<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the
[_] Definitive Proxy Statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ELECTRIC FUEL CORPORATION
(Exact Name of Registrant as Specified in Charter)
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]
, 2000
Dear Stockholder:
It is our pleasure to invite you to the annual meeting of stockholders of
Electric Fuel Corporation, a Delaware corporation, to be held on December 4,
2000 at 4:00 PM local time at
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 (a) approving the election of the Class III
directors, (b) the approval of a proposal to amend our Amended and Restated
Certificate of Incorporation to increase our authorized common stock,
(c) amending our Non-Employee Director Stock Option Plan and (d) amending our
Amended and Restated 1993 Stock Option and Restricted Stock Purchase Plan.
Sincerely,
Robert S. Ehrlich
Chairman of the Board of Directors
<PAGE>
ELECTRIC FUEL CORPORATION
120 Wood Avenue South, Suite 300
Iselin, New Jersey 08830
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held December 4, 2000
----------------
To our Stockholders:
Our annual meeting of stockholders will be held at [ , on
, December 4, 2000 at 4:00 PM local time] 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 2003 and continuing until
their successors are elected and qualified.
2. To consider and act upon a proposal to amend our Amended and Restated
Certificate of Incorporation to increase our authorized common stock
from 28,000,000 shares to 100,000,000 shares.
3. To consider and act upon a proposal to amend our Non-Employee Director
Stock Option Plan.
4. To consider and act upon a proposal to increase the number of shares
available in our Amended and Restated 1993 Stock Option and Restricted
Stock Purchase Plan.
5. To act upon all other business that may properly come before the
meeting.
Our Board of Directors has fixed the close of business on October 5, 2000
as the record date for determining which stockholders are entitled to notice
of the meeting and to vote at the meeting and any adjournments thereof.
If you are unable to be present at the meeting personally, please sign and
date the enclosed proxy card and return it promptly in the enclosed envelope.
Any stockholder who grants a proxy may revoke it at any time prior to it is
exercised. Also, whether or not you grant a proxy, you may vote in person if
you attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
-------------------------------------
Robert S. Ehrlich
Chairman of the Board of Directors
, 2000
<PAGE>
ELECTRIC FUEL CORPORATION
120 Wood Avenue South, Suite 300
Iselin, New Jersey 08830
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
----------------
The accompanying proxy is solicited by and on behalf of our Board of
Directors, for use at our annual meeting of stockholders and any adjournments
thereof. The meeting is currently planned to be held at [add address,]
December 4, 2000 at 4:00 PM local time for the purposes described in the
accompanying notice of annual meeting of stockholders.
Stockholders of record at the close of business on October 5, 2000 will be
entitled to vote at the annual meeting. As of October 1, 2000, there were
20,288,702 shares of our common stock outstanding. Each holder of common stock
is entitled to one vote per share on each matter that comes before the annual
meeting.
Proxies that are properly executed and returned will be voted at the annual
meeting in accordance with any indicated directions. If no direction is
indicated, proxies will be voted FOR the election of the nominees for director
set forth below, FOR the fixing of the number of Class III directors at two,
FOR increasing our authorized common stock, FOR the proposed amendment to the
Non-Employee Director Stock Option plan and FOR increasing the number of
shares of common stock available for issuance under our Amended and Restated
1993 Stock Option and Restricted Stock Purchase Plan.
Holders of proxies will vote them in their discretion with respect to any
other business that properly comes before the annual meeting and all matters
relating to the conduct of the annual meeting. You may revoke your proxy at
any time before it is voted by delivering to the Secretary of Electric Fuel 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.
This proxy statement and the enclosed form of proxy to stockholders will be
mailed commencing on or about October 2000.
We will pay for the solicitation of proxies.
We are 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 do come before the annual meeting for a stockholder vote, the
persons named as proxies in the form of proxy being delivered to you along
with this proxy statement will vote in accordance with their best judgment on
those matters.
We are mailing our most recent annual report, which is our annual report on
Form 10-K for the fiscal year ended December 31, 1999, to our stockholders
along with this proxy statement.
At least 10 days before the annual meeting, we will 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. The list will
be open for inspection at our U.S. offices at 120 Wood Avenue South, Suite
300, Iselin NJ 08830, and shall also be made available to stockholders present
at the annual meeting.
Voting
Consistent with Delaware corporate law and our By-laws, a quorum for the
meeting consists of the presence, in person or by proxy, of a majority of
those shares which are outstanding and entitled to vote. Votes cast by
1
<PAGE>
proxy or in person at the annual meeting will be counted by persons we will
appoint to act as election inspectors at the annual meeting.
The affirmative vote of a plurality of the votes cast at the meeting is
required for the election of directors. As a result, the two nominees for
election as Class III Directors who receive the greatest number of votes shall
be elected as Class III Directors. A properly executed Proxy marked "Withhold
Authority" with respect to the election of one or more directors will not be
voted with respect to the director or directors indicated, although it will be
counted for purposes of determining whether there is a quorum.
For each other item, the affirmative vote of the holders of either a
majority of the shares entitled to vote or a majority of the shares
represented in person or by proxy and entitled to vote on the item will be
required for approval. A properly executed proxy marked "abstained" with
respect to any such matter will not be voted, although it will be counted for
purpose of determining whether there is a quorum. Accordingly, an abstention
will have the effect of a negative vote. If you hold your shares in "street
name" through a broker or other nominee, your broker or nominee may not be
permitted to exercise voting discretion with respect to some of the matters to
be acted upon. Thus, if you do not give your broker or nominee specific
instructions, your shares may not be voted on those matters and will not be
counted in determining the number of shares necessary for approval. Shares
represented by such "broker non-votes" will, however, be counted in
determining whether there is a quorum.
2
<PAGE>
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
The annual meeting will consider the election of two Class III directors
for three-year terms that expire in 2003. Our five other directors have terms
that end in either 2001 or 2002, as indicated below. Unless instructions are
given to the contrary, each of the persons named as proxies will vote the
shares to which each proxy relates "FOR" the election of each of the nominees
listed below for a term of three years expiring at the annual meeting of
stockholders to be held in 2003, and until the nominee's successor is elected
and qualified or until the nominee's earlier death, removal or resignation.
One of the two nominees named below is presently serving as a director of
Electric Fuel and both nominees are anticipated to be available for election
and able to a serve. However, if they should become unavailable, the proxy
will be voted for substitute nominees designated by the Board. The two
nominees who receive the greatest number of votes properly cast for the
election of directors shall be elected.
Our By-laws provide for a Board of one or more directors, and the number of
directors currently is fixed at seven. Our Board is composed of three classes
of similar size. The members of each class are elected in different years, so
that only approximately one-third of the Board is elected in any single year.
Mr. Harats, Dr. Eastman and Mr. Gross are designated as Class I directors.
Their term expires in 2001. Messrs. Rosenfeld and Miller are designated as
Class II directors. Their term expires in 2002. Mr. Ehrlich and Mr. Kahn are
designated as Class III directors. Their current term expires in 2000.
The following table contains information concerning the nominees for Class
III directors and the other incumbent directors:
Board of Directors
<TABLE>
<CAPTION>
Director
Name Age Position Class since
---- --- -------- ----- --------
<C> <C> <S> <C> <C>
Yehuda Harats............. 48 President, Chief I May 1991
Executive Officer and
Director
Dr. Jay M. Eastman(1)(2).. 51 Director I October 1993
Leon S. Gross............. 93 Director I March 1997
Jack E. Rosenfeld(1)(2)... 62 Director II October 1993
Lawrence M. Miller(1)(2).. 53 Director II November 1996
Robert S. Ehrlich......... 62 Chairman of the Board, III May 1991
Chief Financial Officer
and Director
Jeff Kahn................. 42 Director III June 2000
</TABLE>
--------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Nominees for Election as Class III Directors
Robert S. Ehrlich has been our Chairman of the Board since January 1993 and
our Chief Financial Officer since May 1991. From May 1991 until January 1993,
Mr. Ehrlich was Vice Chairman of the Board. Mr. Ehrlich also serves as a
director of PSC, Inc., a manufacturer and marketer of hand-held laser diode
bar code scanners and, since April 1997, has been the chairman of the board of
PSC, a position he previously held from December 1987 until July 1992. Mr.
Ehrlich also serves as a director of Eldat Communications Ltd. Since June
1999. Mr. Ehrlich received a B.S. and J.D. from Columbia University in New
York, New York.
3
<PAGE>
Jeff Kahn has been a director since June 2000. Mr. Kahn founded and managed
Kahn communications Group from 1987 to 1995. In 1995 that company was sold to
Ruder Finn and he became Chief Strategic & Planning Officer of Ruder Finn
(International). In 1997, Mr. Kahn founded and served as Chairman of Ruder
Finn Israel while maintaining his responsibilities in Ruder Finn
(international). Mr. Kahn also serves on the Board of e-Sim (Nasdaq: ESIM) and
several other privately held companies.
Class I Directors
Yehuda Harats has been our President and Chief Executive Officer and a
director of Electric Fuel since May 1991. 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. 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 Luz. Before joining Luz 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 Electric Fuel since October 1993.
Since November 1991, Dr. Eastman has served as President and Chief Executive
Officer of Lucid Technologies, Inc., which develops laser technology
applications for medical diagnosis and treatment. Dr. Eastman has served as a
director of PSC since April 1996, and served as Senior Vice President of
Strategic Planning at PSC from December 1995 through October 1997. From
December 1987 through December 1995, Dr. Eastman was Executive Vice President
of PSC. Dr. Eastman is also a director of Chapman Instruments, Inc., which
develops, manufactures and sells surface profiling instruments; Dimension
Technologies, Inc., a developer and manufacturer of 3D displays for computer
and video displays; and Centennial Technologies Inc., a manufacturer of PCMCIA
cards.
Leon S. Gross was elected to the Board in March 1997. Mr. Gross's principal
occupation for the past five years has been as a private investor in various
publicly held corporations, including Electric Fuel. He is also majority owner
and an officer of Micro TV, Inc., a business that owns communications towers.
Class II Directors
Jack E. Rosenfeld has been a director of Electric Fuel since October 1993.
Mr. Rosenfeld was President and Chief Executive Officer of Hanover Direct,
Inc. 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 from May 1988 until
September 1990. Mr. Rosenfeld is also a director of Potpourri Holdings, Inc.
and a director of PSC. Mr. Rosenfeld has been President and Chief Executive
Officer of Potpourri Collection Inc., a specialty catalog direct marketer,
since April 1998.
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 directors of The Phoenix Resource Companies, Inc., a publicly
traded energy exploration and production company, and as a member of the Audit
and Compensation Committee of that board. That company was merged into Apache
Corporation in May 1996.
Information Concerning the Board and Its Committees
In the fiscal year ending December 31, 1999, the Board held five meetings
and acted by unanimous written consent on two occasions. The Board has two
committees: the Audit Committee and the Compensation Committee. All directors
attended at least 75% of all Board meetings.
The Audit Committee was established in December 1993, and held one meeting
during fiscal year 1999.
4
<PAGE>
The duties of the Audit Committee are to review with management and our
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 our
financial statements, and
. any comments by the independent auditors on our policies and procedures
with respect to internal accounting, auditing and financial controls,
In addition the Audit Committee is charged with the responsibility for
making recommendations to the Board on the engagement of independent auditors.
The Audit Committee recommended to the board that the annual financial
statements be included with the company's annual report on form 10- K,
discussed the audited financial statements with the independent auditors
statement and management and received written disclosures from the independent
auditors concerning their independence.
Messrs. Rosenfeld and Miller and Dr. Eastman are members of the Audit
Committee.
The Compensation Committee was established in December 1993. This Committee
did not hold any meetings during fiscal year 1999. The duties of the
Compensation Committee are to recommend compensation arrangements for our
Chief Executive Officer and Chief Financial Officer and review annual
compensation arrangements for all other officers and significant employees.
Messrs. Rosenfeld and Miller and Dr. Eastman are members of the Compensation
Committee. All Committee members are "disinterested persons" as that term is
used in Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
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, in 1996 we adopted 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 our common
stock upon being elected as a director. Thereafter, non-employee directors
receive options to purchase 5,000 shares of common stock for each year of
service on the Board. All options are granted at fair market value on the date
of grant and vest ratably over three years. However, one of the items being
submitted to our stockholders for a vote at the upcoming annual meeting is an
amendment to this Plan, as described in Proposal Number 3 below.
THE BOARD OF DIRECTORS RECOMMENDS ELECTION
OF THE CLASS III NOMINEES DESCRIBED ABOVE.
5
<PAGE>
EXECUTIVE COMPENSATION; CERTAIN ARRANGEMENTS;
SECURITY OWNERSHIP
The following table shows the compensation paid to or accrued for our Chief
Executive Officer and our other highest paid executive officers who received
more than $100,000 in salary and bonuses during the year ended December 31,
1999 (collectively, the "Named Executive Officers") for services rendered by
them in 1997, 1998 and 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------------ ------------
Name and Principal Other Annual Securities All Other
Position Salary Bonus Compensation Underlying Compensation
At December 31, 1999 Year ($) ($) ($) Options (#) ($)
-------------------- ---- ------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Yehuda Harats(1)........ 1999 141,710 80,011(2) 8,055(4) 100,000 78,060(5)
President, Chief 1998 118,246 77,652 15,942 368,177 146,386
Executive
Officer and Director 1997 154,968 50,000 10,691 0 280,748
Robert Ehrlich(1)....... 1999 137,466 80,011(2) 6,094(4) 47,500 173,384(6)
Chairman and Chief 1998 118,246 77,652 14,536 372,577 202,030
Financial Officer 1997 154,968 50,000 14,193 0 264,501
Joshua Degani(1)........ 1999 110,259 17,500(3) 5,063(4) 35,000 34,825(7)
Executive Vice 1998 109,497 14,250 6,241 185,071 41,996
President,
Chief Operating Officer 1997 59,105 15,062 3,449 122,500 51,906
</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) No cash bonuses for fiscal year 1999 were paid out in 1999. We accrued
$80,011 for the bonuses Messrs. Harats and Ehrlich were entitled to per
their contracts. During 1999, we paid each of them $30,000 from their
respective 1998 bonuses. We paid the remainder of these bonuses in 2000.
(3) No cash bonuses for fiscal year 1999 were paid out in 1999. We did not
accrue any bonus for Mr. Degani for 1999, but anticipate paying him the
full amount of his 1999 bonus in 2000. In January 2000, we paid Mr. Degani
the bonus awarded in 1998.
(4) Represents the costs of taxes paid by the Named Executive Officer and
reimbursed by us.
(5) This amount consists of: (a) a $13,968 accrual for severance pay that
would be payable to Mr. Harats if we underwent a "change of control" or
upon the occurrence of certain other events; (b) a $30,523 accrual for
sick leave and vacation redeemable by Mr. Harats; (c) a reduction in the
amount of ($12,066) in the accrual for severance pay that would be payable
to Mr. Harats under the laws of the State of Israel upon the termination
of his employment by us; and (d) $28,569 in 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 on-going education
of employees. Additionally, $7,017 represents the reduction of our accrual
to fund Mr. Harats' pension and education funds as well as provide him
with certain other post-termination benefits, and $8,448 represents the
value charged for tax purposes for the use of a car provided by us.
(6) This amount consists of: (a) a $85,328 accrual for severance pay that
would be payable to Mr. Ehrlich if we underwent a "change of control" or
upon the occurrence of certain other events; (b) a reduction in the amount
of ($79,618) in the accrual for sick leave and vacation redeemable by Mr.
Ehrlich; (c) a reduction in the amount of ($15,391) in the accrual for
severance pay that would be payable to Mr. Ehrlich under the laws of the
State of Israel upon the termination of his employment by us; and (d)
$30,171 in payments and accruals to pension and education funds.
Additionally, $40,868 represents our accrual to fund Mr. Ehrlich's pension
fund as well as provide him with certain other post-termination benefits,
and $6,487 represents the value charged for tax purposes for the use of a
car provided by us.
6
<PAGE>
(7) This amount consists of: (a) a $6,459 accrual for vacation redeemable by
Dr. Degani; (b) a reduction in the amount of ($591) in the accrual for
severance pay that would be payable to Dr. Degani under the laws of the
State of Israel upon the termination of his employment by us; and (c)
$16,496 in payments and accruals to pension and education funds.
Additionally, $5,467 represents the value charged for tax purposes for the
use of a car provided by us.
The table below sets forth information with respect to stock options
granted to the Named Executive Officers for the fiscal year 1999.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------
Potential
% of Total Realizable Value
Number of Options at Assumed Annual
Securities granted to Exercise Rates of Stock
Underlying Employees or Base Price
Options in Fiscal Price Expiration Appreciation for
Granted Year ($/Sh) Date Option Term
---------- ---------- -------- ---------- -----------------
Name 5% ($) 10% ($)
---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Yehuda Harats.... 100,000 20.14 % $1.38 26-Jul-09 $223,973 $356,640
(54,345)(1) (10.95)% $2.50 29-Dec-08
Robert Ehrlich... 47,500 9.57 % $1.38 26-Jul-09 $106,387 $169,404
(54,345)(1) (10.95)% $2.50 29-Dec-08
Joshua Degani.... 35,000 7.05 % $1.38 26-Jul-09 $ 78,391 $124,824
(18,000)(2) (3.63)% $2.50 29-Dec-08
</TABLE>
--------
(1) During 1998, Messrs. Ehrlich and Harats agreed that for 1999 they would
each waive approximately 27% of their base salary, for a total of $43,476
for the calendar year. In lieu of the amount waived, Messrs. Ehrlich and
Harats were each granted options at an exercise price equal to the fair
market value of our common stock on the date of grant. The number of
options granted was based on a variety of factors considered by the Board.
Messrs. Ehrlich and Harats each received 108,690 options in this program
on December 29, 1998. These options were to vest 1/12 per month over the
calendar year. However, the program was terminated as of June 30, 1999 and
the unvested portion of the option grant, or 54,345 options were
forfeited.
(2) During 1998, Dr. Degani agreed that for 1999, he would waive $1,200 per
month of his base salary, or $14,400 for the calendar year. In lieu of the
amount waived, Dr. Degani was granted options at an exercise price equal
to the fair market value of our common stock on the date of grant. Dr.
Degani received 36,000 options in this program on December 29, 1998.
However, the program was terminated as of June 30, 1999 and the unvested
portion of the option grant, or 18,000 options were forfeited.
The table below sets forth information for the Named Executive Officers
with respect to fiscal 1999 year-end option values.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
Fiscal Year End at Fiscal Year End (1)
------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
Name (Number) (Number) ($) ($)
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert S. Ehrlich........... 331,720 280,857 24,918 32,714
Yehuda Harats............... 237,320 280,857 19,330 32,714
Joshua Degani............... 68,838 116,233 17,209 26,558
</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.
7
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors for the 1999 fiscal
year consisted of Dr. Jay Eastman, Jack Rosenfeld and Lawrence Miller. None of
the committee members have served as Electric Fuel officers.
Robert S. Ehrlich, our Chairman and Chief Financial Officer, serves as
chairman and a director of PSC, Inc. Dr. Eastman serves as a director and Mr.
Rosenfeld serves as a director and a member of the Compensation Committee of
PSC, Inc.
Employment Contracts and Termination of Employment Arrangements
Each of Messrs. Ehrlich and Harats are parties to similar employment
agreements with us. The terms of each of the employment agreements expires in
2000; the agreements are currently under renegotiation.
The employment agreements each provide for a base salary of $20,000 per
month or a larger amount if the Board so determines pursuant to an annual
salary review. On January 1 of each year starting in 2001, the base salary
will be adjusted in an amount equal to the greater of (a) 3% or (b) the
official anticipated net Israeli inflation rate as published by the Israeli
Central Bureau of Statistics in the month of December immediately preceding
the relevant January.
Each employment agreement provides for an annual bonus in an amount ranging
from 35% to 90% of the executive's base salary, depending on whether we
achieve 80% to 120% of the budgeted results for the relevant fiscal year
established by our Board prior to that fiscal year.
The employment agreements also contain confidentiality and non-competition
covenants. They also provide each of Messrs. Ehrlich and Harats with demand
and "piggyback" registration rights covering shares of our common stock held
by them. The employment agreements may be terminated by us for "Cause"
(defined as conviction of certain crimes, willful failure to carry out
directives of the Board or gross negligence or willful misconduct). Messrs.
Ehrlich and Harats both have the right to terminate their employment for "Good
Reason," which include adverse changes in employment status or compensation,
our insolvency, material breaches and other specified events. Upon termination
of employment other than for Cause, the employment agreements provide for
payment of all accrued and unpaid compensation, as well as a bonus equal to
35% of the relevant annual base salary for each year left in the term of the
agreement if there would be no termination. The employment agreements also
provide for a termination payment equal to the relevant annual base salary at
the highest rate in effect within the 90-day period prior to the termination
of employment. In the event that we terminate the agreement during the course
of its term other than for Cause, the termination payment will equal the
relevant annual base salary multiplied by three. Furthermore, certain benefits
will continue.
Dr. Degani entered into an employment agreement upon joining Electric Fuel
in June 1997. The employment agreement has no fixed termination date and,
subject to advance notice by either party of two months, may be terminated at
will. It provides for a monthly base salary of $9,000. This was adjusted to
$10,500, effective February 2000. It also provides for an annual bonus of not
less than 1.5 times the monthly base salary then in effect, in accordance with
Dr. Degani's success in the position, as well as other benefits such as
vacation, sick leave, provision of an automobile and insurance contributions.
Furthermore, Dr. Degani is entitled to a termination payment (in addition to
severance pay by law) in an amount between 2-5 months" base salary, depending
on who gives notice of termination and how long Dr. Degani has been employed
with us. Dr. Degani's employment agreement also contains confidentiality and
non-competition covenants.
For information regarding bonuses paid to or accrued for Messrs. Ehrlich
and Harats and Dr. Degani, please see notes 2 and 3 to the Summary
Compensation Table.
8
<PAGE>
COMPENSATION COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of our previous
filings under the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act which 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 Electric Fuel for
1999 consisted of Dr. Eastman, Mr. Rosenfeld and Mr. Miller. 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 Electric Fuel may have with such persons. No member of this
Committee was an officer or employee of Electric Fuel during 1999. The members
of the Committee are familiar with various forms and types of remuneration
from reports of other public corporations and their own business experience.
Electric Fuel maintains compensation and incentive programs designed to
motivate, retain and attract management and utilize various combinations of
base salary, bonuses payable upon the achievement of specified goals,
discretionary bonuses and stock options. It is our 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. The Chief Executive
Officer, Yehuda Harats, and the Chief Financial Officer, Robert S. Ehrlich,
are parties to employment agreements with the Company. The Executive Vice
President of Technology, Dr. Joshua Degani, is also party to an employment
agreement. For details regarding the various employment agreements, see
"Employment Contracts and Termination of Employment Arrangements" on page 14-
15 of this Proxy Statement.
Each of the employment agreements with Messrs. Harats and Ehrlich requires
that bonuses be paid in an amount equal to the greater of (a) 50% of annual
base salary or (b) 2% of annual net earnings (defined as net income before
taxes and extraordinary and other nonrecurring items), provided that 100% of
budgeted results and other goals are attained. In addition, the Board may
award the executive a discretionary bonus based on the achievement of
objectives established by the Board in its sole discretion if we have attained
at least 80% of our budgeted results for such period. The Committee has also
determined that, given the stage of our development, 1999 compensation for
executive officers should not be related primarily to our annual profit
performance. A primary consideration for executive officers' compensation is
leadership effort in the development of our proprietary technology and its
applications and in planning for future growth and profitability through
commercialization of the Company's products. This Committee also considers
qualitative achievements occurring during each fiscal year as a basis for
paying the Bonus to each of Messrs. Ehrlich and Harats.
Among the qualitative achievements considered by the Committee for 1999
were: (i); developing the commercialization of the cellphone battery (ii);
establishment of initial cellphone battery production (iii) obtaining new
equity financing; and (iv) implementing of the Las Vegas bus program.
In an effort to help the Company conserve available cash, during 1999 each
of Messrs. Harats and Ehrlich deferred portions of their regular salary and
benefits payments of approximately $22,000 each. In lieu of these payments,
each of Messrs. Harats and Ehrlich received 54,345 options at fair market
value. These options vest 1/12th per month over the first half of the calendar
year. In July 1999, we canceled the unvested portion of these options and
resumed full payment of Messrs. Ehrlich's and Harats's base salary. For the
year ended December 31, 1999 the Company achieved its budgeted results and
based on the term of employment agreements, each of Messrs. Ehrlich and Harats
were entitled to receive a cash bonus of 50% of their base salary ($6,667 per
month). During 1999, no cash bonuses were paid to Messrs. Ehrlich and Harats.
However, we accrued $80,011 for each of them. We paid each of Mr. Ehrlich
$21,106 of his 1999 bonuses in 2000 and we expect to pay Messrs. Ehrlich and
Harats balance in 2000.
9
<PAGE>
As of December 31, 1999, Messrs. Harats' and Ehrlich's total options
represented approximately 2.8% and 3%, respectively, of our fully-diluted
outstanding stock, which the Compensation Committee believes are appropriate
levels of options for Messrs. Harats and Ehrlich in view of their equity
position (including options) in Electric Fuel which, as of December 31, 1999,
represented approximately 9.5% and 6.9%, respectively, of the fully-diluted
outstanding stock of the Company. As of December 31, 1999, Dr. Degani's
options represented approximately 1% of our fully-diluted outstanding stock,
which the Compensation Committee believes is an appropriate level of options
considering his position in Electric Fuel.
Dr. Degani was awarded cash bonus of $17,500 for 1999. During 1999, no cash
bonus was paid to Dr. Degani. However, the Company accrued $17,500 for Dr.
Degani's 1999 bonus. During the year 2000 the Company paid to Dr. Degani in
cash $25,000 on account of his previously accrued and not paid bonuses for
1998 and 1999.
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 our employees based on such objectives.
We seek to promote, including through our compensation plans, an
environment that encourages employees to focus on our continuing long-term
growth. Employee compensation is generally comprised of a combination of cash
compensation and grants of options under our 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 us. There is no set formula for the award of
options to individual employees. Factors considered in making option awards to
the employees other than the Named Executive Officers in 1999, and during the
year 2000 on account of 1999, included prior grants to the employees, the
importance of retaining the employees services, the amount of cash bonuses
received by the employees, the employees potential to contribute to our
success and the employees' past contributions to the Company.
Dated: , 2000
COMPENSATION COMMITTEE
Dr. Jay M. Eastman
Lawrence M. Miller
Jack E. Rosenfeld
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<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, 1999. 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. The stock prices on the
Performance Graph are not necessarily indicative of future price performance.
CUMULATIVE TOTAL RETURN THROUGH DECEMBER 31, 1999
AMONG ELECTRIC FUEL CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
2/94 12/9 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- ----- -----
ELECTRIC FUEL 100.00 48.54 65.53 54.37 28.16 21.36 27.18
PEER
GROUP/(1)/ 100.00 41.45 55.65 31.78 44.47 36.67 86.28
BROAD MARKET 100.00 97.2 126.09 156.68 191.66 270.32 476.77
ASSUMES $100 INVESTED ON FEBRUARY 24, 1994 (THE DAY THE COMPANY'S COMMON STOCK
BEGAN TRADING ON THE NASDAQ NATIONAL MARKET)
--------
(1) 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.
11
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth information regarding the security
ownership, as of October 1, 2000, of those persons owning of record or known
by the Company to own beneficially more than 5% of our Common Stock and of
each of the Company's Named Executive Officers and directors, and the shares
of Common Stock held by all directors and executive officers of the Company as
a group.
<TABLE>
<CAPTION>
Shares Percentage of
Beneficially Total Shares
Owned(1)(2) Outstanding(1)
------------ --------------
Named Executive Officers and
Directors
----------------------------
<S> <C> <C>
Leon S. Gross............... 4,267,202(3) 20.9%
Robert S. Ehrlich........... 1,240,566(4)(7) 6.1%
Yehuda Harats............... 1,746,372(6)(7) 8.8%
Dr. Jay M. Eastman.......... 30,000(8) *
Jack E. Rosenfeld........... 32,000(9) *
Lawrence M. Miller ......... 36,914(9)(10) *
Jeff Kahn................... 60,000(8) *
All Directors and Executive
Officers of the Company as
a group (6 persons)........ 7,453,054(3)(4)(5)(6)(7)(8)(9)(10) 35.83%
</TABLE>
--------
*Less than one percent.
(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 our 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.
(3) Includes 20,000 shares of common stock issuable upon exercise of options
exercisable within 60 days, 175,000 shares held by Leon S. Gross and
Lawrence M. Miller as co-trustees of the Rose Gross Charitable
Foundation, and 375,000 shares of common stock issuable upon exercise of
warrants.
(4) Includes 423,400 shares of common stock issuable upon exercise of options
exercisable, or potentially exercisable, within 60 days.
(5) Includes 310,000 shares of common stock issuable upon exercise of options
exercisable, or potentially exercisable, within 60 days.
(6) Shares of common stock issuable upon exercise of options exercisable
within 60 days.
(7) Messrs. Ehrlich and Harats are parties to a Stockholders Voting Agreement
pursuant to which they agreed to vote their shares of common stock in
favor of the election of each other (or their designees) as directors of
Electric Fuel.
(8) Shares of common stock issuable upon exercise of options exercisable
within 60 days.
(9) Includes 25,000 shares of common stock issuable upon exercise of options
exercisable within 60 days.
(10) Includes 20,000 shares of common stock issuable upon exercise of options
exercisable within 60 days.
12
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 (a) of the Securities Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10%
of the company's common stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission ("SEC").
Such persons are required by the SEC regulations to furnish the Company with
copies of all section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms furnished to the company
and written representations from certain reporting persons, the Company
believes that all filings requirements applicable to the Company's executive
officers, directors and more than 10% stockholders were satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information regarding the exercise of options to purchase our shares of
common stock by Messrs. Erlich, and Harats please see "Compensation Committee
Interlocks and Insider Participation".
Pursuant to a stock purchase agreement dated September 30, 1996, between us
and Mr. Gross, on October 2, 1996 we 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
million.
Pursuant to a securities purchase agreement dated December 28, 1999,
between us and a group of purchasers, including Mr.Gross, we issued an
aggregate of 1,425,000 shares of common stock, including 375,000 shares to Mr.
Gross. These shares were issued at a price of $2.00 per share. In addition, we
issued warrants to purchase an additional 1,425,000 shares of common stock, of
which warrants to purchase 950,000 shares of common stock featured an exercise
price of $1.25 per share and were exercisable for a period of six months from
the closing of the agreement and warrants to purchase an additional 425,000
shares of common stock at an exercise price of $4.50 per share and are
exercisable for one year. Of these, Mr. Gross purchased six-month warrants to
purchase 250,000 shares of common stock and one-year warrants to purchase
125,000 shares of common stock.
Messrs. Ehrlich and Harats have issued promissory notes for previously
exercised options in the principal amounts $423,116 and $719,304,
respectively. The notes will mature on December 31, 2007. The Company has
recourse only to certain compensation due Messrs. Ehrlich and Harats upon
termination, other than for cause, in which case Messrs. Ehrlich and Harats
would continue to be personally liable on the notes. The Company's reserve for
termination benefits to each of Messrs. Ehrlich and Harats is greater than the
outstanding amount due the Company under the Promissory Notes. Additionally,
the Company has agreed to repurchase shares of the Company's Common Stock, at
any time, at current market prices, from either Messrs. Ehrlich or Harats as
payment in full for the promissory notes. If the shares were sold to the
Company, Messrs. Ehrlich and Harats would be granted new options at current
market prices to purchase the same amount of shares of the Company's Common
Stock as were sold. As of December 31, 1999, the aggregate amount outstanding
pursuant to the Promissory Notes for each of Messrs. Ehrlich and Harats was
$238,758 and $410,066, respectively (including an aggregate of $87,096 in
accrued interest receivable), which are also the largest aggregate amounts
outstanding since the issuance of the Promissory Notes.
On December 3, 1999, Messrs. Ehrlich and Harats each purchased 125,000
shares of common stock out of our treasury at the closing price of the common
stock on December 2, 1999. Payment was rendered by
13
<PAGE>
Messrs. Ehrlich and Harats for their purchases in the form of non-recourse
promissory notes in the amount of $167,975 each, secured by the shares of
common stock purchased.
Pursuant to the terms of both stock purchase agreements, Mr. Gross agreed
that for a period of five years from the date of each stock purchase
agreement, neither he nor his affiliates directly or indirectly or with or
through any associate will (i) solicit proxies with respect to any of our
capital stock or other voting securities under any circumstances, or become a
participant in any election contest relating to the election of our directors;
or (ii) make an offer for the acquisition of substantially all of our assets
or capital stock or induce or assist any other person to make such an offer;
or (iii) form or join any group with respect to any of our capital stock or
other voting securities for the purpose of accomplishing the actions referred
to in clauses (i) and (ii) above, other than pursuant to the voting rights
agreement described below.
In connection with the 1996 stock purchase agreement, we also entered into
a registration rights agreement with respect to the shares Mr. Gross purchased
in that offering. These rights include the right to make two demands for a
shelf registration statement on Form S-3 that may, subject to customary
limitations and requirements, be underwritten. In addition, Mr. Gross was
granted the right to "piggyback" on registrations of common stock in an
unlimited number of registrations. In addition, under the registration rights
agreement, Mr. Gross is subject to customary underwriting lock-up requirements
with respect to public offerings of our securities.
Pursuant to the 1999 securities purchase agreement, we registered for
resale the shares of common stock issued thereunder and the shares of common
stock issuable pursuant to the warrants issued thereunder.
Pursuant to a voting rights agreement dated September 30, 1996 and as
amended December 10, 1997, between us, Mr. Gross, Robert S. Ehrlich and Yehuda
Harats, Lawrence M. Miller, Mr. Gross's advisor, will be entitled to be
nominated to serve on the Board so long as Mr. Gross, his heirs or assigns
retain at least 1,375,000 shares of common stock. As a result of this
agreement, our Board was increased to a total of six members. In addition,
under the voting rights agreement, Mr. Gross and Messrs. Ehrlich and Harats
agreed to vote and take all necessary action so that Messrs. Ehrlich, Harats
and Miller shall serve as members of the Board until the earlier of December
10, 2002 or the 5th annual meeting after December 10, 1997. In addition, so
long as Mr. Miller serves as a director, Mr. Gross, who shall succeed Mr.
Miller should he cease to serve on our Board (unless Mr. Gross is then serving
on the Board, in which case Mr. Gross may designate a director), shall be
entitled to attend and receive notice of Board meetings.
14
<PAGE>
PROPOSAL NUMBER 2
PROPOSED AMENDMENT TO ARTICLE FOUR OF THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK OF THE
COMPANY FROM 28,000,000 SHARES TO 100,000,000 SHARES.
General
The Board has approved a proposed amendment to Article Four of our Amended
and Restated Certificate of Incorporation to increase the number of shares of
common stock which we are authorized to issue from 28,000,000 to 100,000,000.
The Board has directed that the proposed amendment be submitted to a vote of
our stockholders at the annual meeting.
Our Amended and Restated Certificate of Incorporation currently authorizes
29,000,000 shares of capital stock consisting of 28,000,000 shares of common
stock, $.01 par value, and 1,000,000 shares of preferred stock, $.01 par
value. The proposed amendment would increase the authorized common stock to
100,000,000 shares. The holders of common stock are entitled to (i) one vote
for each share of common stock registered in the name of such holder, (ii)
receive dividends on their shares of stock when and as declared by the Board,
(iii) in the event of liquidation, dissolution or the winding up of our
affairs, share pro rata in the net assets available for distribution to
holders of common stock after satisfaction of the prior claims of the holders
of preferred stock of any series or any shares of any other class of capital
stock ranking senior to the common stock as to assets, in accordance with the
Amended and Restated Certificate of Incorporation.
On August 23, 2000, 20,233,274 shares of common stock were issued and
outstanding. In addition: 135,000 shares of common stock are reserved for
issuance upon the exercise of warrants granted to investors under December 28,
1999 agreement, 60,286 shares of common stock are reserved for issuance upon
the exercise of warrants granted certain consultants under certain agreements,
481,481 shares of common stock are reserved for issuance as future potential
price protection for Koor under our May 17, 2000 stock purchase agreement with
them, 3,000,000 shares stock which are reserved for issuance was declared
effective by the Securities and Exchange Commission on June 27, 2000.
1,246,030 are reserved for issuance upon the exercise of options granted under
our 1991 stock option plan, 1993 stock option and restricted stock purchase
plan and the 1998 non-executive employee stock option and restricted stock
purchase plan; and 1,028,133 shares of common stock may be issued upon the
exercise of stock options to be granted under the amended and restated non-
employee director stock option plan and the 1991,1993 and 1998 described
plans. The total potential common stock issuable upon the agreements, warrants
and stock options plans above is 6,750,505, totaling 26,983,779 shares
including the shares issued and outstanding.
The Board believes that it is in our best interests to increase the
authorized number of shares of common stock to 100,000,000 shares, which would
make available for issuance under our stock option plans as well as for
issuance in the future for other valid corporate purposes, without further
authorization of the stockholders (except as may be required by applicable law
or regulation). The Board believes that the proposed amendment to Article Four
will provide several long-term advantages to us and our stockholders . The
Board has frequently utilized options as a form of non-cash compensation to
employees and consultants. In addition, increased costs related to our
research and development programs and sales and marketing activities may
require us to seek additional financing over the next several years. An
increase in authorized shares would enable the Board to raise cash assets
through sales of common stock or other debt or equity securities convertible
into common stock to public and private investors without the need to seek
stockholder authorization at that time, which could significantly delay any
such financing. Finally, the passage of this proposal would also enable
management, with the approval of the Board, to pursue acquisitions or enter
into transactions or other business combinations which management believes
provide the potential for growth and profit.
15
<PAGE>
Certain Effects, Advantages and Disadvantages of the Proposed Amendment
The proposal, if approved, would strengthen the position of management and
might make the removal of management more difficult, even if such removal
would be generally beneficial to the our stockholders. The authorization to
issue the additional shares of common stock would provide management with a
capacity to negate the efforts of unfriendly tender offerors through the
issuance of securities to others who are friendly or desirable to management.
Moreover, we currently have in place certain provisions which have an anti-
takeover effect. Under the terms of the our Amended and Restated Certificate
of Incorporation, directors are elected for a term of three years, and 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 up for election in any
single year. Additionally our Amended and Restated Certificate of
Incorporation provides for blank check preferred stock. Moreover, the
provisions of the our Amended and Restated Certificate of Incorporation permit
the directors, in exercising their fiduciary duties, including without
limitation, evaluating a tender offer or exchange offer for our stock or any
merger or consolidation or any sale, lease, exchange or transfer of all or
substantially all of our assets, the acquisition of securities of a third
party or any reclassification, recapitalization or reorganization of Electric
Fuel or any of its securities, to consider various factors, including, among
others, other constituencies such as employees, creditors, customers and the
economy. As a result of these provisions, a potential purchaser of Electric
Fuel may be discouraged from attempting to acquire us, thereby possibly
depriving our stockholders of certain opportunities to sell or otherwise
dispose of their securities at above market prices as part of those
transactions. However, we have elected not to be governed by the provisions of
Section 203 of the General Corporation Law of the State of Delaware, an anti-
takeover statute which prohibits certain business combinations between a
Delaware corporation like us and an "interested stockholder," which is defined
as a person who, together with any of its affiliates and/or associates,
beneficially owns, directly or indirectly, 15% or more of the outstanding
voting shares of a Delaware corporation.
This Proposal is not the result of the Board's knowledge of any specific
effort to obtain control of Electric Fuel by means of a merger, tender offer,
proxy solicitation in opposition to management or otherwise. We are not
submitting this proposal to enable us to frustrate any efforts by another
party to acquire a controlling interest in us or to seek Board representation.
The submission of this proposal is not a part of any plan by our management to
adopt a series of amendments to the Amended and Restated Certificate of
Incorporation or Bylaws so as to render the takeover of Electric Fuel more
difficult.
Other than with respect to the issuance of shares in connection with our
stock option plans, including if approved by the stockholders, the Amended and
Restated Non-Employee Directors Plan, we currently have no specific plans or
proposals for the use of the additional shares, the authorization of which is
sought hereby. However, we could determine to issue additional shares at any
time. We are penetrating new markets and, therefore we are continuously
evaluating proposals for potential financings, including private placements of
debt and equity securities. In the event this proposal is passed, stockholder
approval of the issuance of the 22,000,000 additional shares of common stock,
the authorization of which is sought hereby, will not be sought prior to the
issuance of additional securities unless such issuances relate to an increase
in shares under certain stock option plans as required by Section 16 of the
Securities Exchange Act of 1934, or to mergers, consolidations or other
transactions which require stockholder approval.
The affirmative vote of the holders of record of a majority of the
outstanding shares of stock entitled to vote thereon is necessary to adopt the
proposed amendment to Article Four. If this Proposal is adopted, the amended
portion of Article Four of the Amended and Restated Certificate of
Incorporation will read as follows:
FOUR: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is One hundred-one Million
(101,000,000) consisting of two classes of shares designated as follows:
A. One hundred Million (100,000,000) shares of Common Stock, $.01 par
value, (the "Common Stock"); and
B. One Million (1,000,000) shares of Preferred Stock, $.01 par value, (the
"Preferred Stock").
16
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THE APPROVAL OF PROPOSED AMENDMENT TO
ARTICLE FOUR OF THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK OF THE COMPANY FROM
28,000,000 SHARES TO 100,000,000 SHARES.
17
<PAGE>
PROPOSAL NUMBER 3
APPROVAL OF AN AMENDMENT TO THE
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
General
We believe that stock-based awards are a key component to our ability to
retain and attract high quality directors to manage our business and affairs.
Our 1995 Stock Option Plan for Non-Employee Directors, adopted on September
28, 1995 and amended on March 25, 1996, advances our interests by enhancing
our ability to attract and retain directors who are in a position to make
significant contributions to our success and to reward such directors for such
contributions through ownership of shares of our common stock.
The plan currently provides that non-employee directors will receive an
initial grant of options to purchase 15,000 shares of common stock upon the
effective date of the plan or upon their election as a director. Thereafter,
these directors will receive options to purchase 5,000 shares of common stock
per year of service on the Board.
The Board believes that in order to maintain and further enhance the
attraction to new and existing Board members it is necessary to increase the
number of shares initially granted to new board members and to increase the
annual grant.
The Board's proposal is to increase the initial grant of options to
purchase shares of common stock to 25,000. Thereafter, non-employee directors
will receive options to purchase 10,000 shares of common stock per year of
service on the Board.
Description Of The Plan
The following description of the principal terms of the plan is a summary
and is qualified in its entirety by the full text of the plan, which is
attached hereto as Exhibit A.
Administration. The plan is administered by the Compensation Committee. The
Committee's responsibilities in respect of this plan include adopting,
amending and rescinding rules and regulations for the administration of the
plan, interpreting the plan, deciding any questions and settling all
controversies and disputes that may arise in connection with the plan. Subject
to the limitations of the Plan and applicable securities law, the Committee
may waive compliance by a non-employee director with any obligation to be
performed by him under an option and waive any condition or provision of an
option. Because this plan is a "formula" plan under the Securities and
Exchange Act of 1934, non-employee directors may be members of the committee
administering the Plan. Accordingly, options to non-employee directors are
granted solely under this plan and not under our regular stock award plans.
Each director who is not an employee of Electric Fuel or any of its
subsidiaries will be eligible to receive options under the plan.
Term of Plan. This plan was approved by the Board on September 28, 1995 and
was later amended on March 25, 1996. No options may be awarded under this plan
after September 28, 2005, but the plan shall continue thereafter while
previously awarded options remain subject to the plan.
Shares Subject to Plan. Subject to adjustments set forth in the plan, the
aggregate number of shares of common stock available for issuance in
connection with options granted under the Plan shall be 500,000, subject to
customary adjustments for stock splits, stock dividends or similar
transactions. If any option granted under the plan terminates without having
been exercised in full, the number of shares of common stock as to which such
option was not exercised shall be available for future grants within certain
limits under the plan.
Terms and Conditions of Options. The plan currently provides that non-
employee directors will receive an initial grant of options to purchase 15,000
shares of common stock upon the effective date of the plan or upon their
election as a director. Thereafter, these directors will receive options to
purchase 5,000 shares of common
18
<PAGE>
stock per year of service on the Board. The Board's proposal is to increase
the initial grant of options to purchase shares of common stock to 25,000.
Thereafter, non-employee directors will receive options to purchase
10,000 shares of common stock per year of service on the Board.
The exercise price of each option shall be 100% of the fair market value on
the date of the grant which shall equal the closing price of the common stock
as reported on The Nasdaq National Market. The latest date on which an option
may be exercised is ten years from the date of the grant. Each grant of
options shall become exercisable in three equal installments on each of the
first, second and third anniversaries of the grant. The exercise price of
options granted under the plan must be paid in cash, or by certified check,
bank draft or money order payable to our order, through the delivery of shares
of common stock, or by a combination of the above.
All outstanding options shall become exercisable prior to the consummation
of a merger or consolidation involving Electric Fuel, any liquidation or
dissolution of Electric Fuel, any sale of substantially all of our assets or
any other transaction or series of related transactions as a result of which a
single person or several persons acting in concert own a majority of our then
outstanding common stock. The committee shall determine the exercise period
for these outstanding options, which shall not be less than 20 days prior to
the consummation of the merger, consolidation or other event. The Committee
may also accelerate the exercisability of such options in accordance with
applicable securities law, in which case, all then outstanding options not so
exercised shall terminate and cease to be exercisable. These options shall not
become exercisable in the event that (a) the holders of common stock prior to
the consummation retain or acquire securities constituting a majority of the
outstanding voting common stock of the acquiring or surviving corporation or
other entity and (b) no single person owns more than half of the voting common
stock of the acquiring or surviving corporation or other entity.
Miscellaneous. Neither adoption of the plan nor the grant of options to an
eligible director shall confer upon any person any right to continued status
as a director with us or any subsidiary of ours or affect in any way our right
to terminate a director relationship at any time or shall affect our right to
grant to such director options that are not subject to the plan, to issue to
such directors common stock as a bonus or otherwise, or to adopt other plans
or arrangements under which common stock may be issued to directors.
THE BOARD OF DIRECTORS
RECOMMENDS THE AMENDMENT OF THE
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
19
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PROPOSAL NUMBER 4
APPROVAL OF AN AMENDMENT TO THE
AMENDED AND RESTATED
1993 STOCK OPTION AND
RESTRICTED STOCK PURCHASE PLAN
General
The purpose of our Amended and Restated 1993 Stock Option and Restricted
Stock Purchase Plan is to advance our interests by enhancing our ability to
(a) attract and retain employees who are in a position to make significant
contributions to our success; (b) reward employees for these contributions;
and (c) encourage employees to take into account our long-term interests
through ownership of our shares.
The Amended 1993 Plan currently provides for the issuance of up to
2,700,000 shares of our common stock. As of August 28 , 2000 there were
110,613 shares of our common stock available for issuance under the Plan. The
Board believes that in order to advance our interests through use of the
Amended 1993 Plan, we need to increase the number of shares available for
issuance thereunder. The Board's proposal is to increase the total number of
shares reserved for issuance under the Amended 1993 Plan from 2,700,000 to
4,200,000.
Description of the Plan
The following description of the principal terms of the plan is a summary
and is qualified in its entirety by the full text of the plan which is
attached to this proxy statement as Exhibit B.
Administration. The Amended 1993 Plan is administered by our Board, which
may delegate its authority to administer the Amended 1993 Plan to a committee
of the Board. The Board may grant options and make purchase grants for shares
of common stock to eligible employees, determine the terms and conditions of
each option or purchase grant and adopt, amend and rescind rules and
regulations for the administration of the Plan. The Plan grants the Board the
authority to grant options (both incentive stock options and nonstatutory
options) and make purchase grants to eligible employees. Subject to the
limitations of the Plan and applicable securities law, the Board may waive
compliance by any employee with respect to any obligation to be performed by
the employee. The Board may also exercise any right of repurchase with respect
to common stock issued under the Plan pursuant to a purchase grant. The Plan
was adopted by the Board and approved by our stockholders in December 1993 and
was later amended by our stockholders in March 1997. No awards may be made
under this plan after December 2003, but the plan shall continue thereafter
while previously granted awards remain subject to the plan.
Employees Eligible to Receive Options or Purchase Grants Under the 1993
Plan. Employees of Electric Fuel eligible to receive options or purchase
grants under the Plan are those employees who, in the opinion of the Board,
are in a position to make a significant contribution to our success. Directors
who are not employees are not eligible to receive awards under this Plan.
Terms and Conditions of Options. The Board determines the exercise price of
options granted under the Plan. The Board may determine the exercise price of
nonstatutory options at the time of grant. The exercise price of incentive
stock options, 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. No option may be
exercisable for 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 (a) in cash or by certified check,
bank draft or money order, (b) through delivery of shares of common stock
having a fair market value equal to the purchase price, (c) through delivery
of a promissory note acceptable to the Board or (d) a combination of these
methods.
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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 the employee. Options which are exercisable at the time of an
employee's termination will continue to be exercisable for three months,
unless, in the opinion of the Board, the reasons for the termination of
employment justify terminating the employee's exercisable options.
Terms and Conditions of Purchase Grants. The purchase price of common stock
purchased pursuant to a restricted stock purchase grant made under the 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
the 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 (a)
cash, (b) certified check, (c) bank draft or money order, or (d) by a
promissory note. If the employee pays for the common stock with a promissory
note, the note must meet the conditions specified in the 1993 Plan, in
addition to any other conditions which the Board may establish.
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
terminates for any reason other than death, all purchase grants held by the
employee will automatically terminate.
The Board may at any time amend the Plan for the purpose of satisfying the
requirements of the Internal Revenue Code of 1986, as amended, or other
applicable law or regulation or for any other legal purpose, provided that,
without the consent of our stockholders, the Board may not (a) increase the
number of shares available under the 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 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 for Plan Participants Who Are Israeli
Residents. Pursuant to current Israeli tax law, each option and purchase
grant, and shares issued pursuant to each option and purchase grant made under
the 1993 Plan, are issued to, and held in trust for the benefit of the grantee
by, a trustee designated by the Board. Prior to releasing any securities from
the trust, the trustee must ensure that the employee remits an amount of money
which is sufficient and 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, we 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 those shares of common stock.
THE BOARD OF DIRECTORS RECOMMENDS THE AMENDMENT OF THE
AMENDED AND RESTATED 1993 STOCK OPTION
AND RESTRICTED STOCK PURCHASE PLAN
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INDEPENDENT ACCOUNTANTS
Kesselman & Kesselman, a member of PriceWaterhouseCoopers International,
served as our independent accountants for the fiscal year ending December 31,
1998. Upon the recommendation of our Audit Committee, effective as of January
12, 2000, the Board terminated our engagement of Kesselman, and appointed Kost
Forer & Gabbay, a member of Ernst & Young International, to serve as our
independent accountants. The Audit Committee recommended the change in our
independent accountants after soliciting proposals from Kost and comparing
Kost's proposed budget to the costs of our prior audits.
The financial statements for the fiscal year ending December 31, 1999, have
been audited by Kost Forer & Gabbay.
Kesselman's reports on our financial statements for the year ended December
31, 1998 and Kost's report on the financial statements for the years ended
December 31, 1999 did not contain an adverse opinion or disclaimer of opinion,
and were not qualified or modified as to uncertainty, auditing scope or
accounting principles. During the two years preceding the change in
independent accountants and through the effective date of the change, there
were no disagreements with Kesselman on any matter of accounting principles or
practices, financial statement disclosure, auditing scope or procedures or
internal controls, which, if not resolved to the satisfaction of Kesselman,
would have caused it to make reference to such matter in its report.
Representatives of Kost are not expected to be present at the Annual
Stockholders Meeting.
QUORUM REQUIREMENT AND METHOD OF TABULATION
Consistent with Delaware corporate law and under our 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 us 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 the rules of the Securities and Exchange Commission,
stockholder proposals intended to be included in our proxy material for the
annual meeting must be received by us on or before 2001 at our
principal executive offices, 120 Wood Avenue South, Suite 300, Iselin, New
Jersey, 08830, Attention: Corporate Secretary.
OTHER MATTERS
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.
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PROXY SOLICITATION
The cost of soliciting proxies will be paid by us. Proxies may be solicited
without extra compensation by certain of our directors, officers and regular
employees by mail, telegram or in person.
Stockholders are encouraged to send their proxies without delay. Your
cooperation is appreciated.
FINANCIAL STATEMENTS
Our audited financial statements for the fiscal year ended December 31,
1999 and certain other related financial and business information of Electric
Fuel are contained in our 1999 Annual Report on Form 10-K furnished to our
stockholders along with this proxy statement.
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ELECTRIC FUEL CORPORATION
AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1995 Stock Option Plan for Non-Employee Directors (the
"Plan") is to advance the interests of Electric Fuel Corporation (the
"Company") by enhancing the ability of the Company to attract and retain
directors who are in a position to make significant contributions to the
success of the Company and to reward such directors for such contributions
through ownership of shares of the Company's common stock (the "Stock").
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors (the "Board") of the Company from time to time appointed by
the Board to administer the Plan in accordance with the express provisions of
the Plan, (a) to prescribe the form or forms of instruments evidencing options
and any other instruments required under the Plan and to change such forms
from time to time; (b) to adopt, amend and rescind rules and regulations for
the administration of the Plan; and (c) to interpret the Plan and to decide
any questions and settle all controversies and disputes that may arise in
connection with the Plan. Such determinations of the Committee shall be
conclusive and shall bind all parties. Subject to Section 7 of this Plan and
to Rule 16b-3 under the Securities Exchange Act of 1934, as from time to time
in effect ("Rule 16b-3"), the Committee shall also have the authority, both
generally and in particular instances, to waive compliance by a non-employee
director with any obligation to be performed by him under an option and to
waive any condition or provision of an option.
The Plan is a "formula" plan within the meaning of the rules and
regulations of the Securities and Exchange Act of 1934. As a result of the
Plan being a formula plan and otherwise meeting certain requirements of the
SEC adopted under Section 16, non-employee directors may be members of the
Committee administering the Plan. Accordingly, options to non-employee
directors are granted solely under this Plan and not under the Company's
regular stock award plans.
3. EFFECTIVE DATE AND TERM OF PLAN
This Plan, having been approved by the Board of Directors on September 28,
1995 (the "Effective Date"), is subject to approval of this Plan by vote of a
majority of the stockholders of the Company present and eligible to vote on
the question at an annual or special meeting of stockholders held not later
than September 28, 1996. Options may be granted under the Plan prior to the
date of stockholder approval, and options so granted shall be effective on the
effective date of grant subject to stockholder approval of the Plan as
provided in this Section. No options may be awarded under this Plan after
September 28, 2005, but the Plan shall continue thereafter while previously
awarded options remain subject to the Plan.
4. SHARES SUBJECT TO PLAN
a. Number of Shares. Subject to adjustment as provided in Section 4(c) of
this Plan, the aggregate number of shares of Stock that may be delivered upon
the exercise of options granted under the Plan shall be 500,000. If any option
granted under the Plan terminates without having been exercised in full, the
number of shares of Stock as to which such option was not exercised shall be
available for future grants within the limits set forth in this Section 4(a).
b. Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
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c. Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's
capital stock, the number and kind of shares of stock or securities of the
Company subject to options then outstanding or subsequently granted under the
Plan, the maximum number of shares or securities that may be delivered under
the Plan, the exercise price, and other relevant provisions shall be
appropriately adjusted by the Committee, whose determination shall be binding
on all persons.
5. ELIGIBILITY FOR OPTIONS
Each director who is not an employee of the Company or of any subsidiary of
the Company shall be eligible to receive options under the Plan (an "Eligible
Director").
6. TERMS AND CONDITIONS OF OPTIONS
a. Number of Options.
i. Initial Grant. Each individual who is an Eligible Director on the
Effective Date of the Plan shall be granted, on that date, an option
covering 15,000 shares of Stock, subject to stockholder approval as
provided in Section 3. Each individual who thereafter becomes an Eligible
Director shall, upon first qualifying as an Eligible Director, be granted
an option covering 15,000 shares of Stock. Option grants pursuant to either
of the two preceding sentences are herein referred to as "Initial Grants".
ii. Subsequent Options. Following the Initial Grant, each Eligible
Director shall be awarded an additional option covering 5,000 shares of
Stock on each anniversary of the Initial Grant, provided that he or she is
an Eligible Director on such anniversary.
b. Exercise Price. The exercise price of each option shall be 100% of the
fair market value per share of the Stock at the time the option is granted,
but not less, in the case of an original issue of authorized stock, than par
value per share. For this purpose, "fair market value" shall mean the closing
price of the Stock as reported on the Nasdaq National Market System (or other
exchange or market system if no longer listed on such exchange) on the date of
the grant (based on The Wall Street Journal report of composite transactions).
c. Duration of Options. The latest date on which an option may be exercised
(the "Final Exercise Date") shall be the date which is ten years from the date
the option was granted.
d. Exercise of Options.
i. Each option shall become exercisable in accordance with the
following:
(1) One year after the date of the grant, the option shall become
exercisable to the extent of one-third of the shares covered thereby,
and
(2) On each of the second and third anniversaries of the date of the
grant, the option shall become exercisable as to an additional one-
third of the shares covered thereby.
ii. Any exercise of an option shall be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (a) the
option certificate and any other documents required by the Committee and
(b) payment in full for the number of shares for which the option is
exercised.
iii. If an option is exercised by the executor or administrator of a
deceased director, or by the person or persons to whom the option has been
transferred by the director's will or the applicable laws of descent and
distribution, the Company shall be under no obligation to deliver Stock
pursuant to such exercise until the Company is satisfied as to the
authority of the person or persons exercising the option.
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e. Payment for and Delivery of Stock. Stock purchased under the Plan shall
be paid for as follows; (i) in cash or by certified check, bank draft or money
order payable to the order of the Company, (ii) through the delivery of shares
of Stock having a fair market value on the last business day preceding the
date of exercise equal to the purchase price, provided that, in the case of
shares of stock acquired directly from the Company, such shares have been held
for at least six months, or (iii) by a combination of cash and Stock as
provided in clauses (i) and (ii) above.
An option holder shall not have the rights of a stockholder with regard to
awards under the Plan except as to Stock actually received by him or her under
the Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulations have been complied with and any applicable taxes
have been paid, (b) if the outstanding Stock is at the time listed on any
stock exchange, until the shares to be delivered have been listed or
authorized to be listed on such exchange upon official notice of issuance, and
(c) until all other legal matters in connection with the issuance and delivery
of such shares have been approved by the Company's counsel. If the sale of
Stock has not been registered under the Securities Act of 1933, as from time
to time in effect, the Company may require, as a condition to exercise of the
option, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
f. Nontransferability of Options. No option may be transferred other than
by will or by the laws of descent and distribution, and during a director's
lifetime an option may be exercised only by the director.
g. Death. Upon the death of any Eligible Director granted options under
this Plan, all options not then exercisable shall terminate. All options held
by the director that are exercisable immediately prior to death may be
exercised by his executor or administrator, or by the person or persons to
whom the option is transferred by will or the applicable laws of descent and
distribution, at any time within the three-month period following the
director's death (but not later than the Final Exercise Date).
h. Other Termination of Status of Director. If a director's service with
the Company terminates for any reason other than death, all options held by
the director that are not then exercisable shall terminate. Options that are
exercisable on the date of termination shall continue to be exercisable for a
period of three months (or until the Final Exercise Date, if earlier), but
shall terminate immediately if the director was removed or terminated for
fraud, dishonesty or intentional misrepresentation or embezzlement,
misappropriation or conversion of assets or opportunities of the Company or
any of its subsidiaries. After completion of that three-month period, such
options shall terminate to the extent not previously exercised, expired or
terminated.
i. Mergers, etc. In the event of any merger or consolidation involving the
Company, any liquidation or dissolution of the Company, any sale of
substantially all of the Company's assets or any other transaction or series
of related transactions as a result of which a single person or several
persons acting in concert own a majority of the Company's then outstanding
Stock (such merger, consolidation, sale or other transaction being hereinafter
referred to as a "Transaction"), all outstanding options shall become
exercisable prior to the consummation of such Transaction, such options shall
be exercisable at such time as the Committee determines but in no event for
less than a period of at least 20 days prior to the consummation, but only to
the extent the Committee determines it may so accelerate the exercisability of
such options in accordance with the applicable requirements of Rule 16b-3.
Upon consummation of the Transaction, all outstanding options not so exercised
shall terminate and cease to be exercisable. There shall be excluded from the
foregoing any Transaction as a result of which (a) the holders of Stock prior
to the Transaction retain or acquire securities constituting a majority of the
outstanding voting common stock of the acquiring or surviving corporation or
other entity and (b) no single person owns more than half of the outstanding
voting common stock of the acquiring or surviving corporation or other entity.
For purposes of this Section, voting common stock of the acquiring or
surviving corporation or other entity that is issuable upon conversion of
convertible securities or upon exercise of warrants
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or options shall be considered outstanding, and all securities that vote in
the election of directors (other than solely as the result of a default in the
making of any dividend or other payment) shall be deemed to constitute that
number of shares of voting common stock which is equivalent to the number of
such votes that may be cast by the holders of such securities.
7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of options to an Eligible
Director shall confer upon any person any right to continued status as a
director with the Company or any subsidiary or affect in any way the right of
the Company or subsidiary to terminate a director relationship at any time or
shall affect the Company's right to grant to such director options that are
not subject to the Plan, to issue to such directors Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Stock may be
issued to directors.
The Committee may at any time discontinue granting options under the Plan.
The Committee may at any time or times amend the Plan or any outstanding
options for the purpose of satisfying any changes in applicable laws or
regulations or for any other purpose which may at the time be permitted by
law, or may at any time terminate the Plan as to any further grants of
options, provided that no such amendment shall adversely affect the rights of
any director (without his or her consent) under any option previously granted.
The provisions of Section 5 or 6 of this Plan shall not be amended any more
frequently than once every six months other than to comply with changes in the
Internal Revenue Code of 1986, the Employee Retirement Income Security Act of
1974 or the rules and regulations thereunder, all as from time to time in
effect.
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ELECTRIC FUEL CORPORATION
AMENDED AND RESTATED 1993 STOCK OPTION AND
RESTRICTED STOCK PURCHASE PLAN
1. Purpose
The purpose of this Amended and Restated 1993 Stock Option and Restricted
Stock Purchase Plan (the "Plan") is to advance the interests of Electric Fuel
Corporation (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, $.01
par value (the "Stock").
Options granted and purchase grants made pursuant to the Plan may, for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"), be
incentive stock options as defined in section 422 of the Code (any option that
is intended to qualify as an incentive stock option being referred to herein
as an "incentive option"), or options that are not incentive options, or both.
Options granted pursuant to the Plan shall be presumed to be non-incentive
options unless expressly designated as incentive options.
The following Plan provisions are subject to the special provisions for
participants in the Plan who are Israeli residents, attached in Addendum I
hereto.
2. Administration
The Plan shall be administered by the Board of Directors of the Company
(the "Board").
The Board may, in its discretion, delegate its powers with respect to the
Plan to a committee (the "Committee"), in which event all references herein to
the Board shall be deemed to be references to the Committee. The Committee
shall consist of at least three Directors. A majority of the members of the
Committee shall constitute a quorum, and all determinations of the Committee
under the Plan may be made without notice or meeting of the Committee by a
writing signed by a majority of the Committee members. All members of the
Committee shall be disinterested persons within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Board shall have authority, not inconsistent with the express
provisions of the Plan, (a) to grant options and make purchase grants to such
eligible employees as the Board may select; (b) to determine the time or times
when options shall be granted or purchase grants made and the number of shares
of Stock subject to each option or purchase grant; (c) to determine which
options and purchase grants are, and which options and purchase grants are
not, to be treated as incentive options for purposes of the Code; (d) to
determine the terms and conditions of each option and purchase grant; (e) to
prescribe the form or forms of any instruments evidencing options and purchase
grants and any other instruments required under the Plan and to change such
forms from time to time; (f) to adopt, amend and rescind rules and regulations
for the administration of the Plan; and (g) to interpret the Plan and to
decide any questions and settle all controversies and disputes that may arise
in connection with the Plan. Subject to Section 8, the Board shall also have
the authority, both generally and in particular instances, to waive compliance
by an employee with any obligation to be performed by him or her under an
option or purchase grant, to exercise any right of repurchase with respect to
Stock issued under the Plan pursuant to a purchase grant, to waive any
condition or provision of an option or purchase grant, and to amend or cancel
any option or purchase grant (and if an any option or purchase grant is
canceled, to grant a new option or purchase grant on such terms as the Board
shall specify), except that the Board may not, in the case of an option or
purchase grant treated as an incentive option for purposes of the Code, other
than in accordance with Section 4(c), (i) increase the total number of shares
covered by the option or purchase grant, (ii) extend the term of the option to
more than ten years (five years, in the case of an incentive option granted to
a "ten-percent shareholder" as defined in Section 6(a) below), or (iii) unless
the holder of the option or purchase grant consents, reduce the option
exercise price per share or otherwise cause a modification, extension or
renewal (within the meaning of section 424(h) of the Code) of the option or
purchase grant.
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All such determinations and actions of the Board shall be conclusive and
shall bind all parties. The Board may delegate to the Chief Executive Officer
of the Company the authority to grant options and make purchase grants to
employees of the Company who are not officers or directors.
3. Effective Date and Term of Plan
The Plan shall become effective on the date on which the Plan is approved
by the shareholders of the Company. Grants of options and purchase grants
under the Plan may be made prior to that date (but after adoption of the Plan
by the Board of Directors), subject to approval of the Plan by such
shareholders.
No option shall be granted and no purchase grant made under the Plan after
the completion of ten years from the date on which the Plan was adopted by the
Board of Directors, but options previously granted and purchase grants
previously made may extend beyond that date.
4. Shares Subject to the Plan
(a) Number of Shares. Subject to adjustment as provided in Section 4(c),
the maximum aggregate number of shares of Stock that may be delivered upon the
exercise of options and purchase grants granted under the Plan shall be
2,700,000. If any option or purchase grant granted under the Plan terminates
without having been exercised in full, or upon exercise is satisfied other
than by delivery of Stock, the number of shares of Stock as to which such
option or purchase grant was not exercised shall be available for future
grants within the limits set forth in this Section 4(a). In addition, if any
shares of Stock issued under the Plan pursuant to purchase grants are
subsequently repurchased by the Company pursuant to Section 7(g), such shares
shall be available for future grants under the Plan.
The maximum number of shares for which options may be granted to any
individual over the life of the Plan shall be 1,350,000. The per-individual
limitations described in this paragraph shall be construed and applied
consistent with the rules and regulations under section 162(m) of the Code.
(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, reorganization, recapitalization or other change in the
Company's capital stock, the number and kind of shares of Stock or securities
of the Company subject to options or purchase grants then outstanding or
subsequently granted or made under the Plan, the maximum number of shares or
securities that may be delivered under the Plan, the exercise price and other
relevant provisions shall be appropriately adjusted by the Board, whose
determination shall be binding on all persons.
The Board may also adjust the number of shares subject to outstanding
options, the exercise price of outstanding options and the terms of
outstanding options, to take into consideration material changes in accounting
practices or principles, extraordinary dividends, and, except as described in
Sections 6(h) and 7(h), consolidations, mergers acquisitions or dispositions
of Stock or property or any other event if it is determined by the Board that
such adjustment is appropriate to avoid distortion in the operation of the
Plan, provided that no such adjustment shall be made in the case of an
incentive option, without the consent of the participant, if it would
constitute a modification, extension or renewal of the incentive option within
the meaning of section 424(h) of the Code.
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(d) Replacement Options. The Board may grant options under the Plan in
substitution for options held by employees of another corporation who
concurrently become employees of the Company or a subsidiary as a result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary or the acquisition by the Company or a subsidiary of property or
stock of the employing corporation. The Board may direct that the replacement
options be granted on such terms and conditions as the Board considers
appropriate in the circumstances.
5. Eligibility
Employees eligible to receive options or purchase grants under the Plan
shall be those employees of the Company and its subsidiaries who, in the
opinion of the Board, are in a position to make a significant contribution to
the success of the Company or such subsidiaries. A subsidiary for purposes of
the Plan shall be a corporation in which the Company owns, directly or
indirectly, stock possessing 50% or more of the total combined voting power of
all classes of stock.
Directors who are not employees shall not be eligible to participate in the
Plan. Options or purchase grants constituting incentive options for purposes
of the Code shall be granted only to "employees" as defined in the provisions
of the Code or regulations thereunder applicable to incentive stock options.
Receipt of options or purchase grants under the Plan or of awards under any
other employee benefit plan of the Company or any of its subsidiaries shall
not preclude an employee from receiving options or purchase grants or
additional options or purchase grants under the Plan.
6. Terms and Conditions of Options
(a) Exercise Price. The exercise price of each option shall be determined
by the Board but in the case of an incentive option shall not be less than
100% (110%, in the case of an incentive option granted to a ten-percent
shareholder) of the fair market value per share of the Stock at the time the
incentive option is granted; nor shall the exercise price of any option be
less, in the case of an original issue of authorized stock, than par value per
share. In the case of employees who are subject to Section 16 of the Exchange
Act, the exercise price of an option shall not be less than 50% of the fair
market value of the Common Stock on the date of the grant. For this purpose,
"fair market value" in the case of incentive options shall have the same
meaning as it does in the provisions of the Code and the regulations
thereunder applicable to incentive options; and "ten-percent shareholder"
shall mean any employee who at the time of grant owns directly, or is deemed
to own by reason of the attribution set forth in section 424(d) of the Code,
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any of its parent or subsidiary
corporations.
(b) Duration of Options. Options shall be exercisable during such period or
periods as the Board may specify. In no case shall an option be exercisable
more than ten years (five years, in the case of an incentive option granted to
a "ten-percent shareholder" as defined in (a) above) from the date the option
was granted or such earlier date as the Board may specify at the time the
option is granted (the "Final Exercise Date").
(c) Exercise of Options.
(1) Each option shall be made exercisable at such time or times, whether or
not in installments, and upon such conditions as the Board shall prescribe at
the time an option is granted.
In the case of an option not immediately exercisable in full, the Board may
at any time accelerate the time at which all or any part of the option may be
exercised.
(2) The award forms or other instruments evidencing incentive options shall
contain such provisions relating to exercise and other matters as are required
of incentive options under the applicable provisions of the Code and the
regulations thereunder, as from time to time in effect.
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<PAGE>
(3) Any exercise of an option shall be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (a) the option
certificate and any other documents required by the Board and (b) payment in
full for the number of shares for which the option is exercised.
(4) In the case of an option that is not an incentive option, the Board
shall have the right to require that the individual exercising the option
remit to the Company an amount sufficient to satisfy any federal, state, local
or foreign withholding tax requirements (or make other arrangements
satisfactory to the Company with regard to such taxes) prior to the delivery
of any Stock pursuant to the exercise of the option. If permitted by the
Board, either at the time of the grant of the option or the time of exercise,
the individual may elect, at such time and in such manner as the Board may
prescribe, to satisfy such withholding obligation by (i) delivering Stock to
the Company (which in the case of Stock acquired from the Company shall have
been owned by the individual for at least six months prior to the delivery
date) having a fair market value equal to such withholding obligation, or (ii)
requesting that the Company withhold from the shares of Stock to be delivered
upon the exercise a number of shares of Stock having a fair market value equal
to such withholding obligation.
(5) In the case of an incentive option, if at the time the option is
exercised the Board determines that under applicable law and regulations the
Company could be liable for the withholding of any federal, state or foreign
tax, with respect to the exercise or disposition of the Stock received upon
exercise or otherwise, the Board may require as a condition of exercise that
the individual exercising the option agree (i) to inform the Company promptly
of any disposition (within the meaning of section 424(c) of the Code and the
regulations thereunder) of Stock received upon exercise, and (ii) to give such
security as the Board deems adequate to meet the potential liability of the
Company for the withholding of tax, and to augment such security from time to
time in any amount reasonably deemed necessary by the Committee to preserve
the adequacy of such security.
(6) If an option is exercised by the executor or administrator of a
deceased employee, or by the person or person to whom the option has been
transferred by the employee's will or the applicable laws of descent and
distribution, the Company shall be under no obligation to deliver Stock
pursuant to such exercise until the Company is satisfied as to the authority
of the person or persons exercising the option.
(d) Payment For and Delivery of Stock. Stock purchased under the Plan upon
the exercise of options shall be paid for as follows: (i) in cash or by
certified check, bank draft or money order payable to the order of the
Company, or (ii) if so permitted by the Board (which, in the case of an
incentive option, shall specify the method of payment at the time of grant),
through the delivery of shares of Stock (which, in the case of Stock acquired
from the Company, shall have been held for at least six months prior to
delivery) having a fair market value on the last business day preceding the
date of exercise equal to the purchase price, or (iii) if so permitted by the
Board (which, in the case of an incentive option, shall specify the method of
payment at the time of grant) by a combination of such types of payment, or
(iv) if so permitted by the Board (which, in the case of an incentive option,
shall specify the method of payment at the time of grant) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to
the Company sufficient funds to pay the exercise price, or (v) if so permitted
by the terms of the option, by delivery of a promissory note of the employee
containing such terms and conditions, including without limitation, interest
rate and maturity, as the Board may specify in the option (except that the
option may provide that the rate of interest on the note will be such rate as
is sufficient at all times to avoid the imputation of any interest under the
applicable provisions of the Code or of the Israeli Income Tax Ordinance), or
by a combination of cash (or cash and Stock) and such a promissory note;
provided, that if the Stock delivered upon exercise of the option is an
original issue of authorized Stock, at least so much of the exercise price as
represents the par value of such Stock shall be paid in cash or by a
combination of cash and Stock.
An option holder shall not have the rights of a shareholder with regard to
awards under the Plan except as to Stock actually received by him or her under
the Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal, state
and foreign laws and regulations have been complied with, and (b) if the
outstanding Stock is at the time listed on any stock exchange, until the
shares to be delivered have been listed or
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<PAGE>
authorized to be listed on such exchange upon official notice of issuance, and
(c) until all other legal matters in connection with the issuance and delivery
of such shares have been approved by the Company's counsel. If the sale of
Stock has not been registered under the Securities Act of 1933, as amended
(the "Securities Act") the Company may require, as a condition to exercise of
the option, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
(e) Nontransferability of Options. Except as the Board may otherwise
determine, 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.
(f) Death. If an employee's employment with the Company and its
subsidiaries terminates by reason of death, each option held by the employee
immediately prior to death shall become immediately exercisable by his or her
executor or administrator, or by the person or persons to whom the option is
transferred by will or the applicable laws of descent and distribution, at any
time within the three-year period ending with the third anniversary of the
employee's death, but in no event beyond the Final Exercise Date.
(g) Other Termination of Employment. If an employee's employment with the
Company and its subsidiaries terminates for any reason other than death, all
options held by the employee that are not then exercisable shall terminate.
Options that are exercisable on the date of termination shall continue to be
exercisable for a period of three months (subject to Section 6(b)) (or such
longer period as the Board may determine, but into event beyond the Final
Exercise Date) unless the employee was discharged for cause that, in the
opinion of the Board, casts such discredit on him or her as to justify
termination of his or her options. In any event, if the employee's employment
contract includes a provision that defines termination for cause, and the
employee was terminated for cause within the meaning of his or her employment
contract, the Board may terminate the employee's options. Furthermore, the
Board may terminate the employee's options upon a participant's resignation
other than following his or her demotion, loss of title or office or a
substantial reduction in his or her salary or a change in his or her place of
employment to a location outside of the general area in which he was employed
on the date of the grant. After completion of the three-month period following
termination, options not otherwise previously terminated or expired shall
expire without further action by the Board. For purposes of this Section 6(g),
employment shall not be considered terminated (i) in the case of sick leave or
other bona fide leave of absence approved for purposes of the Plan by the
Board, so long as the employee's right to reemployment is guaranteed either by
statute or by contract, or (ii) in the case of a transfer of employment
between the Company and a subsidiary or between subsidiaries, or to the
employment of a corporation (or a parent or subsidiary corporation of such
corporation) issuing or assuming an option in a transaction to which section
424(a) of the Code applies.
(h) Mergers, etc. In the event of a consolidation or merger in which the
Company is not the surviving corporation or which results in the acquisition
of substantially all the Company's outstanding Stock by a single person or
entity or by a group of persons and/or entities acting in concert, or in the
event of the sale or transfer of substantially all the Company's assets, all
outstanding options shall thereupon terminate, provided that all outstanding
options shall become exercisable immediately prior to consummation of such
merger, consolidation or sale of assets unless, if there is a surviving or
acquiring corporation, the Board has arranged, subject to consummation of the
merger, consolidation or sale of assets, for the assumption of the options or
the grant to participants of replacement options by that corporation or an
affiliate of that corporation, which, in the case of incentive options, shall
satisfy the requirements of section 424(a) of the Code.
7. Terms and Conditions of Purchase Grants
(a) Purchase Price. The purchase price of Stock purchased pursuant to
purchase grants under the Plan shall be determined in the same manner as the
exercise price for options (subject to appropriate adjustment by the Board
upon the occurrence of an adjustment made pursuant to Section 4(c), and the
Board's determination of such matter shall be final and binding).
5
<PAGE>
(b) Purchase of Stock Pursuant to Grants. An employee receiving a purchase
grant under the Plan may purchase the Stock subject to such purchase grant at
any time within 60 days after the purchase grant is made (or, in the case of
purchase grants made subject to stockholder approval of this Plan, 60 days
after such approval). If a purchase grant is exercised by the executor or
administrator of a deceased employee, or by the person or persons to whom the
purchase grant has been transferred by the employee's will or the applicable
laws of descent and distribution, the Company shall be under no obligation to
deliver Stock pursuant to such exercise until the Company is satisfied as to
the authority of the person or persons exercising the purchase grant.
(c) Payment For and Delivery of Stock. Stock purchased pursuant to purchase
grants shall be paid for as follows: (i) in cash or by certified check, bank
draft or money order payable to the order of the Company in an amount not less
than the par value of the Stock being purchased, determined on the date of
purchase, and (ii) by delivery of a nonrecourse promissory note of the
employee in a principal amount equal to the balance of such purchase price and
containing the following terms and conditions together with such other terms
and conditions as the Board may specify at the time of purchase:
(1) The rate of interest on the note will be such rate as is sufficient
at all times to avoid the imputation of any interest under the applicable
provisions of the Code and the rules and regulations promulgated
thereunder, and of the Income Tax Ordinance of Israel and the rules and
regulations promulgated thereunder, all as from time to time in effect.
(2) Interest will be payable quarterly, or upon such terms and
conditions as the Board may specify at the time of the payment grant, and
at the option of the participant, interest which is due and payable will be
treated as a new loan to the participant evidenced by the same note.
(3) The principal of the note, and all accrued and unpaid interest, will
be due and payable on such date as may be specified by the Board at the
time of the payment grant, but in no event longer than ten years from the
date of issuance of the note.
(4) The note at all times will be secured by all of the Stock issued
upon exercise of the purchase grant.
(5) Except as stated in (4) above, the note will be without recourse to
the participant or any of his or her assets.
(6) If the participant sells any of the Stock securing the note, all
proceeds from such sale will first be applied, to the extent necessary
therefor, to the payment in full of the principal of, and all accrued and
unpaid interest on, the note.
(7) At any time or from time to time, a participant may specify that
25%, 50%, 75% or 100% of the original principal amount of the note
delivered upon purchase of the Stock (plus all accrued and unpaid interest
thereon and all accrued interest that has been added to the principal of
the note) shall in the future be with recourse to him or her and to all of
his or her assets, in which event the nonrecourse note shall be exchanged
for a recourse and a nonrecourse note in the specified amounts, the Stock
securing the original nonrecourse note shall be divided pro rata between
the two new notes, and otherwise the two new notes shall be identical to
the old note (except, in the case of the new recourse note, with respect to
recourse to the participant and his or her other assets).
A purchase grantee shall not have the rights of a shareholder with regard
to awards under the Plan except as to Stock actually purchased and received by
him or her under the Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulations have been complied with, and (b) if the outstanding
Stock is at the time listed on any stock exchange, until the shares to be
delivered have been listed or authorized to be listed on such exchange upon
official notice of issuance, and (c) until all other legal matters in
connection
6
<PAGE>
with the issuance and delivery of such shares have been approved by the
Company's counsel. If the sale of Stock has not been registered under the
Securities Act, the Company may require, as a condition to exercise of the
purchase grant, such representations or agreements as counsel for the Company
may consider appropriate to avoid violation of such Act and may require that
the certificates evidencing such Stock bear an appropriate legend restricting
transfer. Upon delivery, such Stock shall bear a notion in form and substance
satisfactory to the Company.
(d) Nontransferability of Grants. Except as provided in Section 7(b)
hereof, no purchase grant may be transferred, and a purchase grant may be
exercised only by the employee.
(e) Death. If an employee's employment with the Company and its
subsidiaries terminates by reason of death, each unexercised purchase grant
held by the employee immediately prior to death shall immediately terminate.
(f) Other Termination of Employment. If an employee's employment with the
Company and its subsidiaries terminates for any reason other than death, all
purchase grants held by the employee shall immediately terminate. For purposes
of this Section 7(f), employment shall not be considered terminated (i) in the
case of sick leave or other bona fide leave of absence approved for purposes
of the Plan by the Board, so long as the employee's right to reemployment is
guaranteed either by statue or by contract, or (ii) in the case of a transfer
of employment between the Company and a subsidiary or between subsidiaries.
(g) Call Option. At the time an employee purchases any Stock under the
Plan, he shall execute and deliver to the Company a Call Option in
substantially the form of Exhibit I hereto. The Board shall specify the terms
and conditions to be contained as a Call Option related to a particular
purchase grant at the time of such purchase grant.
(h) Mergers, etc. In the event of a consolidation or merger in which the
Company is not the surviving corporation or which results in the acquisition
of substantially all the Company's outstanding Stock by a single person or
entity or by a group of persons and/or entities acting in concert, or in the
event of the sale or transfer of substantially all the Company's assets, all
outstanding purchase grants shall thereupon terminate, provided that all
outstanding purchase grants shall become exercisable immediately prior to
consummation of such merger, consolidation or sale of assets unless, if there
is a surviving or acquiring corporation, the Board has arranged, subject to
consummation of the merger, consolidation or sale of assets, for the
assumption of the purchase grants or the grant to participants of replacement
purchase grants by that corporation or an affiliate of that corporation.
8. Employment Rights
None of the adoption of the Plan, the grant of options or the making of
purchase grants shall confer upon any employee any right to continued
employment with the Company or any parent or subsidiary or affect in any way
the right of the Company or parent or subsidiary to terminate the employment
of an employee at any time. Except as specifically provided by the Board in
any particular case, the loss of existing or potential profit in options
granted or purchase grants made under this Plan shall not constitute an
element of damages in the event of termination of the employment of an
employee even if the termination is in violation of an obligation of the
Company to the employee by contract or otherwise.
9. Effects of Discontinuance, Cancellation, Amendment and Termination
None of the adoption of the Plan nor the grant of options or the making of
purchase grants to an employee shall affect the Company's right to grant to
such employee options that are not subject to the Plan, to issue to such
employees Stock or purchase grants as a bonus or otherwise, or to adopt other
plans or arrangements under which Stock may be issued to employees.
7
<PAGE>
The Board may at any time discontinue granting options and making purchase
grants under the Plan. With the consent of the employee, the Board may at any
time cancel an existing option or purchase grant in whole or in part and grant
or make to the employee another option or purchase grant for such number of
shares as the Board specifies. The Board may at any time or times amend the
Plan for the purpose of satisfying the requirements of section 422A of the
Code or of any changes in other applicable laws or regulations and the Board
of Directors may amend the Plan for any other purpose which may at the time be
permitted by law, or may at any time terminate the Plan as to any further
grants of options or purchase grants, provided that (except to the extent
expressly required or permitted herein above) no such amendment shall, without
the approval of the shareholders of the Company, (a) increase the maximum
number of shares available under the Plan, (b) change the group of employees
eligible to receive options and purchase grants under the Plan, (c) reduce the
price at which incentive options may be granted or purchase grants may be
made, (d) extend the time within which options may be granted or purchase
grants may be made, (e) alter the Plan in such a way that options or purchase
grants already granted hereunder would not be considered incentive stock
options under Section 422 of the Code, or (f) amend the provisions of this
Section 9, and no such amendment shall adversely affect the rights of any
employee (without his or her consent) under any option previously granted or
purchase grant previously made.
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Addendum I
Special Provisions for Plan Participants who are Israeli Residents.
(a) Anything to the contrary herein notwithstanding, with respect to employees
who are Israeli residents, the Plan may also be administered pursuant to
the provisions of Section 102 ("Section 102") of the Israeli Income Tax
Ordinance (New Version), 1961, the rules promulgated thereunder and the
Israeli Companies Ordinance (New Version), 1983. Details regarding the
terms and conditions of options granted and purchase grants made pursuant
to the provisions of Section 102 in addition to those set forth herein,
will be delivered to the participants who are Israeli residents along with
the remaining terms and conditions.
(b) Anything herein to the contrary notwithstanding, each option and purchase
grant, and each share with respect to which an option or purchase grant
has been exercised by an employee who is an Israeli resident, may be
issued by the Company to, and held in trust (the "Trust") for the benefit
of such employee by a trustee (the "Trustee") designated by the Board of
Directors of the Company or its subsidiaries, as appropriate, pursuant to
Section 102. All certificates representing shares issued to the Trustee
under the Plan shall be deposited with the Trustee, and shall be held by
the Trustee until such time that such shares are released from the Trust
as herein provided. The Trustee shall hold the same pursuant to the
instructions of Directors of the Company or its subsidiaries, as
appropriate, from time to time. The Trustee shall not use the voting
rights vested in such shares and shall not exercise such rights in any way
whatsoever, except in cases when at its discretion and after consulting
with the Board of Directors of the Company or its subsidiaries, as
appropriate, the Trustee believes that the said rights should be exercised
for the protection of the option holders and purchase grantees as a
minority among the Company's shareholders.
(c) Anything herein to the contrary notwithstanding, no options granted,
purchase grants made or shares purchased pursuant to Section 102 shall be
released from the Trust prior to two years after the grant of the options
or purchase grant to the Trustee on behalf of the employee (the "Release
Date"), or two years from May 13, 1997, the effective date of approval of
the 1993 Plan by the Israeli Income Tax authorities, whichever is later.
Subject to the terms hereof, at any time after the Release Date with
respect to any options, purchase grants or shares, each employee may
require (but shall not be obligated to require) the Trustee to release
such options, purchase grants or shares, provided that no securities shall
be released from the Trust to the employee unless and until such employee
shall have deposited with the Trustee an amount of money which, in the
Trustee's opinion, is sufficient and necessary for the discharge of such
employee's tax obligations with respect to such shares.
(d) Upon sale by an employee of any securities held in Trust, the Company
shall (or shall cause the Trustee to) withhold from the proceeds of such
sale all applicable taxes, shall remit the amount withheld to the
appropriate Israeli tax authorities, shall pay the balance thereof
directly to such employee, and shall report to such employee the amount so
withheld and paid to said tax authorities.
(e) All shares issued upon the exercise of options or purchase grants granted
under the Plan shall entitle the employee thereof to receive dividends
with respect thereto, and to vote the same at any meeting of the
shareholders of the Company. For as long as shares issued to the Trustee
on behalf of the employee are held in the Trust, the cash dividends paid
with respect thereto shall be remitted to the Trustee for the benefit of
such employee, and the Trustee shall vote all such shares in accordance
with the instructions of such employee.
(f) Securities acquired by Israeli residents pursuant to this Plan shall be
acquired in the manner provided for in the General Permit promulgated
under the Israel Foreign Currency Control Law.
(g) At the Board's discretion, for purposes of simplicity and in order to
ensure compliance with Israel's foreign currency and tax regulations, the
exercise of the options and the purchases and sales of shares issued upon
the exercise of purchase grants made under the Plan shall be executed by
the Company or its subsidiaries, as appropriate.
9
<PAGE>
(h) With respect to Plan participants who are Israeli residents, the Plan and
all instruments issued thereunder or in connection therewith shall be
governed by, and interpreted in accordance with, the laws of the State of
Israel.
(i) Any tax consequences arising from the grant or exercise of any options or
purchase grants, from the payment for shares covered thereby or from any
other event or act (whether of the option holder or purchase grantee or of
the Company or its subsidiaries) hereunder, shall be borne solely by the
option holder or purchase grantee. Furthermore, such grantee shall agree
to indemnify the corporation that employs the option holder or purchase
grantee and the Trustee and hold them harmless against and from any and
all liability for any such tax or interest or penalty thereon, including
without limitation, liabilities relating to the necessity to withhold, or
to have withheld, any such tax from any payment made to the option holder
or purchase grantee.
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<PAGE>
ELECTRIC FUEL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ELECTRIC FUEL CORPORATION
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD--DECEMBER 4, 2000
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
Monday, December 4, 2000 at 4:00 PM local time at
and all adjournments thereof (the "Meeting") and 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 or her 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 THE REVERSE SIDE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Please mark your
[X] votes as in this DO NOT PRINT IN
example using THIS AREA
dark ink only
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
WITHHOLD
FOR AUTHORITY
all nominees to vote for all nominees Nominees: Robert Ehrlich
listed at right. listed at right. Jeff Kahn
[_] [_]
</TABLE>
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 2003 and until successors are
elected and qualified.
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided:__________________________________
--------------------------------------------------------------------------------
DO NOT PRINT
IN THIS AREA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2. To amend Amended and Restated Certificate of Incorporation to increase the FOR AGAINST ABSTAIN
authorized common stock from 28,000,000 shares to 50,000,000 shares. [_] [_] [_]
3. To amend the Non-Employee Director Stock Option Plan. [_] [_] [_]
4. To amend the Amended and restated 1993 Stock Option and Restricted Stock [_] [_] [_]
Purchase Plan to increase the number of shares of common stock reserved for
issuance thereunder from 2,700,000 to 4,200,000.
</TABLE>
PLEASE DATE AND RETURN THIS PROXY FORM PROMPTLY USING THE
ENCLOSED ENVELOPE.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement of the Company dated [ ], 2000.
[_] [_]
I do plan to attend the meeting. I do not plan to attend the meeting.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
_________________________Date:_______, 2000_______________________Date:______, 2000
SIGNATURE SIGNATURE IF HELD JOINTLY
</TABLE>
Note: Please sign exactly as name appears on this Proxy. When shares are held by
joint tenents, both should sign. If signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If you
are signing for a corporation, please sign in the full corporate name by
President or other authorized officer. If you are signing for a
partnership, please sign in the partnership name by authorized person.
