<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Electric Fuel Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Electric Fuel Corporation
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
[ELECTRIC FUEL LOGO APPEARS HERE]
June 20, 1997
Dear Stockholder:
It is our pleasure to invite you to the Annual Meeting of Stockholders
of Electric Fuel Corporation, a Delaware corporation (the "Company"), to be held
-------
on July 14, 1997 at 9:30 AM at the St. Moritz, 50 Central Park South, New York,
New York 10036.
Whether or not you plan to attend, and regardless of the number of
shares you own, it is important that your shares be represented at the meeting.
You are accordingly urged to carefully review the enclosed proxy materials, and
sign, date and return your proxy promptly in the enclosed envelope, which
requires no postage if mailed in the United States. Your return of a proxy in
advance will not affect your right to vote in person at the meeting.
We ask for your support in approving the election of the Class III
directors, the approval of a proposal to amend the 1993 Stock Option and
Restricted Stock Purchase Plan and the ratification of the appointment of
Kesselman & Kesselman, a member of Coopers & Lybrand (International), as the
Company's independent accountants.
Sincerely,
/s/ ROBERT S. EHRLICH
--------------------------
Chairman of the Board
of Directors
<PAGE>
ELECTRIC FUEL CORPORATION
885 THIRD AVENUE
NEW YORK, NEW YORK 10022
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held July 14, 1997
------------------------
The Annual Meeting of Stockholders of Electric Fuel Corporation (the
"Company") will be held at the St. Moritz, 50 Central Park South, New York, New
- --------
York 10036 on Monday, July 14, 1997 at 9:30 AM for the following purposes:
1. To fix the number of Class III directors at two and to elect two Class
III directors for a three-year term ending in 2000 and until
successors are elected and qualified.
2. To consider and act upon a proposal to amend and restate the 1993
Stock Option and Restricted Stock Purchase Plan of the Company and to
increase the authorized Common Stock of the Company to be issued
thereunder from 1,200,000 shares to 2,700,000 shares.
3. To consider and act upon a proposal to ratify the appointment of
Kesselman & Kesselman, a member of Coopers & Lybrand (International),
as independent accountants of the Company.
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
The Board of Directors (the "Board") has fixed the close of business
-----
on June 20, 1997 as the record date for determination of stockholders entitled
to notice of and to vote at the meeting and any adjournments thereof.
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
by Order Of The Board Of Directors,
/s/ ROBERT S. EHRLICH
--------------------------
Robert S. Ehrlich
Chairman of the Board
of Directors
June 20, 1997
<PAGE>
ELECTRIC FUEL CORPORATION
885 THIRD AVENUE
NEW YORK, NEW YORK 10022
_____________________
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
_____________________
The accompanying proxy is solicited by and on behalf of the Board of
Directors (the "Board") of Electric Fuel Corporation, a Delaware corporation,
-----
(the "Company"), for use at the Annual Meeting of Stockholders (the "Annual
------- ------
Meeting") to be held on Monday, July 14, 1997 at 9:30 AM and any adjournments
- -------
thereof for the purposes set forth in the Notice of Annual Meeting of
Stockholders.
Stockholders of record at the close of business on June 20, 1997 will
be entitled to vote at the Annual Meeting. On that date, there were 14,193,661
shares of Common Stock, par value $.01 per share (the "Common Stock"), of the
------------
Company outstanding, the holders of which are entitled to one vote per share on
each matter to come before the Annual Meeting. Proxies properly executed and
returned will be voted at the Annual Meeting in accordance with any directions
noted thereon or, if no direction is indicated, proxies will be voted FOR the
election of the nominees for director set forth below, FOR approval of the
amendments to the 1993 Stock Option and Restricted Stock Purchase Plan,
including the increase of authorized Common Stock to be issued thereunder, and
FOR the ratification of the appointment of Kesselman & Kesselman, a member of
Coopers & Lybrand (International) ("Kesselman"), as independent accountants of
---------
the Company. Proxies will be voted in the discretion of the holders of the
proxy with respect to any other business that may properly come before the
Annual Meeting and all matters incidental to the conduct of the Annual Meeting.
Any stockholder signing and delivering a proxy may revoke it at any time before
it is voted by delivering to the Secretary of the Company a written revocation
or a duly executed proxy bearing a later date than the date of the proxy being
revoked. Any record stockholder attending the Annual Meeting in person may
revoke his or her proxy and vote his or her shares at the Annual Meeting.
It is expected that this Proxy Statement and the enclosed form of
proxy are being mailed to stockholders on or about June 20, 1997.
Expenses in connection with the solicitation of proxies will be paid
by the Company.
The Company is not aware of any matters other than those described in
this Proxy Statement that will be acted upon at the Annual Meeting. In the
event that any other matters properly come before the Annual Meeting for a vote
of stockholders, the persons named as
<PAGE>
proxies in the enclosed form of proxy will vote in accordance with their best
judgment on such other matters.
The annual report of the Company for the fiscal year ended December
31, 1996 is being mailed to the Company's stockholders with this Proxy
Statement.
At least 10 days before the Annual Meeting, the Company shall make a
complete list of the Stockholders entitled to vote at the meeting open to the
examination of any stockholder for any purpose germane to the Annual Meeting at
its principal executive offices at 885 Third Avenue, Suite 2900, New York, New
York 10022. The list shall also be made available to stockholders present at the
Annual Meeting.
VOTING
Consistent with Delaware corporate law and under the Company's By-
laws, a majority of the shares outstanding and entitled to vote, present in
person or represented by proxy, constitutes a quorum for the transaction of
business at the Annual Meeting. Votes cast by proxy or in person at the Annual
Meeting will be counted by persons appointed by the Company to act as election
inspectors at the Annual Meeting.
The two nominees for election as Class III directors at the Annual
Meeting who receive the greatest number of votes for the election of the
directors shall be elected the Class III directors. A majority vote of the
number of shares present in person or represented by proxy at the Annual Meeting
entitled to vote thereon is necessary to approve the actions proposed in Item 2
and Item 3 as well as any other matter which comes before the Annual Meeting,
except where law, the Company's Amended and Restated Certificate of
Incorporation or By-laws require otherwise.
The total number of votes cast FOR approval of proposals, other than
the election of directors, will be counted for purposes of determining whether
sufficient affirmative votes have been cast. Shares represented by proxies that
withhold authority to vote for a nominee for election as a director or that
reflect abstentions and "broker non-votes" (i.e., shares represented at the
Annual Meeting held by brokers or nominees as to which (a) instructions have not
been received from the beneficial owners or persons entitled to vote, and (b)
the broker or nominee does not have the discretionary voting power on a
particular matter) will be counted as shares that are present and entitled to
vote on the matter for purposes of determining the presence of a quorum.
Directions to withhold authority on a particular matter and broker non-votes
will have the effect of a vote AGAINST a matter.
-2-
<PAGE>
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
Two Class III directors are to be elected at the Annual Meeting for a
three-year term that expires in 2000. Six other directors have been elected or
appointed to terms that end in either 1998 or 1999, as indicated below. Unless
instructions are given to the contrary, it is the intention of the persons named
as proxies to vote the shares to which each proxy relates FOR the election of
the nominee listed below for a term of three years expiring at the Annual
Meeting of Stockholders to be held in 2000 and until the nominee's successor is
elected and qualified or until the nominee's earlier death, removal or
resignation. The nominees named below are presently serving as directors of the
Company and are anticipated to be available for election and able to serve.
However, if the nominees should become unavailable, such proxy will be voted for
substitute nominees designated by the Board. The two nominees for election as
directors at the Annual Meeting who receive the greatest number of votes
properly cast for the election of directors shall be elected.
The Company's By-laws provide for a Board of one or more directors,
and the number of directors is currently fixed at seven. Under the terms of the
Company's Amended and Restated Certificate of Incorporation, the Board is
composed of three classes of similar size, each elected in a different year, so
that only one-third of the Board is elected in any single year. Mr. Harats, Dr.
Eastman and Mr. Gross are designated Class I directors and have been elected for
a term expiring in 1998 and until their successors are elected and qualified;
Messrs. Rosenfeld and Miller are designated Class II directors elected for a
term expiring in 1999 and until their successors are elected and qualified; and
Mr. Ehrlich and Mr. Krueger are designated as Class III directors elected for a
term which expired in 1996 and is continuing until their successors are elected
and qualified.
Set forth below is certain information concerning the nominees and the
other incumbent directors:
BOARD OF DIRECTORS
------------------
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION CLASS SINCE
---- --- -------- ----- ------
<S> <C> <C> <C> <C>
Yehuda Harats 45 President, Chief I May 1991
Executive Officer
and Director
Jack E. Rosenfeld(1)(2) 58 Director II October 1993
Dr. Jay M. Eastman(1)(2) 48 Director I October 1993
Robert S. Ehrlich 58 Chairman of the Board, III May 1991
Chief Financial Officer
and Director
Harvey M. Krueger(1) 67 Director III February 1996
Lawrence M. Miller (3)(4) 50 Director II November 1996
Leon S. Gross 90 Director I March 1997
</TABLE>
____________________
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee since November, 1996.
(4) Member of the Compensation Committee since November, 1996.
-3-
<PAGE>
NOMINEES FOR ELECTION AS CLASS III DIRECTORS AT THE ANNUAL MEETING
ROBERT S. EHRLICH has been Chairman of the Board of the Company since
January 1993 and Chief Financial Officer of the Company since May 1991. From
May 1991 until January 1993, Mr. Ehrlich was Vice Chairman of the Board. From
May 1990 until March 1994, Mr. Ehrlich was also President, Chief Executive
Officer and a director of Advanced Materials Technology, Inc. ("Amtec"), a
-----
former stockholder which was merged with and into the Company immediately prior
to the Closing of the Company's initial public offering. From December 1987
until July 1992, Mr. Ehrlich was Chairman of the Board of PSC Inc., a New York
corporation ("PSCX"), a manufacturer and marketer of hand-held laser diode bar
----
code scanners. As of May, 1997, Mr. Ehrlich is again Chairman of the Board of
PSCX. From February 1987 until October 1989, Mr. Ehrlich was Chairman and Chief
Executive Officer of Fresenius USA, Inc., a Massachusetts corporation ("FRN")
---
(formerly Delmed, Inc.), a manufacturer and distributor of renal care systems,
solutions and supplies. Mr. Ehrlich served as Chairman of the Executive and
Compensation Committees of FRN until 1996, when it was combined with another
entity. Mr. Ehrlich received a B.S. and J.D. from Columbia University in New
York, New York.
HARVEY M. KRUEGER was elected to the Board in February 1996. Mr. Krueger
has been a Senior Managing Director of Lehman Brothers Inc., an investment
banking firm and the lead manager of the Company's most recent public offering,
since May 1984. From December 1977 to May 1984, he was Managing Director of
Lehman Brothers Kuhn Loeb, Inc. From 1965 to 1977, he was a Partner of Kuhn
Loeb & Co. and in 1977, he served as President and Chief Executive Officer of
Kuhn Loeb & Co. Mr. Krueger serves as a director on the boards of directors of
a number of companies, including Automatic Data Processing, Inc., R.G. Barry
Corporation, a manufacturer of footwear, Chaus, Inc., a manufacturer of women's
apparel, and IVAX Corporation, a generic pharmaceutical manufacturer. In
addition, he serves on the International Advisory Board of Club Mediterranee,
S.A. and as Chairman of the Board of Stockton Partners, Inc., the general
partner of the manager of the Renaissance Fund LDC, a private closed-end
investment fund.
CLASS I DIRECTORS
YEHUDA HARATS has been President, Chief Executive Officer and a director of
the Company since May 1991. Previously, from 1980 to May 1991, he was the
Executive Vice President, Director of the Process Division and head of the Heat
Collection Element Division at Luz Industries Israel Limited ("LII"). In 1989,
---
he was part of the team awarded the Rothschild Award for Industry, granted by
the President of the State of Israel, for his work at LII. Before joining LII
in 1980, Mr. Harats was Manager of the Maintenance Planning Unit of the Israel
Air Force. Mr. Harats received a B.Sc. in Mechanical Engineering from the
Israel Institute of Technology (Technion) in Haifa, Israel.
DR. JAY M. EASTMAN has been a director of the Company since October 1993.
Since November 1991, Dr. Eastman has served as President and Chief Executive
Officer of Lucid Technologies, Inc., which is developing laser technology
applications for medical diagnosis and treatment. Dr. Eastman also serves as
Senior Vice President of Strategic Planning and director of PSCX, a position he
has held since January 1, 1996. From December 1987
-4-
<PAGE>
through December 1995, Mr. Eastman was Executive Vice President of PSCX. He
joined PSCX in 1986 when PSCX acquired Optel Systems, Inc., a corporation which
he co-founded and for which he served as Chairman, President and Chief Executive
Officer from its formation in 1981. Dr. Eastman is also a director of Chapman
Instruments, Inc., which develops, manufacturers and sells surface profiling
instruments, and Dimension Technologies, Inc., a developer and manufacturer of
three-dimensional displays for computer and video displays. From 1981 until
January 1983, Dr. Eastman was director of the University of Rochester's
Laboratory for Laser Energetics, where he was a member of the staff from
September 1975 to 1981.
LEON S. GROSS was elected to the Board in March 1997. Mr. Gross' principal
occupation for the past five years has been as a private investor in various
publicly-held corporations, including the Company. He is also majority owner
and an officer of Micro TV, Inc., a business which owns communications towers.
CLASS II DIRECTORS
JACK E. ROSENFELD has been a director of the Company since October 1993.
Mr. Rosenfeld was President and Chief Executive Officer of Hanover Direct, Inc.
("Hanover"), formerly Horn & Hardart Co., which operates a direct mail marketing
-------
business, from September 1990 until December 1995 and had been President and
Chief Executive Officer of its direct marketing subsidiary since May 1988. Mr.
Rosenfeld is currently acting as a consultant to the Board of Hanover. From
July 1986 until May 1988, Mr. Rosenfeld was a partner in Rosenfeld & Co., a
private investment banking group. Mr. Rosenfeld is also a director emeritus of
Hanover Direct, Inc. and a director of PSCX.
LAWRENCE M. MILLER was elected to the Board in November 1996. Mr. Miller
has been a senior partner in the Washington D.C. law firm of Schwartz, Woods and
Miller since 1990. He served from August 1993 through May 1996 as a member of
the Board of The Phoenix Resource Companies, Inc. ("PRC"), a publicly traded
---
energy exploration and production company, and as a member of the Audit and
Compensation Committee of that board. PRC was merged into Apache Corporation in
May 1996.
INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES
In fiscal 1996, the Board held five meetings and acted by unanimous written
consent on four occasions. The Board has three committees: the Audit Committee,
the Compensation Committee and a Special Committee.
The Audit Committee was established in December 1993 and held one meeting
during fiscal 1996. The duties of the Audit Committee are to (i) review with
management and the independent auditors the scope and results of the annual
audit, the nature of any other services provided by the independent auditors,
changes in the accounting principles applied to the presentation of the
Company's financial statements, and any comments by the independent auditors on
the Company's policies and procedures with respect to internal accounting,
auditing and financial controls, and (ii) make recommendations to the Board on
the engagement of the independent auditors. Messrs. Rosenfeld and Krueger and
Dr. Eastman are
-5-
<PAGE>
members of the Audit Committee as is Mr. Miller, who joined the Audit Committee
in November, 1996.
The Compensation Committee was established in December 1993. The Committee
held three meetings during fiscal 1996 and acted by unanimous written consent on
one occasion. The duties of the Compensation Committee are to recommend
compensation arrangements for the Chief Executive Officer and the Chief
Financial Officer and review annual compensation arrangements for all other
officers and significant employees. Mr. Rosenfeld and Dr. Eastman are members
of the Compensation Committee as is Mr. Miller, who joined such Committee in
November, 1996. Mr. Krueger was a member of the Compensation Committee from
March through September, 1996. All Committee members are "disinterested
persons" as that term is used in Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
------------
In December 1996, a Special Committee of the Board was established to work
with the Company's legal, financial and accounting advisers, as well as the
Company's management, in overseeing the negotiations between the Company and the
Deutsche Post AG and certain other strategic issues. The Special Committee
reports its recommendations to the Board for ultimate consideration and approval
of such issues. Messrs. Ehrlich, Harats, Miller and Krueger are members of the
Special Committee, which did not meet in 1996.
Non-employee members of the Board are paid $1,000 (plus expenses) for each
Board meeting attended and $500 (plus expenses) for each meeting of a committee
of the Board attended. In addition, on September 28, 1995, the Board adopted
(and later amended on March 25, 1996), and on June 24, 1996 the Company's
stockholders approved, a Non-Employee Director Stock Option Plan pursuant to
which non-employee directors receive an initial grant of options to purchase
15,000 shares of the Company's Common Stock upon the effective date of such plan
or upon the date of his or her election as a director. Thereafter, non-employee
directors will receive options to purchase 5,000 shares of Common Stock for each
year of service on the Board. All such options will be granted at fair market
value and vest ratably over three years from the date of grant.
Pursuant to the Underwriting Agreements entered into in connection with the
Company's equity offering consummated in February 1996, the Company was
required, prior to its 1996 Annual Meeting of Stockholders, to increase its
number of directors to a total of six and nominate a person for election by the
stockholders at such annual meeting to be approved by Lehman Brothers Inc.
("Lehman"), the lead manager for the underwriters in the equity offering. The
- --------
requirements were waived by Lehman as to the 1996 Annual Meeting of Stockholders
and deferred until this Annual Meeting of Stockholders. In the interim, Lehman
agreed that Mr. Miller's election satisfied such requirements.
THE BOARD OF DIRECTORS RECOMMENDS
ELECTION OF THE NOMINEES
DESCRIBED ABOVE
-6-
<PAGE>
EXECUTIVE COMPENSATION; CERTAIN ARRANGEMENTS;
SECURITY OWNERSHIP
SUMMARY COMPENSATION TABLE
The following table shows the compensation paid and accrued by the Company
for services rendered for 1994, 1995 and 1996 to the Chief Executive Officer and
the other highest paid executive officers (of which there were only two) who
received more than $100,000 in salary and bonuses during fiscal 1996 (the "Named
-----
Executive Officers").
- ------------------
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------------------------- -----------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION OTHER ANNUAL OPTIONS ALL OTHER
AT DECEMBER 31, 1996 YEAR SALARY BONUS COMPENSATION (NUMBER) COMPENSATION
-------------------- ----- ------ ------ ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Yehuda Harats/(1)/ 1996 $145,220 $47,000 $127,558/(3)/ 150,000 $372,875/(4)/
President, Chief Executive 1995 140,684 40,364 1,742 0 175,309
Officer and Director 1994 127,445 30,000 1,447 170,000 192,029
Robert S. Ehrlich/(1)/ 1996 $145,238 $47,000 $ 75,890/(5)/ 150,000 $166,628/(6)/
Chairman and 1995 140,684 40,364 6,148 0 123,657
Chief Financial Officer 1994 114,034 30,000 0 170,000 118,442
Menachem Korall/(1)/ 1996 $110,002 $35,000/(2)/ $ 9,635/(7)/ 0 $169,956/(8)/
Vice President of Technology 1995 106,491 30,328 1,744 0 102,703
1994 95,458 27,000 1,447 90,000 95,458
</TABLE>
_________________________
(1) The amounts reported for each Named Executive Officer were paid in New
Israeli Shekels ("NIS") and have been translated into U.S. Dollars at the
---
exchange rate of NIS into U.S. Dollars at the time of payment or accrual.
(2) Reflects amounts accrued to date. The actual amount of bonuses, if any,
will be determined by the Compensation Committee of the Board during 1997.
(3) Of this amount, $106,250 represents the dollar value of the difference
between the price paid by Mr. Harats in connection with the exercise of
options to purchase shares of the Company's Common Stock at an exercise
price of $5.75 per share (by receipt of a non-recourse loan from the
Company) and the fair market value of such shares on the date of the
purchase of $6.375 per share; and $21,308 represents the costs of taxes
paid by Mr. Harats and reimbursed by the Company.
(4) Of this amount, $224,496 represents the Company's accrual for severance pay
which would be payable to Mr. Harats upon a "change of control" of the
Company or upon the occurrence of certain other events; $17,226 represents
the Company's accrual for sick leave and vacation redeemable by Mr. Harats;
$6,398 consisted of payments to Mr. Harats in lieu of vacation; $45,290
consisted of the Company's payments and accruals to a pension fund which
provides a savings plan, insurance and severance pay benefits and an
education fund which provides for the ongoing education of employees.
Additionally, $77,512 represents the Company's accrual to fund Mr. Harats'
pension fund as well as provide him with certain other post-termination
benefits, and $1,953 represents the value charged for tax purposes for the
use of a car provided by the Company.
(5) Of this amount, $50,000 represents the dollar value of the difference
between the price paid by Mr. Ehrlich in connection with the exercise of
options to purchase shares of the Company's Common Stock at an exercise
price of $5.75 per share (by receipt of a non-recourse loan from the
Company) and the fair market value of such shares on the date of the
purchase of $6.375 per share; and $25,890 represents the costs of taxes
paid by Mr. Ehrlich and reimbursed by the Company.
-7-
<PAGE>
(6) Of this amount, $57,008 represents the Company's accrual for severance pay
which would be payable to Mr. Ehrlich upon a "change of control" of the
Company or upon the occurrence of certain other events; $19,859 represents
the Company's accrual for sick leave and vacation redeemable by Mr.
Ehrlich; $562 represents the Company's accrual for severance pay which
would be payable to Mr. Ehrlich under the laws of the State of Israel upon
the termination of his employment by the Company; and $45,362 represents
the Company's payments and accruals to pension and education funds.
Additionally, $37,386 represents the Company's accrual to fund Mr.
Ehrlich's pension fund as well as provide him with certain other post-
termination benefits, and $6,451 represents the value charged for tax
purposes for the use of a car provided by the Company.
(7) Represents the costs of taxes paid by Mr. Korall and reimbursed by the
Company.
(8) Of this amount, $82,645 represents the Company's accrual for severance pay
which would be payable to Mr. Korall upon a "change of control" of the
Company or upon the occurrence of certain other events; $(2,675) represents
the Company's reduction in the accrual for sick leave and vacation
redeemable by Mr. Korall; $669 represents the Company's accrued severance
pay which would be payable to Mr. Korall under the laws of the State of
Israel upon the termination of his employment by the Company; $22,127
consisted of payments to Mr. Korall in lieu of vacation; and $28,232
represents the Company's payments and accruals to pension and education
funds. Additionally, $37,002 represents the Company's accrual to fund Mr.
Korall's pension fund as well as provide him with certain other post-
termination benefits; and $1,956 represents the value charged for tax
purposes for use of a car provided by the Company.
-8-
<PAGE>
The table below sets forth information with respect to stock options
granted to the Named Executive Officers for the fiscal year 1996.
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM
-------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED(1) IN PRICE EXPIRATION 5% 10%
NAME # FISCAL YEAR ($/SH) DATE ($) ($)
---------- ------------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Yehuda Harats 150,000 27.02 $6.625 6/24/06 $624,964 $1,583,782
Robert S. Ehrlich 150,000 27.02 $6.625 6/24/06 $624,962 $1,583,782
- -----------------------
</TABLE>
(1) The options granted to the Named Executive Officers are performance-based
options which become exercisable upon the earlier of (a) the date on which
the closing sale price of the Company's Common Stock has been at least
$12.50 per share for a period of 20 consecutive trading days on The Nasdaq
National Market or (b) seven years from the date of grant. Such options
also become exercisable upon the termination of the Named Executive
Officer's employment with the Company under certain circumstances. The
options expire ten years from the date of grant.
The table below sets forth information for the Named Executive Officers
with respect to fiscal 1996 year-end option values.
<TABLE>
<CAPTION>
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS (1)
AT FISCAL YEAR END FISCAL-YEAR-END
------------------------------ -------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (NUMBER) (NUMBER) ($) ($)
- ---- ------------ --------------- ------------ ---------------------
<S> <C> <C> <C> <C>
Yehuda Harats 0 150,000 0 56,250
Robert S. Ehrlich 127,478 150,000 344,114 56,250
Menachem Korall 90,000 0 112,500 0
</TABLE>
_______________________
(1) In-the-money options are options for which the fair market value of the
underlying securities exceeds the exercise or base price of the option.
-9-
<PAGE>
The table below sets forth information with respect to stock options
exercised by the Named Executive Officers during fiscal year 1996.
OPTIONS EXERCISED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
SHARES ACQUIRED
NAME ON EXERCISE VALUE REALIZED
(#) ($)
- ------------------ -------------- ---------------
<S> <C> <C>
Yehuda Harats 170,000 106,250
Robert S. Ehrlich 80,000 50,000
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board for the 1996 fiscal year consisted
of Dr. Jay Eastman and Jack Rosenfeld, and for parts of the year Harvey Krueger
and Lawrence Miller. None of the members have served as officers of the
Company.
Robert S. Ehrlich, Chairman and Chief Financial Officer of the Company,
serves as Chairman and a director of PSC, Inc., a New York corporation, for
which Dr. Eastman serves as Senior Vice President of Strategic Planning and a
director and Mr. Rosenfeld serves as a director and a member of the Compensation
Committee.
In January 1993, each of Messrs. Ehrlich, Harats and Korall exercised
options to purchase 423,116, 719,304 and 343,785 shares of the Company's Common
Stock, respectively, at an exercise price of $0.35 per share. In payment for
the option exercise, each of Messrs. Ehrlich, Harats and Korall issued non-
recourse promissory notes (the "Promissory Notes") secured by the shares of
----------------
Common Stock purchased, bearing interest at one point over the applicable United
States federal funds rate. In December 1994, the Promissory Notes were amended
to change the interest rate to the higher of a U.S. Dollar rate of 7% or the
percentage increase in the Israeli CPI between the date of the Promissory Notes
and the date interest is calculated, based upon the original principal amount of
the loan expressed in NIS. Interest is payable at maturity. As of December 31,
1996, the aggregate amounts outstanding pursuant to the Promissory Notes for
each of Messrs. Ehrlich, Harats and Korall was $192,943, $331,186 and $151,219,
respectively (including an aggregate of $162,144 in accrued interest
receivable), which are also the largest aggregate amounts outstanding since the
issuance of the Promissory Notes. The Promissory Notes mature on January 3,
1998.
In August 1996, each of Messrs. Ehrlich and Harats exercised options to
purchase 80,000, and 170,000 shares of the Company's Common Stock, respectively,
at an exercise price of $5.75 per share. In payment for the option exercise,
each of Messrs. Ehrlich and Harats issued new non-recourse promissory notes (the
"New Promissory Notes") secured by the shares of Common Stock purchased, bearing
--------------------
interest at the rate of 6.2% per annum. The income taxes due on the option
exercises were also added to the loan balances. Interest accrues at the higher
of the foregoing rate or the percentage increase in the Israeli CPI between the
date of the New Promissory Notes and the date interest is calculated, based upon
the original principal amount of the loan expressed in NIS. Israel Value Added
Tax ("VAT")
---
-10-
<PAGE>
is being added to the interest. Both Interest and the related VAT are payable at
maturity. As of December 31, 1996, the aggregate amount outstanding pursuant to
the New Promissory Notes for each of Messrs. Ehrlich and Harats was $499,538 and
$1,061,627, respectively (including an aggregate of $48,978 in accrued interest
and VAT receivable), which are also the largest aggregate amounts outstanding
since the issuance of the Promissory Notes. The Promissory Notes mature on
August 20, 2001.
In September 1996, Stewart Edelman, treasurer of the Company, exercised
options to purchase 5,333 shares of the Company's Common Stock, at an average
exercise price of $5.83 per share. In payment for the option exercise, Mr.
Edelman issued a non-recourse promissory note (the "Promissory Note") secured by
---------------
the shares of Common Stock purchased, bearing interest at the rate of 6.2% per
annum. The income taxes due on the option exercise were also added to the loan
balance. Interest accrues at the higher of the foregoing rate or the percentage
increase in the Israeli CPI between the date of the Promissory Note and the date
interest is calculated, based upon the original principal amount of the loan
expressed in NIS. VAT is being added to the interest and is paid currently.
Interest is payable at maturity. As of December 31, 1996, the aggregate amount
outstanding pursuant to the Promissory Note was $33,708 (including an aggregate
of $888 in accrued interest and VAT receivable), which is also the largest
aggregate amount outstanding since the issuance of the Promissory Note. The
Promissory Note matures on September 10, 2001.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Each of Messrs. Ehrlich, Harats and Korall are parties to employment
agreements with the Company (the "Employment Agreements") which can be extended
---------------------
automatically for additional terms of two years each unless terminated sooner by
either the executive or the Company. Mr. Korall's Employment Agreement expires
in December 1998 and each of Messrs. Harats and Ehrlich's Employment Agreements
expire on December 15, 2000. The Employment Agreements provide for a base
salary of $11,736, $11,736, and $7,500 per month for Messrs. Ehrlich, Harats and
Korall, respectively (the "Base Salary"). On each anniversary of Mr. Korall's
-----------
Employment Agreement, Base Salary is increased in an amount equal to the excess,
if any, of any increase in the Israeli Consumer Price Index over any devaluation
in currency of Israel compared to the U.S. Dollar during the immediately
preceding year. With respect to Messrs. Harats and Ehrlich, Base Salary is
increased in an amount equal to the greater of 3% or in an amount equal to the
excess, if any, of any increase in the Israeli Consumer Price Index over any
devaluation in currency of Israel compared to the U.S. Dollar, in each case
during the immediately preceding year. Accordingly, Base Salary for Messrs.
Ehrlich, Harats and Korall is, as of January 1, 1997, $12,565, $12,565 and
$9,423 per month, respectively. In addition, the Employment Agreements provide
for bonuses to be paid in an amount of (a) not less than 50% of Base Salary or
(b) 2%, 2% and 1%, respectively, of Net Earnings (defined as net income before
taxes and extraordinary and other nonrecurring items) (the "Bonus"), subject to
-----
certain conditions, as well as other benefits such as vacation, sick leave,
provision of automobiles and insurance contributions. The determination of the
amount of Bonus to be paid pursuant to the Employment Agreements is based upon
attainment of the Company's budgeted results, including Net Earnings.
Additionally, the Compensation Committee will set qualitative goals annually as
a basis for paying the bonus to each of Messrs. Ehrlich, Harats and Korall. The
Employment Agreements
-11-
<PAGE>
also contain confidentiality and non-competition covenants. Pursuant to the
Employment Agreements, each of Messrs. Ehrlich, Harats and Korall was granted
demand and "piggyback" registration rights covering shares of the Company's
Common Stock held by them. The Employment Agreements may be terminated by the
Company in the event of death, disability or for "Cause" (defined as conviction
of certain crimes, willful failure to carry out directives of the Company's
Board, gross negligence or willful misconduct). Messrs. Ehrlich, Harats and
Korall each have the right to terminate their employment for "Good Reason,"
which is defined to include adverse changes in employment status or
compensation, insolvency of the Company, material breaches and certain other
events. Upon termination of employment, the Employment Agreements provide for
payment of all accrued and unpaid compensation, any Bonus due for the year in
which employment is terminated and a termination payment equal to thirty-six
times monthly Base Salary at the highest rate in effect within the ninety-day
period prior to the termination of employment, and certain benefits will
continue and all outstanding options will be fully vested. In addition, Messrs.
Harats and Ehrlich are entitled to an amount equal to the greater of (a) the
average of all bonuses paid to the executive during the three most recent full
calendar years immediately preceding the Termination Date or (b) all bonuses
paid to the executive during the most recent full calendar year immediately
preceding the Termination Date. Furthermore, Mr. Harats has the right to
terminate his employment even without "Good Reason" prior to the end of the
agreement, and will still be entitled to all termination benefits indicated
above.
Other employees have entered into individual employment agreements with the
Company. Such agreements govern the basic terms of each individual's employment,
such as salary, vacation, overtime pay, severance arrangements and pension
plans. Subject to Israeli law, which restricts a company's right to relocate an
employee to a work site further than sixty kilometers from his or her regular
work site, the Company has retained the right to transfer certain employees to
other locations and/or positions, provided that such transfers do not result in
a decrease in salary or benefits. In addition, all such agreements contain
provisions governing the confidentiality of information and ownership of
intellectual property learned or created during the course of the employee's
tenure with the Company. Under the terms of such provisions, employees must keep
confidential all information regarding the Company's operations (other than
information which is already publicly available) received or learned by the
employee during the course of employment. Such provisions remain in force for
five years after the employee has left the service of the Company. Further,
intellectual property created during the course of the employment relationship
belongs to the Company.
A number of the individual employment agreements, but not all, contain non-
competition provisions which restrict the employee's rights to compete against
the Company or work for an enterprise which competes against the Company, for a
period of two years after the employee has left the service of the Company.
Under the laws of Israel, an employee of the Company who has been dismissed
from service, died in service, retired from service upon attaining retirement
age or left due to poor health, maternity or certain other reasons, is entitled
to severance pay at the rate of one month's salary for each year of service. The
Company currently funds such obligation by making monthly payments to approved
private provident funds and by its accrual for severance pay in the consolidated
financial statements.
-12-
<PAGE>
COMPENSATION COMMITTEE REPORT
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
----------
ACT"), OR THE EXCHANGE ACT, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING
- ---
THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND THE
PERFORMANCE GRAPH ON PAGE 14 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Company for
1996 consisted of Dr. Eastman and Mr. Rosenfeld. Mr. Krueger joined this
Committee in March 1996, but resigned in September 1996. Mr. Miller joined this
Committee in March 1997. The Committee's responsibilities include recommending
the annual compensation arrangements for the Chief Executive Officer and the
Chief Financial Officer of the Company and reviewing the annual compensation
arrangements for all other officers and significant employees of the Company,
all by reference to the parameters set by any agreements the Company may have
with such persons. No member of this Committee was an officer or employee of
the Company during 1996.
The Company maintains compensation and incentive programs designed to
motivate, retain and attract management and utilize various combinations of base
salary, bonus payable upon the achievement of specified goals, discretionary
bonus and stock options. It is the Company's current policy to establish,
structure and administer compensation plans and arrangements so that the
deductibility to the Company of such compensation will not be limited under
Section 162(m) of the Internal Revenue Code. Each of the Named Executive
Officers, namely the Chief Executive Officer, Yehuda Harats, the Chief Financial
Officer, Robert S. Ehrlich, and the Vice President of Technology, Menachem
Korall, are parties to employment agreements with the Company (collectively, the
"Employment Agreements"). For details regarding the Employment Agreements, see
"Employment Contracts and Termination of Employment Arrangements" on page 11 of
this Proxy Statement.
Each of the Employment Agreements require that bonuses be paid in an amount
equal to the greater of (a) 50% of annual Base Salary or (b) 2%, 2% and 1%,
respectively, of annual Net Earnings (defined as net income before taxes and
extraordinary and other nonrecurring items) (the "Bonus"), provided that 100% of
-------- ----
budgeted results are attained. This Committee also considers qualitative
achievements occurring during each fiscal year as a basis for paying the bonus
to each of Messrs. Harats, Ehrlich and Korall. The qualitative achievements
considered by the Committee for 1996 were: (i) the successful completion of the
Company's public offering of 3.75 million shares of its Common Stock, which was
consummated in February 1996 and which resulted in proceeds to the Company of
approximately $24.0 million; (ii) the completion of negotiations for Phase II of
the Company's development program with STN Atlas Elektronic GmbH; (iii) the
Company's ongoing participation and progress in the Deutsche Post field test;
(iv) the successful completion of the Company's $10.0 million private placement
of approximately 1.5 million shares of its Common Stock in October 1996; and (v)
the entry by the Company into several new strategic alliances. In connection
-13-
<PAGE>
with the amendment and restatement of Messrs. Harats' and Ehrlich's Employment
Agreements, the Company agreed that until such time as the Company has positive
net earnings, Messrs. Harats and Ehrlich will be entitled to receive bonuses
based on their qualitative achievements established in advance by the Board of
Directors equal to at least 25% of Base Salary so long as 80% of the Company's
budgeted results are achieved. Certain other amendments were also made to
Messrs. Harats' and Ehrlich's Employment Agreements.
For the year ended December 31, 1996, the Company exceeded its budgeted
results. However, as part of the budgeting process, the Named Executive Officers
recommended to the Compensation Committee that even if they were contractually
entitled to bonuses of 50% of Base Salary, they each be paid bonuses of
approximately 33% of Base Salary. The Compensation Committee, during the first
quarter of 1997, approved bonuses of 33% of Base Salary for each of Messrs.
Harats and Ehrlich in accordance with the terms of the Employment Agreements.
Accordingly, each of Messrs. Harats and Ehrlich was awarded a bonus for 1996 of
$47,000. The Compensation Committee approved a bonus of up to $35,000 for 1996
(33% of Base Salary) for Mr. Korall, subject to review by the Chief Executive
Officer and the Chief Financial Officer of the achievements of certain
qualitative criteria with respect to the operations of the Company for which Mr.
Korall has responsibility.
Each of Messrs. Harats and Ehrlich was granted performance-based options to
purchase 150,000 shares of Common Stock in June 1996. The options become
exercisable on the earlier of (a) the date on which the closing sale price of
the Company's Common Stock has been at least $12.50 per share for a period of 20
consecutive trading days or (b) seven years from the date of grant. The
Compensation Committee believes the grant of these options provides appropriate
incentives to these Named Executive Officers by making a significant amount of
their future remuneration contingent upon either a significant increase in the
price of the Common Stock or a long period of future service to the Company. As
of December 31, 1996, Messrs. Harats', Ehrlich's and Korall's total options
represented approximately 1.0%, 1.8% and 0.6% of the fully-diluted outstanding
stock of the Company, respectively, which the Compensation Committee believes
are appropriate levels of options for the Named Executive Officers in view of
their equity position in the Company which, as of December 31, 1996, represented
approximately 8.9%, 5.3% and 2.6% of the fully-diluted outstanding stock of the
Company.
With respect to employees other than the Named Executive Officers,
compensation is determined not by formula, but based on the achievement of
qualitative and/or quantitative objectives established in advance of each year
by the Chief Executive Officer and Chief Financial Officer, who then, pursuant
to authority delegated by the Compensation Committee, determine remuneration of
the Company's employees based on such objectives.
Employee compensation is generally comprised of a combination of both cash
compensation and grants of options under the Company's stock option plans.
Stock options are awarded annually in connection with annual bonuses and,
occasionally, during the year on a discretionary basis. Stock options are
intended to offer an incentive for superior performance while basing employee
compensation on the achievement of higher share value, and to foster the
retention of key personnel through the use of schedules which vest options over
time if the person remains employed by the Company. There is no set formula for
the
-14-
<PAGE>
award of options to individual employees. Factors considered in making option
awards to the employees other than the Named Executive Officers in 1996 included
prior grants to the employees, the importance of retaining the employees
services, the employees potential to contribute to the success of the Company
and the employees' past contributions to the Company.
Dated: June, 1997 COMPENSATION COMMITTEE
Dr. Jay M. Eastman
Jack E. Rosenfeld
Lawrence M. Miller
-15-
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on its Common Stock with the cumulative
total return on the Nasdaq Market Index (Broad Market Index) and a self-
constructed peer group index from February 24, 1994, the date of the Company's
initial public offering, through December 31, 1996. The cumulative total
shareholder return is based on $100 invested in Common Stock of the Company and
in the respective indices on February 24, 1994 (including reinvestment of
dividends). The stock prices on the Performance Graph are not necessarily
indicative of future price performance.
CUMULATIVE TOTAL RETURN FOR PERIOD INDICATED
AMONG ELECTRIC FUEL CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
<TABLE>
<S> <C> <C> <C> <C>
2/94 12/94 12/95 12/96
ELECTRIC FUEL 100 48.54 65.53 54.37
PEER GROUP 100 49.18 47.69 26.27
BROAD MARKET 100 97.21 126.09 156.68
</TABLE>
ASSUMES $100 INVESTED ON FEBRUARY 24, 1994
(THE DAY THE COMPANY'S COMMON STOCK BEGAN
TRADING ON THE NASDAQ NATIONAL MARKET)
ASSUMES DIVIDENDS REINVESTED YEAR ENDING DECEMBER 31, 1994
____________________________
* The Peer Group Index is comprised of the following companies: AER Energy
Resources, Battery Tech Inc., Electrosource, Inc., Ultralife Batteries, Inc.
and Valence Technology, Inc. The returns of each company have been weighted
according to their respective stock market capitalization for purposes of
arriving at a peer group average.
-16-
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth information regarding the security ownership
of those persons owning of record or known to the Company to be beneficial
owners of more than five percent of the Company's Common Stock as of May 28,
1997, each of the Company's Named Executive Officers and directors, and the
shares of Common Stock held by all directors and Named Executive Officers of the
Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES TOTAL SHARES
BENEFICIALLY OWNED/(1)(2)/ OUTSTANDING/ (2)/
<S> <C> <C>
Five Percent Holders
- ---------------------
Newton D. Becker 1,746,904/(3)/ 12.3%
2743 Aqua Verde Circle
Los Angeles, California
Newton Becker Irrevocable Trust No. 1 633,350/(4)/ 4.5%
c/o Bryan Gordon
4046 San Remo Way
Tarzana, California
Named Executive Officers & Directors
- ------------------------------------
Robert S. Ehrlich 1,112,979/(6)(9)(12)/ 7.7%
Yehuda Harats 1,536,207/(7)(9)/ 10.7%
Menachem Korall 500,632/(8)(9)/ 3.5%
Dr. Jay M. Eastman 5,000/(10)/ *
Jack E. Rosenfeld 5,000/(10)/ *
Harvey M. Krueger 8,000/(11)/ *
Lawrence Miller 7,714 *
Leon S. Gross 3,422,362/(5)/ 24.1%
All Directors and Executive Officers of 6,607,561/(6)(7)(8)(9)(10)(11)/ 44.86%
the Company as a group (9 persons)
- ----------------------------
</TABLE>
(1) Unless otherwise indicated in these footnotes, each of the persons or
entities named in the table has sole voting and sole investment power with
respect to all shares shown as beneficially owned by that person, subject
to applicable community property laws.
(2) For purposes of determining beneficial ownership of the Company's Common
Stock, owners of options exercisable within sixty days are considered to be
the beneficial owners of the shares of Common Stock for which such
securities are exercisable. The percentage ownership of the outstanding
Common Stock reported herein is based on the assumption (expressly required
by the applicable rules of the Securities and Exchange Commission) that
only the person whose ownership is being reported has converted his options
into shares of Common Stock.
-17-
<PAGE>
(3) All shares are held in the name of the Becker Family Trust of which Mr.
Becker is the trustee and sole beneficiary during his lifetime. Excludes
633,350 shares held by the Newton Becker Irrevocable Trust No. 1, as to
which Mr. Becker disclaims beneficial ownership.
(4) Shares held for the benefit of members of Mr. Becker's family. David E.
Becker and Bryan Gordon, Mr. Becker's son and stepson, respectively, are
co-trustees.
(5) Based upon Amendment No. 5 to Schedule 13D dated May 12, 1997.
(6) Includes 277,478 shares of Common Stock issuable upon exercise of options
exercisable, or potentially exercisable, within 60 days.
(7) Includes 150,000 shares of Common Stock issuable upon exercise of options
exercisable, or potentially exercisable, within 60 days.
(8) Includes 90,000 shares of Common Stock issuable upon exercise of options
exercisable, or potentially exercisable, within 60 days.
(9) Messrs. Ehrlich, Harats and Korall are parties to a Stockholders Voting
Agreement pursuant to which each of the parties agrees to vote the shares
of the Company's Common Stock held by that person in favor of the election
of Messrs. Ehrlich and Harats (or their designees) as directors of the
Company.
(10) Includes 5,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(11) Includes 5,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(12) Messrs. Gross, Ehrlich and Harats are parties to a Voting Rights Agreement
pursuant to which each of the parties agrees to vote the shares of the
Company's Common Stock held by that person in favor of the election of
Messrs. Ehrlich, Harats and Miller for five years following October 1996.
* Less than one percent
-18-
<PAGE>
DELINQUENT FILINGS
Under the securities laws of the United States, the Company's directors,
certain of its officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their ownership of the Company's
Common Stock and any changes in that ownership to the Securities and Exchange
Commission. Specific due dates for such reports have been established and the
Company is required to report any failure to file by such dates during 1996.
All filing requirements were satisfied by its directors and officers and, to the
knowledge of the Company, ten percent holders, except as follows: Robert S.
Ehrlich was required to file a Form 4 on or prior to April 10, 1996 for his gift
of 18,000 shares of the Company's Common Stock in March, 1996; Mr. Ehrlich
reported such transactions on a Form 5 filed February 14, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1993, each of Messrs. Ehrlich, Harats and Korall exercised options
to purchase 423,116, 719,304 and 343,785 shares of the Company's Common Stock,
respectively, at an exercise price of $0.35 per share. In payment for the option
exercise, each of Messrs. Ehrlich, Harats and Korall issued non-recourse
promissory notes (the "Promissory Notes") secured by the shares of Common Stock
----------------
purchased, bearing interest at one point over the applicable United States
federal funds rate. In December 1994, the Promissory Notes were amended to
change the interest rate to the higher of a U.S. Dollar rate of 7% or the
percentage increase in the Israeli CPI between the date of the Promissory Notes
and the date interest is calculated, based upon the original principal amount of
the loan expressed in NIS. Interest is payable at maturity. As of December 31,
1996, the aggregate amounts outstanding pursuant to the Promissory Notes for
each of Messrs. Ehrlich, Harats and Korall was $192,943, $331,186 and $151,219,
respectively (including an aggregate of $162,144 in accrued interest
receivable), which are also the largest aggregate amounts outstanding since the
issuance of the Promissory Notes. The Promissory Notes mature on January 3,
1998.
In August 1996, each of Messrs. Ehrlich and Harats exercised options to
purchase 80,000 and 170,000 shares of the Company's Common Stock, respectively,
at an exercise price of $5.75 per share. In payment for the option exercise,
each of Messrs. Ehrlich and Harats issued new non-recourse promissory notes (the
"New Promissory Notes") secured by the shares of Common Stock purchased, bearing
--------------------
interest at the rate of 6.2% per annum. The income taxes due on the option
exercise were also added to the loan balance. Interest accrues at the higher of
the foregoing rate or the percentage increase in the Israeli CPI between the
date of the New Promissory Notes and the date interest is calculated, based upon
the original principal amount of the loan expressed in NIS. Israel Value Added
Tax ("VAT") is being added to the interest. Both Interest and the related VAT
---
are payable at maturity. As of December 31, 1996, the aggregate amounts
outstanding pursuant to the New Promissory Notes for each of Messrs. Ehrlich and
Harats was $499,538 and $1,061,627, respectively (including an aggregate of
$48,978 in accrued interest and VAT receivable), which are also the largest
aggregate amounts outstanding since the issuance of the Promissory Notes. The
Promissory Notes mature on August 20, 2001.
-19-
<PAGE>
In September 1996, Mr. Edelman exercised options to purchase 5,333 shares of
the Company's Common Stock, at an average exercise price of $5.83 per share. In
payment for the option exercise, Mr. Edelman issued a non-recourse promissory
note (the "Promissory Note") secured by the shares of Common Stock purchased,
---------------
bearing interest at the rate of 6.2% per annum. The income taxes due on the
option exercise were also added to the loan balance. Interest accrues at the
higher of the foregoing rate or the percentage increase in the Israeli CPI
between the date of the Promissory Note and the date interest is calculated,
based upon the original principal amount of the loan expressed in NIS. VAT is
being added to the interest and is paid currently. Interest is payable at
maturity. As of December 31, 1996, the aggregate amount outstanding pursuant to
the Promissory Note was $33,708 (including an aggregate of $888 in accrued
interest and VAT receivable), which is also the largest aggregate amount
outstanding since the issuance of the Promissory Note. The Promissory Note
matures on September 10, 2001.
Pursuant to a Stock Purchase Agreement (the "Purchase Agreement"), dated
------------------
September 30, 1996 between the Company and Mr. Leon Gross, one of the Company's
existing shareholders, on October 2, 1996 the Company issued 1,538,462 shares of
Common Stock to Mr. Gross at a price of $6.50 per share, for a total purchase
price of $10.0 million.
Pursuant to the terms of the Purchase Agreement, Mr. Gross agreed that for a
period of five years from the Closing Date, neither Mr. Gross nor his
Affiliates, as defined in the Securities Act, directly or indirectly or in
conjunction with or through any Associate (as defined in Rule 12b-2 of the
Exchange Act, would (a) solicit proxies with respect to any capital stock or
other voting securities of the Company under any circumstances, or become a
"participant" in any "election contest" relating to the election of directors of
the Company (as such terms are used in Rule 14a-11 of Regulation 14A of the
Exchange Act); or (b) make an offer for the acquisition of substantially all of
the assets or capital stock of the Company or induce or assist any other person
to make such an offer or (c) form or join any "group" within the meaning of
Section 13(d)(3) of the Exchange Act with respect to any capital stock or other
voting securities of the Company for the purpose of accomplishing the actions
referred to in clauses (a) and (b) above other than pursuant to the Voting
Rights Agreement described below.
In connection with the Purchase Agreement, the Company and Mr. Gross also
entered into a Registration Rights Agreement (the "Registration Rights
-------------------
Agreement") dated September 30, 1996, setting forth Mr. Gross's registration
rights with respect to the shares of Common Stock issued in connection with the
sale. Such rights include the right to make two demands for a shelf registration
statement on Form S-3 ("Shelf Registration Statement") for the sale of the
----------------------------
Common Stock which may, subject to certain customary limitations and
requirements, be underwritten. In addition, Mr. Gross was granted the right to
"piggyback" on registrations of the Company's securities in an unlimited number
of registrations. Also under the Registration Rights Agreement, Mr. Gross is
subject to customary underwriting lock-up requirements with respect to public
offerings of the Company's securities.
Pursuant to a Voting Rights Agreement (the "Voting Rights Agreement"), dated
-----------------------
September 30, 1996 between the Company, Mr. Gross and Messrs. Ehrlich and Harats
(the "Management Stockholders"), Lawrence M. Miller, Mr. Gross's advisor, will
-----------------------
be entitled to be nominated to serve on the Company's Board, so long as Mr.
Gross, his heirs or assigns retains at least
-20-
<PAGE>
1,375,000 shares of Common Stock. As a result, the Company's Board was increased
to a total of six members. In addition, under the Voting Rights Agreement,
Messrs. Gross, Ehrlich and Harats agreed to vote and take all necessary action
so that Messrs. Miller, Ehrlich and Harats shall serve as members of the Board
for a period of five years covering the next five Meetings of Stockholders. In
addition, so long as Mr. Miller serves as a director, Mr. Gross, who shall
succeed Mr. Miller should he cease to serve on the Board, shall be entitled to
attend and receive notice of Board meetings. Mr. Gross further agreed to vote,
at the Annual Meeting of Stockholders to which this Proxy Statement relates, and
take any further necessary action, in favor of an increase in shares authorized
to be issued upon exercise of options under the Company's 1993 Stock Option and
Restricted Stock Purchase Plan.
-21-
<PAGE>
PROPOSAL NUMBER 2
APPROVAL OF AMENDMENT AND RESTATEMENT OF 1993
STOCK OPTION AND RESTRICTED PURCHASE PLAN
GENERAL
The purpose of the Amended and Restated 1993 Stock Option and Restricted Stock
Purchase Plan (the "Plan") is to advance the interests of the Company by
----
enhancing the ability of the Company and its subsidiaries (a) to attract and
retain employees who are in a position to make significant contributions to the
success of the Company and its subsidiaries; (b) to reward employees for such
contributions; and (c) to encourage employees to take into account the long-term
interests of the Company and its subsidiaries through ownership of shares of the
Company's Common Stock.
DESCRIPTION OF AMENDMENTS TO THE 1993 PLAN
Stockholders are being requested to approve at the Annual Meeting of
Stockholders the following amendments to the 1993 Plan:
a) an amendment to increase the total number of shares reserved for issuance
under the 1993 Plan from 1,200,000 to 2,700,000;
b) an amendment to limit grants under the Plan to an aggregate of 1,350,000
per individual employee;
c) amendments to update the 1993 Plan such that it complies with the
Securities Act and the Code;
d) an amendment to update the 1993 Plan such that it complies with Israeli
law; and
e) other general amendments to the language of the 1993 Plan that will not
have a significant effect on the rights of 1993 Plan participants.
Unless instructions are given to the contrary, it is the intention of the
persons named as proxies to vote the shares to which the proxy is related FOR
the amendments to the 1993 Plan.
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<PAGE>
DESCRIPTION OF CURRENT 1993 PLAN
The 1993 Plan is administered by the Board and allows the Board to grant
Common Stock options and make purchase grants for shares of Common Stock to
eligible employees of the Company. The 1993 Plan was adopted by the Board and
approved by the Company's Stockholders in December, 1993 and will remain in
effect until December, 2003 (unless hereafter amended).
Currently, a total of 1,200,000 shares of the Company's Common Stock have been
reserved for issuance under the 1993 Plan, subject to adjustment in the event of
a Common Stock dividend, Common Stock split or combination of shares,
recapitalization or other change in the Company's capital Common Stock. The
1993 Plan grants the Board the authority to grant options (both incentive Common
Stock options and nonstatutory options) and make purchase grants to eligible
employees of the Company, determine the terms and conditions of each option or
purchase grant and adopt, amend and rescind rules and regulations for the
administration of the 1993 Plan. Subject to certain limitations, the Board has
the authority to waive compliance by any employee with respect to any obligation
to be performed by such employee and to exercise any right of repurchase with
respect to Common Stock issued under the 1993 Plan pursuant to a purchase grant.
As of May 29, 1997 there were 97,366 shares of the Company's Common Stock
available for issuance under the 1993 Plan.
Employees Eligible to Receive Options or Purchase Grants Under the 1993 Plan.
Employees of the Company eligible to receive options or purchase grants under
the 1993 Plan are those employees who, in the opinion of the Board, are in a
position to make a significant contribution to the success of the Company or its
subsidiaries.
Terms and Conditions of Options. The exercise price of options granted under
the 1993 Plan is determined by the Board. The exercise price of incentive
options granted under the 1993 Plan, however, must be at least equal to the fair
market value per share of Common Stock (or 110% of fair market value in the case
of incentive options granted to a "ten-percent shareholder") issuable upon
exercise of the option at the time the incentive option was granted. In the case
of employees who are subject to Section 16 of the Exchange Act, the exercise
price of an option may not be less than 50% of the fair market value per share
of Common Stock on the date of grant. Options which are not incentive options
may have an exercise price as the Board determines at the time of grant. No
option may be exercisable more than ten years (five years in the case of an
incentive option granted to a "ten-percent shareholder") from the date of grant.
Options issued under the 1993 Plan will be exercisable at such time or times as
the Board prescribes at the time of grant.
Generally, the option price may be paid (i) in cash or by certified check,
bank draft or money order, (ii) through delivery of shares of Common Stock
having a fair market value equal to the purchase price, (iii) through delivery
of a promissory note acceptable to the Board or (iv) a combination of the
foregoing methods.
No option may be transferred other than by will or by the laws of descent and
distribution, and during an employee's lifetime an option may be exercised only
by him or her. Should an employee's employment with the Company or a subsidiary
terminate for any reason other than
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<PAGE>
death, all options held by such employee which are not then exercisable
automatically terminate. Options which are exercisable at the time of an
employee's termination continue to be exercisable for three months, unless, in
the opinion of the Board, the reasons for the employee's discharge or separation
from the Company justify terminating the employee's exercisable options.
Terms and Conditions of Purchase Grants. The purchase price of Common Stock
purchased pursuant to a purchase grant made under the 1993 Plan must be at least
equal to the fair market value of the Common Stock at the time the purchase
grant was made (or 110% of the fair market value in the case of purchase grants
made to "ten-percent shareholders"). Employees receiving purchase grants under
the 1993 Plan may purchase the Common Stock subject to such purchase grant at
any time within 60 days after the purchase grant is made.
Common Stock purchased pursuant to a purchase grant may be paid for in cash,
certified check, bank draft or money order, or by giving the Company a
promissory note. If the employee pays for the Common Stock with a promissory
note, certain terms and conditions, in addition to any other conditions
established by the Board, must be met.
Shares of Common Stock issued upon exercise of a purchase grant will bear a
call option legend and each person exercising a purchase grant will be required
to complete a Call Option, the terms and conditions of which will be specified
by the Board at the time the purchase grant is made.
No purchase grant may be transferred other than by will or by the laws of
descent and distribution, and during an employee's lifetime a purchase grant may
be exercised only by him or her. Unexercised purchased grants held by an
employee terminate upon the death of the employee. If an employee's employment
with the Company terminates for any reason other than death, all purchase grants
held by that person automatically terminate.
The Board may at any time amend the 1993 Plan for the purpose of satisfying
the requirements of the Code or other applicable law or regulation or for any
other legal purpose, provided that, without the consent of the Company's
Stockholders, the Board may not (a) increase the number of shares available
under the 1993 Plan, (b) change the group of employees eligible to receive
options and/or purchase grants, (c) reduce the price at which incentive options
may be granted, (d) extend the time within which options may be granted or
purchase grants made, (e) alter the 1993 Plan such that "incentive" options and
purchase grants would not qualify under the applicable provisions of the Code,
or (f) adversely affect the rights of an employee under any option or purchase
grant previously granted or made.
SPECIAL PROVISIONS AND TAX CONSEQUENCES
Special Provisions for Plan Participants Who Are Israeli Residents. Each
option and purchase grant, and shares issued pursuant to each option and
purchase grant made under the Plans, are issued by the Company to, and held in
trust (the "Trust") for the benefit of such employee by, a trustee designated by
the Board (the "Trustee"). Subject to the rights of the Company under any
relevant Call Option, prior to releasing any securities from the Trust, the
Trustee must ensure that the employee remit an amount of money which is
sufficient and
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<PAGE>
necessary for the discharge of the employee's tax obligations
with respect to such securities, if any. Upon the sale of any securities held
by the Trust for the benefit of an employee, the Company must withhold from the
proceeds of such sale all applicable taxes and remit the amount withheld to the
appropriate Israeli tax authority. Each employee who has shares held by the
Trust is entitled to receive dividends with respect thereto and to vote such
shares of Common Stock. Securities acquired by Israeli residents pursuant to the
Plans must be acquired in the manner provided for in the General Permit
promulgated under the Israel Currency Control Law, 1978.
Certain Federal Income Tax Consequences. The following discussion summarizes
certain federal income tax consequences of participation in stock option awards
under the Plans and is based on the law as in effect on the date of this Proxy
Statement. The summary does not address all federal tax consequences, nor does
it cover state, local or non-U.S. tax consequences. In particular and without
limiting the foregoing, the summary does not discuss the tax consequences, under
U.S. or Israeli law, of participation in the Plans by persons other than U.S.
citizens or residents or by persons employed by a non-U.S. affiliate of the
Company.
Common Stock Options
Grant of an option does not itself result in any taxable income to a
participant. Taxable income also does not result merely because an option
becomes exercisable. However, a participant may have taxable income upon
exercise of an option and may have further tax consequences upon disposition of
any Common Stock purchased with the option.
A participant who exercises a nonstatutory option realizes ordinary income
equal to the difference (the "option spread") between the value of the Common
-------------
Stock purchased and the purchase price. This income -- like other wages -- is
subject to tax withholding.
Any subsequent sale of Common Stock purchased under a nonstatutory option may
result in a capital gain or loss. Gain on a sale of Common Stock held for more
than one year is treated as "long term" gain. A participant who sells the
Common Stock at a loss is generally entitled to claim a capital loss, although
the tax rules do not allow losses on so-called "wash sales" and sales to certain
related parties (for example, a family member). The amount of gain or loss
recognized on any sale will depend on the participant's tax basis in the Common
Stock. If the participant paid the option exercise price entirely in cash, his
or her tax basis is the amount of cash paid plus any additional ordinary income
realized upon exercise. If the participant paid part or all of the exercise
price by surrendering previously acquired shares of Common Stock, his or her tax
basis (and capital gains holding period) in the surrendered shares carries over
to an equivalent number of shares purchased under the option. Any additional
shares purchased under the option have a tax basis equal to any cash paid plus
any ordinary income realized upon exercise.
Different rules apply to ISOs. A participant does not have ordinary income
upon exercise of an ISO. However, exercise of an ISO increases alternative
minimum taxable income ("AMTI") by an amount equal to the option spread. This
----
increase may give rise to an alternative minimum tax ("AMT") liability. Whether
---
exercise of an ISO gives rise to an AMT
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<PAGE>
liability will turn on a number of factors, including the size of the option
spread relative to the participant's overall income. The rules for determining
AMT liability require the participant to compute AMTI in excess of certain
exemption amounts, make certain adjustments, and then apply the AMT tax rate. If
the resulting tax amount is greater than the tax computed under the ordinary
method, the participant owes the AMT. A participant who is required to pay the
AMT by reason of exercising an ISO may be able to credit a portion of the AMT
against regular tax liability in subsequent years.
Shares purchased under an ISO ("ISO shares") are subject to special tax
----------
holding rules. If a participant holds on to ISO shares for at least two years
from the date the option was granted and at least one year after exercise, any
subsequent sale of the shares will produce long-term capital gain or loss.
However, a disposition of ISO shares within either of these special holding
periods (a so-called "disqualifying disposition") has the following
consequences:
. The participant will have ordinary income in the year of the disposition.
The amount of this income is normally measured by the option spread at the
time the option was exercised. If the disposition was a sale (other than
to a related party), however, and if the participant sold the Common Stock
for less than what it was worth when the ISO was exercised, the ordinary
income is limited to the gain on sale, if any. The ordinary income
realized upon a disqualifying disposition of ISO shares is taxable but is
not subject to withholding under current Internal Revenue Service rules.
. The participant may have additional gain on the disposition. In order to
give rise to additional gain, a disqualifying disposition must be a taxable
"sale or exchange." Gain will result where the participant sells the shares
for more than what they were worth when they were acquired. Any additional
gain will be treated as long-term capital gain if the participant has held
the shares for more than one year; otherwise it will be treated as short-
term capital gain.
. Note that certain transactions may constitute disqualifying dispositions
(giving rise to ordinary income as described above) without constituting a
sale or exchange. For example, if a participant, within the one-year or
two-year periods described above, gives away his or her shares to a person
other than the participant's spouse, or uses the shares to exercise another
ISO, the participant may be treated as having disposed of the shares for
purposes of the "disqualifying disposition" rules.
. A "disqualifying disposition" of ISO shares that takes place in the same
year as the increase in AMTI attributable to the exercise has the effect of
eliminating the AMTI adjustment.
. A "cashless exercise" of an ISO, where the participant arranges with a
broker to promise to pay the exercise price from the sale proceeds, will
involve a disqualifying disposition to the extent it involves a sale of the
underlying shares.
A participant's "tax basis" in ISO shares (used in measuring any capital gain
or loss upon a sale or exchange) will depend on a number of factors. In
general, the rules for determining tax basis are similar to those described
above for nonstatutory options. However, because a
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<PAGE>
participant does not have taxable ordinary income upon exercising an ISO, his or
her aggregate tax basis in ISO shares (except for AMT calculation purposes) is
generally limited to the amount of cash paid plus the tax basis in any shares
surrendered as part of the purchase price. On the other hand, the participant's
tax basis in ISO shares that are disposed of in a "disqualifying disposition" is
increased by the amount of any ordinary income realized by reason of that
disposition.
The rules described above for ISOs assume that the participant exercises the
ISO while an employee of the Company or its subsidiaries or within three months
following termination of his or her employment. If the participant exercises an
ISO after the expiration of these periods, the option will be treated for tax
purposes as a nonstatutory option. ISOs are also treated as nonstatutory
options for tax purposes to the extent that, in the aggregate, they first become
exercisable by an individual in any calendar year for shares of Common Stock
having a fair market value (determined at time of grant) in excess of $100,000.
TAX CONSEQUENCES TO THE COMPANY
The employer will generally be entitled to claim a deduction equal to the
amount of ordinary income, if any, recognized by a participant in connection
with the exercise of an option or the disqualifying disposition of shares
acquired pursuant to an ISO. Except in the case of a disqualifying disposition
of ISO shares, regulations require that the Company or the employer satisfy
applicable wage withholding requirements in order to claim the deduction.
SPECIAL RULES
The employer's ability to claim a deduction with respect to awards may also be
limited in certain cases, including special rules applicable to compensation
payable in connection with a change in control and compensation to key officers
in excess of $1 million.
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<PAGE>
OPTION GRANTS UNDER THE COMMON STOCK OPTION PLANS
The future benefits or amounts that would be received under the Common Stock
Option Plans by the executive officers and the groups named in the table below
are not determinable at this time. The following table shows the number of
shares subject to options granted in fiscal 1996 to the individuals and groups
indicated below, which options, in the case of a Named Executive Officer, are
also included in the relevant tables above.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION SHARES SUBJECT TO OPTIONS
AS OF DECEMBER 31, 1996 GRANTED IN FISCAL 1996
- ----------------------- ----------------------
<S> <C>
Yehuda Harats 150,000
President and Chief Executive Officer
Robert S. Ehrlich 150,000
Chairman of the Board and
Chief Financial Officer
Menachem Korall 0
Vice President, Technology
All Executive Officers as a Group 305,000
All Non-Executive Officer Directors as a Group 0
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION
OF THE AMENDED AND RESTATED 1993 COMMON STOCK OPTION
AND RESTRICTED PURCHASE PLAN
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<PAGE>
PROPOSAL NUMBER 3
RATIFICATION OF THE SELECTION
OF INDEPENDENT ACCOUNTANTS
The Board recommends the ratification by the Stockholders of the
appointment by the Board of Kesselman & Kesselman, a member of Coopers & Lybrand
(International) ("Kesselman"), as the Company's independent accountants for the
---------
fiscal year ending December 31, 1997. Kesselman has served as the Company's
independent accountants since December 1990. Unless instructions are given to
the contrary, it is the intention of the persons named as proxies to vote the
shares to which the proxy is related FOR the ratification of the appointment of
Kesselman. The affirmative vote of the holders of a majority of shares properly
cast on the proposal, in person or by proxy, will be required to ratify the
selection of Kesselman. In the event that the Stockholders do not ratify the
selection of Kesselman, as an independent accounting firm, the Board will
consider the selection of another firm of independent accountants.
Representatives of Kesselman are not expected to be present at the Annual
Meeting of Stockholders.
The affirmative vote of at least a majority of all outstanding shares of
Common Stock of the Company entitled to vote is required to authorize the
proposed amendment.
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE
SELECTION OF INDEPENDENT ACCOUNTANTS DESCRIBED ABOVE
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<PAGE>
QUORUM REQUIREMENT AND METHOD OF TABULATION
Consistent with Delaware corporate law and under the Company's By-Laws, a
majority of the shares entitled to be cast on a particular matter, present in
person or represented by proxy, constitutes a quorum as to such matter. Votes
cast by proxy or in person at the Annual Meeting of Stockholders will be counted
by persons appointed by the Company to act as election inspectors for the
meeting. The election inspectors will count shares represented by proxies that
withhold authority to vote for a nominee for election as a director or that
reflect abstentions and "broker non-votes" (i.e., shares represented at the
meeting held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or persons entitled to vote, and (ii) the
broker or nominee does not have the discretionary voting power on a particular
matter) only as shares that are present and entitled to vote on the matter for
purposes of determining the presence of a quorum, but neither abstentions nor
broker non-votes have any effect on the outcome of voting on the matter.
COMMON STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the SEC, Common Stockholder proposals
intended to be included in the Company's proxy material for the Annual Meeting
of Stockholders must be received by the Company on or before February 19, 1998
at its principal executive offices, 885 Third Avenue, Suite 2900, New York, New
York 10022 Attention: Corporate Secretary.
OTHER MATTERS
The management has no knowledge of any other matter that may come before
the Annual Meeting of Stockholders and does not, itself, currently intend to
present any such other matter. However, if any such other matters properly come
before the meeting or any adjournment thereof, the persons named as proxies will
have discretionary authority to vote the shares represented by the accompanying
proxy in accordance with their own judgment.
PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. Proxies may be
solicited without extra compensation by certain directors, officers and regular
employees of the Company by mail, telegram or in person.
Stockholders are encouraged to send their proxies without delay. Your
cooperation is appreciated.
FINANCIAL STATEMENTS
The Company's audited financial statements for the fiscal year ended
December 31, 1996 and certain other related financial and business information
of the Company are contained in the Company's 1996 Annual Report furnished to
the Stockholders along with this Proxy Statement.
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<PAGE>
FORM OF PROXY FOR ELECTRIC FUEL CORPORATION 1997 ANNUAL MEETING
ELECTRIC FUEL CORPORATION
Proxy Solicited on behalf of the Board of Directors of Electric Fuel Corporation
for Annual Meeting of Stockholders to be held July 14, 1997
The undersigned, having received the Notice of the Annual Meeting of
Stockholders and the Proxy Statement on behalf of the Board of Directors of
Electric Fuel Corporation (the "Company"), hereby appoint(s) Robert S. Ehrlich
and Yehuda Harats, and each of them, proxies of the undersigned (with full power
of substitution) to attend the Annual Meeting of the Company to be held on July
14, 1997 at 9:30 a.m. at the St. Moritz, 50 Central Park South, New York, NY
10036 and all adjournments thereof (the "Meeting") and there to vote all shares
of Common Stock of the Company that the undersigned would be entitled to vote,
if personally present, in regard to all matters which may come before the
Meeting, and without limiting the general authorization hereby given, the
undersigned directs that his vote be cast as specified in this proxy.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER SPECIFIED
HEREIN. IF NO SPECIFICATION IS MADE, THE PROXIES INTEND TO VOTE FOR THE NOMINEES
AND FOR THE OTHER PROPOSALS SET FORTH HEREIN AND DESCRIBED IN THE BOARD OF
DIRECTORS' PROXY STATEMENT. IF EITHER OF THE NOMINEES IS NOT AVAILABLE TO SERVE,
THIS PROXY MAY BE VOTED FOR A SUBSTITUTE. THIS PROXY DELEGATES DISCRETIONARY
AUTHORITY WITH RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF
SOLICITATION OF THIS PROXY. THE UNDERSIGNED HEREBY REVOKES ANY OTHER PROXY
PREVIOUSLY GRANTED TO VOTE THE SAME SHARES OF STOCK FOR SAID MEETING.
SEE REVERSE SIDE. If you wish to vote in accordance with the
recommendations of the Board of Directors, just sign on the reverse side. You
need not mark any boxes.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING MATTERS:
1. The election of two Class II directors, each for a term ending in 2000 and
until their successors are elected and qualified.
FOR WITHHELD NOMINEES: Robert S. Ehrlich
[_] [_] Harvey M. Krueger
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below
- --------------------------------------------------------------------------------
2. To fix the number of Class III directors at two.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To amend the 1993 Stock Option and Restricted Stock Purchase Plan and
increase the number of shares authorized for issuance thereunder.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To ratify the appointment of Kesselman & Kesselman, a member of Coopers &
Lybrand (International), as independent accountants of the Company.
FOR AGAINST ABSTAIN
[_] [_] [_]
PLEASE DATE AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED ENVELOPE.
I do plan to attend the meeting. [_]
I do not plan to attend the meeting. [_]
Signature _______________________________ Date ___________________
Signature if Held Jointly _______________ Date ___________________
NOTE: Please sign name exactly as it appears on this Proxy. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
-2-
