ELECTROSOURCE, INC.
2809 IH 35 South
San Marcos, Texas 78666
May 5, 2000
Dear Shareholder:
I want to take this opportunity to invite you to the annual
meeting of shareholders at the San Marcos Activity Center, 501
East Hopkins, San Marcos, Texas on June 14, 2000, at 10:00 am.
Enclosed is the Proxy Statement with voting instructions as well
as the 1999 Annual Report (Securities and Exchange Commission
Form 10-K).
At this meeting, we will vote on the matters described in the
Proxy Statement. We know that it is not practical for most
shareholders to attend the Annual Meeting in person. Whether or
not you attend the Annual Meeting, we strongly encourage you to
designate the proxies shown on the enclosed card to vote your
shares. We are pleased to offer you the option of voting by mail
for designating the proxies and indicating your voting
preferences; you may simply complete, sign, date and return by
mail the proxy card in the enclosed envelope.
In response to the SEC's recent emphasis on clear and simple
communications to shareholders and investors, our proxy statement
is written in "plain English." We hope you like this simplified
format and welcome your comments.
Following the business meeting and a brief overview of Company
activities, attendees will be given the opportunity to tour the
manufacturing facilities at 2809 IH 35 South. The current level
of production is at an all-time high. To respond to a growing
business, much of our existing equipment is being utilized around
the clock. To operate at this level, we have increased the
number of manufacturing associates, and plan to increase the
employee base during this fiscal year as new equipment is
acquired and commissioned.
During your tour of the plant, you will see two basic battery
designs in production: the 12H85 and the E-POWER, which is our
new 12-volt, 25 Ah battery. Several variants of these two basic
designs are being produced for a variety of applications, each of
which requires a slight modification of the basic cell design to
maximize performance and service life. Both of these products
and their variants are finding acceptance in electric and hybrid-
electric vehicles, engine starting and emergency power
applications. Including these variants, the Company has six
products being produced in these two basic designs.
The Company has emerged from fiscal year 1999 highly focused on
production and cost containment. We are confident and excited
about our potential for growth and profitability.
Hope to see you at the annual meeting. Thank you for your
continued interest in and support of Electrosource, Inc.
Sincerely,
/s/
Benny E. Jay
President/Chief Executive Officer
QUESTIONS and ANSWERS
Q: What am I voting on?
A: Two proposals. Item numbers refer to item numbers on proxy
card.
Item 1. Election of three directors
Item 2 Ratification of appointment of Weaver & Tidwell
LLP as independent auditors of the Company
Q: Who can vote?
A: All stockholders of record at the close of business on April
17, 2000 are entitled to vote. Holders of the Company's Common
stock ("Common Stock") are entitled to one vote per share.
Fractional shares may not be voted. All shares of Common Stock
vote together as one class.
Q: Who can attend the meeting?
A: All stockholders as of the record date, or their duly
appointed proxies, may attend the meeting. Seating, however,
is limited. Please note that if you hold your shares in "street
name" (that is, through a broker or other nominee), you will
need to bring a copy of a brokerage statement reflecting
your stock ownership as of the record date. If you wish to
vote shares held in "street name" at the meeting, you will need
to secure a Proxy from your broker authorizing you to vote such shares.
Everyone must check in at the registration desk at the
meeting.
Q: How do I vote?
A: By mail: Complete, date, sign and mail the proxy card in the
enclosed postage pre-paid envelope.
By voting in the way listed above, you will authorize the
individuals named on the proxy card, referred to as the
proxies, to vote your shares according to your instructions.
Q: What happens if I do not indicate my preference for one of
the items?
A: If you do not indicate how you wish to vote for one or more
of the nominees for Director, the proxies will vote FOR
election of all the nominees for Directors (Item 1). If you
leave Item 2 blank, the proxies will vote FOR ratification of
the appointment of Weaver & Tidwell LLP (Item 2).
Q: What if I vote and then change my mind?
A: You can revoke your proxy by writing to us, by voting again
via mail, or by attending the meeting and casting your vote
in person. Your last vote will be the vote that is counted.
Q: What constitutes a quorum?
A: As of the record date, April 17, 2000, the Company had
13,226,533 shares of Common Stock outstanding. The holders
of Common Stock have the right to cast a total of 13,226,533
votes. The presence, in person or by proxy, of stockholders
entitled to cast at least a majority of the votes which all
stockholders are entitled to cast constitutes a quorum for
adopting the proposals at the Annual Meeting. If you have
properly designated the proxies and indicated your voting
preferences by mail, you will be considered part of the
quorum, and the proxies will vote your shares as you have
instructed them. If a broker holding your shares in "street"
name indicates to us on a proxy card that the broker lacks
discretionary authority to vote your shares, we will not
consider your shares as present or entitled to vote for any
purpose.
Q: Is my vote confidential?
A: Yes. Proxy cards, ballots and voting tabulations that
identify individual shareholders are kept confidential except
in certain circumstances where it is important to protect the
interests of the Company and its shareholders. Generally,
only the inspectors of election and the employees of Harris
Trust & Savings Bank processing the votes will have access to
your name. They will not disclose your name as the author of
any comments you include on the proxy card unless you ask
that your name be disclosed to management.
Q: Who will count the votes?
A: Employees of Harris Trust & Savings Bank will tabulate the
votes and act as the inspectors of election.
Q: What shares are included on the proxy card?
A: The shares listed on your card sent by the Company represent
all the shares of Common Stock held in your name (as
distinguished from those held in "street" name). You will
receive a separate card or cards from your broker if you hold
shares in "street" name.
Q: What does it mean if I get more than one proxy card?
A: It indicates that your shares are held in more than one
account, such as two brokerage accounts and registered in
different names. You should vote each of the proxy cards to
ensure that all of your shares are voted. We encourage you
to register all of your brokerage accounts in the same name
and address for better shareholder service. You may do this
by contacting your broker. If you are a holder of record,
you may do this by contacting our transfer agent, Harris
Trust & Savings Bank at 312/360-5475.
Q: Whom can I call with any questions?
A: You may call the office of the Corporate Secretary at
ELECTROSOURCE at 512-753-6500.
ELECTROSOURCE, INC.
ANNUAL SHAREHOLDERS MEETING
PROXY STATEMENT
CONTENTS
General Information 1
*Election of Directors 3
Compensation/Stock Option Committee Report on
Executive Compensation(1) 6
*We expect to vote Performance Graph(1) 9
on these items at Executive Compensation and Other Information 9
the meeting. Employment Agreements 9
Compensation Committee Interlocks and
Insider Participation 12
Section 16(a) Beneficial Ownership
Reporting Compliance 13
*Selection of Independent Auditors 14
ELECTROSOURCE Stock Ownership 14
Voting Procedures/Revoking Your Proxy 16
Submission of Stockowner Proposals 17
Other Business 17
(1) The Compensation/Stock Option Committee report and the performance graph
will not be incorporated by reference into any present or future filings
we make with the SEC, even if those reports incorporated all or any part
of this proxy statement.
ELECTROSOURCE, INC.
2809 IH 35 South
San Marcos, Texas 78666
United States
ANNUAL SHAREHOLDERS MEETING
PROXY STATEMENT
Date: June 14, 2000
Time: 10:00 A.M., Central Daylight Savings Time
Place: San Marcos Activity Center
The Meeting is 501 East Hopkins
in San Marcos. San Marcos, Texas
Record Date: Close of Business, April 17, 2000. If you
were a stockholder at that time, you may
vote at the meeting. Each share is entitled
to one vote. You may not cumulate votes.
On the record date, we had 13,226,533 shares
of our common stock outstanding.
Agenda: 1. Elect 3 directors.
2. Ratify the selection of Weaver and Tidwell LLP
as our independent auditors for 2000.
3. Any other proper business.
Proxies: Unless you tell us on the proxy card to vote
We will follow your differently, we will vote signed returned proxies
Voting instructions. "FOR" the Board's nominees and "FOR" Item 2.
If none, we will vote The Board or proxy holders will use their discretion
Signed proxies for on other matters. If a nominee cannot or will not
the proposals. serve as a director, the Board or proxy holders will
vote for a person whom they believe will carry on our
present policies.
Board YOUR BOARD OF DIRECTORS RECOMMENDS YOU
Recommendations: VOTE IN FAVOR OF THE ELECTION OF DIRECTORS AND THE
APPOINTMENT OF WEAVER AND TIDWELL LLP.
Proxies The Board of Directors
Solicited By:
First Mailing We anticipate first mailing of this proxy statement
Date: on or about May 8, 2000
Revoking You may revoke your proxy before it is voted at the
Your Proxy: meeting. To revoke, follow the procedures listed on
page 20 under "Voting Procedures/Revoking Your Proxy."
We welcome Your Your comments about any aspects of our business are
your Comments: welcome. You may use the space provided on the proxy
comments. The card for this purpose, if desired. Although we may
proxy card has not respond on an individual basis, your comments help
room for them. us to measure your satisfaction, and we may benefit
from your suggestions.
IF YOU PLAN TO ATTEND:
Please note that space limitations make it necessary to limit attendance.
"Street name" holders will need to bring a copy of a brokerage statement
reflecting stock ownership as of the record date. If you wish to vote
shares held in "street name" at the meeting, you will need to secure a Proxy
from your broker authorizing you to vote such shares.
PLEASE VOTE - YOUR VOTE IS IMPORTANT
It will be helpful to us if you will read the Proxy Statement and the voting
instructions on the proxy card, and then vote by filling out, signing and
dating the proxy card and returning it by mail. Prompt return of your proxy
will help reduce the costs of any additional mailings.
ELECTION OF DIRECTORS
Board Structure: The Board has eight members. The directors are
divided into three classes. At each annual meeting,
the term of one class expires. Directors in each
class serve for three-year terms.
BOARD NOMINEES (Item 1)
Terms Expire (Director) (Names and Offices Held with ELECTROSOURCE)
at the 2000 Richard E. Balzhiser - Director (67)
Annual Meeting Electrosource, Inc., 1997 to Present; 1996-Present,
President Emeritus, Electric Power Research Institute
(EPRI); 1988-1996 President and CEO, EPRI; 1996-
Present, Director, Reliant Energy, The Aerospace Co.,
and Nexant.
We will elect 3 Nathan P. Morton - Director (51)
Directors this year. Electrosource, Inc., 1995 to Present; CEO, BuildNet,
We urge you to vote 1998 to present; Chairman, Handtech.com, 1998 to
FOR Dr. Balzhiser, and present; Chairman, Starpower Home Entertainment Inc.,
Messrs. Morton and 1996 to present; Senior Partner, Channel Marketing
Winckless. Corporation, 1994-Present; Co-Chairman/Chief Executive
Officer, Computer City, Inc., 1997-1998; President
and Chief Executive Officer, Open Environment
Corporation, 1994-1996; Director, Consolidated Stores,
1990-present; Director, E-Machines, 1999-present.
Clifford G. Winckless - Director (52)
Electrosource, Inc., June 1998 to present; Director,
Kamkorp Ltd., 1994 to present, Secretary 1995 to 1997;
Director, Frazer-Nash Research Ltd., 1993 to Present,
Secretary 1995 to 1997; Director, Frazer-Nash
Engineering Technology Ltd., 1998 to Present;
Director, Electrosource International Ltd., 1998 to
present; Frazer-Nash Technology Ltd., Director 1993
to present, Secretary 1995 to 1998; Director Kamkorp
Investments Ltd., 1997 to present; Director, Molegate
Ltd., 1994 to Present.
CONTINUING DIRECTORS:
Terms Expire William F. Griffin-Director (52)
at the 2001 Electrosource, Inc., December 1998 to present;
Annual Meeting President, Chief Executive Officer and Chairman of the
Board, Electrosource, Inc., December 1998 to September
1999; Executive Vice President/Marketing, April 1996
to December 1998; Vice President, COMPUSA, 1990-1995.
Kamal Siddiqi - Director (47)
Electrosource, Inc., June 1998 to Present; Director,
Kamkorp Ltd., 1992 to Present; Director, Frazer-Nash
Research Ltd., 1992 to Present; Director, Frazer-Nash
Engineering Technology Ltd., 1998 to Present;
Director, Electrosource International Ltd., 1998 to
Present; Director, Frazer-Nash Technology Ltd., 1992
to Present; Director, Kamkorp Investments Ltd., 1997
to Present.
Terms Expire Norman Hackerman - Director (88)
at the 2002 Electrosource, Inc., 1993 to Present; Chairman,
Annual Meeting: Scientific Advisory Board, Robert A. Welch Foundation,
for more than five years; Director, American General
Portfolio Fund, for more than five years.
Benny E. Jay - Director (61)
President and Chief Executive Officer, Electrosource,
Inc., August 1999 to Present; Executive Vice
President, Electrosource, Inc., December 1998 to
September 1999; Chief Technical Officer,
Electrosource, Inc., 1995-1998; Executive Vice
President, Electrosource, Inc., 1994-1995; President
and Chief Executive Officer, Electrosource, Inc.,
1992-1994.
Roger G. Musson - Director (50)
Electrosource, Inc., June 1998 to Present; Director
and Secretary, Kamkorp Ltd., 1997 to Present; Director
and Secretary, Frazer-Nash Research Ltd., 1997 to
Present; Director and Secretary, Frazer-Nash
Engineering Technology Ltd., 1998 to present; Director
and Secretary, Electrosource International Ltd., 1998
to present; Director and Secretary, Frazer-Nash
Technology Ltd., 1999 to present; Director and
Secretary, Kamkorp Investments Ltd., 1997 to present;
Financial Controller, Vickers PLC, 1987-1997.
EXECUTIVE OFFICERS
CHRIS MORRIS (54) Electrosource, Inc., Vice President/Chief Operating
Officer, January 1999 to Present; Technical Manager,
October 1998 to December 1998; Next Century Power,
Inc., Vice President Manufacturing, August 1998 to
October 1998; Electrosource, Inc., Chief Engineer,
November 1997 to July 1998; Vice President of
Technical Operations, November 1995 to November 1997;
and Chief Engineer, November 1994 to November 1995.
DONALD C. PERRIELLO Electrosource, Inc., Vice President/Finance and
(51) Treasurer, May 1999 to Present; Self-employed
Consultant, February 1999 to May 1999; Chief
Financial Officer, JRL Systems, Inc., December 1997
to February 1999; Self-employed, August 1995 to
December 1997; Controller, Treasurer and Assistant
Corporate Secretary, Electrosource, Inc., February
1992 to July 1995.
BOARD INFORMATION
Board In 1999, the Board held a total of seven regular
Meetings: meetings and special meetings. Four directors
attended at least 75 percent of his or her Board and
committee meetings. Directors Balzhiser, Siddiqi and
Winckless attended 71 percent of the meetings, while
Mr. Morton attended 57 percent of the meetings.
Board The Executive Committee was discontinued when no
Committees: members were appointed to the Committee at the Board
Meeting of June 22, 1999.
The Audit Committee recommends appointment of the
Company's independent auditors. 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. It also approves
audit reports and plans, accounting policies,
financial statements, internal audit reports, internal
controls, audit fees and certain other expenses. The
Audit Committee held two meetings in 1999. All
members are non-employee directors.
Members:
James M. Rosel, Chair (2); Nathan P. Morton, and
Roger G. Musson
The Finance Committee was discontinued when no members
were appointed to the Committee at the Board Meeting
of June 22, 1999.
The Compensation/Stock Option Committee manages
executive officer compensation. It also administers
our compensation and incentive plans, including the
1996 Stock Option Plan and the 1999 Stock Option Plan.
The committee evaluates the competitiveness of
ELECTROSOURCE'S compensation and the performance of
the Chief Executive Officer. It held five regular and
special meetings in 1999. All members of the committee
are non-employee directors.
Members:
Norman Hackerman, Chair; Richard E. Balzhiser;
James M. Rosel (2), Clifford Winckless.
The Nominating Committee recommends to the Company's
Board of Directors candidates for election as
directors of the Company. The Nominating Committee
held one regular meeting during 1999. The names of
potential director candidates are drawn from a number
of sources, including recommendation from members of
the Board, management, and shareholders. 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 in writing not less than sixty
days prior to the scheduled date of the meeting by a
Stockholder of record, accompanied by the consent of
the person nominated to serve if elected.
Members:
Richard E. Balzhiser, Chair; Norman Hackerman,
Roger G. Musson, Kamal Siddiqi, and Clifford G.
Winckless.
(2) Mr. Rosel served as a director from December 1998 until April 2000.
During this time, he was a member of the Audit Committee and the
Compenation/Stock Option Committee.
BOARD COMPENSATION
Directors Retainer We reimburse directors for any reasonable expenses
receive and Fees: related to their Board service. Directors and
no fees for members of Committees who are employees of the
their services, Company are not separately compensated for Board
only expense and Committee activities.
reimbursements
Stock Options: Pursuant to the Company's 1996 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 15,000 shares of Common Stock at
the time such person becomes a director. All options
are exercisable six months from the date of grant
under the 1996 Stock Option Plan. In addition, each
director will be awarded an option to purchase 2,000
shares annually commencing with the second anniversary
of the date on which the director joined the Board.
Directors of the Company that are also employees or
officers of the Company are eligible for grants of
options under the Company's 1996 Stock Option Plan;
the number of options granted and the vesting schedule
of such options are determined by the Company's
Compensation/Stock Option Committee. The exercise
price of each option granted under the plan is not
less than the market price of the Common Stock at the
date of grant, but in no event less than the par value
of the stock.
Pursuant to the Company's 1999 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 15,000 shares of Common Stock
under this or any prior plan at the time such person
becomes a director. All options are exercisable at
six months from the date of grant under the 1999 Stock
Option Plan. In addition, each director will be
awarded an option to purchase 2,000 shares annually
under this or any other prior plan commencing with the
second anniversary of the date on which the director
joined the Board. Directors of the Company that are
also employees or officers of the Company are eligible
for grants of options under the Company's 1999 Stock
Option Plan; the number of options granted and the
vesting schedule of such options are determined by the
Company's Compensation/Stock Option Committee. The
exercise price of each option granted under the plan
is not less than the market price of the Common Stock
at the date of grant, but in no event less than the
par value of the stock.
COMPENSATION/STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Committee: The Compensation/Stock Option Committee is comprised
only of independent directors as defined by the SEC
and IRS. The committee exercises the Board's powers
in compensating executive officers of ELECTROSOURCE
and its subsidiaries. The committee administers
ELECTROSOURCE'S incentive plans, including the 1996
Stock Option Plan and the 1999 Stock Option Plan.
ELECTROSOURCE'S compensation program helps
ELECTROSOURCE to attract, retain and motivate all of
the Company's employees and to align their efforts
with increases in stockholder value and
ELECTROSOURCE's profitability. ELECTROSOURCE makes
every effort to assure the Company's compensation
program is consistent with ELECTROSOURCE's values and
furthers its business strategy.
Overall The committee has developed a compensation program for
Objectives: executive and key employees designed to meet the
following goals.
ELECTROSOURCE's Reward performance that increases the value of your
Compensation programs stock.
seek to fulfill these Attract, retain and motivate executives and key
objectives employees with competitive compensation
opportunities.
Build and encourage ownership of the Company's
shares.
Balance short-term and long-term strategic goals.
Address the concerns of shareowners, employees, the
financial community and the general public.
To meet these objectives, the committee studied
competitive compensation data and implemented the base
salary and annual and long-term incentive programs
discussed below.
Executive The committee reviews executives' pay each year.
Compensation Compensation depends on many factors, including
Generally: individual performance and responsibilities, future
challenges and objectives and how the executive might
contribute to the Company's future success. The
committee also looks at ELECTROSOURCE's financial
performance and the compensation levels at comparable
companies.
Total Compensation: During fiscal 1999, executive compensation consisted
of three components: (A) base pay; (b) year-end bonus;
and (c) awards under the Company's Stock Option Plans
(the "Plans"). The committee established total
compensation levels for the executives at the
compensation of other similar companies, adjusted in
light of ELECTROSOURCE's and the executive's
performance. The committee's primary objective is to
incentivize the Company's executives. Doing so helps
encourage performance that increases the value of your
shares. As a result, maximum performanc warrants
additional rewards.
Base Salary: The committee sets the Company's base salaries for
executives after considering the factors noted above.
The committee links the performance of each executive
to the amount of compensation paid to such executive.
The committee reserves the right to make subjective
judgments in assessing compensation relative to an
individual executive's contribution to the overall
performance of the Company.
Fees and Year-end bonuses of less than $1,200 for non-executive
Bonus: employees are determined by management. A bonus for
any employee in excess of $1,200 must be approved by
the committee. The committee authorized no bonuses
during 1999.
Stock Option Plans: 1996 Stock Option Plan. The 1996 Stock Option Plan
was approved by the Board in August 1996, and approved
by Stockholders at the 1997 Annual Meeting. Under the
1996 Stock Option Plan, all outstanding options under
the various previous plans then in place were
aggregated under the 1996 Plan, and all the other
plans were terminated. The committee recommended, and
the Board approved, an award of additional shares to
selected executives based upon the ability of such
individuals to impact the long-term success of the
Company.
1999 Stock Option Plan. The 1999 Stock Option Plan
was approved by the Board in March 1999 and approved
by the Stockholders at the 1999 Annual Meeting. No
shares have been granted under this plan at this time.
Tax Code Concerns: Section 162(m) of the Internal Revenue Code disallows
the corporate income tax deduction on executive
compensation paid to certain executives in excess of
$1 million per year, unless that income meets
permitted exceptions. One exception is if the pay is
based on performance, under stringent tests
established by that section. However, this is not a
concern for the Company at this time since no
executive of the Company earns in excess of $1 million
per year.
Stock Option Electrosource has been granting stock options to its
Programs: employees since 1988. From time to time, options are
granted to non-executive employees. Non-executive
Key employees are employees received options to purchase a total of
eligible to receive 24,083 shares in 1999. Those grants constituted
options. These grants about 11.8% of the options granted last year. These
help motivate these grants help motivate outstanding performance by all
employees. the Company's employees, and encourage everyone at
Electrosource, not just executives, to increase the
value of Electrosource shares.
CEO Benny Jay took over as CEO in August, 1999. We set
Compensation: Mr. Jay's total compensation based on Electrosource's
performance, his individual performance, compensation
at other companies, and the desire to retain him. His
salary and incentives reflect the leadership, vision
and focus he has provided. We believe that with Mr.
Jay in control, Electrosource is positioned for future
success.
Conclusion: We believe that the executive team has provided
outstanding service to ELECTROSOURCE. We will work to
assure the executive compensation programs continue to
meet the Company's strategic goals as well as the
overall objectives discussed above.
Norman Hackerman, Chairman
Richard E. Balzhiser
Clifford G. Winckless
Members, Compensation/Stock Option Committee(3)
(3) Mr. Rosel served as a member of Compensation/
Stock Option Committee until his resignation as
of April 6, 2000.
PERFORMANCE GRAPH
Comparison of Cumulative Total Return Among
ELECTROSOURCE, Nasdaq Index and Nasdaq Electronic Component Index(1)
1994 1995 1996 1997 1998 1999
NASDAQ 100.00 156.50 270.59 283.66 438.54 860.41
Electronic 100.00 141.30 173.80 212.91 300.00 542.10
Components
Electrosource 100.00 47.00 20.21 7.68 1.99 6.77
CRSP
Total Return
As of Dec. 31 411.197 681.024 1177.737 1234.605 1908.392 3743.791
Electronic
Components
Index
As of Dec. 31 244.532 345.609 425.222 521.032 734.202 1326.416
ELSI
As of Dec. 31 30.625 14.375 6.219 2.375 .625 2.750
(1) Assumes $100 invested on December 31, 1994, and no
dividends. Historical data does not necessarily predict
future growth.
The above chart presents the total shareholder return with
respect to the Company's Common Stock for each of the last
five years, compared to the total return over the same period
of (i) all NASDAQ U.S. stocks and (ii) all NASDAQ electronic
component stocks. Stockholder return for a given year is
measured by the difference between the Company's share price
at the end and beginning of each calendar year. Dividends are
not a factor in the computation of the Company's total return
because the Company paid no dividends during the periods
represented. Closing prices at the end of each year have been
compared to the beginning index value, with cumulative returns
for each subsequent year measured as a change from that base.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of The following table summarizes the compensation we
Compensation: paid the Chairman, President and Chief Executive
Officer and each of the three other most highly
compensated executive officers as of the end of 1999,
based on salary and other compensation. The Company
has no Employment Agreements.
[CAPTION]
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term Compensation (5)
Annual Compensation Awards Payouts
Other Restricted All other
Annual Stock Securities LTIP Compen-
Name and Principal Bonus($) Compen- Award(s) Underlying Payouts sation
Position(1) Year Salary($) (2)(3) sation($)(4) $ Options(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
William F. Griffin 1999 201,225 0 1,927 65,000(6) 4,048(8)
President, CEO 1998 154,968 0 2,446 52,500(7) 19,327(9)
and Acting 1997 146,385 0 2,339 17,500(6) 38,838(10)
Chairman(until
August 1999)
Benny E. Jay 1999 110,195 0 1,100 45,000(6)
President, CEO and 1998 111,692 0 1,100 30,000(7)
Acting Chairman 1997 107,308 0 1,069 10,000(6)
(August 1999-
present)
Chris Morris 1999 115,351 0 1,000 45,000(6)
Vice President 1998 94,331 0 1,000 0
Chief Operating 1997 117,975 0 1,048 17,500(6)
Officer
Ajoy Datta 1999 105,650 0 2,446 5,000(6)
Technical Vice 1998 99,460 0 2,446 25,500(7)
President 1997 90,767 0 1,683 7,500(6)
</TABLE>
(1) No executive officer serving during 1999 (other than officers shown on this
table) earned in excess of $100,000 in annual salary and bonus in 1997,
1998 and 1999.
(2) Includes deferred compensation, if any.
(3) Bonus payments depend on both ELECTROSOURCE's and individual performance.
No bonus is paid unless set performance levels are achieved.
(4) All amounts shown were received as a Company contribution under the 401(k)
plan which is available to all employees of the Company and is paid as a
uniform percentage of the amount of employee contribution.
(5) The Company has made no restrictive stock awards and has no long-term
incentive plans.
(6) Reflects options to purchase stated number of shares of Common Stock
granted during respective years.
(7) Reflects options to purchase stated number of shares of Common Stock
granted during prior years and regranted/repriced during 1998. No
additional options to purchase were granted to listed individuals during
1998.
(8) Includes reimbursement for travel between residence and place of business,
lodging and local transportation for 1999.
(9) Includes $16,041 reimbursement for travel between residence and place of
business and $3,286 reimbursement for lodging, local transportation and
miscellaneous expenses for 1998.
(10) Includes $3l,780 reimbursement for travel between residence and place of
business and $7,058 reimbursement for lodging, local transportation and
miscellaneous expenses for 1997.
Stock The following table lists our grants during 1999 of
Options: stock options to officers named in the Summary
Compensation Table. The amounts shown as potential
realizable values rely on arbitrarily assumed rates of
Option only have share price appreciation prescribed by the SEC. In
value if our share assessing those values, please note that the ultimate
price increases value of the options, as well as your shares, depends
on actual future share values.
The potential realizable values for all stock option
holders represent the corresponding increases in the
value of outstanding shares, assuming all 274,083
option shares were outstanding. Annual appreciation
at 5% from the grant date would increase the market
value of all outstanding option shares by more than
62%, and 10% annual appreciation would increase it by
more than 159% over the 10-year option term.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
[CAPTION]
<TABLE>
Potential Realizable
Value at Assumed
Annual Rates
of Stock Price
Appreciation
for Option Term
Number of % of Total
Securities Options/
Underlying Granted to
Options Employee in Base Price Expiration
Name Granted(1) Fiscal Year ($/Share)(2) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
William F. Griffin 65,000 31.8 $1.750 2/3/2009 71,537 181,288
Benny E. Jay 15,000 7.3 1.750 2/3/2009 16,508 41,836
30,000 14.7 1.156 8/4/2009 21,810 56,271
Chris Morris 30,000 14.7 1.750 2/3/2009 33,017 86,671
15,000 7.3 1.156 8/4/2009 10,905 27,635
Ajoy Datta 5,000 2.4 1.750 2/3/2009 5,503 13,945
</TABLE>
(1) The Options granted may be either incentive or non-qualified options
(2) The exercise price of all options is equal to the market
price of the Common Stock as of the date of grant.
`
1999 Option The following table lists the number of shares
Holdings: acquired and the value realized as a result of option
exercises during 1999 for the listed officers. It
also includes the number and value of their
exercisable and non-exercisable options as of
December 31, 1999. The table contains values for "in
the money" options, meaning a positive spread between
the year-end share price of $2.75 and the exercise
price. These values have not been, and may never be,
realized. The options might never be exercised, and
the value, if any, will depend on the share price on
the exercise date.
[CAPTION]
<TABLE>
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Options at FiscalYear-End Options at Fiscal Year-end(1)
Shares
Acquired
on
Exercise Value
Name # Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
William F. Griffin 0 0 74,166 43,334 $83,984 $43,334
Benny E. Jay 0 0 35,000 40,000 $40,610 $57,820
Chris Morris 0 0 10,000 35,000 $10,000 $43,910
Ajoy Datta 0 0 27,166 3,334 $31,935 $3,334
</TABLE>
(1) Based on the $2.75 per share close market price of the Common Stock as
reported on NASDAQ as of December 31, 1999 (last market day of year).
COMPENSATION/ Dr. Hackerman and Messrs. Winckless, Rosel, and
STOCK OPTION Balzhiser were members of the Company's Compensation/
COMMITTEE Stock Option Committee throughout 1999. None of these
INTERLOCKS AND committee members is or has been an officer of the
INSIDER Company with the exception of Mr. Rosel who served
PARTICIPATION as Vice President/Finance and General Counsel from
1994 until August 1998 and as a Director from
December 1998 until April 2000.
Mr. Winckless is a Director of Kamkorp, Limited, and
other companies within the Kamkorp group. See
"Certain Relationships and Related Transactions" below
for a description of the relationship of the Company
to the Kamkorp entities.
Mr. Nathan Morton, Director, and Mr. William Griffin,
Director, are related as brothers-in-law.
CERTAIN Transactions with Kamkorp Limited. During 1998,
RELATIONSHIPS AND Kamkorp Limited, a private company located in Great
RELATED Britain, acquired a controlling stock interest in the
TRANSACTIONS Company. See "Changes in Control" below. Mesrs.
Siddiqi, Musson and Winckless, directors of the
Company are directors and holders of all the shares of
Kamkorp Limited. Mr. Siddiqi, who holds an 85%
interest in Kamkorp Limited, serves as a Director and
Chairman; Mr. Winckless with a 10% interest serves as
Managing Director; and Mr. Musson with a 5% interest
serves as Finance Director.
During 1998, the Company received a purchase order
for 5,800 batteries for delivery during the second
half of 1998 from Electrosource International Limited
("EIL"), a newly-formed distribution company 100%
owned by Kamkorp. EIL, in turn received a purchase
order for 5,800 batteries from Perusahaan Otomobile
Elektric (Malaysia) Sdn. Bhd. ("POEM"), an emerging
Malaysian joint venture company in which Kamkorp
affiliates hold a significant minority interest,
engaged in the production of electric vehicles
developed by companies within the Kamkorp group.
As of January 1, 1999, ELECTROSOURCE had delivered
2,062 batteries under the purchase order, no
deliveries have been made in 1999. The Company
completed negotiations of the terms of a purchase
order for 8,000 batteries from EIL for delivery
beginning during the second half of 1999. The order
replaces the previous order for 5,800 batteries. EIL
took delivery of 2,062 batteries under the previous
order and made a $507,500 down payment equal to fifty
percent of the purchase price of the entire order. The
Company will retain the entire amount paid under the
previous order. The new order will therefore
represent 4,262 net new batteries ordered, given the
undelivered portion of the previous order, which has
now been cancelled.
Contract with Bastrop Metal Products. Mr. Charles L.
Mathews, Chief Engineer for the Company, is the sole
owner, director and officer of Bastrop Metal Products,
Inc. In November 1995, Development Agreement and
Agreement for Purchase of Machinery and Supplies
between the Company and Charles L. Mathews was
executed under which Mr. Mathews contracted to
manufacture and provide to the Company coextruders for
use in present and anticipated Company production
facilities at a set price per single head coextruder.
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.
SECTION 16(a) Based on a review of reports filed by our directors,
BENEFICIAL executive officers and beneficial holders of 10% or
OWNERSHIP more of our shares, and upon representations from
REPORTING those persons, all SEC stock ownership reports
COMPLIANCE required to be filed by those reporting persons during
1999 were timely made.
CHANGE IN CONTROL The Company does not know of any arrangements that
OF THE COMPANY would result in a change of control.
SELECTION OF INDEPENDENT AUDITORS (Item 2)
We ask that you approve the following resolution on
the appointment of our independent auditors.
RESOLVED, that the stockowners ratify the
appointment of Weaver and Tidwell LLP to
audit the accounts of ELECTROSOURCE and its
subsidiaries for the fiscal year 2000.
The Board appointed them as our independent auditors
for 2000, upon recommendation of the Audit Committee.
We expect a representative of Weaver and Tidwell LLP
to attend the meeting, respond to appropriate
questions and be given an opportunity to speak.
The Board recommends that you vote "FOR" the
ratification of the appointment of Weaver and Tidwell
LLP as ELECTROSOURCE's independent auditors for 2000.
ELECTROSOURCE The following tables list our share ownership for the
SHARE OWNERSHIP persons or groups specified. Ownership includes
direct and indirect (beneficial) ownership as defined
by SEC rules. To our knowledge, each person, along
with his or her spouse, has sole voting and investment
power over the shares unless otherwise noted.
Information in the first table is as of April 3, 2000.
Information in the second table is as of the latest
reports by those entities received by us. That table
lists the beneficial owners of at least 5% of our
shares.
DIRECTORS, NOMINEES FOR DIRECTOR
AND EXECUTIVE OFFICERS
Amount and Nature of Percentage of
Name Position(s) Beneficial Ownership(1) Outstanding Shares
Benny E. Jay President/CEO, 0 *
Director and 44,999 Options(2)
Acting Chairman
(August 1999 to
present)
Richard E. Balzhiser Director 0 *
19,000 Options(2)
William F. Griffin Director 8,719 *
President/CEO, 50,000 Warrants(3)
Acting Chairman 74,166 Options (2)
(December 1998 to
August 1999)
Norman Hackerman Director 403 *
21,000 Options(2)
Nathan P. Morton Director 500 *
21,000 Options(2)
Roger G. Musson Director 8,130,000(4) 70.2
Chief Financial 3,870,000(5)
Officer 15,000 Options(2)
James M. Rosel(6) Director 100 *
25,003 Warrants(3)
15,000 Options(2)
Kamal Siddiqi Director 8,130,000(7) 70.2
3,870,000(8)
15,000 Options(2)
Clifford Winckless Director 8,130,000(9) 70.2
3,870,000(10)
15,000 Options(2)
All Directors, Nominees for 8,139,722 70.8
Director, and Executive Officers 100,006 Warrants
as a Group 4,180,165 Options(2)
* Less than 1 percent
(1) Each case of beneficial owner has sole voting and investment power except
as otherwise indicated in Notes 3, 4, 5, and 7 through 10.
(2) Includes Option shares exercisable in sixty days or less.
(3) Acquired in Private Placement of January 1997.
(4) Total shares owned by Kamkorp Limited of which Mr. Musson owns five
percent. As five percent shareholder and director of Kamkorp Limited,
Mr. Musson may be considered to share voting and investment powers with
respect to such shares. Mr. Musson disclaims beneficial ownership of
such shares.
(5) Kamkorp owns options to purchase 3,870,000 of Common Stock under the Stock
Purchase Agreement and an Option Agreement dated October 27, 1999. As five
percent shareholder and director of Kamkorp Limited, Mr. Musson may be
considered to share voting and investment powers with respect to such
shares. Mr. Musson disclaims beneficial ownership of such shares.
(6) Mr. Rosel resigned as Vice President, Finance and General Counsel in
August 1998. At the time of his resignation, Mr. Rosel had been granted
options to purchase 47,667 shares of common stock at an exercise price of
$1.563 per share, subsequently, all such options expired unexercised under
the terms and conditions of the 1996 Stock Option Plan. He was appointed
to the Board of Directors in December 1998 at which time he was granted an
option to purchase 15,000 shares of common stock at an exercise price of
$1.00 pr share; subsequently, as of April 6, 2000, Mr. Rosel resigned as
a director.
(7) Total shares owned by Kamkorp Limited of which Mr. Siddiqi owns eighty-
five percent. As eighty-five percent shareholder and director of Kamkorp
Limited, Mr. Siddiqi may be considered to share voting and investment
powers with respect to such shares. Mr. Siddiqi disclaims beneficial
ownership of such shares.
(8) Kamkorp owns options to purchase 3,870,000 of Common Stock under the Stock
Purchase Agreement and an Option Agreement dated October 27, 1999. As
eighty-five percent shareholder and director of Kamkorp Limited, Mr.
Siddiqi be considered to share voting and investment powers with respect
to such shares. Mr. Siddiqi disclaims beneficial ownership of such shares.
(9) Total shares owned by Kamkorp Limited of which Mr. Winckless owns ten
percent. As ten percent shareholder and director of Kamkorp Limited, Mr.
Winckless may be considered to share voting and investment powers with
respect to such shares. Mr. Winckless disclaims beneficial ownership of
such shares.
(10) Kamkorp owns options to purchase 3,870,000 of Common Stock under the Stock
Purchase Agreement and an Option Agreement dated October 27, 1999. As ten
percent shareholder and director of Kamkorp Limited, Mr. Winckless may be
considered to share voting and investment powers with respect to such
shares. Mr. Winckless disclaims beneficial ownership of such shares.
CERTAIN BENEFICIAL OWNERS
Amount and Nature
of Beneficial Percentage
Name and Address of Beneficial Owner Ownership(1) of Shares
Kamkorp Limited 8,130,000(2) 70.2
Mytchett Place, Mytchett 3,870,000(3)
Surrey GU16 6DQ England
(1) The information is based on reported ownership as of April 17, 2000. The
owners report they hold the shares for themselves and their affiliates,
advisory clients and investors. The entities may disclaim that they
constitute a "group" for purposes of owning these shares.
(2) Total shares owned by Kamkorp, Limited.
(3) Kamkorp owns options to purchase 3,870,000 of Common Stock under the Stock
Purchase Agreement and an Option Agreement dated October 27, 1999.
VOTING PROCEDURES/REVOKING YOUR PROXY
To be elected, directors must receive a plurality of the shares present and
voting in person or by proxy, provided a quorum exists. A plurality means
receiving the largest number of votes, regardless of whether that is a majority.
A quorum is present if at least majority of the outstanding shares on the Record
Date (6,613,267 shares) are present in person or by proxy. All matters other
than the election of directors submitted to you at the meeting will be decided
by a majority of the votes cast on the matter, provided a quorum exists, except
as otherwise provided by law or our Certificate of Incorporation or Bylaws.
Those who fail to return a proxy or attend the meeting will not count
towards determining any required plurality, majority or quorum. Shareowners and
brokers returning proxies or attending the meeting who abstain from voting on a
proposition will could towards a quorum, plurality or majority for that
proposition.
The enclosed proxies will be voted in accordance with the instructions
you place on the proxy card. Unless otherwise stated all shares represented
by your returned, signed proxy will be voted as noted on the first page of
this proxy statement.
Proxies may be revoked if you:
Deliver a signed, written revocation letter,
You can change your dated later than the proxy, to Audrey T. Dearing,
mind after sending in a Corporate Secretary, at 2809 IH 35 South, San
proxy, until the meeting, Marcos, Texas 78666;
by following these
procedures Deliver a signed proxy, dated later than the first
one, to Harris Trust and Savings Bank, 311 W.
Monroe Street, Post Office Box A3800, Chicago, IL
606690-9608; or
Attend the meeting and vote in person or by proxy.
Attending the meeting alone will not revoke your
proxy.
Proxy Harris Trust & Savings Bank, Inc. will help us
Solicitation: tabulate proxies at no cost other than expenses.
Our employees may also solicit proxies for no
additional compensation. We will reimburse banks,
brokers, custodians, nominees and fiduciaries for
reasonable expenses they incur in sending these
proxy materials to you if you are a beneficial
holder of our shares.
SUBMISSION OF STOCKOWNER PROPOSALS
From time to time, stockowners seek to nominate
directors or present proposals for inclusion in
the proxy statement and form of proxy for
consideration at the annual meeting. To be
included in the proxy statement or considered at
an annual or any special meeting, you must timely
submit nominations of directors or proposals, in
addition to meeting other legal requirements. We
must receive proposals for the 2001 annual meeting
no later than January 22, 2001, for possible
inclusion in the proxy statement. If the date of
the 2001 Annual Meeting of Shareholders, which is
expected to take place on May 24, 2001, is changed
by more than 30 days from May 24, then shareholder
proposals must be received a reasonable time
before the Company begins to print and mail its
proxy materials. Proposals submitted outside the
procedures established by Rule 14a-8 must be
received between February 13 and March 5, 2001.
OTHER BUSINESS
The Board of Directors knows of no other matters
for consideration at the meeting. If any other
business should properly arise, the persons
appointed in the enclosed proxy have discretionary
authority to vote in accordance with their best
judgment.
By order of the Board of Directors.
/s/
Benny E. Jay
President and Chief Executive Officer.
PLEASE VOTE - YOUR VOTE IS IMPORTANT
PROXY ELECTROSOURCE, INC. PROXY
Proxy is Solicited on Behalf of the Board of Directors
By my signature below, I revoke all previous proxies and appoint Benny
E. Jay and Don C. Perriello, 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. that I held of record on
April 17, 2000 at the Annual Meeting of Shareholders to be held at 10:00
A.M. on June 14, 2000, at the San Marcos Activity Center, 501 East Hopkins,
San Marcos, Texas, or any adjournments thereof.
If you execute and return this Proxy it will be voted in the manner
you have indicated above. If you execute and return this Proxy without
indicating any voting preference, this Proxy will be voted FOR proposals 1,
2, and 3. If you execute this PROXY in a manner that does not withhold
authority to vote for the election of any nominees, authority to vote for
the nominees is deemed granted. The Proxy tabulator can not vote your
shares unless you sign and return this card.
Change of Address/Comments:
________________________________ PLEASE VOTE, SIGN, DATE AND RETURN
PROMPTLY
________________________________ IN THE ENCLOSED
ENVELOPE
________________________________
PLEASE MARK VOTE IN BOXES USING DARK INK ONLY.
1. To elect the three nominees specified below as directors:
For All Withhold All For All Except
Nominees: 01 Richard E. Balzhiser
02 Nathan P. Morton
03 Clifford G. Winckless
(Instruction: To withhold authority to vote for any individual
nominee(s), write the name of the nominee(s) on the line below.)
__________________________________________________
For Against Abstain
2. To approve the appointment of Weaver
and Tidwell LLP as auditors.
For Against Abstain
3. Authority for the Proxies to vote
upon any other business that may
properly come before the meeting
or any adjournment.
Mark here if address has changed (note corrections on reverse side)
Date:___________________________________, 2000
Signature(s)
________________________________________
________________________________________
NOTE: Please sign exactly as your name appears
on this Proxy. Joint owners should each sign.
When signing as a fiduciary, such as an
attorney, executor, administrator, trustee,
guardian, etc., please give your full title
as such.
