Definitive Proxy Solicitation Material — Schedule 14A
Filing Table of Contents
Document/Exhibit Description Pages Size
1: DEF 14A 2001 Proxy Notice, Statement and Card 33 140K
2: EX-99 Annual Report on Form 10-K for Fiscal 2001 124 545K
3: EX-99 Corporate Brochure 13 31K
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 determined by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ENERGY CONVERSION DEVICES, INC.
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(Name of Registrant as Specified In Its Charter)
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(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)(1)and 0-11.
(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
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COMPANY LOGO
ENERGY CONVERSION DEVICES, INC.
2956 Waterview Drive
Rochester Hills, Michigan 48309
January 18, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Energy Conversion Devices, Inc., which will be held at Michigan State University
Management Education Center, 811 West Square Lake Road, Troy, Michigan on
Thursday, February 21, 2002, at 10:00 a.m. (EST). If you plan to attend the
meeting, we would appreciate your calling the Investor Relations department at
(248) 293-0440 or sending us an e-mail at investor_relations@ovonic.com.
Details of the business to be conducted at this meeting are given in the
attached Notice of Meeting of Stockholders and Proxy Statement.
You may vote your shares by telephone, by the Internet or by signing,
dating and returning the enclosed proxy promptly in the accompanying reply
envelope. Representation of your shares at the meeting is very important.
Accordingly, whether or not you plan to attend the meeting, we urge you to
submit your proxy promptly by one of the methods offered.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Robert C. Stempel
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Robert C. Stempel
Chairman of the Board
YOUR VOTE IS IMPORTANT
In order to assure your representation at this meeting, you are requested
to vote your shares by telephone, by the Internet or by signing, dating and
returning the enclosed proxy as promptly as possible in the enclosed envelope.
No postage need be affixed if mailed in the United States.
ENERGY CONVERSION DEVICES, INC.
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NOTICE OF MEETING OF STOCKHOLDERS
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Rochester Hills, Michigan
January 18, 2002
To the Stockholders of
ENERGY CONVERSION DEVICES, INC.:
NOTICE is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of ENERGY CONVERSION DEVICES, INC. (the "Company" or "ECD") will be
held at 10:00 a.m. (E.S.T.) on Thursday, February 21, 2002, at Michigan State
University Management Education Center, 811 West Square Lake Road, Troy,
Michigan. The purpose of the Meeting is to:
1. Elect fourteen directors to hold office until the next Annual
Meeting of Stockholders of the Company.
2. Approve the appointment of Deloitte & Touche LLP as independent
auditors for the fiscal year ending June 30, 2002.
3. Transact such other business as may properly come before the Meeting.
Stockholders of record at the close of business on December 31, 2001 will
be entitled to vote at the Meeting. A list of stockholders entitled to vote at
the Meeting will be available for inspection at our offices. Whether or not you
plan to attend the Meeting in person, please vote your shares by telephone, by
the Internet or by signing, dating and returning the enclosed proxy promptly in
the accompanying reply envelope.
The Company's Annual Report on Form 10-K for its fiscal year ended June
30, 2001 accompanies the enclosed Proxy Statement.
By Order of the Board of Directors
/s/ Ghazaleh Koefod
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Ghazaleh Koefod
Secretary
Energy Conversion Devices, Inc.
2956 Waterview Drive
Rochester Hills, MI 48309
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PROXY STATEMENT
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Energy Conversion Devices, Inc. (the
"Company" or "ECD"), a Delaware corporation, to be voted at the Annual Meeting
of Stockholders (the "Meeting") to be held at Michigan State University
Management Education Center, 811 West Square Lake Road, Troy, Michigan on
Thursday, February 21, 2002, at 10:00 a.m. (EST).
This proxy statement and accompanying proxy were first mailed to
stockholders on or about January 18, 2002.
Purpose of the Meeting. The specific proposals to be considered and acted
upon at the annual meeting are summarized in the accompanying notice and are
described in more detail in this proxy statement.
Voting Rights of Stockholders. Holders of record of the Company's Common
Stock at the close of business on December 31, 2001, are entitled to vote at the
Meeting. As of December 31, 2001, there were outstanding 21,237,443 shares of
the Company's Common Stock, $.01 par value ("Common Stock"); 219,913 shares of
the Company's Class A Common Stock, $.01 par value ("Class A Common Stock"); and
430,000 shares of the Company's Class B Common Stock, $.01 par value ("Class B
Common Stock"). Each share of Common Stock is entitled to one vote per share,
Class B Common Stock is entitled initially to one vote per share, and each share
of Class A Common Stock is entitled to 25 votes per share. The three classes
vote as one class on all matters, including the election and removal of
directors, except that with respect to (i) a merger or consolidation of the
Company with another corporation, (ii) the liquidation or dissolution of the
Company, (iii) the sale of all or substantially all of the assets of the
Company, (iv) an amendment to the Company's Certificate of Incorporation for
which class voting is required by Section 242 of the Delaware General
Corporation Law, or (v) the authorization of additional shares of Common Stock,
Class A Common Stock or Class B Common Stock, the affirmative vote of a majority
of the outstanding shares of Common Stock, the majority of the outstanding
shares of Class A Common Stock and the majority of the outstanding shares of
Class B Common Stock, voting as separate classes, is required. Section 242 of
the Delaware General Corporation Law provides that "the holders of the
outstanding shares of a class shall be entitled to vote as a class upon a
proposed amendment [to the corporation's certificate of incorporation], whether
or not entitled to vote thereon by the certificate of incorporation, if the
amendment would increase or decrease the aggregate number of authorized shares
of such class, increase or decrease the par value of the shares of such class,
or alter or change the powers, preferences or special rights of the shares of
such class so as to affect them adversely."
Stanford R. Ovshinsky and his wife, Dr. Iris M. Ovshinsky, executive
officers, directors and founders of the Company, are record owners of 153,420
and 65,601 shares (or approximately 69.8 percent and 29.8 percent),
respectively, of the outstanding shares of Class A Common Stock, with the
balance of the outstanding shares (892 shares) owned by members of their
family. Mr. and Dr. Ovshinsky also own of record 19,884 shares of Common
Stock. In addition, Mr. Ovshinsky
has the right to vote 126,500 shares of Common Stock (the "Sanoh Shares") owned
by Sanoh Industrial Co., Ltd. ("Sanoh") under the terms of an agreement dated
November 3, 1992 between the Company and Sanoh.
Robert C. Stempel, Chairman and Executive Director of the Company, is
entitled to all voting rights with respect to 430,000 shares, or 100 percent, of
the outstanding shares of Class B Common Stock awarded to Mr. Stempel on January
15, 1999, under a Restricted Stock Agreement. Mr. Stempel also owns of record
61,404 shares of Common Stock.
The directors and officers of the Company have advised the Company that
they intend to vote FOR each of the proposals set forth in the accompanying
Notice of Meeting of Stockholders. Such persons together hold approximately
22.79 percent of the combined voting power of the outstanding Common Stock,
Class A Common Stock and Class B Common Stock.
Pursuant to the Stock Purchase Agreement dated as of May 1, 2000,
ChevronTexaco Corporation has agreed that (i) so long as it beneficially owns an
aggregate of 5 percent of ECD's Common Stock and (ii) so long as Mr. and Dr.
Ovshinsky are the beneficial owners of Class A Common Stock, or Mr. Stempel is
the beneficial owner of Class B Common Stock, ChevronTexaco will vote its shares
of ECD Common Stock in accordance with the votes cast by the holders of Class A
Common Stock (prior to its conversion) or Class B Common Stock (after conversion
of the Class A Common Stock). As of December 31, 2001, ChevronTexaco owns
4,376,633 shares of ECD Common Stock.
Record Date. Stockholders of record as of the close of business on
December 31, 2001, will be entitled to vote at the Meeting.
Quorum. The required quorum for the transaction of business at the Meeting
is a majority of the votes eligible to be cast by holders of record of the
Common Stock, Class A Common Stock and Class B Common Stock as of the close of
business on the record date. If a stockholder withholds his or her vote for the
election of directors or abstains from voting on the other proposals to be
considered at the Meeting, the shares owned by such stockholder will be
considered to be present at the Meeting for purposes of establishing the
presence or absence of a quorum for the transaction of business. If a broker
indicates on the form of proxy that he or she does not have discretionary
authority as to certain shares to vote on any proposal, those shares will also
be considered to be present at the Meeting for purposes of establishing the
presence or the absence of a quorum for the transaction of business.
Required Vote. The affirmative vote of a plurality of the votes cast at
the Meeting will be required to elect the directors of the Company. Because
directors are elected by a plurality vote, abstentions and withheld votes have
no impact in the election of directors once a quorum is established.
The affirmative vote of a majority of the votes cast at the Meeting will
be required to approve the proposal with respect to the appointment of the
Company's independent accountants. Abstentions will be considered as votes cast
with respect to such proposal and will have the same effect as a vote against
the proposal.
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Voting of Proxies. All shares represented by signed proxies received at or
prior to the Meeting from stockholders of record as of the close of business on
December 31, 2001, will be voted at the Meeting. Unless a stockholder specifies
otherwise, all proxies will be voted FOR each of the proposals set forth in the
accompanying Notice of Meeting of Stockholders.
Voting by telephone or Internet. Stockholders of record (those who hold
stock in their own name) may vote their shares over the telephone or Internet as
follows:
By telephone: If you have a touch-tone phone, call 1-877-PRX-VOTE
(1-877-779-8683) toll free. You will be asked to enter the
Control Number located on your Proxy Card. Then follow the
instructions.
By Internet: If you have an e-mail and Internet access, point your
browser to http://www.eproxyvote.com/ener. You will be asked
to enter the Control Number located on your Proxy Card.
Then follow the instructions.
Stockholders who hold their shares in "street name" should contact their
broker or other nominee to determine whether they will be able to vote by
telephone or Internet.
Voting in Person. If you plan to attend the meeting and wish to vote in
person, we will give you a ballot at the meeting. However, if your shares are
held in the name of your broker, bank or other nominee, you must bring an
account statement or letter from the nominee indicating that you are the
beneficial owner of the shares on December 31, 2001, the record date for voting.
Revocation of Proxies. You may revoke your proxy before it is voted by:
o submitting a new proxy with a later date, including a proxy given by
telephone or internet;
o notifying the Company's Secretary in writing before the meeting that
you have revoked your proxy; or
o voting in person at the Meeting.
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ITEM NO. 1
ELECTION OF DIRECTORS
At the Meeting, the directors are to be elected to serve until the next
annual meeting of stockholders and until their successors are duly elected and
qualified. Pursuant to the provisions of the Company's bylaws, the Board of
Directors has, by resolution, set the number of directors comprising the full
Board at fourteen. In the unanticipated event that any nominee for director
should become unavailable, it is intended that all proxies will be voted for
such substitute nominee as may be designated by the Board of Directors. The
affirmative vote of a plurality of the votes cast at the Meeting will be
required to elect the directors.
Mr. Tyler Lowrey, who served as a member of the Board of Directors since
1999, will not be standing for re-election due to additional business
responsibilities at Ovonyx, Inc. Mr. Lowrey, a world-recognized authority in
semiconductor memory technology, is the president and chief executive officer of
Ovonyx which is working with Intel Corporation, STMicroelectronics and BAE
Systems to commercialize ECD's nonvolatile memory technology, the Ovonic Unified
Memory.
Information concerning the nominees for election as directors, including
the year each nominee first became a director, is set forth on the following
pages.
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THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ALL
FOURTEEN NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS.
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Director
of the
Company Principal Occupation and
Name Since Office Business Experience
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Stanford R. Ovshinsky 1960 President, Chief Mr. Ovshinsky, 79, the founder, chief executive officer
Executive Officer and president, has been an executive officer and director
and Director of ECD since its inception in 1960. Mr. Ovshinsky is the
primary inventor of ECD's technologies. He also serves
as the chief executive officer and a director of Ovonic
Battery Company, Inc.; chief executive officer and
chairman of United Solar Systems Corp.; president and
member of the Management Committees of Texaco
Ovonic Fuel Cell Company LLC and Texaco Ovonic
Hydrogen Systems LLC; a member of the Management
Committee of Texaco Ovonic Battery Systems LLC and
Bekaert ECD Solar Systems, LLC; chairman and
director of Ovonyx, Inc.; a member of the Alliance Board
of Ovonic Media, LLC; and co-chairman of the board of
directors of Sovlux Co., Ltd. Mr. Ovshinsky is the
husband of Dr. Iris M. Ovshinsky.
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Iris M. Ovshinsky 1960 Vice President Dr. Ovshinsky, 74, co-founder and vice president, has
and Director been an executive officer and director of ECD since its
inception in 1960. Dr. Ovshinsky also serves as a
director of Ovonic Battery. Dr. Ovshinsky is the wife of
Stanford R. Ovshinsky.
Robert C. Stempel 1995 Chairman of the Mr. Stempel, 68, is chairman of the board and executive
Board and director of ECD. Prior to his election as a director in
Executive December 1995, Mr. Stempel served as senior business
Director and technical advisor to Mr. Ovshinsky. He is also the
chairman of Ovonic Battery; a director of United Solar
and Ovonyx; a member of the Management Committee
of Texaco Ovonic Fuel Cell, Texaco Ovonic Hydrogen
Systems and Bekaert ECD Solar Systems; chief
executive officer and a member of the Management
Committee of Texaco Ovonic Battery Systems and a
member of the Alliance Board of Ovonic Media. From
1990 until his retirement in 1992, he was the chairman
and chief executive officer of General Motors
Corporation; prior to serving as chairman, he was GM's
president since 1987. He is a director of Southwall
Technologies, Inc.
Nancy M. Bacon 1977 Senior Vice Mrs. Bacon, 55, senior vice president, joined ECD in
President and 1976 as its vice president of finance and treasurer. Mrs.
Director Bacon also serves as a director of United Solar and
Sovlux and is a member of the Management Committee
of Bekaert ECD Solar Systems.
Umberto Colombo 1995 Director Professor Colombo, 74, is chairman of the Scientific
Councils of the ENI Enrico Mattei Foundation and of the
Instituto Per l'Ambiente in Italy. He was chairman of the
Italian National Agency for New Technology, Energy and
the Environment until 1993 and then served as Minister
of Universities and Scientific and Technological
Research in the Italian Government until 1994.
Professor Colombo is a member of the board of
directors of several Italian-based public companies. He
is also active as a consultant in international science and
technology policy institutions related to economic growth.
Subhash K. Dhar 1999 Director Mr. Dhar, 50, president and chief operating officer of
Ovonic Battery, joined ECD in 1981 and has held various
positions with Ovonic Battery since its inception in
October 1982. He also serves as a director of Ovonic
Battery.
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Hellmut Fritzsche 1969 Vice President Dr. Fritzsche, 74, was a professor of Physics at the
and Director University of Chicago from 1957 until his retirement in
1996. He was chairman of the Department of Physics
at the University of Chicago until 1986. Dr. Fritzsche
has been a vice president of ECD since 1965, acting on
a part-time basis, chiefly in ECD's research and product
development activities. He serves on the board of
directors of United Solar.
Walter J. McCarthy, Jr. 1995 Director Mr. McCarthy, 76, until his retirement in 1990, was the
chairman and chief executive officer of Detroit Edison
Company. He has served as a consultant to ECD since
1990. Until 1995, Mr. McCarthy also served on the
boards of Comerica Bank, Detroit Edison Company and
Federal-Mogul Corporation. He is a member of the
National Academy of Engineering. Mr. McCarthy serves
as chairman of the Compensation Committee and is on
the Audit Committee of the ECD board.
Florence I. Metz 1995 Director Dr. Metz, 72, until her retirement in 1996, held various
executive positions with Inland Steel: General Manager,
New Ventures, Inland Steel Company (1989-1991);
General Manager, New Ventures, Inland Steel Industries
(1991-1992) and Advanced Graphite Technologies
(1992-1993); Program Manager for Business and
Strategic Planning at Inland Steel (1993-1996). Dr. Metz
also serves on the board of directors of Ovonic Battery
and is on the Compensation and Audit Committees of
the ECD board.
James R. Metzger 2000 Director Mr. Metzger, 54, who retires from ChevronTexaco
Corporation on March 1, 2002 following the merger of
Chevron Corporation and Texaco on October 9, 2001,
was vice president and chief technology officer at
Texaco and held various positions since joining Texaco
in 1969. Mr. Metzger's responsibilities at Texaco
included all aspects of technology, Corporate Planning
and Economics, Safety, Health and Environment,
Corporate Services and Purchasing. He was a member
of the Diversity Council, chaired the Corporate
Technology Council and served on Texaco's Executive
Council, the company's senior management committee.
Mr. Metzger serves on the Audit Committee of the ECD
board.
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Donald L. Paul 2001 Director Mr. Paul, 55, is vice president and chief technology
officer of ChevronTexaco. Previously, he served as vice
president of technology and environmental affairs for
Chevron Corp., a position he assumed in 1996, in which
role he was also the corporate officer for Chevron's
worldwide health, safety and environmental compliance
function. Mr. Paul joined Chevron in 1975 as a research
geophysicist with Chevron Oil Field Research Co. and
has held a variety of management positions in both the
business and technology, including president of Chevron
Petroleum Technology Co. and president of Chevron
Canada. Mr. Paul holds a doctorate in geophysics from
MIT.
Stanley K. Stynes 1977 Director Dr. Stynes, 70, was dean of the College of Engineering
at Wayne State University from 1970 to August 1985,
and a professor of engineering at Wayne State
University from 1985 until his retirement in 1992. He has
been involved in various administrative, teaching,
research and related activities. Dr. Stynes serves as
chairman of the Audit Committee of the ECD board.
Greg M. Vesey 2001 Director Mr. Vesey, 43, is president of ChevronTexaco
Technology Ventures. In this position, he is responsible
for the commercialization of both internal and external
technology in which ChevronTexaco finds current or
strategic application. Previously, he was vice president,
ebusiness and general manager, Business Service
Center for Texaco Inc., a position he assumed in
November 1999. He has held many positions since
joining Texaco in 1984, including assistant to the
Chairman of the Board (1999).
William M. Wicker 2000 Director Mr. Wicker, 52, is currently a managing director in the
Investment Banking Division of Goldman Sachs. Prior
to this, Mr. Wicker had been a senior vice president at
Texaco where he was responsible for worldwide
Refining & Marketing, Power & Gasification, Texaco
Natural Gas & Texaco Energy Systems and also served
on Texaco's Executive Council, the company's senior
management committee. Prior to joining Texaco in
1997, Mr. Wicker had been a managing director at
Credit Suisse First Boston and co-head of the Global
Energy Group which he joined in 1989.
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MEETINGS OF THE BOARD OF DIRECTORS AND COMPENSATION OF DIRECTORS
During the fiscal year ended June 30, 2001, the Board of Directors held
four meetings. All the directors attended more than 75 percent of the meetings
of the Board and the committees on which such directors served, except for Prof.
Colombo.
Officers of the Company who serve on the Company's Board do not receive
compensation for their services as a director. The other directors of the
Company are issued approximately $5,000 per year in ECD Common Stock based on
the closing price of the Common Stock on the first business day of each year and
are paid $1,000 for attendance at each Board meeting and each Committee meeting
(in person or via telephone conference call). They are also reimbursed for all
expenses incurred for the purpose of attending board of directors and committee
meetings, including airfare, mileage, parking, transportation and hotel. Messrs.
Paul and Vesey have waived any entitlement to compensation for serving as
directors of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors (the "Audit Committee") is
composed of Dr. Stanley K. Stynes (Chairman), Mr. Walter J. McCarthy, Jr., Dr.
Florence Metz (since May 2001) and Mr. James Metzger (since February 2001).
Drs. Stynes and Metz and Mr. McCarthy are independent directors as defined
under Rule 4200(a)(14) of the Listing Standards of the National Association of
Security Dealers, Inc. ("NASD"). At the time of his appointment to the Audit
Committee, Mr. Metzger was not deemed to be an independent director by virtue
of his service as an executive officer of Texaco Inc. and because the Company
received payments from Texaco (other than those arising solely from investments
in the Company's securities) that exceeded 5% of the Company's consolidated
gross revenues for 2001.
Paragraph (d)(2)(B) of NASD Rule 4350 allows for the appointment to the
Audit Committee of one director who is not independent upon a determination by
the Board of Directors that membership on the Audit Committee by the individual
is in the best interests of the Company and its shareholders. The Company's
Board of Directors made such a determination in appointing Mr. Metzger to the
Audit Committee based upon the importance to the Company and its shareholders of
the joint ventures formed by the Company and Texaco. Because Mr. Metzger will
retire from ChevronTexaco effective March 1, 2002, he thereafter will qualify as
an independent director under the NASD's Listing Standards.
In accordance with its written charter adopted by the Board of Directors,
the Audit Committee assists the Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing, and financial reporting practices of the Company.
The Compensation Committee of the Board of Directors (the "Compensation
Committee") met four times during the fiscal year ended June 30, 2001 and was
composed of Mr. Walter J. McCarthy, Jr. (Chairman) and Dr. Florence I. Metz. The
Compensation Committee is responsible for administering the policies which
govern both annual compensation of executive officers and the Company's stock
option plans. The Compensation Committee meets during the year to review
recommendations from management regarding stock options and compensation. None
of the Compensation Committee members are, or were during the past fiscal year,
officers or employees
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of the Company or of any of its subsidiaries, nor had they any business
relationship with the Company or any of its subsidiaries.
The Company does not have a standing nominating committee.
AUDIT COMMITTEE REPORT
During fiscal year 2001, the Audit Committee met five times with
management and the independent auditors, Deloitte & Touche LLP and discussed the
interim financial information contained in each quarterly earnings announcement
prior to public release.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from Deloitte & Touche a formal written statement
describing all relationships between Deloitte & Touche and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may impact their objectivity
and independence and satisfied itself as to the auditors' independence. The
Audit Committee also discussed with management and Deloitte & Touche the quality
and adequacy of the Company's internal controls. The Audit Committee reviewed
with Deloitte & Touche their audit plans, audit scope, and identification of
audit risks.
The Audit Committee discussed and reviewed with Deloitte & Touche all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of Deloitte & Touche's examination of the
financial statements.
The Audit Committee reviewed with management and Deloitte & Touche the
audited financial statements of the Company as of and for the fiscal year ended
June 30, 2001. Management has the responsibility for the preparation of the
Company's financial statements and Deloitte & Touche has the responsibility for
the examination of those statements.
Based on the above-mentioned reviews and discussions with management and
Deloitte & Touche, the Audit Committee recommended to the Board of Directors
that the Company's audited financial statements be included in its Annual Report
on Form 10-K for the fiscal year ended June 30, 2001, for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE
Stanley K. Stynes, Chairman
Walter J. McCarthy Jr.
Florence I. Metz
James R. Metzger
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AUDIT FEES
The aggregate fees billed or expected to be billed to the Company for the
fiscal year ended June 30, 2001 by the Company's principal accounting firm,
Deloitte & Touche, are as follows:
Audit Fees......................................................$315,000
Financial Information Systems Design and Implementation Fees....$ -0-
All Other Fees..................................................$ 75,850
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Total...................................................$390,850
========
The Audit Committee, based on its reviews and discussions with management
and Deloitte & Touche noted above, determined that the provision of All Other
Fees by Deloitte & Touche was compatible with maintaining Deloitte & Touche's
independence.
ITEM NO. 2
APPROVAL OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed Deloitte & Touche LLP as independent accountants for the Company to
audit its consolidated financial statements for the fiscal year ending June 30,
2002 and to perform audit-related services. Such services include review of
periodic reports and registration statements filed by the Company with the
Securities and Exchange Commission and consultation in connection with various
accounting and financial reporting matters. Deloitte & Touche also performs
audit services for certain of the Company's joint ventures and limited non-audit
services for the Company.
The Board of Directors has directed that the appointment of Deloitte &
Touche be submitted to the stockholders for approval. The affirmative vote of a
majority of the votes cast at the Meeting will be required to approve such
appointment. If the stockholders should not approve such appointment, the Audit
Committee and the Board of Directors would reconsider the appointment.
The Company has been advised by Deloitte & Touche that it expects to have
a representative present at the Meeting and that such representative will be
available to respond to appropriate questions. Such representative will also
have the opportunity to make a statement if he or she desires to do so.
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THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE APPOINTMENT OF DELOITTE & TOUCHE AS INDEPENDENT ACCOUNTANTS.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
CLASS A COMMON STOCK
Mr. Stanford R. Ovshinsky and his wife, Dr. Iris M. Ovshinsky (executive
officers, directors and founders of the Company), own of record 153,420 shares
and 65,601 shares, respectively (or approximately 69.8 percent and 29.8 percent,
respectively), of the outstanding shares of Class A Common Stock. Such shares
are owned directly or indirectly through certain trusts of which Mr. and Dr.
Ovshinsky are co-trustees. Each share of Common Stock is entitled to one vote
per share; Class B Common Stock is entitled initially to one vote per share; and
each share of Class A Common Stock is entitled to 25 votes per share. Class A
Common Stock is convertible into Common Stock on a share-for-share basis at any
time and from time to time at the option of the holders, and will be deemed to
be converted into Common Stock on a share-for-share basis on September 30, 2005.
Under applicable Delaware law, the September 30, 2005 mandatory conversion date
may be extended in the future from time to time with the approval of the
Company's stockholders voting together as a single class.
Mr. Ovshinsky also has the right to vote 126,500 Sanoh Shares which,
together with the Class A Common Stock and 19,884 shares of Common Stock Mr. and
Dr. Ovshinsky own, give Mr. and Dr. Ovshinsky voting control, as of December 31,
2001, over shares representing approximately 20.70 percent of the combined
voting power of the Company's outstanding stock.
The following table sets forth, as of December 31, 2001, information
concerning the beneficial ownership of Class A Common Stock by each director and
all executive officers and directors of the Company as a group. All shares are
owned directly except as otherwise indicated. Under the rules of the Securities
and Exchange Commission, Stanford R. Ovshinsky and Iris M. Ovshinsky may each be
considered to beneficially own the shares held by the other.
[Enlarge/Download Table]
Class A
Name of Common Stock Total Number of Shares
Beneficial Owner Beneficially Owned(1)(2) Beneficially Owned Percentage of Class
------------------ ------------------ ---------------------- -------------------
Stanford R. Ovshinsky 153,420 153,420 69.8%
Iris M. Ovshinsky 65,601 65,601 29.8%
All other executive
officers and directors as
a group (14 persons) __ __ __
Total 219,021 219,021 99.6%
------------
(1) The balance of the 219,913 shares of Class A Common Stock outstanding,
892 shares, or approximately 0.4 percent, are owned by other members of
Mr. and Dr. Ovshinsky's family. Neither Mr. nor Dr. Ovshinsky has voting
or investment power with respect to such shares.
(2) On November 10, 1995, the Compensation Committee recommended, and the
Board of Directors approved, an amendment to Mr. and Dr. Ovshinsky's Stock
Option Agreements dated November 18, 1993 (the "Agreements") to permit Mr.
and Dr. Ovshinsky to exercise a portion (126,082 and 84,055 shares,
respectively) of their existing Common Stock options for Class A Common
Stock on the same terms and conditions as provided in the Agreements. The
shares of Class A Common Stock issuable upon exercise of the options under
the Agreements, as amended, are not included in the number of shares
indicated in the above table, but are included in the shares of Common
Stock beneficially owned by Mr. and Dr. Ovshinsky.
-11-
CLASS B COMMON STOCK
At the Company's Annual Meeting held on March 25, 1999, the Company's
stockholders approved a proposal to increase the Company's authorized capital
stock and to authorize 430,000 shares of a new Class B Common Stock. All of the
authorized shares of Class B Common Stock were awarded to Mr. Robert C. Stempel
pursuant to the terms of a Restricted Stock Agreement dated as of January 15,
1999 between the Company and Mr. Stempel.
The terms of the Class B Common Stock are substantially similar to those
of the Company's Class A Common Stock. The principal difference between the
Class A Common Stock and the Class B Common Stock is with respect to voting
rights. Each share of Class B Common Stock will initially entitle the holder to
one vote on all matters to be voted upon by the Company's stockholders. However,
each share of Class B Common Stock will become entitled to 25 votes as of the
first date upon which all of the outstanding shares of Class A Common Stock have
been converted into Common Stock and no shares of Class A Common Stock are
outstanding. The preferential voting rights of the Class B Common Stock, if
triggered, will expire on September 30, 2005.
The Class B Common Stock will be convertible into Common Stock on a
share-for-share basis at any time at the option of the holder. In addition, the
Class B Common Stock will be deemed to be converted into Common Stock on
September 30, 2005. The Company's amended Certificate of Incorporation provides
that the foregoing September 30, 2005 mandatory conversion date may be extended
in the future with the approval of the Company's stockholders voting together as
a single class.
Pursuant to the Stock Purchase Agreement dated as of May 1, 2000,
ChevronTexaco has agreed that (i) so long as it beneficially owns an aggregate
of 5 percent of ECD's Common Stock and (ii) so long as Mr. and Dr. Ovshinsky are
the beneficial owners of Class A Common Stock, or Mr. Stempel is the beneficial
owner of Class B Common Stock, ChevronTexaco will vote its shares of ECD Common
Stock in accordance with the votes cast by the holders of Class A Common Stock
(prior to its conversion) or Class B Common Stock (after conversion of the Class
A Common Stock). As of December 31, 2001, ChevronTexaco owns 4,376,633 shares
of ECD Common Stock.
-12-
COMMON STOCK
Directors and Executive Officers. The following table sets forth, as of
December 31, 2001, information concerning the beneficial ownership of Common
Stock by each director and executive officer and for all directors and executive
officers of the Company as a group. All shares are owned directly except as
otherwise indicated.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percentage of Class(2)
-------------------------- ----------------------- ----------------------
Robert C. Stempel 1,080,404 (3) 4.85%
Stanford R. Ovshinsky 888,382 (4) 4.04%
Iris M. Ovshinsky 478,227 (5) 2.20%
Nancy M. Bacon 180,015 (6) *
Subhash K. Dhar 49,540 (7) *
Hellmut Fritzsche 18,250 (8) *
Walter J. McCarthy, Jr. 13,437 *
Stanley K. Stynes 12,318 *
Stephan Zumsteg 11,600 (9) *
Tyler Lowrey 11,250 (10) *
Florence I. Metz 10,134 (11) *
Umberto Colombo 8,401 (12) *
James R. Metzger -
Donald L. Paul -
Greg M. Vesey -
William M. Wicker -
All executive officers and 2,761,958 11.65%
directors as a group
(16 persons)
-----------------
* Less than 1%.
(1) Under the rules and regulations of the Securities and Exchange
Commission, a person is deemed to be the beneficial owner of a security
if that person has the right to acquire beneficial ownership of such
security within sixty days, whether through the exercise of options or
warrants or through the conversion of another security.
(2) Under the rules and regulations of the Securities and Exchange
Commission, shares of common stock issuable upon exercise of options and
warrants or upon conversion of securities which are deemed to be
beneficially owned by the holder thereof (see Note (1) above) are deemed
to be outstanding for the purpose of computing the percentage of
outstanding securities of the class owned by such person, but are not
deemed to be outstanding for the purpose of computing the percentage of
the class owned by any other person.
-13-
(3) Includes 430,000 shares of Class B Common Stock and 589,000 shares
represented by options exercisable within 60 days.
(4) Includes 596,222 shares (adjusted as of December 31, 2001) represented by
options exercisable within 60 days, the 126,500 Sanoh Shares over which
Mr. Ovshinsky has voting power, and 153,420 shares of Class A Common
Stock which are convertible into Common Stock. Under the rules and
regulations of the Securities and Exchange Commission, Mr. Ovshinsky may
be deemed a beneficial owner of the shares of Common Stock and Class A
Common Stock owned by his wife, Iris M. Ovshinsky. Such shares are not
reflected in Mr. Ovshinsky's share ownership in this table.
(5) Includes 404,982 shares (adjusted as of December 31, 2001) represented by
options exercisable within 60 days, and 65,601 shares of Class A Common
Stock which are convertible into Common Stock. Under the rules and
regulations of the Securities and Exchange Commission, Dr. Ovshinsky may
be deemed a beneficial owner of the shares of Common Stock and Class A
Common Stock owned by her husband, Stanford R. Ovshinsky. Such shares are
not reflected in Dr. Ovshinsky's share ownership in this table.
(6) Includes 155,200 shares represented by options exercisable within 60 days.
(7) Includes 48,040 shares represented by options exercisable within 60 days.
(8) Includes 5,388 shares represented by options exercisable within 60 days.
(9) Includes 9,600 shares represented by options exercisable within 60 days.
(10) Includes 10,000 shares represented by options exercisable within 60 days.
(11) Includes 3,000 shares represented by options exercisable within 60 days.
(12) Includes 5,000 shares represented by options exercisable within 60 days.
-14-
Principal Shareholders. The following table sets forth, as of December 31,
2001, to the knowledge of the Company, the beneficial holders of more than 5%
of the Company's Common Stock (see footnotes for calculation used to determine
"percentage of class" category):
Name and Address of Amount and Nature of
Beneficial Holder Beneficial Ownership Percentage of Class
---------------------------- -------------------- -------------------
TRMI Holdings Inc. (ChevronTexaco) 4,376,633 (1) 19.9962%
2000 Westchester Avenue
White Plains, NY 10650
Stanford R. and Iris M. Ovshinsky 1,366,707 (2) 6.24% (3)(4)
2956 Waterview Drive
Rochester Hills, MI 48309
------------
(1) Pursuant to the Stock Purchase Agreement dated as of May 1, 2000,
ChevronTexaco has agreed that (i) so long as it beneficially owns an
aggregate of 5 percent of ECD's Common Stock and (ii) so long as Mr. and
Dr. Ovshinsky are the beneficial owners of Class A Common Stock, or Mr.
Stempel is the beneficial owner of Class B Common Stock, ChevronTexaco
will vote its ECD Common Stock in accordance with the votes cast by the
holders of Class A Common Stock (prior to its conversion) or Class B
Common Stock (after conversion of the Class A Common Stock).
(2) Includes 219,021 shares of Class A Common Stock owned by Mr. and Dr.
Ovshinsky (which shares are convertible at any time into Common Stock and
will be deemed to be converted into Common Stock on September 30, 2005),
19,884 shares of Common Stock owned by Mr. and Dr. Ovshinsky, 126,500
shares of Sanoh Shares over which Mr. Ovshinsky has voting rights, and
1,001,204 (adjusted as of December 31, 2001) shares represented by options
exercisable within 60 days.
(3) Under the rules and regulations of the Securities and Exchange Commission,
shares of Common Stock issuable upon exercise of options and warrants or
upon conversion of securities which are deemed to be beneficially owned by
the holder thereof are deemed to be outstanding for the purpose of
computing the percentage of outstanding securities of the class owned by
such person, but are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person.
(4) Represents the sum of Mr. and Dr. Ovshinsky's respective ownership
interests calculated separately.
-15-
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
Served As An Executive
Name Age Office Officer or Director Since
--------------------- ---- -------------------------- -------------------------
Stanford R. Ovshinsky 79 President, Chief Executive 1960 (1)
Officer and Director
Iris M. Ovshinsky 74 Vice President and Director 1960 (1)
Robert C. Stempel 68 Executive Director and 1995
Chairman of the Board
Nancy M. Bacon 55 Senior Vice President and 1976
Director
Hellmut Fritzsche 73 Vice President and Director 1969
Subhash K. Dhar 50 President and Chief 1986
Operating Officer of Ovonic
Battery and Director
Stephan W. Zumsteg 55 Vice President and Chief 1997
Financial Officer
-----------
(1) The predecessor of ECD was originally founded in 1960. The present
corporation was incorporated in 1964 and is the successor by merger of
the predecessor corporation.
See "Item No. 1, Election of Directors" for information relating to
Stanford R. Ovshinsky, Iris M. Ovshinsky, Robert C. Stempel, Nancy M. Bacon,
Subhash K. Dhar and Hellmut Fritzsche.
Stephan W. Zumsteg joined ECD in March 1997. He was elected treasurer in
April 1997 and vice president and chief financial officer in February 2001. Mr.
Zumsteg also serves as treasurer of Ovonic Battery, Texaco Ovonic Fuel Cell and
Texaco Ovonic Hydrogen Systems. Prior to joining ECD, Mr. Zumsteg was chief
financial officer of the Kirlin Company from July 1996 to February 1997 and
vice president of finance & administration and chief financial officer of
Lincoln Brass Works from July 1991 to June 1996.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers to file with the Securities and Exchange
Commission reports of ownership and changes in ownership with respect to the
securities of the Company and its affiliates and to furnish copies of these
reports to the Company. Based on a review of these reports and written
representations from the Company's directors and officers regarding the
necessity of filing a report, the Company believes that during fiscal year
ended June 30, 2001, all filing requirements were met on a timely basis.
-16-
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by ECD during its
last three fiscal years to its chief executive officer and each of its other
four most highly compensated executive officers for the fiscal year ended June
30, 2001.
SUMMARY COMPENSATION TABLE
[Enlarge/Download Table]
Annual Long Term
Compensation Compensation
------------------ ----------------
All
Restricted Options Other
Name and Principal Fiscal Stock (Number of Compen-
Position Year(1) Salary(2) Bonus Award Shares) sation(3)
-------------------------- --------- ----------- --------- -------------- ------------- -----------
Stanford R. Ovshinsky, 2001 $334,408 118,239(4) $10,361
President and Chief 2000 $303,908 106,611(5) $12,657
Executive Officer 1999 $294,929 4,084(5) $14,952
Iris M. Ovshinsky, 2001 $284,636 82,160(4) $10,361
Vice President 2000 $265,918 71,074(5) $12,657
1999 $257,941 2,723(5) $14,952
Robert C. Stempel, 2001 $270,004 - 100,000 $ 4,191
Executive Director 2000 $270,004 $4,591,540(6) - $ 5,035
1999 $270,004 300,000 $ 6,111
Nancy M. Bacon, 2001 $264,243 60,000 $ 6,041
Senior Vice President 2000 $255,008 $ 6,538
1999 $254,854 $ 7,104
Subhash K. Dhar, President 2001 $247,703 50,000 $ 5,528
and Chief Operating Officer, 2000 $224,421 $ 5,829
Ovonic Battery 1999 $220,001 $ 6,157
-------------
(1) ECD's fiscal year is July 1 to June 30. ECD's 2001 fiscal year ended June
30, 2001.
(2) Amounts shown include compensation deferred under ECD's 401 (k) Plan. The
amounts shown do not include taxable income resulting from exercise of
stock options.
(3) "All Other Compensation" is comprised of (i) contributions made by ECD to
the accounts of each of Mr. Ovshinsky, Dr. Ovshinsky, Mrs. Bacon and Mr.
Dhar in the amount of $4,800 under ECD's 401(k) Plan with respect to each
of the calendar years ended December 31, 2000, 1999 and 1998; (ii) the
dollar value of any life insurance premiums paid by ECD in the calendar
years ended December 31, 2000, 1999 and 1998, respectively, with respect
to term-life insurance for the benefit of each of the named executives as
follows: Mr. Ovshinsky $5,561, $7,857 and $10,152; Dr. Ovshinsky $5,561,
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$7,857 and $10,152; Mr. Stempel $4,191, $5,035 and $6,111; Mrs. Bacon
$1,241, $1,738 and $2,304; Mr. Dhar $728, $1,029 and $1,357. Under the 401
(k) Plan, which is a qualified defined-contribution plan, ECD makes
matching contributions periodically on behalf of the participants in the
amount of 50% of each such participant's contributions. These matching
contributions were limited to 3% of a participant's salary, up to $160,000
for the three calendar years reported.
(4) In fiscal year 2001, of the stock options issued to Mr. and Dr. Ovshinsky
in the amount of 118,239 shares and 82,160 shares, respectively, 18,239
shares (Mr. Ovshinsky) and 12,160 shares (Dr. Ovshinsky) were issued
pursuant to stock option agreements dated November 1993 which are subject
to periodic antidilution protection adjustments based on changes in the
number of outstanding shares of ECD Common Stock. Under those stock option
agreements, if ECD issues any equity securities other than pursuant to the
exercising of options, ECD is obligated to grant to Mr. and Dr. Ovshinsky
additional options covering sufficient additional shares of ECD Common
Stock so that their respective proportionate equity interest is maintained
on a fully-diluted basis. Such adjustments are calculated quarterly as of
the last day of each of the Company's fiscal quarters and coincident with
significant issuances of ECD Common Stock.
(5) The stock options were issued to Mr. and Dr. Ovshinsky pursuant to stock
option agreements dated November 1993 which are subject to periodic
antidilution protection adjustments based on changes in the number of
outstanding shares of ECD Common Stock.
(6) Represents the market value, less consideration paid consisting of the par
value $.01, of 430,000 shares of Common Stock awarded to Mr. Stempel under
a Restricted Stock Agreement dated January 15, 1999. Such shares of Common
Stock were exchanged for an equal number of shares of Class B Common Stock
upon the approval by ECD's stockholders, at the Annual Meeting held on
March 25, 1999, of a proposal to amend ECD's Certificate of Incorporation
to authorize 430,000 shares of a new Class B Common Stock. See "Class B
Common Stock." All shares of Restricted Stock will be deemed to vest if
Mr. Stempel is serving as a director and officer of ECD on September 30,
2005, or upon the occurrence of a change in control of ECD. Dividends will
be paid on the Restricted Stock if and to the extent paid on ECD's Common
Stock generally. So long as Mr. Stempel continues to serve as a director
of ECD and irrespective of whether the shares are deemed vested, he will
be entitled to exercise all voting rights with respect to the Restricted
Stock, including all preferential voting rights to which the Class B
Common Stock may become entitled after the conversion of the Class A
Common Stock. The value of Mr. Stempel's Restricted Stock at the close of
ECD's fiscal year was $8,400,000.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all options granted to the named executive
officers during the fiscal year ended June 30, 2001.
[Enlarge/Download Table]
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Optiond Term(1)
---------------------------------------------------- -----------------------------
Percent of
Number of Total
Securities Options Exercise
Underlying Granted to of Base
Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% 10%
---------------------- ----------- ------------ ---------- ---------- -----------------------------
Stanford R. Ovshinsky 118,239(2) 8.94% $23.84(3) (4) $1,773,094 $4,493,369
Iris M. Ovshinsky 82,160(2) 6.21% $23.80(3) (5) $1,396,590 $3,703,721
Robert C. Stempel 100,000 7.60% $22.625 3/14/2011 $1,422,874 $3,605,842
Nancy M. Bacon 60,000 4.54% $22.625 3/14/2011 $ 853,724 $2,163,505
Subhash K. Dhar 50,000 3.80% $22.625 3/14/2011 $ 711,437 $1,802,921
------------
(1) The potential realizable value amounts shown illustrate the values that
might be realized upon exercise immediately prior to the expiration of
their term using 5% and 10% appreciation rates as required to be used in
this table by the Securities and Exchange Commission, compounded annually,
and are not intended to forecast possible future appreciation, if any, of
the Company's stock price. Additionally, these values do not take into
consideration the provisions of the options providing for
nontransferability or termination of the options following termination of
employment.
(2) Of the stock options issued to Mr. and Dr. Ovshinsky in the amount of
118,239 shares and 82,160 shares, respectively, 18,239 shares (Mr.
Ovshinsky) and 12,160 shares (Dr. Ovshinsky) were issued pursuant to Stock
Option Agreements dated November 1993 which are subject to periodic
antidilution protection adjustments based on changes in the number of
outstanding shares of ECD Common Stock. Under those Stock Option
Agreements, if ECD issues any equity securities other than pursuant to the
exercising of options, ECD is obligated to grant to Mr. and Dr. Ovshinsky
additional options covering sufficient additional shares of ECD Common
Stock so that their respective proportionate equity interest is maintained
on a fully-diluted basis. Such adjustments are calculated quarterly as of
the last day of each of our fiscal quarters and coincident with
significant issuances of ECD Common Stock.
(3) The exercise price is the weighted average exercise price of the stock
options granted in fiscal year 2001.
(4) Of the 118,239 stock options granted in fiscal year 2001, 100,000 shares
expire on March 14, 2011 and 18,239 shares expire on November 18, 2003 or
12 months after termination of employment, whichever is later.
(5) Of the 82,160 stock options granted in fiscal year 2001, 70,000 shares
expire on March 14, 2011 and 12,160 shares expire on November 18, 2003 or
12 months after termination of employment, whichever is later.
-19-
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth all stock options exercised by the named
executives during the fiscal year ended June 30, 2001, and the number and value
of unexercised options held by the named executive officers at fiscal year end.
[Enlarge/Download Table]
Shares
Acquired Number of Securities Value of Unexercised
on Value Underlying Unexercised in-the-Money Options
Exercise Realized Options at Fiscal Year End at Fiscal Year End
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
------------------ -------- ------------ -------------------------- -------------------------
Stanford R. Ovshinsky(1) 65,400 $990,101 (2) 551,926/100,000 $8,176,779/$537,500
Iris M. Ovshinsky(3) 27,500 $524,101 (4) 375,451/70,000 $5,526,212/$376,250
Robert C. Stempel(5) 25,000 $300,688 (6) 579,000/100,000 $8,726,850/$537,500
Nancy M. Bacon(7) 12,000 $145,420 (8) 150,200/60,000 $2,215,725/$322,500
Subhash K. Dhar(9) 18,000 $178,912(10) 44,040/50,000 $495,450/$268,750
-------------
(1) Mr. Ovshinsky's exercisable and unexercisable options are exercisable at
a weighted average price of $13.27 and $22.63 per share, respectively.
(2) Of the $990,101 value realized, approximately $306,930 was used to cover
withholding taxes and other expenses associated with the exercise and
$17,500 was used to purchase 2,500 shares of ECD Common Stock.
(3) Dr. Ovshinsky's exercisable and unexercisable options are exercisable at
a weighted average price of $11.85 and $22.63 per share, respectively.
(4) Of the $524,101 value realized, approximately $179,429 was used to cover
withholding taxes and other expenses associated with the exercise and
$17,500 was used to purchase 2,500 shares of ECD Common Stock.
(5) Mr. Stempel's exercisable and unexercisable options are exercisable at a
weighted average price of $12.93 and $22.63 per share, respectively.
(6) Of the $300,688 value realized, approximately $108,000 was used to cover
withholding taxes and other expenses associated with the exercise and
$58,750 was used to purchase 5,000 shares of ECD Common Stock.
(7) Mrs. Bacon's exercisable and unexercisable options are exercisable at a
weighted average price of $13.25 and $22.63 per share, respectively.
(8) Of the $145,420 value realized, approximately $50,020 was used to cover
withholding taxes and other expenses associated with the exercise and
$29,375 was used to purchase 2,500 shares of ECD Common Stock.
(9) Mr. Dhar's exercisable and unexercisable options are exercisable at a
weighted average price of $16.75 and $22.63 per share, respectively.
(10) Of the $178,912 value realized, approximately $63,316 was used to cover
withholding taxes and other expenses associated with the exercise and
$25,125 was used to purchase 1,500 shares of ECD Common Stock.
-20-
EMPLOYMENT AGREEMENTS
On September 2, 1993, Stanford R. Ovshinsky entered into separate
employment agreements with each of ECD and Ovonic Battery in order to define
clearly his duties and compensation arrangements and to provide to each company
the benefits of his management efforts and future inventions. The initial term
of each employment agreement was six years. In February 1999, the board of
directors of ECD and Ovonic Battery renewed each of Mr. Ovshinsky's employment
agreements for an additional term ending September 30, 2005. Mr. Ovshinsky's
employment agreement with ECD provides for an annual salary of not less than
$100,000, while his agreement with Ovonic Battery provides for an annual salary
of not less than $150,000. Both agreements provide for annual increases to
reflect increases in the cost of living, discretionary annual increases as
determined by the board of directors of ECD and an annual bonus equal to 1% of
pre-tax income of ECD (excluding Ovonic Battery) and 1% of the operating income
of Ovonic Battery. Mr. Ovshinsky's annual salary increases for fiscal years
2000 and 1999 have been determined based upon increases in the cost of living
as determined by the Compensation Committee using as a guide the percentage
increase in the Consumer Price Index for the Detroit-metropolitan area
published by the Bureau of Labor Statistics. In recognition and acknowledgement
of Mr. Ovshinsky's invaluable contributions to ECD which resulted in
significant strategic alliances, the Compensation Committee determined that Mr.
Ovshinsky's salary increase in fiscal year 2001 should be above the nominal
cost-of-living increase.
Mr. Ovshinsky's employment agreement with Ovonic Battery additionally
contains a power of attorney and proxy from ECD providing Mr. Ovshinsky with
the right to vote the shares of Ovonic Battery held by ECD following a change
in control of ECD. For purposes of the agreement, change in control means (i)
any sale, lease, exchange or other transfer of all or substantially all of
ECD's assets; (ii) the approval by ECD's stockholders of any plan or proposal
of liquidation or dissolution of ECD; (iii) the consummation of any
consolidation or merger of ECD in which ECD is not the surviving or continuing
corporation; (iv) the acquisition by any person of 30 percent or more of the
combined voting power of the then outstanding securities having the right to
vote for the election of directors; (v) changes in the constitution of the
majority of the board of directors; (vi) the holders of the Class A Common
Stock ceasing to be entitled to exercise their preferential voting rights other
than as provided in ECD's charter and (vii) bankruptcy. In the event of mental
or physical disability or death of Mr. Ovshinsky, the foregoing power of
attorney and proxy will be exercised by Dr. Iris M. Ovshinsky.
Pursuant to his employment agreement with Ovonic Battery, Mr. Ovshinsky
was granted stock options, exercisable at a price of $16,129 per share to
purchase 186 shares (adjusted from a price of $50,000 per share to purchase 60
shares pursuant to the anti-dilution provisions of the option agreement) of
Ovonic Battery's common stock, representing approximately 6 percent of Ovonic
Battery's outstanding common stock. The Ovonic Battery stock options vest on a
quarterly basis over six years commencing with the quarter beginning October 1,
1993, subject to Mr. Ovshinsky's continued performance of his obligations to
Ovonic Battery under his employment agreement.
In February 1998, the Compensation Committee of the board of directors
recommended and the board of directors approved an employment agreement between
ECD and Dr. Iris M. Ovshinsky. The purpose of the employment agreement is to
clearly define Dr. Ovshinsky's duties and compensation arrangements. The
employment agreement also provides for ECD to have the benefits of Dr.
Ovshinsky's services as a consultant to ECD following the termination of her
active
-21-
employment for consulting fees equal to 50 percent of the salary payable to
Dr. Ovshinsky at the date of the termination of her active employment. Dr.
Ovshinsky shall have the right to retire at any time during her services as a
consultant and receive retirement benefits equal to the consulting fees for
the remainder of Dr. Ovshinsky's life.
The initial term of Dr. Ovshinsky's employment period was until September
2, 1999 and is automatically renewed for successive one-year periods unless
terminated by Dr. Ovshinsky or ECD upon 120 days notice in advance of the
renewal date. Dr. Ovshinsky's employment agreement provides for an annual
salary of not less than $250,000, annual increases to reflect increases in the
cost of living and discretionary annual increases, as determined by the board
of directors of ECD.
On January 15, 1999, ECD entered into an executive employment agreement
with Mr. Stempel. The executive employment agreement provides that Mr. Stempel
will serve as the Executive Director of ECD for a term ending September 30,
2005. During the term of his employment, Mr. Stempel will be entitled to
receive an annual salary as determined by the board of directors from time to
time. The executive employment agreement also provides for discretionary
bonuses to be determined by the board of directors based on Mr. Stempel's
individual performance and the financial performance of ECD. The executive
employment agreement also requires ECD to provide Mr. Stempel with non-wage
benefits, including insurance, pension and profit sharing, stock options,
automobile use or allowance and organizational membership fees, of the types
provided generally by ECD to its senior executive officers.
The executive employment agreement permits Mr. Stempel to retire as an
officer and employee of ECD and will permit him to resign his employment at any
time in the event he becomes subject to any mental or physical disability
which, in the good faith determination of Mr. Stempel, materially impairs his
ability to perform his regular duties as an officer of ECD. The executive
employment agreement permits ECD to terminate Mr. Stempel's employment upon the
occurrence of certain defined events, including the material breach by Mr.
Stempel of certain non-competition and confidentiality covenants contained in
the executive employment agreement, his conviction of certain criminal acts or
his gross dereliction or malfeasance of his duties as an officer and employee
of ECD (other than as a result of his death or mental or physical disability).
Mr. Stempel's entitlement to compensation and benefits under the executive
employment agreement will generally cease effective upon the date of the
termination of his employment, except that ECD will be required to continue to
provide Mr. Stempel and his spouse with medical, disability and life insurance
coverage for the remainder of their lives or until the date they secure
comparable coverage provided by another employer.
-22-
COMPENSATION COMMITTEE REPORT
Compensation Committee
The Compensation Committee is composed of Mr. McCarthy (Chairman) and
Dr. Metz. Neither of the Compensation Committee members are or were during
the last fiscal year an officer or employee of ECD or any of its subsidiaries,
or had any business relationship with ECD or any of its subsidiaries.
The Compensation Committee is responsible for administering the policies
which govern both annual compensation of executive officers and ECD's stock
option plans. The Compensation Committee meets several times during the year to
review recommendations from management regarding stock options and compensation.
Compensation and stock option recommendations are based upon performance,
current compensation, stock option ownership, and years of service to ECD.
ECD does not have a formal bonus program for executives, although it has
awarded bonuses to its executives from time to time.
Compensation of Executive Officers
The Compensation Committee considers ECD's financial position and other
factors in determining the compensation of its executive officers. These
factors include remaining competitive within the relevant hiring market -
whether scientific, managerial or otherwise - so as to enable ECD to attract and
retain high quality employees, and, where appropriate, linking a component of
compensation to the performance of ECD's Common Stock - such as by a granting of
stock option or similar equity-based compensation - to instill ownership
thinking and align the employees' and stockholders' objectives. ECD has been
successful at recruiting and retaining and motivating executives who are highly
talented, performance-focused and entrepreneurial.
During ECD's last fiscal year, the Compensation Committee determined that
ECD had achieved several important scientific and business milestones. The
Compensation Committee also concluded that the achievement of these milestones
had not yet been fully reflected in ECD's financial results. However, the
Compensation Committee determined that it was advisable to raise executive base
salaries and grant stock options to ECD's executive officers. There were no
bonuses awarded to ECD executives during the fiscal year.
Chief Executive Officer Compensation
In September 1993, Mr. Ovshinsky entered into separate employment
agreements with each of ECD and Ovonic Battery. The purpose of these
agreements, which provide for the payment to Mr. Ovshinsky of an annual salary
of not less than $250,000 by ECD and by Ovonic Battery, was to define clearly
Mr. Ovshinsky's duties and compensation arrangements and to provide to each
company the benefits of his management efforts and future inventions. See
"Employment Agreements." Mr. Ovshinsky's compensation for fiscal year 2001 was
determined in accordance with his employment agreements with ECD and Ovonic
Battery and included a discretionary increase above the nominal cost-of-living
increase. Based on Mr. Ovshinsky's employment agreement with ECD, he is
entitled to a bonus, payable in fiscal year 2002, based on ECD's financial
performance in fiscal year 2001.
COMPENSATION COMMITTEE
Walter J. McCarthy, Jr.
Florence I. Metz
-23-
PERFORMANCE GRAPH
The line graph below compares the cumulative total stockholder return on
ECD's Common Stock over a five-year period with the return on the NASDAQ Stock
Market - U.S. Index and the JP Morgan H & Q Technology Index.
[Enlarge/Download Table]
Cumulative Total Return
--------------------------------------------------------
6/96 6/97 6/98 6/99 6/00 6/01
------ ------ ------ ------ ------ ------
ENERGY CONVERSION DEVICES, INC. 100.00 56.04 42.58 43.68 111.54 123.08
NASDAQ STOCK MARKET (U.S.) 100.00 121.60 160.06 230.22 340.37 184.51
JP MORGAN H & Q TECHNOLOGY 100.00 130.60 165.43 267.75 469.74 233.62
The total return with respect to NASDAQ Stock Market - U.S. Index and the
JP Morgan H & Q Technology Index assumes that $100 was invested on June 30,
1996, including reinvestment of dividends.
We have not paid any cash dividends in the past and do not expect to pay
any in the foreseeable future.
The Report of the Compensation Committee on Executive Compensation and the
Performance Graph are not deemed to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, or Securities Exchange
Act of 1934, as amended, or incorporated by reference in any documents so
filed.
-24-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ChevronTexaco. Texaco Inc. and Chevron Corporation completed a merger on
October 9, 2001 with the combined company renamed ChevronTexaco Corporation. On
May 1, 2000, Texaco purchased a 20% equity stake in ECD for $67.4 million.
Pursuant to the Stock Purchase Agreement between the Company and Texaco,
ChevronTexaco has rights to purchase additional shares of Common Stock or other
securities ("ECD Stock").
So long as ChevronTexaco owns more than 5% of ECD Stock and in the event
ECD issues additional ECD Stock other than to ChevronTexaco, ChevronTexaco has
the right to purchase additional ECD Stock in order for ChevronTexaco to
maintain its same proportionate interest in ECD Stock as ChevronTexaco held
prior to the issuance of the additional ECD Stock. If ChevronTexaco elects to
purchase Common Stock, the purchase price will be the average of the closing
price on NASDAQ of the Common Stock as reported in The Wall Street Journal for
the five trading days prior to the closing date of the sale multiplied by the
number of shares of the Common Stock which ChevronTexaco is entitled to
purchase.
If ChevronTexaco does not exercise its right to purchase additional ECD
Stock within 15 days after delivery of a Rights Notice from the Company,
ChevronTexaco's right to purchase such additional ECD Stock which are the
subject of the Rights Notice will terminate. William M. Wicker and James R.
Metzger, directors of ECD, were, respectively, senior vice president and vice
president and chief technology officer of Texaco until their retirement from
Texaco upon the merger of Texaco and Chevron. Donald L. Paul and Greg M. Vesey,
directors of ECD, are vice president and chief technology officer of
ChevronTexaco and President, ChevronTexaco Technology Ventures, respectively.
Texaco Ovonic Fuel Cell. Stanford R. Ovshinsky, a director of ECD, is
president of Texaco Ovonic Fuel Cell as well as a member of its Management
Committee. Robert C. Stempel, a director of ECD, is a member of the Management
Committee of Texaco Ovonic Fuel Cell. ECD owns 50% of Texaco Ovonic Fuel Cell.
For the year ended June 30, 2001, ECD recorded revenues of $8,831,000 from
Texaco Ovonic Fuel Cell for facilities and product development services.
Texaco Ovonic Hydrogen Systems. Stanford R. Ovshinsky, a director of ECD,
is president of Texaco Ovonic Hydrogen Systems as well as a member of its
Management Committee. Robert C. Stempel, a director of ECD, is a member of the
Management Committee of Texaco Ovonic Hydrogen Systems. ECD owns 50% of Texaco
Ovonic Hydrogen Systems.
For the year ended June 30, 2001, ECD recorded revenues of $11,818,000
from Texaco Ovonic Hydrogen Systems for facilities and product development
services.
Texaco Ovonic Battery Systems. Stanford R. Ovshinsky and Robert C.
Stempel, directors of Ovonic Battery, are members of the Management Committee
of Texaco Ovonic Battery Systems. Mr. Stempel is the chief executive officer
of Texaco Ovonic Battery Systems. Ovonic Battery owns 50% of Texaco Ovonic
Battery Systems.
For the year ended June 30, 2001, Ovonic Battery recorded revenues of
$6,433,000 from Texaco Ovonic Battery Systems for product development services.
-25-
Ovonyx. Stanford R. Ovshinsky, Robert C. Stempel and Tyler Lowrey
(until February 21, 2002), directors of ECD, are directors of Ovonyx. Tyler
Lowrey is also president and chief executive officer of Ovonyx. ECD currently
owns 41.7% of Ovonyx and Mr. Lowrey owns in excess of 10% of Ovonyx.
ECD recorded revenues from Ovonyx of $382,000 and $2,686,000 for the years
ended June 30, 2001 and 2000, respectively, representing services performed for
its operations which commenced on January 15, 1999. ECD has received payment of
$3,022,000 for these services as of June 30, 2001, and the remaining balance is
included in accounts receivable.
GM Ovonic. Stanford R. Ovshinsky and Robert C. Stempel, directors of ECD,
were members of the Board of Managers of GM Ovonic. Ovonic Battery had a 40%
interest in this joint venture. In July 2001,ChevronTexaco purchased from
General Motors its stake in GM Ovonic which was then reorganized as Texaco
Ovonic Battery Systems.
For the year ended June 30, 2001, the Company had revenues of $2,127,000
from GM Ovonic for the sales of products and providing contract personnel
services, facilities and product development services.
Ovonic Media. Stanford R. Ovshinsky and Robert C. Stempel, directors of
ECD, are members of the Alliance Board of Ovonic Media. ECD has a 49% interest
in this joint venture.
For the year ended June 30, 2001, the Company had revenues of $2,298,000
from Ovonic Media for providing product development services.
United Solar. Stanford R. Ovshinsky, Robert C. Stempel, Nancy M. Bacon
and Hellmut Fritzsche, directors of ECD, are directors of United Solar. The
financial statements of United Solar are included in the consolidated financial
statements of ECD for the period from April 11, 2000 through June 30, 2001.
For the period from July 1, 1999 through April 10, 2000, the Company
recorded revenues of $149,000 from United Solar for services performed for
United Solar under a product development subcontract.
Bekaert ECD Solar Systems. Stanford R. Ovshinsky, Robert C. Stempel and
Nancy M. Bacon, directors of ECD, are members of the Management Committee of
Bekaert ECD Solar Systems, of which United Solar owns 40%.
Bekaert ECD Solar Systems was formed on April 11, 2000 and for the period
from April 11, 2000 through June 30, 2000 and the year ended June 30, 2001, the
Company recorded revenues of $2,291,000 and $9,948,000, respectively, from
Bekaert ECD Solar Systems for miscellaneous services.
Southwall. Robert C. Stempel, a director of ECD, is a member of the
board of directors of Southwall.
For the year ended June 30, 2001, the Company had revenues of $30,000 from
Southwall under a contract to build large-area deposition equipment. The
completed equipment was shipped to Southwall in July 2000. $708,000 of the sale
price is included in accounts receivable at June 30, 2001.
-26-
Herbert Ovshinsky, Stanford R. Ovshinsky's brother, is employed by ECD as
Director of the Production Technology and Machine Building Division working
principally in the design of manufacturing equipment. He received $190,008 in
salary during the year ended June 30, 2001.
Benjamin Ovshinsky, Stanford R. Ovshinsky's son, is employed by ECD as its
business representative for Western United States. He received compensation of
$69,089 during the year ended June 30, 2001.
HKO Media, Inc., owned by Harvey Ovshinsky, Stanford R. Ovshinsky's son,
performed video production services on behalf of ECD. HKO Media, Inc. was
paid $71,691 by ECD for its services during the fiscal year ended June 30, 2001.
ADDITIONAL INFORMATION
Cost of Solicitation. The cost of solicitation will be borne by the
Company. In addition to solicitation by mail, directors, officers and other
employees of the Company may solicit proxies personally or by telephone or
other means of communication. Arrangements may be made with brokerage houses
and other custodians, nominees and fiduciaries to forward, at the expense of
the Company, copies of the proxy materials to the beneficial owners of shares
held of record by such persons. The Company also intends to hire Morrow & Co.,
at an anticipated cost of approximately $6,000 plus out-of-pocket expenses, to
assist it in the solicitation of proxies personally, by telephone, or by other
means.
Other Action at the Meeting. The Company's management, at the time hereof,
does not know of any other matter to be presented which is a proper subject for
action by the stockholders at the Meeting. If any other matters shall properly
come before the Meeting, the shares represented by a properly executed proxy
will be voted in accordance with the judgment of the persons named on the
proxy.
Stockholder Proposals for 2002 Annual Meeting. Proposals of stockholders
intended to be presented at the Company's next annual meeting of stockholders,
presently expected to be held during February 2003, must be received by the
Company no later than September 21, 2002 in order for those proposals to be
included in the proxy materials for the meeting.
---------------
Stockholders are urged to send in their proxies without delay.
By Order of the Board of Directors
/s/ Ghazaleh Koefod
-----------------------------------
Ghazaleh Koefod
Secretary
January 18, 2002
-27-
BACK PAGE
MAP: DIRECTIONS TO MICHIGAN STATE UNIVERSITY MANAGEMENT EDUCATION CENTER,
811 WEST SQUARE LAKE ROAD
TROY, MI
(248) 879-2456
ENERGY CONVERSION DEVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, FEBRUARY 21, 2002 - 10:00 a.m.
ECVCM-PS-01
ENERGY CONVERSION DEVICES, INC.
C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398
[Enlarge/Download Table]
--------------------------- --------------------------
Vote by Telephone Vote by Internet
--------------------------- --------------------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
Follow these four easy steps: Follow these four easy steps:
-------------------------------------------------------- --------------------------------------------------------
1. Read the accompanying Proxy Statement and Proxy Card. 1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/ener
There is NO CHARGE for this call.
3. Enter your Control Number located on your Proxy Card. 3. Enter your Control Number located on your Proxy Card.
4. Follow the recorded instructions. 4. Follow the instructions provided.
-------------------------------------------------------- --------------------------------------------------------
Your vote is important! Your vote is important!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/ener anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE
[Enlarge/Download Table]
1. Election of Directors. ----------------------------------------------------
Nominees as Directors: ENERGY CONVERSION DEVICES, INC.
----------------------------------------------------
(01) Stanford R. Ovshinsky, (02) Iris M. Ovshinsky,
(03) Robert C. Stempel, (04) Nancy M. Bacon, For Against Abstain
(05) Umberto Colombo, (06) Subhash K. Dhar, 2. Proposal to approve the appointment of
(07) Hellmut Fritzsche, (08) Walter J. McCarthy, Jr., Deloitte & Touche LLP as independent [ ] [ ] [ ]
(09) Florence I. Metz, (10) James R. Metzger, accountants for the fiscal year
(11) Donald L. Paul, (12) Stanley K. Stynes, ending June 30, 2002.
(13) Greg M. Vesey and (14) William M. Wicker
3. In their discretion, the Proxies are authorized to vote upon
For [ ] [ ] Withhold such other business as may properly come before the Meeting.
All All
For all
Except [ ] ______________________________________
For all nominees except as noted above
Mark box at right if an address change or comment has been [ ]
noted on the reverse side of this card.
Mark box at right if you plan to Attend the Annual Meeting. [ ]
Please be sure to sign and date this Proxy.
Signature: -------------------------- Date:--------------- Signature: --------------------------- Date: --------------
ENERGY CONVERSION DEVICES, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy Ballot.
The matters you are asked to vote upon are discussed in detail in the enclosed
proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders,
February 21, 2002.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Energy Conversion Devices, Inc.
DETACH HERE
ENERGY CONVERSION DEVICES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROGER JOHN LESINSKI and GHAZALEH KOEFOD and each
of them, with full power of substitution, and in place of each, in case of
substitution, his or her substitute, the attorneys for and on behalf of the
undersigned to attend the Annual Meeting of Stockholders (the "Meeting") to be
held at Michigan State University Management Education Center, 811 West Square
Lake Road, Troy, Michigan, on Thursday, February 21, 2002 at 10:00 a.m. (EST)
and any adjournments thereof, and to cast the number of votes the undersigned
would be entitled to vote if then personally present. The undersigned instructs
such proxies to vote as specified on this card.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ALL NOMINEES FOR THE BOARD OF DIRECTORS AND "FOR" PROPOSAL 2 AS
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT.
The Board of Directors of the Company recommends a vote FOR Proposals 1 and 2.
--------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AN RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Please sign this Proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
--------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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Dates Referenced Herein and Documents Incorporated by Reference
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