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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as determined by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] 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)
- --------------------------------------------------------------------------------
(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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(2) Aggregate number of securities to which transaction applies:
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(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 state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
COMPANY LOGO
ENERGY CONVERSION DEVICES, INC.
1675 West Maple Road
Troy, Michigan 48084
Dear Stockholder:
The Annual Meeting of the Stockholders of Energy Conversion Devices, Inc.
will be held at 10:00 a.m. (E.S.T.) on January 27, 2000 at Michigan State
University Management Education Center, 811 West Square Lake Road, Troy,
Michigan. If you plan to attend, we would appreciate your calling the Investor
Relations department at (248) 280-1900.
Sincerely,
Robert C. Stempel
Chairman of the Board
<PAGE>
ENERGY CONVERSION DEVICES, INC.
----------------------
NOTICE OF MEETING OF STOCKHOLDERS
----------------------
Troy, Michigan
December 28, 1999
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") will be held at
10:00 a.m. (E.S.T.) on Thursday, January 27, 2000 at Michigan State University
Management Education Center, 811 West Square Lake Road, Troy, Michigan. The
purpose of the Meeting is to:
1. Elect fifteen directors to hold office until the next Annual Meeting
of the Stockholders of the Company;
2. Approve the appointment of Deloitte & Touche LLP as independent
auditors for the fiscal year ending June 30, 2000;
3. Consider and act upon a proposal of the Board of Directors to amend
the Company's Certificate of Incorporation to increase the number of
authorized shares by10,000,000 to make available an adequate number
of the Company's shares to be used for future corporate transactions;
and
4. Transact such other business as may properly come before the Meeting.
Stockholders of record at the close of business on November 30, 1999 will
be entitled to vote at the Meeting.
The Company's Annual Report on Form 10-K for its fiscal year ended June
30, 1999 accompanies the enclosed Proxy Statement.
Whether or not you expect to attend the Meeting in person, please sign,
date and return the accompanying Proxy in the enclosed prepaid envelope. If you
attend the Meeting, you may vote in person even though you have already signed
and returned a Proxy.
Cordially,
Robert C. Stempel
Chairman of the Board
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Energy Conversion Devices, Inc. (the
"Company"), 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 January 27, 2000
at 10:00 a.m. (E.S.T.) for the purposes set forth in the accompanying Notice of
Meeting of Stockholders.
Voting Rights of Stockholders. Holders of record of the Company's Common
Stock at the close of business on November 30, 1999 are entitled to vote at the
Meeting. As of November 30, 1999, there were outstanding 12,734,498 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; 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, respectively (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 11,489 shares of Common Stock. In
addition, as of November 30, 1999, Mr. Ovshinsky had 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
46,404 shares of Common Stock.
Record Date. Stockholders of record as of the close of business on
November 30, 1999 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
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<PAGE>
and Class B Common Stock as of the close of business on the record date. If a
stockholder withholds its 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 it 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.
The affirmative vote of a majority of the outstanding Common Stock, Class
A Common Stock and Class B Common Stock, voting as separate classes, will be
required to approve the proposal to amend the Company's certificate of
incorporation to increase its authorized shares. Because of this requirement,
abstentions and broker non-votes on such proposal will have the same effect as a
vote against the proposal.
All of the directors and officers of the Company, including Stanford R.
Ovshinsky, Iris M. Ovshinsky and Robert C. Stempel, 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
33.04% of the combined voting power of the outstanding Common Stock, Class A
Common Stock and Class B Common Stock.
Voting of Proxies. All shares which are represented by signed proxies
received at or prior to the Meeting from stockholders of record as of the close
of business on November 30, 1999 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.
Revocation of Proxies. A stockholder who executes a Proxy may revoke it by
written notice received by the Company at any time before it is voted. Proxies
may also be revoked by any subsequently dated Proxy or by the stockholder
attending the Meeting and voting in person.
Other Information. The Company's executive offices are located at 1675
West Maple Road, Troy, Michigan 48084. This Proxy Statement and the accompanying
Proxy are being sent to the Company's stockholders on or about December 28,
1999.
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<PAGE>
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 by-laws, the Board of
Directors has by resolution set the number of directors comprising the full
Board at fifteen. 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.
Information concerning the nominees for election as directors, including
the year each nominee first became a director, is set forth below.
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THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ALL
FIFTEEN NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS.
<TABLE>
<CAPTION>
Director
of the
Company Principal Occupation and
Name Since Office Business Experience
---- ------- ------ ------------------------
<S> <C> <C> <C>
Stanford R. Ovshinsky 1960 President, Chief Mr. Ovshinsky, 77, the founder and Chief Executive
Executive Officer Officer of the Company, has been an executive officer
and Director and director of the Company since its inception in 1960.
Mr. Ovshinsky is the primary inventor of the Company's
technology. Mr. Ovshinsky also serves as the Chief
Executive Officer and director of Ovonic Battery
Company, Inc. ("Ovonic Battery"); President, Chief
Executive Officer and director of United Solar Systems
Corp. ("United Solar"); a member of the Board of
Managers of GM Ovonic L.L.C. ("GM Ovonic");
Chairman of Ovonyx, Inc. ("Ovonyx") and Co-Chairman
of the Board of Directors of Sovlux Co. Ltd. ("Sovlux").
Mr. Ovshinsky is the husband of Dr. Iris M. Ovshinsky.
Iris M. Ovshinsky 1960 Vice President Dr. Ovshinsky, 72, co-founder and Vice President of the
and Director Company, has been an executive officer and director
of the Company since its inception in 1960. Dr.
Ovshinsky also serves as a director of Ovonic Battery.
Dr. Ovshinsky is the wife of Stanford R. Ovshinsky.
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<PAGE>
Robert C. Stempel 1995 Chairman of the Mr. Stempel, 66, is Chairman of the Board and
Board and Director of the Company. Prior to his election
Executive as a director in December 1995, Mr. Stempel served
Director as senior business and technical advisor to Mr.
Ovshinsky. He is also the Chairman of Ovonic Battery
and serves on the Board of Managers of GM Ovonic.
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
had been President since 1987. Mr. Stempel serves on
the Audit Committee of the Board.
Nancy M. Bacon 1977 Senior Vice Mrs. Bacon, 53, joined the Company in 1976 as its Vice
President and President of Finance and Treasurer. She became the
Director Senior Vice President of the Company in 1993. Mrs.
Bacon also serves as a director of Sovlux and United
Solar.
Kenneth R. Baker 1999 Director Mr. Baker, 52, currently the President, Chief Executive
Officer and a director of Environmental Research
Institute of Michigan ("ERIM"), a not-for-profit scientific
research and development organization, was the
Company's Vice Chairman and Chief Operating Officer
from February 1999-November 1999. Presently, Mr.
Baker serves as an advisor to Mr. Ovshinsky and Mr.
Stempel. Prior to his retirement from General Motors
Corporation in 1999, he held a variety of positions with
General Motors Corporation from 1985-1999, including
Vice President and General Manager of GM's
Distributed Energy Business Unit (1998-1999); Vice
President, GM R&D (1993-1998); Program Manager,
GM Electric Vehicles (1990-1993). Mr. Baker is a
director of AeroVironment, Inc.
Umberto Colombo 1995 Director Prof. Colombo, 72, 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. Prof.
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, 48, joined the Company in 1981 and has held
various positions with Ovonic Battery since its inception
in October 1982. Mr. Dhar is currently the President,
Chief Operating Officer and a director of Ovonic Battery.
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<PAGE>
Hellmut Fritzsche 1969 Vice President Dr. Fritzsche, 72, was a professor of Physics at the
and Director University of Chicago from 1957 until his retirement in
1996. He was also Chairman of the Department of
Physics, the University of Chicago, until 1986. Dr.
Fritzsche has been a Vice President of the Company
since 1965, acting on a part-time basis, chiefly in the
Company's research and product development
activities.
Joichi Ito 1995 Director Mr. Ito, 33, is the Chairman and a Director of Digital
Garage, K.K. and Infoseek Japan K.K. He is also the
President of Neoteny and Transoceanic Ventures, Inc.
as well as a board member of PSINet Japan, K.K. He
is an expert on new computer technology and
networked information systems and writes and lectures
extensively in the United States, Japan and Europe.
Mr. Ito serves as a director and advisor to many
companies in the field of information technology.
Seymour Liebman 1997 Director Mr. Liebman, 50, currently Executive Vice President
and General Counsel at Canon U.S.A., Inc., has held
a variety of positions with Canon since 1974, including
Senior Vice President and General Counsel from 1992-
1996. Mr. Liebman also serves on the Board of
Directors of United Solar. He is a director of Zygo
Corporation.
Tyler Lowrey 1999 Vice President Mr. Lowrey, 46, prior to joining the Company in January
and Director 1999 as a Vice President, held a variety of positions
with Micron Technology Inc. ("Micron") from 1984-1997,
including Vice Chairman, Chief Technology Officer,
Chief Operating Officer and Vice President, R&D. While
at Micron, Mr. Lowrey was responsible for DRAM,
SRAM, Flash and RFID product development as well as
heading up all manufacturing operations, DRAM design,
QA and R&D Process Fab. Mr. Lowrey is also a
director of Ovonyx as well as its President and Chief
Executive Officer.
Walter J. McCarthy, Jr. 1995 Director Mr. McCarthy, 74, until his retirement in 1990, was the
Chairman and Chief Executive Officer of Detroit Edison
Company. He has served as a consultant to the
Company 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 on the Audit Committee of the Board.
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<PAGE>
Florence I. Metz 1995 Director Dr. Metz, 70, until her retirement in 1996, held various
executive positions with Inland Steel Company: 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. She serves on the Compensation
Committee of the Board.
Nathan J. Robfogel 1990 Director Mr. Robfogel, 64, was, until his retirement in 1996, a
partner with the law firm of Harter, Secrest & Emery,
which he joined in 1959. Mr. Robfogel is currently Vice
President for University Relations of the Rochester
Institute of Technology where he was a trustee from
1985-1996. He is a member of the Board of Directors
of Genesee Valley Trust Company and Rochester
Community Baseball, Inc. From 1989 to 1995, Mr.
Robfogel served as Chairman of the Board and Chief
Executive Officer of the New York State Facilities
Development Corporation, a public benefit corporation.
Stanley K. Stynes 1977 Director Dr. Stynes, 67, 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 Board.
</TABLE>
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<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Audit Committee of the Board of Directors (the "Audit Committee") met
three times during the fiscal year ended June 30, 1999 and was composed of
Stanley K. Stynes (Chairman), Walter J. McCarthy, Jr. and Robert C. Stempel. The
principal duties of the Audit Committee are to (i) recommend selection of the
Company's independent accountants, (ii) review with the independent accountants
the results of their audits, (iii) review with the independent accountants and
management the Company's financial reporting and operating controls and the
scope of audits, (iv) review all budgets of the Company and its subsidiaries and
(v) make recommendations concerning the Company's financial reporting,
accounting practices and policies and financial, accounting and operating
controls and safeguards.
The Compensation Committee of the Board of Directors (the "Compensation
Committee") met twice during the fiscal year ended June 30, 1999 and was
composed of 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 several times during the year to
review recommendations from management regarding stock options and compensation.
The Company does not have a standing nominating committee.
During the fiscal year ended June 30, 1999, the Board of Directors held
three meetings. All directors attended more than 75 percent of the meetings of
the Board and the committees on which such directors served, except for
Dr. Fritzsche, Mr. Ito, Mr. Liebman and Dr. Stynes.
COMPENSATION OF DIRECTORS
Directors who are officers of the Company receive no payment for service
as a director. The other directors of the Company are issued approximately
$5,000 per year in the Company's Common Stock based on the closing price of
Common Stock on the first business day of each year and are paid $500 for each
Board meeting attended (in person or via telephone conference call) as well as
$500 for each committee meeting if not coincident with a Board meeting.
Directors 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1999, the Compensation Committee was
composed of Mr. McCarthy and Dr. Metz. None of the Compensation Committee
members are or were during the last fiscal year an officer or employee of the
Company or any of its subsidiaries, or had any business relationship with the
Company or any of its subsidiaries.
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<PAGE>
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 ("Deloitte & Touche") as independent accountants
for the Company to audit its consolidated financial statements for the fiscal
year ending June 30, 2000 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 certain 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.
------------
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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<PAGE>
ITEM NO. 3
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK FROM 20,000,000 TO 30,000,000
At the meeting, the stockholders of the Company will be asked to consider
and act upon a proposal (the "Common Stock Proposal") to amend Article FOURTH of
the Company's Certificate of Incorporation to increase the number of authorized
shares of the Company's Common Stock from 20,000,000 to 30,000,000.
As more fully described below, the purpose of the Common Stock Proposal is
to make available additional shares of Common Stock for future corporate
transactions. Such additional shares may be used by the Company for stock
issuances in the future if the Company determines to enter into strategic joint
ventures or collaborative business arrangements, to seek additional equity
financing or to establish additional employee or director equity compensation
plans or arrangements. The Company has no present plan to issue the additional
shares of Common Stock to be authorized pursuant to the Common Stock Proposal.
As indicated below, the Board of Directors strongly believes that the
Common Stock Proposal is in the best interests of the Company and its
stockholders. Under Delaware law and the Company's Certificate of Incorporation,
the Common Stock Proposal must be approved by both the Board of Directors and
the holders of a majority of the Company's outstanding Class A Common, Class B
Common Stock and Common Stock, voting as separate classes. Because of this
requirement, abstentions and broker non-votes on such proposal will have the
same effect as a vote against the proposal. The Board of Directors approved the
Common Stock Proposal at a meeting held on November 29, 1999.
If the Common Stock Proposal is adopted by the stockholders, the Company
will file a Certificate of Amendment with the Delaware Secretary of State
amending the Company's Certificate of Incorporation in accordance with the
Common Stock Proposal. The text of Article FOURTH, as it is proposed to be
amended, is set forth in Exhibit A to this Proxy Statement.
Background
Under the Company's Certificate of Incorporation as presently in effect,
the Company has 20,000,000 shares of authorized Common Stock. As of the mailing
date of this Proxy Statement, 12,843,898 shares of the Company's Common Stock
were issued and outstanding and 6,274,245 shares were reserved for issuance upon
the exercise of outstanding stock options, warrants and convertible securities.
Purpose of the Common Stock Proposal
The purpose of the Common Stock Proposal is to make available additional
shares of Common Stock for issuance in the event the Company in the future
determines to enter into strategic joint ventures or collaborative business
arrangements, to seek additional equity financing or to establish additional
employee or director equity compensation plans or arrangements.
The Company may in the future enter into strategic joint venture or other
collaborative business arrangements with licensees, suppliers, distributors and
other parties with whom the Company does business. Certain such transactions
could involve an equity investment in the
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<PAGE>
Company or the issuance of stock options, warrants or other securities
convertible into or exercisable or exchangeable for shares of Common Stock.
The Company may also in the future determine that it is necessary or desirable
to seek additional equity financing through a public offering or private
placement of Common Stock or other securities, including debt securities,
convertible into or exercisable or exchangeable for shares of Common Stock.
The authorization of additional shares of Common Stock pursuant to the Common
Stock Proposal will permit the Company to seek such additional equity financing
when and if market conditions are advantageous without the delay and uncertainty
inherent in obtaining future stockholder approval for the authorization of
additional shares of Common Stock in order to permit such financing. For
example, the cost, prior notice requirement and delay involved in obtaining
shareholder approval at the time that a transaction may become desirable could
make it difficult or impossible to effect the transaction. The additional shares
of Common Stock, together with other authorized and unissued shares, generally
would be available for issuance without any requirement for further shareholder
approval, unless shareholder action is required by applicable law or by the
rules of the stock exchange on which the Company's securities may then be
listed.
The Company has no present plan to issue the additional shares of Common
Stock to be authorized pursuant to the Common Stock Proposal.
Effect of Change
One of the effects of the Common Stock Proposal, if adopted, however, may
also be to enable the Board of Directors to render it more difficult to, or
discourage an attempt to, obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
present management. The Board of Directors would, unless prohibited by
applicable law, have additional shares of Common Stock available to effect
transactions (including private placements) in which the number of the Company's
outstanding shares would be increased and would thereby dilute the interest of
any party attempting to gain control of the Company. Such action, however, could
discourage an acquisition of the Company which stockholders might view as
desirable. In addition, since the Company's stockholders have no preemptive
rights to purchase additional shares of Common Stock issued, the issuance of
such shares could dilute the interests of current stockholders of the Company.
-------------
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE COMMON STOCK PROPOSAL.
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<PAGE>
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% and 29.8%,
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;
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.
At the Company's Annual Meeting held on March 25, 1999, the Company's
stockholders approved a proposal to amend the Company's Certificate of
Incorporation changing the date on which shares of Class A Common Stock are
deemed to be converted into shares of Common Stock from September 14, 1999 to
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
approval of the Company's stockholders voting together as a single class.
As of November 30, 1999, Mr. Ovshinsky also had 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 as of November 3, 1992 between
the Company and Sanoh which, together with the Class A Common Stock and 11,489
shares of Common Stock Mr. and Dr. Ovshinsky own, give Mr. and Dr. Ovshinsky
voting control over shares representing approximately 30.08% of the combined
voting power of the Company's outstanding stock.
The following table sets forth, as of November 30, 1999, 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.
<TABLE>
<CAPTION>
Class A
Name of Common Stock Total Number of Shares
Beneficial Owner Beneficially Owned(1)(2) Beneficially Own Percentage of Class
- ---------------- ------------------------ ---------------------- -------------------
<S> <C> <C> <C>
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%
- -------
</TABLE>
(1) The balance of the 219,913 shares of Class A Common Stock outstanding, 892
shares, or approximately 0.4%, 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.
-11-
<PAGE>
(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 option 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.
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.
-12-
<PAGE>
COMMON STOCK
Directors and Executive Officers. The following table sets forth, as of
November 30, 1999, 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) % of Class(2)
- ------------------------ ----------------------- -------------
Robert C. Stempel 1,114,404(3) 8.01%
Stanford R. Ovshinsky 844,289(4) 6.23%
Iris M. Ovshinsky 422,102(5) 3.18%
Nancy M. Bacon 207,715(6) 1.59%
Subhash K. Dhar 68,928(7) *
Kenneth R. Baker 41,000(8) *
Hellmut Fritzsche 29,510(9) *
Walter J. McCarthy, Jr. 22,681(10) *
Stanley K. Stynes 21,378(11) *
Umberto Colombo 12,645(12) *
Nathan J. Robfogel 12,611(13) *
Florence I. Metz 11,378(14) *
Seymour Liebman 11,021(15) *
Stephan W. Zumsteg 10,000(16) *
Joichi Ito 8,554(17) *
Tyler Lowrey 5,000(18) *
All executive officers and
directors as a group 2,624,195 17.26%
(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-
<PAGE>
(3) Includes 430,000 shares of Class B Common Stock and 638,000 shares
represented by options exercisable within 60 days.
(4) Includes 554,629 shares (adjusted as of September 30, 1999) 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 354,752 shares (adjusted as of September 30, 1999) 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 185,200 shares represented by options exercisable within 60
days.
(7) Includes 68,928 shares represented by options exercisable within 60 days.
(8) Includes 40,000 shares represented by options exercisable within 60 days.
(9) Includes 18,980 shares represented by options exercisable within 60 days.
(10) Includes 10,000 shares represented by options exercisable within 60 days.
(11) Includes 9,000 shares represented by options exercisable within 60 days.
(12) Includes 10,000 shares represented by options exercisable within 60 days.
(13) Includes 10,000 shares represented by options exercisable within 60 days.
(14) Includes 5,000 shares represented by options exercisable within 60 days.
(15) Includes 10,000 shares represented by options exercisable within 60 days.
(16) Includes 8,000 shares represented by options exercisable within 60 days.
(17) Includes 6,743 shares represented by options exercisable within 60 days.
(18) Includes 4,000 shares represented by options exercisable within 60 days.
-14-
<PAGE>
Principal Shareholders. The following table sets forth, as of November 30,
1999, 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
------------------- -------------------- -------------------
Stanford R. and Iris M. Ovshinsky 266,391(1) 9.41%(2)(3)
1675 West Maple Road
Troy, Michigan 48084
Robert C. Stempel 1,114,404(4) 8.01%(2)
1675 West Maple Road
Troy, Michigan 48084
FMR Corp. 1,020,000(5) 7.9%
82 Devonshire St.
Boston, MA 02109
T. Rowe Price Associate , Inc. 801,700(6) 6.1%
100 E. Pratt Street
Baltimore, MD 21202
- -------
(1) 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),
11,489 shares of Common Stock owned by Mr. and Dr. Ovshinsky, 126,500
shares of Sanoh Shares over which Mr. Ovshinsky has voting rights and
909,381 (adjusted as of September 30, 1999) shares represented by options
exercisable within 60 days.
(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 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.
(3) Represents the sum of Mr. and Dr. Ovshinsky's respective ownership interests
calculated separately.
(4) Includes 430,000 shares of Class B Common Stock owned by Mr. Stempel
(which shares are convertible at any time into Common Stock and will be
deemed to be converted into Common Stock on September, 30, 2005), 46,404
shares of Common Stock and 638,000 shares represented by options
exercisable within 60 days.
(5) Based upon information contained in Schedule 13G dated February 1, 1999,
Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp. and an investment adviser, is the beneficial owner
of 1,020,000 shares or 7.9% of the Common Stock outstanding of the Company
as a result of acting as investment adviser to various investment
companies. The number of shares of Common Stock of the Company owned by
the investment companies on December 31, 1998 included 400,000 shares of
Common Stock resulting from the assumed conversion of 400,000 of the
Company's Warrants. Edward C. Johnson 3d, FMR Corp., through its control
of Fidelity, and the funds each has sole power to dispose of the 1,020,000
shares owned by the Funds. Neither FMR Corp. nor Edward C. Johnson 3d,
chairman of FMR Corp, has sole power to vote or direct the voting of the
shares owned directly by the Fidelity Funds, which power resides with the
Funds' Boards of Trustees.
-15-
<PAGE>
Fidelity carries out the voting of the shares under written guidelines
established by the Funds' Boards of Directors.
(6) Based upon information contained in Schedule 13G dated February 12, 1999,
T. Rowe Price Associates, Inc. ("Price Associates") has indicated that
these securities are owned by various individual and institutional
investors, including T. Rowe Price New Horizons Fund, Inc., which owns
800,000 shares representing 6.1% of the shares outstanding which Price
Associates serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial owner
of such securities.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Served as an Executive
Name Age Office Officer or Director Since
---- --- ------ -------------------------
<S> <C> <C> <C>
Stanford R. Ovshinsky 77 President, Chief Executive Officer 1960(1)
and Director
Iris M. Ovshinsky 72 Vice President and Director 1960(1)
Robert C. Stempel 66 Executive Director and Chairman 1995
of the Board
Nancy M. Bacon 53 Senior Vice President 1976
Subhash K. Dhar 48 President and Chief Operating 1986(2)
Officer of Ovonic Battery and
Director
Hellmut Fritzsche 72 Vice President and Director 1969
Tyler Lowrey 46 Vice President and Director 1999
Stephan W. Zumsteg 53 Treasurer 1997
- -------
</TABLE>
(1) The predecessor of the Company was originally founded in 1960. The present
corporation was incorporated in 1964 and is the successor, by merger, to
the predecessor corporation.
(2) Mr. Dhar was appointed as a director by the Company's Board of Directors
in October 1999.
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, Hellmut Fritzsche and Tyler Lowrey.
Stephan W. Zumsteg joined the Company in March 1997 and was elected
Treasurer in April 1997. Prior to joining the Company, Mr. Zumsteg was Chief
Financial Officer of the Kirlin Company from July 1996 to February 1997 and
Vice President-Finance & Administration and Chief Financial Officer of Lincoln
Brass Works from July 1991 to June 1996.
-16-
<PAGE>
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 reports of ownership and changes in
ownership with respect to the securities of the Company and its affiliates with
the Securities and Exchange Commission 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, 1999, all
filing requirements were met on a timely basis.
EXECUTIVE COMPENSATION
The following tables set forth the compensation paid by the Company 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, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
------------ ------------
<S> <C> <C> <C> <C> <C> <C>
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, 1999 $294,929 -- $14,952
President and Chief 1998 $284,967 -- $14,652
Executive Officer 1997 $276,016 $37,981(4) $10,017
Robert C. Stempel, 1999 $270,004 $4,591,540(5) 300,000 $ 6,111
Executive Director 1998 $270,005 -- -- $ 3,159
1997 $270,005 -- 25,000 $ 3,159
Iris M. Ovshinsky, 1999 $257,941 $14,952
Vice President 1998 $250,016 $13,569
1997 $250,016 $ 8,939
Nancy M. Bacon, 1999 $254,854 $ 7,104
Senior Vice President 1998 $235,019 $ 5,796
1997 $235,019 $ 5,796
Kenneth R. Baker, 1999 $100,968 100,000
Chief Operating Officer(6)
</TABLE>
- -------
-17-
<PAGE>
(1) The Company's fiscal year is July 1 to June 30. The Company's 1999 fiscal
year ended June 30, 1999.
(2) Amounts shown include compensation deferred under the Company's 401 (k)
Plan. Does not include taxable income resulting from exercise of stock
options.
(3) "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the
Company's 401(k) Plan with respect to each of the calendar years ended
December 31, 1998, 1997 and 1996, respectively, as follows: Mr. Ovshinsky
$4,800 (1998) and $4,500 (1997); Dr. Ovshinsky $4,800, $4,500 and $3,269;
Mrs. Bacon $4,800 (1998) and $4,500 (for each of 1997 and 1996); (ii) the
dollar value of any life insurance premiums paid by the Company in the
calendar years ended December 31, 1998, 1997 and 1996, respectively, with
respect to term-life insurance for the benefit of each of the named
executives as follows: Mr. Ovshinsky $10,152 (for each of 1998 and 1997)
and $10,017 (1996); Mr. Stempel $6,111 (1998) and $3,159 (for each of 1997
and 1996); Dr. Ovshinsky $10,152, $9,069 and $5,670; Mrs. Bacon $2,304
(1998) and $1,296 (for each of 1997 and 1996). Under the 401 (k) Plan,
which is a qualified defined-contribution plan, the Company 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 $150,000 for 1996 and
up to $160,000 for 1997 and 1998.
(4) Computed based on net income from operations for preceding years as
provided in Mr. Ovshinsky's September 1993 Employment Agreement. See
"Employment Agreements."
(5) 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 the Company's stockholders, at the Annual Meeting
held on March 25, 1999, of a proposal to amend the Company'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 the
Company on September 30, 2005 or upon the occurrence of a change in
control of the Company. Dividends will be paid on the Restricted Stock if
and to the extent paid on the Company's Common Stock generally. So long as
Mr. Stempel continues to serve as a director of the Company 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 the Company's
fiscal year was $4,273,340.
(6) Mr. Baker joined the Company in February 1999. The salary reported for
1999 is for the five-month period February 1999 - June 1999. Mr. Baker
resigned as the Company's Vice Chairman and Chief Operating Officer
effective November 12, 1999. He is currently a director of the Company
and an advisor to Messrs. Stempel and Ovshinsky.
-18-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all options granted to the named executive
officers during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term(1)
-------------------------------------------------- -----------------------------
% of Total
Options
Options Granted Exercise
Granted to Employees Price Expiration
Name (#) in Fiscal Year ($/Sh) Date 0% 5% 10%
- ------------------ ---------- -------------- ----------- ------------ -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert C. Stempel 300,000(2) 61.86% $10.688 1/15/2009 _ $2,016,487 $5,110,175
Kenneth R. Baker 100,000 20.62% $10.188 3/24/2009 _ $640,717 $1,623,704
</TABLE>
- ------
(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) On January 15, 1999, the Company entered into a Stock Option Agreement
(the "Stock Option Agreement") with Mr. Stempel, pursuant to which the
Company granted Mr. Stempel an option to purchase up to 300,000 shares of
Common Stock at an exercise price of $10.688 per share, the fair market
value of the Common Stock as of the date of the Stock Option Agreement.
The option granted to Mr. Stempel may be exercised from time to time in
whole or in part commencing as of the date of the Stock Option Agreement
and ending on the tenth anniversary of such date. The option is not
subject to vesting requirements and may be exercised by Mr. Stempel prior
to or after the termination of his service as an executive officer and
director of the Company.
(3) Mr. Baker resigned as the Company's Vice Chairman and Chief Operating
Officer effective November 12, 1999. He is currently a director of the
Company and an advisor to Messrs. Stempel and Ovshinsky.
-19-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth all stock options exercised by the named
executives during the fiscal year ended June 30, 1999 and the number and value
of unexercised options held by the named executive officers at fiscal year end.
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised in-the-Money Options
Exercise Realized Options at Fiscal Year End at Fiscal Year End
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------ ----------- --------- --------------------------- -------------------------
<S> <C> <C> <C> <C>
Stanford R. Ovshinsky(1) _ _ 554,576/0 $491,027/$0
Iris M. Ovshinsky (2) _ _ 354,716/0 $326,618/$0
Robert C. Stempel (3) _ _ 638,000/0 $19,692/$0
Kenneth R. Baker(4) _ _ 0/100,000 $0/$0
Nancy M. Bacon(5)(6) 40,000 $94,965 185,200/0 $0/$0
</TABLE>
- -------
(1) Mr. Ovshinsky's exercisable options are exercisable at a weighted average
price of $11.057 per share.
(2) Dr. Ovshinsky's exercisable options are exercisable at a weighted average
price of $11.03 per share.
(3) Mr. Stempel's exercisable options are exercisable at a weighted average
price of $12.76 per share.
(4) Mr. Baker's unexercisable options are exercisable at a weighted average
price of $10.188 per share.
(5) Mr. Baker resigned as the Company's Vice Chairman and Chief Operating
Officer effective November 12, 1999. He is currently a director of the
Company and an advisor to Messrs. Stempel and Ovshinsky.
(6) Mrs. Bacon's exercisable options are exercisable at a weighted average
price of $12.97 per share.
(7) Of the $94,965 value realized, approximately $34,383 was used to cover
withholding taxes and other expenses associated with the exercise, and
$33,750 was used to purchase 5,000 shares of the Company Common Stock.
EMPLOYMENT AGREEMENTS
On September 2, 1993, Stanford R. Ovshinsky entered into separate
employment agreements with each of the Company 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 the Company renewed each of Mr. Ovshinsky's employment
agreements for an additional term ending September 30, 2005. Mr. Ovshinsky's
employment agreement with the Company 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
-20-
<PAGE>
annual increases as determined by the Board of Directors of the Company and an
annual bonus equal to 1% of the net income from operations of the Company
(excluding Ovonic Battery) or Ovonic Battery. Mr. Ovshinsky's annual salary
increases over the last three fiscal years 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.
Mr. Ovshinsky's employment agreement with Ovonic Battery additionally
contains a power of attorney and proxy from the Company providing Mr. Ovshinsky
with the right to vote the shares of Ovonic Battery held by the Company
following a change in control of the Company. For purposes of the agreement,
change in control means (i) any sale, lease, exchange or other transfer of all
or substantially all of the Company's assets; (ii) the approval by the
Company's stockholders of any plan or proposal of liquidation or dissolution of
the Company; (iii) the consummation of any consolidation or merger of the
Company in which the Company 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
the Company'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
the Company 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 the Company to have the benefits of Dr.
Ovshinsky's services as a consultant to the Company following the termination
of her active 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 the Company 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 the Company.
On January 15, 1999, the Company entered into an Executive Employment
Agreement (the "Executive Employment Agreement") with Mr. Stempel. The
Executive Employment Agreement provides that Mr. Stempel will serve as the
Executive Director of the Company for a term ending
-21-
<PAGE>
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 the Company.
The Executive Employment Agreement also requires the Company 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 the Company to its senior
executive officers.
The Executive Employment Agreement permits Mr. Stempel to retire as an
officer and employee of the Company 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
the Company. The Executive Employment Agreement permits the Company 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 the Company (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 the Company 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.
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 the Company or any of its
subsidiaries, or had any business relationship with the Company or any of its
subsidiaries.
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 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 the Company. The Company 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 the Company'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 the
Company to attract and retain high quality employees, and, where appropriate,
linking a component of compensation to the performance of the Company's Common
Stock--such as
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<PAGE>
by a granting of stock option or similar equity-based compensation--to instill
ownership thinking and align the employees' and stockholders' objectives. The
Company has been successful at recruiting and retaining and motivating
executives who are highly talented, performance-focused and entrepreneurial.
During the Company's last fiscal year, the Compensation Committee
determined that the Company 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 the
Company's financial results. In light of the Company's general policy of
conserving available cash flow where possible to advance its business
objectives, the Compensation Committee determined that it was not advisable to
materially raise executive base salaries or grant material bonuses, stock
options or other compensation to the Company's executive officers.
Chief Executive Officer Compensation.
In September 1993, Mr. Ovshinsky entered into separate employment
agreements with each of the Company 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 the Company 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 1999 was
determined in accordance with his Employment Agreements with the Company and
Ovonic Battery. Based on the factors described above with respect to the
compensation of the Company's executive officers, the Compensation Committee
determined that it was not advisable to pay a discretionary bonus to the
Company's Chief Executive Officer during 1999.
COMPENSATION COMMITTEE
Walter J. McCarthy, Jr.
Florence I. Metz
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<PAGE>
PERFORMANCE GRAPH
The line graph below compares the cumulative total stockholder return on
the Company's Common Stock over a five-year period with the return on the
NASDAQ Stock Market - US Index and the Hambrecht & Quist Technology Index.
Cumulative Total Return
----------------------------------------
6/94 6/95 6/96 6/97 6/98 6/99
---- ---- ---- ---- ---- ----
ENERGY CONVERSION DEVICES, INC. 100 133 186 104 79 81
NASDAQ STOCK MARKET (U.S.) 100 133 171 208 274 393
HAMBRECHT & QUIST TECHNOLOGY 100 177 207 270 342 554
The total return with respect to NASDAQ Stock Market - US Index and the
Hambrecht & Quist Technology Index assumes that $100 was invested on June 30,
1994, including reinvestment of dividends.
ECD has paid no cash dividends in the past and no cash dividends are
expected to be paid 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.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Herbert Ovshinsky, Stanford R. Ovshinsky's brother, is employed by the
Company as Director of the Production Technology and Machine Building Division
working principally in the design of manufacturing equipment. He received
$122,398 in salary during the year ended June 30, 1999.
HKO Media, Inc., owned by Harvey Ovshinsky, Stanford R. Ovshinsky's son,
performed video production services on behalf of the Company. HKO Media, Inc.
was paid $69,947 by the Company for its services during the fiscal year ended
June 30, 1999.
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 $5,000 plus out-of-pocket expenses, to
assist it in the solicitation of proxies personally, by telephone, or by other
means.
Other Action at the Meeting. The Company's management, at the time hereof,
does not know of any other matter to be presented which is a proper subject for
action by the stockholders at the Meeting. If any other matters shall properly
come before the Meeting, the shares represented by a properly executed proxy
will be voted in accordance with the judgment of the persons named on the
proxy.
Stockholder Proposals for 2000 Annual Meeting. Proposals of stockholders
intended to be presented at the Company's next annual meeting of stockholders,
presently expected to be held during January 2001 must be received by the
Company no later than August 11, 2000 in order for those proposals to be
included in the proxy materials for the meeting.
---------------
Stockholders are urged to send in their proxies without delay.
By Order of the Board of Directors
Robert C. Stempel
Chairman of the Board
December 28, 1999
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<PAGE>
EXHIBIT A
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK FROM 20,000,000 TO 30,000,000
The first sentence of Article FOURTH is to be modified to read as follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 30,930,000 shares, of which
500,000 shares shall be Class A Common Stock of a par value of one cent ($.01)
per share, 430,000 shall be Class B Common Stock of a par value of one cent
($.01) per share, and 30,000,000 shares shall be Common Stock of a par value of
one cent ($.01) per share.
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<PAGE>
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 power of substitution, and in place of each, in case of
substitution, his or her substitute, the attorneys and proxies for and on behalf
of the undersigned to attend the Annual Meeting of Stockholders (the "Meeting")
of ENERGY CONVERSION DEVICES, INC. (the "Company") to be held at Michigan State
University Management Education Center, 811 West Square Lake Road, Troy,
Michigan, on January 27, 2000 at 10:00 a.m. (EST) and any and all 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 DIRECTORS AND FOR PROPOSALS 2 AND 3 AS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT.
The Board of Directors of the Company recommends a vote FOR Proposals 1, 2,
and 3.
1. Election of Directors: Stanford R. Ovshinsky, Iris M. Ovshinsky, Robert C.
Stempel, Nancy M. Bacon, Kenneth R. Baker, Umberto Colombo, Subhash K. Dhar,
Hellmut Fritzsche, Joichi Ito, Seymour Liebman, Tyler Lowrey, Walter J.
McCarthy, Jr., Florence I. Metz, Nathan J. Robfogel and Stanley K. Stynes.
[ ]VOTE FOR ALL FIFTEEN NOMINEES LISTED ABOVE [ ]VOTE WITHHELD FOR ALL NOMINEES
(except as directed to the contrary below):
INSTRUCTION: To withhold authority to vote for any nominee, write that
nominee's name in the space provided below:
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2. Proposal to approve the appointment of Deloitte & Touche LLP as independent
accountants for the fiscal year ending June 30, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
3. Proposal to consider and approve the amendment to the Company's Certificate
of Incorporation to increase the Company's authorized shares by 10,000.000
to make available an adequate number of the Company's shares to be used for
future corporate transactions.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
_______________________________Dated: ____________________,
Signature:
_______________________________Dated: ____________________,
Signature:
Please sign exactly as your name appears above. If shares are registered in the
names of two or more persons, each should sign. Executors, administrators,
trustees, guardians, attorneys and corporate officers should show their full
titles.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENVELOPE
PROVIDED. If you have changed your address, please PRINT your new address
above.
