SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Definitive Additional Materials
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Beacon Power Corporation
(Name of Registrant as Specified In Its Charter)
Beacon Power Corporation
(Name of Person(s) Filing Proxy Statement)
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Beacon Power Corporation
234 Ballardvale Street
Wilmington, MA 01887
November 8, 2004
Dear Stockholder:
I am pleased to invite you to the 2004 Annual Meeting of Stockholders of
Beacon Power Corporation, which will be held on Thursday December 9, 2004, 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
November 8, 2004
Mailed at Boston, Massachusetts
Beacon Power Corporation
234 Ballardvale Street
Wilmington, MA 01887
Notice of Annual Meeting
To be held on December 9, 2004
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, December 9, 2004 at
10:00 a.m., Eastern Daylight Time, for the following purposes:
(1) To elect certain 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 Miller Wachman, LLP as independent auditors
to audit our books and accounts for the fiscal year ending December
31, 2004.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on October 27, 2004 will be
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
By Order of the Board of Directors,
Beacon Power Corporation
/s/James M. Spiezio
James M. Spiezio
Secretary
November 8, 2004
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
To be held on December 9, 2004
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 December 9, 2004
and at any adjournment of the Annual Meeting, for the purposes set forth in the
accompanying notice of the meeting. All holders of record of our Common Stock at
the close of business on October 27, 2004 will be entitled to vote at this
meeting and any adjournments thereof. The stock transfer books have not been
closed. All of our directors are encouraged to attend our Annual Meeting, and
last year all directors were present.
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 November 8, 2004.
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 October 27, 2004, we had 43,493,236 shares of our Common Stock, with
a par value of $0.01 ("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 who receive a plurality of votes are
elected. 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 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 October 27 2004, 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.
Percentage of
Common Stock
Beneficially
Name and Address of Beneficial Owner (1) TOTAL Owned (2) (3)
- ----------------------------------------------------------------- ------------------- ----------------------
F. William Capp 1,686,265 3.7%
William J. Driscoll -- *
Richard Hockney 282,991 *
Matthew L. Lazarewicz 857,861 1.9%
James M. Spiezio 789,819 1.8%
Stephen P. Adik 100,000 *
Philip J. Deutch (6) 110,000 *
Jack P. Smith (4) 134,806 *
Kenneth M. Socha (6) 110,000 *
William E. Stanton (5) 121,000 *
Perseus L.L.C. (6) 12,014,944 25.0%
The Beacon Group Energy Investment Fund II, L.P. (7) 3,055,856 6.9%
All directors and executive officers as a group (8 persons) 3,909,751 8.4%
- --------------
* Less than 1%.
(1) The address for all executive officers, directors, and Chief Engineer is
c/o Beacon Power Corporation, 234 Ballardvale Street, Wilmington, MA 01887.
Messrs. Capp, Lazarewicz, and Spiezio are executive officers of Beacon. Mr.
Driscoll is a former executive officer of Beacon. His address is 15
Robinson Road, Westford, MA 01886. Mr. Hockney is chief engineer at Beacon.
Messrs. Adik, Capp, Deutch, Smith, Socha and Stanton are directors of
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 October 27, 2004 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 October 27, 2004, 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 December 26,
2004: Mr. Capp, 1,500,000; Mr. Hockney, 153,000; Mr. Lazarewicz, 646,666;
Mr. Spiezio, 683,333; Mr. Adik, 100,000; Mr. Deutch, 110,000; Mr. Smith,
133,306; Mr. Socha, 110,000; and Mr. Stanton, 120,000.
(4) Includes 500 shares of common stock held by Mr. Smith's son. Mr. Smith
disclaims beneficial ownership over these shares.
(5) Includes 1,000 shares of common stock held by Mr. Stanton's wife. Mr.
Stanton disclaims beneficial ownership over these shares.
(6) Includes shares of common stock issuable upon exercise of warrants to
purchase 4,512,593 shares of common stock. Perseus L.L.C.'s address is 2099
Pennsylvania Avenue, N.W., Suite 900, Washington, DC 20006. Mr. Philip J.
Deutch and Mr. Kenneth M. Socha, members of the Board of Directors of the
Company, are also Managing Director and Senior Managing Director,
respectively, of Perseus L.L.C. Messrs. Deutch and Socha disclaim
beneficial ownership of all the shares of common stock held by Perseus
L.L.C. other than shares in which they may have a pecuniary interest.
(7) 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 his respective successor shall have been duly elected and
qualified. In accordance with Delaware General Corporation Law, the nominees for
director need a plurality of the votes of shares present in person or
represented by proxy at the Annual Meeting in order to gain election.
The nominees are members of the present Board. The nominees for director
have consented to being named as nominees in this Proxy Statement and have
agreed to serve as directors, 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 THE NOMINEES FOR DIRECTOR LISTED BELOW.
Stephen P. Adik, age 62 (director since 2004)
Audit committee
Mr. Adik served as Vice Chairman at NiSource Inc., (NYSE: NI), a Fortune 500
electric, natural gas and pipeline company, from December 2000 until his
retirement in December 2003. He joined NiSource in 1987 as Vice President and
general manager, Corporate Support Group, and later held positions of Senior
Executive Vice President and Chief Financial Officer. At NiSource, he helped
grow the company's market capitalization from $600 million to the current value
of approximately $5.6 billion. Before joining the energy industry in 1983, Mr.
Adik also had more than 20 years of operating and financial experience in the
transportation industry. His industry affiliations have included the American
Gas Association, Edison Electric Institute and the Midwest Gas Association. He
is currently a member of the boards of NiSource, Inc., and the Chicago
SouthShore and South Bend Railroad. He was also recently nominated to the board
of North Western Corp, an electric and natural gas company serving Montana,
South Dakota and Nebraska. Mr. Adik holds a degree in mechanical engineering
from the Stevens Institute of Technology, and an MBA degree in finance from
Northwestern University.
Jack P. Smith, age 56 (director since 2001)
Audit committee, Compensation committee
Mr. Smith is Chairman, Director and co-owner of SilverSmith Inc, a producer of
natural gas well metering and automated data reporting systems. With partner,
Mr. David Silvers, Smith founded SilverSmith Inc. in 2003. Prior to his current
connection with SilverSmith, Smith was President and CEO of More Space Place,
Inc., a leading producer and retailer of furniture system solutions. Currently
located mainly in Florida, the company has several retail locations in other
states as well. Prior to More Space Place, Inc., Mr. Smith served as President
and Chief Executive Officer of Holland Neway International in Muskegon,
Michigan, a leading designer and manufacturer of suspension systems and brake
actuators for the commercial vehicle market. In 2000, this 650-person company
had worldwide sales of $200 million. During his tenure, Smith was responsible
for growing sales of Holland Neway (formerly Neway Anchorlok International) from
$70 million to $200 million. In 1995, Smith led a successful management buyout
of the company with equity partner Kohlberg Kravis Roberts. From 1992 to 1999,
this and an earlier buyout transaction generated an equity return of over $110
million. Smith also held the positions of Vice President of Engineering and
Quality Assurance at Neway Anchorlok International and directed the engineering
and quality assurance departments. Earlier, he was Chief Engineer. From 1972 to
1982, Smith was Design Group Leader at the Ford Motor Company - Heavy Truck
Division, in Dearborn, Michigan, where he also held positions as project
engineer, and product planning analyst. Smith also serves on the board of
directors of Bissell Corporation in Grand Rapids, Michigan, SRAM Corporation in
Chicago and Weasler Engineering in Wisconsin. He is a Trustee of Grand Valley
State University Foundation. A resident of Grand Rapids, Michigan, Smith
attended the University of Michigan where he earned bachelor's (1970) and
master's (1971) degrees in mechanical engineering and an MBA (1979.)
Kenneth M. Socha, age 58 (director since 1998)
Compensation Committee, Audit Committee
Mr. Socha has served as Senior Managing Director of Perseus L.L.C. since 1996.
From 1985 to June 1988, he practiced law as a Partner in the New York office of
Lane & Edson. He became a partner of Dewey Ballantine in New York City in 1988.
Mr. Socha left Dewey Ballantine in February 1992 to join Rappahannock Investment
Company, the predecessor of Perseus L.L.C. on a full-time basis. Mr. Socha is a
director of five private companies in which Perseus has investments. He is a
graduate of the University of Notre Dame and the Duke University School of Law.
CERTAIN INFORMATION REGARDING OUR BOARD OF DIRECTORS
Board Composition
We now have a board of six members, five of whom are non-employee
directors. The directors elected at this meeting will be for a term that expires
at the third succeeding annual meeting of our stockholders after their election.
Shareholders may communicate directly with the board of directors by writing to
F. William Capp at the Company's headquarters located at 234 Ballardvale Street,
Wilmington, MA 01887-1032.
Members of the current board of directors with terms that expire after 2004
are as follows:
F. William Capp, age 56 (director since 2001)
Mr. Capp has served as our President and Chief Executive Officer since December
1, 2001 when he joined Beacon Power. Prior to joining Beacon Power, Mr. Capp was
the President of the Telecommunications group of Bracknell Corporation, a
company that provided infrastructure for the telecommunications industry with
annual sales of $350 million and 30 regional offices in the US and Canada. From
1997-2000, Mr. Capp served as the President of a division of York International
where he increased aftermarket sales by over 50% from 1997 to 1999, which were
the two most profitable years in that division's history. From 1978-1997, Mr.
Capp held numerous positions at Ingersoll Rand. From 1992-1997, he served as
Vice President and General Manager of the Compressor Division were he was
responsible for an operation with over 700 employees. He managed a complex
supply chain including over $100 million in purchases from a variety of
companies. From 1989-1992, Mr. Capp was the Vice President of Technology for the
Torrington Company, which is a $900 million manufacturer of bearings and
precision components to the automotive and other industries worldwide. Mr. Capp
assisted in the development of new products, new manufacturing technologies and
project management. He also held numerous other engineering positions within
Ingersoll Rand. Prior to joining Ingersoll Rand in 1978, he worked for Ford's
Truck Division in such positions as project engineering, supervisor, and product
planning. Mr. Capp received his Bachelor of Science in Aeronautical Engineering
from Purdue University, a Master of Business Administration and a Master Degree
in Mechanical Engineering from the University of Michigan. He also has his Black
Belt Training Program from the American Society for Quality. Mr. Capp's term of
office expires in 2005.
Philip J. Deutch, age 39 (director since 1998)
Nominating committee
Mr. Deutch has served as a Managing Director of Perseus L.L.C. since 1997. In
this position, Mr. Deutch has led Perseus' investments in numerous energy
technology companies. Prior to joining Perseus, Mr. Deutch was an attorney at
Williams & Connolly LLP. and worked in the Mergers and Acquisitions Department
of Morgan Stanley & Co. in New York City. In this position, Mr. Deutch was a
member of execution teams for acquisitions, divestitures, and leveraged buyouts.
Mr. Deutch is a graduate, with distinction, of Stanford Law School and of
Amherst College where he was elected a member of Phi Beta Kappa. Mr. Deutch
serves on the board of directors of Evergreen Solar, Inc., the City Lights
School, and the International Center for Research on Women. Mr. Deutch's term of
office expires in 2005.
William E. Stanton, age 61 (1997)
Nominating committee
Mr. Stanton has been a director of the Company since its formation in 1997. He
served as the President and CEO of the Company from January 1998 through
December of 2001. Prior to joining Beacon, Mr. Stanton was the Chief Operating
Officer of SatCon Technology Corporation ("SatCon") from September 1995 to May
1997, where he managed operations and the strategy development to shift SatCon
from a contract research and development company to a commercial product
organization. This strategy included the formation of Beacon Power. Prior to
joining SatCon, Mr. Stanton, in his 26 years at the Charles Stark Draper
Laboratory, held the positions of Vice President of Operations, Vice President
of Corporate Development , Director of New Programs, Director of Avionics
Programs, Avionics Program Manager, Director of Electronics Engineering,
Principal Engineer, and Electronics Engineer. Mr. Stanton is on the board of his
home owners association, was a founder and director of an in-school child-care
center, and owned and operated residential rental property. He received a
Bachelor's Degree in Electrical Engineering from the University of Maine, a
Master's Degree in Instrumentation and Control from the Massachusetts Institute
of Technology, and a Master's in Business Administration from the Harvard
Business School. Mr. Stanton's term of office expires in 2006.
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 16 meetings during 2003. 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 and a
nominating committee. No member of the audit or compensation committee is an
employee of Beacon.
Audit Committee.
The Audit Committee members are Messrs. Adik, Smith and Socha. Under NASDAQ
audit committee rules for Small Business filers, Beacon's audit committee must
have at least three members, of which two must be "independent." Both, Messrs.
Smith and Adik qualify as "independent" as defined in those new standards. Mr.
Socha is an affiliated person and therefore does not meet the "independent"
requirement. Mr. Adik is qualified as an Audit Committee Financial Expert. The
Committee is appointed by and reports to the Board of Directors. Its
responsibilities include, but are not limited to, the appointment, compensation
and dismissal of the independent auditors, review of the scope and results of
the independent auditors' audit activities, evaluation of the independence of
the independent auditors, and review of the Company's accounting controls and
policies, financial reporting practices and the internal audit control
procedures and related reports of the Company. During the last fiscal year, the
Audit Committee held four meetings that were not part of a full meeting of the
board of directors.
Compensation Committee.
The current Compensation Committee members are Messrs. Smith and Socha. The
Compensation Committee has the authority to set the compensation of Beacon's
Chief Executive Officer and all executive officers and has the responsibility to
review the design, administration and effectiveness of all programs and policies
concerning executive compensation and establishing and reviewing general
policies relating to compensation and benefits of employees. The Committee
administers Beacon's Second Amended and Restated 1998 Stock Incentive Plan,
Employee Stock Purchase Plan and its Restricted Stock Unit Incentive Plan. The
Committee consists of two non-employee directors who have no interlocking
relationships as defined by the Securities and Exchange Commission. The
Compensation Committee held no formal 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 charter for the nominating
committee can be found on the Company's web site at www.beaconpower.com. 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: James M. Spiezio, Secretary, 234 Ballardvale Street, Wilmington, MA 01887.
Director nominees submitted by shareholders will be considered on the same terms
as other nominees. The current members of the nominating committee are Messrs.
Stanton and Deutch. The Nominating Committee held no meetings during the last
fiscal year that were not part of a full meeting of the board of directors.
Director Compensation.
The Company has adopted a revised compensation package that consists of
stock options and cash designed to compensate board members who are not
employees ("non-employee directors"). All non-employee directors serving on the
board of directors receive a one-time grant of options to purchase 100,000
shares of the Company's common stock that vest daily over an 80 day period and
an exercise price equal to the fair market value of the common stock on the date
of grant. Options under this program were granted on October 13, 2004 and
November 2, 2004. On a yearly basis each non-employee director will receive
additional options to purchase 10,000 shares of the Company's 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. Through September of
2004, the compensation package had been all non-employee directors serving on
the board of directors received options to purchase 10,000 shares of the
Company's common stock that vest monthly over a 12-month period and 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 the Company's board, each non-employee director will receive additional
options to purchase 10,000 shares of the Company's 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. Audit committee members receive
an annual retainer of $50,000 for 2003 and $30,000 for 2004 payable quarterly
plus $500 per meeting. The board of directors will establish audit committee
retainers for years subsequent to 2004 during 2004. All other committee members
receive $500 per meeting. Directors are reimbursed for reasonable out-of-pocket
expenses incurred in the performance of their duties. Messrs. Socha and Deutch
have elected not to accept retainers or meeting fees for their participation as
board and committee members.
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, 2003, 2002 and 2001 to our chief executive officer and four
of our other executive officers whose aggregate compensation exceeded $100,000
in 2003.
SUMMARY COMPENSATION TABLE (1)
Annual Compensation Long Term Compensation
---------------------------------------------- -------------------------------------------
Awards Payouts
------------------------------ ------------
Restricted Securities
All Other (2) Stock Underlying LTIP
Name and Principal Position Year Salary Bonus Compensation Awards Options Payouts
- -------------------------------------------------- ----------- ---------- -------------- -------------- -------------- -------------
F. William Capp (3) 2003 $220,000 $ - $ 71,335 $ 225,217 - $ -
President and Chief Executive Officer 2002 $220,000 $ - $ 212,685 $ - - $ -
2001 $ 12,692 $ 90,000 $ 2,765 $ - 900,000 $ -
Matthew L. Lazarewicz (4) 2003 $157,500 $ 20,000 $ 1,077 $ 108,422 - $ -
Vice President and Chief Technical Officer 2002 $157,500 $ 32,573 $ 1,073 $ - 80,000 $ -
2001 $150,000 $ 35,000 $ 1,073 $ - - $ -
James M. Spiezio (5) 2003 $168,000 $ 25,200 $ 3,103 $ 125,183 - $ -
Vice President of Finance, Chief Financial 2002 $168,000 $ 51,094 $ 3,094 $ - 80,000 $ -
Officer, Treasurer and Secretary 2001 $160,000 $ - $ 3,094 $ - - $ -
William J. Driscoll (6) 2003 $ 87,404 $ - $ - $ - - $ -
Former Vice President of Engineering 2002 $145,769 $ 21,839 $ - $ - 100,000 $ -
2001 $ 37,500 $ - $ - $ - 50,000 $ -
Richard L. Hockney (7) 2003 $114,400 $ 2,500 $ - $ 27,706 - $ -
Chief Engineer 2002 $ 97,223 $ - $ - $ - 25,000 $ -
2001 $ 70,548 $ - $ - $ - 3,000 $ -
- ----------------------
(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. Mr. Capp also received other
compensation relating to realtor expenses and temporary living costs and
the related taxes on these items. For 2003 Mr. Capp's temporary living and
relocation expenses were $40,499, Company paid life insurance premiums were
$2,480, and the related taxes were $28,356. For 2002 Mr. Capp's temporary
living and relocation expenses were $32,361, realtor expenses were $83,763,
life insurance premiums were $2,480 and the related taxes were $94,081. For
2001 Mr. Capp received life insurance premiums of $2,262 and the related
taxes were $503.
(3) The Company hired Mr. Capp in December 2001. At the time of his employment,
Mr. Capp received 900,000 stock options with a strike price of $.89.
One-third of these options vested immediately with the remainder vesting
over a two year period. These options expire ten years from the date of
issuance.
(4) The Company hired Mr. Lazarewicz in February 1999. On March 15, 2002 Mr.
Lazarewicz received 80,000 stock options with a strike price of $.70.
One-third of these options vested immediately with the remainder vesting
over a two year period. These options expire ten years from the date of
issuance.
(5) The Company hired Mr. Spiezio in May 2000. On March 15, 2002 Mr. Spiezio
received 80,000 stock options with a strike price of $.70. One-third of
these options vested immediately with the remainder vesting over a two year
period. These options expire ten years from the date of issuance.
(6) Mr. Driscoll resigned from the Company in May 2003. All of Mr. Driscoll's
options have expired.
(7) Mr. Hockney has been an employee of the Company from its incorporation. On
March 15, 2002 Mr. Hockney received 25,000 stock options with a strike
price of $.70. One-third of these options vested immediately with the
remainder vesting over a two year period. On August 2, 2001 Mr. Hockney
received 3,000 stock options with a strike price of $5.27 with a three year
vesting schedule. Mr. Hockney's options expire ten years from the date of
issuance.
Executive Employment Agreements.
The Company has employment agreements with Messrs. Capp, Lazarewicz and Spiezio.
In addition to the benefits described below, each executive is entitled to
receive group health and dental benefits, group long and short term disability
insurance coverage, 401(k) plan and stock plan participation, paid vacation and
life insurance.
Mr. Capp
The term of the agreement is from December 1, 2003 to December 31, 2004. In 2004
Mr. Capp is entitled to salary of $240,000 and a bonus of $240,000 if Mr. Capp
achieves the performance goals set by the Board (which bonus may be more if the
goals are exceeded or less if they are not reached). If the agreement is
terminated by Mr. Capp without good reason (generally, a diminution of his
duties or title, a breach of this agreement by the Company, a change of the
Company's location, a sale of the Company or his removal from the Board) or by
the Company for cause (generally, fraud or embezzlement, failure to cure a
breach of this agreement within 30 days after notice, a material breach of a
material Company policy or willful misconduct), then Mr. Capp will be entitled
to his salary up to the date of termination. If the agreement is terminated by
the Company without cause or by Mr. Capp for good reason, then Mr. Capp will be
entitled to the remainder of his salary for the term and the portion of $225,217
equal to the percentage of the term that has elapsed (but not to exceed
$192,000). In the event of Mr. Capp's death or disability, he or his estate
shall be entitled to three months' salary. If the Company fails to offer Mr.
Capp a new employment agreement by the end of the term, or if he continues
thereafter as an employee-at-will, then he will be entitled to receive the same
amount in 2005 as he received in 2004.
Mr. Lazarewicz
The term of the agreement is from October 25, 2002 to December 31, 2004. In 2004
Mr. Lazarewicz is entitled to salary of $167,000 per year and, at the discretion
of the Board, a bonus. If the agreement is terminated by Mr. Lazarewicz without
good reason (generally, a diminution of his duties or title, a breach of this
agreement by the Company, a change of the Company's location, a sale of the
Company or his removal from the Board) or by the Company for cause (generally,
fraud or embezzlement, failure to cure a breach of this agreement within 30 days
after notice, a material breach of a material Company policy or willful
misconduct), then Mr. Lazarewicz will be entitled to his salary up to the date
of termination. If the agreement is terminated by the Company without cause or
by Mr. Lazarewicz for good reason, then Mr. Lazarewicz will be entitled to one
years' salary and the portion of $108,422 equal to the percentage of the term
that has elapsed (but not to exceed $78,750). In the event of Mr. Lazarewicz 's
death or disability, he or his estate shall be entitled to three months' salary.
In addition, in the event of Mr. Lazarewicz's death or disability or the
termination by the Company without cause or by Mr. Lazarewicz for good reason,
the vesting of his stock options accelerates. If the Company fails to offer Mr.
Lazarewicz a new employment agreement by the end of the term, or if he continues
thereafter as an employee-at-will, then he will be entitled to receive the same
amount in 2005 as he received in 2004.
Mr. Spiezio
The term of the agreement began on October 25, 2002 and continues until it is
terminated. In 2004 Mr. Spiezio is entitled to salary of $178,500 per year and,
at the discretion of the Board, a bonus. If the agreement is terminated by Mr.
Spiezio without good reason (generally, the Company's material breach of the
agreement or a change of the Company's location) or by the Company for cause
(having the same meaning as in Mr. Capp's agreement) then Mr. Spiezio will be
entitled to his salary up to the date of termination. If the agreement is
terminated by the Company without cause or by Mr. Spiezio for good reason, then
Mr. Spiezio will be entitled to 48 weeks' salary. In the event of Mr. Spiezio's
death or disability, he or his estate shall be entitled to three months' salary.
Equity compensation plan information
The following table gives information about equity awards under the Company's
stock option plan and employee stock purchase plan, as of December 31, 2003.
- ----------------------------------------------------------------------------------------------------------------
Number of securities to be Weighted average exercise
issued upon exercise of price of outstanding Number of securities
outstanding options, options, warrants and remaining available for
Plan category warrants and rights rights future issuance
- ----------------------------------------------------------------------------------------------------------------
(a) (b) (c)
- ----------------------------------------------------------------------------------------------------------------
Equity compensation plans -- $ -- --
approved by security holders
- ----------------------------------------------------------------------------------------------------------------
Equity compensation plans not 2,815,929 $ 1.59 5,653,593
approved by security holders
- ----------------------------------------------------------------------------------------------------------------
Total 2,815,929 $ 1.59 5,653,593
- ----------------------------------------------------------------------------------------------------------------
For additional information concerning the Company's equity compensation plans,
see discussion in footnotes 8, 9 and 10 to the Company's consolidated financial
statements, Stock Options, Employee Stock Purchase Plan and Restricted Stock
Units on pages 46 and 47 of the Company's annual report on form 10-K/A for 2003,
which is incorporated by reference.
Option Grants in Last Fiscal Year
There were no options granted to executive officers of the Company during the
fiscal year ending December 31, 2003.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Underlying Value of Unexercised in-the-money
Shares Unexercised Options at Year End Options at Year End
Acquired on Value ----------------------------------- -------------------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------- ----------- ----------------- ----------------- -------------------- ----------------
F. William Capp - $ - 900,000 - $ 180,000 $ -
Matthew L. Lazarewicz - $ - 269,999 26.667 $ 54,133 $ 10,400
James M. Spiezio - $ - 206,666 26,667 $ 20,800 $ 10,400
William J. Driscoll - $ - - - $ - $ -
Richard L. Hockney - $ - 18,667 9,333 $ 6,500 $ 3,250
Total value of exercisable and unexercisable options is derived from the
difference between the fair market value ($1.09 as of December 31, 2003) of the
Company's stock and the exercise price of the options at fiscal year-end.
Long-Term Incentive Plans -- Awards in Last Fiscal Year
Estimated Future Payouts
Performance or Under Non-Stock Price Based Plans*
Number Period Until ----------------------------------------
of Units Payout Threshold Target Maximum
--------------- --------------------------- -------------- ---------- --------------
F. William Capp 206,621 Quarterly during 2004 100% 100% 100%
Matthew L. Lazarewicz 99,470 Quarterly during 2004 100% 100% 100%
James M. Spiezio 114,847 Quarterly during 2004 100% 100% 100%
William J. Driscoll - N/A 0% 0% 0%
Richard L. Hockney 25,418 Quarterly during 2004 100% 100% 100%
See note 10 on page 47 of the Company's annual report on form 10-K/A for
2003, which is incorporated by reference, for a full description of the
Company's long-term incentive plan.
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 2003. 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 Second Amended and Restated 1998 Stock
Incentive Plan. The Committee also administers Beacon's Employee Stock Purchase
Plan and Restricted Stock Unit Incentive 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. 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.
In 2003 the Committee established a restricted stock unit ("RSUs") plan for 2003
and 2004 that provides bonuses in the form of deferred stock in lieu of cash.
Under this plan, Executive Officers, based on performance, receive RSUs that are
converted into shares of the Company's common stock in the fiscal year following
the fiscal year of performance. The RSUs earned in 2003 by the Executive
Officers are listed in the summary Compensation Table set forth in the
Aggregated Option/SAR Exercises table in this Proxy.
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. 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 Aggregated
Option/SAR Exercises table. 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 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 Second 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 2002 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 M. Socha, Chairman
Jack P. Smith
AUDIT COMMITTEE REPORT
The Audit Committee of Beacon's board of directors is composed of three
members and acts under a written charter first adopted and approved by the board
of directors on October 18, 2000, a copy of which is attached as Annex A to this
proxy statement. Two members of the Audit Committee are independent directors,
as defined by its charter and the rules of the SEC and NASDAQ.
In connection with the preparation and filing of our Annual Report on Form
10-K/A for the year ended December 31, 2003, the Audit Committee (i) reviewed
and discussed the audited financial statements with management, (ii) discussed
with Deloitte & Touche LLP, our independent auditors for the fiscal year ending
December 31, 2003, 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/A for the
year ended December 31, 2003.
Submitted by the Audit Committee:
Stephen P. Adik, Chairman
Jack P. Smith
Kenneth M. Socha
CORPORATE PERFORMANCE
The line graph below compares the cumulative total stockholder return for
the year ended December 31, 2003 of our common stock against the cumulative
total return of the Nasdaq Stock Market Index and the Dow Jones Utility Average.
The graph and table assume that $100 was invested on January 1, 2003, in each of
our common stock, the Nasdaq Stock Market Index and the Dow Jones Utility
Average, 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
[OBJECT OMITTED]
1/1/2003 3/31/2003 6/30/2003 9/30/2003 12/31/2003
--------------------------------------------------------
Beacon Power Corporation 100.00 80.95 133.33 361.90 519.05
DJ Utility Index 100.00 96.65 116.64 116.45 124.02
Nasdaq Composite 100.00 100.42 121.51 133.80 150.01
* 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 2003 all of our Insiders met their Section
16(a) filing requirements with the following exception: eight sales by SatCon
Technology Corp. from June 11, 2003 through July 15, 2003 of 4,705,910 shares
reported on Form 4 on September 17, 2003.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Strategic Investment
On May 15, 2003, the Company invested $1,000,000 in Series A Preferred
Stock of Evergreen Solar, Inc., a public company that specializes in renewable
energy sources, in order to develop a strategic relationship with that company.
This investment was part of a larger financing provided by several investors.
The Company made its investment on the same terms as the other investors in this
financing. The Company purchased 892,857 shares of Series A Preferred Stock of
Evergreen, for $1.12 per share. In addition the Company also purchased a
three-year warrant exercisable for 2,400,000 shares of Evergreen's common stock.
The warrant has a purchase price of $100,000 and a cash exercise price of $3.37
per share. On October 18, 2004, the warrant was amended to provide for a term of
approximately three years and three months. Evergreen's financing was a private
placement of $29.475 million of its Series A Preferred Stock and the above
warrant. Perseus 2000, L.L.C., an affiliate of one of the Company's
stockholders, Perseus L.L.C., invested $3 million in Evergreen's Series A
Preferred Stock, and led the investor group in this financing. Mr. Philip J.
Deutch and Mr. Kenneth M. Socha, members of the Board of Directors of the
Company, are Managing Director and Senior Managing Director, respectively, of
Perseus, L.L.C. Mr. Deutch led the Evergreen Series A Preferred financing and is
one of four individuals from the Evergreen investor group to be added to the
Board of Directors of Evergreen. Messrs. Deutch and Socha disclosed their
possible conflict relating to this transaction, and abstained from voting on the
matter. Beacon's participation in the transaction was evaluated, debated and
approved by all the disinterested directors of the Company, after full
disclosure of relevant facts and circumstances. Mr. Deutch does not participate
in discussions concerning this strategic investment. During 2004, all the
Company's holdings in Evergreen Series A Preferred Stock were converted into
Evergreen common stock, and sold at various dates ending on October 13, 2004 for
$3,000,937.
Advances to Certain Officers
During 2001, the Company advanced approximately $785,000, in the aggregate,
to three officers of the Company. These advances are interest bearing and
secured by the officers' holdings of Beacon Power Corporation common stock and
options and were provided to the officers to allow them to exercise stock
options and in one case, to pay the related taxes. Through December 31, 2003,
the Company had collected approximately $667,000 in principal payments on these
advances. In June 2002, due to the current market value of the pledged
securities and the uncertainty of collection of the advance, the Company took a
charge in the amount of $426,000 to reserve the remaining balance of the advance
to Mr. William Stanton, a director of the Company and its former CEO and
president. During 2003, a portion of this reserve was reversed due to a partial
repayment of $323,000 from the proceeds of the sale of the Beacon stock that
secured the loan. The balance of this loan as of December 31, 2003 was $118,000,
inclusive of interest. The unpaid balance of this loan is fully reserved,
however, it has not been cancelled. Mr. Stanton continues to be a director of
the Company. Mr. Stanton is providing consulting services to the Company and a
portion of these fees are being applied to the outstanding balance of this loan.
All other officers have paid their respective loan balances in full as of
December 31, 2003.
Agreement with GE Corporation Research and Development
As a result of the investment in Beacon by GE Capital Equity Investments,
Inc., the Company entered into an agreement with GE Corporate Research and
Development ("GE CR&D"), under which GE CR&D will provide the Company with
technical expertise in controls and materials. Under the terms of that
agreement, GE CR&D agreed to make available to Beacon up to $2,000,000 of its
services at cost and the Company has issued GE Equity a warrant to purchase
240,000 shares of its 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 Beacon uses GE CR&D's services. This agreement terminates, and
any unvested options are forfeited on October 24, 2005. Beacon did not engage GE
CR&D for any services during 2003; thus no other warrants were vested during
2003.
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 Miller Wachman LLP ("Miller Wachman") as independent auditors to
audit the books and accounts of Beacon for the fiscal year ending December 31,
2004. 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 Miller Wachman 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. Our former independent public accountants, Deloitte & Touche LLP
("Deloitte") will not be represented at the Annual meeting, and as such, will
not be available to make any statement or respond to questions.
Miller Wachman 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.
Independent Public Accountants
On August 27, 2004 our former independent auditors, Deloitte, informed us
of its decision to resign from performing the review and audit of our books and
accounts effective immediately. The decision to resign was solely that of
Deloitte. Deloitte performed the review and audit of the Company's books and
accounts for the fiscal year ending December 31, 2003 and 2002 and has performed
quarterly reviews through June 30, 2004. Deloitte's report for 2003 and 2002
contained an unqualified opinion regarding the fair presentation of our
financial statements, but Deloitte's 2003 audit report contained a modification
paragraph expressing doubt about the Company's ability to continue as a going
concern. There were no disagreements during the past two fiscal years between
Deloitte and our management.
Deloitte 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.
Principal Accounting Fees and Services
2003 2002
------------- -------------
Audit Fees $122,960 $123,920
Audit-Related Fees - -
Tax Fees 78,480 41,760
All Other Fees - -
------------- -------------
Total Fees $ 201,440 $ 165,680
============= =============
The Company had engaged Deloitte as its principal auditors since before its
initial public offering in November 2000 through the date of their resignation,
August 27, 2004.
Audit Fees
The aggregate audit fees billed by Deloitte for the fiscal years ended
December 31, 2003 and 2002 were $122,960 and $123,920, respectively. These fees
include amounts for the audit of the Company's consolidated annual financial
statements and the reviews of the consolidated financial statements included in
the Company's Quarterly Reports on Form 10-Q, including services related thereto
such as attest services and consents.
Audit-Related Fees
There were no audit-related fees billed during the fiscal years ended
December 31, 2003 and December 31, 2002.
Tax Fees
The aggregate fees billed by Deloitte for tax services rendered for the
fiscal years 2003 and 2002 were $78,480 and $41,760, respectively. These fees
were for the preparation and filing of the 2001 and 2002 income tax return,
developing estimated payments for 2003 income taxes, and tax advice related to
the Company's restricted stock unit bonus program.
All Other Fees
Other than the services performed above, there were no other fees billed
for 2003 and 2002.
Audit Committee Pre-Approval Requirements
The Audit Committee's charter provides that it has the sole authority to
review in advance and grant any pre-approvals of (i) all auditing services to be
provided by the independent auditor, (ii) all significant non-audit services to
be provided by the independent auditors as permitted by Section 10A of the
Securities Exchange Act of 1934, and (iii) all fees and the terms of engagement
with respect to such services. All audit and non-audit services performed by
Deloitte during fiscal 2003 were pre-approved pursuant to the procedures
outlined above.
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 2003 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.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g.
brokers) to satisfy the delivery requirements for proxy statements and annual
reports with respect to two or more stockholders sharing the same address by
delivering a single proxy statement addressed to those stockholders. This
process, which is commonly referred to as "householding," potentially means
extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are Beacon
stockholders will be "householding" our proxy materials. A single proxy
statement will be delivered to multiple stockholders sharing an address unless
contrary instructions have been received from the affected stockholders. Once
you have received notice from your broker that they will be "householding"
communications to your address, "householding" will continue until you are
notified otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in "householding" and would prefer to receive a
separate proxy statement and annual report, please notify your broker, direct
your request to Beacon Power Corporation, Investor Relations, 234 Ballardvale
Street, Wilmington, MA 01887, or contact Investor Relations at (978) 694-9121.
Stockholders who currently receive multiple copies of the proxy statement at
their address and would like to request "householding" of their communications,
should contact their broker.
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
In order to be included in proxy materials for the 2005 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, 2004. 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 2005
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 21, 2005. If a
stockholder fails to provide timely notice of a proposal to be presented at the
2005 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
November 8, 2004
<page>
ANNEX A
Beacon Power Corporation
AUDIT COMMITTEE CHARTER
ARTICLE I
PURPOSE
The purpose of the Audit Committee (the "Committee") of the Board of Directors
(the "Board") of Beacon Power Corporation, a Delaware corporation (the
"Corporation"), is to provide assistance to the Board in fulfilling their
responsibility to the stockholders, potential stockholders and the investment
community relating to the corporate accounting and reporting practices of the
Corporation, and the quality and integrity of financial reports of the
Corporation. In so doing, it is the objective of the Committee to establish and
maintain free and open communication between the Corporation's directors,
independent auditors, internal auditors and financial management.
ARTICLE II
COMMITTEE MEMBERSHIP
2.1 Number of Committee Members. The authorized number of members of the
Committee shall be three (3) and all members of the Committee shall be composed
of directors independent of the Corporation and otherwise duly qualified under
the relevant sections of the Nasdaq National Market Rules, attached hereto and
incorporated by reference as Schedule 1. The Board may designate one or more
directors as alternate Committee members, who may replace any absent member at
any meeting of the Committee.
2.2 Appointment and Term of Office of Committee Members. Committee members shall
be appointed by the Board to hold office until replaced by a resolution of the
Board. Each Committee member, including a member elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified, except in the case of the death,
resignation, or removal of such a member.
2.3 Removal. The entire Committee or any individual Committee member may be
removed from office without cause by the affirmative vote of a majority of the
Board.
2.4 Resignation and Vacancies. Any Committee member may resign effective upon
giving oral or written notice to the Chairman of the Board, the Secretary of the
Corporation or the Board, unless the notice specifies a later time for the
effectiveness of such resignation. If the resignation of a Committee member is
effective at a future time, the Board may elect a successor to take office when
the resignation becomes effective.
The Board may fill vacancies on the Committee. Each Committee member so elected
shall hold office until a successor has been elected and qualified by the Board,
or until his or her death, resignation or removal. A vacancy or vacancies in the
Committee shall be deemed to exist (i) in the event of the death, resignation or
removal of any Committee member, (ii) if the Board by resolution declares vacant
the office of a Committee member who has been declared of unsound mind by an
order of court or convicted of a felony or (iii) if the authorized number of
Committee members is increased.
ARTICLE III
COMMITTEE PROCESS
3.1 Place of Meetings; Meetings by Telephone. Regular meetings of the Committee
may be held at any place within or outside the State of Delaware that has been
designated from time to time by the Chairman of the Committee. In the absence of
such a designation, regular meetings shall be held at the principal executive
office of the Corporation. Special meetings of the Committee may be held at any
place within or outside the State of Delaware that has been designated in the
notice of the meeting or, if not stated in the notice or if there is no notice,
at the principal executive office of the Corporation.
Members of the Committee may participate in a meeting through the use of
conference telephone or similar communications equipment, so long as all
Committee members participating in such meeting can hear one another.
Participation in a meeting pursuant to this paragraph constitutes presence in
person at such meeting.
3.2 Regular Meetings. Regular meetings of the Committee may be held without
notice if the time and place of such meetings are fixed by resolution of the
Board or by resolution of the Committee.
3.3 Special Meetings; Notice. Subject to the provisions of the following
paragraph, special meetings of the Committee for any purpose or purposes may be
called at any time by the Chairman of the Committee, by the Board or by two (2)
Committee members.
Notice of the time and place of special meetings shall be delivered personally
or by telephone to each director or sent by first-class mail, telegram, charges
prepaid, or by facsimile or electronic mail, addressed to each Committee member
at that member's address as it is shown on the records of the Corporation. If
the notice is mailed, it shall be deposited in the United States mail at least
four (4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone or by facsimile, telegram or electronic
mail, it shall be delivered personally or by telephone or by facsimile or to the
telegraph company at least forty-eight (48) hours before the time of the holding
of the meeting. Any oral notice given personally or by telephone may be
communicated either to the Committee member or to a person at the office of the
member who the person giving the notice has reason to believe will promptly
communicate it to the member. The notice need not specify the purpose of the
meeting.
3.4 Quorum. A majority of the authorized number of Committee members shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 3.6 of this Charter. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present is the act of the Committee, subject to certain provisions of the
Delaware General Corporation Law, the Corporation's Certificate of
Incorporation, as amended, and other applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of Committee members, if any action
taken is approved by at least a majority of the required quorum for such
meeting.
3.5 Waiver of Notice. Notice of a meeting need not be given to any Committee
member who signs a waiver of notice or a consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such member. All such waivers, consents, and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. A waiver of notice need not specify the purpose of any regular or
special meeting of the Committee.
3.6 Adjournment. A majority of the Committee members present, whether or not a
quorum is present, may adjourn any meeting to another time and place.
3.7 Notice of Adjournment. If the meeting is adjourned for more than twenty-four
(24) hours, notice of any adjournment to another time and place shall be given
prior to the time of the adjourned meeting to the Committee members who were not
present at the time of the adjournment.
3.8 Committee Action by Written Consent Without A Meeting. Any action required
or permitted to be taken by the Committee may be taken without a meeting, if all
Committee members individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Committee. Such action by written consent shall have the same
force and effect as a unanimous vote of the Committee.
ARTICLE IV
COMMITTEE STRUCTURE
4.1 Chairman of the Committee. The Chairman of the Committee, if such an officer
be elected, shall, if present, preside at meetings of the Committee and exercise
and perform such other powers and duties as may from time to time be assigned by
the Board or as may be prescribed by this Charter. The Chairman of the Committee
shall be elected by resolution of the Board. In the absence or disability of the
Chairman of the Committee, the Board shall appoint an alternative Chairman to
preside at the Committee meetings.
4.2 Secretary. The Secretary of the Committee shall keep or cause to be kept, at
the principal executive office of the Corporation or such other place as the
Board may direct, a book of minutes of all meetings and actions of the
Committee. The minutes shall show the time and place of each meeting, whether
regular or special (and, if special, how authorized and the notice given), the
names of those present and the proceedings thereof. The Secretary shall give, or
cause to be given, notice of all meetings of the Committee required to be given
by law, this Charter or by the Corporation's Bylaws.
ARTICLE V
RECORDS AND REPORTS
5.1 Maintenance and Inspection of Charter. The Corporation shall keep at its
principal executive office the original or a copy of this Charter as amended to
date, which shall be open to inspection by the stockholders at all reasonable
times during office hours.
5.2 Minutes and Reports. The Committee shall keep regular minutes of its
proceedings, which shall be filed with the Secretary of the Corporation. All
action by the Committee shall be reported to the Board at the next meeting
thereof, and, insofar as rights of third parties shall not be affected thereby,
shall be subject to revision and alteration by the Board.
5.3 Maintenance and Inspection of Minutes. The records and the minutes of
proceedings of the Committee shall be kept at such place or places as are
designated by the Board or, in absence of such designation, at the principal
executive office of the Corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
ARTICLE VI
RESPONSIBILITIES
In carrying out its responsibilities, the Committee believes its policies and
procedures should remain flexible, in order best to react to changing conditions
and to ensure to the directors and stockholders that the corporate accounting
and reporting practices of the Corporation are in accordance with all
requirements and are of the highest quality. The Committee shall:
6.1 Documents/Reports Review.
(a) Review the annual audited financial statements with management and the
independent auditors, including major issues regarding accounting and
auditing principles and practices as well as the adequacy of internal
controls that could significantly affect the Corporation's financial
statements, and recommend that the audited financial statements be included
in the Corporation's Annual Report on Form 10-K.
(b) Review with management and the independent auditors the Corporation's
quarterly financial statements.
(c) Review with management and the independent auditors the significant
financial reporting issues and judgments made in connection with the
preparation of the Corporation's financial statements and discuss any other
matters communicated to the Committee by the independent auditors.
(d) Prepare the report of the Committee required by the rules and
regulations of the Securities and Exchange Commission to be included in the
Corporation's annual proxy statement.
6.2 Accounting and Financial Controls Framework.
(a) Review major changes to the Corporation's auditing and accounting
principles and practices as suggested by the independent auditors or
management.
(b) Review with the independent auditors any management letter provided by
the independent auditors and the Corporation's responses to that letter.
6.3 Independent Auditors.
(a) Recommend to the Board the appointment of the independent auditors,
which firm is ultimately accountable to the Committee and the Board.
(b) Approve the fees to be paid to the independent auditors.
(c) Receive disclosures from the independent auditors regarding the
auditors' independence required by Independence Standards Board Standard
No. 1, discuss such reports with the independent auditors, and, if so
determined by the Committee, recommend that the Board take appropriate
action to satisfy itself of the independence of the auditors.
(d) Evaluate together with the Board the performance of the independent
auditors and, if so determined by the Committee, recommend that the Board
replace the independent auditors.
(e) Meet with the independent auditors prior to the audit to review the
planning and staffing of the audit.
(f) Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct
of the audit.
6.4 General Authority and Responsibilities. The Committee shall have the
authority to retain special legal, accounting or other consultants to advise the
Committee. The Committee may request any officer or employee of the Corporation
or the Corporation's outside counsel or independent auditors to attend a meeting
of the Committee or to meet with any members of, or consultants to, the
Committee.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Corporation's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditors. Nor is it the duty of
the Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditors or to assure compliance with
laws and regulations.
The Committee shall review and reassess the adequacy of this Charter annually
and recommend any proposed changes to the Board.
6.5 Duties As Needed.
(a) Review reports received from regulators and other legal and regulatory
matters that may have a material effect on the financial statements or
related Corporation compliance policies.
(b) Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
ARTICLE VII
INDEMNIFICATION
Every person who was or is a party to, or is threatened to be made a party to,
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a Committee member of the
Corporation shall be indemnified and held harmless to the fullest extent legally
permissible under the laws of the State of Delaware from time to time against
all expenses, liability and loss, including attorneys' fees, judgments, fines
and amounts paid or to be paid in settlement, reasonably incurred or suffered by
him in connection therewith. Such right of indemnification shall be a contract
right which may be enforced in any manner desired by such person.
This indemnification is intended to provide at all times the fullest
indemnification permitted by the laws of the State of Delaware and the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a Committee member of the corporation against any liability asserted
against such person and incurred in any such capacity or arising out of such
status, whether or not the corporation would have the power to indemnify such
person.
ARTICLE VIII
AMENDMENTS
8.1 Amendment by the Board. This Charter and any provision contained herein may
be amended or repealed by the Board.
8.2 Record of Amendments. Whenever an amendment or a new Charter is adopted, it
shall be copied in the book of minutes with the original Charter. If any
provision of this Charter is repealed, the fact of repeal, with the date of the
meeting at which the repeal was enacted or written consent was filed, shall be
stated in said book.