual Meeting is February 26, 1997. On the record date, 3,921,124 shares of Common Stock were outstanding and eligible to be voted at the Annual Meeting. Quorum and Vote Required The presence, in person or by proxy, of a majority of the outstanding shares of Common Stock of the Company is necessary to constitute a quorum at the Annual Meeting. The affirmative vote of the holders of a plurality of the shares of Common Stock represented in person or by proxy at the Annual Meeting is required to elect the directors. Abstentions, including broker non-votes, will have no effect on the outcome of this matter. -1- Voting by Proxy In voting by proxy with regard to the election of directors, shareholders may vote in favor of all nominees, withhold their votes as to all nominees or withhold their votes as to specific nominees. Shareholders should specify their choices on the accompanying proxy card. All properly executed proxy cards delivered by shareholders to the Company and not revoked will be voted at the Annual Meeting in accordance with the directions given. If no specific instructions are given with regard to the matters to be voted upon, the shares represented by a signed proxy card will be voted "FOR" the election of all directors. If any other matters properly come before the Annual Meeting, the persons named as proxies will vote upon such matters according to their best judgment. Any shareholder delivering a proxy has the power to revoke it at any time before it is voted by giving written notice to the Secretary of the Corporation, by executing and delivering to the Secretary a proxy card bearing a later date or by voting in person at the Annual Meeting. In addition to soliciting proxies through the mail, the Company may solicit proxies through its directors and employees in person and by telephone. Brokerage firms, nominees, custodians and fiduciaries also may be requested to forward proxy materials to the beneficial owners of shares held of record by them. All expenses incurred in connection with the solicitation of proxies will be borne by the Company. -2- PROPOSAL NO. 1 ELECTION OF DIRECTORS Nine directors are to be elected at the Annual Meeting, each to hold office until the next annual meeting of shareholders and until a successor is elected and qualified. It is the intention of the persons named in the enclosed form of proxy to vote, if authorized, the proxies for the election as directors of the nine persons named below as nominees. All of the nominees are at present directors of the Company. If any nominee declines or is unable to serve as a director (which is not anticipated), the persons named as proxies reserve full discretion to vote for any other person who may be nominated. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO ELECT THE NINE NOMINEES LISTED BELOW AS DIRECTORS OF THE COMPANY. The following table sets forth certain information for each nominee for election as a director.
DIRECTOR NAME AGE PRINCIPAL OCCUPATION SINCE ---- --- -------------------- -------- Bernard S. Baker 60 Dr. Baker joined the Company in 1970 1970 and has been President since 1973. He was Chief Operating Officer of the Company from 1973 to March, 1992 and Chief Executive Officer since March, 1992. He received a Ph.D. from the Illinois Institute of Technology in 1969, and was a Fulbright Fellow at the Laboratory for Electrochemistry at the University of Amsterdam subsequent to his receiving his Master of Science in Chemical Engineering from the University of Pennsylvania in 1959. Hansraj C. Maru 52 Dr. Maru has been Executive Vice 1992 President and Chief Operating Officer of the Company since December, 1992. Prior to that, he was Senior Vice President-Research and Development. Dr. Maru joined the Company in 1977. Dr. Maru received a Ph.D. in Chemical Engineering from the Illinois Institute of Technology in 1975. -3- DIRECTOR NAME AGE PRINCIPAL OCCUPATION SINCE ---- --- -------------------- -------- Christopher R. 54 Mr. Bentley has been Executive 1993 Bentley Vice President of the Company and President of the Company's manufacturing subsidiary since September, 1990. Mr. Bentley received a BSME from Tufts University in 1966. From 1985 through 1989 he was Director of Manufacturing (1985), Vice President and General Manager (1985-1988) and President (1988- 1989) of the Turbine Airfoils Division of Chromalloy Gas Turbine Corporation, a major manufacturer of gas turbine hardware. Thomas L. 69 Thomas Kempner became the Chairman 1988 Kempner of the Board of Directors of the Company on March 13, 1992. He has been Chairman and Chief Executive Officer of Loeb Partners Corporation since 1979 and a general partner of Loeb Investors Co. LXXV, an affiliate of Loeb Partners Corporation and an investment partnership. Mr. Kempner is a director of Alcide Corporation, The Arlen Corporation, Cybernetics Service, Inc. (Formerly Silent Radio, Inc.), IGENE Biotechnology, Inc, Intermagnetics General Corporation, CCC Information Group, Northwest Airlines, Inc. and Roper Starch Worldwide, Inc. -4- DIRECTOR NAME AGE PRINCIPAL OCCUPATION SINCE ---- --- -------------------- -------- William A. 63 William Lawson has been President 1988 Lawson Since 1987 of W.A. Lawson Associates, an industrial and financial consulting firm. Mr. Lawson was a general partner of Loeb Investors Co. LXXV from 1988 to January, 1993. Mr. Lawson was Chairman of the Board of Directors of the Company from September, 1988 until March 13, 1992. Mr. Lawson is Chairman of the Board of Directors of Newcor, Inc., Chairman and Chief Executive Officer of Atlantic Eagle, Inc. and a director of Old Kent-Central Bank. Warren D. 58 Warren Bagatelle has been a 1988 Bagatelle Managing Director of Loeb Partners Corporation since 1988. Mr. Bagatelle was Chairman of the Board of Directors of the Company from January, 1988 to September, 1988. Mr. Bagatelle is a director of Genisys Reservation Systems, Inc. (formerly Corporate Travel Link, Inc.) which owns and operates a computer reservation system for ground transportation. Richard M.H. 62 Since November, 1991, Richard 1988 Thompson Thompson has been the President of Rotary Power International, Inc., a company that designs and builds rotary engines for military and commercial uses. Mr. Thompson has been Chairman of the Executive Committee of the Company since January, 1988. Since March, 1987, he has been President of Richard M.H. Thompson & Associates, Inc., a private investment company and financial advisor serving a variety of technology and emerging growth companies. From May, 1990 until January, 1993, he was a part-time employee of the Company. -5- DIRECTOR NAME AGE PRINCIPAL OCCUPATION SINCE ---- --- -------------------- ------- Michael Bode 51 Michael Bode joined Messerschmitt- 1993 Bolkow-Blohm GmbH in 1974, where he had held a variety of positions since that time. He became Vice President and Director of the New Technology group of the Space Transportation and Propulsion Systems division of Deutsche Aerospace AG, a subsidiary of Daimler-Benz Corp. in 1990. Since July, 1993, Mr. Bode has been Vice President and Director of the New Technology group of Daimler Benz affiliate MTU-Friedrichshafen GmbH (MTU). James D. Gerson 53 Since March, 1993, Mr. Gerson has 1992 been Senior Vice President of Fahnestock & Co., Inc. and is currently Portfolio Manager of the Hudson Capital Appreciation Fund. From January, 1992 to March, 1993, Mr. Gerson was Senior Vice President and Managing Director of Corporate Finance of Reich & Co., Inc. For more than five years prior to January, 1992, Mr. Gerson was Vice President and Manager of Corporate Finance at Josepthal & Co., Inc. (and successor corporations), a securities firm. Mr. Gerson also serves as a director of Ag Services of America, Inc., American Power Conversion Corp., Conceptronic Inc., Computer Outsourcing Services, Inc. and Hilite Industries, Inc.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS The Board of Directors held five meetings during the fiscal year ended October 31, 1996. All incumbent directors attended at least 75% of the meetings of the Board of Directors and Board committees of which they were members, except for Michael Bode, who attended 60% of the meetings. The Company does not have a standing nominating committee. -6- Executive Committee The Board of Directors has an Executive Committee comprised of Richard Thompson (Chairman), Warren Bagatelle, William Lawson and Bernard Baker which held one meeting during fiscal 1996. The Executive Committee has and exercises the powers of the Board in monitoring the management of the business of the Company between meetings of the Board of Directors. Audit Committee The Company has an Audit Committee consisting of Messrs. Bagatelle (Chairman), Thompson and Lawson. The Audit Committee had one meeting in fiscal 1996 and has responsibility for consulting with the Company's officers regarding the appointment of independent public accountants as auditors, discussing the scope of the auditors' examination and reviewing annual financial statements. Compensation Committee The Company has a Compensation Committee consisting of Messrs. Lawson (Chairman), Thompson and Bagatelle. The Compensation Committee had two meetings in fiscal 1996. The functions of the Compensation Committee are to review, approve and recommend to the Board of Directors the terms and conditions of incentive bonus plans applicable to corporate officers and key management personnel, to review and approve the annual salary of the chief executive officer, and to administer the Energy Research Corporation Section 423 Stock Purchase Plan. Director Compensation The Company currently pays directors fees of $1,250 per month to Messrs. Bagatelle and Kempner in connection with their duties as Chairman of the Audit Committee and Chairman of the Board, respectively. The Company also pays a directors fee of $1,500 per month to William Lawson in connection with his duties as Chairman of the Compensation Committee and his activities on the Audit and Executive Committees, as well as his duties as a director of the Company's manufacturing subsidiary. Mr. Gerson is currently paid $1,000 each month in connection with his duties as a director of the Company. Mr. Thompson is currently paid $2,000 each month in connection with his duties as Chairman of the Executive Committee, his activities on the Audit and Compensation Committees, his duties as Chairman and a director of the Company's manufacturing subsidiary and as a director of the Company's engineering subsidiary. The Company reimburses certain directors for reasonable expenses incurred in connection with the performance of their duties as directors. -7- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of the Company's Common Stock as of February 1, 1997 by each person or group that is known by the Company to be the beneficial owner of more than 5% of its outstanding Common Stock, each director of the Company, each of the executive officers named under the heading "Executive Compensation" below and all directors and executive officers of the Company as a group (11 persons). This information is based upon information received from or on behalf of the named individuals.
AMOUNT AND NATURE PERCENT NAME OF BENEFICIAL OWNERSHIP (1) OF CLASS ---- --------------------------- -------- Warren Bagatelle 546,284 (2) 13.91 c/o Loeb Partners Corp. 61 Broadway New York, NY 10006 Thomas L. Kempner 404,167 (2) 10.30 c/o Loeb Partners Corp. 61 Broadway New York, NY 10006 Loeb Investors Co., LXXV 401,667 (2) 10.24 61 Broadway New York, NY 10006 Daimler Benz affiliate MTU-Friedrichshafen 527,758 (3) 13.22 GmbH (MTU) Abt.VC, Gebaude 6.1 Zimmer 102A D-85521 Ottobrunn James D. Gerson 196,133 (4) 5.00 Bernard S. Baker 145,124 (5) 3.65 -8- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (Continued). AMOUNT AND NATURE PERCENT NAME OF BENEFICIAL OWNERSHIP (1) OF CLASS ---- -------------------------- -------- Richard M.H. Thompson 127,800 (6) 3.26 William A. Lawson 55,666 (7) 1.41 Christopher R. Bentley 42,076 (8) 1.06 Hansraj C. Maru 30,650 (9) * Donald R. Glenn 30,120 (10) * Louis P. Barth 26,300 (11) * Michael Bode -- (12) -- All Directors and Executive Officers as a Group 1,604,320 (13) 38.98 (11 persons)
* Less than one percent. (1) Unless otherwise noted, each person identified possess sole voting and investment power with respect to the shares listed. (2) Warren Bagatelle and Thomas L. Kempner, by virtue of being general partners of Loeb Investors Co. LXXV, may each be deemed to beneficially own the shares of Loeb Investors Co. LXXV. Each of Mr. Kempner and Mr. Bagatelle is a member of a group, as that term is used in Section 13(d) of the Exchange Act, which group, in the aggregate, owns 546,284 shares of Common Stock. Mr. Bagatelle's shareholdings include warrants to purchase 2,500 shares of Common Stock that are exercisable for four years after June 25, 1993. Mr. Bagatelle's and Mr. Kempner's shareholdings also include warrants to purchase 2,500 shares of Common Stock held by Loeb Partners Corporation that are exercisable for four years after June 25, 1993. (3) Includes 70,000 shares of Common Stock MTU may acquire at any time by converting its loan to the Company. (4) Mr. Gerson's shareholdings include 36,400 shares held by his wife, Barbara Gerson as Custodian for two minor children and also includes 15,800 shares held by a private foundation, of which Mr. Gerson is President and a Director. Mr. Gerson disclaims beneficial ownership of the securities held by his wife and of the private foundation. -9- (5) Includes 54,000 shares owned by Dr. Baker's wife Cornelia Baker. Also includes currently exercisable options to purchase 55,000 shares of Common Stock. (6) Mr. Thompson's shareholdings include 75,800 shares owned by his wife, Elizabeth Thompson. Mr. Thompson disclaims beneficial ownership of the shares owned by Mrs. Thompson. Mr. Thompson's shareholdings do not include (i) 2,777 shares owned beneficially by Intervalora Investments Inc. ("Intervalora"), a company owned by a trust, the sole beneficiaries of which are Mr. Thompson's children or (ii) 96,000 shares owned beneficially by Malbena Foundation Vaduz ("Malbena"), a trust, the sole beneficiaries of which are Mr. Thompson's children. Mr. and Mrs. Thompson disclaim beneficial ownership in the Common Stock owned by Intervalora and Malbena. (7) Mr. Lawson's shareholdings include currently exercisable options to purchase 19,000 shares of Common Stock. (8) Mr. Bentley's shareholdings include currently exercisable options to purchase 41,500 shares of Common Stock. (9) Dr. Maru's shareholdings include currently exercisable options to purchase 29,500 shares of Common Stock. (10) Mr. Glenn's shareholdings include currently exercisable options to purchase 24,100 shares of Common Stock. (11) Mr. Barth's shareholdings include currently exercisable options to purchase 18,400 shares of Common Stock. (12) Michael Bode is an executive officer of MTU. (13) Includes currently exercisable options to purchase 195,000 shares of Common Stock. -10- EXECUTIVE COMPENSATION The following table sets forth the compensation during the last three fiscal years of the Chief Executive Officer and each of the four most highly-compensated executive officers of the Company whose annual salary and bonus, if any, exceeded $100,000 for services in all capacities to the Company during the last fiscal year (the "named executive officers"). SUMMARY COMPENSATION TABLE -------------------------- ANNUAL COMPENSATION -------------------
LONG TERM COMPENSATION AWARDS NAME AND UNDERLYING ALL OTHER PRINCIPAL SALARY BONUS OPTIONS COMPENSATION POSITION YEAR ($) ($) # ($) -------- ---- ------ ----- ---------- ------------ Bernard S. Baker 1996 270,688 75,000 -0- 13,500 (1) President, Chief 1995 246,306 75,000 -0- 13,500 Executive Officer 1994 224,280 75,000 -0- 14,922 Hansraj C. Maru 1996 152,221 31,000 6,000 13,631 (2) Exec. Vice President, 1995 142,095 28,000 -0- 14,705 Chief Operating 1994 131,284 23,000 -0- 13,826 Officer Christopher R. Bentley 1996 185,246 36,000 6,000 13,500 (3) Executive Vice 1995 175,175 33,000 -0- 13,500 President 1994 163,270 27,000 -0- 15,715 Louis P. Barth 1996 138,174 29,000 6,000 14,455 (4) Senior VP, Chief 1995 128,884 26,000 -0- 13,878 Financial Officer, 1994 121,412 21,000 -0- 12,763 Treasurer, Corporate Secretary Donald R. Glenn 1996 157,446 29,000 6,000 13,500 (5) Vice President-Corp. 1995 148,430 26,000 -0- 14,530 Development 1994 138,029 22,000 -0- 14,297
(1) Represents employer contributions to the Defined Contribution Pension Plan of $6,000 and employer contributions to the Section 401(k) Plan of $7,500. (2) Represents employer contributions to the Defined Contribution Pension Plan of $6,058 and employer contributions to the Section 401(k) Plan of $7,573. (3) Represents employer contributions to the Defined Contribution Pension Plan of $6,000 and employer contributions to the Section 401(k) Plan of $7,500. (4) Represents employer contributions to the Defined Contribution Pension Plan of $6,424 and employer contributions to the Section 401(k) Plan of $8,031. (5) Represents employer contributions to the Defined Contribution Pension Plan of $6,000 and employer contributions to the Section 401(k) Plan of $7,500. -11- The following two tables set forth certain information with respect to (i) option grants to the named executive officers of the Company during the fiscal year ended October 31, 1996, and (ii) the aggregated number and value of options exercisable and unexercisable by the named executive officers as of October 31, 1996. OPTION GRANTS IN LAST FISCAL YEAR (Individual Grants)
POTENTIAL REALIZABLE VALUE NUMBER OF PERCENT OF AT ASSUMED ANNUAL SECURITIES THE TOTAL RATES OF STOCK UNDERLYING OPTIONS/SARs PRICE APPRECIATION OPTIONS/SARs GRANTED TO EXERCISE OR FOR OPTION TERM GRANTED EMPLOYEES IN BASE PRICE EXPIRATION (2) NAME # (1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($) - ---- ----------- ----------- ---------- ---------- ------------------- Christopher Bentley 6,000 20% $12.25 12/14/2005 $46,200 $117,100 Louis P. Barth 6,000 20% $12.25 12/14/2005 $46,200 $117,100 Donald R. Glenn 6,000 20% $12.25 12/14/2005 $46,200 $117,100 Hansraj C. Maru 6,000 20% $12.25 12/14/2005 $46,200 $117,100
(1) The options were granted under the Company's 1988 Stock Option Plan. These options become exercisable in four equal annual installments on each anniversary date of the date of grant. Options that have been issued may not be exercised beyond the earlier of (a) ten years from the date of grant, or (b) three months after the holder ceases to be employed by the Company, except in the event of termination by reason of death or permanent disability, in which event the option may be exercised for up to one year following termination. (2) The assumed rates are compounded annually for the full term of the options. -12-
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES ----------------------- NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY SHARES OPTIONS OPTIONS AT ACQUIRED AT 10/31/96 10/31/96 ON VALUE EXERCISABLE/ EXERCISABLE/ EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE NAME # $ # ($) (1) ---- ------- ------- ------------- ------------ Bernard S. Baker 2,000 20,160 55,000 (2) 575,300 (2) -0- (3) -0- (3) Hansraj C. Maru 2,000 27,660 25,500 (2) 206,130 (2) 8,500 (3) 5,950 (3) Christopher R. Bentley -0- -0- 40,000 (2) 305,200 (2) 6,000 (3) -0- (3) Louis P. Barth 1,300 12,617 16,900 (2) 176,774 (2) 6,000 (3) -0- (3) Donald R. Glenn -0- -0- 26,000 (2) 223,480 (2) 8,000 (3) 4,760 (3)
(1) Based upon the closing price of $12.13 on October 31, 1996 of the Company's Common Stock on The Nasdaq Stock Market minus the respective option exercise price. (2) Exercisable (3) Unexercisable -13- EMPLOYMENT AGREEMENT The Company entered into a one year employment agreement with Dr. Bernard S. Baker, the president of the Company, on January 1, 1997 entitling Dr. Baker to a base salary of $320,000 for the calendar year 1997. Dr. Baker is also entitled to certain life insurance benefits in the event of death and such other employment benefits as may be generally available to employees of the Company. Dr. Baker may terminate his employment with the Company if there is a change in control, entitling Dr. Baker to receive his base salary for a period of sixty-four weeks from the date of termination, plus any incentive compensation awarded to Dr. Baker, but not yet paid. Either the Company or Dr. Baker may terminate the employee agreement prior to the expiration of the employment agreement upon 30 days written notice. The Company has agreed, for the term of the agreement, to use its best efforts to cause Dr. Baker to be elected as a director of the Company. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Decisions regarding certain executive compensation are made by the Compensation Committee, which is composed of Warren D. Bagatelle, Richard M.H. Thompson and William A. Lawson. Decisions with respect to the salary and bonus of the Chief Executive Officer are made by the Compensation Committee. The Chief Executive Officer is responsible for the salary administration of the remaining executive officers. The Company has an informal incentive compensation plan. The Committee is responsible for approval of the incentive awards with significant reliance on the recommendations of the Chief Executive Officer. All stock option awards under the 1988 Stock Option Plan are approved by the Board of Directors with reliance upon the recommendations of the Compensation Committee or the Chief Executive Officer. No member of the Compensation Committee is a current or former employee of the Company, except Richard M.H. Thompson, who was a part-time employee from May 1990 until January 1993. COMPENSATION COMMITTEE REPORT AND BOARD OF DIRECTORS REPORT The Company's primary objectives in developing executive compensation policies are to attract, motivate and retain superior talent to enable the Company to achieve its business objectives and to align the financial interests of the executive officers with the shareholders of the Company. -14- The compensation of executive officers consists of base compensation, bonus, periodic grants of options and participation in benefit plans generally available to employees. In setting compensation, the Compensation Committee and the Chief Executive Officer strive to maintain base compensation for the Company's executive officers at levels which the Compensation Committee and the Chief Executive Officer, based on their experience, believe are competitive with the compensation of comparable executive officers in similar situated companies while relying upon stock options and the informal bonus plan to provide significant performance incentives. Executive officers are eligible to participate in an informal bonus plan. The bonus of Dr. Bernard S. Baker is determined independent of the bonus plan. Awards under the informal bonus plan and the bonus of Dr. Baker are determined by the Compensation Committee. The Compensation Committee relies significantly upon the recommendation of the Chief Executive Officer with respect to the bonus to be awarded to the other executive officers. The executive officers, as well as other key employees, may receive discretionary bonuses based upon a subjective evaluation of the performance of the Company and their contributions to the Company. Each of the executive officers and certain key employees are eligible to receive grants of options under the 1988 Stock Option Plan. The plan is used to align a portion of the officers compensation with the stockholders' interest and the long-term success of the Company. In determining the number of options to be granted to each executive officer, the Board of Directors reviews the recommendations provided by the Compensation Committee with respect to the Chief Executive Officer or the recommendations of the Chief Executive Officer with respect to the other executive officers and makes a subjective determination regarding those recommendations. In the fiscal year ended October 31, 1996, Dr. Baker received a base salary of $270,688 pursuant to his then employment agreement and a bonus of $75,000 (See "Employment Agreement"). The Compensation Committee has not conducted any surveys of compensation packages of the chief executive officer in comparable companies. The Committee has determined Dr. Baker's salary after consideration of his experience, long-term service with the Company, his international reputation and performance as Chief Executive Officer. -15-
Compensation Committee Board of Directors William A. Lawson Bernard S. Baker Warren D. Bagatelle Warren D. Bagatelle Richard M.H. Thompson Christopher R. Bentley Michael Bode James D. Gerson Thomas L. Kempner William A. Lawson Hansraj C. Maru Richard M.H. Thompson
PERFORMANCE GRAPH The following graph compares the annual change in Energy Research Corporation's cumulative total Shareholder return for the period from the initial public offering date, June 25, 1992 through October 31, 1996 based upon the market price of the Company's Common Shares, with the cumulative total return on the Russell 2000 and the Russell 3000 Index and a peer group consisting of SIC Group Code 369 companies listed on the The Nasdaq Stock Market and Small Cap Market for that period. The Company has introduced the Russell 2000 index as its broad market index for comparison purposes because this index contains companies whose market capitalizations are more comparable to that of Energy Research Corporation than the Russell 3000 index. [PERFORMANCE GRAPH APPEARS HERE]
6/25/92 10/31/92 10/31/93 10/31/94 10/31/95 10/31/96 ------- -------- -------- -------- -------- -------- COMPUTED INDEX DATA: Energy Research Corp. 100.00 98.63 136.99 109.59 124.66 132.88 Peer Group 100.00 118.27 124.49 117.84 192.25 167.70 Broad Market (Russell 2000 Index) 100.00 106.11 140.50 140.07 165.74 193.45 Broad Market (Russell 3000 Index) 100.00 104.27 122.05 125.43 158.18 193.38
-16- SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE The Securities Exchange Act of 1934 requires the Company's executive officers and directors, and any persons owning more than 10% of a class of the Company's stock to file certain reports of ownership and changes in ownership with the Securities and Exchange Commission (the "SEC"). All filings for 1996 were made on a timely basis except (i) MTU-Friedrichshafen GmbH filed a Form 4 late with respect to one transaction; (ii) Warren Bagatelle filed a Form 4 late with respect to one transaction. The above information is to the Company's knowledge, based solely on a review of copies of reports furnished to the Company and representations of certain officers, directors and shareholders owning more than 10% of the Company's Common Stock. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the fiscal year, the Company sold to Daimler Benz affiliate MTU-Friedrichshafen GmbH (MTU) approximately $1,132,000 of fuel cell components. In November, 1989 the Company entered into a license agreement with MTU, which license was originally with Messerschmitt-Bolkow-Blohm GmbH, that granted to MTU an exclusive license, with certain exceptions, to develop the Company's carbonate fuel cell technology in Europe, and a non-exclusive license for the Middle East, Africa and South America. Pursuant to the MTU Agreement, the Company receives annual license fees and has the right to receive royalties upon commercial sales. Concurrent with the entering into of the MTU Agreement, MTU purchased 360,000 shares of Common Stock of the Company at a purchase price of $7.00 per share and made loans to the manufacturing subsidiary of the Company, which are secured by the stock of that subsidiary, in the aggregate principal amount of $1,980,000. During fiscal 1996, $877,000 of this loan was converted into 97,397 shares of common stock of the Company. MTU extended the maturity of $630,000 of the loan to November 30, 1997 with the right to convert principal and accrued interest to common stock of the Company at $9 per share. During December 1996, the Company paid to MTU $1,296,000 of principal and interest. The Subscription Agreement between the Company and MTU also grants to all shareholders of the Company preemptive rights on sales of the Common Stock of the Company at a price less than $7.00 per share. As a condition to MTU entering into its agreements with the Company, substantially all of the then shareholders of the Company agreed to vote their shares in favor of one nominee of MTU to the Board of Directors of the Company for so long as MTU owns at least 10% of the Common Stock of the Company. -17- The Company has agreed to purchase a test facility from MTU for approximately $300,000. The Company believes that the terms of the transactions with MTU are no less favorable to the Company than it could have obtained from an unaffiliated third party. Pursuant to the terms of a certain Shareholder's Agreement, dated as of April 13, 1988, entered into by the Company and its shareholders (the "Shareholders Agreement"), the Company granted its then shareholders (including certain current directors and officers of the Company) the right, subject to certain limitations, to include their shares in future registration statements filed by the Company with the Commission within five years of the day immediately following the date of the consummation of the initial stock offering. All provisions of the Shareholder's Agreement (other than those governing the future registration rights of shareholders and certain other provisions relating thereto) terminated, pursuant to their terms, upon the consummation by the Company of the initial stock offering. INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors has appointed KPMG Peat Marwick LLP, certified public accountants to audit the consolidated financial statements of the Company for the fiscal year ending October 31, 1997. KPMG Peat Marwick LLP was engaged as the Company's principal accountants to audit its financial statements on August 17, 1995. On August 17, 1995, the Company dismissed its prior independent certified public accountants, Blum, Shapiro & Co., P.C. The decision to change accountants was approved by the Executive Committee of the Board of Directors. The report of Blum, Shapiro & Co, P.C. on the Company's financial statements for the fiscal years ended October 31, 1994 and 1993 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. There have been no disagreements with Blum, Shapiro & Co., P.C. on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure during the Company's two fiscal years ended October 31, 1994 and 1993 and the subsequent interim period beginning November 1, 1994 through August 17, 1995. A representative of KPMG Peat Marwick LLP will be present at the Annual Meeting to make a statement if such representative desires to do so and to respond to appropriate questions. Representatives of Blum, Shapiro & Co., P.C. will not be present at the Annual Meeting. -18- SHAREHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING Shareholders who may wish to present proposals for inclusion in the Company's proxy materials and for consideration at the 1998 Annual Meeting of Shareholders should submit the proposals in writing to the Secretary of the Company in accordance with all applicable rules and regulations of the SEC no later than November 14, 1997. ANNUAL REPORT AND FORM 10-K ADDITIONAL COPIES OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996 AND COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST ADDRESSED TO: ENERGY RESEARCH CORPORATION, 3 GREAT PASTURE ROAD, DANBURY, CONNECTICUT 06813 ATTN: SHAREHOLDER RELATIONS. OTHER MATTERS As of the date of this proxy statement, the Board of Directors knows of no matters which will be presented for consideration at the Annual Meeting other than the proposals set forth in this Proxy Statement. If any other matters properly come before the meeting, it is intended that the persons named in the proxy will act in respect thereof in accordance with their best judgment. By Order of the Board of Directors Louis P. Barth Corporate Secretary Danbury, CT March 13, 1997 -19- ENERGY RESEARCH CORPORATION 3 GREAT PASTURE ROAD DANBURY, CT 06813 PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoint(s) Bernard S. Baker and Thomas L. Kempner as Proxies, each with power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all of the shares of Common Stock of Energy Research Corporation (the "Company") held by the undersigned of record on February 26, 1997, at the annual meeting of the shareholders of the Company to be held on April 15, 1997 and at any and all adjournments thereof, and hereby revokes all former proxies: 1. Election of nine directors. [ ] FOR all nominees listed below (except as marked to the contrary below) [ ] WITHHOLD AUTHORITY to vote for all nominees listed below: Bernard S. Baker Warren D. Bagatelle Hansraj C. Maru Richard M.H. Thompson Christopher R. Bentley Michael Bode Thomas L. Kempner James D. Gerson William A. Lawson (Instruction: To withhold authority to vote for any nominee, write that nominee's name in the space provided below.) _________________________________________________________________________ 2. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (sign on reverse side) -1- This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EVERY ITEM LISTED ABOVE. Dated _______________________, 1997 ____________________________________ Signature _____________________________________ Signature if held jointly Please sign exactly as name appears on this card. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person. PLEASE MARK, SIGN, DATE AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. -2- -----END PRIVACY-ENHANCED MESSAGE-----