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