Schedule 14A Information
Proxy Statement Pursuant to Section 14(A)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ELECTROSOURCE, INC.
(Name of Registrant as Specified In Its Charter)
ELECTROSOURCE, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] 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: __/
(4) Proposed maximum aggregate value of transaction:
__/ Set forth the amount on which the filing fee is calculated
and state how it was determined.
[ ] 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:
PRELIMINARY COPY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of Electrosource, Inc. (the "Company") will be held
at the Wyndham Hotel Southpark, 4140 Governor's Row, Austin,
Texas, on Wednesday, June 26, 1996, at 10:00 o'clock A.M.,
Austin, Texas time, for the following purposes:
1. To elect three of the eight members of the Board of Directors.
2. To consider and act upon a proposal to approve an amendment to the
Restated Certificate of Incorporation of the Company (the "Amendment")
which will effect a reverse split (the "Reverse Split") of the Company's
outstanding shares of Common Stock on the basis of one new share of
Common Stock for each ten outstanding shares of Common Stock.
3. If presented at the meeting, to consider and act upon a shareholder
proposed recommendation with respect to the Company's financing
activities.
4. To consider and act upon a proposal to approve the selection by the
Board of Directors of Ernst & Young LLP as the firm of independent
auditors to audit the accounts of the Company for the fiscal year
ending December 31, 1996.
5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Holders of record of Common Stock at the close of business on
April 29, 1996, will be entitled to notice of and to vote at such
meeting or any adjournment thereof. The transfer books of the
Company will not be closed.
It is important that your shares be represented at this
meeting in order that the presence of a quorum may be assured.
Enclosed is a form of proxy that you are urged to sign and
forward in the accompanying envelope, whether or not you expect
to attend in person. Stockholders who attend the meeting in
person may revoke their proxies and vote in person if they
desire.
All Stockholders are cordially invited to attend the Annual
Meeting of the Stockholders.
Austin, Texas Michael G. Semmens,
May__, 1996 President
PRELIMINARY COPY
PROXY STATEMENT
GENERAL INFORMATION
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished to Stockholders in
connection with the solicitation of proxies by and on behalf of
the management of ELECTROSOURCE, INC. (hereinafter referred to as
the "Company", located at 3800-B Drossett Drive, Austin, Texas
78744-1131), for use at the Annual Meeting of Stockholders of the
Company, and at any adjournment thereof. The Annual Meeting will
be held at 10:00 o'clock A.M., June 26, 1996, at the Wyndham
Hotel Southpark, 4140 Governor's Row, Austin, Texas 78744. When a
proxy is properly executed and returned, the shares it represents
will be voted at the Annual Meeting in accordance with any
instructions noted thereon or, if no instructions are indicated,
it will be voted for the election as directors of the three
nominees named in this Proxy Statement, for the approval of an
amendment to the Company's Restated Certificate of Incorporation
to effect a reverse split of stock, against a shareholder's
proposed recommendation with respect to the Company's financing
activities, and for the approval of the selection of auditors.
Execution of a proxy confers discretionary authority to vote with
respect to any matter which the Board of Directors do not know, a
reasonable time before the mailing of this Proxy Statement, is to
be presented at the meeting, with respect to the approval of
minutes of the prior meeting (if such approval does not amount to
ratification of the action taken at that meeting), with respect
to the election of any person to any office for which a bona fide
nominee is named in the Proxy Statement if such nominee is unable
to serve or for good cause will not serve, and with respect to
matters incident to the conduct of the meeting. Any proxy given
pursuant to this solicitation may be revoked by the Stockholder
who has given it at any time before it is exercised.
The close of business on April 29, 1996, has been fixed as
the record date for determination of Stockholders entitled to
notice of and to vote at the Annual Meeting. As of such date,
there were issued and outstanding shares of
Common Stock, $.10 par value per share, of the Company ("Common
Stock"). Each Stockholder of record on such date is entitled to
one vote for each share of Common Stock then held by such
Stockholder.
The costs of solicitation of proxies, including the cost of
preparing and mailing this Proxy Statement, will be borne by the
Company. Employees of the Company, at no additional compensation,
may communicate with Stockholders to solicit their proxies. In
addition, the Company has retained KeyCorp Shareholders Services,
Inc., the Company's Transfer Agent, to distribute the proxy
materials to shareholders of record and to tabulate the vote and
Corporate Investor Communications, Inc., to distribute the proxy
materials to brokers and to solicit proxies from banks, brokers,
nominees and institutions for which they will be paid fees
estimated not to exceed $5,000 in the aggregate. Brokers and
others holding stock in their names, or in the names of nominees,
may be requested to forward copies of the proxy soliciting
material to beneficial owners and to seek authority for execution
of proxies, and the Company will reimburse them for reasonable
direct and indirect expenses incurred in connection with
completing the mailing of annual reports and proxy statements to
and the solicitation of proxies of beneficial owners at approved
rates.
This Proxy Statement is first being mailed to Stockholders
of the Company on or about May 15, 1996.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 15, 1996, the
number of shares owned by each of the current directors, the most
highly paid executive officers and by the current directors and
executive officers of the Company as a group, the nature of such
ownership, and the percentage of the outstanding shares of each
class of voting securities represented thereby. To the Company's
knowledge, there is no person who is an owner of more than five
percent of the Company's Common Stock.
COMMON STOCK
Name and Address of
Beneficial Owner Beneficially Owned Percentage of
(1) Class
Michael G. Semmens 346,734 (2) 1.0%
Chairman of the Board
President and CEO
3800-B Drossett Drive
Austin Texas 78744
William R. Graham 18,000 (3) .05%
Director
7517 Royal Oak Drive
McLean Virginia 22101
Norman Hackerman 59,030 (4) .17%
Director
2001 Pecos Street
Austin Texas 78703
John D. Malone 475,466 (5) 1.35%
Director
510 Valley Mills Road
Waco Texas 76710
Charles L. Mathews 105,040 (6) .30%
Director
1111 Cardinal Drive
Paige Texas 78659
Nathan P. Morton 15,000 (7) .04%
Director
4228 San Carlos Drive
Dallas Texas 75205
Richard S. Williamson 35,000 (8) .09%
Director
190 S. LaSalle Street
Chicago Illinois 60603
Thomas S. Wilson 626,031 (9) 1.75%
Director
5 Revere Road
Northbrook Illinois 60062
EXECUTIVE OFFICERS
James M. Rosel 69,999 (10) .2%
Vice President, General Counsel
1507 Falcon Ledge Drive
Austin TX 78746
Chris Morris 45,000 (11) .13%
Vice President,
Technical Operations
1314 Falcon Ledge, #110
Austin TX 78746
All Directors and 1,649,634 (12) 4.6%
Executive Officers as a
Group (11 persons)
(Notes 2-11)
(1) Shares are owned beneficially and of record unless otherwise indicated.
(2) Includes 325,000 shares of Common Stock receivable upon the exercise
of options; 5,667 shares of Common Stock receivable upon the exercise
of warrants; and 400 shares of Common Stock are owned by Mr. Semmens'
spouse as custodian for minor children.
(3) Includes 15,000 shares of Common Stock receivable upon the exercise
of options.
(4) Includes 55,000 shares of Common Stock receivable upon the exercise
of options.
(5) Includes 55,000 shares of Common Stock receivable upon the exercise
of options.
(6) Includes 88,334 shares of Common Stock receivable upon the exercise
of options and 40 shares of Common Stock held by Mr. Mathew's wife,
as to which shares Mr. Mathews disclaims beneficial ownership.
(7) Includes 15,000 shares of Common Stock receivable by Mr. Morton
upon the exercise of options.
(8) Includes 35,000 shares of Common Stock receivable by Mr. Williamson
upon the exercise of options.
(9) Includes 55,000 shares of Common Stock receivable upon the exercise
of options; 1,800 shares of Common Stock held in Mr. Wilson's Individual
Retirement Account; 5,735 shares held by Mr. Wilson as Custodian for
his minor children as to which Mr. Wilson has sole voting power; 115,000
shares in a life estate trust of which he is one of the three final
remaindermen and has shared voting and investment control; and 100,000
shares of Common Stock and 50,000 warrants to purchase shares in a
charitable trust of which he has shared voting and investment control.
In addition, the Charitable Trust owns 20,000 shares of Common Stock
purchased in an open market transaction. Mr. Wilson disclaims
beneficial ownership of shares held by the Charitable Trust.
(10) Includes 68,332 shares of Common Stock receivable upon the exercise
of options.
(11) Includes 45,000 shares of Common Stock receivable upon the exercise
of options.
(12) Includes 25,000 shares of Common Stock receivable upon the exercise
of options in addition to option shares described in Notes (2)
through (11).
ITEM 1
ELECTION OF DIRECTORS
The Company had an eleven member Board until the Board of
Directors meeting held March 6, 1996, at which the resignations
of three members were accepted and the size of the Board was
reduced to eight members by resolution in compliance with the
Bylaws. Messrs. John H. Akin, Frank Butler, and Todd Templeton
served the Board of Directors until the acceptance of their
resignations dated March 6, February 23 and March 5, 1996,
respectively, at the March 6 meeting. Until their resignations,
these directors served on the various Committees of the Board.
The Company presently has a Board of Directors consisting of
eight members serving staggered terms. The terms of directors
Norman Hackerman, Charles L. Mathews and Richard S. Williamson
will expire at the 1996 Annual Meeting and, accordingly, three
directors are to be elected at such meeting. Messrs. Mathews and
Williamson and Dr. Hackerman have been nominated by the
Nominating Committee of the Company for reelection as directors.
The nominees receiving the greatest number of votes will be
elected directors of the Company to serve until the Annual
Meeting of Stockholders to be held in 1999, and until their
respective successors shall have been elected and shall have
qualified, or their respective terms of office shall have been
otherwise terminated as provided in the Bylaws.
The following table sets forth certain information as to the
directors and nominees for director and the executive officers of
the Company.
Name and Offices Term to Expire at
Held with the Age Principal Occupation During Annual
Company Past Five Years Meeting in
Michael G. Semmens 45 President, Chief Executive 1997
President, Chief Officer and Chairman of the
Executive Officer Board, Electrosource, Inc.,
and Chairman of June 1994 to present;
the Board of Corporate Vice President,
Directors BDM Technologies, Inc., 1992-
1994; (Managing Director of
BDM Europe, B.V.) 1992-1994;
Corporate Vice President,
BDM International, Inc.,
1988-1992.
William R. Graham 58 Senior Vice President, The 1998
Director Defense Group, Washington,
D.C. 1994-present; Director
and subsequently President,
C-COR Electronics, Inc.,
1990-1993; Director, Watkins-
Johnson Corporation.
Norman Hackerman 84 Chairman, Scientific 1996
Director Advisory Board, Robert A.
Welch Foundation, for more
than five years; Director,
Van Campen/American Capital,
Inc.; Director, American
General Portfolio Fund, for
more than five years;
Director, Vista, Inc., 1989-
93; Director, Fuel Tech,
Inc., 1989-94; Director,
Scientific Measurement
Systems, Inc.; Director,
Columbia Scientific
Industries Corporation, 1989-
94; Director, Medical
Polymers, Inc., 1993-
present.
John D. Malone 46 President and shareholder in 1998
Director the law firm of Vander
Woude, Malone & Istre, 1992-
present; Vice President and
shareholder in the law firm
of Clark, Malone, Knapp &
Raybold, P.C., for more than
5 years previous to 1992;
General Counsel to
Electrosource, Inc., 1992-
1993.
Charles L. Mathews 61 Consultant to Electrosource, 1996
Director Inc., 1995-present;
President and CEO, Bastrop
Metal Products, Inc., 1995-
present; Chief Scientific
Officer, Electrosource, Inc.
1994-1995; Chairman of the
Board, Electrosource, Inc.,
1992-1994; Treasurer,
Electrosource, Inc., 1992-
1993; Consultant to
Electrosource, Inc., 1989-
1991; Director, Blanyer
Mathews Associates, Inc.,
for more than the past five
years.
Nathan P. Morton 47 President and Chief 1997
Director Executive Officer, Open
Environment Corporation,
1994-present; Chairman,
President, and Chief
Executive Officer, COMPUSA,
1989-1993.
Richard S. 46 Partner, Mayer, Brown & 1996
Williamson Platt, 1989-Present;
Director Assistant Secretary of
State, United States
Department of State, 1988-
1989; Director, Federal Home
Loan Bank of Chicago, 1990-
present
Thomas S. Wilson 36 Vice President-Investments, 1998
Director Smith Barney, June 1993-
present; Shareholder,
brokerage firm of Berean
Capital, Inc., 1989-1993.
Executive Officers
James M. Rosel 47 Vice President and General
Vice President Counsel, 1994-present; Vice
General Counsel President and Secretary,
Nord Pacific Ltd, 1990-1994.
Chris Morris 46 Vice President, Technical
Vice President Operations, Electrosource,
Technical Inc., 1995-present; Chief
Operations Engineer, Electrosource,
Inc., 1994-1995; Consultant,
Chris Morris & Associates,
1991-1994; President,
Electrosource, Inc., 1989-
1991.
Mary Beth Koenig 34 Treasurer/Controller,
Treasurer/Controller Electrosource, Inc., 1995-
present; Senior Manager,
Ernst & Young, 1984-1995.
The members of the Board of Directors hold office for staggered
three-year terms, until their successors are elected or until
their earlier death, resignation or removal. Dr. Hackerman was
appointed to fill the vacancy created by the resignation of
Donald S. Thomas effective September 1, 1993. Dr. Hackerman was
a director of the Company from 1988 until 1991. Mr. Mathews also
served as a director of the Company from March 1990 to January
1991 and was reappointed in January 1992 until present. Messrs.
Malone and Wilson were appointed to the Board in January and
November, 1992, respectively. Mr. Semmens has served as
President, Chief Executive Officer, and Chairman of the Company
since June 1994. Mr. Williamson was appointed to the Board in
November 1994. Dr. William R. Graham and Mr. Nathan P. Morton
were appointed to the Board in June 1995.
Committees of the Board of Directors
The Board of Directors held 16 meetings and gave 3 written
consents during the year ended December 31, 1995. Each of the
members of the Board of Directors attended at least 75 percent of
the number of meetings of the Board and of each committee on
which he served during 1995.
The Company's Board of Directors has five committees: the Audit
Committee, the Executive Committee, the Finance Committee, the
Nominating Committee and the Compensation/Stock Option Committee.
The Audit Committee acts as a liaison between the Company's
Board of Directors and the Company's independent certified public
accountants. The Audit Committee meets periodically with the
accountants to review the Company's accounting and reporting
practices and its accounting and financial controls. The members
of the Audit Committee for the period ending November 8, 1995,
were Messrs. Malone, Butler and Wilson. At the November 8
meeting the following members were appointed to serve until the
next annual meeting of the Board of Directors: Messrs. Akin,
Mathews, Templeton, and Williamson. The Audit Committee met one
time during the year ended December 31, 1995.
The Executive Committee has the authority to act in behalf of
the Board of Directors at such times as the Board is not in
session except in regard to certain matters with respect to which
its authority is limited by Delaware corporate statutes. Messrs.
Semmens, Akin, Butler, and Mathews served as members of the
Executive Committee until November 8, 1995, at which time Messrs.
Semmens, Butler, Malone, Mathews and Dr. Hackerman were appointed
to serve until the next annual meeting of the Board of Directors.
The Executive Committee met three times during the year ended
December 31, 1995.
The Finance Committee periodically reviews and makes
recommendations to the Board of Directors with respect to the
capital structure of the Company and the Company's commercial and
investment banking relationships. The members of the Finance
Committee for the period ending November 8, 1995, were Messrs.
Wilson, Butler and Templeton at which time Messrs. Morton,
Templeton, Wilson and Dr. Graham were appointed to serve until
the next annual meeting of the Board of Directors. There were
two meetings of the Finance Committee during the fiscal year
1995.
The Nominating Committee recommends to the Company's Board of
Directors candidates for election as directors of the Company.
The Nominating Committee consisted of Dr. Hackerman and Messrs.
Akin and Semmens through November 8, 1995, at which time Dr.
Graham, and Messrs. Akin and Wilson were appointed to serve until
the next annual meeting of the Board of Directors. The
Nominating Committee met one time during the year ended December
31, 1995. The names of the potential director candidates are
drawn from a number of sources, including recommendations from
members of the Board, management, and stockholders. Stockholders
wishing to recommend director nominees should submit name and
address and pertinent information about the proposed nominee
similar to that set forth for the nominees named herein. The
Restated Certificate of Incorporation requires that any such
nominations be directed to the corporate secretary in writing not
less than sixty days prior to the scheduled date of the meeting
by a shareholder of record, accompanied by the consent of the
person nominated to serve if elected.
The Compensation/Stock Option Committee makes recommendations to
the Company's Board of Directors regarding compensation of the
Company's officers, and is responsible for the administration of
the Company's stock option plans. The members of the
Compensation/Stock Option Committee until November 8, 1995, were:
Messrs. Templeton, Malone and Dr. Hackerman. Messrs. Malone,
Morton, Williamson and Dr. Hackerman were appointed to serve on
the Compensation/Stock Option Committee until the next annual
meeting of the Board of Directors. The Compensation/Stock
Option Committee met four times during the year ended December
31, 1995.
Section 16(a) Disclosure
Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") requires the Company's officers and directors,
and persons who own more than 10 percent of a registered class of
the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission
and the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"). Officers, directors and greater than
10 percent Stockholders are required by Securities and Exchange
Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received
by it, or written representations from certain reporting persons
that no Forms 5 were required from such persons, the Company
believes that during 1995, except as described below, its
officers, directors and greater than 10 percent beneficial owners
complied with all filing requirements applicable to them.
A Form 4 Statement of Changes in Beneficial Ownership required
to be filed in connection with the disposition of shares by Frank
Butler which occurred in July and August 1995, was not filed
until September 15, 1995. Form 4's Statement of Changes in
Ownership were not filed in connection with the acquisition of
additional shares by Messrs. Todd Templeton and Thomas Wilson in
July 1995 but were filed in September 1995. A Form 3 Initial
Statement of Beneficial Ownership to be filed in connection with
the appointment of Michael Rosen as Chief Financial Officer and
Treasurer of the Company which occurred on February 27, 1995, was
not filed until April 17, 1995. Messrs. Butler, Templeton and
Rosen are no longer directors and/or officers of the Company.
Compensation of Executive Officers and Directors
The following tables set forth the cash and non-cash
compensation paid during the fiscal year ended December 31, 1995
to the Chief Executive Officer of the Company and to each other
executive officer of the Company earning $100,000 or more 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation(1)
Annual Compensation Awards Payouts
Other Restricted Securities All Other
Annual Stock Underlying LTIP Compen-
Name and Principal Compen- Award(s) Options/ Payouts sation
Position (2) Year Salary($) Bonus($) sation($) $ SARS(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Michael G. Semmens 1995 $200,000 $2,000(3) $37,399(4)
President, Chief 1994 175,285 475,000 37,601(4)
Executive Officer
and Chairman of
the Board
Chris Morris 1995 $110,173 $5,000(5) $1,149(3) 72,000
Vice President 1994 18,801 33,000
Tech. Operations
James M. Rosel 1995 $113,750 $1,136 5,000 $15,650(6)
Vice President 1994 50,878 100,000 35,390(6)
General Counsel
Sam R. Smith 1995 $115,000 30,000
Vice President 1994 62,031 75,000
Marketing
Michael Weinstein(7) 1995 $97,506 30,000 $56,000(8)
Vice President 1994 12,000
Communications
Benny Jay(9) 1995 $124,885 $1,260(3) 30,000
Chief Scientist 1994 128,000
1993 119,176
</TABLE>
(1) The Company has made no restricted stock awards and has no long-term
incentive plans.
(2) No executive officer serving during 1995 (other than officers shown in
table) earned in excess of $100,000 in annual salary and bonus in 1993,
1994, or 1995.
(3) Messrs. Semmens, Morris, Rosel and Jay received the amounts shown as a
Company contribution under the 401(k) plan which is available to all
employees of the Company and distributed equitably based on the amount
of employee contribution.
(4) Partial moving expenses paid by the Company on behalf of Mr. Semmens.
(5) Mr. Morris received a bonus prior to his appointment as Vice President
while his assignment was that of Chief Engineer.
(6) Partial moving expenses paid by the Company on behalf of Mr. Rosel.
(7) Mr. Weinstein's employment ceased as of September 15, 1995. He was not
an executive officer as of December 31, 1995. The 105,000 options to
purchase Electrosource, Inc., Common Stock terminated as of December 15,
1995.
(8) Mr. Weinstein was paid a severance payment under the terms of a
Settlement Agreement.
(9) Mr. Jay was not an executive officer at December 31, 1995; however, he
continues to serve the Company as Chief Scientist.
Michael G. Semmens was hired to be the President and Chief Executive Officer of
the Company in June 1994 at an annual base salary of $200,000 and a $50,000
signing bonus. In addition, Mr. Semmens was granted options to purchase 475,000
shares of Common Stock 325,000 shares of which vest over a 30-month period from
the date of grant, and the remaining 150,000 shares becoming exercisable upon
the share price reaching certain thresholds. Mr. Semmens' Letter of Employment
provided for a three-year employment contract, with a provision for a one year's
salary severance in the event of termination. The Letter of Employment included
the above terms and an annual performance based bonus of up to 50 percent of
base compensation. In addition, the implementation of a management incentive
program for which Mr. Semmens would be eligible was authorized.
The following table sets forth certain information concerning
options/SARs granted during 1995 to the named executives:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
% of Total
Number of Options/
Securities SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Granted Fiscal Year ($/Share) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Michael G. Semmens _ _ _ _ _ _
Chris Morris 72,000 13.6% $1.5625 11/7/2005 70,773 179,353
James M. Rosel 5,000 .9% $3.375 5/30/2005 10,613 26,894
Sam R. Smith 30,000 5.6% $3.375 5/30/2005 63,676 161,366
Michael Weinstein 30,000 5.6% $3.375 (2) _ _
Benny Jay 30,000 5.6% $3.375 5/30/2005 63,676 161,366
</TABLE>
(1) The exercise price of all options is equal to the market price of the
Common Stock as of the date of grant.
(2) Mr. Weinstein's employment ceased as of September 15, 1995, and the
right to exercise these options expired as of December 15, 1995.
The following table summarizes options and SARs exercised
during 1995 and presents the value of unexercised options and
SARs held by the named executives at fiscal year-end:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Fiscal Year-End Fiscal Year-End
Shares Acquired (#) ($)
on Exercise Value Realized Exercisable(E)/ Exercisable (E)/
Name (#) ($) Unexercisable(U) Unexercisable(U)(1)
<S> <C> <C> <C> <C>
Michael G. Semmens 0 0 325,000(E) (2)
Chris Morris 0 0 45,000(E) (2)
James M. Rosel 0 0 68,332(E) (2)
36,668(U)
Sam R. Smith 0 0 60,000(E) (2)
45,000(U)
Michael Weinstein 0 0 (3)
Benny Jay 0 0 38,334(E) $14,567(E)
10,000(E) (2)
20,000(U)
</TABLE>
(1) Based on the $1.44 per share market price of the Common Stock as reported
on NASDAQ as of December 29, 1995, (last market day of year).
(2) Option price exceeded the market price at December 29, 1995.
(3) Mr. Weinstein's employment ceased as of September 15, 1995; therefore,
his options expired in accordance with their terms as of December 15, 1995.
The Company's directors are not paid any fee for attendance at
Board or Committee meetings; however, they are reimbursed for
expenses incurred in attending Board or Committee meetings.
Directors and members of Committees of the Board who are
employees of the Company are not separately compensated for their
Board and Committee activities. Mr. Akin received $175 per hour
for attendance at special (but not regular) board meetings and
for other work undertaken at the request of the Board of
Directors prior to his resignation. Mr. Akin received $1,216
pursuant to this arrangement in 1995.
The Company has had a consulting agreement with Dr. Hackerman
since September 1992; this agreement provides for a retainer of
$800 per month for a minimum of one day a month of technical
scientific advice. The Agreement expired December 31, 1995.
In November, 1995, Charles L. Mathews and the Company entered
into a Consulting Agreement for a period of two years to assist
the Company with respect to all matters pertaining to battery
development, engineering, production equipment, materials and
related matters. Under the terms of this Agreement, Mr. Mathews
will be paid a consulting fee of $5,000 per month.
Pursuant to the Company's 1988 Non-Employee Director stock
Option Plan, each director of the Company that is not an employee
or officer of the Company receives a one-time grant of options to
purchase 55,000 shares of Common Stock at the time such person
becomes a director. All options are exercisable as to 15,000
shares starting six months from the date of grant, as to 20,000
shares starting eighteen months from the date of grant, and the
remaining 20,000 shares thirty months from the date of grant.
Directors of the Company that are also employees or officers of
the Company are eligible for grants of options under the
Company's 1987 Stock Option Plan; the number of options granted
and the vesting schedule of such options are determined by the
Company's Compensation Committee. The exercise price of each
option granted under either plan is equal to the market price of
the Common Stock at the date of grant.
Compensation Committee Interlocks and Insider Participation.
From August 3, 1994, to November 8, 1995, the Company's
Compensation/Stock Option Committee consisted of Messrs. Todd
Templeton, John D. Malone and Dr. Hackerman. In November 1995,
Messrs. Malone, Morton, Williamson and Dr. Hackerman were
appointed to serve the Board of Directors as members of the
Compensation/Stock Option Committee. None of the persons serving
as members of the committee during 1995 is or has been an officer
or employee of the Company.
Messrs. Malone and Wilson own approximately 1% each of the
outstanding common shares of Blanyer-Mathews Associates, Inc.
("Blanyer-Mathews"). Until March 2, 1996, Mr. Malone served as a
director of Blanyer-Mathews.
Blanyer-Mathews is the holder of the patent relating to
coextruded wire under which the Company holds an exclusive
license. The Company paid minimum royalties under this license
totaling $100,000 to Blanyer-Mathews during 1995.
Mr. Charles L. Mathews, a director and, for a portion of 1995,
an executive officer of the Company , is the sole owner, director
and officer of Bastrop Metal Products, Inc. In November, 1995, a
Development Agreement and Agreement for Purchase of Machinery and
Supplies between the Company and Charles L. Mathews was executed
under which Mr. Mathews contracts to manufacture and provide to
the Company co-extruders for use in present and anticipated
Company production facilities at a set price per single head co-
extruder. The Agreement provides that the Company will advance 50
percent of anticipated construction cost of each co-extruder. In
addition, Mr. Mathews agrees to develop certain other equipment
to be utilized in the Company's manufacturing operations. The
Company will own all intellectual property rights as well as all
engineering drawings to this equipment. The term for the
development work shall be eighteen months funded at $3,611 per
month.
The Company raised approximately $886,966 through a private
placement of its Common Stock under Regulation D of The
Securities Act of 1933 during 1995. The terms of the offering
allowed purchasers to acquire shares of Common Stock at a price
of $1.10 per share, which was the price at which other investors
purchased shares under other private placements at that time.
The participants in the private placement concluded in 1995 who
were also participants in a private placement in 1994 were
allowed an amendment on the warrants purchased in 1994. This
amendment adjusted the price of the warrants from $4.50 and $5.50
per share to $2.50 and $3.50, respectively, and extended the
exercise date of such warrants until September 1997. The warrant
price of the participants in the 1994 placement that did not
participate in the 1995 private placement remained as originally
issued; however, the exercise date of the warrants was extended
until September 1997. The Company filed a registration statement
under the Securities Act of 1933 in order to allow resale of the
shares purchased in this private placement as well as those
purchased under the 1994 placement. Dan Malone, the brother of
John Malone, purchased 115,000 shares of Common Stock for a cash
consideration of $126,500 in the 1995 placement and had
previously purchased 10,000 shares of Common Stock for a cash
consideration of $30,625 in the 1994 placement. A charitable
trust of which Thomas Wilson is a co-trustee purchased 50,000
shares of Common Stock in the offering for a cash purchase price
of $55,000 in 1995 and in 1994 had purchased 50,000 shares of
Common Stock for a cash purchase price of $153,125. Michael
Semmens purchased 10,000 shares of Common Stock for a cash
consideration of $11,000 in 1995 and 5,667 shares of Common Stock
for a cash consideration of $17,355 in 1994. All such persons
participated in the offering on the same terms and conditions
available to all other participants.
Each of the members of the Compensation/Stock Option Committee
has received options to purchase 55,000 shares of Common Stock
under the Company's 1988 Non-Employee Director Stock Option Plan.
Compensation Committee Report on Executive Compensation.
During fiscal 1995, executive compensation consisted of three
components: (a) base pay; (b) year-end bonus; and (c) awards
under the 1987 and 1994 Stock Option Plans (the "Plans").
Total Cash Compensation. The Compensation Committee proposed
salary increases averaging four percent for all executives in
1995 to make such salaries more competitive with prevailing
salaries of executives of comparable experience. As a part of
cost containment efforts, early in 1996 the Compensation
Committee made the recommendation to accept, and the Board of
Directors unanimously approved, an offer from the officers and
some of the director-level management to participate in a six-
month salary reduction program. Reductions ranged from twenty-
five percent for the Chief Executive Officer to nine percent for
some of the other participants with an average of approximately
nineteen percent involving sixteen individuals. In exchange for
such reductions, stock options were granted on the basis of 1.3
shares for each dollar of reduction in salary offered. In
addition to potential for appreciation in the value of options as
the Company's performance improves, the Committee currently has
under consideration a plan linking the performance of the
executive to compensation paid. The Compensation/Stock Option
Committee recommended that future increases for officers and
executive personnel should be based upon future Company
performance. The Compensation Committee reserves the right to
make some subjective judgments in assessing compensation relative
to an individual executive's contribution to the overall
performance of the Company.
Year-end Bonus. Year-end bonuses of less than $1,200 are
determined by management. A bonus for any employee in excess of
$1,200 must be approved by the Compensation Committee. Mr. Chris
Morris received a bonus prior to his appointment as Vice
President while his assignment was that of Chief Engineer. No
bonuses were authorized by the Compensation Committee during 1995
for any employees above the level of Vice President and/or
Director. All employees below the level of Vice President and/or
Director were given a bonus of $100 each.
1987 Stock Option Plan. The 1987 Stock Option Plan is a long-
term incentive compensation plan for key employees of the
Company. The number of options granted to individual executive
officers under the Plan was based upon the ability of such
individual to impact the long-term success of the Company, and
the reduced salary (if any) which such employee was paid.
1994 Stock Option Plan. The 1994 Stock Option Plan is a long-
term compensation plan for key employees of the Company. The
number of options granted to individual executive officers under
the Plan is based upon the ability of such individual to impact
the long-term success of the Company. The 1994 Stock Option Plan
was approved by the Stockholders of the Company at the 1995
Annual Meeting.
Compensation of CEO and President. Michael G. Semmens was hired
to be the President and Chief Executive Officer of the Company in
June 1994 at an annual base salary of $200,000. In addition, Mr.
Semmens was granted options to purchase 475,000 shares of Common
Stock, 325,000 shares of which vest over a 30-month period from
the date of grant, and the remaining 150,000 shares become
exercisable upon the share price reaching certain thresholds.
Mr. Semmens' Letter of Employment provided for a three-year
employment contract, with a provision for a one year's salary
severance and an annual bonus of up to 50 percent of base
compensation.
At the January 17, 1996, meeting of the Board of Directors, the
Compensation/Stock Option Committee made the recommendation to
accept, and the Board of Directors unanimously approved, an offer
from the officers and some of the director-level management to
participate in a six-month salary reduction program. Reductions
ranged from twenty-five percent for the Chief Executive Officer
to nine percent for some of the other participants with an
average of approximately nineteen percent involving sixteen
individuals. In exchange for such reductions, stock options were
granted on the basis of 1.3 shares for each dollar of reduction
in salary offered.
The above recommendations were approved by the following non-
employee directors who comprised the Compensation Committee from
August 1994 until November 1995, as well as those directors
serving on the committee from November 1995 to present:
August 1994/November 1995 November 1995/Present
Todd Templeton John D. Malone
John D. Malone Nathan Morton
Norman Hackerman Richard S. Williamson
Norman Hackerman
Comparative Performance of Company's Securities.
The following chart presents the total shareholder return with
respect to the Company's Common Stock for each of the last five
years, compared to the total return over the same period of (i)
all NASDAQ stocks and (ii) all NASDAQ electronic components
stocks. Shareholder return for a given year is measured by
dividing dividends paid during the year plus the difference
between the Company's share price at the end and the beginning of
the year by the average of the bid and asked prices of a share of
the Company's Common Stock as of the beginning of the year;
dividends are not a factor in the computation of the Company's
total return since the Company paid no dividends during the
periods presented.
COPY OF GRAPH TO BE PROVIDED TO BRANCH CHIEF.
ITEM 2
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
TO EFFECT A ONE-FOR-TEN REVERSE STOCK SPLIT OF THE
COMPANY'S OUTSTANDING COMMON STOCK
GENERAL SUMMARY
The Board of Directors of the Company has unanimously approved,
subject to Stockholder approval, a proposed amendment to the
Company's Restated Certificate of Incorporation (the "Amendment")
which will effect a one-for-ten reverse stock split (the "Reverse
Split") of the Company's outstanding shares of Common Stock. On
March 1, 1996, the Company had 50,000,000 shares of authorized
Common Stock, par value $0.10 per share, of which approximately
35,282,000 shares were issued and outstanding and approximately
10,000,000 shares were reserved for issuance pursuant to
outstanding options, warrants, convertible debentures and other
agreements. Thus at March 1, 1996, the Company had only
approximately 4,718,000 authorized shares of Common Stock
unissued and not reserved for issuance. Had the Amendment to
effect the Reverse Split been approved and effective as of March
1, 1996, the Company would have had 50,000,000 authorized shares,
par value $1.00 per share, of Common Stock, approximately
4,528,000 shares of Common Stock issued and outstanding or
reserved for issuance and approximately 45,472,000 authorized
shares of Common Stock unissued and not reserved for any purpose.
The authorized number of shares of the Company's Preferred
Stock, $1.00 par value (the "Preferred Stock"), will remain
unchanged at 10,000,000 shares. There are no issued and
outstanding shares of Preferred Stock and there are no shares of
Preferred Stock reserved for future issuance.
If the requisite approval of the Company's Stockholders is
obtained, the Amendment to effect the Reverse Split will be
effective on the date (the "Effective Date") specified in the Certificate
of Amendment to the Company's Restated Certificate of Incorporation
required to be filed with the Delaware Secretary of State in connection
with the Amendment. The Effective Date cannot be later than ninety days
following the date of filing of the Certificate of Amendment. The Company
anticipates that the Effective Date will be on or about July 22, 1996.
Each certificate representing shares of Common Stock outstanding
immediately prior to the Reverse Split (the "Old Shares") will be deemed
automatically, without any action on the part of the Stockholders,
to represent one-tenth the number of shares of Common Stock after the Reverse
Split (the "New Shares"). A Stockholder's proportionate ownership
interest in the Company will remain unchanged by the Reverse Split. The New
Shares issued pursuant to the Reverse Split will be fully paid and
nonassessable. The voting and other rights of the Common Stock
will not be altered by the Amendment or the Reverse Split.
No fractional New Shares will be issued as a result of the
Reverse Split. In lieu thereof, each Stockholder whose Old
Shares are not evenly divisible by ten will receive one
additional New Share for the fractional New Share that such
Stockholder would otherwise be entitled to receive as a result of
the Reverse Split. When the Reverse Split becomes effective,
Stockholders will be asked to surrender certificates representing
Old Shares in accordance with the procedures set forth in a
letter of transmittal to be sent by the Company. Upon such
surrender, a certificate representing the New Shares will be
issued and forwarded to the Stockholders; however, each
certificate representing Old Shares will continue to be valid
and represent New Shares equal to one-tenth of the number of Old
Shares. Persons who hold their shares in brokerage accounts or
"street name" will not be required to take any further actions to
effect the exchange of their certificates.
Purpose of the Reverse Split
The Board of Directors believes that a reverse split is
essential to the Company's continued growth and development. The
Reverse Split is expected to enhance the marketability and
acceptance of the Company's Common Stock in financial markets.
It will facilitate different forms of finance, including the
ability to attract potential strategic partners. It should
facilitate possible inclusion on the National Market systems
(NMS) of the NASDAQ system. In addition, the Reverse Split will
result in an increase in the number of unused shares of Common
Stock available for issuance in the future for business
combinations, strategic alliances, equity offerings and other
business opportunities. At this time, the Company knows of no
such business combinations, strategic alliances, equity offerings
or other business opportunities. The proposed increase in unused
shares will enable the Company to obtain additional capital
resources to pursue the commercialization of the Company's
technology. The potential increase in price may also encourage
new interest and additional trading in the Common Stock, and may
open new and preferable avenues of finance to the Company, which
could reduce any future dilution from financing activities. Without the
reverse split, the Company's options for any needed finance will
be extremely limited. Management wishes to pursue new avenues of
any necessary finance.
Background and Reasons
The Board of Directors believes that the Amendment to effect the
Reverse Split is desirable for several additional reasons.
During 1995, the Company sold approximately 10.7 million shares
of Common Stock into the public market. The introduction of
these shares may have had an adverse effect on the financial
market for the Company's shares. There was a decline in the per
share market value. From January 1 through December 31, 1995,
the trading range of the Common Stock has ranged from $4.50 to
$1.1875 per share. The Reverse Split will have the effect of
reducing the number of outstanding shares of Common Stock without
effecting any material change in the proportionate ownership
interest of Common Stockholders in the Company. The Board
believes that the Reverse Split may increase the trading price
for shares of Common Stock on the NASDAQ Small Cap Market and
thereby enhance the acceptability of the Common Stock by a much
broader group of investors, including institutional investors
(many of whom will not invest in securities which trade at a
price of $5 or less per share), and the financial community and
the investing public at large. The Company believes to attract
the type of financial support it desires it must have a per share
price that is higher than at present and with fewer outstanding
shares.
Additionally, a variety of brokerage house policies and
practices tend to discourage individual brokers within those
firms from dealing with lower priced stocks. Some of these
policies and practices pertain to the payment of brokers'
commissions and to time-consuming procedures that make the
trading of lower priced stocks economically unattractive to
brokers. In addition, the structure of trading commissions also
tends to have an adverse impact upon investors in lower price
securities because the brokerage commission on a sale of lower
priced stock generally represents a higher percentage of the
sales price than the commission on a relatively higher priced
issue. The Company stock has not been eligible for margin accounts
because of low prices per share and if the price per share increases
because of the reverse split, the stock could become marginable which
could increase investor activity and interest. The proposed Reverse Split
should result in a price level for the Common Stock that will
reduce, to some extent, the effect of these policies and
practices of brokerage firms and diminish the adverse impact that
minimum trading commissions may have on the market for the
Company's Common Stock.
Management of the Company sought and received expert guidance on
the advisability of a reverse split and reviewed a number of case
studies prior to recommending the reverse split. It was noted
from the case studies and experts consulted that a majority of
those companies experienced an increase in share price in
proportion to the decrease of outstanding shares, which was,
presumably, among the benefits that were anticipated from the
reverse split. However, the Company is aware that not all
companies have maintained their market capitalization after a
reverse stock split, and it should be noted that the Board of
Directors cannot provide assurance of the effect on the market
price of the Common Stock as a result of the Reverse Split or any
of the other potentially favorable consequences.
Effect of the Reverse Split
The Company has authorized capital stock of 50,000,000 shares
Common Stock (par value $0.10 per share) and 10,000,000 shares of
Preferred Stock (par value $1.00 per share). The Reverse Split
will not affect the number of authorized shares of Common Stock
or Preferred Stock of the Company; however, it will change the par
value of the Common Stock to $1.00 per share.
As of March 1, 1996, the number of issued and outstanding Old
Shares was approximately 35,282,000. The following table
illustrates the principal effects of the proposed Reverse Split
and decrease in outstanding Common Stock assuming that no
additional shares of Common Stock are issued prior to the
Effective Date as a result of the exercise of any options,
warrants, conversions or other reserved issuance's and without
giving effect to the disposition of fractional shares.
Authorized Authorized Outstanding Outstanding
Prior to After Prior to After
Reverse Reverse Reverse Reverse
Split Split Split Split
Common Stock 50,000,000 50,000,000 35,282,000 3,528,200
Preferred Stock 10,000,000 10,000,000 0 0
As of March 1, 1996, the Company had approximately 10,000,000
shares of Common Stock reserved for issuance pursuant to
outstanding options, warrants, convertible debentures and other
agreements. Under the terms of the various plans, warrant
agreements, convertible debentures and other agreements, the
number of shares reserved for issuance will be reduced
proportionately by a factor of ten.
The Common Stock is currently registered under Section 12(g) of
the Securities Exchange Act of 1934 (the "Exchange Act") and, as
a result, the Company is subject to the periodic reporting and
other requirements of the Exchange Act. The Common Stock is
admitted for trading on the NASDAQ Small-Cap Issues Market. The
number of holders of the Common Stock on the Record Date was
3,918. The Company does not anticipate that the Reverse Split
will result in a significant reduction in the number of such
holders. Accordingly, the Reverse Split is not expected to
affect the registration of the Common Stock under the Exchange
Act or its status as a NASDAQ Small-Cap Market security.
Federal Income Tax Consequence of the Reverse Split
The Company has not sought and will not seek an opinion of
counsel or a ruling from the Internal Revenue Service regarding
the federal income tax consequences of the Reverse Split.
However, the Company believes that because the Reverse Split is
not part of a plan to periodically increase a Stockholder's
proportionate interest in the assets or earnings and profits of
the Company, the Reverse Split will have the following effects.
The receipt of Common Stock in the Reverse Split should not
result in any taxable gain or loss to Stockholders for federal
income tax purposes. If the Reverse Split is approved, the tax
basis of Common Stock received as a result of the Reverse Split
will be equal, in the aggregate, to the basis of the shares
exchanged for the Common Stock. For tax purposes, the holding
period of the shares immediately prior to the Effective Date will
be included in the holding period of the Common Stock received as
a result of the Reverse Split.
Statutory Accounting Consequences
The par value of the Common Stock will increase from ten cents per
share to one dollar per share as a result of the Reverse Split.
Since the number of shares of Common Stock outstanding will be
proportionately reduced by the Reverse Split, there will be no
material change in the aggregate par value of the outstanding Common
Stock or in the aggregate capital accounts of the Company for
statutory accounting purposes under the Delaware General Corporation
Law.
ITEM 3
SHAREHOLDER PROPOSAL
A shareholder, Barry W. Casanova, owner of 51,700 shares of
Common Stock, 3701 Court House Drive, Elicit City, Maryland
21043, has informed the Company that he intends to present the
following proposal at the Annual Meeting.
RESOLVED: That the shareholders of the Company
request that the Board of Directors, in negotiating the
terms and conditions of sales of Company securities,
attempt to obtain terms such that no sale of authorized
shares, whether of unissued shares or shares held in
treasury, be made at a price less than ninety percent
of the market price at which such shares may be
purchased in the open market at the time of the
issuance in question, and such that no warrants or
options to purchase shares of the Company's securities
be issued with an exercise price less than one hundred
ten percent of such market price.
SUPPORTING STATEMENT
In the recent past there has been substantial dilution of the
existing long term shareholder interests by repeated "Regulation
S" placements and other debt and share swaps that have allowed
arbitrage and violent movement of the price of the Common Stock,
mostly decreasing its price and to the detriment of long term
shareholders. The number of shares outstanding has increased by
about three hundred percent in the recent past. Meanwhile, share
value has dropped to less than one-third of recent levels and at
$1.25 per share is less than 18 percent of its high.
Capitalization of the growing Company should be able to be done
without such significant conflict between immediate needs and
long term Company Investors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recognizes and constantly acts in
accordance with its fiduciary duties to the shareholders of the
Company. This is especially true in the case of its capital-
raising activities. The decision to become the North American
manufacturer of the Horizonr Battery in early 1994 was
responsible for a large and continuing need to raise new capital
to finance the build-out of the San Marcos plant as well as to
support the Company's ongoing research and development programs.
In Management's opinion, being a manufacturer will ultimately
maximize shareholder value, particularly as compared to the
alternatives of not undertaking manufacutring or ceasing such
operations. In each round of financing for these activities,
management has made inquiries of multiple possible sources of
funding and has exerted its best efforts to obtain the most
favorable terms available. The Board of Directors would prefer
to issue stock at no discount. However, the sources of financing
available to the Company (or to any small company attempting to
enter an established market with an innovative technology) have
been extremely limited. Potential investors demand a discount
from the market price of the Company's shares to reflect the
reduced liquidity of large blocks of privately placed shares in
comparison to that of shares purchased and sold in normal market
quantities over the NASDAQ system. The amount of this discount
is only one aspect to be considered among many that make up the
terms of a financing. Limiting the discount to ten percent of
market price could make financing unavailable or force the
Company to make concessions in other areas that would make the
overall terms offered unacceptable.
The Board of Directors believes that the decision to become a
manufacturing company was at the time and remains in the best
long-term interests of the Company and its shareholders. The
Board believes that, if revenue and income from sales of the
Horizonr Battery can be increased to a level at which operating
cash flow can be relied upon to fund internal growth, the need
for external financing will decrease and the terms of what
financing proves necessary will become more attractive.
Management is devoting all of its attention to achieving this
goal and improving the terms of any financing that maybe
required.
ITEM 4
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has voted to appoint Ernst
& Young LLP, independent auditors, to audit the accounts of the
Company for the fiscal year ended December 31, 1996. A
representative of Ernst & Young LLP is expected to attend the
Annual Meeting and will have the opportunity to make a statement
if desired. Such representative is expected to be available to
respond to appropriate questions.
OTHER BUSINESS
Management does not know of any matters to be acted upon at the
Annual Meeting other than those described above.
VOTE REQUIRED FOR APPROVAL
Directors will be elected by a plurality of the votes cast by
holders of shares entitled to vote at the Annual Meeting.
Approval of the proposed amendment to the Restated Certificate of
Incorporation to effect the reverse split of stock will require
the affirmative vote of holders of a majority of the Common
Shares outstanding as of the record date for the Annual Meeting.
All other matters will be decided by the affirmative vote of
holders of a majority of the shares represented in person or by
proxy and entitled to vote at the Annual Meeting. Abstentions
and broker nonvotes will not affect the election of directors.
Since all other matters to be considered at the Annual Meeting
require the affirmative vote of a given percentage of shares
outstanding or present at the meeting, abstentions will have the
effect of a vote against any matter other than the election of
directors. Broker nonvotes are counted for purposes of
determining the presence or absence of a quorum, but are not
counted for purposes of determining the number of votes cast for
or against the particular proposal for which authorization to
vote was withheld. A broker nonvote will therefore have the
effect of a vote against the proposal to amend the Restated
Certificate of Incorporation (which requires an affirmative vote
of a majority of shares outstanding), but will have no effect
with respect to the other proposals to be considered (which
require only the affirmative vote of a majority of shares
represented and voting on the proposal in question). Votes will
be tabulated by KeyCorp Shareholder Services, Inc.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
It is currently anticipated that the 1997 Annual Meeting of
Stockholders of the Company will be held on or about May 20,
1997. Stockholder proposals to be presented at the 1997 Annual
Meeting must be received in writing by the Company at its
principal executive offices not later than one hundred twenty
days prior to the mailing date of the Stockholder materials which
is projected to be on or about April 9, 1997.
FORM 10-K
The Company will, upon written request, furnish without charge
to each person who was a beneficial owner of its securities on
April 29 1996, the record date for the Company's Annual Meeting,
a copy of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, including financial statements and
schedule, as filed with the Securities and Exchange Commission.
Requests for copies of such report should be directed to the
Corporate Secretary, Electrosource, Inc., 3800-B Drossett Drive,
Austin, Texas 78744-1131.
The date of this Proxy Statement is May __, 1996.
PROXY
Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby constitutes and appoints Michael G.
Semmens and James M. Rosel, or either of them, as Proxies, each
with full power of substitution, to represent and to vote, as
designated below, all shares of Common Stock of Electrosource,
Inc., held of record by the undersigned on April 29, 1996, at the
Annual Meeting of Shareholders to be held at 10:00 A.M., June 26,
1996, The Wyndham Southpark, 4140 Governors Row, Austin, Texas,
or any adjournment thereof.
1. ELECTION OF DIRECTORS, NOMINEES:
Norman Hackerman Charles L. Mathews Richard S. Williamson
2. Proposal to approve the amendment of the Restated Certificate of
Incorporation.
3. If presented at the meeting, to consider and act upon a shareholder's
proposed recommendation with respect to the Company's financing
activities.
4. Proposal to approve the appointment of Ernst & Young as auditors.
5. In their discretion, the Proxies are authorized to vote upon
such business as may properly come before the meeting or any
adjournment thereof as provided in the accompanying Proxy
Statement.
This Proxy when properly executed will be voted in the manner directed
by the undersigned shareholder. If no direction is made, this Proxy
will be voted FOR Proposals 1, 2, 4 and 5, and AGAINST Proposal 3. If
this Proxy is executed by the undersigned shareholder in such a manner
as not to withhold authority to vote for the election of any nominee,
such authority shall be deemed granted. The Proxy tabulator cannot vote
your shares unless you sign and return this card in the enclosed envelope.
Check box for address change.
(Change of Address)
________________________________
________________________________
________________________________
________________________________
(If you have written in the above space,
please mark the box)
SIGNATURE(S)___________________________________ DATE ____________
SIGNATURE(S)___________________________________ DATE ____________
NOTE: Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such.
