<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996
/ / Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ------------ to ------------
Commission file number 1-10446
---------------------------------------------------
LITHIUM TECHNOLOGY CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
<TABLE>
<S> <C>
Delaware 13-3411148
------------------------------------ ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
5115 Campus Drive, Plymouth Meeting, PA 19462
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(610) 940-6090
- ------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- ------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
------- ----------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
------------- ---------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of July 20, 1996:
15,784,438 shares of Common Stock
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE> 2
LITHIUM TECHNOLOGY CORPORATION AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
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<CAPTION>
Page
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<S> <C> <C>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations - Six Months Ended June 30, 1996 4
and 1995, and Period From July 21, 1989 (Date of Inception) to
June 30, 1996
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) - 5
Six Months Ended June 30, 1996
Consolidated Statements of Cash Flows - Six Months ended June 30, 1996 6
and 1995 and Period from July 21, 1989 (Date of Inception) to
June 30, 1996
Notes to Consolidated Financial Statements - June 30, 1996 7 - 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 13 - 18
RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
LITHIUM TECHNOLOGY CORPORATION AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
----------- ------------
<S> <C> <C>
CURRENT ASSETS: (Unaudited)
Cash and equivalents $ 1,309,000 $ 217,000
Prepaid expenses and other current assets 2,000 54,000
----------- -----------
Total Current Assets 1,311,000 271,000
----------- -----------
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION OF
$262,000 at June 30, 1996 and $177,000 at December 31, 1995 693,000 653,000
----------- -----------
OTHER ASSETS:
Restricted cash 65,000 47,000
Debt issue costs, less accumulated amortization of $100,000 - 174,000
Security deposits 20,000 20,000
----------- -----------
85,000 241,000
----------- -----------
$ 2,089,000 $ 1,165,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
12% convertible promissory notes $ $ 1,284,000
Accounts payable 1,214,000 891,000
Due to related parties - 327,000
Accrued salaries 177,000 155,000
----------- -----------
Total Current Liabilities 1,391,000 2,657,000
7% CONVERTIBLE PROMISSORY NOTES, DUE DECEMBER 1999 - 300,000
----------- -----------
Total Liabilities 1,391,000 2,957,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Undesignated preferred stock:
Authorized - 75,849 shares, issued and outstanding - None - -
Series B convertible preferred stock, par value $.01 per share:
Authorized - 14,151 shares; issued and outstanding - None at June 30, 1996 and - -
6,942 shares at December 31, 1995
Series C convertible preferred stock, par value $.01 per share: - -
Authorized - 10,000 shares; issued and outstanding - None at June 30, 1996 and
10,000 shares at December 31, 1995
Common stock par value $.01 per share:
Authorized - 50,000,000 shares
Issued and outstanding - 15,784,438 shares at June 30, 1996 and 7,542,795
shares at December 31, 1995 158,000 75,000
Additional paid-in capital 15,864,000 11,471,000
Accumulated deficit (6,865,000) (6,865,000)
Deficit accumulated during development stage (8,459,000) (6,473,000)
----------- -----------
Total Stockholders' Equity (Deficiency) 698,000 (1,792,000)
----------- -----------
$ 2,089,000 $ 1,165,000
=========== ===========
</TABLE>
See notes to consolidated financial statements
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LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Period from
June 30, June 30, July 21, 1989
------------ -------------- ------------ ------------ (Date of Inception)
1996 1995 1996 1995 to June 30, 1996
------------ -------------- ------------ ------------ -------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
COSTS AND EXPENSES:
Engineering, research and development $ 318,000 $ 279,000 $ 574,000 $ 564,000 $ 3,208,000
General and administrative 723,000 388,000 1,378,000 626,000 5,121,000
Interest expense, net of interest income (22,000) 17,000 34,000 36,000 130,000
----------- ---------- ----------- ----------- -----------
1,019,000 684,000 1,986,000 1,226,000 8,459,000
----------- ---------- ----------- ----------- -----------
NET LOSS $(1,019,000) $ (684,000) $(1,986,000) $(1,226,000) $(8,459,000)
=========== ========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 15,674,000 6,797,000 11,842,000 6,711,000
=========== ========== =========== ===========
NET LOSS PER SHARE $ (.07) $ (.10) $ (.17) (.18)
=========== ========== =========== ===========
</TABLE>
See notes to consolidated financial statements
Page 4
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LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)- (Unaudited)
Series B Series C
Convertible Preferred Stock Convertible Preferred Stock Common Stock
---------------------------- ---------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
------------ -------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1995 $6,942 $ $ 10,000 $ $ 7,543,000 $ 75,000
SIX MONTHS ENDED
JUNE 30, 1996:
Issuance of Common Stock:
Upon conversion of convertible
preferred stock (6,942) - (10,000) - 454,000 4,000
Upon conversion of 7% convertible
promissory notes and accrued
interest thereon 152,000 2,000
Upon conversion of 12% convertible
promissory notes and accrued
interest thereon 7,004,000 70,000
For cash from Consortium,
net of placement costs 632,000 7,000
Issuance of Warrants in
settlement of litigation
Net Loss
------- --------- -------- ---------- ----------- --------
BALANCES AT
JUNE 30, 1996 - $ - - $ - $15,785,000 $158,000
======= ========= ======== ========== =========== ========
Deficit
Accumulated
Additional During
Paid-In Accumulated Development
Capital Deficit State
------------- ------------ ------------
<S> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1995 $11,471,000 $(6,865,000) $ 6,473,000
SIX MONTHS ENDED
JUNE 30, 1996:
Issuance of Common Stock:
Upon conversion of Convertible
preferred stock (4,000)
Upon conversion of 7% convertible
promissory notes and accrued
interest thereon 318,000
Upon conversion of 12% convertible
promissory notes and accrued
interest thereon 1,830,000
For cash from Consortium,
net of placement costs 2,181,000
Issuance of Warrants in
settlement of litigation 68,000
Net Loss (1,986,000)
--------- ----------- -----------
BALANCES AT
JUNE 30, 1996 $15,864,000 $(6,865,000) $(8,459,000)
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements
Page 5
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LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Six Months Ended July 21, 1989
June 30, (Date of Inception)
---------------------------
1996 1995 June 30, 1996
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Net loss $(1,986,000) $(1,226,000) $(9,088,000)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation 85,000 84,000 262,000
Amortization of debt issue costs 225,000 11,000 470,000
Other - - 25,000
Loss from discontinued operations - - 629,000
Fair value of warrants and option granted for service rendered - - 38,000
Common stock of the Company issued to certain
employees for services provided to Industries - - 106,000
Expenses paid by shareholder on behalf of Company - - 79,000
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 52,000 24,000 (2,000)
Security deposits - - (20,000)
Accounts payable and accrued expenses 347,000 94,000 1,680,000
Due to related parties (209,000) (3,000) -
----------- ----------- -----------
Net cash provided by (used in) operating activities (1,486,000) (1,016,000) (5,821,000)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (125,000) (7,000) (705,000)
Restricted cash (18,000) 185,000 (65,000)
Net advances from (to) discontinued operations - - 94,000
----------- ----------- -----------
Net cash provided by (used in) investing activities (143,000) 178,000 (676,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net advances repayable only out of proceeds of public
offering - - 471,000
Proceeds received upon issuance of common stock 2,188,000 - 3,220,000
Proceeds received from issuance of preferred stock - - 100,000
Proceeds received upon exercise of warrants, net of costs 63,000 342,000 535,000
Net advances by former principal stockholder - - 321,000
Proceeds from sale of convertible debt 516,000 475,000 3,624,000
Debt issue costs (51,000) (48,000) (470,000)
----------- ----------- -----------
Net cash provided by financing activities 2,716,000 769,000 7,801,000
----------- ----------- -----------
NET CHANGE IN CASH AND EQUIVALENTS 1,087,000 (69,000) 1,304,000
CASH AND EQUIVALENTS, BEGINNING OF YEAR 217,000 106,000 -
----------- ----------- -----------
CASH AND EQUIVALENTS, END OF YEAR $ 1,304,000 $ 37,000 $ 1,304,000
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Contribution to capital by former principal stockholder $ - $ - $ 3,659,000
=========== =========== ===========
Related party debt exchanged for convertible debt $ - $ - $ 321,000
=========== =========== ===========
Exchange of indebtedness to former principal
stockholder for common stock $ - $ - $ 445,000
=========== =========== ===========
Issuance of common stock for services $ - $ - $ 88,000
=========== =========== ===========
Exchange of equipment and accrued rent for common stock $ - $ - $ 271,000
=========== =========== ===========
Subordinated notes and related accrued interest
exchanged for Series A preferred stock $ - $ - $ 3,300,000
=========== =========== ===========
Exchange of convertible debt for convertible
preferred stock $ - $ - $ 356,000
=========== =========== ===========
Conversion of convertible debt and accrued interest
into common stock $ - $ 160,000 $ 1,215,000
=========== =========== ===========
Exchange of advances repayable only out of
proceeds of public offering for common stock $ - $ - $ 471,000
=========== =========== ===========
Deferred offering costs on warrants exercised $ - $ - $ 88,000
=========== =========== ===========
Settlement of payable upon issuance of warrants $ 68,000 $ - $ 68,000
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements
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LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
applicable to interim periods. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. These
financial statements should be read in conjunction with the Company's
audited financial statements included in the Company's Annual Report on
Form 10-KSB filed with the Securities and Exchange Commission for the year
ended December 31, 1995. Operating results for the three and six month
periods ended June 30, 1996 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996 or any interim
period.
2. DESCRIPTION OF BUSINESS
Lithium Technology Corporation (sometimes referred to herein as "LTC")
together with its wholly-owned subsidiary Lithion Corporation (sometimes
referred to herein as "Lithion") (LTC and Lithion are collectively referred
to herein as the "Company") is considered to be a development stage
company for financial reporting purposes until significant product sales
occur. LTC was incorporated in 1986 but did not conduct business
operations until July 1989 when it exchanged its capital stock for all of
the capital stock of Hope Industries, Inc. ("Industries") and Lithion
Corporation. By the end of 1993, Industries was divested and since such
time the Company has focused on commercialization of battery technology and
developing strategic alliance partners of global prominence who the Company
believes will assist in bringing the technology to the manufacturing stage
and participate in the distribution and sale of LTC products on a worldwide
basis. The Company is engaged in the business of developing and seeking to
commercialize a unique, solid-state, lithium-polymer, rechargeable battery.
The Company's patented technology base includes battery composition,
construction and related continuous-flow manufacturing processes. The
Company believes that its battery technology, which is currently in the
pre-prototype development phase, is capable of providing two to four times
the run time performance of current rechargeable batteries. The Company's
objective is the commercialization of such technology, inclusive of moving
from laboratory-scale product prototypes and related prototype processes to
full scale market introduction, achieving cost-competitiveness, and
constructing manufacturing lines capable of
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producing ever-increasing volumes. The Company's commercialization focus
is on the rapidly growing portable electronics market segment (notebook
computers, wireless communications handsets and multimedia devices). The
Company has generated no revenues and has no commercial operations to date.
The Company has been unprofitable since inception and expects to incur
substantial additional operating losses over the next several years. The
Company does not expect to generate any revenues from operations during the
fiscal year ending December 31, 1996.
3. SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes in accounting policies from those
stated in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995.
The Company adopted the following accounting standards during the six
months ended June 30, 1996:
Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," requires that certain long-lived assets be reviewed for impairment
when events or circumstances indicated that the carrying amounts of the
assets may not be recoverable. If such review indicates that the carrying
amount of an asset exceeds the sum of its expected future cash flows, the
asset's carrying value must be written down to fair value.
Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation," requires companies to measure employee stock
compensation plans based on the fair value method of accounting. However,
the statement allows the alternative of continued use of Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," with pro forma disclosure of net income and earnings per share
determined as if the fair value based method had been applied in measuring
compensation cost.
4. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Laboratory Equipment $835,000 $714,000
Furniture and fixtures 82,000 80,000
Leasehold improvements 38,000 36,000
-------- --------
955,000 830,000
Less: Accumulated depreciation and amortization 262,000 177,000
-------- --------
$693,000 $653,000
======== ========
</TABLE>
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5. COMMITMENTS AND CONTINGENCIES
LEASES - The Company leases its principal operating facility from an
unrelated party providing for annual rent of $122,400 through November 1999
and contains an option to renew for an additional 5 years.
EMPLOYMENT AGREEMENT - On May 9, 1996, the Company entered into a one-year
employment agreement with Thomas R. Thomsen pursuant to which Mr. Thomsen
is employed as the Company's Chief Executive Officer at an annual salary of
$185,000. Mr. Thomsen shall also be eligible to receive a target bonus of
up to 40% of his annual salary for such fiscal year of the Company, the
exact amount of such bonus to be determined by the Board of Directors in
accordance with performance thresholds for such fiscal year to be agreed
upon by the Board of Directors and Mr. Thomsen. Mr. Thomsen's employment
agreement also provides for the issuance of a ten (10) year non-qualified
option to purchase 400,000 shares of the Company's common stock at an
exercise price of $2.5625 per share. If Mr. Thomsen's employment is
terminated without cause and other than due to disability or death, the
Company will be obligated to (i) continue Mr. Thomsen's salary for an
additional six (6) months or the remainder of the term on the contract,
whichever is longer ("severance period"), (ii) continue for such "severance
period" all of Mr. Thomsen's benefits under the Company's medical
insurance, disability insurance, life insurance and other benefit plans as
are then in effect for executives of the Company, and (iii) accelerate the
vesting of all unexercisable options such that upon termination all then
exercisable and unexercisable options immediately become exercisable on the
date of termination, and all the same shall remain exercisable for a period
of three (3) years commencing on the date of termination.
CONSULTING AGREEMENT - On May 9, 1996, the Company entered into a
consulting agreement with Donald C. Taylor, a former director of the
Company, at a monthly compensation of $7,000. Mr. Taylor will provide
advisory services, shareholder relations and related consulting services to
the Company. The Agreement will be in effect for a period of one (1) year,
subject to automatic renewals of one (1) year unless either party to the
Agreement provides written notice of non-renewal to the other party at
least ninety (90) days prior to the expiration of the initial or any
renewal term of the Agreement. In no event shall the Agreement be
automatically renewed for more than two additional one (1) year terms.
These terms may be modified as mutually agreed upon by the parties at any
time.
WARRANTS - During the quarter ended June 30, 1996, the Company issued two
warrants. One warrant was issued to Group III Capital, Inc. ("Group III")
entitling Group III to purchase up to 1,500,000 shares of the Company's
Common Stock at an exercise price of $1.54 per share. The warrant is
exercisable with respect to the first 320,000 shares as of the date of
issuance and with respect to the balance of 1,180,000 underlying shares on
May 1, 1997, provided that exercisability as to the balance of such
1,180,000 warrant shares is accelerated upon the closing of certain debt or
equity financing transactions resulting in gross proceeds to the Company of
$5,000,000 or more. The warrant was issued to Group III in consideration
of services rendered and to be rendered by Group III to the Company.
Donald C. Taylor, a former director of
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the Company, is the President and a director of Group III. The Company
also issued a warrant to Robert Pfeffer in connection with the settlement
of litigation between the Company and Mr. Pfeffer. This warrant entitles
Mr. Pfeffer to purchase up to 600,000 shares of Common Stock at $0.51 per
share. The Company has disputed the issuance of certain other warrants to
Mr. Pfeffer, Matthew Stuart & Co., Inc., and Richard Perlman, formerly a
vice president of Matthew Stuart and formerly a director of the Company.
The Company has declared such other warrants and related documents void.
LEGAL PROCEEDINGS - As of June 30, 1996, there were no legal proceedings
pending against the Company. Two lawsuits were commenced against the
Company on August 7, 1996 and August 8, 1996. See Note 7 for details.
6. STOCKHOLDERS' EQUITY
MERGER AND REVERSE STOCK SPLIT - Effective February 1996, the Company's
then majority stockholder approved a merger agreement pursuant to which the
Company, a Nevada corporation, merged with a newly formed Delaware
corporation in order to reincorporate the Company as a Delaware corporation
and effectuate a recapitalization, principally a 1 for 30 reverse stock
split which has been reflected in the Company's financial statements as if
it had occurred on December 31, 1995.
WARRANTS - At June 30, 1996, the Company had warrants outstanding to
purchase 2,307,858 shares of Common Stock at exercise prices ranging from
$0.51 per share to $2.56 per share which expire through May 2006.
SERIES B CONVERTIBLE PREFERRED STOCK - During June 1996, 795 shares of
Series B Convertible Preferred Stock were converted into 42,400 shares of
Common Stock.
SERIES C CONVERTIBLE PREFERRED STOCK - During June 1996, 10,000 shares of
Series C Convertible Preferred Stock were converted into 83,334 shares of
Common Stock.
7% CONVERTIBLE PROMISSORY NOTES - During January 1996, $300,000 of such
promissory notes were converted into 152,038 shares of Common Stock.
REPRICING OF DIRECTORS STOCK OPTIONS - In August 1995, the Board of
Directors adopted the Directors Stock Option Plan (the "Directors Plan")
and on February 8, 1996, Majestic Hopes, LLC, as the majority stockholder,
ratified the adoption of the Directors Plan. As of February 8, 1996,
options previously granted to directors who were not officers or employees
of the Company were cancelled and new options were reissued under the
Directors Plan, with the identical number of options granted, but with the
exercise price of such options at the fair market value of the Common Stock
as of the effective date, pursuant to the terms and conditions of the
Directors Plan.
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STOCK INCENTIVE PLAN - Options under the 1994 Stock Incentive Plan are
summarized as follows:
<TABLE>
<S> <C>
Options outstanding, January 1, 1996
($0.501 to $2.56 per share) 1,166,645
Options granted 480,000
Options cancelled (15,824)
---------
Options outstanding, June 30, 1996 1,630,821
=========
Options available for grant, June 30, 1996 1,035,846
=========
</TABLE>
As of July 1, 1996, options with respect to 657,901 shares of Common Stock
were fully vested.
DIRECTORS STOCK OPTION PLAN - As of July 1, 1996, there were outstanding
options under the Directors Plan with respect to 106,672 shares of Common
Stock, which have exercise prices ranging from $0.90 per share to $2.56 per
share and options with respect to 10,000 shares of Common Stock are fully
vested as of July 1, 1996.
TECHNOLOGY DEVELOPMENT AGREEMENT AND 12% CONVERTIBLE NOTES - On March 29,
1996, the Company entered into a Technology Development Agreement and Stock
Purchase Agreement (the "Agreement") with a Japanese Consortium consisting
of two multi-billion dollar companies (the "Consortium"), based on the
Company's proprietary lithium-polymer rechargeable battery technology. The
parties anticipate that this is the first step in a broader strategic
alliance for the research and development, production, promotion and
distribution of lithium-polymer batteries worldwide. The Company is
continuing to seek a third investor to join the Consortium. There can be no
assurance that a third party will in fact join the Consortium or do so on
terms favorable and acceptable to the Company. Under the Agreement, the
Consortium provided funds and will provide technical resources to assist
the Company in completing the development of its high energy battery to
meet specific performance requirements for portable electronics
applications. The principal objective is to take the patented technology
to the manufacturing scale-up stage. The Agreement gives the Consortium
exclusive option rights to license the Company's technology for
manufacturing in the Far East and Oceania, and co-exclusive rights along
with the Company for manufacturing in Europe and the Americas, where the
parties' strategy includes establishing joint ventures for manufacturing
operations. The Agreement also gives the Consortium an exclusive option
for worldwide distribution and sales of the Company's products. For these
considerations and 631,637 shares of the Company's Common Stock
(representing a 4% equity position in the Company as of the closing), the
Consortium paid $2,400,000. In addition, $1,800,000 of 12% convertible
promissory notes and related accrued interest were converted into 7,003,446
shares of the Company's Common Stock in connection with the Agreement.
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7. SUBSEQUENT EVENTS
On July 23, 1996, the Company agreed to issue 198,354 restricted shares of
its Common Stock to certain employees in full payment of $99,000 of
deferred salary and bonus accrued in prior periods. Vesting will occur on
the earlier of January 1, 1997 or at such time the shares are eligible to
be resold pursuant to an effective Registration Statement.
On July 24, 1996, the Company entered into a one-year employment agreement
with David J. Cade pursuant to which Mr. Cade is employed as the Company's
President and Chief Operating Officer at an annual salary of $140,000. Mr.
Cade shall also be eligible to receive a target bonus of up to 20% of his
annual salary for such fiscal year of the Company, the exact amount of such
bonus to be determined by the Board of Directors in accordance with
performance thresholds for such fiscal year to be agreed upon by the Board
of Directors and Mr. Cade. Mr. Cade's employment agreement also provides
for the issuance of a ten (10) year incentive option to purchase 133,333
shares of the Company's common stock at an exercise price of $1.33 per
share. If Mr. Cade's employment is terminated without cause and other than
due to disability or death, the Company will be obligated to (i) continue
Mr. Cade's salary for an additional six (6) months or the remainder of the
term on the contract, whichever is longer ("severance period"), (ii)
continue for such "severance period" all of Mr. Cade's benefits under the
Company's medical insurance, disability insurance, life insurance and other
benefit plans as are then in effect for executives of the Company, and
(iii) in the case of death or disability, the option shall be exercisable
to the extent then vested for a period of three years.
On July 24, 1996, the Company entered into a one-year employment agreement
with George R. Ferment pursuant to which Dr. Ferment is employed as the
Company's Executive Vice President of Operations and Chief Technical
Officer at an annual salary of $130,000. Dr. Ferment shall also be
eligible to receive a target bonus of up to 20% of his annual salary for
such fiscal year of the Company, the exact amount of such bonus to be
determined by the Board of Directors in accordance with performance
thresholds for such fiscal year to be agreed upon by the Board of Directors
and Dr. Ferment. Dr. Ferment's employment agreement also provides for the
issuance of a ten (10) year incentive option to purchase 133,333 shares of
the Company's common stock at an exercise price of $1.33 per share. If Dr.
Ferment's employment is terminated without cause and other than due to
disability or death, the Company will be obligated to (i) continue Dr.
Ferment's salary for an additional six (6) months or the remainder of the
term on the contract, whichever is longer ("severance period"), (ii)
continue for such "severance period" all of Dr. Ferment's benefits under
the Company's medical insurance, disability insurance, life insurance and
other benefit plans as are then in effect for executives of the Company,
and (iii) in the case of death or disability, the option shall be
exercisable to the extent then vested for a period of three years.
On August 7, 1996 and August 8, 1996 civil actions were commenced against
the Company by Richard Perlman and Christy & Viener, respectively. The two
suits were commenced in United States District Court for the Southern
District of New York. Mr. Perlman's complaint alleges that he is entitled
to monetary damages and specific performance of registration rights
relating to certain warrants of the Company that have not been registered
and to which he claims entitlement. The Company has declared such warrants
and related documents void. Christy & Viener's complaint alleges
non-payment of legal fees incurred in connection with the rendering of
legal services. The Company was served with both complaints on August 8,
1996 and is in the initial stages of evaluating the allegations and the
Company's course of action. The Company intends to vigorously defend both
actions and to assert all available defenses and couterclaims.
On June 20, 1996 the Company settled litigation commenced against the
Company by Robert Pfeffer and Matthew Stuart and Co., Inc. in the Southern
District of New York. See Note 5 for details pertaining to the terms of
this settlement. The parties exchanged mutual releases and the suit was
dismissed with prejudice.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this
report.
GENERAL
The Company is a development stage company engaged in the business of
developing and seeking to commercialize a unique, solid-state,
lithium-polymer, rechargeable battery. The Company has generated no
revenues and has no commercial operations to date. The Company has been
unprofitable since inception and expects to incur substantial additional
operating losses over the next several years. The Company does not expect
to generate any revenues from operations during the fiscal year ending
December 31, 1996. The Company believes that its battery technology, which
is currently in the pre-prototype development phase, is capable of
providing two to four times the performance of current rechargeable
batteries. The Company's objective is the commercialization of such
technology, inclusive of moving from laboratory-scale product prototypes
and related prototype processes to full scale market introduction,
achieving cost-competitiveness. The Company's commercialization focus is
on the rapidly growing portable electronics market segment (notebook
computers, wireless communications handsets and multimedia devices).
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
The Company has financed its operations from December 10, 1993 with
convertible debt and private placements of common and preferred stock and
has raised approximately $7.1 million, including, most recently, $2.4
million from the March 29, 1996 sale of shares of Common Stock to the
Consortium described herein.
AS OF JUNE 30, 1996
At June 30, 1996, the Company had cash of $1,309,000, prepaid and other
current assets of $2,000, fixed assets of $693,000 and other assets of
$85,000. The Company's total liabilities were $1,391,000, consisting of
accounts payable and accrued expenses. The $300,000 plus accrued interest
due to holders of the 7% convertible promissory notes was converted into
152,038 shares of Common Stock during January 1996. In addition, the
Company converted $1,800,000 of debt plus accrued interest into 7,003,446
shares of Common Stock on March 29, 1996. The Company had a net working
capital deficit of $80,000 on June 30, 1996.
The Company's working capital declined by approximately $942,000 from March
31, 1996 to June 30, 1996. The Company's cash and equivalents declined by
approximately $914,000 from March 31, 1996 to June 30, 1996. This decline
in working capital and cash is attributable primarily to the Company's
expenditure of cash obtained from equity investments in order to pay
operating expenses, which have increased during the quarter and six months
ended June 30, 1996 as compared to corresponding 1995 periods and as
compared to the quarter ended March 31, 1996 primarily for the reasons
discussed below in "Results of Operations".
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The Company's stockholder's equity was $698,000 at June 30, 1996, after
giving effect to an accumulated deficit of $(15,324,000) which consisted of
$(8,459,000) accumulated deficit during the development stage from July 21,
1989 through June 30, 1996 and $(6,865,000) accumulated deficit from prior
periods. The Company expects to incur substantial operating losses as it
continues its commercialization efforts.
While the Company's operating plan seeks to minimize the Company's capital
requirements, commercialization of the Company's battery technology will
require substantial amounts of additional capital. The Company expects
that research and development and production expenses will increase
significantly as it continues to advance its battery technology and develop
products for commercial applications. The Company's working capital and
capital requirements will depend upon numerous factors, including, without
limitation, the progress of the Company's research and development program,
the levels and resources that the Company devotes to the development of
manufacturing and marketing capability, technological advances, the status
of competitors and the ability of the Company to establish collaborative
arrangements with other companies to provide research and development
funding to the Company and to manufacture and market the Company's
products.
The Company believes that is has sufficient capital resources to meet the
Company's needs and satisfy the Company's obligations through approximately
the last quarter of 1996 based on the Company's current strategies and
subject to the uncertainties discussed in this Report. The Company does
not currently have sufficient cash to achieve all its development and
production objectives, including the 1997 installation of the DMF pilot
manufacturing line during the first half of 1997. In order to raise
sufficient capital for its future growth, the Company will be required to
sell additional debt or equity securities. See "Plan of Operation for the
Company."
There can be no assurances that the capital needed for attaining commercial
viability of the Company's battery technology, which the Company currently
estimates at $25 million, will continue to be obtained. If the Company is
unable to raise sufficient capital, it will be forced to curtail research
and development expenditures which, in turn, will delay, and could prevent,
the completion of the commercialization process.
On March 29, 1996, the Company entered into the Technology Development
Agreement and Stock Purchase Agreement with the Japanese consortium
consisting of Mitsubishi Materials Corporation and Mitsui & Co., Ltd. (the
"Consortium") discussed in further detail elsewhere in this Report, based
on the Company's proprietary lithium-polymer rechargeable battery
technology, which Agreements, among other things, required that the
$1,800,000 due to the holders of the 12% convertible promissory notes, and
accrued interest thereon, be converted into 7,003,446 shares of Common
Stock, on such date and as permitted under the Notes. All liens and
security interests held by the Noteholders were simultaneously released and
discharged.
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<PAGE> 15
Under the Technology Development Agreement, the Consortium will provide
funds and technical resources to assist the Company in completing the
development of its high energy battery to meet specific performance
requirements for portable electronics applications. The principal
objective is to take the patented technology to the manufacturing scale-up
stage. The Agreement gives the Consortium exclusive option rights to
license the Company's technology for manufacturing in the Far East and
Oceania, and co-exclusive rights along with the Company for manufacturing
in Europe and the Americas, where the parties' strategy includes
establishing joint ventures for manufacturing operations. The Agreement
also gives the Consortium an exclusive option for worldwide distribution
and sales of the Company's products. For these considerations, and 631,637
shares of the Company's Common Stock (representing a 4% equity position in
the Company as of the closing) the Consortium paid $2.4 million, prior to
payment of placement costs of approximately $212,000, which funds have been
invested in treasury bills.
RESULTS OF OPERATIONS
Six Months ended June 30, 1996 and 1995.
The Company has had no revenues for the six month periods ended June 30,
1996 and 1995.
Engineering, research and development expenses were $574,000 for the six
months ended June 30, 1996 compared to $564,000 in 1995. The increase
resulted from increased contract research activities.
General and administrative expenses were $1,378,000 for the six months
ended June 30, 1996 compared to $626,000 in 1995. The increase of $752,000
was due to increased legal costs of $600,000 associated with the
termination of certain investment banking services and the defense and
settlement of litigation and preparation of a Registration Statement
related thereto, increased amortization of debt issue costs of $214,000
relating to the 1995 sale of 12% Convertible Promissory Notes and increased
insurance costs offset to a minor extent by discontinuance of a director's
consulting agreement and decreased employment costs.
Interest expense decreased to $34,000 (net of interest income of $26,000)
for the six months ended June 30, 1996 compared to $36,000 (net of interest
income of $9,000) in 1995. The increase in interest expense for the
comparable periods is primarily attributable to the Company's 12%
convertible term notes.
Three Months ended June 30, 1996 and 1995.
The Company has had no revenues for the three month periods ended June 30,
1996 and 1995.
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<PAGE> 16
Engineering, research and development expenses were $318,000 for the three
months ended June 30, 1996 compared to $279,000 in 1995. The increase
resulted from increased contract research activities.
General and administrative expenses were $723,000 for the three months ended
June 30, 1996 compared to $388,000 in 1995. The increase of $335,000 was
due to increased legal costs of $434,000 primarily associated with the
termination of certain investment banking services and the defense and
settlement of litigation and preparation of a Registration Statement related
thereto, and increased insurance costs offset to a minor extent by
discontinuance of a director's consulting agreement and decreased employment
costs.
Interest expense decreased to ($22,000) (net of interest income of $22,000)
for the three months ended June 30, 1996 compared to $17,000 (net of
interest income of $7,000) in 1995. The increase in interest expense for
the comparable periods is primarily attributable to the Company's 12%
convertible term notes.
PLAN OF OPERATION FOR THE COMPANY
The Company's strategy is to commercialize its solid-state,
lithium-polymer, rechargeable battery with primary focus on high
performance portable electronic products (notebook computers, wireless
communications handsets and multimedia devices). These market segments are
large, growing rapidly, and demand high performance batteries with a thin,
flat form factor and long run times. There can be no assurance, however,
that the Company will be able to achieve the technological breakthroughs
that will be necessary in order to ultimately achieve commercialization
and/or obtain financings or generate revenues in order to sustain the
Company's on-going research and development phase or to undertake the
design and construction of the Demonstration Pilot Manufacturing line
discussed herein and other manufacturing-related facilities.
During 1994, the Company recruited a new management team and a core
technical staff with commercialization and battery technology expertise. A
modern research facility has been leased and product development is
continuing. At June 30, 1996, the management team and technical staff
consisted of nine full-time employees. The staff has the required
expertise in technology, commercialization, process development, battery
engineering, electrochemistry and strategic alliance development. During
1996 the Company has entered into an employment agreement with Thomas R.
Thomsen pursuant to which Mr. Thomsen now serves as the Company's Chief
Executive Officer and the Company has also promoted David Cade to the
office of President and Chief Operating Officer and Dr. George Ferment to
the office of Executive Vice President and Chief Technical Officer.
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The Company's development and commercialization plan currently has the
following milestones:
(i) hand-made cell samples tested by potential strategic partners in
1995 (accomplished);
(ii) installation of a Demonstration Manufacturing Facility (DMF)
continuous flow coating and laminating unit in first quarter of 1996
(accomplished);
(iii) upgrade of the DMF in late 1996 and distribution of cell samples
from the DMF to potential Original Equipment Manufacturer (OEM)
customers in early 1997;
(iv) complete manual assembly process on the back end of the DMF in
late 1997, which would enable initial production of battery packs
using cells from the DMF for OEMs in early 1998;
(v) installation of a pilot manufacturing line in early 1998;
(vi) expansion of the pilot manufacturing line in late 1998 by
automating the back-end assembly; and
(vii) construction of a second tier manufacturing capability once
market demand exceeds initial manufacturing capacity.
The Company estimates that completion of phases (i) through (vi) will cost
approximately $25 million. There can be no assurances that the Company
will meet these development milestones on the time schedule outlined above.
During March 1996, a benchtop continuous flow coating/laminating line --
referred to previously in this "Plan of Operation" as the Demonstration
Manufacturing Facility ("DMF") -- was installed by the Company. This line
will be used to further define the Company's manufacturing technology, to
sharpen manufacturing cost estimates, and then serve as the initial
production facility for battery cells which will be manually assembled into
battery packs for original equipment manufacturer ("OEM") customers.
Thereafter, based on design data obtained from the DMF, the Company must
successfully construct a pilot manufacturing line reflecting the cost,
quality, reliability, and performance required for the various target
market applications. It is anticipated that the pilot manufacturing line
and associated equipment will cost approximately $7.5 million to construct
in the 1998 time frame. The pilot manufacturing line, according to the
Company's current strategy, will be located within the Company's existing
facility in Plymouth Meeting, Pennsylvania. Construction of the pilot
manufacturing line will require approximately 12 months. Ultimately, the
pilot manufacturing line would be replaced with a larger scale second tier
manufacturing capability housed in the Company's existing facility, which
could be expanded if necessary. The Company intends to finance the overall
estimated $25 million total capital equipment and operating expense
required to bring the Company to the initial commercial production
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<PAGE> 18
stage at approximately the end of 1998 (which $25 million includes the
aforementioned estimated $7.5 million cost of the pilot manufacturing
facility) by means of private and/or public equity or debt financings
during the next two years.
There can be no assurance that the Company will be able to meet the
technological objectives and/or satisfy the capital requirements that the
Company believes are necessary to convert battery technology into
successful commercial products. There can be no assurance that the
Company's products will generate any revenues, will not encounter
technical problems when used, will be successfully marketed, will be
produced at a competitive cost, or will achieve customer acceptance or, if
commercial products are developed and revenues produced, that the Company
will be profitable. The likelihood of the success of the Company must be
weighed against the problems, expenses, difficulties, complications and
delays frequently encountered in developing and marketing a new product.
During the next twelve months after the date of this Report, the Company
expects to incur expenses of approximately $2,000,000 for the purchase of
equipment based on the Company's current strategies and subject to the
uncertainties discussed in this Report. During the same time frame the
Company expects the number of its employees to increase to approximately 27
individuals.
The Company does not currently have sufficient cash to achieve all its
development and production objectives, including the 1997 installation of
the DMF pilot line during the first half of 1997. In order to raise
sufficient capital for its future growth, the Company will be required to
sell additional debt or equity securities. On March 29, 1996, the Company
entered into the Technology Development Agreement and Stock Purchase
Agreement with the Consortium as discussed herein, as the first step in a
broader strategic alliance and simultaneously sold an aggregate of 631,637
shares of Common Stock to the Consortium for $2.4 million. This capital
infusion will permit the Company to continue its development and
commercialization efforts through approximately the last quarter of 1996
and will be used to accomplish the commercialization plan milestones
through the last quarter of 1996 based on the Company's current strategies
and subject to the uncertainties discussed in this Report.
New capital will be required in order for the Company to proceed with the
Company's business strategy, and such new capital is planned to be sought
from several sources, including the Consortium. The Company is also
seeking to raise additional capital for its activities beyond 1996, which
may result in further dilution to the Company's existing stockholders. The
Company will seek to expand its strategic alliance with the Consortium and
is pursuing further corporate alliances which would provide capital from
license fees or an additional equity investment. Discussions are
continuing with companies in Japan, Korea, Taiwan, Europe and the United
States. However, there can be no assurances that additional capital will
be available to the Company on a timely basis or on acceptable terms.
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PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings.
On August 7, 1996 and August 8, 1996 civil actions were commenced against
the Company by Richard Perlman and Christy & Viener, respectively. The two
suits were commenced in United States District Court for the Southern
District of New York. Mr. Perlman's complaint alleges that he is entitled
to monetary damages and specific performance of registration rights
relating to certain warrants of the Company that have not been registered
and to which he claims entitlement. The Company has declared such warrants
and related documents void. Christy & Viener's complaint alleges
non-payment of legal fees incurred in connection with the rendering of
legal services. The Company was served with both complaints on August 8,
1996 and is in the initial stages of evaluating the allegations and the
Company's course of action. The Company intends to vigorously defend both
actions and to assert all available defenses and couterclaims.
On June 20, 1996 the Company settled litigation commenced against the
Company by Robert Pfeffer and Matthew Stuart and Co., Inc. in the Southern
District of New York. See Note 5 for details pertaining to the terms of
this settlement. The parties exchanged mutual releases and the suit was
dismissed with prejudice.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
a) Exhibits
10.1 Employment Agreement, dated July 24, 1996,
between David Cade and the Company.
10.2 Employment Agreement, dated July 24, 1996,
between George Ferment and the Company.
10.3 Stock Option Agreement, dated July 24, 1996,
between David Cade and the Company.
10.4 Stock Option Agreement, dated July 24, 1996,
between George Ferment and the Company.
27.1 Financial Data Schedule
b) Form 8-K
The Company filed one Current Report on Form
8-K during the quarter ended June 30, 1996.
Such report was dated June 28, 1996 with
respect to Item 5 of such form.
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SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ Thomas R. Thomsen
---------------------
Chairman
/s/ William D. Walker
---------------------
William D. Walker
Treasurer and
Chief Financial Officer
(principal financial officer)
August 13, 1996
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<PAGE> 1
EMPLOYMENT AGREEMENT
AGREEMENT made as of July 24, 1996, by and between LITHIUM TECHNOLOGY
CORPORATION, a Delaware corporation (the "Corporation"), having an address at
5115 Campus Drive, Plymouth Meeting, Pennsylvania 19462, and DAVID J. CADE
("Executive"), residing at 251 Standish Road, Merion Station, Pennsylvania
19066.
W I T N E S S E T H:
WHEREAS, the Corporation wishes to employ Executive, and Executive is
willing to accept such employment, on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth herein, the parties hereto agree as follows:
1. Employment and Term. Subject to the terms and conditions of
this Agreement, the Corporation agrees to employ Executive, and Executive
hereby accepts employment by the Corporation, for a period of one year (the
"Term") commencing on the date first written above (the "Commencement Date").
2. Duties. During the Term, Executive shall serve the
Corporation as its President and Chief Operating Officer, or in such other
capacity or capacities as may be determined by the Board of Directors of the
Corporation. Executive shall perform such executive, administrative,
development, production, marketing and other services and duties for the
Corporation, or any subsidiary, affiliate or joint venture of the Corporation,
as are incidental to the positions he holds or as he may, from time to time, be
requested to hold by the Board of Directors of the Corporation. If requested
by the Board of Directors of the Corporation, Executive shall also serve,
without additional compensation, as an officer or director of any subsidiary,
affiliate or joint venture of the Corporation. During the Term, Executive
shall be available at all times to discharge his duties under this Agreement;
provided, however, that the Corporation agrees that Executive shall be able to
act as an independent director of other corporations and engage in other
professional and business endeavors so long as Executive's duties in connection
therewith do not (i) unreasonably interfere with Executive's duties under this
Agreement or (ii) cause Executive to violate in any manner his obligations
under Sections 7 and 8 of this Agreement.
<PAGE> 2
3. Compensation.
(a) During the Term, the Corporation shall pay to Executive,
in equal installments no less frequently than twice per month (or at such other
intervals as are in effect from time to time for other executive officers of
the Corporation), a salary at the rate of $140,000.00 per year.
(b) During each fiscal year of the Term, Executive shall be
eligible to receive a target bonus of up to 20% of Executive's annual salary
for such fiscal year of the Corporation, the exact amount of such bonus to be
determined by the Board of Directors of the Corporation in accordance with
performance thresholds for such fiscal year to be agreed upon prior to the
Commencement Date by the Board of Directors and Executive. For any fiscal year
of the Corporation during the Term, Executive shall receive a pro rated bonus,
based upon the length of service in such fiscal year.
(c) During the Term, Executive shall be entitled to four
weeks of vacation, and in addition thereto such personal days, sick leave and
other similar benefits in accordance with the policies of the Corporation from
time to time in effect for executives of comparable expertise and authority.
(d) Executive agrees that the Corporation may obtain key man
life insurance with respect to Executive, and in connection therewith, agrees
to submit to all reasonable and customary examinations by the provider of such
life insurance.
(e) Executive agrees to submit to, at the expense of the
Corporation, an annual physical examination by a physician of his choice.
(f) Executive shall be entitled to reimbursement for all
normal and reasonable travel, entertainment and other expenses necessarily
incurred by him in the performance of his duties hereunder. Executive shall
submit on a timely basis such itemized accounts of such expenses, together with
such vouchers or receipts for individual expense items, as the Corporation may
from time to time require under its established policies and procedures.
(g) Except as hereinafter provided, the Corporation shall pay
Executive for any period, up to a maximum of six months, during the Term in
which he is unable fully to perform his duties because of physical or mental
disability or incapacity, an amount equal to the base salary due him for such
period pursuant to Section 3(a), less the aggregate amount of all income
disability benefits which for such period he may receive or to which he may be
entitled by reason of (i) any group health insurance plan or disability
insurance plan, which is intended to function as a salary replacement plan,
(ii) any applicable compulsory state disability law, (iii) the Federal Social
Security Act, (iv) any applicable workmen's compensation law or similar law and
(v) any plan towards which the Corporation or any subsidiary or affiliate of
the Corporation (including any predecessor of any thereof) has contributed or
for which it has made payroll deductions, such as group accident or health
policies, other than those which reimburse for actual medical expenses.
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<PAGE> 3
4. Stock Options. As part of the consideration to be paid to
Executive for his services hereunder the Corporation shall issue to Executive
under the Corporation's 1994 Stock Incentive Plan, as amended (the "Plan")
options to purchase 133,333 shares of its Common Stock, exercisable for ten
years, on the terms set forth in the Stock Option Agreement attached hereto as
Annex A.
5. Rights of Termination.
(a) For Cause. The Corporation shall have the right, at any
time effective upon notice to Executive, to terminate this Agreement and
Executive's employment hereunder for "cause" (as hereinafter defined). For
purposes of this Agreement, "cause" shall mean the breach or continued gross
neglect by Executive, or gross negligence or willful misconduct by Executive in
the performance, of any of his duties or obligations under this Agreement.
(b) Disability; Death. In the event of Executive's permanent
and total disability as determined under the Corporation's long-term disability
program or, if no such program has been adopted, the continuous absence of
Executive for 180 consecutive days or more due to physical or mental illness or
incapacity, the Corporation shall have the right to terminate this Agreement and
Executive's employment hereunder upon 30 days' prior written notice. In the
event that Executive is able to and recommences rendering services and
performing his duties hereunder within such 30-day notice period, Executive
shall be reinstated and such notice shall be without further force or effect.
If Executive dies during the Term, this Agreement shall terminate immediately
upon his death.
6. Effects of Termination.
(a) In the event that Executive's employment is terminated
pursuant to Section 5(a) hereof, (i) Executive's employment hereunder shall
immediately cease, (ii) the Corporation shall pay to the Executive his accrued
and unpaid salary, accrued vacation time and expense reimbursement through the
date of termination in accordance with the Corporation's usual procedures and
(iii) all options shall be treated in accordance with the terms of the Stock
Option Agreement. Once the amounts referred to in clause (ii) are paid,
however, the Corporation shall have no further obligation to Executive.
(b) In the event that Executive's employment is terminated
pursuant to Section 5(b) hereof, (i) Executive's employment hereunder shall
cease in accordance with Section 5(b), (ii) the Corporation shall pay to
Executive his accrued and unpaid salary, accrued vacation time and expense
reimbursement through the date of termination (except subject to Section 3(f)
hereof in the event of disability) in accordance with the Corporation's usual
procedures, (iii) options shall be treated in accordance with the terms of the
Stock Option Agreement and (iv) in the event of the
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<PAGE> 4
death of Executive, any and all options (whether vested or unvested) shall be
transferred in accordance with Executive's will and become exercisable for a
period of thirty-six (36) months.
(c) In the event that Executive's employment hereunder is
terminated by the Corporation other than pursuant to Section 5(a) or (b), then:
(i) Executive shall be entitled to receive, and the Corporation shall continue
to pay to Executive, the annual salary specified in Section 3(a) for the
remainder of the Term or for six months (whichever is longer), (ii) Executive
shall be entitled, during the period during which such severance payment is
being paid, to receive all benefits under the Corporation's medical insurance,
disability insurance, life insurance and other benefit plans as are then in
effect for executives of the Corporation and (iii) all options shall be treated
in accordance with the terms of the Stock Option Agreement.
(d) In the event that Executive's employment hereunder is
terminated by Executive, then: (i) the Corporation shall pay to the Executive
his accrued and unpaid salary, accrued vacation time and expense reimbursement
through the date of termination in accordance with the Corporation's usual
procedures and (ii) all options shall be treated in accordance with the terms
of the Stock Option Agreement.
(e) Executive's obligations pursuant to Sections 7 and 8
hereof shall survive any termination of this Agreement for any reason
whatsoever.
7. Confidentiality.
(a) Executive understands and acknowledges that as a
result of Executive's employment with the Corporation, and involvement with the
business of the Corporation, he is or shall necessarily become informed of, and
have access to, confidential information of the Corporation including, without
limitation, inventions, patents, patent applications, trade secrets, technical
information, know-how, plans, specifications, marketing plans and information,
pricing information, identity of customers and prospective customers and
identity of suppliers, and that such information, even though it may have been
or may be developed or otherwise acquired by Executive, is the exclusive
property of the Corporation to be held by Executive in trust and solely for the
Corporation's benefit. Executive shall not at any time, either during or
subsequent to his employment hereunder, reveal, report, publish, transfer or
otherwise disclose to any person, corporation or other entity, or use, any of
the Corporation's confidential information, without the written consent of the
Corporation's Board of Directors, except for use on behalf of the Corporation
in connection with the Corporation's business, and except for such information
which legally and legitimately is or becomes of general public knowledge from
authorized sources other than Executive.
(b) Upon the termination of his employment with the
Corporation for any reason, Executive shall promptly deliver to the Corporation
all drawings, manuals, letters, notes, notebooks, reports and copies thereof
and all other materials, including, without limitation, those of a secret or
confidential nature, relating to the Corporation's
4
<PAGE> 5
business which are in Executive's possession or control. The Corporation shall
reimburse Executive for any packing or moving costs reasonably incurred by
Executive in connection with the foregoing delivery.
For purposes of this Section 7 and Section 8, the term "Corporation" includes
the Corporation and any other predecessor corporation, and affiliates
(including, without limitation, distributors, licensees, franchisees,
subsidiaries and joint ventures).
8. Non-Competition.
(a) Executive agrees that, for a period commencing on the date hereof
and ending one year after the termination of his employment with the
Corporation for any reason, he shall not, anywhere in North America, directly
or indirectly:
(i) solicit or attempt to solicit business of any
customers of the Corporation (including prospective customers
solicited by the Corporation) for products or services the same or
similar to those offered, sold, produced or under development by the
Corporation during the term of his employment therewith or dealt in by
Executive during his employment with the Corporation;
(ii) otherwise divert or attempt to divert from the
Corporation any business whatsoever;
(iii) solicit or attempt to solicit for any business
endeavor any employee of the Corporation;
(iv) interfere with any employment relationship or other
business relationship between the Corporation and any other
individual, person, or other entity;
(v) use the name of the Corporation or a name similar
thereto; or
(vi) render any services as an officer, director, employee,
partner, consultant or otherwise to, or have any interest as a
stockholder, partner, lender or otherwise in, any person which is
engaged in activities which, if performed by Executive would violate
this Section 8.
(b) Executive agrees that during the term of his employment with the
Corporation, he will not, anywhere in North America, directly or indirectly
engage, directly or indirectly, as an independent contractor or otherwise, in
any activity for or on behalf of any person or entity in a competitive line of
business to that carried on by the Corporation, or engage in any manner in the
design, development, manufacturing, assembling, installing, and/or marketing of
rechargeable lithium battery technology or other technology competitive with the
business carried on by the Corporation or dealt in by Executive during his
employment with the Corporation.
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<PAGE> 6
(c) If during the one year period commencing on the termination of
his employment with the Corporation for any reason, Executive, directly or
indirectly engages, anywhere in North America, as an independent contractor or
otherwise, in any activity for or on behalf of any person or entity in a
competitive line of business to that carried on by the Corporation during the
term of his employment therewith, or engages in any manner in the design,
development, manufacturing, assembling, installing, and/or marketing of
rechargeable lithium battery technology or other technology competitive with
the business carried on by the Corporation during the term of Executive's
employment therewith or dealt in by Executive during his employment with the
Corporation, all the non-exercised vested and unvested options held by
Executive shall terminate.
(d) The provisions contained in paragraphs (b) and (c) of this
Section 8 shall not prevent Executive from purchasing or owning up to five
percent (5%) of the voting securities of any corporation, the securities of
which are publicly-traded.
9. Remedies and Survival. Because the Corporation does not have
an adequate remedy at law to protect its interest in its trade secrets,
privileged, proprietary or confidential information and similar commercial
assets, or its business from Executive's competition, the Corporation shall be
entitled to injunctive relief, in addition to such other remedies and relief
that would, in the event of a breach or a threatened breach of the provisions
of Sections 7 or 8, be available to the Corporation. The Corporation shall not
be required to plead or prove the inadequacy of damages. The provisions of
Sections 7 and 8 and this Section 9 shall survive any termination of
Executive's employment with the Corporation for any reason whatsoever.
10. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to its subject matter, merges
and supersedes any prior or contemporaneous agreements or understandings with
respect to its subject matter, and shall not be modified or terminated except
by another agreement in writing executed by the Corporation and Executive.
Failure of a party to enforce one or more of the provisions of this Agreement
or to require at any time performance of any of the obligations hereof shall
not be construed to be a waiver of such provisions by such party nor to in any
affect the validity of this Agreement or such party's right thereafter to
enforce any provision of this Agreement, nor to preclude such party from taking
any other action at any time which it would legally be entitled to take. In
the event of a conflict between this Agreement and any of the stock option
agreements entered into between the Corporation and Executive, the terms and
condition of this Agreement shall control.
11. Severability. If any provision of this Agreement is held to
be invalid or unenforceable by any court or tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected by such judgment, and
such provision shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
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<PAGE> 7
12. Successors and Assigns. Neither party shall have the right to
assign this personal Agreement, or any rights or obligations hereunder, without
the consent of the other party; provided, however, that upon the sale or
transfer of all or substantially all of the assets and business of the
Corporation to another party, or upon the merger or consolidation of the
Corporation with, or acquisition of the Corporation by, another corporation or
entity, this Agreement shall inure to the benefit of, and be binding upon, both
Executive and the party purchasing such assets, business and goodwill, or
surviving such merger or consolidation or acquiring the Corporation, as the
case may be, in the same manner and to the same extent as though such other
party were the Corporation. Subject to the foregoing, this Agreement shall
inure to the benefit of, and bind, the parties hereto and their legal
representatives, heirs, successors and assigns.
13. Communications. All notices and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
at the time when mailed in any United States post office enclosed in a
registered or certified postage-paid envelope and addressed as set forth at the
beginning of this Agreement, or to such other address as any party may specify
by notice to the other parties, or delivered by Federal Express or a similar
overnight courier to such address; provided, however, that any notice of change
of address shall be effective only upon receipt.
14. Construction; Counterparts. The headings contained in this
Agreement are for convenience only and shall in no way restrict or otherwise
affect this construction of the provisions hereof. References in this
Agreement to Sections are to the sections of this Agreement. This Agreement
may be executed in multiple counterparts, each of which shall be an original
and all of which together shall constitute one and the same instrument.
15. Governing Law. This Agreement shall be governed by the laws
of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first set forth above.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ THOMAS R. THOMSEN
------------------------------
Thomas R. Thomsen
Chairman and Chief Executive Officer
Executive:
/s/ DAVID J. CADE
----------------------------------
David J. Cade
7
<PAGE> 1
EMPLOYMENT AGREEMENT
AGREEMENT made as of July 24, 1996, by and between LITHIUM TECHNOLOGY
CORPORATION, a Delaware corporation (the "Corporation"), having an address at
5115 Campus Drive, Plymouth Meeting, Pennsylvania 19462, and GEORGE R. FERMENT
("Executive"), residing at 16 Hillcrest Drive, Randolph, New Jersey 07869.
W I T N E S S E T H:
WHEREAS, the Corporation wishes to employ Executive, and Executive is
willing to accept such employment, on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth herein, the parties hereto agree as follows:
1. Employment and Term. Subject to the terms and conditions of
this Agreement, the Corporation agrees to employ Executive, and Executive
hereby accepts employment by the Corporation, for a period of one year (the
"Term") commencing on the date first written above (the "Commencement Date").
2. Duties. During the Term, Executive shall serve the
Corporation as its Executive Vice President of Operations and Chief Technical
Officer, or in such other capacity or capacities as may be determined by the
Board of Directors of the Corporation. Executive shall perform such executive,
administrative, development, production, marketing and other services and
duties for the Corporation, or any subsidiary, affiliate or joint venture of
the Corporation, as are incidental to the positions he holds or as he may, from
time to time, be requested to hold by the Board of Directors of the
Corporation. If requested by the Board of Directors of the Corporation,
Executive shall also serve, without additional compensation, as an officer or
director of any subsidiary, affiliate or joint venture of the Corporation.
During the Term, Executive shall be available at all times to discharge his
duties under this Agreement; provided, however, that the Corporation agrees
that Executive shall be able to act as an independent director of other
corporations and engage in other professional and business endeavors so long as
Executive's duties in connection therewith do not (i) unreasonably interfere
with Executive's duties under this Agreement or (ii) cause Executive to violate
in any manner his obligations under Sections 7 and 8 of this Agreement.
<PAGE> 2
3. Compensation.
(a) During the Term, the Corporation shall pay to Executive,
in equal installments no less frequently than twice per month (or at such other
intervals as are in effect from time to time for other executive officers of
the Corporation), a salary at the rate of $130,000 per year.
(b) During each fiscal year of the Term, Executive shall be
eligible to receive a target bonus of up to 20% of Executive's annual salary
for such fiscal year of the Corporation, the exact amount of such bonus to be
determined by the Board of Directors of the Corporation in accordance with
performance thresholds for such fiscal year to be agreed upon prior to the
Commencement Date by the Board of Directors and Executive. For any fiscal year
of the Corporation during the Term, Executive shall receive such pro rated,
based upon the length of service in such fiscal year.
(c) During the Term, Executive shall be entitled to four
weeks of vacation, and in addition thereto such personal days, sick leave and
other similar benefits in accordance with the policies of the Corporation from
time to time in effect for executives of comparable expertise and authority.
(d) Executive agrees that the Corporation may obtain key man
life insurance with respect to Executive, and in connection therewith, agrees
to submit to all reasonable and customary examinations by the provider of such
life insurance.
(e) Executive agrees to submit to, at the expense of the
Corporation, an annual physical examination by a physician of his choice.
(f) Executive shall be entitled to reimbursement for all
normal and reasonable travel, entertainment and other expenses necessarily
incurred by him in the performance of his duties hereunder. Executive shall
submit on a timely basis such itemized accounts of such expenses, together with
such vouchers or receipts for individual expense items, as the Corporation may
from time to time require under its established policies and procedures.
(g) Except as hereinafter provided, the Corporation shall pay
Executive for any period, up to a maximum of six months, during the Term in
which he is unable fully to perform his duties because of physical or mental
disability or incapacity, an amount equal to the base salary due him for such
period pursuant to Section 3(a), less the aggregate amount of all income
disability benefits which for such period he may receive or to which he may be
entitled by reason of (i) any group health insurance plan or disability
insurance plan, which is intended to function as a salary replacement plan,
(ii) any applicable compulsory state disability law, (iii) the Federal Social
Security Act, (iv) any applicable workmen's compensation law or similar law and
(v) any plan towards which the Corporation or any subsidiary or affiliate of
the Corporation (including any predecessor of any thereof) has contributed or
for which it has made payroll deductions, such as group accident or health
policies, other than those which reimburse for actual medical expenses.
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<PAGE> 3
4. Stock Options. As part of the consideration to be paid to
Executive for his services hereunder the Corporation shall issue to Executive
under the Corporation's 1994 Stock Incentive Plan, as amended (the "Plan")
options to purchase 133,333 shares of its Common Stock, exercisable on the
terms and conditions set forth in the Stock Option Agreement attached hereto as
Annex A.
5. Rights of Termination.
(a) For Cause. The Corporation shall have the right, at
any time effective upon notice to Executive, to terminate this Agreement and
Executive's employment hereunder for "cause" (as hereinafter defined). For
purposes of this Agreement, "cause" shall mean the breach or continued gross
neglect by Executive, or gross negligence or willful misconduct by Executive in
the performance, of any of his duties or obligations under this Agreement.
(b) Disability; Death. In the event of Executive's
permanent and total disability as determined under the Corporation's long-term
disability program or, if no such program has been adopted, the continuous
absence of Executive for [180] consecutive days or more due to physical or
mental illness or incapacity, the Corporation shall have the right to terminate
this Agreement and Executive's employment hereunder upon 30 days' prior written
notice. In the event that Executive is able to and recommences rendering
services and performing his duties hereunder within such 30-day notice period,
Executive shall be reinstated and such notice shall be without further force or
effect. If Executive dies during the Term, this Agreement shall terminate
immediately upon his death.
6. Effects of Termination.
(a) In the event that Executive's employment is
terminated pursuant to Section 5(a) hereof, (i) Executive's employment
hereunder shall immediately cease, (ii) the Corporation shall pay to the
Executive his accrued and unpaid salary, accrued vacation time and expense
reimbursement through the date of termination in accordance with the
Corporation's usual procedures and (iii) all options shall be treated in
accordance with the terms of the Stock Option Agreement. Once the amounts
referred to in clause (ii) are paid, however, the Corporation shall have no
further obligation to Executive.
(b) In the event that Executive's employment is
terminated pursuant to Section 5(b) hereof, (i) Executive's employment
hereunder shall cease in accordance with Section 5(b), (ii) the Corporation
shall pay to Executive his accrued and unpaid salary, accrued vacation time and
expense reimbursement through the date of termination (except subject to
Section 3(f) hereof in the event of disability) in accordance with the
Corporation's usual procedures, (iii) all options shall be treated in
accordance with the terms of the Stock Option Agreement and (iv) in the event
of the
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<PAGE> 4
death of Executive, any and all options (whether vested or unvested) shall be
transferred in accordance with Executive's will and become exercisable for a
period of thirty-six (36) months.
(c) In the event that Executive's employment hereunder is
terminated by the Corporation other than pursuant to Section 5(a) or (b), then:
(i) Executive shall be entitled to receive, and the Corporation shall continue
to pay to Executive, the annual salary specified in Section 3(a) for the
remainder of the Term or for six months (whichever is longer), (ii) Executive
shall be entitled, during the period during which such severance payment is
being paid, to receive all benefits under the Corporation's medical insurance,
disability insurance, life insurance and other benefit plans as are then in
effect for executives of the Corporation and (iii) all options shall be treated
in accordance with the terms of the Stock Option Agreement.
(d) In the event that Executive's employment hereunder is
terminated by Executive, then: (i) the Corporation shall pay to the Executive
his accrued and unpaid salary, accrued vacation time and expense reimbursement
through the date of termination in accordance with the Corporation's usual
procedures and (ii) all options shall be treated in accordance with the terms
of the Stock Option Agreement.
(e) Executive's obligations pursuant to Sections 7 and 8
hereof shall survive any termination of this Agreement for any reason
whatsoever.
7. Confidentiality.
(a) Executive understands and acknowledges that as a
result of Executive's employment with the Corporation, and involvement with the
business of the Corporation, he is or shall necessarily become informed of, and
have access to, confidential information of the Corporation including, without
limitation, inventions, patents, patent applications, trade secrets, technical
information, know-how, plans, specifications, marketing plans and information,
pricing information, identity of customers and prospective customers and
identity of suppliers, and that such information, even though it may have been
or may be developed or otherwise acquired by Executive, is the exclusive
property of the Corporation to be held by Executive in trust and solely for the
Corporation's benefit. Executive shall not at any time, either during or
subsequent to his employment hereunder, reveal, report, publish, transfer or
otherwise disclose to any person, corporation or other entity, or use, any of
the Corporation's confidential information, without the written consent of the
Corporation's Board of Directors, except for use on behalf of the Corporation
in connection with the Corporation's business, and except for such information
which legally and legitimately is or becomes of general public knowledge from
authorized sources other than Executive.
(b) Upon the termination of his employment with the
Corporation for any reason, Executive shall promptly deliver to the Corporation
all drawings, manuals, letters, notes, notebooks, reports and copies thereof
and all other materials, including, without limitation, those of a secret or
confidential nature, relating to the Corporation's
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<PAGE> 5
business which are in Executive's possession or control. The Corporation shall
reimburse Executive for any packing or moving costs reasonably incurred by
Executive in connection with the foregoing delivery.
For purposes of this Section 7 and Section 8, the term "Corporation" includes
the Corporation and any other predecessor corporation, and affiliates
(including, without limitation, distributors, licensees, franchisees,
subsidiaries and joint ventures).
8. Non-Competition.
(a) Executive agrees that, for a period commencing on the date hereof
and ending one year after the termination of his employment with the
Corporation for any reason, he shall not, anywhere in North America, directly
or indirectly:
(i) solicit or attempt to solicit business of any
customers of the Corporation (including prospective customers
solicited by the Corporation) for products or services the same or
similar to those offered, sold, produced or under development by the
Corporation during the term of his employment therewith or dealt in by
Executive during his employment with the Corporation;
(ii) otherwise divert or attempt to divert from the
Corporation any business whatsoever;
(iii) solicit or attempt to solicit for any business
endeavor any employee of the Corporation;
(iv) interfere with any employment relationship or other
business relationship between the Corporation and any other
individual, person, or other entity;
(v) use the name of the Corporation or a name similar
thereto; or
(vi) render any services as an officer, director, employee,
partner, consultant or otherwise to, or have any interest as a
stockholder, partner, lender or otherwise in, any person which is
engaged in activities which, if performed by Executive would violate
this Section 8.
(b) Executive agrees that during the term of his employment with the
Corporation, he will not, anywhere in North America, directly or indirectly
engage, directly or indirectly, as an independent contractor or otherwise, in
any activity for or on behalf of any person or entity in a competitive line of
business to that carried on by the Corporation, or engage in any manner in the
design, development, manufacturing, assembling, installing, and/or marketing of
rechargeable lithium battery technology or other technology competitive with the
business carried on by the Corporation or dealt in by Executive during his
employment with the Corporation.
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<PAGE> 6
(c) If during the one year period commencing on the termination of
his employment with the Corporation for any reason, Executive, directly or
indirectly engages, anywhere in North America, as an independent contractor or
otherwise, in any activity for or on behalf of any person or entity in a
competitive line of business to that carried on by the Corporation during the
term of his employment therewith, or engages in any manner in the design,
development, manufacturing, assembling, installing, and/or marketing of
rechargeable lithium battery technology or other technology competitive with
the business carried on by the Corporation during the term of Executive's
employment therewith or dealt in by Executive during his employment with the
Corporation, all the non-exercised vested and unvested options held by
Executive shall terminate.
(d) The provisions contained in paragraphs (b) and (c) of this
Section 8 shall not prevent Executive from purchasing or owning up to five
percent (5%) of the voting securities of any corporation, the securities of
which are publicly-traded.
The foregoing shall not prevent Executive from purchasing or owning up
to five percent (5%) of the voting securities of any corporation, the
securities of which are publicly-traded.
9. Remedies and Survival. Because the Corporation does not have
an adequate remedy at law to protect its interest in its trade secrets,
privileged, proprietary or confidential information and similar commercial
assets, or its business from Executive's competition, the Corporation shall be
entitled to injunctive relief, in addition to such other remedies and relief
that would, in the event of a breach or a threatened breach of the provisions
of Sections 7 or 8, be available to the Corporation. The Corporation shall not
be required to plead or prove the inadequacy of damages. The provisions of
Sections 7 and 8 and this Section 9 shall survive any termination of
Executive's employment with the Corporation for any reason whatsoever.
10. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to its subject matter, merges
and supersedes any prior or contemporaneous agreements or understandings with
respect to its subject matter, and shall not be modified or terminated except
by another agreement in writing executed by the Corporation and Executive.
Failure of a party to enforce one or more of the provisions of this Agreement
or to require at any time performance of any of the obligations hereof shall
not be construed to be a waiver of such provisions by such party nor to in any
affect the validity of this Agreement or such party's right thereafter to
enforce any provision of this Agreement, nor to preclude such party from taking
any other action at any time which it would legally be entitled to take. In
the event of a conflict between this Agreement and any of the stock option
agreements entered into between the Corporation and Executive, the terms and
condition of this Agreement shall control.
11. Severability. If any provision of this Agreement is held to
be invalid or unenforceable by any court or tribunal of competent jurisdiction,
the remainder of this
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<PAGE> 7
Agreement shall not be affected by such judgment, and such provision shall be
carried out as nearly as possible according to its original terms and intent to
eliminate such invalidity or unenforceability.
12. Successors and Assigns. Neither party shall have the right to
assign this personal Agreement, or any rights or obligations hereunder, without
the consent of the other party; provided, however, that upon the sale or
transfer of all or substantially all of the assets and business of the
Corporation to another party, or upon the merger or consolidation of the
Corporation with, or acquisition of the Corporation by, another corporation or
entity, this Agreement shall inure to the benefit of, and be binding upon, both
Executive and the party purchasing such assets, business and goodwill, or
surviving such merger or consolidation or acquiring the Corporation, as the
case may be, in the same manner and to the same extent as though such other
party were the Corporation. Subject to the foregoing, this Agreement shall
inure to the benefit of, and bind, the parties hereto and their legal
representatives, heirs, successors and assigns.
13. Communications. All notices and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
at the time when mailed in any United States post office enclosed in a
registered or certified postage-paid envelope and addressed as set forth at the
beginning of this Agreement, or to such other address as any party may specify
by notice to the other parties, or delivered by Federal Express or a similar
overnight courier to such address; provided, however, that any notice of change
of address shall be effective only upon receipt.
14. Construction; Counterparts. The headings contained in this
Agreement are for convenience only and shall in no way restrict or otherwise
affect this construction of the provisions hereof. References in this
Agreement to Sections are to the sections of this Agreement. This Agreement
may be executed in multiple counterparts, each of which shall be an original
and all of which together shall constitute one and the same instrument.
15. Governing Law. This Agreement shall be governed by the laws
of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first set forth above.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ THOMAS R. THOMSEN
------------------------------
Thomas R. Thomsen
Chairman and Chief Executive Officer
Executive:
/s/ GEORGE R. FERMENT
----------------------------------
George R. Ferment
7
<PAGE> 1
LITHIUM TECHNOLOGY CORPORATION
STOCK OPTION AGREEMENT
Lithium Technology Corporation, a Delaware corporation having offices
at 5115 Campus Drive, Plymouth Meeting, Pennsylvania 19462 (the "Company"),
hereby grants to David Cade (the "Optionee"), an Incentive Stock Option (the
"Option") to purchase a total of One Hundred Thirty Three Thousand Three
Hundred Thirty Three (133,333) shares of the Company's Common Stock (the
"Shares"), at the price determined as provided herein, and subject to the
terms, definitions and provisions of the 1994 Stock Incentive Plan, as amended
(the "Plan") adopted by the Company, which is incorporated herein by reference.
The terms defined in the Plan shall have the same defined meanings herein. The
Option is intended to qualify as an "incentive stock option" as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
1. EXERCISE PRICE. The exercise price of the Option is $1.33 per
Share for each Share subject to the Option.
2. EXERCISE OF OPTION. This Option is granted in connection with
the Optionee's employment by the Corporation. The Option shall be exercisable
in installments as set forth herein on or before July 24, 2006 (the
"Termination Date"). Subject to provisions contained elsewhere in this
Agreement, the Options shall be first exercisable cumulatively as follows:
44,445 shares on July 24, 1996, 44,444 shares on July 24, 1997; and 44,444
shares on July 24, 1998.
Notwithstanding the above, the vesting schedule set forth above may be
accelerated in the event the following occurs:
a) 44,444 of such options shall vest at such time as the
Company receives proceeds from a private placement of common
stock, preferred stock or other security which results in
gross proceeds equal to or greater than $2 million.
b) the remaining 44,444 of such options shall vest when (i)
the Company completes a secondary offering of its common stock
resulting in gross proceeds equal to or greater than $4
million or (ii) the Japanese Consortium of Mitsubishi
Materials Corporation and Mitsui & Co. Ltd. makes an
additional investment in the Company of at least $3 million or
(iii) the Company receives proceeds from private placements of
common stock, preferred stock or other security (in addition
to the one referred to in (a) above) which results in gross
proceeds equal to or greater than $4 million.
<PAGE> 2
In the event that any of the Options granted hereunder cannot qualify
as incentive stock option (as defined by Section 422 of the Code) due to the
accelerated vesting provisions of this Paragraph 2, such options shall
automatically be treated under the Code as non-statutory or non-qualified
options.
3. ADMINISTRATION. The Plan is administered by the Company's
Compensation Committee (the "Committee"). All determinations and acts of the
Committee as to any matters concerning the Plan, including interpretations or
constructions of this Option and of the Plan, shall be conclusive and binding
on the Optionee and any parties claiming through the Optionee.
4. EXERCISE. Unless the Optionee ceases to be employed by the
Company or a direct or indirect subsidiary thereof or as otherwise provided in
Paragraphs 13 and 14 below (in the event of death or disability), the right of
the Optionee to purchase shares hereunder, subject to any installment
requirements set forth above, may be exercised in whole or in part at any time
after the accrual of such respective installment and prior to the Termination
Date, except as otherwise provided herein. The Option may not be exercised for
a fraction of a share.
5. NOTICE OF EXERCISE. The Options shall be exercisable by written
notice (the "Notice") which shall state the election to exercise the Option and
the number of Shares in respect of which the Option is being exercised, and
such other representations and agreements as to the Optionee's investment
intent with respect to such shares of Common Stock as may be required by the
Company pursuant to the provisions of the Plan. Such written notice shall be
signed by the Optionee and shall be delivered in person or by certified mail to
the Secretary of the Company. The written notice shall be accompanied by
payment in full of the exercise price.
6. DELIVERY OF CERTIFICATES. As soon as practicable after receipt of
the Notice and payment, and subject to the next two paragraphs, the Company
shall, without transfer or issue tax or other incidental expense to the
Optionee, deliver to the Optionee a certificate or certificates for the shares
of Common Stock so purchased. Such delivery shall be made (a) at the offices
of the Company at 5115 Campus Drive, Plymouth Meeting, Pennsylvania 19462, (b)
at such other place as may be mutually acceptable to the Company and the
Optionee, or (c) by certified mail addressed to the Optionee at the Optionee's
address shown in the records of the Company.
7. WITHHOLDING. The Company shall have the right to withhold an
appropriate number of shares of Common Stock (based on the fair market value
thereof on the date of exercise) for payment of taxes required by law or to
take such other action as may be necessary in the opinion of the Company to
satisfy all tax withholding obligations.
8. COMPLIANCE WITH LAWS. The Company may postpone the time of
delivery of certificate(s) for shares of Common Stock for such additional time
as the
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Company shall deem necessary or desirable to enable it to comply with the
requirements of any securities exchange upon which the Common Stock may be
listed, or the requirements of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, any rules or regulations of the
Securities and Exchange Commission promulgated thereunder, or any applicable
state laws relating to the authorization, issuance or sale of securities.
9. RESTRICTIONS ON TRANSFER. The issuance of the shares of Common
Stock subject hereto and issuable upon the exercise of this Option and the
transfer or resale of such shares shall be subject to such restrictions as are,
in the opinion of the Company's counsel, required to comply with the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder,
and the certificate(s) representing such shares shall, if it is deemed
advisable by the Company's counsel, bear a legend to such effect.
10. FAILURE TO PAY. If, upon tender of delivery thereof, the
Optionee fails to accept delivery of and pay or have paid for all or any part
of the number of shares of Common Stock specified in the Notice, the Optionee's
right to exercise this Option with respect to such undelivered and unpaid for
shares may be terminated by the Company.
11. NON-TRANSFERABLE. During the Optionee's lifetime, this Option
shall be exercisable only by the Optionee and neither this Option nor any right
hereunder may be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner otherwise than by will or by the laws of descent or
distribution. The terms of this Option Agreement shall be binding upon the
executors, administrator, heirs, successors and assigns of Optionee.
12. TERMINATION OF EMPLOYMENT.
a. Except as provided in a certain Employment Agreement
dated the date hereof between the Optionee and the Company or as otherwise
provided in Paragraphs 13 and 14 below (in the event of death or disability),
if Optionee's employment by or association with the Company or its direct or
indirect subsidiaries terminates for any reason other than "for cause" as
defined in Paragraph 12(b) below, all currently exercisable installments of
this Option shall be exercisable for a period of twelve (12) months from the
date of termination and, to the extent not exercised, shall terminate. All
other installments of this Option shall immediately and automatically
terminate.
b. If Optionee ceases to serve as an employee of the
Company by virtue of a termination for cause (as defined in Optionee's
Employment Agreement or as set forth below), the Committee shall have the
continuing option to continue or terminate the Option, whether vested or not,
in their sole discretion, without prior notice to Optionee; provided, however
that Optionee (if permitted by the Committee) must exercise the Option for all
remaining shares within three (3) months after the date he ceased to be an
employee of the Company. To the extent the Option is not exercised within said
three (3) month period, the Option shall terminate. If Employee is not
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<PAGE> 4
employed pursuant to an Employment Agreement as of the date of termination,
cause shall mean the substantial breach or continuous neglect by Employee of
his employment obligations, or willful misconduct by Employee in the
performance of such obligations which occurs or persists after notice and an
opportunity to cure.
13. DISABILITY OF OPTIONEE. If Optionee is unable to continue his
employment with the Company as a result of his disability (as such condition is
defined in the Plan) Optionee may, but only within thirty-six (36) months from
the date of disability, exercise such portion of the Option which has vested to
the extent he was entitled to exercise it at the date of such disability, and
such portion of the Option which has not vested shall terminate. If Optionee
does not exercise such portion of the Option which has vested and which
Optionee was entitled to exercise within the time specified herein, this Option
shall terminate.
14. DEATH OF OPTIONEE. In the event of the death of Optionee
during the term of the Option and while an employee of the Company and having
been employed continuously as an employee since the date of grant of the
Option, the Option may be exercised, at any time within thirty-six (36) months
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance but only to
the extent of the right to exercise that had accrued at the date of death. If
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise such portion of Optionee's Option
which has vested and which he was entitled to exercise in the time specified
herein, the Option shall terminate.
15. NON-DILUTION. In the event of any change in the outstanding
Common Stock by reason of a stock split, stock dividend, combination or
reclassification of shares, recapitalization, merger or similar event, the
Committee shall adjust proportionally the number of shares of Common Stock
covered by this Option and the Option Price thereof. In the event of any other
change affecting the Common Stock or any distribution (other than normal cash
dividends) to holders of Common Stock, such adjustments as may be deemed
equitable by the Committee, including adjustments to avoid fractional shares,
shall be made to give proper effect to such event. Upon the occurrence of a
"change in control" (as hereinafter defined) of the Company, all then
non-exercisable installments of this Option shall become exercisable
immediately. For purposes of this Agreement, a "change in control" shall be
deemed to have occurred if (a) any "person" or "group" of persons (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 and the rules and regulations thereunder) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the then outstanding securities of the
Company, or (b) a change of more than 25% in the composition of the Board of
Directors occurs within a two year period unless such change was approved in
advance by at least two-thirds of the previous directors. In the event of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation not constituting a change in control, the
Committee may authorize the assumption of this Option or substitute a new stock
option for this Option, whether or
4
<PAGE> 5
not in a transaction to which Section 424(a) of the Internal Revenue Code
applies. The judgment of the Committee with respect to any matter referred to
in this paragraph shall be conclusive and binding upon the Optionee and any
parties claiming through the Optionee.
16. NO RIGHT TO DIVIDENDS. Neither the Optionee nor any person or
persons entitled to exercise the Optionee's rights under this Option in
accordance herewith shall have any rights to dividends or to Common Stock
subject to this Option, except to the extent that a certificate for such shares
shall have been issued upon the exercise of this Option as provided herein.
17. NOTICES. Each notice relating to this Option shall be in writing
and delivered in person or by certified mail to the proper address. All
notices to the Company shall be addressed to it at its offices at 5115 Campus
Drive, Plymouth Meeting, Pennsylvania 19462, attention of the Committee, c/o
the Company's secretary. All notices to the Optionee or other person or
persons then entitled to exercise any rights with respect to this Option shall
be addressed to the Optionee or such other person or persons at the Optionee's
address shown in the records of the Company or the location at which the
Optionee is employed by the Company. Anyone to whom a notice may be given
under this Option may designate a new address by notice to that effect.
18. NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the
granting of this Option confers on the Optionee any right to continued
employment or association with the Company (or any of its direct or indirect
subsidiaries) or in any way interferes with or alters any of the Company's (and
its direct and indirect subsidiaries') rights to terminate the employment or
association with the Company of the Optionee at any time, with or without
cause, and without liability therefor. This Option shall not be deemed a part
of the Optionee's regular, recurring compensation for any purpose, including,
without limitation, for the purposes of any termination indemnity or severance
pay law of any jurisdiction.
19. GOVERNING LAW. This Option and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by the
Internal Revenue Code of 1986, as amended from time to time, or the securities
laws of the United States, shall be governed by and construed under the laws of
the State of Delaware.
20. REGISTRATION ON FORM S-8. The Company hereby agrees that in
the event that during the Term the Company causes to be filed with the
Securities and Exchange Commission a registration statement on Form S-8 (or
equivalent form as may be in effect at such time) the Optionee may include in
such registration statement all shares underlying options theretofore granted
to Optionee under the Plan. The Company covenants that it will keep such
registration statement current and effective while the Optionee or his guardian
or estate has the right to exercise any of the options granted hereunder. The
Company also hereby agrees that in the event that during the Term the Company
causes to be filed with the Securities and Exchange Commission a
5
<PAGE> 6
registration statement on a form other than Form S-8, Optionee shall have
"piggyback" registration rights to include in such registration statement all
the shares underlying options granted to Optionee under the Plan and the shares
underlying such options, subject to a reasonable cutback in the inclusion of
such options and shares if the Board or the Company's underwriter determines
that such cutback is necessary to prevent an adverse effect on the Company's
offering.
IN WITNESS WHEREOF, LITHIUM TECHNOLOGY CORPORATION has caused this
Option to be executed by its officers as of the 24th day of July, 1996.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ THOMAS R. THOMSEN
-----------------------------
ACCEPTED AND AGREED:
/s/ DAVID CADE
- --------------------------
Optionee: David Cade
6
<PAGE> 1
LITHIUM TECHNOLOGY CORPORATION
STOCK OPTION AGREEMENT
Lithium Technology Corporation, a Delaware corporation having offices
at 5115 Campus Drive, Plymouth Meeting, Pennsylvania 19462 (the "Company"),
hereby grants to George Ferment (the "Optionee"), an Incentive Stock Option
(the "Option") to purchase a total of One Hundred Thirty Three Thousand Three
Hundred Thirty Three (133,333) shares of the Company's Common Stock (the
"Shares"), at the price determined as provided herein, and subject to the
terms, definitions and provisions of the 1994 Stock Incentive Plan, as amended
(the "Plan") adopted by the Company, which is incorporated herein by reference.
The terms defined in the Plan shall have the same defined meanings herein. The
Option is intended to qualify as an "incentive stock option" as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
1. EXERCISE PRICE. The exercise price of the Option is $1.33 per
Share for each Share subject to the Option.
2. EXERCISE OF OPTION. This Option is granted in connection with
the Optionee's employment by the Corporation. The Option shall be exercisable
in installments as set forth herein on or before July 24, 2006 (the
"Termination Date"). Subject to provisions contained elsewhere in this
Agreement, the Options shall be first exercisable cumulatively as follows:
44,445 shares on July 24, 1996, 44,444 shares on July 24, 1997; and 44,444
shares on July 24, 1998.
Notwithstanding the above, the vesting schedule set forth above may be
accelerated in the event the following occurs:
a) 44,444 of such options shall vest at such time as the
Company's upgraded Demonstration Manufacturing
Facility produces cell samples for delivery to
Original Equipment Manufacturers.
b) the remaining 44,444 of such options shall vest when
the Company has delivered completed battery pack
samples to OEM's using cells produced by the
Demonstration Manufacturing Facility.
In the event that any of the options granted hereunder cannot qualify
as incentive stock options (as defined by Section 422 of the Code) due to the
accelerated vesting provisions of this Paragraph 2, such options shall
automatically be treated under the Code as non-statutory or non-qualified
options.
<PAGE> 2
3. ADMINISTRATION. The Plan is administered by the Company's
Compensation Committee (the "Committee"). All determinations and acts of the
Committee as to any matters concerning the Plan, including interpretations or
constructions of this Option and of the Plan, shall be conclusive and binding
on the Optionee and any parties claiming through the Optionee.
4. EXERCISE. Unless the Optionee ceases to be employed by the
Company or a direct or indirect subsidiary thereof, the right of the Optionee
to purchase shares hereunder, subject to any installment requirements set forth
above, may be exercised in whole or in part at any time after the accrual of
such respective installment and prior to the Termination Date, except as
otherwise provided herein. The Option may not be exercised for a fraction of a
share.
5. NOTICE OF EXERCISE. The Options shall be exercisable by written
notice (the "Notice") which shall state the election to exercise the Option and
the number of Shares in respect of which the Option is being exercised, and
such other representations and agreements as to the Optionee's investment
intent with respect to such shares of Common Stock as may be required by the
Company pursuant to the provisions of the Plan. Such written notice shall be
signed by the Optionee and shall be delivered in person or by certified mail to
the Secretary of the Company. The written notice shall be accompanied by
payment in full of the exercise price.
6. DELIVERY OF CERTIFICATES. As soon as practicable after receipt of
the Notice and payment, and subject to the next two paragraphs, the Company
shall, without transfer or issue tax or other incidental expense to the
Optionee, deliver to the Optionee a certificate or certificates for the shares
of Common Stock so purchased. Such delivery shall be made (a) at the offices
of the Company at 5115 Campus Drive, Plymouth Meeting, Pennsylvania 19462, (b)
at such other place as may be mutually acceptable to the Company and the
Optionee, or (c) by certified mail addressed to the Optionee at the Optionee's
address shown in the records of the Company.
7. WITHHOLDING. The Company shall have the right to withhold an
appropriate number of shares of Common Stock (based on the fair market value
thereof on the date of exercise) for payment of taxes required by law or to
take such other action as may be necessary in the opinion of the Company to
satisfy all tax withholding obligations.
8. COMPLIANCE WITH LAWS. The Company may postpone the time of
delivery of certificate(s) for shares of Common Stock for such additional time
as the Company shall deem necessary or desirable to enable it to comply with
the requirements of any securities exchange upon which the Common Stock may be
listed, or the requirements of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, any rules or regulations of the
Securities and
2
<PAGE> 3
Exchange Commission promulgated thereunder, or any applicable state laws
relating to the authorization, issuance or sale of securities.
9. RESTRICTIONS ON TRANSFER. The issuance of the shares of Common
Stock subject hereto and issuable upon the exercise of this Option and the
transfer or resale of such shares shall be subject to such restrictions as are,
in the opinion of the Company's counsel, required to comply with the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder,
and the certificate(s) representing such shares shall, if it is deemed
advisable by the Company's counsel, bear a legend to such effect.
10. FAILURE TO PAY. If, upon tender of delivery thereof, the
Optionee fails to accept delivery of and pay or have paid for all or any part
of the number of shares of Common Stock specified in the Notice, the Optionee's
right to exercise this Option with respect to such undelivered and unpaid for
shares may be terminated by the Company.
11. NON-TRANSFERABLE. During the Optionee's lifetime, this Option
shall be exercisable only by the Optionee and neither this Option nor any right
hereunder may be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner otherwise than by will or by the laws of descent or
distribution. The terms of this Option Agreement shall be binding upon the
executors, administrator, heirs, successors and assigns of Optionee.
12. TERMINATION OF EMPLOYMENT.
a. Except as provided in a certain Employment Agreement
dated the date hereof between the Optionee and the Company or as otherwise
provided in Paragraphs 13 and 14 below (in the event of death or disability),
if Optionee's employment by or association with the Company or its direct or
indirect subsidiaries terminates for any reason other than "for cause" as
defined in Paragraph 12(b) below, all currently exercisable installments of
this Option shall be exercisable for a period of twelve (12) months from the
date of termination and, to the extent not exercised, shall terminate. All
other installments of this Option shall immediately and automatically
terminate.
b. If Optionee ceases to serve as an employee of the
Company by virtue of a termination for cause (as defined in Optionee's
Employment Agreement or as set forth below), the Committee shall have the
continuing option to continue or terminate the Option, whether vested or not,
in their sole discretion, without prior notice to Optionee; provided, however
that Optionee (if permitted by the Committee) must exercise the Option for all
remaining shares within three (3) months after the date he ceased to be an
employee of the Company. To the extent the Option is not exercised within said
three (3) month period, the Option shall terminate. If Employee is not
employed pursuant to an Employment Agreement as of the date of termination,
cause shall mean the substantial breach or continuous neglect by Employee of
his employment obligations, or willful misconduct by Employee in the
performance of such obligations which occurs or persists after notice and an
opportunity to cure.
3
<PAGE> 4
13. DISABILITY OF OPTIONEE. If Optionee is unable to continue his
employment with the Company as a result of his disability (as such condition is
defined in the Plan) Optionee may, but only within thirty-six (36) months from
the date of disability, exercise such portion of the Option which has vested to
the extent he was entitled to exercise it at the date of such disability, and
such portion of the Option which has not vested shall terminate. If Optionee
does not exercise such portion of the Option which has vested and which
Optionee was entitled to exercise within the time specified herein, this Option
shall terminate.
14. DEATH OF OPTIONEE. In the event of the death of Optionee
during the term of the Option and while an employee of the Company and having
been employed continuously as an employee since the date of grant of the
Option, the Option may be exercised, at any time within thirty-six (36) months
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance but only to
the extent of the right to exercise that had accrued at the date of death. If
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise such portion of Optionee's Option
which has vested and which he was entitled to exercise in the time specified
herein, the Option shall terminate.
15. NON-DILUTION. In the event of any change in the outstanding
Common Stock by reason of a stock split, stock dividend, combination or
reclassification of shares, recapitalization, merger or similar event, the
Committee shall adjust proportionally the number of shares of Common Stock
covered by this Option and the Option Price thereof. In the event of any other
change affecting the Common Stock or any distribution (other than normal cash
dividends) to holders of Common Stock, such adjustments as may be deemed
equitable by the Committee, including adjustments to avoid fractional shares,
shall be made to give proper effect to such event. Upon the occurrence of a
"change in control" (as hereinafter defined) of the Company, all then
non-exercisable installments of this Option shall become exercisable
immediately. For purposes of this Agreement, a "change in control" shall be
deemed to have occurred if (a) any "person" or "group" of persons (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 and the rules and regulations thereunder) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the then outstanding securities of the
Company, or (b) a change of more than 25% in the composition of the Board of
Directors occurs within a two year period unless such change was approved in
advance by at least two-thirds of the previous directors. In the event of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation not constituting a change in control, the
Committee may authorize the assumption of this Option or substitute a new stock
option for this Option, whether or not in a transaction to which Section 424(a)
of the Internal Revenue Code applies. The judgment of the Committee with
respect to any matter referred to in this paragraph shall be conclusive and
binding upon the Optionee and any parties claiming through the Optionee.
4
<PAGE> 5
16. NO RIGHT TO DIVIDENDS. Neither the Optionee nor any person or
persons entitled to exercise the Optionee's rights under this Option in
accordance herewith shall have any rights to dividends or to Common Stock
subject to this Option, except to the extent that a certificate for such shares
shall have been issued upon the exercise of this Option as provided herein.
17. NOTICES. Each notice relating to this Option shall be in writing
and delivered in person or by certified mail to the proper address. All
notices to the Company shall be addressed to it at its offices at 5115 Campus
Drive, Plymouth Meeting, Pennsylvania 19462, attention of the Committee, c/o
the Company's secretary. All notices to the Optionee or other person or
persons then entitled to exercise any rights with respect to this Option shall
be addressed to the Optionee or such other person or persons at the Optionee's
address shown in the records of the Company or the location at which the
Optionee is employed by the Company. Anyone to whom a notice may be given
under this Option may designate a new address by notice to that effect.
18. NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the
granting of this Option confers on the Optionee any right to continued
employment or association with the Company (or any of its direct or indirect
subsidiaries) or in any way interferes with or alters any of the Company's (and
its direct and indirect subsidiaries') rights to terminate the employment or
association with the Company of the Optionee at any time, with or without
cause, and without liability therefor. This Option shall not be deemed a part
of the Optionee's regular, recurring compensation for any purpose, including,
without limitation, for the purposes of any termination indemnity or severance
pay law of any jurisdiction.
19. GOVERNING LAW. This Option and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by the
Internal Revenue Code of 1986, as amended from time to time, or the securities
laws of the United States, shall be governed by and construed under the laws of
the State of Delaware.
20. REGISTRATION ON FORM S-8. The Company hereby agrees that in
the event that during the Term the Company causes to be filed with the
Securities and Exchange Commission a registration statement on Form S-8 (or
equivalent form as may be in effect at such time) the Optionee may include in
such registration statement all shares underlying options theretofore granted
to Optionee under the Plan. The Company covenants that it will keep such
registration statement current and effective while the Optionee or his guardian
or estate has the right to exercise any of the options granted hereunder. The
Company also hereby agrees that in the event that during the Term the Company
causes to be filed with the Securities and Exchange Commission a registration
statement on a form other than Form S-8, Optionee shall have "piggyback"
registration rights to include in such registration statement all the shares
underlying options granted to Optionee under the Plan and the shares underlying
such options,
5
<PAGE> 6
subject to a reasonable cutback in the inclusion of such options and shares if
the Board or the Company's underwriter determines that such cutback is
necessary to prevent an adverse effect on the Company's offering.
IN WITNESS WHEREOF, LITHIUM TECHNOLOGY CORPORATION has caused this
Option to be executed by its officers as of the 24th day of July, 1996.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ THOMAS R. THOMSEN
-----------------------------
ACCEPTED AND AGREED:
/s/ GEORGE FERMENT
- --------------------------
Optionee: George Ferment
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS FOR
THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,309
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,311
<PP&E> 955
<DEPRECIATION> 262
<TOTAL-ASSETS> 2,089
<CURRENT-LIABILITIES> 1,391
<BONDS> 0
0
0
<COMMON> 158
<OTHER-SE> 540
<TOTAL-LIABILITY-AND-EQUITY> 2,089
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,952
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> (1,986)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,986)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,986)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
