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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material under Rule 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 tables 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: ___________________________________________________________
Electric Fuel Corporation
[LOGO] Electric Fuel
632 Broadway, Suite 301
New York, New York 10012
Tel: (212) 529-9100 Fax: (212) 529-5800
http://www.electric-fuel.com
Writer's e-mail: ehrlich@electric-fuel.com
[LOGO] INSTANT POWER
Robert S. Ehrlich
Chairman and Chief Financial Officer
June 8, 2001
Dear Stockholder:
It is our pleasure to invite you to the 2001 Annual Meeting of Stockholders
of Electric Fuel Corporation, a Delaware corporation, to be held on Monday,
July 9, 2001 at 10:00 a.m. local time at The Penn Club of New York, The Spruce
Room, 3rd Floor, 30 West 44th Street, New York, New York.
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 to
mark, date, sign and return the enclosed proxy card as promptly as possible in
the postage-prepaid envelope provided, or vote electronically through the
Internet (at (less than)http://www.voteproxy.com(greater than)) or by
telephone, to ensure your representation and the presence of a quorum at the
annual meeting. If you submit your proxy and then decide to attend the annual
meeting to vote your shares in person, you may still do so. Your proxy is
revocable in accordance with the procedures set forth in the Proxy Statement.
Sincerely,
/s/ Robert S. Ehrlich
Robert S. Ehrlich
Chairman of the Board of Directors
- --------------------------------------------------------------------------------
Electric Fuel Ltd. Western Industrial Zone Beit Shemesh Israel 99000 Tel:
972-2-9906666 Fax: 972-2-9991013
[LOGO] Electric Fuel
632 BROADWAY, SUITE 301
NEW YORK, NEW YORK 10012
-------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 9, 2001
-------------------------------------------------------
To our Stockholders:
Our Annual Meeting of Stockholders will be held at The Penn Club of New
York, The Spruce Room, 3rd Floor, 30 West 44th Street, New York, New York, on
Monday, July 9, 2001 at 10:00 a.m. local time, and thereafter as it may be
postponed or adjourned from time to time, for the following purposes:
1. To fix the number of Class I directors at three and to elect three Class
I directors for a three-year term ending in 2004 and continuing until
their successors are duly elected and qualified.
2. To ratify the appointment of Kost Forer & Gabbay, independent certified
public accountants in Israel and a member firm of Ernst & Young
International, as our independent accountants for the fiscal year ending
December 31, 2001.
3. To act upon all other business that may properly come before the meeting
or any postponements or adjournments thereof.
Our Board of Directors has fixed the close of business on May 21, 2001 as
the record date for determining which stockholders are entitled to notice of
the meeting and to vote at the meeting and any postponements or adjournments
thereof.
If you are unable to be present at the meeting personally, please mark,
date, sign and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope provided, or vote electronically through the Internet
(at (less than)http://www.voteproxy.com(greater than)) or by telephone. Any
stockholder who grants a proxy may revoke it at any time prior to its exercise.
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,
/s/ Yaakov Har-oz
Yaakov Har-Oz
Vice President, General Counsel and
Secretary
New York, New York
June 8, 2001
YOUR VOTE IS IMPORTANT! PLEASE SIGN, DATE AND RETURN
YOUR PROXY FORM IN THE ENCLOSED STAMPED, SELF-
ADDRESSED ENVELOPE AS SOON AS POSSIBLE.
[LOGO] Electric Fuel
632 BROADWAY, SUITE 301
NEW YORK, NEW YORK 10012
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 9, 2001
-----------------------
PROXY STATEMENT
-----------------------
The accompanying proxy is solicited by and on behalf of our Board of
Directors, for use at our Annual Meeting of Stockholders and any postponements
and adjournments thereof. The meeting is currently planned to be held at The
Penn Club of New York, The Spruce Room, 3rd Floor, 30 West 44th Street, New
York, New York, on Monday, July 9, 2001 at 10:00 a.m. local time, and
thereafter as it may be postponed or adjourned from time to time, for the
purposes described in the accompanying Notice of Annual Meeting of
Stockholders.
Stockholders of record at the close of business on May 21, 2001 will be
entitled to vote at the annual meeting. As of May 21, 2001, there were
26,359,397 shares of our common stock outstanding held of record by 244
stockholders. Each holder of common stock is entitled to one vote per share on
each matter that comes before the annual meeting.
This proxy statement and the enclosed form of proxy to stockholders will be
mailed commencing on or about June 8, 2001. We are mailing our most recent
annual report, which is our annual report on Form 10-K for the fiscal year
ended December 31, 2000, to our stockholders along with this proxy statement.
Voting Procedures and Vote Required
Proxies that are properly marked, dated, and signed, or submitted
electronically via the Internet or by telephone by following the instructions
on the proxy card, and not revoked will be voted at the annual meeting in
accordance with any indicated directions. If no direction is indicated, proxies
will be voted FOR the fixing of the number of Class I directors at three and
the election of the nominees for director set forth below, and FOR ratification
of the appointment of Kost Forer & Gabbay, independent certified public
accountants in Israel and a member firm of Ernst & Young International, as our
independent accountants for the fiscal year ending December 31, 2001, and in
the discretion of the holders of the proxies with respect to any other business
that properly comes before the annual meeting and all matters relating to the
conduct of the annual meeting. If a broker indicates on the enclosed proxy or
its substitute that it does not have discretionary authority as to certain
shares to vote on a particular matter ("broker non-votes"), those shares will
not be considered as voting with respect to that matter. We believe that the
tabulation procedures to be followed by the Inspector of Elections are
consistent with the general requirements of Delaware law concerning voting of
shares and determination of a quorum.
You may revoke your proxy at any time before it is voted by delivering to
the Secretary of our company a written revocation or a duly executed proxy
bearing a later date than the date of the proxy being revoked (including a
proxy voted over the Internet or by telephone). 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.
Votes cast by proxy or in person at the annual meeting will be tabulated by
the Inspector of Elections, with the assistance of our transfer agent. The
Inspector of Elections will also determine whether or not a quorum is present
at the annual meeting. The presence of a quorum is required to transact the
business proposed to be transacted at the annual meeting. The presence in
person or by proxy of holders of a majority of the outstanding shares of common
stock entitled to vote will constitute a quorum for the transaction of business
at the annual meeting. Abstentions and broker non-votes (as defined above) will
be counted for purposes of determining the presence or absence of a quorum.
Directors will be elected by a plurality of the votes cast by the holders of
our common stock voting in person or by proxy at the annual meeting. In order
to be adopted, the proposal to ratify our appointment of the designated
independent accountants will require the affirmative vote of a majority of the
votes represented by the shares of common stock present in person or
represented by proxy at the annual meeting. Abstentions will have the same
practical effect as a negative vote on the proposal to ratify our appointment
of the designated independent accountants, but will have no effect on the vote
for election of directors.
The solicitation of proxies will be conducted by mail and we will bear all
attendant costs. These costs will include the expense of preparing and mailing
proxy solicitation materials for the annual meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation materials regarding the annual meeting to beneficial owners of our
common stock. We may conduct further solicitation personally, telephonically or
by facsimile through our officers, directors and employees, none of whom will
receive additional compensation for assisting with the solicitation.
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.
At least ten 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 during ordinary business hours at our offices at 632
Broadway, Suite 301, New York, New York 10012, and will also be made available
to stockholders present at the annual meeting.
2
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
The annual meeting will consider the election of three Class I directors
for three-year terms that expire in 2004. Our four other directors have terms
that end in either 2002 or 2005, 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 2004, and until the nominee's successor is duly
elected and qualified or until the nominee's earlier death, removal or
resignation. The three nominees named below are presently serving as directors
and all of them 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 nominee(s) designated by the Board. The three nominees who receive
the greatest number of votes properly cast for the election of directors will
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. Messrs. Ehrlich and Kahn are
designated as the Class III directors. Their term expires in 2005.
The following table contains information concerning the nominees for Class
I directors and the other incumbent directors:
Board of Directors
Name Age Position Class Director Since
---- --- -------- ----- --------------
Yehuda Harats............. 50 President, Chief Executive Officer and director I May 1991
Dr. Jay M. Eastman/(1)(2)/ 52 Director I October 1993
Leon S. Gross............. 94 Director I March 1997
Jack E. Rosenfeld/(1)(2)/. 62 Director II October 1993
Lawrence M. Miller/(1)(2)/ 54 Director II November 1996
Robert S. Ehrlich......... 63 Chairman of the Board and Chief Financial Officer III May 1991
Jeff Kahn................. 43 Director III June 2000
- --------
/(1)/ Member of the Audit Committee.
/(2)/ Member of the Compensation Committee.
Nominees for Election as Class I Directors
Yehuda Harats has been our President and Chief Executive Officer and a
director since May 1991. Previously, from 1980 to May 1991, he was the
Executive Vice President, Director of the Process Division and head of the Heat
Collection Element Division at Luz Industries Israel Limited. In
3
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. Mr.
Harats received a B.Sc. in Mechanical Engineering from the Israel Institute of
Technology (the Technion) in Haifa, Israel.
Dr. Jay M. Eastman has been one of our directors since October 1993. Since
November 1991, Dr. Eastman has served as President and Chief Executive Officer
of Lucid, Inc., which is developing laser technology applications for medical
diagnosis and treatment. Dr. Eastman has served as a director of PSC, Inc., a
manufacturer and marketer of hand-held laser diode bar code scanners (PSCX)
since April 1996, and served as Senior Vice President of Strategic Planning
from December 1995 through October 1997. Dr. Eastman is also a director of
Dimension Technologies, Inc., a developer and manufacturer of 3D displays for
computer and video displays, and Centennial Technologies Inc., a manufacturer
of PCMCIA cards. From 1981 until January 1983, Dr. Eastman was Director of the
University of Rochester's Laboratory for Laser Energetics, where he was a
member of the staff from September 1975 to 1981. Dr. Eastman holds a B.S. and a
Ph.D. in Optics from the University of Rochester in New York.
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.
Class II Directors
Jack E. Rosenfeld has been one of our directors since October 1993. Mr.
Rosenfeld is also a director of Maurice Corporation and a director of PSCX.
Since April 1998, Mr. Rosenfeld has been President and Chief Executive Officer
of Potpourri Collection Inc., a specialty catalog direct marketer. 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, since May 1988. Mr.
Rosenfeld holds a B.A. from Cornell University in Ithaca, New York and an LL.B.
from Harvard University in Cambridge, Massachusetts.
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. Mr. Miller holds a B.A. from Dickinson College in
Carlisle, Pennsylvania and a J.D. with honors from George Washington University
in Washington, D.C. He is a member of the District of Columbia bar.
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 our Vice Chairman of the Board. Mr. Ehrlich has been a director
of Eldat, Ltd., an Israeli manufacturer of electronic shelf labels, since June
1999. Since 1987, Mr. Ehrlich has served as a director of PSCX, and, since
April 1997, Mr. Ehrlich has been the chairman of the board of PSCX. Mr. Ehrlich
received a B.S. and J.D. from Columbia University in New York, New York.
Jeff Kahn has been a director since June 9, 2000. Mr. Kahn founded and
managed Kahn Communications Group from 1987 to 1995. In 1995 that company was
sold to Ruder Finn and he
4
became Chief Strategic and 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. Mr. Kahn holds a B.A. from Brooklyn College in New York.
Information Concerning the Board and its Committees
In the fiscal year ending December 31, 2000, the Board held five meetings
and acted by unanimous written consent on nine occasions. All directors
attended at least 75% of the aggregate number of meetings of the Board and
meetings of the committees of the Board on which he serves.
Our board of directors has an Audit Committee and a Compensation Committee
consisting of Messrs. Rosenfeld and Miller and Dr. Eastman. There is no
standing nominating committee.
Audit Committee
Created in December 1993, the purpose of the Audit Committee is 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.
All Committee members are "independent," as independence is defined in Rule
4200(a)(15) of the National Association of Securities Dealers' listing
standards. As required by law, the Audit Committee operates pursuant to a
charter, a copy of which is included herein as Appendix A.
The Audit Committee held two meetings during the fiscal year ending
December 31, 2000.
Compensation Committee
The Compensation Committee was established in December 1993. 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. All
Committee members are "disinterested persons" as that term is used in Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
The Compensation Committee held six meetings during the fiscal year ending
December 31, 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR FIXING THE
NUMBER OF CLASS I DIRECTORS AT THREE AND FOR ELECTION
OF THE CLASS I NOMINEES DESCRIBED ABOVE.
5
PROPOSAL NUMBER 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Kost Forer & Gabbay, independent certified public accountants in Israel and
a member firm of Ernst & Young International, have served as our independent
accountants since January 2000 and have been appointed by the Board to continue
as our independent accountants for the fiscal year ending December 31, 2001. In
the event that ratification of this selection of accountants is not approved by
a majority of the shares of our common stock voting at the annual meeting in
person or by proxy, management will review its future selection of 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 years ending December 31, 1999 and
2000 have been audited by Kost Forer & Gabbay.
Kost's report on the financial statements for the years ended December 31,
1999 and 2000 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.
A representative of Kost Forer & Gabbay is expected to be present at the
Annual Meeting. This representative will have an opportunity to make a
statement and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
KOST FORER & GABBAY AS OUR INDEPENDENT ACCOUNTANTS.
6
EXECUTIVE OFFICER COMPENSATION AND OTHER MATTERS
Director Compensation
Non-employee members of our board of directors are paid $1,000 (plus
expenses) for each board of directors meeting attended and $500 (plus expenses)
for each meeting of a committee of the board of directors attended. In
addition, we have adopted a Non-Employee Director Stock Option Plan pursuant to
which non-employee directors receive an initial grant of options to purchase
25,000 shares of our common stock upon the effective date of such plan or upon
the date of his or her election as a director. Thereafter, non-employee
directors will receive options to purchase 10,000 shares of our common stock
for each year of service on the board. All such options are granted at fair
market value and vest ratably over three years from the date of the grant.
Cash and Other Compensation
The following table shows the compensation that we paid (or accrued), in
connection with services rendered for 2000, 1999 and 1998, to our Chief
Executive Officer and the other highest paid executive officers (of which there
were two) who received more than $100,000 in salary and bonuses during the year
ended December 31, 2000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE/(1)/
Long Term
Annual Compensation Compensation
---------------------------------- ------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
--------------------------- ---- -------- -------- -------- ------------ ---------
Yehuda Harats................. 2000 $245,560 $82,380/(2)/ $ 8,083/(3)/ 400,000 $170,804/(4)/
President, Chief Executive 1999 $141,710 $80,011 $ 8,055 100,000 $ 78,060
Officer and director 1998 $118,246 $77,652 $15,942 368,177 $146,386
Robert Ehrlich................ 2000 $245,574 $82,380/(2)/ $ 7,146/(3)/ 400,000 $247,185/(5)/
Chairman of the Board and 1999 $137,466 $80,011 $ 6,094 47,500 $173,384
Chief Financial Officer 1998 $118,246 $77,652 $14,536 372,577 $202,030
Joshua Degani................. 2000 $130,417 $25,000/(6)/ $ 6,120/(3)/ 35,000 $ 31,214/(7)/
Executive Vice President 1999 $110,259 $17,500 $ 5,063 35,000 $ 34,825
and Chief Operating Officer 1998 $109,497 $14,250 $ 6,241 185,071 $ 41,996
- --------
/(1)/ We paid the amounts reported for each named executive officer in New
Israeli Shekels (NIS). We have translated these amounts into U.S. dollars
at the exchange rate of NIS into U.S. dollars at the time of payment or
accrual.
/(2)/ We did not pay any cash bonuses for fiscal year 2000 that were paid out
in 2000. However, we accrued for each of Messrs. Ehrlich and Harats $82,380
in satisfaction of the bonuses they were entitled to according to their
contracts. During 2000, we paid each of Messrs. Harats and Ehrlich $127,663
of their respective bonuses for 1998 and 1999 and we paid the balance in
2001.
/(3)/ Represents the costs of taxes paid by the Named Executive Officer and
reimbursed by us.
/(4)/ Of this amount, $2,911 represents our accrual for severance pay that
would be payable to Mr. Harats upon a "change of control" of EFC or upon
the occurrence of certain other events; $70,500 represents our accrual for
sick leave and vacation redeemable by Mr. Harats; $54,727 represents the
increase of the
7
accrual for severance pay that would be payable to Mr. Harats under the
laws of the State of Israel if we were to terminate his employment; and
$41,807 consists of our payments and accruals to a pension fund that
provides a savings plan, insurance and severance pay benefits and an
education fund that provides for the ongoing education of employees.
Additionally, $859 represents other benefits that we paid to Mr. Harats in
2000.
/(5)/ Of this amount, $59,363 represents our accrual for severance pay that
would be payable to Mr. Ehrlich upon a "change of control" of EFC or upon
the occurrence of certain other events; $58,353 represents the increase of
the accrual for sick leave and vacation redeemable by Mr. Ehrlich; $59,942
represents the increase of our accrual for severance pay that would be
payable to Mr. Ehrlich under the laws of the State of Israel if we were to
terminate his employment; and $41,806 represents our payments and accruals
to pension and education funds. Additionally, $26,862 represents our
accrual to fund Mr. Ehrlich's pension fund as well as provide him with
certain other post-termination benefits, and $859 represents other
benefits that we paid to Mr. Ehrlich in 2000.
/(6)/ We paid Dr. Degani the full amount of his 2000 bonus in 2000. In January
2000, we paid Dr. Degani $10,000 of his 1998 bonus and we paid the balance
of his 1998 bonus in 2000.
/(7)/ Of this amount, $7,206 represents our accrual for vacation redeemable by
Dr. Degani; ($159) represents the reduction in the accrual for severance
pay that would be payable to Dr. Degani under the laws of the State of
Israel if we were to terminate his employment; and $23,577 represents our
payments and accruals to pension and education funds. Additionally, $590
represents other benefits that we paid to Dr. Degani in 2000.
Stock Options
The table below sets forth information with respect to stock options
granted to the Named Executive Officers for the fiscal year 2000.
Option Grants in Last Fiscal Year
Individual Grants
---------------------
Potential Realizable
% of Total Value of Assumed
Number of Options Annual Rates of Stock
Securities granted to Exercise Price Appreciation for
Underlying Employees or Base Option Term/(1)/
Options in Fiscal Price Expiration ----------------------
Name Granted Year ($/Sh) Date 5% ($) 10% ($)
---- ---------- --------- -------- ---------- ---------- ----------
Yehuda Harats.... 400,000 25.1% $4.6875 12/29/10 $3,054,177 $4,863,267
Robert S. Ehrlich 400,000 25.1% $4.6875 12/29/10 $3,054,177 $4,863,267
Joshua Degani.... 35,000 2.2% $4.1250 12/20/05 $ 235,172 $ 374,472
- --------
/(1) / The potential realizable value illustrates value that might be realized
upon exercise of the options immediately prior to the expiration of their
terms, assuming the specified compounded rates of appreciation of the
market price per share from the date of grant to the end of the option
term. Actual gains, if any, on stock option exercise are dependent upon a
number of factors, including the future performance of the common stock
and the timing of option exercises, as well as the optionee's continued
employment through the vesting period. The gains shown are net of the
option exercise price, but do not include deductions for taxes and other
expenses payable upon the exercise of the option or for sale of underlying
shares of common stock. There can be no assurance that the amounts
reflected in this table will be achieved.
8
The table below sets forth information for the Named Executive Officers
with respect to aggregated option exercises during fiscal 2000 and fiscal 2000
year-end option values.
Aggregated Option Exercises and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year End Fiscal-Year-End/(1)/
Acquired on Value -------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- ------------- ----------- -------------
Yehuda Harats.... 441,665 $ 921,665.00 195,501 326,666 $180,990.31 $198,750.00
Robert S. Ehrlich 371,000 $1,011,665.00 338,901 295,166 $388,665.31 $ 94,406.25
Joshua Degani.... 75,000 $ 711,000.00 85,070 62,000 $169,591.37 $ 89,250.00
- --------
/(1)/ Options that are "in-the-money" are options for which the fair market
value of the underlying securities exceeds the exercise or base price of
the option.
Report on Repricing of Options
The table below sets forth information for all executive officers with
respect to repricing of options for the ten years preceding December 31, 2000.
Ten-Year Option Repricings
Length of
Market Original
Number of Price of Exercise Option Term
Securities Stock at Price at Remaining
Underlying Time of Time of New at Date of
Options Repricing or Repricing or Exercise Repricing or
Name and Repriced or Amendment Amendment Price Amendment
Principle Position Date Amended ($) ($) ($) (Years)
------------------- ------- ----------- ------------ ------------ -------- ------------
Yehuda Harats............ 5/25/00 150,000 $5.125 $6.625 $4.950/(1)/ 6.07
President, Chief 5/25/00 160,000 $5.125 $3.375 $4.950/(1)/ 8.43
Executive Officer and
director
Joshua Degani............ 4/22/98 122,500 $2.500 $5.500 $2.500 9.05
Executive Vice
President and Chief
Operating Officer
- --------
/(1)/ The effect of repricing these options to market value would have meant a
net loss to Mr. Harats of $55,000, since a majority of the options were
exercisable at $1.75 below market value. In order to avoid this, we
repriced the options at a new exercise price of $4.95, which was $0.625
below market value, which diminished the net loss in value to Mr. Harats to
a loss of only $750. The purpose of the repricing was to help Mr. Harats
avoid certain negative tax consequences under Israeli law.
Employment Contracts
Each of Messrs. Ehrlich and Harats are parties to similar employment
agreements with us effective as of January 1, 2000. The terms of each of these
employment agreements expire on December 31, 2002, but are extended
automatically for additional terms of two years each unless either
9
the executive or we terminate the agreement sooner. Additionally, we have the
right, on at least 90 days' notice to the executive, unilaterally to extend the
initial term of the executive's agreement for a period of one year (i.e., until
December 31, 2003); if we exercise this right, the automatic two-year
extensions would begin from December 31, 2003 instead of December 31, 2002.
The employment agreements provide for a base salary of $20,000 per month
for each of Messrs. Ehrlich and Harats, as adjusted annually for Israeli
inflation and devaluation of the Israeli shekel against the U.S. dollar, if
any. Additionally, the board may at its discretion raise the executive's base
salary. As of January 31, 2001, the board raised Mr. Harats's base salary to
$23,750 per month effective January 1, 2002.
Each employment agreement provides that if the results we actually attain
in a given year are at least 80% of the amount we budgeted at the beginning of
the year, we will pay a bonus to each of Messrs. Ehrlich and Harats, on a
sliding scale, in an amount equal to a minimum of 35% of their annual base
salaries then in effect, up to a maximum of 90% of their annual base salaries
then in effect if the results we actually attain for the year in question are
120% or more of the amount we budgeted at the beginning of the year. We accrued
a bonus for Messrs. Ehrlich and Harats for 2000 at the 35% level. During 2000,
we paid each of Messrs. Ehrlich and Harats $80,011 that we owed them (as
calculated pursuant to the terms of their previous employment agreements with
us) for their 1999 bonuses, as well as $47,652 that we still owed them on
account of their 1998 bonuses.
The employment agreements also contain various benefits customary in Israel
for senior executives, tax and financial planning expenses and an automobile,
and contain confidentiality and non-competition covenants. Pursuant to the
employment agreements, we granted each of Messrs. Ehrlich and Harats demand and
"piggyback" registration rights covering shares of our common stock held by
them.
We can terminate the employment agreements in the event of death or
disability or for "Cause" (defined as conviction of certain crimes, willful
failure to carry out directives of our board of directors or gross negligence
or willful misconduct). Messrs. Ehrlich and Harats each have the right to
terminate their employment upon a change in our control or for "Good Reason,"
which is defined to include adverse changes in employment status or
compensation, our insolvency, material breaches and certain other events.
Additionally, Messrs. Ehrlich and Harats may retire (after age 68) or terminate
their respective agreements for any reason upon 150 days' notice. Upon
termination of employment, the employment agreements provide for payment of all
accrued and unpaid compensation, and (unless we have terminated the agreement
for Cause or the executive has terminated the agreement without Good Reason and
without giving us 150 days' notice of termination) bonuses due for the year in
which employment is terminated and severance pay in the amount of three years'
base salary (or, in the case of termination by an executive on 150 days'
notice, a lump sum payment of $520,000). Furthermore, certain benefits will
continue and all outstanding options will be fully vested.
Dr. Degani entered into an employment agreement with us upon joining us in
June 1997. Dr. Degani's employment agreement runs through January 1, 2003, and
provides for a monthly base salary of $9,000. This was adjusted to $9,500,
effective January 1998, and $12,000, effective January 2001. Dr. Degani's
employment agreement 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.
10
During 2000, we accrued for Dr. Degani a bonus of $25,000 (half of which was
paid in 2000 and half of which was paid in 2001), and we paid him $15,000 that
we owed him for his 1998 bonus and his 1999 bonus.
Under the terms of his agreement, Dr. Degani is under most circumstances
entitled to a termination payment (in addition to severance pay by law) in an
amount equal to one year's base salary, or two years' base salary if the
termination occurs within one year of a change in our control. Dr. Degani's
employment agreement also contains confidentiality and non-competition
covenants.
Voting Agreements
Messrs. Ehrlich and Harats are parties to a Voting Agreement pursuant to
which each of the parties agrees to vote the shares of our common stock held by
that person in favor of the election of Messrs. Ehrlich and Harats (or their
designees) as directors. Messrs. Gross, Ehrlich and Harats are parties to a
Voting Rights Agreement dated September 30, 1996, as amended, pursuant to which
each of the parties agrees to vote the shares of our common stock held by that
person in favor of the election of Messrs. Ehrlich, Harats and Miller until the
earlier of December 10, 2002 or our fifth annual meeting of stockholders after
December 10, 1997.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of our board of directors for the 2000 fiscal
year consisted of Dr. Jay Eastman, Jack Rosenfeld and Lawrence Miller. None of
the members has served as our officer or employee.
Robert S. Ehrlich, our Chairman and Chief Financial Officer, serves as
Chairman and a director of PSCX, for which Dr. Eastman serves as director and
member of the Executive and Strategic Planning Committees and Mr. Rosenfeld
serves as director and member of the Executive Compensation Committees.
REPORT OF THE COMPENSATION COMMITTEE
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 13 shall not be incorporated by reference into any such filings.
Objectives and Philosophy
We maintain 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 of such compensation will not be limited under
Section 162(m) of the Internal Revenue Code. Our Chief Executive Officer,
Yehuda Harats, and our Chief Financial Officer, Robert S. Ehrlich, are
parties to employment agreements with us. Our Executive Vice President of
Technical Operations, Dr. Joshua Degani, is also party to an employment
agreement.
11
Executive Officer Compensation
Each of the employment agreements with Messrs. Harats and Ehrlich
provides that if the results we actually attain in a given year are at
least 80% of the amount we budgeted at the beginning of the year, we will
pay a bonus to each of Messrs. Ehrlich and Harats, on a sliding scale, in
an amount equal to a minimum of 35% of their annual base salaries then in
effect, up to a maximum of 90% of their annual base salaries then in effect
if the results we actually attain for the year in question are 120% or more
of the amount we budgeted at the beginning of the year.
For the year ended December 31, 2000, we accrued a bonus for Messrs.
Ehrlich and Harats for 2000 at the 35% level. During 2000, we paid each of
Messrs. Ehrlich and Harats $80,011 that we owed them (as calculated
pursuant to the terms of their previous employment agreements with us,
which required 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)) for
their 1999 bonuses, as well as $47,652 that we still owed them on account
of their 1998 bonuses.
As of December 31, 2000, Messrs. Harats' and Ehrlich's total options
represented approximately 2.3% and 2.8%, respectively, of our outstanding
stock, which the Compensation Committee believes are appropriate levels of
options for them in view of their equity position (including options
exercisable within 60 days) in Electric Fuel which, as of December 31,
2000, represented approximately 9.0% and 6.2%, respectively, of our
outstanding stock. As of December 31, 2000, Dr. Degani's options
represented less than 1% of our fully-diluted outstanding stock, which the
Compensation Committee believes is an appropriate level of options
considering his position with us.
Dr. Degani was awarded a cash bonus of $25,000 for 2000. Additionally,
during the year 2000 we paid $25,000 to Dr. Degani on account of his
previously accrued and unpaid bonuses for 1998 and 1999.
Compensation of Other Employees
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
12
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 2000 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 us.
Repricing of Stock Options
During 2000, we approved the repricing of 150,000 of Mr. Harats's stock
options from an exercise price of $6.625 to a new exercise price of $4.95,
and 160,000 options from an exercise price of $3.375 to a new exercise
price of $4.95. The market price of our common stock at the time of the
repricing was $5.5125. The purpose of the repricing was to help Mr. Harats
avoid certain negative tax consequences under Israeli law. The effect of
repricing these options to market value would have meant a net loss to Mr.
Harats of $55,000, since a majority of the options were exercisable at
$1.75 below market value. In order to avoid this, the options were repriced
at a new exercise price of $4.95, which was $0.625 below market value,
which diminished the net loss in value to Mr. Harats to a loss of only
$750.
Submitted by the Compensation Committee
Dr. Jay M. Eastman
Lawrence M. Miller
Jack E. Rosenfeld
13
Performance Graph
The following graph compares the yearly percentage change in our cumulative
total shareholder return on our common stock with the cumulative total return
on the Nasdaq Market Index (Broad Market Index) and a self-constructed peer
group index over the past five years, from December 31, 1995 through December
31, 2000. The cumulative total shareholder return is based on $100 invested in
our common stock and in the respective indices on December 31, 1995. The stock
prices on the performance graph are not necessarily indicative of future price
performance.
CUMULATIVE TOTAL RETURN THROUGH DECEMBER 31, 2000
AMONG ELECTRIC FUEL CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
[CHART]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
-------- -------- -------- -------- -------- --------
ELECTRIC FUEL.. 100.00 82.96 42.96 35.59 41.48 55.56
PEER GROUP/(1)/ 100.00 54.45 59.27 50.36 98.56 54.97
BROAD MARKET... 100.00 122.71 149.25 208.40 386.77 234.81
- --------
/(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.
REPORT OF THE AUDIT COMMITTEE
The audit committee of the board of directors (the "Audit Committee")
consists of three non-employee directors, Dr. Jay Eastman, Lawrence M.
Miller, and Jack E. Rosenfeld, each of whom has been determined to be
independent as defined by the Nasdaq Marketplace Rules. The Audit Committee
operates under a written charter adopted by the board of directors,
attached to this Proxy Statement as Appendix A. Among its other functions,
the Audit Committee recommends to the board of directors, subject to
stockholder ratification, the selection of the Company's independent
accountants.
14
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible
for performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted accounting principles and
to issue a report thereon. The Audit Committee's responsibility is to
monitor and oversee these processes.
In this context the Audit Committee has met and held discussions with
management and the independent accountants. Management represented to the
Audit Committee that the Company's consolidated financial statements were
prepared in accordance with generally accepted accounting principles, and
the Audit Committee has reviewed and discussed the consolidated financial
statements with management and the independent accountants. The Audit
Committee discussed with the independent accountants matters required to be
discussed by Statement on Auditing Standards No. 61.
The Company's independent accountants also provided to the Audit
Committee the written disclosure required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees." The
Committee discussed with the independent accountants that firm's
independence and considered whether the non-audit services provided by the
independent accountants are compatible with maintaining its independence.
Based on the Audit Committee's discussion with management and the
independent accountants, and the Audit Committee's review of the
representation of management and the report of the independent accountants
to the Audit Committee, the Audit Committee recommended that the board of
directors include the audited consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000
filed with the Securities and Exchange Commission.
Submitted by the Audit Committee
Lawrence M. Miller
Dr. Jay M. Eastman
Jack E. Rosenfeld
FEES BILLED FOR SERVICES RENDERED BY PRINCIPAL ACCOUNTANT
For the fiscal year ended December 31, 2000, Kost Forer & Gabbay, our
independent auditor and principal accountant, billed the approximate fees set
forth below:
Audit Fees.................................................. $36,060
Financial Information Systems Design and Implementation Fees $ 0
All Other Fees.............................................. $57,440
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information regarding the security
ownership, as of February 28, 2001, of (i) each person known to us to own of
record or beneficially more than 5% of our common stock, (ii) each of our
directors, and (iii) each of our executive officers named in the Summary
15
Compensation Table set forth under the caption "Executive Officer Compensation
and Other Matters," above, and (iv) all of our directors and executive officers
as a group. There are no persons owning of record or known by us to own
beneficially more than 5% of our common stock other than our directors and
executive officers as listed below.
Shares Beneficially Percentage of Total
Named Executive Officers and Directors Owned/(1)(2)/ Shares Outstanding/(2)/
-------------------------------------- ------------------- ----------------------
Leon S. Gross................................... 4,187,862/(3)(11)/ 15.9%
Yehuda Harats................................... 1,926,872/(4)(7)(11)/ 7.3%
Robert S. Ehrlich............................... 1,340,567/(5)(7)(11)/ 5.0%
Joshua Degani................................... 139,570/(6)/ *
Avihai Shen..................................... 4,000 *
Dr. Jay M. Eastman.............................. 30,001/(8)/ *
Jack E. Rosenfeld............................... 32,001/(9)/ *
Lawrence M. Miller.............................. 36,915/(10)/ *
Jeff Kahn....................................... 65,000/(8)/ *
All of our directors and executive officers as a
group (9 persons)............................. 7,762,788/(3)(4)(5)(6)(7)(8)(9)(10)(11)/ 28.6%
- --------
* 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 175,000 shares held by Leon S. Gross and Lawrence M. Miller as
co-trustees of the Rose Gross Charitable Foundation, and 35,000 shares
issuable upon exercise of options exercisable within 60 days.
/(4)/ Includes 1,000,000 shares held by a family trust and 195,501 shares
issuable upon exercise of options exercisable within 60 days.
/(5)/ Includes 91,068 shares held by an affiliated corporation, 232,813 shares
held in Mr. Ehrlich's pension plan, and 338,901 shares issuable upon
exercise of options exercisable within 60 days.
/(6)/ Includes 88,070 shares issuable upon exercise of options exercisable
within 60 days.
/(7)/ Messrs. Ehrlich and Harats are parties to a Voting Agreement pursuant to
which each of the parties agrees to vote the shares of our common stock
held by that person in favor of the election of Messrs. Ehrlich and Harats
(or their designees) as directors.
/(8)/ Shares issuable upon exercise of options exercisable within 60 days.
/(9)/ Includes 30,001 shares issuable upon exercise of options exercisable
within 60 days.
/(10)/ Includes 25,001 shares issuable upon exercise of options exercisable
within 60 days.
/(11)/ Messrs. Gross, Ehrlich and Harats are parties to a Voting Rights
Agreement pursuant to which each of the parties agrees to vote the shares
of our common stock held by that person in favor of the election of
Messrs. Ehrlich, Harats and Miller until the earlier of December 10, 2002
or our fifth annual meeting of stockholders after December 10, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, our directors, certain of
our officers and any persons holding more than ten percent of our common stock
are required to report their ownership of
16
our common stock and any changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established
and we are required to report any failure to file by these dates during 2000.
We are not aware of any instances during 2000 where such "reporting persons"
failed to file the required reports on or before the specified dates, except as
follows:
(i) Mr. Kahn was required to report his holdings of our securities in a
Form 3 that should have been filed on or prior to June 19, 2000 in
connection with his becoming a director on June 9, 2000. He reported
his holdings in a Form 5 filed on February 14, 2001.
(ii) Dr. Degani was required to file a Form 4 on or prior to August 10, 2000
in connection with his exercise of stock options in July 2000 that
resulted in his acquisition of 51,500 shares of our common stock. He
reported this transaction in a Form 5 filed on February 12, 2001.
(iii) Mr. Ehrlich was required to file a Form 4 on or prior to May 10, 2000
in connection with the sale by trusts for the benefit of certain of his
children in April 2000 of 4,000 shares of our common stock, and on or
prior to July 10, 2000 in connection with the sale by trusts for the
benefit of certain of his children in June 2000 of 12,000 shares of our
common stock. He reported these transactions in a Form 5 filed on
February 12, 2001. Additionally, in a Form 4 filed on December 5, 2000,
Mr. Ehrlich erroneously reported that a gift of 9,500 shares of our
common stock in November 2000 had been a gift of shares held by Red
Lion Enterprises, Inc., a company affiliated with Mr. Ehrlich, rather
than his personal gift. Mr. Ehrlich corrected these errors, as well as
certain arithmetic errors with respect to the calculation of his total
holdings, in a Form 5 filed on March 19, 2001 amending the Form 5 he
filed on February 12, 2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Ehrlich and Harats have issued promissory notes for previously
exercised options in the principal amounts $206,805 and $354,979, respectively.
These notes will mature on December 31, 2007. We have 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. Our reserve for termination benefits to each of Messrs.
Ehrlich and Harats is greater than the outstanding amount due to us under these
promissory notes. Additionally, we have agreed to repurchase shares of our
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 us, Messrs. Ehrlich and Harats would be granted new options at
current market prices to purchase the same amount of shares of our common stock
as were sold. As of December 31, 2000, the aggregate amount outstanding
pursuant to these promissory notes for each of Messrs. Ehrlich and Harats was
$0 and $46,182, respectively.
Pursuant to a securities purchase agreement dated December 28, 1999 between
a group of purchasers, including Mr. Gross, and us, we issued an aggregate of
1,425,000 shares of common stock, including 375,000 shares to Mr. Gross. Such
shares were issued at a price of $2.00 per share. We also issued in this
transaction warrants to purchase an additional 1,425,000 shares of common
stock, of which warrants to purchase 950,000 shares of common stock have an
exercise price of $1.25 per share and are exercisable for a period of six
months, and warrants to purchase 425,000 shares of common
17
stock have 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. Pursuant to this agreement, we agreed to register for resale the
shares of common stock issued thereunder and the shares of common stock
issuable pursuant to the warrants issued thereunder. The registration statement
registering these shares became effective on February 10, 2000. Mr. Gross
exercised his 250,000 six-month warrants on a cashless exercise basis in June
2000, resulting in the acquisition by him of 221,198 shares of common stock. He
exercised his 125,000 one-year warrants on a cashless exercise basis in
December 2000, resulting in the acquisition by him of 30,668 shares of common
stock.
Pursuant to the terms of this purchase agreement, Mr. Gross agreed that for
a period of five years, neither he nor his "affiliates" (as such term is
defined in the Securities Act) directly or indirectly or in conjunction with or
through any "associate" (as such term is defined in Rule 12b-2 of the Exchange
Act), will (i) solicit proxies with respect to any capital stock or other
voting securities of ours under any circumstances, or become a "participant" in
any "election contest" relating to the election of our directors (as such terms
are used in Rule 14a-11 of Regulation 14A of the Exchange Act); (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" within the meaning of Section 13(d)(3) of the Exchange Act
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 a stock purchase agreement dated September 30, 1996
between Leon S. Gross and us, we also entered into a registration rights
agreement with Mr. Gross dated September 30, 1996, setting forth registration
rights with respect to the shares of common stock issued to Mr. Gross in
connection with the offering. These rights include the right to make two
demands for a shelf registration statement on Form S-3 for the sale of the
common stock that may, subject to certain 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 a voting rights agreement dated September 30, 1996 and as
amended December 10, 1997, between Mr. Gross, Robert S. Ehrlich, Yehuda Harats
and us, Lawrence M. Miller, Mr. Gross's advisor, is entitled to be nominated to
serve on our board of directors so long as Mr. Gross, his heirs or assigns
retain at least 1,375,000 shares of common stock. 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 of directors until the earlier of December 10,
2002 or our fifth annual meeting of stockholders 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 the 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.
On December 3, 1999, Messrs. Ehrlich and Harats each purchased 125,000
shares of our common stock out of our treasury at the closing price of the
common stock on December 2, 1999. Payment was rendered by Mr. Ehrlich in the
form of a recourse promissory note in the amount of $167,975, secured
18
by certain compensation due Mr. Ehrlich upon termination. Mr. Harats paid in
the form of a non-recourse promissory note in the amount of $167,975, secured
by the shares of common stock purchased and other shares of common stock
previously held by Mr. Harats. The other terms of these notes are similar to
the terms of the previous notes as described above.
On February 9, 2000, Messrs. Ehrlich and Harats each exercised 131,665
stock options. Messrs. Ehrlich and Harats paid the exercise price of the stock
options and certain taxes that we paid on their behalf by giving us
non-recourse promissory notes in the amount of $789,990 each, secured by the
shares of our common stock acquired through the exercise of the options.
On January 12, 2001, Messrs. Ehrlich and Harats and Dr. Degani, along with
certain other employees of ours, purchased shares of our common stock and
warrants having similar terms to those we sold to Capital Ventures
International, on the terms described in the following two paragraphs.
On January 12, 2001, Messrs. Ehrlich and Harats each purchased 100,000
shares of common stock, 66,667 Series A warrants to purchase 66,667 shares of
our common stock at any time prior to January 12, 2006 at a price of $8.3438
per share, and 33,333 Series B warrants to purchase 33,333 shares of our common
stock at any time prior to October 12, 2001 at a price of $7.5094 per share.
The total purchase price of $556,250 (based on the number of shares of common
stock purchased multiplied by the closing sale price of our common stock on the
Nasdaq National Market on January 12, 2001, which was $5.5625 per share) was
paid by each of Messrs. Ehrlich and Harats by means of a non-recourse
promissory note secured by the shares of common stock and warrants purchased.
As part of the consideration for our agreeing to this arrangement, Messrs.
Ehrlich and Harats each agreed to give us the right unilaterally to extend the
term of his employment agreement for an additional year. Additionally, if Mr.
Ehrlich or Mr. Harats voluntarily leaves our employ prior to the end of the
extended term of his agreement, the shares and warrants purchased by means of
this non-recourse note will revert back to us.
On January 12, 2001, Dr. Degani purchased 50,000 shares of common stock,
33,333 Series A warrants identical to those purchased by Messrs. Ehrlich and
Harats, and 16,667 Series B warrants identical to those purchased by Messrs.
Ehrlich and Harats. The total purchase price of $278,125 was paid by Dr. Degani
by means of a non-recourse promissory note secured by the shares of common
stock and warrants purchased. As part of the consideration for our agreeing to
this arrangement, Dr. Degani agreed to extend the term of his employment
agreement for an additional two years. Additionally, if Dr. Degani voluntarily
leaves our employ prior to the end of the extended term of his agreement, the
shares and warrants purchased by means of this non-recourse note will revert
back to us.
STOCKHOLDER PROPOSALS
Pursuant to the rules of the Securities and Exchange Commission,
stockholder proposals made in accordance with Rule 14a-8 under the Exchange Act
intended to be included in our proxy material for the next annual meeting must
be received by us on or before February 8, 2002 at our principal executive
offices, 632 Broadway, Suite 301, New York, New York 10012, Attention:
Corporate Secretary.
19
FINANCIAL STATEMENTS
Our audited financial statements for the fiscal year ended December 31,
2000 and certain other related financial and business information of Electric
Fuel are contained in our 2000 Annual Report on Form 10-K, which is being
furnished to our stockholders along with this proxy statement.
OTHER MATTERS
We are not aware of any other matter that may come before the annual
meeting of stockholders and we do not 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.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Yaakov Har-Oz
Yaakov Har-Oz
Vice President, General Counsel and
Secretary
New York, New York
June 8, 2001
20
Appendix A
ELECTRIC FUEL CORPORATIOn
AUDIT COMMITTEE CHARTER
Membership
The Audit Committee is a standing committee of the Board of Directors. The
committee shall be composed of at least three directors, each of whom shall be
independent directors as such term is defined in Annex A to this charter,
except that, as provided by applicable Nasdaq rules, one member may not be an
independent director if the Board of Directors determines that his or her
membership on the Audit Committee is required by the best interests of the
Company and its shareholders. Each member of the Audit Committee shall be able
to read and understand fundamental financial statements, including a company's
balance sheet, income statement and cash flow statement. In addition, not later
than June 14, 2001, at least one member shall have had past employment
experience in finance or accounting, professional certification in accounting,
or any other comparable experience or background that has resulted in the
member's financial sophistication.
Statement of Policy
The Audit Committee shall assist the Board of Directors in overseeing the
Company's financial reporting process, reviewing financial information issued
to shareholders and others, and monitoring the Company's systems of internal
control and the audit process. In so doing, it is the responsibility of the
Audit Committee to maintain free and open means of communication between the
Board of Directors, the independent auditors, the internal auditors, if any,
and the financial management of the Company. The Company's independent auditors
shall be ultimately responsible to the Board of Directors and Audit Committee
as representatives of the Company's shareholders. The Board of Directors shall
have the authority and responsibility to select and, where appropriate, to
remove the independent auditors.
Responsibilities
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the Board of Directors and shareholders
that the corporate accounting and reporting practices of the Company are in
accordance with all applicable requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee shall:
. Review and recommend to the Board of Directors the independent auditors
to be selected to audit the financial statements of the Company and its
divisions and subsidiaries, and, where appropriate, recommend the
replacement of the independent auditors.
. Take appropriate action to oversee the independence of the Company's
independent auditors, including the following:
[ARROW] Receive from the independent auditors each year a formal written
statement delineating all relationships between the independent
auditors and the Company, consistent with Independence Standards
Board Standard 1, as it may be modified or supplemented.
A-1
[ARROW] Actively engage in a dialogue with the independent auditors
regarding any disclosed relationships or services that may
impact the objectivity and independence of the auditors.
. Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at its conclusion review
such audit, including any comments or recommendations of the
independent auditors.
. Review with the independent auditors, the Company's internal auditor,
if any, and financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the Company,
and elicit any recommendations for the improvement of such internal
control procedures or particular areas where new or more detailed
controls or procedures are desirable. Particular emphasis should be
given to the adequacy of such internal controls to expose any
payments, transactions, or procedures that might be deemed illegal or
otherwise improper. Further, the Audit Committee periodically should
review Company policy statements to determine their adherence to any
code of conduct prescribed by the Board.
. Review the internal audit function of the Company, if any, including
the independence and authority of its reporting obligations, the
proposed audit plans for the coming year, and the coordination of such
plans with the independent auditors.
. Review and discuss the financial statements contained in the annual
report on Form 10-K with management and the independent auditors to
determine that management and the independent auditors are satisfied
with the disclosure and content of the financial statements to be
included. Any changes in accounting principles should be reviewed.
. Provide a report of the Audit Committee as required by the proxy rules
of the Securities and Exchange Commission.
. Provide sufficient opportunity for the independent auditors and
internal auditors, if any, to meet with the members of the Audit
Committee without members of management present. Items for discussion
in these meetings include the independent auditors' evaluation of the
Company's financial, accounting, and auditing personnel, and the
cooperation that the independent auditors received during the course
of the audit.
. Review accounting and financial human resources and succession
planning within the Company.
. Submit the minutes of all meetings of the Audit Committee to, or
discuss the matters discussed at each Audit Committee meeting with,
the Board of Directors.
. Investigate any matter brought to the Audit Committee's attention
within the scope of its duties and retain independent counsel for this
purpose if, in its judgment, that is appropriate.
A-2
Annex A
"Independent director" means a person other than an officer or employee of
the Company or its subsidiaries or any other individual having a relationship
which, in the opinion of the Company's Board of Directors, would interfere with
the exercise of independent judgment in carrying out the responsibilities of a
director. The following persons shall not be considered independent:
(a) a director who is employed by the Company or any of its affiliates for
the current year or any of the past three years;
(b) a director who accepts any compensation from the Company or any of its
affiliates in excess of $60,000 during the previous fiscal year, other
than compensation for board service, benefits under a tax-qualified
retirement plan, or non-discretionary compensation;
(c) a director who is a member of the immediate family of an individual who
is, or has been in any of the past three years, employed by the Company
or any of its affiliates as an executive officer. Immediate family
includes a person's spouse, parents, children, siblings, mother-in-law,
father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law and anyone who resides in such person's home;
(d) a director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the
Company made, or from which the Company received, payments (other than
those arising solely from investments in the Company's securities) that
exceed 5% of the Company's or business organization's consolidated gross
revenues for that year, or $200,000, whichever is more, in any of the
past three years;
(e) a director who is employed as an executive of another entity where any
of the Company's executives serve on that entity's compensation
committee.
A-3
ANNUAL MEETING OF SHAREHOLDERS OF
ELECTRIC FUEL CORPORATION
July 9, 2001
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
YOUR CONTROL NUMBER IS
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ELECTRIC FUEL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ELECTRIC FUEL
CORPORATION
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JULY 9, 2001
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, July 9, 2001 at 10:00 a.m. local time at The Penn Club of New York,
The Spruce Room, 3/rd/ Floor, 30 West 44/th/ Street, New York, New York, and
all postponements and adjournments thereof (the "Meeting"), and there to vote
all shares of common stock of the Company that the undersigned would be
entitled to vote, if personally present, in regard to all matters that 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 proposal set forth herein and described in the Board
of Directors' Proxy Statement. If any 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.
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
ELECTRIC FUEL CORPORATION
July 9, 2001
(down arrow) Please Detach and Mail in the Envelope Provided (down arrow)
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X
Please mark your votes as in this example.
The Board of Directors recommends a vote FOR each of the following matters:
1. To fix the number of Class I directors at three and to elect three
Class I directors for a three-year term ending in 2004 and continuing
until their successors are duly elected and qualified.
FOR WITHHOLD
all nominees AUTHORITY
listed at right to vote for all nominees
(except as indicated below). listed at right.
[_] [_]
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided: ____________________________________
NOMINEES: Yehuda Harats Dr. Jay M. Eastman Leon S. Gross
FOR AGAINST ABSTAIN
2. To ratify the appointment of Kost Forer [_] [_] [_]
& Gabbay, independent certified public
accountants in Israel and a member firm
of Ernst & Young International, as our
independent accountants for the fiscal
year ending December 31, 2001.
PLEASE SIGN, 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 Electric Fuel Corporation dated June 8,
2001.
[_] [_]
I do plan to attend the meeting. I do not plan to attend the meeting.
- --------- Date: , 2001 ------------------------- Date: , 2001
SIGNATURE SIGNATURE IF HELD JOINTLY
Note: Please sign exactly as name appears on this Proxy. When shares are
held by joint tenants, 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.