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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12 [ ]
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Beacon Power Corporation
(Name of Registrant as Specified In Its Charter)
Beacon Power Corporation
(Name of Person(s) Filing Proxy Statement)
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 state 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:
Beacon Power Corporation
234 Ballardvale Street
Wilmington, MA 01887
April 23, 2002
Dear Stockholder:
I am pleased to invite you to the 2002 Annual Meeting of Stockholders of
Beacon Power Corporation, which will be held on Thursday May 23, 2002, at 10:00
a.m., at the offices of Beacon, 234 Ballardvale Street, Wilmington,
Massachusetts.
The accompanying Notice of Annual Meeting of Stockholders and proxy
statement contain the matters to be considered and acted upon. Please read these
materials carefully.
Matters scheduled for consideration at the Annual Meeting are the election
of directors and the ratification of Beacon's independent auditors.
I hope you will be able to attend the meeting, but if you cannot do so, it
is important that your shares be represented and voted. ACCORDINGLY, I URGE YOU
TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE RETURN
ENVELOPE PROVIDED.
Very truly yours,
/s/ F. William Capp
F. William Capp
President and Chief Executive Officer
Beacon Power Corporation
234 Ballardvale Street
Wilmington, MA 01887
Notice of Annual Meeting
May 23, 2002
To the Stockholders of
Beacon Power Corporation
We are hereby notifying you that Beacon Power Corporation will be holding
its Annual Meeting of Stockholders at the offices of the Company, 234
Ballardvale Street, Wilmington, Massachusetts, on Thursday, May 23, 2002 at
10:00 a.m., Eastern Daylight Time, for the following purposes:
(1) To elect members of the Company's Board of Directors for the ensuing
year, and until their successors are duly elected and qualified.
(2) To ratify the selection of Deloitte & Touche LLP as independent
auditors to audit our books and accounts for the fiscal year ending
December 31, 2002.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Directors,
Beacon Power Corporation
/s/ F. William Capp
F. William Capp
President and Chief Executive Officer
April 23, 2002
Mailed at Boston, Massachusetts
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT AS
PROMPTLY AS POSSIBLE. IF YOU ATTEND THE MEETING AND VOTE IN PERSON, THE PROXY
WILL NOT BE USED.
Beacon Power Corporation
234 Ballardvale Street
Wilmington, Massachusetts 01887
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 23, 2002
INTRODUCTION
We are furnishing you with this Proxy Statement in connection with the
solicitation of proxies to be used at the Annual Meeting of Stockholders
("Annual Meeting") of Beacon Power Corporation to be held on May 23, 2002 and at
any adjournment of the Annual Meeting, for the purposes set forth in the
accompanying notice of the meeting. All holders of our Common Stock of record at
the close of business on April 12, 2002 will be entitled to vote at this
meeting. The stock transfer books have not been closed.
SOLICITATION OF PROXIES
We are soliciting proxies in the form enclosed on behalf of the Board of
Directors. We will vote any such signed proxy, if received in time for the
voting and not revoked, at the Annual Meeting according to your directions. We
will vote any proxy that fails to specify a choice on any matter to be acted
upon for the election of each nominee for director and in favor of each other
proposal to be acted upon. If you submit a signed proxy in the form enclosed,
you will have the power to revoke it at any time before we exercise it by filing
a later proxy with us, by attending the Annual Meeting and voting in person, or
by notifying us of the revocation in writing addressed to the Secretary of
Beacon Power Corporation at 234 Ballardvale Street, Wilmington, MA 01887.
We will begin mailing the Proxy Statement and accompanying proxy card to
our stockholders on April 23, 2002.
We will pay for all expenses of preparing, assembling, printing and mailing
the material used in the solicitation of proxies by the Board. In addition to
the solicitation of proxies by use of the mail, officers and regular Beacon
employees may solicit proxies on behalf of the Board by telephone, telegram or
personal interview, and we will bear the expenses of such efforts. We also may
make arrangements with brokerage houses and other custodians, nominees and
fiduciaries to forward soliciting materials to the beneficial owners of stock
held of record by such persons at our expense.
VOTING RIGHTS
As of April 12, 2002, we had 42,770,856 shares of our Common Stock, $0.01
par value ("Common Stock"), issued and outstanding. Each share of Common Stock
that you own entitles you to one vote on each matter to be voted upon at the
Annual Meeting. All holders of Common Stock vote together as one class. If you
withhold a vote with regard to the election of directors, such vote will have no
effect because directors are elected who receive a plurality of votes. An
abstention on the ratification of accountants will have the same legal effect as
a vote against such matter because the ratification requires the votes of a
majority of shares represented at the meeting. Brokers holding shares in street
name have the authority to vote in favor of all the nominees for director and in
favor of ratifying accountants when they have not received contrary instructions
from the beneficial owners.
We will have a quorum for the transaction of business at the Annual Meeting
if the holders of a majority of the issued and outstanding shares of Common
Stock entitled to vote are present in person or represented by proxy. We will
count abstentions and broker non-votes in determining whether a quorum is
present. If we do not have a quorum, we may postpone the Annual Meeting from
time to time until stockholders holding the requisite number of shares of Common
Stock are present or represented by proxy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2002, certain information
concerning the ownership of shares of Common Stock by (i) each person or group
that we know owns beneficially more than five percent of the issued and
outstanding shares of Common Stock, (ii) each director and nominee for director,
(iii) each named executive officer described in "Compensation of Executive
Officers" below, and (iv) all directors and executive officers as a group.
Except as otherwise indicated, each person named has sole investment and voting
power with respect to his or its shares of Common Stock shown.
Number of Percentage of
Shares Common Stock
Beneficially Beneficially
Name and Address of Beneficial Owner (1) Owned (2) (3) Owned (2) (3)
- ------------------------------------------------------------- ----------- --------------
F. William Capp 200,000 *
William J. Driscoll 33,334 *
Robert D. French 161,709 *
Matthew L. Lazarewicz (4) 306,744 *
Maureen A. Lister 91,429 *
Stephen A. Spanos 40,000 *
James M. Spiezio 144,384 *
Philip J. Deutch 10,000 *
Alan P. Goldberg 20,000 *
Nancy Hawthorne 10,000 *
Jack P. Smith (5) 9,000 *
Kenneth M. Socha 10,000 *
William E. Stanton (6) 1,087,618 2.5%
Perseus Capital, L.L.C. (7) 11,604,147 24.5%
SatCon Technology Corporation (8) 4,879,614 11.4%
David B. Eisenhaure (9) 5,700,010 13.3%
DQE Enterprises, Inc. (10) 3,994,702 9.3%
Mechanical Technology, Incorporated (11) 4,410,797 10.3%
GE Capital Equity Investments, Inc. (12) 4,440,475 10.4%
The Beacon Group Energy Investment Fund II, L.P. (13) 3,055,856 7.0%
All directors and executive officers as a group (13 persons) 2,369,057 5.0%
- ------------------------------------------------------------ ------------ --------------
* Less than 1%.
(1) The address for all executive officers and directors is c/o Beacon
Power Corporation, 234 Ballardvale Street, Wilmington, MA 01887.
Messrs. Capp, Driscoll, French, Lazarewicz, Spanos and Spiezio are
executive officers of Beacon. Messrs. Deutch, Goldberg, Smith, Socha
and Stanton and Ms. Hawthorne are directors of Beacon. Ms. Lister was
an executive officer with Beacon until March 12, 2002 when she
terminated her employment with Beacon.
(2) The number of shares beneficially owned by each stockholder is
determined under rules issued by the Securities and Exchange Commission
and includes voting or investment power with respect to those
securities. Under these rules, beneficial ownership includes any shares
as to which the individual or entity has sole or shared voting power or
investment power and includes any shares as to which the individual or
entity has the right to acquire beneficial ownership within 60 days
after March 31, 2002 through the exercise of any warrant, stock option
or other right. The inclusion in this proxy statement of these shares,
however, does not constitute an admission that the named stockholder is
a direct or indirect beneficial owner of those shares. The number of
shares of common stock outstanding used in calculating the percentage
for each listed person includes the shares of common stock underlying
warrants or options held by that person that are exercisable or
convertible within 60 days of March 31, 2002, but excludes shares of
common stock underlying warrants or options held by any other person.
(3) Includes the following number of shares of common stock issuable upon
the exercise of stock options which may be exercised on or before May
30, 2002: Mr. Capp, 200,000; Mr. Driscoll, 33,334; Mr. French, 160,000;
Mr. Spanos, 40,000; Mr. Spiezio, 96,667; Mr. Lazarewicz, 293,334; Mr.
Deutch, 10,000; Mr. Goldberg, 10,000; Mr. Smith 10,000; Mr. Socha,
10,000; Mr. Stanton 787,800 and Ms. Hawthorne 10,000.
(4) Includes 2,500 shares of common stock held in trust for Mr. Lazarewicz'
wife and sister-in-law for which Mr. Lazarewicz acts as sole trustee.
Mr. Lazarewicz disclaims beneficial ownership over these shares.
(5) Includes 500 shares of common stock held by Mr. Smith's sons. Mr. Smith
disclaims beneficial ownership over these shares.
(6) Includes 1,000 shares of common stock held by Mr. Stanton's wife. Mr.
Stanton disclaims beneficial ownership over these shares.
(7) Includes shares of common stock issuable upon exercise of warrants to
purchase 4,512,593 shares of common stock. Perseus Capital's address is
2099 Pennsylvania Avenue, N.W., Suite 900, Washington, DC 20006.
(8) Includes shares of common stock issuable upon exercise of warrants to
purchase 173,704 shares of common stock. SatCon's address is 161 First
Street, Cambridge, MA 02142.
(9) Includes the shares and warrants held by SatCon of which Mr. Eisenhaure
is the President, Chief Executive Officer and Chairman of the Board of
Directors. Mr. Eisenhaure disclaims beneficial ownership of these
shares.
(10) DQE Enterprises' address is One Northshore Center, Suite 100, 12
Federal Street, Pittsburgh, PA 15212.
(11) Mechanical Technology's address is 30 South Pearl Street, Albany, NY
12207.
(12) Includes shares of common stock issuable upon exercise of warrants to
purchase 1,573,333 shares of common stock and options to purchase
10,000 shares of common stock. Also includes shares of common stock
issuable upon exercise of options to purchase 120,000 shares of common
stock issued to GE Corporate Research and Development. GE Equity's
address is 120 Long Ridge Road, Stamford, CT 06927.
(13) Includes shares of common stock issuable upon exercise of warrants to
purchase 1,018,000 shares of common stock. Beacon Group's address is
399 Park Avenue, New York, NY 10022.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors has nominated the persons named below for election
at the Annual Meeting as directors. The directors who are elected shall hold
office until their respective successors shall have been duly elected and
qualified. In accordance with Delaware General Corporation Law, each nominee for
director needs a plurality of the votes of shares present in person or
represented by proxy at the Annual Meeting in order to gain election.
All nominees are members of the present Board. Each of the nominees for
director has consented to being named a nominee in this Proxy Statement and has
agreed to serve as a director, if elected at the Annual Meeting. The persons
named in the proxy intend to vote for the following nominees.
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR DIRECTOR LISTED BELOW.
Name and Age Principal Occupation and Other Information
Alan P. Goldberg, 56
Mr. Goldberg joined us as a director in June 2000.
Mr. Goldberg has served as President and Co-Chief
Executive Officer of First Albany Companies Inc.,
an investment bank, since 1993 and as a Director
of First Albany Companies Inc. since 1985. Mr.
Goldberg also has served on the board of directors
of Mechanical Technology, Incorporated since 1996
and of SatCon since 1999. Mr. Goldberg is active
in industry and civic organizations and serves on
the board of several non-profit institutions. He
received a B.A. degree in Government from Tufts
University. Mr. Goldberg also serves as a member
of the Audit Committee and the Finance Committee.
Nancy Hawthorne, 51
Ms. Hawthorne joined us as a director in February
2001. Ms. Hawthorne served as Chief Financial
Officer of Continental Cablevision, Inc. until
1996. Upon Continental's merger with US West and
subsequent renaming as MediaOne, she became that
company's executive vice president. She departed
MediaOne in 1997. Subsequently, she has served on
several corporate boards, including Avid
Technology, Life F/X, Inc., Perini Corporation,
New England Zenith Fund and CGU (formerly
Commercial Union). She is also a private investor
in and advisor to various early-stage companies
including WorldClinic, Inc., whose Board of
Directors she chairs. Ms. Hawthorne is active in
industry and civic organizations and serves on the
board of several non-profit institutions. Ms
Hawthorne received a bachelor's degree from
Wellesley College in 1973 and an MBA from Harvard
Business School in 1977. Ms. Hawthorne also serves
as the Chairperson of the Audit Committee and as
Chairperson of the Finance Committee. She also
serves on the Nominating Committee and the
Compensation Committee.
CERTAIN INFORMATION REGARDING OUR BOARD OF DIRECTORS
Board Composition
Our board of directors consists of seven members, six of whom are outside
directors. Each director elected to succeed those directors whose terms then
expire shall be elected for a term of office to expire at the third succeeding
annual meeting of our stockholders after their election. An eighth board seat is
vacant due to the resignation of a director who was elected for a term expiring
with the annual meeting of 2004, and it may be filled for the duration of the
unexpired term by a majority of directors then in office.
There are no family relationships among any of our directors or executive
officers.
Meetings and Committees
General. The board of directors held a total of 11 meetings during 2001.
Each member of the board of directors attended at least 75% of the aggregate
number of meetings of the board of directors and each committee on which he or
she served. Our board of directors has an audit committee, a compensation
committee, a nominating committee and a finance committee. No member of the
audit or compensation committee is an employee of Beacon.
Audit Committee. The members of the audit committee are responsible for
recommending to the board of directors the engagement of our independent
auditors and reviewing our accounting controls and the results and scope of
audits and other services provided by our auditors. The current members of the
audit committee are Mr. Goldberg, Ms. Hawthorne and Mr. Smith. The audit
committee held 4 meetings during the last fiscal year. We are required by the
rules of the Nasdaq to satisfy certain requirements with respect to the audit
committee. In conformity with those requirements, our board of directors has
approved the audit committee's written charter. In addition, our board of
directors has determined that all of the members of the audit committee satisfy
the independence and other applicable requirements of the Nasdaq's listing
standards.
Compensation Committee. The compensation committee is responsible for
reviewing and recommending to the board of directors the amount and type of
non-stock and stock compensation to be paid to senior management and
establishing and reviewing general policies relating to compensation and
benefits of employees. The current members of the compensation committee are Mr.
Socha and Ms. Hawthorne. The compensation committee held no meetings during the
last fiscal year that were not part of a full meeting of the board of directors.
Nominating Committee. The members of the nominating committee are
responsible for recommending nominee directors to our board of directors. The
board as a whole then reviews the qualifications of nominee directors and
recommends to the stockholders the election of our directors. A stockholder may
nominate a person for election as a director by complying with Section 2.2 of
our By-Laws, which provides that advance notice of a nomination must be
delivered to Beacon and must contain the name and certain information concerning
the nominee and the stockholders who support the nominee's election. A copy of
this By-Law provision may be obtained by writing to Beacon Power Corporation,
Attn: Secretary, 234 Ballardvale Street, Wilmington, MA 01887. The current
members of the nominating committee are Mr. Stanton, Mr. Deutch and Ms.
Hawthorne. The nominating committee held no meetings during the last fiscal year
that were not part of a full meeting of the board of directors.
Finance Committee. The finance committee is responsible for evaluating and
making recommendations to the board concerning Beacon's financing strategy. The
current members of the finance committee are Ms. Hawthorne, Mr. Goldberg, Mr.
Deutch and Mr. Stanton. The finance committee held no meetings during the last
fiscal year that were not part of a full meeting of the board of directors.
Director Compensation
We have adopted a compensation package that consists of stock options
and cash designed to compensate board members who are not our employees
("non-employee directors"). All non-employee directors serving on our board of
directors have received options to purchase 10,000 shares of our common stock.
Options granted to directors who were on the board of directors prior to our
initial public offering are fully vested with an exercise price equal to $6.00.
Non-employee directors who joined our board of directors receive options to
purchase 10,000 shares of our common stock that vest monthly over a 12-month
period and have an exercise price equal to the fair market value of the common
stock on the date of grant. On the anniversary date of each particular
non-employee director's appointment to our board, each non-employee director
will receive options to purchase 10,000 shares of our common stock that vest
monthly over a 12-month period and have an exercise price equal to the fair
market value of the common stock on the date of grant.
Non-employee directors also receive an annual retainer of $10,000, payable
quarterly, plus $2,000 for each board of directors meeting attended in person
and $500 for each meeting attended by telephone. Committee members receive $500
per meeting. We also reimburse directors for reasonable out-of-pocket expenses
incurred in the performance of their duties.
Limitation of Liability and Indemnification
Our certificate of incorporation limits the liability of our directors,
officers and various other parties whom we have requested to serve as directors,
officers, trustees or in similar capacities with other entities to us or our
stockholders for any liability arising from an action to which such persons are
a party by reason of the fact that they were serving us or at our request to the
fullest extent permitted by the Delaware General Corporation Law.
We have entered into indemnification agreements with our directors and
officers. Subject to certain limited exceptions, under these agreements, we will
be obligated, to the fullest extent permitted by the Delaware General
Corporation Law, to indemnify such directors and officers against all expenses,
judgments, fines and penalties incurred in connection with the defense or
settlement of any actions brought against them by reason of the fact that they
were our directors or officers. We also maintain liability insurance for our
directors and officers in order to limit our exposure to liability for
indemnification of our directors and officers.
Term of Office for our Executive Officers
Our officers serve until their successors are appointed by our board of
directors.
COMPENSATION OF EXECUTIVE OFFICERS
Executive Compensation
The following table sets forth the total compensation paid in the years
ended December 31, 2001, 2000 and 1999 to our chief executive officer and four
of our other executive officers whose aggregate compensation exceeded $100,000
in 2001.
SUMMARY COMPENSATION TABLE (1)
ANNUAL COMPENSATION
Securities
Underlying All Other (2)
Name and Principal Position Year Salary Bonus Options Compensation
- ---------------------------------------------------------- -------- ------------- ------------- ------------ --------------
F. William Capp (3) 2001 $12,692 $ 90,000 900,000 $ 2,765
President and Chief Executive Officer
William E. Stanton (4) 2001 $230,428 $110,000 50,000 $ 371,083
President and Chief Executive Officer 2000 $228,778 $217,069 900,000 $ 4,987
1999 $157,500 $ -- 190,000 $ --
Robert D. French (5) 2001 $140,000 $ -- -- $ 1,719
Vice President of Manufacturing 2000 $91,346 $ 16,707 200,000 $ 1,880
Matthew L. Lazarewicz (6) 2001 $150,000 $ 35,000 -- $ 1,073
Vice President of Engineering 2000 $155,769 $ 50,000 50,000 $ 1,174
1999 $113,723 $ -- 250,000 $ --
Maureen A. Lister (7) 2001 $140,000 $ -- -- $ 493
Vice President of Operations Management and 2000 $125,000 $115,241 118,000 $ 539
Chief Administrative Officer 1999 $ 83,323 $ -- 132,000 $ --
Stephen A. Spanos (8) 2001 $110,577 $ 17,457 63,000 $ --
Corporate Controller and Chief Accounting Officer
James M. Spiezio (9) 2001 $160,000 $ -- -- $ 3,094
Vice President of Finance and Chief Financial Officer 2000 $111,712 $100,241 200,000 $ 3,717
- ----------------------
1) Columns required by the rules and regulations of the Securities and Exchange
Commission that contain no entries have been omitted.
2) Amounts represent term life insurance premiums paid by the executive and
reimbursed by Beacon plus an amount to reimburse the executive for taxes
paid on the amount of the premium.
3) We hired Mr. Capp in December 2001.
4) Mr. Stanton's employment was terminated on December 1, 2001. His
compensation in 2001 includes $366,660 in connection with that termination.
5) We hired Mr. French in April 2000.
6) We hired Mr. Lazarewicz in February 1999.
7) Ms. Lister's employment with Beacon terminated March 12, 2002.
8) We hired Mr. Spanos in January 2001.
9) We hired Mr. Spiezio in May 2000.
Employment and Consulting Agreements
We entered into employment agreements with Messrs. Capp, Stanton, Spiezio,
Lazarewicz and French and Ms. Lister for, in the case of Mr. Stanton, three
years, and, in the case of all other executive officers two years. The
agreements with Mr. Stanton and Ms. Lister have been terminated. In light of the
scheduled expiration of the agreements with Messrs. Spiezio, Lazarewicz and
French in October 2002, we anticipate entering into a one year extension of
those agreements. The current base salary under these agreements is $220,000 in
the case of Mr. Capp; $160,000 in the case of Mr. Spiezio; $150,000 in the case
of Mr. Lazarewicz; and $140,000 in the case of Mr. French. The agreements
contain provisions for bonuses, including in the case of Mr. Capp, a $90,000
signing bonus. In the event of the termination of an employment agreement by us
without cause or resignation by the executive for good reason, we must pay the
executive a severance payment equal to between one and two years of the
executive's base salary depending on the duration of the executive's employment.
Additionally, in the event of such a termination or resignation, we are
obligated to continue to provide benefits to the executive for one year, pay the
executive a prorated bonus to the date of termination and accelerate the
executive's vesting of his or her stock options by up to 66% depending on the
duration of the executive's employment. In the event that the executive's
employment is terminated as a result of death or disability, we are obligated to
pay the executive or his or her estate severance equal to three months salary,
provide benefits for one year from the date of termination and accelerate the
vesting of the executive's stock options by up to 66%. If, in connection with a
payment under an employment agreement, an executive incurs any excise tax
liability on the receipt of "excess parachute payments" as defined in Section
280G of the Internal Revenue Code of 1986, as amended, the employee agreements
provide for gross-up payments to return them to the after-tax position they
would have been in if no excise tax had been imposed. As used in the employment
agreements, "cause" means an act constituting fraud, embezzlement or other
felony committed by the executive, a material breach of the executive's
obligations to us or of our policies or the engagement by the executive in
willful misconduct. As used in the employment agreements, "for good reason"
means a material diminution of the executive's duties, a material breach by us
of our obligations to the executive, a breach by us of the requirement that the
executive provide primary services in a location that is no more than fifty
miles from Wilmington, Massachusetts, a sale of us or, in the case of our chief
executive officer, the failure to appoint him as a member of our board of
directors or the removal of him from our board of directors without cause. Also,
if we do not offer to renew the employment agreements with Messrs. Capp,
Spiezio, Lazarewicz or French upon their scheduled expiration and if the
executive's employment then ceases, then for 12 months we must pay him monthly
amounts equal to one-twelfth of his base salary and of last year's bonus.
Upon his termination from Beacon on December 1, 2001 as our Chief Executive
Officer, William Stanton entered into a consulting agreement with Beacon for
nine months. Under the terms of the consulting agreement, Mr. Stanton was paid
$30,000 per month for the three months immediately following his termination. In
return, Mr. Stanton worked full time on behalf of Beacon. After the first three
months, Mr. Stanton is to be paid $1,500 per day for each day of consulting
services he performs on behalf of Beacon. He is to be paid a minimum of $12,000
per month through August 2002. Any amounts paid above the minimum of $12,000 are
at the discretion of Beacon with Mr. Stanton's consent. Under the agreement, Mr.
Stanton is required to perform at least eight days per month of consulting on
behalf of Beacon unless Beacon agrees to fewer days. Also, under the agreement,
Mr. Stanton's stock option grants were amended. Under the new terms, some
vesting of the options was accelerated to reflect the time Mr. Stanton had
served. As a result of the accelerated vesting, Mr. Stanton vested options for
137,800 shares that would have otherwise been cancelled. In addition, the vested
options will remain exercisable by Mr. Stanton for one year after his consulting
agreement terminates. This is different than the terms under his original option
agreement that call for the vested ptions to be cancelled 90 days after
termination of employment. Mr. Stanton continues to serve as a Board member of
Beacon.
Option Grants in Last Fiscal Year
The following table sets forth information regarding stock options granted
during 2001 to our executive officers listed in the Summary Compensation Table.
During 2001, we granted options to purchase an aggregate of 1,513,000 shares of
common stock to employees and 20,000 shares of common stock to directors. The
exercise price per share for these options was equal to the fair market value of
the common stock as of the grant date as determined by our board of directors.
Option Grants in Last Fiscal Year
Potential Realizable Value
Number of Percent of Individual Grants at Assumed Annual Rates
Securities Total Options ---------------------------- of Stock Price Appreciation
Underlying Granted to Exercise for Option Term (1)
Options Employees in Price -----------------------------
Name Granted Fiscal Year ($/Share) Expiration Date 5% ($) 10% ($)
- ---------------------- ----------- --------------- ----------- ----------------- -------------- --------------
F. William Capp 900,000 59.5% $0.89 December 1, 2011 $503,745 $ 1,276,588
William E. Stanton 50,000 3.3% 0.89 December 1, 2011 27,986 70,922
Robert D. French --- 0.0% N/A N/A N/A N/A
Matthew L. Lazarewicz --- 0.0% N/A N/A N/A N/A
Stephen A. Spanos 60,000 4.0% 9.25 January 25, 2011 349,037 884,527
3,000 0.2% 5.27 August 2, 2011 9,943 25,197
James M. Spiezio --- 0.0% N/A N/A N/A N/A
- ------------------
(1) The dollar amounts under these columns represent the potential realizable
value of each grant assuming that the market value of our common stock
appreciates from the date of grant to the expiration of the option at
annualized rates of 5% and 10%. These assumed rates of appreciation have
been specified by the SEC for illustrative purposes only and are not
intended to forecast future financial performance or possible future
appreciation in the price of our common stock. The actual amount the
executive officer may realize will depend on the extent to which the stock
price exceeds the exercise price of the options on the date the option is
exercised.
Fiscal Year-End Option Values
NUMBER OF SECURITIES UNDERLYING
Value of Unexercised
Unexercised Options at in the Money Options
The Fiscal Year End (#) at Fiscal Year End ($)(1)
Exercisable Unexercisable Exercisable Unexercisable
F. William Capp 200,000 700,000 $ 82,000 $ 287,000
William E. Stanton 737,800 50,000 $ 17,138 $ 20,500
Robert D. French 66,667 133,333 $ 27,333 $ 54,667
Matthew L. Lazarewicz 100,000 116,666 $ 34,167 $ 34,167
Maureen A. Lister 39,334 78,666 $ --- $ ---
Stephen A. Spanos --- 63,000 $ --- $ ---
James M. Spiezio 20,001 133,332 $ --- $ ---
- ------------------
(1) Based on a per share price of $1.30, the closing price of our common
stock on the Nasdaq National Market on December 31, 2001.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of Beacon's board of directors (the "Committee")
has the authority to set the compensation of Beacon's Chief Executive Officer
and all executive officers and makes the following report for the year 2001. The
Committee has the responsibility to review the design, administration and
effectiveness of all programs and policies concerning executive compensation.
The Committee administers Beacon's Amended and Restated 1998 Stock Incentive
Plan. The Committee also administers Beacon's Employee Stock Purchase Plan. In
addition, the Committee has responsibility for the review and approval of the
Management Incentive Program(s) to be in effect for the Chief Executive Officer,
executive officers and key employees each fiscal year. The Committee is composed
of two independent, non-employee directors who have no interlocking
relationships as defined by the Securities and Exchange Commission.
General Compensation Philosophy. Beacon operates in the competitive and
rapidly changing power technology industry. The Committee strives to maintain
compensation programs that allow Beacon to respond to the competitive pressures
within this industry. Beacon's compensation philosophy is to offer compensation
opportunities that are linked to Beacon's business objectives and performance,
individual performance and contributions to Beacon's success, and enhanced
shareholder value. These compensation opportunities are intended to be
competitive within this industry and enable Beacon to attract, retain and
motivate the management talent necessary to achieve Beacon's overall business
objectives and ensure Beacon's long-term growth.
Compensation Components. It is the Committee's objective to have a
substantial portion of each executive officer's compensation opportunity
conditional ("at risk") upon Beacon's performance, as well as his or her
contribution to Beacon's meeting its objectives and to design a total
compensation and incentive structure to motivate and reward success, balancing
short and long-term goals. Beacon's executive compensation program consists of
three major components: (i) base salary; (ii) an annual management incentive
bonus; and (iii) long-term incentives. The second and third elements constitute
the "at risk" portion of Beacon's overall compensation program.
Base Salary. The Committee annually reviews each executive officer's base
salary. The base salary for each officer reflects the salary levels for
comparable positions in the industry and in published surveys. These surveys
include companies with whom Beacon competes for senior-level executives. (Some
of the companies included in the surveys are included in the CIBC World Markets
Power Technology & Growth Index used in the graph set forth under "Corporate
Performance".) In addition, the Committee considers the executive's individual
performance and Beacon's success in achieving the annual business objectives.
The Committee exercises its judgment based upon the above criteria and does not
apply a specific formula or assign a weight to each factor considered. The
relative weight given to each factor varies with each individual in the sole
discretion of the Committee. Each executive officer's base salary is adjusted
each year on the basis of (i) the Committee's evaluation of the officer's
personal performance for the year and (ii) the competitive marketplace for
persons in comparable positions. The Committee attempts to fix base salaries on
a basis generally in line with base salary levels for comparable companies.
Annual Management Incentive Bonus. The annual management incentive bonus is
the first "at risk" executive compensation element in Beacon's executive
compensation program. At the beginning of each year, the Committee establishes
objectives for the management incentive bonus program drawn from the fiscal year
business plan approved by the Board of Directors. Additionally, at the beginning
of each year, the Committee establishes bonus award targets for the Executive
Officers. The bonus plan has a threshold level of performance by Beacon that
must be achieved before any bonuses are awarded. The bonus amounts payable to
each Executive Officer are then determined by considering Beacon's performance
and individual performance.
Long-Term Incentive Program ("LTIP"). The LTIP is the second "at risk"
element of Beacon's compensation program in which executive officers and all
other employees participate. This program has consisted solely of stock options,
not cash. The Committee views the granting of stock options as a significant
method of aligning management's long-term interests with those of the
shareholders, which bring into balance short and long-term compensation with
Beacon's goals, fostering the retention of key executive and management
personnel, and stimulating the achievement of superior performance over time.
Awards to executives are based upon criteria which include an individual's
current position with Beacon, total compensation, unvested stock options, the
executive's performance in the recent period, expected contributions to the
achievement of Beacon's long-term performance goals, and current competitive
practice. The relative weight given to each of these factors will vary from
executive to executive at the Committee's discretion. After giving consideration
to the criteria deemed relevant by the Committee, including prior option grants
made to Beacon executives, a competitive analysis of Beacon's option program and
overall compensation programs against the programs of companies of similar size
and industry, and the recommendations of Beacon's management, the Committee
approved the stock option grants to the executive officers listed in the summary
Compensation Table set forth in the option grant table. The Committee also
approved a stock option grant to two other executive officers hired in 2001.
These stock options were granted at exercise prices equal to the fair market
value of the stock at the effective date of the grant, become exercisable over
three years and have a term of ten years.
Compensation of Chief Executive Officer. F. William Capp, Beacon's Chief
Executive Officer and President, receives competitive compensation and regular
benefits in effect for senior executives of Beacon. Mr. Capp's base salary will
be reviewed annually and adjusted as determined on the same basis as other
senior executives of Beacon, based on the factors noted above in " Compensation
Committee Report - Base Salary". Mr. Capp also received a cash bonus at the
beginning of his employment with Beacon in the amount of $90,000. This amount
was determined by the Committee as a part of his offer for employment. In
addition to such cash compensation, Mr. Capp also received options to acquire an
aggregate of 900,000 shares of Common Stock at exercise prices equal to the fair
market value of the Common Stock on the date of grant. The vesting of all of
such options accelerates upon a sale of Beacon.
Employee Stock Purchase Plan. Beacon maintains an employee stock purchase
plan that qualifies under Section 423 of the Internal Revenue Code and permits
substantially all of its employees to purchase shares of its common stock.
Participating employees may purchase common stock at a purchase price equal to
85% of the lower of the fair market value of the common stock at the beginning
of an offering period or on the exercise date. Employees may designate up to 15%
of their base compensation for the purchase of common stock under this plan.
Beacon's executive officers are eligible to participate in this program,
subject to any applicable tax laws.
Retirement Plans. Beacon maintains a plan that complies with the provisions
of Section 401(k) of the Internal Revenue Code. Substantially all U.S. employees
are eligible to participate in this plan, and eligibility for participation
commences upon hiring. Beacon's executive officers are eligible to participate
in this program, subject to any applicable tax laws. Each participant in the
Plan may elect to contribute a percentage of his or her annual compensation to
the Plan on a pre-tax basis up to the annual limit established by the Internal
Revenue Service. The Company matches employee contributions at a rate of 50% up
to the first 6% of the employee's contributions. The Company may also elect to
make a profit-sharing contribution at the discretion of the Board of Directors.
Employee contributions are fully vested. Company matching and profit sharing
contributions vest 20% after two years of service consisting of at least 1,000
hours per calendar year and 20% annually thereafter.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code disallows a tax deduction to publicly held companies for
compensation paid to certain of their executive officers, to the extent that
compensation exceeds $1 million per covered officer in any fiscal year. The
limitation applies only to compensation that is not considered to be
performance-based. Beacon's Amended and Restated 1998 Stock Incentive Plan has
been structured so that any compensation deemed paid in connection with the
exercise of option grants made under that plan with an exercise price equal to
the fair market value of the option shares on the grant date will qualify as
performance-based compensation which will not be subject to the $1 million
limitation. Cash and other non-performance based compensation paid to Beacon's
executive officers for fiscal 2001 did not exceed the $1 million limit per
officer, and the Committee does not anticipate that the non-performance based
compensation to be paid to Beacon executive officers will exceed that limit.
Because it is unlikely that the cash compensation payable to any of Beacon's
executive officers in the foreseeable future will approach the $1 million limit,
the Committee has decided at this time not to take any action to limit or
restructure the elements of cash compensation payable to Beacon's executive
officers. The Committee will reconsider this decision should the individual cash
compensation of any executive officer ever approach the $1 million level.
It is the opinion of the Committee that the executive compensation policies
and plans provide the necessary total remuneration program to properly align
Beacon's performance and the interests of Beacon's stockholders through the use
of competitive and equitable executive compensation in a balanced and reasonable
manner, for both the short and long-term.
Submitted by the Compensation Committee:
Kenneth Socha, Chairperson
Nancy Hawthorne
AUDIT COMMITTEE REPORT
In connection with the preparation and filing of our Annual Report on Form
10-K for the year ended December 31, 2001, the Audit Committee (i) reviewed and
discussed the audited financial statements with management, (ii) discussed with
Deloitte & Touche LLP, our independent auditors, the matters required to be
discussed by Statement of Auditing Standards 61 (as modified or supplemented)
and (iii) received the written disclosures and the letter from Deloitte & Touche
LLP required by Independence Standards Board Standard No. 1 (as modified or
supplemented) and discussed the independence of Deloitte & Touche LLP with
Deloitte & Touche LLP. Based on the review and discussions referred to above,
among other things, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Corporation's Annual
Report on Form 10-K for the year ended December 31, 2001.
Submitted by the Audit Committee:
Nancy Hawthorne, Chairperson
Alan P. Goldberg
Jack Smith
CORPORATE PERFORMANCE
The line graph below compares the cumulative total stockholder return for
the year ended December 31, 2001 of our common stock against the cumulative
total return of the Nasdaq Stock Market Index and the CIBC Power Technology
Growth Index. The graph and table assume that $100 was invested on November 17,
2000, the first date on which our common stock began trading following our
initial public offering, in each of our common stock, the Nasdaq Stock Market
Index and the CIBC Power Technology, and that all dividends were reinvested. No
cash dividends have been declared on our common stock.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PERIOD ENDING
Index 12/31/2000 3/31/2001 6/30/2001 9/30/2001 12/31/2001
Beacon Power Corporation 100 52.50 69.00 15.20 13.00
CIBC World Markets Power
Technology & Growth Index 100 80.82 97.69 44.71 55.64
Nasdaq Stock Market Index 100 74.49 87.45 60.67 78.95
* Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, and persons who own more than 10% of a registered class of our
equity securities ("Insiders"), to file reports of ownership and changes in
ownership with the SEC. Insiders are required by SEC regulation to furnish us
with copies of all Section 16(a) forms they file. Based solely on review of the
copies of such forms furnished to us and on written representations from our
Insiders, we believe that during 2001 all of our Insiders met their Section
16(a) filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Advances to Certain Officers
During 2001, we advanced, on a full recourse basis, approximately $785,000
to three officers of the Company. The officers repaid approximately $152,000 of
these advances during 2001. The advances are expected to be repaid in full by
the officers and are secured by the officers' holdings of Beacon Power
Corporation common stock. During March 2002, upon her termination from Beacon,
one officer repaid her balance of $120,000 in full.
Licenses with SatCon
SatCon has granted us a perpetual, exclusive, royalty-free, worldwide right
and license to all patents, patent applications, technical knowledge,
information and know-how in existence in May 1997 and any improvements on that
intellectual property developed by SatCon prior to the completion of our initial
public offering which relate to the field of flywheel energy storage products,
systems and processes for stationary terrestrial (in or on ground or affixed to
structures on ground) applications, but not for satellite or other
non-terrestrial, stationary applications. We do not have the right to sublicense
this technology other than in connection with our manufacturing and distribution
operations. We will not have any rights to future improvements to its flywheel
technology that SatCon develops after our initial public offering. We have
granted SatCon a perpetual, worldwide, royalty-free, exclusive right and license
to use any improvements upon the flywheel energy storage technology for any
applications made by us other than stationary terrestrial applications. SatCon's
rights to further improvements made by us in our flywheel technology terminated
upon the consummation of our initial public offering. The license from SatCon is
terminable by SatCon in certain limited circumstances, including our bankruptcy,
upon the material breach of our obligations under the license, the exercise of
certain put rights granted by SatCon to certain of our investors and upon notice
by SatCon that the license agreement infringes upon the rights of a third party.
SatCon is a shareholder in our company. Alan P. Goldberg is a director of both
SatCon and our company.
Agreement with GE Corporation Research and Development
As a result of the investment in our company by GE Capital Equity
Investments, Inc., we have entered into an agreement with GE Corporate Research
and Development ("GE CR&D"), under which GE CR&D will provide us with technical
expertise in controls and materials. Under the terms of that agreement, GE CR&D
has agreed to make available to us up to $2,000,000 of its services at cost and
we have issued GE Equity a warrant to purchase 240,000 shares of our common
stock at an exercise price of $2.10 per share. Of these warrants, 120,000 vested
immediately and 120,000 will vest ratably to the extent to which we use GE
CR&D's services. This agreement terminates, and any unvested options are
forfeited, on November 1, 2003. GE Equity is a shareholder in our company. We
did not engage GE CR&D for any services during 2001; thus no other warrants were
vested during 2001.
DQE Enterprises Distribution Agreement
In connection with our May 1997 formation, DQE Enterprises, a subsidiary of
DQE, Inc., entered into a letter agreement with us pursuant to which, among
other things, we have agreed to appoint DQE Enterprises or one of its affiliates
as our exclusive distributor of our flywheel products for stationary energy
storage applications in the states of Pennsylvania, New York, Ohio, West
Virginia, Maryland, Delaware, Virginia and the District of Columbia. Under this
agreement, we retained the right to make sales in this territory to cable and
telephone companies and to electric utilities for their internal use. DQE
Enterprises also has a nonexclusive right to distribute the products outside
this territory, which we have the right to terminate at any time. The
distribution rights have a term of 20 years from the commencement of commercial
production of our products, provided that the rights may be terminated earlier
if DQE Enterprises does not meet sales targets to be agreed upon in the future.
We have agreed to sell our products to DQE Enterprises at the lower of (i) cost
of goods sold (including certain overhead expenses) plus 30% and (ii) the lowest
price at which the products are sold to others. DQE Enterprises is a shareholder
in our company. The terms of the license agreement were determined on the basis
of arms-length negotiations.
Registration Rights Agreement
Perseus Capital, DQE Enterprises, Micro-Generation, Mechanical Technology,
Beacon Group, Penske, SatCon and GE Capital Equity Investments, Inc., have the
right to demand that we register their shares on up to two occasions, provided
the anticipated aggregate offering is at least $500,000. In addition, these
holders may require us to file additional registration statements on Form S-3.
These holders will also have the right to include the shares of common stock
they hold or acquire upon the exercise of the warrants in any registration
statements we file with the Securities Exchange Commission, other than
registration statements filed with respect to employee benefit plans or in
connection with an acquisition. We are not required to file more than one
registration statement in any six-month period. We are required to bear the
costs of the exercise of these registration rights.
PROPOSAL 2
RATIFICATION OF SELECTION OF AUDITORS
We are submitting for ratification at the Annual Meeting the selection, by
a majority of the members of the Board who are not officers or employees of
Beacon, of Deloitte & Touche LLP ("Deloitte") as independent auditors to audit
the books and accounts of Beacon for the fiscal year ending December 31, 2002.
Such ratification requires the affirmative vote of a majority of the shares
entitled to vote thereon present in person or represented by proxy at the Annual
Meeting when a quorum is present. Representatives of Deloitte will be present at
the Annual Meeting and will be given an opportunity to make a statement if they
desire to do so and will respond to appropriate questions of stockholders.
Deloitte has advised us that neither it nor any of its members has any
direct financial interest in Beacon as a promoter, underwriter, voting trustee,
director, officer or employee.
Audit Fees
The aggregate fees billed for professional services rendered for the audit
of our annual financial statements for the fiscal year ended December 31, 2001,
were $138,605, all of which were paid to Deloitte.
Financial Information Systems Design and Implementation Fees
Deloitte did not render professional services relating to financial
information systems design and implementation for the fiscal year ended December
31, 2001.
All Other Fees
The aggregate fees billed by Deloitte for services rendered to us, other
than the services described above under "Audit Fees" for the fiscal year ended
December 31, 2001, were $59,200. These services were for the preparation and
filing of our 2000 income tax return and estimated payments for our 2001 income
taxes as well as other tax advice.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF DELOITTE AS INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2002.
OTHER MATTERS
Management does not know of any matters that will be brought before the
Annual Meeting other than those specified in the Notice of Annual Meeting.
However, if any other matters properly come before the Annual Meeting, the
persons named in the form of proxy, or their substitutes, will vote on such
matters in accordance with their best judgment.
FINANCIAL STATEMENTS
The Beacon 2001 Annual Report to Stockholders is provided to stockholders
along with this form of Proxy and contains the financial statements of Beacon.
The Annual Report and the financial statements contained therein are not to be
considered as a part of this soliciting material.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
In order to be included in proxy materials for the 2003 Annual Meeting of
Stockholders, stockholders' proposed resolutions must be received by Beacon at
its offices, 234 Ballardvale Street, Wilmington, Massachusetts 01887 on or
before December 24, 2001. Beacon suggests that proponents submit their proposals
by certified mail, return receipt requested, addressed to the Secretary of
Beacon.
If a stockholder of Beacon wishes to present a proposal before the 2003
Annual Meeting of Stockholders, but does not wish to have the proposal
considered for inclusion in Beacon's proxy statement and proxy card, such
stockholder must give written notice to the Secretary of Beacon at the address
noted above. The Secretary must receive such notice by January 23, 2003. If a
stockholder fails to provide timely notice of a proposal to be presented at the
2003 Annual Meeting of Stockholders, the proxies designated by the Board of
Directors of Beacon will have discretionary authority to vote on any such
proposal.
By order of the Board of Directors,
Beacon Power Corporation
/s/ F. William Capp
F. William Capp
President and Chief Executive Officer
Wilmington, Massachusetts
April 23, 2002