Document:

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                                                                       EXHIBIT B
                                                                   to Securities
                                                                        Purchase
                                                                       Agreement

     VOID AFTER 5:00 P.M., NEW YORK CITY
     TIME, August 17, 2001
     (UNLESS EXTENDED PURSUANT TO SECTION 2 HEREOF)

                                         Right to Purchase 333,333 Shares of
                                         Common Stock, par value $.01 per share

Date: November 17, 2000

                           ELECTRIC FUEL CORPORATION
                        SERIES B STOCK PURCHASE WARRANT

     THIS CERTIFIES THAT, for value received, Capital Ventures International, or
its registered assigns, is entitled to purchase from Electric Fuel Corporation,
a corporation organized under the laws of the State of Delaware (the "Company"),
at any time or from time to time during the period specified in Section 2
hereof, Three Hundred Thirty-three Thousand Three Hundred and Thirty-three
(333,333) fully paid and nonassessable shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), at an exercise price per share (the
"Exercise Price") equal to $11.31 in effect on the Issue Date (as defined in
Section 2 hereof). The number of shares of Common Stock purchasable hereunder
(the "Warrant Shares") and the Exercise Price are subject to adjustment as
provided in Section 4 hereof. The term "Warrants" means this Warrant and the
other Series B Share Warrants and Series A Share Warrants of the Company issued
pursuant to and as defined in that certain Securities Purchase Agreement, dated
as of November 17, 2000, by and between the Company and the other signatories
thereto (the "Securities Purchase Agreement").

     This Warrant is subject to the following terms, provisions and conditions:

     1.    Manner of Exercise; Issuance of Certificates; Payment for Shares.
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     (a) Subject to the provisions hereof, including, without limitation, the
limitations contained in Section 7 hereof, this Warrant may be exercised by the
holder hereof, in whole or in part, by the surrender of this Warrant, together
with a completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in United States

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dollars in cash, by certified or official bank check or by wire transfer of
immediately available funds for the account of the Company, of the Exercise
Price for the Warrant Shares specified in the Exercise Agreement or (ii) if the
holder is effectuating a Cashless Exercise (as defined in Section 11(c) hereof)
pursuant to Section 11(c) hereof, delivery to the Company of a written notice of
an election to effect a Cashless Exercise for the Warrant Shares specified in
the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be
issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which this Warrant shall
have been surrendered, the completed Exercise Agreement shall have been
delivered, and payment shall have been made for such shares as set forth above
or, if such date is not a business date, on the next succeeding business date.
The Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding two business days, after this Warrant
shall have been so exercised (the "Delivery Period"). If the Company's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, the Company shall cause its transfer agent to
electronically transmit the Warrant Shares so purchased to the holder by
crediting the account of the holder or its nominee with DTC through its Deposit
Withdrawal Agent Commission system ("DTC Transfer"). If the aforementioned
conditions to a DTC Transfer are not satisfied, the Company shall deliver to the
holder physical certificates representing the Warrant Shares so purchased.
Further, the holder may instruct the Company to deliver to the holder physical
certificates representing the Warrant Shares so purchased in lieu of delivering
such shares by way of DTC Transfer. Any certificates so delivered shall be in
such denominations as may be reasonably requested by the holder hereof, shall be
registered in the name of such holder or such other name as shall be designated
by such holder, and shall not bear any restrictive legend, unless otherwise
required by law. If this Warrant shall have been exercised only in part, then
the Company shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised.

     (b) If, at any time, a holder of this Warrant submits this Warrant, an
Exercise Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement (including pursuant to a
Cashless Exercise), and the Company fails for any reason to deliver, on or prior
to the fourth business day following the expiration of the Delivery Period for
such exercise, the number of shares of Common Stock to which the holder is
entitled upon such exercise (an "Exercise Default"), then the Company shall pay
to the holder payments ("Exercise Default Payments") for an Exercise Default in
the amount of (a) (N/365), multiplied by (b) the amount by which the Market
Price (as defined in Section 4(l) hereof) on the date the Exercise Agreement
giving rise to the Exercise Default is transmitted in accordance with this
Section 1 (the "Exercise Default Date") exceeds the Exercise Price in respect of
such Warrant Shares, multiplied by (c) the number of shares of Common Stock the
Company failed to so deliver in such Exercise Default, multiplied by (d) .24,
where N = the number of days from the Exercise Default Date to the date that the
Company effects the full exercise of this Warrant which gave rise to the
Exercise Default.  The accrued Exercise Default Payment for each calendar month
shall be paid in cash or shall be convertible into Common Stock, at the holder's
option, as follows:

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          (i)   In the event holder elects to take such payment in cash, cash
payment shall be made to holder by the fifth day of the month following the
month in which it has accrued; and

          (ii)  In the event holder elects to take such payment in Common Stock,
the holder may convert such payment amount into Common Stock at the lower of the
Exercise Price or the Market Price (as defined in Section 4(l)) (as in effect at
the time of exercise) at any time after the fifth day of the month following the
month in which it has accrued.

                Nothing herein shall limit the holder's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of Common Stock as required pursuant to the terms of Section 3(b) hereof
or to otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and the holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).

     (c)  This Warrant is immediately exercisable, at any time or from time to
time on or after the date of initial issuance of this Warrant (the "Issue Date")
and before 5:00 p.m., New York City time, on the date which is the ninth (9th)
month anniversary of the Issue Date (the "Exercise Period"). The Exercise Period
shall automatically be extended by one (1) Trading Day  (as defined in Section
2(a)) for each day on which the Company is not in compliance with Section 3(b)
hereof.

     2.      Mandatory Exercise.
             -------------------

                 (a) Subject to Section 7(f), if after the Issue Date, (i) the
Company consummates a primary public offering of its Common Stock for gross
proceeds to the Company of at least $35,000,000 and (ii) if the Closing Bid
Price (as defined below) of the Common Stock for each of the ten (10)
consecutive Trading Days ending on the Trading Day immediately preceding the
closing date of such public offering exceeded $13.57, subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or similar
events (the "Trigger Event"), the Company may at its sole discretion, but
subject to satisfaction (or waiver) of all of the conditions set forth in
Section 2(c) hereof, require the holder to exercise this Warrant in whole, but
not in part, in accordance with the terms set forth below (the "Mandatory
Exercise"). For purposes hereof, "Closing Bid Price" means, for the Common Stock
as of any date, the closing bid price of such security on the Nasdaq National
Market ("NNM"), the New York Stock Exchange ("NYSE") or the American Stock
Exchange ("AMEX"). For purposes hereof "Trading Day" means any business day on
which the principal United States securities exchange or trading market on which
Common Stock is listed or traded and reported by Bloomberg Financial Markets (or
a comparable reporting service of national reputation selected by the Company
and reasonably acceptable if Bloomberg Financial Markets is not then reporting
closing bid prices of such security) (collectively, "Bloomberg") is open for
trading.
                (b) In order to cause the Mandatory Exercise, the Company must
first deliver to the holder, on or before the second (2/nd/) Trading Day
immediately following the occurrence of the

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Trigger Event, written notice thereof (the "Trigger Event Notice"). The Trigger
Event Notice shall set forth the date on which the Warrant Shares shall be
issued to the holder, which date shall not be less than [three (3) Trading Days
or more than five (5) Trading Days] following the occurrence of the Trigger
Event (the "Mandatory Exercise Date"). On the Mandatory Exercise Date, the
Company shall issue to the Holder the Warrant Shares and the Holder shall pay
the Exercise Price in United States dollars in cash, by certified check or
official bank check or by wire transfer of immediately available funds to the
account of the Company.

         (c)   The Holder's obligation to purchase the Warrant Shares pursuant
to a Mandatory Exercise is conditioned upon the satisfaction by the Company (or
waiver by the Holder) of each of the following events as of the date of the
Trigger Event Notice (the "Trigger Notice Date") and the Mandatory Exercise Date
(except for the event identified in subclause (v) below which shall be satisfied
only on the Mandatory Exercise Date).

               (i)   the Registration Statement as defined in the Securities
Purchase Agreement shall have been available to the holder at all times from the
Issue Date up to and including the Mandatory Exercise Date for the issuance and
sale of the Warrant Shares pursuant to the exercise of the Warrants;

               (ii)  the representations and warranties of the Company set forth
in the Securities Purchase Agreement shall be true and correct in all material
respects as of the Mandatory Exercise Date as if made on such date (except for
representations and warranties that speak as of a specific date which
representations shall be true and correct as of such date).

               (iii) the Company shall have complied with or performed in all
material respects all of the agreements, obligations and conditions set forth in
the Securities Purchase Agreement and the Warrants that are required to be
complied with or performed by the Company on or before the Mandatory Exercise
Date;

               (iv)  the Company shall have delivered to the holder a
certificate, signed by an officer of the Company, certifying that the conditions
set forth in this subparagraph 2(c) have been fulfilled as of the Trigger Notice
Date and the Mandatory Exercise Date, it being understood that the holder may
rely on such certificate as though it were a representation and warranty of the
Company made in the Securities Purchase Agreement and, in the event of any
breach thereof, shall be entitled to the same remedies as may be available to
the holder in the event of a breach of any such representation or warranty;

               (v)   the Company shall have delivered to the holder the Warrant
Shares as provided in Section 1(a) hereof;

               (vi)  the Warrant Shares, issuable upon the Mandatory Exercise of
this Warrant, shall be listed for quotation and/or trading on the NMM, NYSE or
AMEX and no suspension of trading in the Common Stock on such market shall have
occurred and be continuing as

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of the Mandatory Exercise Date; and

               (vii) the Company shall have declared a Mandatory Exercise under
all other Series B Share Warrants (as defined in the Securities Purchase
Agreement) issued pursuant to the Stock Purchase Agreement.

     3.   Certain Agreements of the Company.  The Company hereby covenants and
          ---------------------------------
agrees as follows:

     (a)  Shares to be Fully Paid.  All Warrant Shares will, upon issuance in
          -----------------------
accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.

     (b)  Reservation of Shares.  During the Exercise Period, the Company shall
          ---------------------
at all times have authorized, and reserved for the purpose of issuance upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise in full of this Warrant (without giving effect to the
limitations on exercise set forth in Section 7(f) hereof).

     (c)  Listing.  The Company shall promptly secure the listing of the Warrant
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Shares upon exercise of this Warrant upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed or become listed (subject to official notice of issuance upon exercise of
this Warrant) and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all Warrant Shares; and the Company shall so
list on each national securities exchange or automated quotation system, as the
case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.

     (d)  Certain Actions Prohibited.  The Company will not, by amendment of its
          --------------------------
charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the economic benefit inuring to the holder hereof
and the exercise privilege of the holder of this Warrant against dilution or
other impairment, consistent with the tenor and purpose of this Warrant.
Without limiting the generality of the foregoing, the Company (i) will not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, and (ii) will
take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

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          (e)  Successors and Assigns.  This Warrant will be binding upon any
               ----------------------
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.

          (f)  Blue Sky Laws.  The Company shall, on or before the date of
               -------------
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this Warrant prior to such date; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (a) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(f), (b) subject itself to general
taxation in any such jurisdiction or (c) file a general consent to service of
process in any such jurisdiction.

     4.   Antidilution Provisions.  During the Exercise Period, the Exercise
          -----------------------
Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 4.

     In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent.

          (a)  Adjustment of Exercise Price.  Except as otherwise provided in
               ----------------------------
Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price on the Measurement Date (as
such terms are hereinafter defined) (a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in
accordance with the following formula:

          E' = E x    O + P/M
                    ---------
                       CSDO

          where:

          E'   =    the adjusted Exercise Price;
          E    =    the Exercise Price on the Measurement Date;
          M    =    the Market Price on the Measurement Date;
          O    =    the number of shares of Common Stock outstanding immediately
                    prior to the Dilutive Issuance;
          P    =    the aggregate consideration, calculated as set forth in
                    Section 4(b) hereof, received by the Company upon such
                    Dilutive Issuance; and
          CSDO =    the total number of shares of Common Stock Deemed
                    Outstanding (as defined in Section 4(l)(i)) immediately
                    after the Dilutive Issuance.

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Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 4(a) if such adjustment would result in an increase in the Exercise
Price.

          (b)  Effect on Exercise Price of Certain Events.  For purposes of
               ------------------------------------------
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:

               (i)   Issuance of Rights or Options.  If the Company in any
                     -----------------------------
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as "Options") and
the price per share for which Common Stock is issuable upon the exercise of such
Options is less than the Market Price in effect on the Measurement Date ("Below
Market Options"), then the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Market Options (assuming full
exercise, conversion or exchange of Convertible Securities, if applicable) will,
as of the date of the issuance or grant of such Below Market Options, be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share. For purposes of the preceding sentence, the "price per share for
which Common Stock is issuable upon the exercise of such Below Market Options"
is determined by dividing (i) the total amount, if any, received or receivable
by the Company as consideration for the issuance or granting of all such Below
Market Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Below Market
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Below Market Options, the minimum aggregate amount of additional
consideration payable upon the exercise, conversion or exchange thereof
(determined in accordance with the calculation method set forth in (b)(ii)
below) at the time such Convertible Securities first become exercisable,
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Below Market Options
(assuming full conversion of Convertible Securities, if applicable). No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Below Market Options or upon the
exercise, conversion or exchange of Convertible Securities issuable upon
exercise of such Below Market Options. If, in any case, the total number of
shares of Common Stock issuable upon exercise of any Below Market Options or
upon exercise, conversion or exchange of any Convertible Securities (including
Convertible Securities contemplated by Section 4(b)(ii) below) is not, in fact,
issued and the rights to exercise such Below Market Option or to exercise,
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Below Market Options or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.

               (ii)  Issuance of Convertible Securities.
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                    (A)  If the Company in any manner issues or sells any
Convertible Securities, which Convertible Securities do not have a fluctuating
conversion or exercise price or exchange ratio, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
exercise, conversion or exchange (as determined pursuant to Section 4(b)(ii)(B)
if applicable) is less than the Market Price in effect on the Measurement Date,
then the maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Convertible Securities will, as of
the date of the issuance of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For the purposes of the preceding sentence, the "price per share for
which Common Stock is issuable upon such exercise, conversion or exchange" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise, conversion or exchange thereof at
the time such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon exercise, conversion or exchange of
such Convertible Securities.

                    (B)  If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "Variable Rate Convertible Security"), then the "price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange" for purposes of the calculation contemplated by Section 4(b)(ii)(A)
shall be deemed to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any discounts contained in
such Convertible Security have been satisfied) if the Market Price on the
Measurement Date of such Convertible Security were 75% of the Market Price on
such Measurement Date (the "Assumed Variable Market Price"). Further, if the
Market Price at any time or times thereafter is less then or equal to the
Assumed Variable Market Price last used for making any adjustment under this
Section 4 with respect to any Variable Rate Convertible Security, the Exercise
Price in effect at such time shall be readjusted to equal the Exercise Price
which would have resulted if the Assumed Variable Market Price at the time of
issuance of the Variable Rate Convertible Security had been 75% of the Market
Price existing at the time of the adjustment required by this sentence.

          (iii)     Change in Option Price or Conversion Rate.  If there is a
                    -----------------------------------------
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock (in
each such case, other than under or by reason of provisions designed to protect
against dilution and except when an adjustment is made pursuant to (ii)(B)
above), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such

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Options or Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold.

               (iv)   Calculation of Consideration Received.  If any Common
                      -------------------------------------
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, after deduction of all commissions,
underwriting discounts or allowances and other expenses paid or incurred by the
Company in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
part or all of which shall be other than cash, including in the case of a
strategic or similar arrangement in which the other entity will provide services
to the Company, purchase services from the Company or otherwise provide
intangible consideration to the Company, the amount of the consideration other
than cash received by the Company (including the net present value of the
consideration expected by the Company for the provided or purchased services)
will be the fair market value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible Securities are issued
in connection with any merger or consolidation in which the Company is the
surviving corporation, the amount of consideration therefor will be deemed to be
the fair market value of such portion of the net assets and business of the non-
surviving corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. Notwithstanding anything else herein
to the contrary, if Common Stock, Options or Convertible Securities are issued,
granted or sold in conjunction with each other as part of a single transaction
or in a series of related transactions, the holder of this Warrant may elect to
determine the amount of consideration deemed to be received by the Company
therefore by deducting the fair value of any type of securities (the
"Disregarded Securities") issued, granted or sold in such transaction or series
of transactions. If the holder makes an election pursuant to the immediately
preceding sentence, no adjustment to the Exercise Price shall be made pursuant
to this Section 4 for the issuance of the Disregarded Securities or upon any
conversion or exercise thereof. For example, if the Company were to issue
convertible notes having a face value of $1,000,000 and warrants to purchase
shares of Common Stock at an exercise price equal to the market price of the
Common Stock on the date of issuance of such warrants in exchange for $1,000,000
of consideration, the fair value of the warrants would be subtracted from the
$1,000,000 of consideration received by the Company for the purposes of
determining whether the shares of Common Stock issuable upon conversion of the
convertible notes shall be deemed to be issued at a price per share below market
price and, if so, for purposes of determining any adjustment to the Exercise
Price hereunder as a result of the issuance of the Convertible Securities. The
Company shall calculate, using standard commercial valuation methods appropriate
for valuing such assets, the fair market value of any consideration other than
cash or securities; provided, however, that if the holder hereof does not agree
to such fair market value calculation within three business days after receipt
thereof from the Company, then such fair market value will be determined in good
faith by an investment banker or other appropriate expert of national reputation
selected by the Company and reasonably acceptable to the holder hereof, with the
costs of such appraisal to be borne by the Company.

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               (v)    Issuances Pursuant to Existing Securities.  If the
                      -----------------------------------------
Company, at any time during the Exercise Period, issues shares of Common Stock
pursuant to any antidilution or similar adjustments contained in a security or
instrument outstanding on and including the Issue Date but not included on
Schedule 3(d) of the Stock Purchase Agreement, then all shares of Common Stock
so issued shall be deemed to have been issued for no consideration. If the
Company, at any time during the Exercise Period, issues shares of Common Stock
pursuant to any antidilution or similar adjustments contained in a security or
instrument without complying with Section 4(s) of the Stock Purchase Agreement,
all shares so issued shall be deemed to have been issued for no consideration.

               (vi)   Exceptions to Adjustment of Exercise Price.  No
                      ------------------------------------------
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities issued and outstanding on and
including the Issue Date and set forth on Schedule 3(d) of the Securities
Purchase Agreement in accordance with the terms of such securities or
instruments as of such date provided that the Company has complied with Section
4(s) of the Securities Purchase Agreement; (ii) upon the grant or exercise of
any stock or options which may hereafter be granted or exercised under any
employee benefit plan of the Company now existing or to be implemented in the
future, so long as the issuance of such stock or options is approved by a
majority of the non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established
for such purpose; (iii) upon the issuance of Common Shares and Warrants pursuant
to and in accordance with the terms of the Securities Purchase Agreement; or
(iv) upon or exercise of the Warrants.

          (c)  Subdivision or Combination of Common Stock.  If the Company, at
               ------------------------------------------
any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time during the Exercise Period, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.

          (d)  Adjustment in Number of Shares.  Upon each adjustment of the
               ------------------------------
Exercise Price pursuant to the provisions of Section 4(c), the number of shares
of Common Stock issuable upon exercise of this Warrant at each such Exercise
Price shall be adjusted by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of shares of Common
Stock issuable upon exercise of this Warrant at such Exercise Price immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.

          (e)  Consolidation, Merger or Sale.  In case of any consolidation of
               -----------------------------
the Company with, or merger of the Company into, any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such

                                       10
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consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder hereof will have the right to acquire and receive upon
exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case, the Company will
make appropriate provision to insure that the provisions of this Section 4
hereof will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise of this
Warrant. The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this Warrant and the obligations to deliver to the holder hereof such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire. Notwithstanding the foregoing, in the event
of any consolidation of the Company with, or merger of the Company into, any
other corporation, or the sale or conveyance of all or substantially all of the
assets of the Company, at any time during the Exercise Period, the holder hereof
shall, at its option, have the right to receive, in connection with such
transaction, cash consideration equal to the fair market value of this Warrant
as determined in accordance with customary valuation methodology used in the
investment banking industry.

     (f)  Distribution of Assets.  In case the Company shall declare or make any
          ----------------------
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend, stock repurchase by way of
return of capital or otherwise (including any dividend or distribution to the
Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time during the
Exercise Period, then the holder hereof shall be entitled upon exercise of this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets (or rights) which would have been
payable to the holder had such holder been the holder of such shares of Common
Stock on the record date for the determination of shareholders entitled to such
Distribution.  If the Company distributes rights, warrants, options or any other
form of convertible securities and the right to exercise or convert such
securities would expire in accordance with their terms prior to the expiration
of the Exercise Period, then the terms of such securities shall provide that
such exercise or convertibility right shall remain in effect until 30 days after
the date the holder hereof receives such securities pursuant to the exercise
hereof.

     (g)  Notice of Adjustment.  Upon the occurrence of any event which requires
          --------------------
any adjustment of the Exercise Price, then, and in each such case, the Company
shall give notice thereof to the holder hereof, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease in
the number of Warrant Shares purchasable at such price upon exercise, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.  Such calculation shall be certified by the chief
financial officer of the Company.

                                       11
<PAGE>

     (h)  Minimum Adjustment of Exercise Price.  No adjustment of the Exercise
         ------------------------------------
Price shall be made in an amount of less than $.01, but any such lesser
adjustment shall be carried forward and shall be made at the time and together
with the next subsequent adjustment which, together with any adjustments so
carried forward, shall amount to not less than $.01.

     (i)  No Fractional Shares.  No fractional shares of Common Stock are to be
          --------------------
issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.

     (j)  Other Notices.  In case at any time:
          -------------

               (i)    the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;

               (ii)   the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;

               (iii)  there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or

               (iv)   there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place.  Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be.  Such notice shall be given at
least twenty (20) days prior to the record date or the date on which the
Company's books are closed in respect thereto.  Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above.  Notwithstanding the foregoing,
the Company shall publicly

                                       12
<PAGE>

disclose the substance of any notice delivered hereunder prior to delivery of
such notice to the holder hereof.

          (k)  Certain Events.  If, at any time during the Exercise Period, any
               --------------
event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(g) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant at
each such Exercise Price so that the rights of the holder shall be neither
enhanced nor diminished by such event.

          (l)  Certain Definitions.
               -------------------

               (i)   "Common Stock," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.

               (ii)  "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Below
Market Options, the maximum total number of shares of Common Stock issuable upon
the exercise of the Below Market Options for which the adjustment is required
(including any Common Stock issuable upon the conversion of Convertible
Securities issuable upon the exercise of such Below Market Options), and (y) in
the case of any adjustment required by Section 4(a) resulting from the issuance
of any Convertible Securities, the maximum total number of shares of Common
Stock issuable upon the exercise, conversion or exchange of the Convertible
Securities for which the adjustment is required, as of the date of issuance of
such Convertible Securities, if any.

               (iii) "Market Price," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on the Nasdaq
National/SmallCap Market by Bloomberg for the five consecutive business days
immediately preceding such date, or (ii) if the Nasdaq National/SmallCap Market
is not the principal trading market for the shares of Common Stock, the average
of the reported closing bid prices reported by Bloomberg on the principal
trading market for the Common Stock during the same period, or, if there is no
bid price for such period, the last sales price reported by Bloomberg for such
period, or (iii) if the foregoing do not apply, the last sale price of such
security in the over-the-counter market on the pink sheets or bulletin board for
such security as reported by Bloomberg for such period, or if no sale price is
so reported for such security, the last bid price of such security as reported
by Bloomberg for such period, or (iv) if market value cannot be calculated as of
such date on any of the foregoing bases, the Market Price shall be the

                                       13
<PAGE>

average fair market value as reasonably determined by an investment banking firm
selected by the Company and reasonably acceptable to the holder, with the costs
of the appraisal to be borne by the Company. The manner of determining the
Market Price of the Common Stock set forth in the foregoing definition shall
apply with respect to any other security in respect of which a determination as
to market value must be made hereunder.

               (iv)  "Measurement Date"  means (i) for purposes of any private
offering of securities under Section 4(2) of the Securities Act of 1933, as
amended, the date that the Company enters into legally binding definitive
agreements for the issuance and sale of such securities, (ii) for purposes of
the issuance of securities issuable upon the exercise of any Options, the date
of issuance of such Option, and (iii) for purposes of any other issuance of
securities, the date of issuance thereof.

     5.   Issue Tax.  The issuance of certificates for Warrant Shares upon the
          ---------
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.

     6.   No Rights or Liabilities as a Shareholder.  This Warrant shall not
          -----------------------------------------
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company.  No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

     7.   Transfer, Exchange, Redemption and Replacement of Warrant.
          ---------------------------------------------------------

          (a)  Restriction on Transfer.  This Warrant and the rights granted to
               -----------------------
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Sections 7(f) hereof.  Each transferee of this
Warrant or any portion thereof shall be bound by the selling restrictions set
forth in Section 4(n) of the Securities Purchase Agreement, which Section is
incorporated herein by reference.  Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary.

          (b)  Warrant Exchangeable for Different Denominations.  This Warrant
               ------------------------------------------------
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new Warrants to represent the right to purchase such

                                       14
<PAGE>

number of shares (at the Exercise Price therefor) as shall be designated by the
holder hereof at the time of such surrender.

          (c)  Replacement of Warrant.  Upon receipt of evidence reasonably
               ----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

          (d)  Cancellation; Payment of Expenses.  Upon the surrender of this
               ---------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company.  The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 7.  The Company shall
indemnify and reimburse the holder of this Warrant for all losses and damages
arising as a result of or related to any breach of the terms of this Warrant,
including costs and expenses (including legal fees) incurred by such holder in
connection with the enforcement of its rights hereunder.

          (e)  Warrant Register.  The Company shall maintain, at its principal
               ----------------
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.

          (f)  Additional Restrictions on Exercise or Transfer.  In no event
               -----------------------------------------------
shall the holder hereof have the right to exercise any portion of this Warrant
for shares of Common Stock or to dispose of any portion of this Warrant to the
extent that such right to effect such exercise or disposition would result in
the holder or any of its affiliates beneficially owning more than 4.99% of the
outstanding shares of Common Stock.  For purposes of this Section 7(f),
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder.
The restriction contained in this Section 7(f) may not be altered, amended,
deleted or changed in any manner whatsoever unless the holders of a majority of
the outstanding shares of Common Stock and the holder hereof shall approve, in
writing, such alteration, amendment, deletion or change.

     8.   Intentionally Omitted.
          ---------------------

     9.   Notices.  Any notices required or permitted to be given under the
          -------
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail,

                                       15
<PAGE>

if mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:

               If to the Company:

               ELECTRIC FUEL CORPORATION
               120 Wood Avenue South
               Suite 300
               Iselin, New Jersey  08830
               Facsimile:  (732) 635-7101
               Attn:   Robert S. Ehrlich
                       Chief Financial Officer

               with a copy simultaneously transmitted by like means to:

               HARRIS BEACH LLP
               130 East Main Street
               Rochester, New York 14604
               Facsimile: (716) 232-6926
               Attn:  Thomas Willett, Esq.

               and to:

               Yaakov Har-Oz, Adv
               Vice President and General Counsel
               Electric Fuel Corporation
               Western Industrial Park
               P.O. Box 641
               Bent Shemesh 99000
               Israel
               Tel No.: 972-2-990-6023
               Fax No.: 972-2-990-6088

If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9.

                                       16
<PAGE>

     10.  Governing Law; Jurisdiction.  This Warrant shall be governed by and
          ---------------------------
construed in accordance with the laws of the State of Delaware The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware in any suit or proceeding based on
or arising under this Warrant and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding.  Nothing herein shall affect
the holder's right to serve process in any other manner permitted by law.  The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.

     11.  Miscellaneous.
          -------------

          (a)  Amendments.  Except as provided in Section 7(f) hereof, this
               ----------
Warrant and any provision hereof may only be amended by an instrument in writing
signed by the Company and the holder hereof.

          (b)  Descriptive Headings.  The descriptive headings of the several
               --------------------
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.

          (c)  Cashless Exercise.  Notwithstanding anything to the contrary
               -----------------
contained in this Warrant, if the issuance and sale of Warrant Shares by the
holder is not then registered pursuant to an effective registration statement
under the Securities Act, this Warrant may be exercised at any time during the
Exercise Period by presentation and surrender of this Warrant to the Company at
its principal executive offices with a written notice of the holder's intention
to effect a cashless exercise, including a calculation of the number of shares
of Common Stock to be issued upon such exercise in accordance with the terms
hereof (a "Cashless Exercise").  In the event of a Cashless Exercise, in lieu of
paying the Exercise Price in cash, the holder shall surrender this Warrant for
that number of shares of Common Stock determined by multiplying the number of
Warrant Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between the then current Market Price
of a share of the Common Stock on the date of exercise and the Exercise Price,
and the denominator of which shall be the then current Market Price per share of
Common Stock.

          (d)  Business Day.  For purposes of this Warrant, the term "business
               ------------
day" means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law,
regulation or executive order to close.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       17
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.

                              ELECTRIC FUEL CORPORATION

                              By: _________________________________
                                 Name:
                                 Title:

<PAGE>

                          FORM OF EXERCISE AGREEMENT

        (To be Executed by the Holder in order to Exercise the Warrant)

To:  ELECTRIC FUEL CORPORATION
     120 Wood Avenue South
     Suite 300
     Iselin, New Jersey  08830
     Facsimile:
     Attn:

     The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of ELECTRIC FUEL CORPORATION, a
corporation organized under the laws of the State of Delaware (the "Company"),
evidenced by the attached Warrant, and herewith [makes payment of the Exercise
Price with respect to such shares in full][elects to effect a Cashless Exercise
(as defined in Section 11(c) of such Warrant], all in accordance with the
conditions and provisions of said Warrant.

     The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any Common Stock obtained on exercise of the Warrant, except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
or any state securities laws.

[_]  The undersigned requests that the Company cause its transfer agent to
     electronically transmit the Common Stock issuable pursuant to this Exercise
     Agreement to the account of the undersigned or its nominee (which is
     _________________) with DTC through its Deposit Withdrawal Agent Commission
     System ("DTC Transfer"), provided that such transfer agent participates in
     the DTC Fast Automated Securities Transfer program.

[_]  In lieu of receiving the shares of Common Stock issuable pursuant to this
     Exercise Agreement by way of DTC Transfer, the undersigned hereby requests
     that the Company cause its transfer agent to issue and deliver to the
     undersigned physical certificates representing such shares of Common Stock.

     The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:

Dated:_________________            _____________________________________
                                        Signature of Holder

                                   _____________________________________
                                        Name of Holder (Print)

                                        Address:
                                   _____________________________________
                                   _____________________________________
                                   _____________________________________

<PAGE>

                              FORM OF ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:

Name of Assignee              Address                        No. of Shares
----------------              -------                        -------------

, and hereby irrevocably constitutes and appoints ______________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.

Dated: _____________________, ____

In the presence of

__________________

                              Name: ____________________________

                                    Signature: _______________________
                                    Title of Signing Officer or Agent (if any):
                                              ________________________
                                    Address:  ________________________
                                              ________________________

                                    Note:  The above signature should correspond
                                           exactly with the name on the face of
                                           the within Warrant.<PAGE>

     VOID AFTER 5:00 P.M., NEW YORK CITY
     TIME, ON NOVEMBER 17, 2005
     (UNLESS EXTENDED PURSUANT TO SECTION 2 HEREOF)

                                  Right to Purchase 50,000 Shares of
                                  Common Stock, par value $.01 per share

Date: November 17, 2000

                           ELECTRIC FUEL CORPORATION
                            STOCK PURCHASE WARRANT

     THIS CERTIFIES THAT, for value received, Josephthal & Co., Inc., or its
registered assigns, is entitled to purchase from Electric Fuel Corporation, a
corporation organized under the laws of the State of Delaware (the "Company"),
at any time or from time to time during the period specified in Section 2
hereof, FIFTY THOUSAND (50,000) fully paid and nonassessable shares of the
Company's common stock, par value $.01 per share (the "Common Stock"), at an
exercise price per share (the "Exercise Price") equal to $12.56 in effect on
the Issue Date (as defined in Section 2 hereof). The number of shares of Common
Stock purchasable hereunder (the "Warrant Shares") and the Exercise Price are
subject to adjustment as provided in Section 4 hereof. The term "Warrants" means
this Warrant.

     This Warrant is subject to the following terms, provisions and conditions:

     1    Manner of Exercise; Issuance of Certificates; Payment for Shares
          ----------------------------------------------------------------
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in United States dollars in cash, by certified or
official bank check or by wire transfer of immediately available funds for the
account of the Company, of the Exercise Price for the Warrant Shares specified
in the Exercise Agreement or (ii) if the holder is effectuating a Cashless
Exercise (as defined in Section 11(c) hereof) pursuant to Section 11(c) hereof,
delivery to the Company of a written notice of an election to effect a Cashless
Exercise for the Warrant Shares specified in the Exercise Agreement.  The
Warrant Shares so purchased shall be deemed to be issued to the holder hereof or
such holder's designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered, the
completed Exercise Agreement shall have been delivered, and payment shall have
been made for such shares as set

                                       1
<PAGE>

forth above or, if such date is not a business date, on the next succeeding
business date. The Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding two business days, after
this Warrant shall have been so exercised (the "Delivery Period"). If the
Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, the Company shall cause its
transfer agent to electronically transmit the Warrant Shares so purchased to the
holder by crediting the account of the holder or its nominee with DTC through
its Deposit Withdrawal Agent Commission system ("DTC Transfer"). If the
aforementioned conditions to a DTC Transfer are not satisfied, the Company shall
deliver to the holder physical certificates representing the Warrant Shares so
purchased. Further, the holder may instruct the Company to deliver to the holder
physical certificates representing the Warrant Shares so purchased in lieu of
delivering such shares by way of DTC Transfer. Any certificates so delivered
shall be in such denominations as may be reasonably requested by the holder
hereof shall be registered in the name of such holder or such other name as
shall be designated by such holder, and shall not bear any restrictive legend,
unless otherwise required by law. If this Warrant shall have been exercised only
in part, then the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the holder a new Warrant representing the number of
shares with respect to which this Warrant shall not then have been exercised.

     If, at any time, a holder of this Warrant submits this Warrant, an Exercise
Agreement and payment to the Company of the Exercise Price for each of the
Warrant Shares specified in the Exercise Agreement (including pursuant to a
Cashless Exercise), and the Company fails for any reason to deliver, on or prior
to the fourth business day following the expiration of the Delivery Period for
such exercise, the number of shares of Common Stock to which the holder is
entitled upon such exercise (an "Exercise Default"), then the Company shall pay
to the holder payments ("Exercise Default Payments") for an Exercise Default in
the amount of (a) (N/365), multiplied by (b) the amount by which the Market
Price (as defined in Section 4(l) hereof) on the date the Exercise Agreement
giving rise to the Exercise Default is transmitted in accordance with this
Section 1 (the "Exercise Default Date") exceeds the Exercise Price in respect of
such Warrant Shares, multiplied by (c) the number of shares of Common Stock the
Company failed to so deliver in such Exercise Default, multiplied by (d) 24,
where N = the number of days from the Exercise Default Date to the date that the
Company effects the full exercise of this Warrant which gave rise to the
Exercise Default.  The accrued Exercise Default Payment for each calendar month
shall be paid in cash or shall be convertible into Common Stock, at the holder's
option, as follows:

          (a)  In the event holder elects to take such payment in cash, cash
payment shall be made to holder by the fifth day of the month following the
month in which it has accrued; and

          (b)  In the event holder elects to take such payment in Common Stock,
the holder may convert such payment amount into Common Stock at the lower of the
Exercise Price or the Market Price (as defined in Section 4(l)) (as in effect at
the time of exercise) at any time after the fifth day of the month following the
month in which it has accrued.

               Nothing herein shall limit the holder's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of Common Stock as required pursuant to the terms of Section 3(b) hereof
or to otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and the holder shall

                                       2
<PAGE>

have the right to pursue all remedies available at law or in equity (including a
decree of specific performance and/or injunctive relief).

     2    Period of Exercise This Warrant is immediately exercisable, at any
          ------------------
time or from time to time on or after the date of initial issuance of this
Warrant (the "Issue Date") and before 5:00 p.m., New York City time, on the
fifth anniversary of the Issue Date (the "Exercise Period").

     3    Certain Agreements of the Company.  The Company hereby covenants and
          ---------------------------------
agrees as follows:

          (a) Shares to be Fully Paid.  All Warrant Shares will, upon issuance
              -----------------------
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.

          (b) Reservation of Shares  During the Exercise Period, the Company
              ---------------------
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise in full of this Warrant (without giving effect to the
limitations on exercise set forth in Section 7(f) hereof).

          (c)  Listing  The Company shall promptly secure the listing of the
               -------
Warrant Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed or become
listed (subject to official notice of issuance upon exercise of this Warrant)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Warrant shares; and the Company shall so list on
each national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.

          (d)  Certain Actions Prohibited  The Company will not, by amendment of
               --------------------------
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the economic benefit inuring to the holder hereof
and the exercise privilege of the holder of this Warrant against dilution or
other impairment, consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.

          (e)  Successors and Assigns  This Warrant will be binding upon any
               ----------------------
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.

                                       3
<PAGE>

          (f)  Blue Sky Laws  The Company shall, on or before the date of
               -------------
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this Warrant prior to such date; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (a) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(f), (b) subject itself to general
taxation in any such jurisdiction or (c) file a general consent to service of
process in any such jurisdiction.

     4    Antidilution Provisions  During the Exercise Period, the Exercise
          -----------------------
Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 4.

     In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent.

          (a)  Adjustment of Exercise Price.  Except as otherwise provided in
               ----------------------------
Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price on the Measurement Date (as
such terms are hereinafter defined) (a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in
accordance with the following formula:

          E' = E x    O + P/M
                   --------------
                        CSDO

          where:

          E'   =  the adjusted Exercise Price;
          E    =  the Exercise Price on the Measurement Date;
          M    =  the Market Price on the Measurement Date;
          O    =  the number of shares of Common Stock outstanding immediately
                  prior to the Dilutive Issuance;
          P    =  the aggregate consideration, calculated as set forth in
                  Section 4(b) hereof, received by the Company upon such
                  Dilutive Issuance; and
          CSDO =  the total number of shares of Common Stock Deemed Outstanding
                  (as defined in Section 4(l)(i)) immediately after the Dilutive
                  Issuance.

Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 4(a) if such adjustment would result in an increase in the Exercise
Price and no adjustment shall be made upon the Company's sale of the Initial
Securities as defined in and pursuant to that certain Securities Purchase
Agreement (the "Securities Purchase Agreement") dated as of November 16, 2000
between the Company and Capital Ventures International, or pursuant to exercise
of the Series A and Series B Warrants as such terms are defined in the
Securities Purchase Agreement.

                                       4
<PAGE>

          (b)  Effect on Exercise Price of Certain Events.  For purposes of
               ------------------------------------------
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:

               (i)  Issuance of Rights or Options  If the Company in any manner
                    -----------------------------
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price in effect on the Measurement Date ("Below Market
Options"), then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Below Market Options (assuming full exercise,
conversion or exchange of Convertible Securities, if applicable) will, as of the
date of the issuance or grant of such Below Market Options, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Below Market Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Below
Market Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Below Market
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Below Market Options, the minimum aggregate amount of additional
consideration payable upon the exercise, conversion or exchange thereof
(determined in accordance with the calculation method set forth in (b)(ii)
below) at the time such Convertible Securities first become exercisable,
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Below Market Options
(assuming full conversion of Convertible Securities, if applicable) No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Below Market Options or upon the
exercise, conversion or exchange of Convertible Securities issuable upon
exercise of such Below Market Options. If, in any case, the total number of
shares of Common Stock issuable upon exercise of any Below Market Options or
upon exercise, conversion or exchange of any Convertible Securities (including
Convertible Securities contemplated by Section 4(b)(ii) below) is not, in fact,
issued and the rights to exercise such Below Market Option or to exercise,
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Below Market Options or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.

          (ii) Issuance of Convertible Securities.
               ----------------------------------

               (A)  If the Company in any manner issues or sells any Convertible
Securities, which Convertible Securities do not have a fluctuating conversion or
exercise price or exchange ratio, whether or not immediately convertible (other
than where the same are issuable upon the exercise of Options) and the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange (as determined pursuant to Section 4(b)(ii)(B) if applicable) is less
than the Market Price in effect on the Measurement Date, then the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities will, as of the date of the issuance
of such

                                       5
<PAGE>

Convertible Securities, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For the purposes of the preceding
sentence, the "price per share for which Common Stock is issuable upon such
exercise, conversion or exchange" is determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
issuance or sale of all such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
exercise, conversion or exchange thereof at the time such Convertible Securities
first become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
exercise, conversion or exchange of such Convertible Securities.

                (B)  If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "Variable Rate Convertible Security"), then the "price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange" for purposes of the calculation contemplated by Section 4(b)(ii)(A)
shall be deemed to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any discounts contained in
such Convertible Security have been satisfied) if the Market Price on the
Measurement Date of such Convertible Security were 75% of the actual Market
Price on such Measurement Date (the "Assumed Variable Market Price"). Further,
if the Market Price at any time or times thereafter is less then or equal to the
Assumed Variable Market Price last used for making any adjustment under this
Section 4 with respect to any Variable Rate Convertible Security, the Exercise
Price in effect at such time shall be readjusted to equal the Exercise Price
which would have resulted if the Assumed Variable Market Price at the time of
issuance of the Variable Rate Convertible Security had been 75% of the Market
Price existing at the time of the adjustment required by this sentence.

          (iii) Change in Option Price or Conversion Rate  If there is a change
                -----------------------------------------
at any time in (i) the amount of additional consideration payable to the Company
upon the exercise of any Options; (ii) the amount of additional consideration,
if any, payable to the Company upon the exercise, conversion or exchange of any
Convertible Securities; or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock (in each such case, other
than under or by reason of provisions designed to protect against dilution and
except when an adjustment is made pursuant to (ii)(B) above), the Exercise Price
in effect at the time of such change will be readjusted to the Exercise Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold.

          (iv)  Calculation of Consideration Received  If any Common Stock,
                -------------------------------------
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, after deduction of all commissions,
underwriting discounts or allowances and other expenses paid or incurred by the
Company in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
part or all of which shall be other than cash, including in the case of a
strategic or similar arrangement in which the other entity will provide services
to the Company, purchase services from the Company or otherwise provide
intangible consideration to the Company, the amount of the

                                       6
<PAGE>

consideration other than cash received by the Company (including the net present
value of the consideration expected by the Company for the provided or purchased
services) will be the fair market value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible Securities are issued
in connection with any merger or consolidation in which the Company is the
surviving corporation, the amount of consideration therefor will be deemed to be
the fair market value of such portion of the net assets and business of the non-
surviving corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. Notwithstanding anything else herein
to the contrary, if Common Stock, Options or Convertible Securities are issued,
granted or sold in conjunction with each other as part of a single transaction
or in a series of related transactions, the holder of this Warrant may elect to
determine the amount of consideration deemed to be received by the Company
therefore by deducting the fair value of any type of securities (the
"Disregarded Securities") issued, granted or sold in such transaction or series
of transactions. If the holder makes an election pursuant to the immediately
preceding sentence, no adjustment to the Exercise Price shall be made pursuant
to this Section 4 for the issuance of the Disregarded Securities or upon any
conversion or exercise thereof. For example, if the Company were to issue
convertible notes having a face value of $1,000,000 and warrants to purchase
shares of Common Stock at an exercise price equal to the market price of the
Common Stock on the date of issuance of such warrants in exchange for $1,000,000
of consideration, the fair value of the warrants would be subtracted from the
$1,000,000 of consideration received by the Company for the purposes of
determining whether the shares of Common Stock issuable upon conversion of the
convertible notes shall be deemed to be issued at a price per share below market
price and, if so, for purposes of determining any adjustment to the Exercise
Price hereunder as a result of the issuance of the Convertible Securities. The
Company shall calculate, using standard commercial valuation methods appropriate
for valuing such assets, the fair market value of any consideration other than
cash or securities; provided, however, that if the holder hereof does not agree
to such fair market value calculation within three business days after receipt
thereof from the Company, then such fair market value will be determined in good
faith by an investment banker or other appropriate expert of national reputation
selected by the Company and reasonably acceptable to the holder hereof, with the
costs of such appraisal to be borne by the Company.

          (v)  Issuances Pursuant to Existing Securities.  If the Company, at
               -----------------------------------------
any time during the Exercise Period, issues shares of Common Stock pursuant to
any antidilution or similar adjustments contained in a security or instrument
other than the Initial Securities, the Series A Warrants, the Series B Warrants,
or any other security or instruments outstanding on and including the Issue Date
and identified on Schedule 3(d) of the Stock Purchase Agreement, then all shares
of Common Stock so issued shall be deemed to have been issued for no
consideration.

          (vi) Exceptions to Adjustment of Exercise Price  No adjustment to the
               ------------------------------------------
Exercise Price will be made (i) upon the exercise of any warrants, options or
convertible securities issued and outstanding on and including the Issue Date in
accordance with the terms of such securities or instruments as of such date;
(ii) upon the grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee benefit plan of the Company now existing
or to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee of non-
employee directors established

                                       7
<PAGE>

for such purpose; (iii) upon the issuance of the Initial Securities pursuant to
and in accordance with the terms of the Securities Purchase Agreement; (iv) upon
the exercise of the Series A Warrants and Series B Warrants as such terms are
defined in the Securities Purchase Agreement; or (v) upon the exercise of the
Warrants.

     (c)  Subdivision or Combination of Common Stock  If the Company, at any
          ------------------------------------------
time during the Exercise Period, subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a greater number of shares, then, after the date of record for
effecting such subdivision, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced.  If the Company, at any time
during the Exercise Period, combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
smaller number of shares, then, after the date of record for effecting such
combination, the Exercise Price in effect immediately prior to such combination
will be proportionately increased.

     (d)  Adjustment in Number of Shares  Upon each adjustment of the Exercise
          ------------------------------
Price pursuant to the provisions of Section 4(c), the number of shares of Common
Stock issuable upon exercise of this Warrant at each such Exercise Price shall
be adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant at such Exercise Price immediately prior
to such adjustment and dividing the product so obtained by the adjusted Exercise
Price.

     (e)  Consolidation, Merger or Sale  In case of any consolidation of the
          -----------------------------
Company with, or merger of the Company into, any other corporation, or in case
of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder hereof will have the right to acquire and receive upon
exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place.  In any such case, the Company
will make appropriate provision to insure that the provisions of this Section 4
hereof will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise of this
Warrant.  The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this Warrant and the obligations to deliver to the holder hereof such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire. Notwithstanding the foregoing, in the event
of any consolidation of the Company with, or merger of the Company into, any
other corporation, or the sale or conveyance of all or substantially all of the
assets of the Company, at any time during the Exercise Period, the holder hereof
shall, at its option, have the right to receive, in connection with such
transaction, cash consideration equal to the fair market value of this Warrant
as determined in accordance with customary valuation methodology used in the
investment banking industry.

                                       8
<PAGE>

     (f)  Distribution of Assets.  In case the Company shall declare or make any
          ----------------------
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend, stock repurchase by way of
return of capital or otherwise (including any dividend or distribution to the
Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time during the
Exercise Period, then the holder hereof shall be entitled upon exercise of this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets (or rights) which would have been
payable to the holder had such holder been the holder of such shares of Common
Stock on the record date for the determination of shareholders entitled to such
Distribution.  If the Company distributes rights, warrants, options or any other
form of convertible securities and the right to exercise or convert such
securities would expire in accordance with their terms prior to the expiration
of the Exercise Period, then the terms of such securities shall provide that
such exercise or convertibility right shall remain in effect until 30 days after
the date the holder hereof receives such securities pursuant to the exercise
hereof.

     (g)  Notice of Adjustment.  Upon the occurrence of any event which requires
          --------------------
any adjustment of the Exercise Price, then, and in each such case, the Company
shall give notice thereof to the holder hereof, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease in
the number of Warrant Shares purchasable at such price upon exercise, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.  Such calculation shall be certified by the chief
financial officer of the Company.

     (h)  Minimum Adjustment of Exercise Price.  No adjustment of the Exercise
          ------------------------------------
Price shall be made in an amount of less than $.01, but any such lesser
adjustment shall be carried forward and shall be made at the time and together
with the next subsequent adjustment which, together with any adjustments so
carried forward, shall amount to not less than $.01.

     (i)  No Fractional Shares.  No fractional shares of Common Stock are to be
          --------------------
issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.

     (j)  Other Notices.  In case at any time:
          -------------

               (i)   the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;

               (ii)  the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;

               (iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or

                                       9
<PAGE>

               (iv)  there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place.  Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be.  Such notice shall be given at
least thirty (30) days prior to the record date or the date on which the
Company's books are closed in respect thereto.  Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above.  Notwithstanding the foregoing,
the Company shall publicly disclose the substance of any notice delivered
hereunder prior to delivery of such notice to the holder hereof.

          (k)  Certain Events  If, at any time during the Exercise Period, any
               --------------
event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(g) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant at
each such Exercise Price so that the rights of the holder shall be neither
enhanced nor diminished by such event.

          (l)  Certain Definitions.
               -------------------

               (i) "Common Stock," for purposes of this Section 4, includes the
Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.

                                      10
<PAGE>

               (ii)  "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Below
Market Options, the maximum total number of shares of Common Stock issuable upon
the exercise of the Below Market Options for which the adjustment is required
(including any Common Stock issuable upon the conversion of Convertible
Securities issuable upon the exercise of such Below Market Options), and (y) in
the case of any adjustment required by Section 4(a) resulting from the issuance
of any Convertible Securities, the maximum total number of shares of Common
Stock issuable upon the exercise, conversion or exchange of the Convertible
Securities for which the adjustment is required, as of the date of issuance of
such Convertible Securities, if any.

               (iii) "Market Price," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on the Nasdaq
National/SmallCap Market by Bloomberg Financial Markets ("Bloomberg") for the
five consecutive business days immediately preceding such date, or (ii) if the
Nasdaq National/SmallCap Market is not the principal trading market for the
shares of Common Stock, the average of the reported closing bid prices reported
by Bloomberg on the principal trading market for the Common Stock during the
same period, or, if there is no bid price for such period, the last sales price
reported by Bloomberg for such period, or (iii) if the foregoing do not apply,
the last sale price of such security in the over-the-counter market on the pink
sheets or bulletin board for such security as reported by Bloomberg for such
period, or if no sale price is so reported for such security, the last bid price
of such security as reported by Bloomberg for such period, or (iv) if market
value cannot be calculated as of such date on any of the foregoing bases, the
Market Price shall be the average fair market value as reasonably determined by
an investment banking firm selected by the Company and reasonably acceptable to
the holder, with the costs of the appraisal to be borne by the Company. The
manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.

               (iv)  "Measurement Date" means (i) for purposes of any private
offering of securities under Section 4(2) of the Securities Act of 1933, as
amended, the date that the Company enters into legally binding definitive
agreements for the issuance and sale of such securities, (ii) for purposes of
the issuance of securities issuable upon the exercise of any Options, the date
of issuance of such options, and (iii) for purposes of any other issuance of
securities, the date of issuance thereof.

     5    Issue Tax  The issuance of certificates for Warrant Shares upon the
          ---------
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.

     6.   No Rights or Liabilities as a Shareholder  This Warrant shall not
          -----------------------------------------
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company.  No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

                                      11
<PAGE>

     7.   Transfer, Exchange, Redemption and Replacement of Warrant.
          ---------------------------------------------------------

          (a)  Restriction on Transfer  This Warrant and the rights granted to
               -----------------------
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Section 7(f) hereof, and provided further that such
transfer or assignment shall only be to any affiliate or employee of Josephthal.
Each transferee of this Warrant or any portion thereof shall be bound by the
selling restrictions set forth in Section 4(n) of the Securities Purchase
Agreement, which Section is incorporated herein by reference.  Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary.

          (b)  Warrant Exchangeable for Different Denominations.  This Warrant
               ------------------------------------------------
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new Warrants to represent the right to purchase such number of
shares (at the Exercise Price therefor) as shall be designated by the holder
hereof at the time of such surrender.

          (c)  Replacement of Warrant.  Upon receipt of evidence reasonably
               ----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

          (d)  Cancellation; Payment of Expenses  Upon the surrender of this
               ---------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 7. The Company shall indemnify
and reimburse the holder of this Warrant for all losses and damages arising as a
result of or related to any breach of the terms of this Warrant, including costs
and expenses (including legal fees) incurred by such holder in connection with
the enforcement of its rights hereunder.

          (e)  Warrant Register  The Company shall maintain, at its principal
               ----------------
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.

          (f)  Additional Restrictions on Exercise or Transfer.  In no event
               -----------------------------------------------
shall the holder hereof have the right to exercise any portion of this Warrant
for shares of Common Stock or to dispose of any portion of this Warrant to the
extent that such right to effect such exercise or disposition would result in
the holder or any of its affiliates beneficially owning more than

                                      12
<PAGE>

4.99% of the outstanding shares of Common Stock. For purposes of this Section
7(f), beneficial ownership shall be determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder. The restriction contained in this Section 7(f) may not be altered,
amended, deleted or changed in any manner whatsoever unless the holders of a
majority of the outstanding shares of Common Stock and the holder hereof shall
approve, in writing, such alteration, amendment, deletion or change.

     8    Intentionally Omitted.
          ---------------------

     9    Notices  Any notices required or permitted to be given under the terms
          -------
of this Warrant shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier, or by
confirmed telecopy, in each case addressed to a party.  The addresses for such
communications shall be:

               If to the Company:

               ELECTRIC FUEL CORPORATION
               120 Wood Avenue South
               Suite 300
               Iselin, New Jersey 08830
               Facsimile:
               Attn:

               with a copy simultaneously transmitted by like means to:

               HARRIS BEACH LLP
               130 East Main Street
               Rochester, New York 14604
               Facsimile: (716) 232-6926
               Attn.: Thomas Willett, Esq.

               and to:

               Yaakov Har-Oz, Adv
               Vice President and General Counsel
               Electric Fuel Corporation
               Western Industrial Park
               P.O. Box 641
               Bent Shemesh 99000
               Israel
               Tel No.: 972-2-990-6023
               Fax No.: 972-2-990-6088

If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9.

                                      13
<PAGE>

     10.  Governing Law; Jurisdiction.  This Warrant shall be governed by and
          ---------------------------
construed in accordance with the laws of the State of Delaware.  The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware in any suit or proceeding based on
or arising under this Warrant and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding.  Nothing herein shall affect
the holder's right to serve process in any other manner permitted by law.  The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.

     11.  Miscellaneous.
          -------------

          (a)  Amendments Except as provided in Section 7(f) hereof, this
               ----------
Warrant and any provision hereof may only be amended by an instrument in writing
signed by the Company and the holder hereof.

          (b)  Descriptive Headings.  The descriptive headings of the several
               --------------------
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.

          (c)  Cashless Exercise Notwithstanding anything to the contrary
               -----------------
contained in this Warrant, this Warrant may be exercised at any time during the
Exercise Period by presentation and surrender of this Warrant to the Company at
its principal executive offices with a written notice of the holder's intention
to effect a cashless exercise, including a calculation of the number of shares
of Common Stock to be issued upon such exercise in accordance with the terms
hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, in lieu of
paying the Exercise Price in cash, the holder shall surrender this Warrant for
that number of shares of Common Stock determined by multiplying the number of
Warrant Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between the then current Market Price
of a share of the Common Stock on the date of exercise and the Exercise Price,
and the denominator of which shall be the then current Market Price per share of
Common Stock.

          (d)  Business Day.  For purposes of this Warrant, the term "business
               ------------
day" means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law,
regulation or executive order to close.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      14
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.

                                   ELECTRIC FUEL CORPORATION

                                   By: _________________________________
                                       Name:
                                       Title:

                                      15
<PAGE>

                          FORM OF EXERCISE AGREEMENT

        (To be Executed by the Holder in order to Exercise the Warrant)

To:  ELECTRIC FUEL CORPORATION
     120 Wood Avenue South
     Suite 300
     Iselin, New Jersey  08830
     Facsimile:
     Attn:

     The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of ELECTRIC FUEL CORPORATION, a
corporation organized under the laws of the State of Delaware (the "Company"),
evidenced by the attached Warrant, and herewith [makes payment of the Exercise
Price with respect to such shares in full][elects to effect a Cashless Exercise
(as defined in Section 11(c) of such Warrant], all in accordance with the
conditions and provisions of said Warrant.

     The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any Common Stock obtained on exercise of the Warrant, except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
or any state securities laws.

[_]  The undersigned requests that the Company cause its transfer agent to
     electronically transmit the Common Stock issuable pursuant to this Exercise
     Agreement to the account of the undersigned or its nominee (which is
     _________________) with DTC through its Deposit Withdrawal Agent Commission
     System ("DTC Transfer"), provided that such transfer agent participates in
     the DTC Fast Automated Securities Transfer program.

[_]  In lieu of receiving the shares of Common Stock issuable pursuant to this
     Exercise Agreement by way of DTC Transfer, the undersigned hereby requests
     that the Company cause its transfer agent to issue and deliver to the
     undersigned physical certificates representing such shares of Common Stock.

     The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:

Dated:_________________             _____________________________________
                                            Signature of Holder

                                    ____________________________________
                                           Name of Holder (Print)

                                           Address:
                                    _____________________________________
                                    _____________________________________
                                    _____________________________________
<PAGE>

                              FORM OF ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:

Name of Assignee              Address                        No. of Shares
----------------              -------                        -------------

, and hereby irrevocably constitutes and appoints ______________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.

Dated: ________, ____

In the presence of

__________________

                               Name: ____________________________

                                     Signature: ______________________________
                                     Title of Signing Officer or Agent (if any):
                                              ________________________________
                                     Address: ________________________________
                                              ________________________________

                                     Note: The above signature should correspond
                                           exactly with the name on the face of
                                           the within Warrant.

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