<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 1996
REGISTRATION NO. 33-_________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LITHIUM TECHNOLOGY CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 3691 13-3411148
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
CODE NUMBER)
5115 CAMPUS DRIVE
PLYMOUTH MEETING, PA 19462
(610) 940-6090
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
5115 CAMPUS DRIVE
PLYMOUTH MEETING, PA 19462
(610) 940-6090
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR
INTENDED PRINCIPAL PLACE OF BUSINESS)
THOMAS R. THOMSEN COPIES TO:
CHAIRMAN AND CEO THOMAS P. GALLAGHER, ESQ.
LITHIUM TECHNOLOGY CORPORATION JOHN K. BUTLER, ESQ.
5115 CAMPUS DRIVE MASON, BRIODY, GALLAGHER & TAYLOR
PLYMOUTH MEETING, PA 19462 104 CARNEGIE CENTER
(610) 940-6090 SUITE 201
(NAME, ADDRESS AND TELEPHONE PRINCETON, NJ 08540
NUMBER OF AGENT FOR SERVICE) (609) 987-1381
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX AND LIST
THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class of Securities to Amount to be Registered Proposed Maximum Aggregate Amount of Registration Fee
be Registered Offering Price
<S> <C> <C> <C>
Common Stock 10,827,984 $22,738,767 $7,840.96
Common Stock Underlying
Warrants 2,307,858 $ 4,846,502 $1,671.21
Common Stock Underlying Options 386,645 $ 811,955 $ 279.98
TOTAL 13,522,487 $28,397,224 $9,793.15
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
LITHIUM TECHNOLOGY CORPORATION
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number and Caption Location or Heading in Prospectus
- ----------------------- ---------------------------------
<S> <C>
1. Front of Registration Statement and Outside Outside Front Cover Page
Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page
Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price *
6. Dilution *
7. Selling Security-Holders Selling Shareholders
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Promoters and Management
Control Persons
11. Security Ownership of Certain Beneficial Security Ownership of Certain Beneficial
Owners and Management Owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel *
14. Disclosure of Commission Position on Disclosure of Commission Position on Indemnification
Indemnification for Securities Act Liabilities for Securities Act Liabilities
15. Organization Within Last Five Years Certain Relationships and Related Transactions
16. Description of Business Business
17. Management's Discussion and Analysis or Plan Management's Discussion and Analysis or Plan of
of Operation Operation
18. Description of Property Property
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Item Number and Caption Location or Heading in Prospectus
- ----------------------- ---------------------------------
<S> <C>
19. Certain Relationships and Related Transactions Certain Relationships and Related Transactions
20. Market for Common Equity and Related Market Prices
Stockholder Matters
21. Executive Compensation Executive Compensation
22. Financial Statements Index to Financial Statements
23. Changes In and Disagreements with Changes In and Disagreements with Accountants on
Accountants on Accounting and Financial Accounting and Financial Disclosures
Disclosures
</TABLE>
- --------------------------
* Not Applicable
ii
<PAGE> 5
The date of this Prospectus is July , 1996.
LITHIUM TECHNOLOGY CORPORATION
13,522,487 Shares of Common Stock
This Prospectus relates to (i) 10,827,984 of the outstanding shares
(the "Outstanding Shares") of common stock, $.01 par value per share (the
"Common Stock"), of Lithium Technology Corporation, a Delaware corporation
(sometimes referred to herein as, the "Company" or "LTC"), and (ii) 2,307,858
shares of Common Stock underlying stock purchase warrants ("Warrants"), and
386,645 shares of Common Stock underlying certain stock options ("Options") (the
shares underlying the Warrants and Options collectively, the "Underlying
Shares") (the Outstanding Shares together with the Underlying Shares, the
"Shares").
The Shares covered by this Prospectus are being sold by the Selling
Shareholders identified herein. See "Selling Shareholders". Except for the
exercise price of the Options and Warrants, the Company will not receive any
part of the proceeds from the sale of the Shares. All expenses incurred in
connection with the offering by Selling Shareholders are being borne by the
Company.
The Common Stock is quoted on the "OTC Bulletin Board" under the
stock symbol "LITH". On July 11, 1996, the closing bid price for the Common
Stock was $1.9375 per share and the closing asked price was $2.25 per share as
quoted on the OTC Bulletin Board.
THESE SECURITIES ARE SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK AND
SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE LOSS OF HIS/HER ENTIRE
INVESTMENT. SEE "RISK FACTORS" ON PAGES 7 TO 16 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 6
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement
under the Securities Act of 1933, as amended, with respect to the Shares offered
by this Prospectus (the "Registration Statement").
The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information filed by the Company,
including the Registration Statement, can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and will also be available for
inspection and copying at the regional offices of the Commission located at 7
World Trade Center, New York, New York 10048, and at Northwestern Atrium Center,
500 West Madison Street, Suite #1400, Chicago, Illinois 60661. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a Web site (http://www.sec.gov)
that will contain certain subsequently filed reports, proxy and information
statements and other information regarding the Company.
This Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits thereto. For further information
with respect to the Company and the Shares, reference is made to the
Registration Statement and the exhibits filed therewith. The Company will
provide without charge to each person who receives this Prospectus upon written
or oral request of such person, a copy of the information that was incorporated
by reference in this Prospectus (not including exhibits to the information that
is incorporated by reference, unless the exhibits themselves are specifically
incorporated by reference). All such requests should be directed to the Company
at 5115 Campus Drive, Plymouth Meeting, PA 19462, Attention: Secretary, or by
telephone at (610) 940-6090 (ext. 109). Statements contained in this Prospectus
as to the contents of any document filed as an exhibit to the Registration
Statement are qualified in all respects by reference to the exhibit for a
complete statement of its terms and conditions.
2
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. For a description of certain technical terms used
in this Prospectus, see "Glossary of Technical Terms."
THE COMPANY
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 a development stage company engaged in the business
of developing and seeking to commercialize a unique solid state,
lithium-polymer, rechargeable battery. The Company believes that its battery
technology, which is currently in the pre-prototype development phase, is
capable of providing four to six 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, and constructing a manufacturing plant.
The Company's strategy includes the development of strategic
alliances with 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 the Company's products on a world-wide basis. On
March 29, 1996, the Company entered into a Technology Development Agreement with
a Japanese consortium consisting of Mitsubishi Materials Corporation and Mitsui
& Co., Ltd. (the "Consortium"), based on the Company's proprietary
lithium-polymer rechargeable battery technology. The Company is continuing to
seek a third investor to join the Consortium. There can be no assurance that a
third investor will join the Consortium or do so on terms favorable and
acceptable to the Company. The Consortium has been granted options on market
specific, exclusive manufacturing and distribution rights. The Company and the
Consortium anticipate that the Technology Development Agreement is the first
step in a broad strategic alliance for the research and development, production,
promotion, and distribution of the Company's lithium-polymer batteries. It is
the Company's and the Consortium's strategy that the Consortium will assist the
Company in the development of its lithium-polymer battery product line with the
Company taking advantage of the Consortium's expertise and experience in the
development of other high-tech products, familiarity with the geographic markets
for such products, and experience in developing new markets.
The Company's operating results consist solely of operating losses
attributable to research and development and general and administrative
expenses. The Company has generated no revenues from operations.
3
<PAGE> 8
During the last two years, the Company has recruited a new
management team and a core technical staff with commercialization and battery
technology expertise. A modern research facility has been leased and research
and product development is continuing. Earlier in 1996, in addition to
consummating the Consortium arrangement with Mitsubishi and Mitsui, the Company
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
also promoted David Cade to the office of President and Chief Operating Officer
and Dr. George Ferment to the office of Executive Vice President of Operations
and Chief Technical Officer.
The Company is a corporation organized under the laws of the State
of Delaware on December 28, 1995. The Company's predecessor -- Lithium
Technology Corporation (a Nevada corporation) -- merged with and into the
Company in a reincorporation merger that became effective on February 8, 1996.
The principal executive office of the Company is located at 5115 Campus Drive,
Plymouth Meeting, PA 19462 and its telephone number is (610) 940-6090.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by Selling
Shareholders 13,522,487 shares
Common Stock to be outstanding after the
offering 18,478,941 shares(1)
Estimated Proceeds $3,176,810 gross proceeds to the Company, if all of the
Underlying Shares are purchased by the holders of the
Warrants and the Options. The Company will receive
none of the proceeds from the sale of the Outstanding
Shares or the sale of the Underlying Shares by the
Selling Shareholders.
Use of Proceeds Research and development activities of
the Company; working capital.
Risk Factors Investment in the securities offered hereby involves a
high degree of risk. See "Risk Factors".
OTC Bulletin Board Symbol LITH
</TABLE>
- -----------------------
(1) Includes 15,784,438 shares of Common Stock issued and outstanding on
June 28, 1996, and 2,307,858 shares underlying the Warrants and
386,645 shares underlying the Options, and assumes the exercise of
all the Warrants and the Options to the maximum extent. Excludes
approximately 1,586,784 shares that the Company intends to
subsequently register for public sale inclusive of up to 236,770
shares that may be issued to certain employees and 1,350,014 shares
which are issuable upon exercise of certain options to purchase
Common Stock which options have been granted to directors and
officers of the Company.
4
<PAGE> 9
SELECTED FINANCIAL INFORMATION
The following table contains selected financial information derived
from the financial statements set forth elsewhere in this Prospectus, and should
be read in conjunction with such financial statements and notes thereto.
The unaudited financial information of the Company as of March 31,
1996 and for the three months then ended has been prepared on the same basis as
the audited financial statements of the Company and, in the opinion of
management, include all adjustments necessary to present fairly the financial
position and the results of operations of the Company.
SUMMARY STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
Three Months Ended Year Ended December 31
---------------------- -----------------------
March 31, March 31,
1996 1995 1995 1994
--------- --------- -------- ------
Unaudited Unaudited
<S> <C> <C> <C> <C>
Costs and expenses $ 967,000 $ 542,000 $ 2,472,000 $ 2,133,000
Net Loss $(967,000) $(542,000) $(2,472,000) $(2,133,000)
Net Loss Per Common
Share $ (.12) $ (.08) $ (.36) $ (.36)
</TABLE>
SUMMARY BALANCE SHEET DATA
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
Unaudited
<S> <C> <C>
Working capital (deficit) $ 882,000 $(2,386,000)
Total assets $2,998,000 $ 1,165,000
Long-term debt - 0 - $300,000
Total liabilities $1,349,000 $ 2,957,000
Stockholders' equity $1,649,000 $(1,792,000)
(deficiency)
</TABLE>
5
<PAGE> 10
GLOSSARY OF TECHNICAL TERMS
<TABLE>
<S> <C>
Alkaline Metals................................... The elements which are in Group 1A of the Periodic Table including
lithium, sodium and potassium.
Anode............................................. The electrode in a battery which releases electrons to an external circuit and
ions into the electrolyte.
Cathode........................................... The electrode in a battery which accepts electrons from the external circuit and
ions from the electrolyte.
Electrolyte....................................... The medium in a battery which provides the ion transport mechanism between
the anode and cathode.
Electron.......................................... An elementary particle having a negative charge.
Energy Density.................................... The total quantity of electrical energy in a battery, expressed as a function of
volume (e.g., Watt-hours per liter) or weight (e.g., Watt-hours per kilogram).
Ion............................................... An atom or a molecule that has acquired an electrical charge by the loss or gain
or electrons.
Laminated Battery................................. A battery composed of thin sheets of anode, electrolyte and cathode that have
been bonded together.
Lead Acid Battery................................. A rechargeable battery with electrodes made of lead compounds and with an
electrolyte containing acid.
Lithium........................................... A soft, low density alkali earth metal with high electrochemical potential.
Memory Effect..................................... The undesirable characteristic of NiCd batteries to lose energy storage capacity
on each recharge after a partial discharge.
Nickel Cadmium Battery (NiCd)..................... A rechargeable battery with electrodes made of nickel and cadmium
compounds.
Polymer........................................... A large molecule that is made by bonding together many smaller identical
molecules.
Primary Battery................................... A battery that is not rechargeable.
Rechargeable Battery.............................. A battery that, after discharge, may be restored close to the fully charged
state by the passage of electric current through the battery in the opposite
direction to that of discharge.
Self-Discharge Rate............................... The rate at which a charged battery loses energy while not in use.
Web............................................... A non-woven net composed of thin fibers that have been randomly placed in
all directions and bonded together to form an open mesh structure of
continuous length.
</TABLE>
6
<PAGE> 11
RISK FACTORS
THE SHARES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. AN INVESTMENT IN THE COMPANY IS SUITABLE ONLY FOR PERSONS WHO CAN
AFFORD TO SUSTAIN THE LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS,
PRIOR TO MAKING AN INVESTMENT DECISION, SHOULD CAREFULLY CONSIDER, ALONG WITH
OTHER MATTERS REFERRED TO HEREIN, THE FOLLOWING RISK FACTORS. THERE IS NO
ASSURANCE THAT THE PROPOSED BUSINESS OF THE COMPANY DESCRIBED HEREIN WILL BE
COMMERCIALLY VIABLE. IN ADDITION, ACTUAL RESULTS OF THE DEVELOPMENT ACTIVITIES,
TECHNOLOGICAL DEVELOPMENTS, MARKET AND COMPETITIVE CONDITIONS, RESULTS OF
OPERATIONS AND OTHER FACTORS MAY REQUIRE SIGNIFICANT MODIFICATIONS OF ALL OR
PART OF THE PROPOSED BUSINESS. INVESTORS SHOULD CAREFULLY CONSIDER THE
FOLLOWING:
COMPANY IS AT AN EARLY STAGE OF DEVELOPMENT. The Company currently
has no commercial products available for sale. Moreover, the Company does not
expect to generate sales in commercial quantities in the near term. Significant
additional development will be necessary in order to make the Company's
lithium-polymer rechargeable battery technically and commercially viable. No
assurance can be given that the Company will be able to complete such
development, engineering or commercialization successfully, or that the Company
will be able to develop products for commercial sale or that, if developed, they
can be produced in commercial quantities or at acceptable costs or be
successfully marketed. The likelihood of the Company's future success must be
considered in light of the risks, expenses, difficulties and delays frequently
encountered in connection with the operation and development of a relatively
early stage business and development activities generally. See "Business."
NEED FOR ADDITIONAL CAPITAL; UNCERTAINTY OF ADDITIONAL FUNDING. The
amount of capital the Company currently has will not be sufficient to finance
all stages necessary to commercialize the Company's rechargeable battery
technology. The Company has sufficient working capital 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 Prospectus. In order to finance its business,
the Company will need to obtain additional financing. In order to raise this
capital, the Company will be required to sell additional debt or equity
securities. The Company has thus far successfully raised approximately $7.1
million through the private sale of its securities including $2,400,000 from the
Consortium earlier in 1996. There can be no assurance that the incremental
capital needed to attain commercial viability of the Company's battery
technology will be obtained (which the Company currently estimates at
approximately $25 million). There can be no assurance that additional financing
will be available when needed or on terms acceptable to the Company. If
additional funds are raised by issuing equity securities, existing stockholders
will incur further dilution. If the Company is unable to raise sufficient
capital, it will be forced to curtail research
7
<PAGE> 12
and development expenditures which, in turn, will delay, and could prevent, the
completion of the commercialization process.
The Company is currently discussing future funding alternatives with
an unrelated third-party investor, with whom a letter of intent was executed on
July 5, 1996. This letter of intent contemplates a $5.0 million preferred stock
investment in the Company including certain registration, redemption and
conversion rights and a right of first refusal relative to the Company's private
equity financings. The letter of intent further contemplates closing on the
first $3.75 million not later than July 31, 1996. The completion of this
transaction is subject to several conditions including the investor's due
diligence and the negotiation of mutually satisfactory definitive agreements.
There is no assurance that this $5.0 million investment, or portion thereof,
will be consummated. See "Management's Discussion and Analysis -- Liquidity,
Capital Resources, and Financial Conditions".
HISTORY OF LOSSES. The Company has generated no revenues from
operations. LTC had existed as a capital equipment manufacturer under various
names since 1966. It had pursued research and development on lithium-polymer
rechargeable batteries since the early 1980s. LTC's equipment business
experienced financial difficulties in the early 1990s and all battery research
and development was suspended in early 1992. Until November 1993, the Company's
principal operating subsidiary was Hope Industries, Inc. ("Industries"); as part
of the reorganization plan of Industries under Chapter 11 of the U.S. Bankruptcy
Code, LTC transferred all of the outstanding stock of Industries to Stephen F.
Hope, the then principal stockholder of LTC. On December 10, 1993, the Company
had no personnel, and no assets other than the intellectual property (patents
and other documentation) associated with its battery technology. Since April
1994 the Company has assembled a new management team, including research
scientists, technicians and executives experienced in the battery industry. The
Company's activities have been solely research and development, and accordingly,
its results of operations consist solely of the operating loss attributable to
the cost of such research and development activities and general and
administrative expenses. For the period July 1989 through November 1993, the
Company had accumulated losses attributable to the research and development
activities associated with the battery technology of $1,801,000. For the period
November 1993 through March 1996, the Company had accumulated net losses of
$5,639,000, resulting from the Company's research and development expenses and
administrative expenses since November 1993. Therefore, the Company's aggregate
accumulated losses for the battery technology through March 1996 are $7,440,000.
The Company spent approximately $505,000 and $1,080,000 on research and
development activities during 1994 and 1995, respectively. The Company expects
to incur substantial additional losses because of the research and development
expenses necessary for the development of a commercially feasible rechargeable
lithium-polymer battery. See "Management's Discussion and Analysis or Plan of
Operations" and "Business".
8
<PAGE> 13
STATUS OF TECHNOLOGY. The Company's technologies, whether patented
or unpatented, are in the development stage. The technologies are undergoing
laboratory tests and studies and none have proved in actual operations to be
commercially viable. Further, even if the Company had favorable results from
such laboratory tests and studies, no assurance can be given that any such
technology will ultimately be commercially viable.
RISK OF NEW PRODUCTS AND TECHNOLOGIES; PRODUCT LIABILITY. The
proposed marketing of the Company's proposed products have inherent risks. The
proposed technologies have not operated over time and under various conditions
of actual use. Even if a proposed product is successfully developed,
manufactured and marketed, the occurrence of warranty liability and/or product
liability, or retraction of market acceptance due to failure of a proposed
product or failure of such product to meet expectations could prevent the
Company from ever becoming profitable. Failure of a proposed product to operate
as expected could lead to potential liability suits. The Company does not
currently have product liability insurance. The Company intends to obtain
appropriate product liability insurance at the point in time when the Company
places products in distributor or end-user applications. Development of new
technologies for manufacture is frequently subject to unforeseen expenses,
difficulties and complications and in some cases such development cannot be
accomplished.
TIME LAPSE FROM START OF OPERATIONS TO COMMERCIAL SALES. There will
be a period of time before any product resulting from the Company's development
efforts can be commercially marketed, sold and delivered. There can be no
assurances as to when, if ever, the proposed products can be commercially
marketed, sold and delivered. In addition, because of such development period
and other potential delays, other companies may develop and commence production
of similar products prior to the Company commencing commercial production.
OBSTACLES TO DEVELOPMENT OF COMMERCIAL PRODUCTS. The challenge
facing the Company is the commercialization of its battery product.
Commercialization is the process by which the Company will move from
laboratory-scale product prototypes and related manufacturing processes to the
construction of a manufacturing plant for full-scale market introduction.
The Company continues to work on improving product performance and
refining its manufacturing concepts. During 1995, the Company delivered test
cells and test data for certain potential customers and alliance partners to
demonstrate its laboratory results. The efforts of further developing the
technology to meet product application specific parameters will be ongoing. The
Company must now expand the testing protocols to include specific customer
parameters.
During March 1996, a benchtop continuous flow coating/laminating
line -- referred to 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
9
<PAGE> 14
construct a pilot manufacturing facility reflecting the cost, quality,
reliability, and performance required for the various target market
applications. It is anticipated that a full pilot manufacturing facility and
associated equipment will cost approximately $7.5 million to construct in the
1998 time frame. The pilot manufacturing facility, according to the Company's
current strategy, will be located within the Company's existing facility in
Plymouth Meeting, Pennsylvania. Ultimately, the pilot manufacturing facility
would be replaced with a larger scale second tier manufacturing facility.
Construction of the pilot manufacturing facility will require approximately 12
months. 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 stage at approximately the end of 1998 (which $25
million includes the aforementioned estimated $7.5 million cost of the pilot
manufacturing facility).
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.
COMPANY'S MANUFACTURING EXPERIENCE IS LIMITED; DEPENDENCE ON
SUPPLIERS. The Company currently has no capacity for, or experience in,
manufacturing lithium-polymer rechargeable batteries in commercial quantities.
In order for the Company to be successful in the commercial market, its products
must be manufactured to meet high quality standards in commercial quantities at
competitive prices. The development of such manufacturing technology and
processes will require extensive lead times and the commitment of significant
financial and engineering resources of the Company and others. There can be no
assurance that the Company will successfully develop this technology or these
processes or obtain access to these resources. Moreover, there can be no
assurance that the Company will be able to successfully implement the quality
control measures necessary for commercial manufacturing.
There is no assurance fully committed sources of supply can be
located or that they will provide sufficient supplies at a reasonable cost for
the proposed products. Even if an acceptable supplier can be found, termination
of the services of such supplier could result in interruptions of the ability to
manufacture the products until an alternative source can be secured. The Company
will thus be dependent on third parties in order to timely manufacture the
proposed products in sufficient quantities, at the required specifications, and
at low enough prices to meet the Company's proposed sales prices for its
proposed products.
MARKET ACCEPTANCE. To be successful, the Company's batteries must
gain broad market acceptance. There can be no assurance that such market
acceptance will be achieved or sustained. In addition, the Company's
lithium-polymer batteries can best be optimized when
10
<PAGE> 15
configured to the requirements of each application. To determine such
requirements, the Company will be dependent upon original equipment
manufacturers ("OEMS") in the portable consumer electronics and
telecommunications markets into whose products the Company's batteries will be
incorporated. No assurances can be given that the Company will receive adequate
assistance from OEMs to successfully commercialize its products. Furthermore, no
assurances can be given that the perceived safety risks associated with lithium
will not impede acceptance of the Company's batteries by OEMs or end users. See
"Business- Government Regulations, Safety, Environmental Compliance."
RELIANCE ON STRATEGIC ALLIANCES. Consummation of corporate alliances
is an important step in the Company's commercialization strategy. The Company's
strategy contemplates that these corporate partners will bring technology and
funding support through equity, licensing of the technology, and manufacturing
and distribution rights. Extensive discussions have been held with numerous
potential corporate partners from the United States, the Pacific Rim and Europe.
To date, the Company has only entered into one strategic alliance with a
Japanese Consortium pursuant to a Technology Development Agreement entered into
on March 29, 1996. Pursuant to the Technology Development Agreement, the
Consortium has been granted options on market specific, exclusive manufacturing
and distribution rights. The Company and the Consortium anticipate that the
Technology Development Agreement is the first step in a broad strategic alliance
for the research and development, manufacture, distribution, promotion and sales
of the Company's lithium-polymer batteries. It is the Company's and the
Consortium's strategy that the Consortium will assist the Company in the
development, production and distribution of the Company's lithium-polymer
battery product line with the Company taking advantage of the Consortium's
expertise and experience in the development of other high tech products,
familiarity with the geographic market for such products, experience in
developing new markets and existing relationships with key OEMs around the
world. The Consortium partners are committed to using their own marketing, sales
and product support capabilities to provide a global network for the
distribution of the Company's products. Although the Company has held its own
discussions with OEMs in the portable consumer electronics and
telecommunications markets about possible strategic relationships as a means to
accelerate introduction of its batteries into these markets, no assurance can be
given that the Company will be able to enter into any such alliances. Moreover,
there can be no assurance that any strategic alliance will achieve its goals.
The success of any strategic alliance is dependent upon the general business
condition of the partner, its commitment to the strategic alliance and the
skills and experience of its employees responsible for the strategic alliance.
COMPANY IS DEPENDENT ON PATENTS AND PROPRIETARY RIGHTS. The
Company's ability to compete effectively will depend on its ability to maintain
the proprietary nature of its technology and manufacturing processes through a
combination of patent and trade secret protection, non-disclosure agreements and
licensing agreements. The Company currently holds 19 U.S. patents and three
foreign patents covering key elements of its technology. In addition, the
Company has patent applications pending in the United States and in foreign
countries, including the European Community and Japan. The Company intends to
continue to file patent applications covering important features of its
technology. There can be no assurance, however,
11
<PAGE> 16
that patents will issue from any of these pending applications or, if patents
issue, that the claims allowed will be sufficiently broad to protect the
Company's technology, or that issued patents will not be challenged or
invalidated or that any of its issued patents will afford protection against a
competitor. Litigation, or participation in administrative proceedings, may be
necessary to protect the Company's patent position. Such litigation can be
costly and time consuming and there can be no assurance that the Company would
be successful if such litigation were instituted. The invalidation of patents
owned by or licensed to the Company could have a material adverse effect on the
Company. In addition, patent applications filed in foreign countries are subject
to laws, rules and procedures that differ from those of the United States. Thus,
there can be no assurance that foreign patent applications related to patents
issued in the United States will be granted. Furthermore, even if these patent
applications are granted, some foreign countries provide significantly less
patent protection than the United States. In the absence of patent protection,
and despite the Company's reliance upon its proprietary confidential
information, competitors of the Company may be able to use innovations similar
to those used by the Company to design and manufacture products directly
competitive with the Company's lithium-polymer rechargeable batteries. In
addition, no assurance can be given that patents issued to the Company will not
be infringed upon or designed around by others or that others will not obtain
patents that the Company will need to license or design around. Moreover, to the
extent any of the Company's products are covered by third party patents,
development and marketing of such products by the Company could require a
license under such patents.
Despite the Company's efforts to safeguard and maintain its
proprietary rights, there can be no assurance that the Company will be
successful in doing so. While the Company believes its patents to be unique from
those of its competitors, competition in lithium battery research and
development is intense, and there can be no assurance that the Company's
competitors will not independently develop or patent technologies that are
substantially equivalent or superior to the Company's technology. Moreover, if
the issues were to be placed before a court, the Company cannot be certain that
such a court would determine that the Company was the first creator of
inventions covered by its issued patents or pending patent applications or that
it was the first to file patent applications for such inventions. If the Company
is found to be infringing third party patents, there can be no assurance that it
will be able to obtain the required licenses from the holders of such patents on
acceptable terms, if at all. Failure of the Company to obtain necessary licenses
could result in delays in the introduction of the Company's lithium-polymer
rechargeable battery and in costly attempts to design around such patents, or
could foreclose the development, manufacture or sale of the Company's products.
The Company could also incur substantial costs in defending itself in patent
infringement suits brought by others and in prosecuting patent infringement
suits against infringers.
The Company also relies on trade secrets and proprietary know-how
that it seeks to protect, in part, through non-disclosure and confidentiality
agreements with its employees, consultants, strategic partners and potential
strategic partners. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or be independently
developed by competitors.
12
<PAGE> 17
GOVERNMENT REGULATIONS, SAFETY, ENVIRONMENTAL COMPLIANCE. The
Company's products incorporate lithium, which is known to cause explosions and
fires if not properly handled. Although the Company believes that its batteries
do not present safety risks, there can be no assurance that safety problems will
not develop in the future. The Company intends to incorporate safety policies in
its manufacturing processes designed to minimize safety risks, although there
can be no assurance that an accident in its facilities will not occur. Any
accident, whether occasioned by the use of a battery or the Company's
manufacturing operations, could result in significant production delays or
claims for damages resulting from injuries, which would adversely affect the
Company's operations and financial condition.
Prior to the commercial introduction of the Company's batteries into
a number of markets, the Company will seek to obtain approval of its products by
one or more of the organizations engaged in testing product safety, such as
Underwriters Laboratories. Such approvals could require significant time and
resources from the Company's technical staff and, if redesign were necessary,
result in a delay in the introduction of the Company's products.
Pursuant to the regulations of the United States Department of
Transportation ("DOT"), a permit is required to transport lithium across state
lines. The International Air Transport Association ("IATA") similarly regulates
the international shipment of lithium. Although the Company believes that DOT
has granted permits for, and IATA has allowed, the transport of rechargeable
lithium-based batteries to be shipped or used by the general public, there can
be no assurance that DOT or IATA will grant such a permit to the Company or that
changes in such regulations, or in their enforcement, will not impose costly
requirements or otherwise impede the transport of lithium. In addition, the DOT
and IATA approval processes will require significant time and resources from the
Company's technical staff and if redesign were necessary, could delay the
introduction of the Company's products.
Various regulatory agencies will have jurisdiction over the
operation of any manufacturing facilities established by the Company. Because of
the risks generally associated with the use of lithium, the Company expects
rigorous enforcement. No assurance can be given that the Company will not
encounter any difficulties in complying with applicable health and safety
regulations.
Federal, state and local regulations impose various environmental
controls on the storage, use and disposal of certain chemicals and metals used
in the manufacture of lithium-polymer batteries. Although the Company believes
its activities will conform to current environmental regulations, there can be
no assurances that changes in such regulations will not impose costly equipment
or other requirements. Any failure by the Company to adequately control the
discharge of hazardous wastes could also subject it to future liabilities.
COMPETITION; TECHNOLOGICAL OBSOLESCENCE. Competition in the battery
industry is intense with a large number of companies offering or seeking to
develop technology and products similar to those of the Company. The industry
consists of development stage companies and major domestic and international
companies, many of which have financial, technical, marketing, sales,
13
<PAGE> 18
manufacturing, distribution and other resources significantly greater than those
of the Company. There can be no assurance that the Company will be successful in
competing with such entities. Furthermore, there can be no assurance that
competitors will not succeed in developing products or technologies that would
render the Company's technology and products obsolete or in obtaining market
acceptance of products more rapidly than the Company. See
"Business--Competition."
DEPENDENCE ON KEY PERSONNEL. The Company's success will to a large
degree be dependent on its ability to retain the services of its key executives
and research scientists, in particular, on the services of Thomas R. Thomsen
(the Chief Executive Officer of the Company), David Cade (the President and
Chief Operating Officer), and Dr. George Ferment (the Executive Vice President
of Operations and Chief Technical Officer). Loss of the services of Mr.
Thomsen, Mr. Cade or Dr. Ferment or any key executives or research scientists
could have a material adverse effect upon the ability of the Company to
commercialize the rechargeable battery technology or to develop its business.
The Company currently has no "key-man" life insurance. A total of eight
employees are currently engaged full-time in research, development, and
engineering necessary for the commercialization of the battery technology. The
Company's success will, to a large degree, be dependent on its ability to
retain the services of its key executives and research scientists. The ability
of the Company to pursue effectively its business strategy will also depend
upon, among other factors, the successful recruitment and retention of
additional highly skilled and experienced managerial, marketing, engineering
and technical personnel. There can be no assurance that the Company will be
able to retain or recruit such personnel. See "Business-Employees" and
"Management--Executive Officers and Directors."
RISKS RELATING TO GROWTH AND EXPANSION. Rapid growth of the
Company's business may significantly strain the Company's management,
operational and technical resources. If the Company is successful in obtaining
rapid market penetration of its products, the Company will be required to
deliver large volumes of quality products to its customers on a timely basis at
a reasonable cost to those customers. The Company has no experience in
delivering large volumes of its rechargeable batteries or in manufacturing
commercial quantities of rechargeable batteries. There can be no assurance,
however, that the Company's business will achieve rapid growth or that its
efforts to expand its manufacturing and quality control activities will be
successful or that it will be able to satisfy commercial scale production
requirements on a timely and cost-effective basis. The Company will also be
required to continue to improve its operational, management and financial
systems and controls. Failure to manage growth effectively could have an adverse
effect on the business of the Company.
Certain customers for the Company's batteries may be outside the
United States, in various parts of the world. The Technology Development
Agreement the Company has recently entered into is with a Consortium of two
Japanese companies. Thus, the Company may be subject to the risk of foreign
operations including arbitrary governmental actions, currency fluctuation,
import/export controls, lack of a well-defined business or legal system,
arbitrary government actions, and instability of a political system.
14
<PAGE> 19
LACK OF DIVIDENDS. LTC has never paid a cash dividend on any class
of its capital stock and does not anticipate paying any dividends in the
foreseeable future. It is anticipated that future earnings, if any, will be
retained to finance the development and expansion of the Company's business. See
"Dividend Policy".
TRADING AND VOLATILITY OF COMMON STOCK. The outstanding shares of
the Common Stock of LTC are quoted only on the OTC Bulletin Board, and on July
1, 1996, the highest bid price was $2.25 per share and the highest ask price was
$2.4375 per share. There can be no assurance that the existing market for the
Company's Common Stock will be maintained or that the holders of Common Stock
will be able to sell the Common Stock should they so desire.
The market price of the Common Stock has fluctuated significantly
since January 1, 1994 (see "Market Prices") and may continue to be highly
volatile. Factors such as delays by the Company in achieving development goals,
inability of the Company to commercialize or manufacture its products,
fluctuation in the Company's operating results, changes in earnings estimates by
analysts, announcements of technological innovations or new products by the
Company or its competitors, perceived changes in the markets for various OEM
applications incorporating the Company's products, the announcement or
termination of relationships with strategic alliance partners or OEMs, and
general market conditions may cause significant fluctuations in the market price
of the Common Stock. The market prices of the stock of many high technology
companies have fluctuated substantially, often unrelated to the operating or
research and development performance of the specific companies. Such market
fluctuations could adversely affect the market price for the Company's Common
Stock.
CONTROL BY EXISTING SHAREHOLDERS. The existing officers and
directors of the Company and related parties currently control approximately
33.15% of the outstanding Common Stock (including shares that may be acquired
upon the exercise of options that are exercisable or will become exercisable
within 60 days). As a result, they will be able to exert significant influence
on the Company. In addition, Mr. Donald C. Taylor and entities affiliated with
him own beneficially approximately 8.69% of the outstanding Common Stock
(including shares that may be obtained upon the exercise of Warrants that are
exercisable or could become exercisable within 60 days). As a result, Mr. Taylor
will be able to exert significant influence on the Company. See "Security
Ownership of Certain Beneficial Owners and Management."
EXERCISE OF OUTSTANDING OPTIONS AND WARRANTS; ADDITIONAL DILUTION.
At July 1, 1996, there were outstanding stock options to purchase an aggregate
of 1,744,577 shares of Common Stock at exercise prices ranging from $0.501 to
$2.56 per share. Of this amount, options to purchase 672,485 shares were
exercisable as of such date. Additionally, at July 1, 1996, there were
outstanding warrants to purchase 2,307,858 shares of Common Stock at exercise
prices ranging from $0.50 to $2.56 per share. Of this amount, warrants to
purchase 1,127,858 shares are immediately exercisable. To the extent that the
outstanding stock options and warrants are exercised, substantial additional
dilution to the interests of the Company's stockholders will occur. Moreover,
the terms upon which the Company will be able to obtain additional equity
capital may be adversely affected since the holders of such outstanding
securities can be expected to
15
<PAGE> 20
exercise them at a time when the Company would, in all likelihood, be able to
obtain any needed capital on terms more favorable to the Company than those
provided in the outstanding options. See "Description of Securities". As noted
above, the Company plans to proceed in raising additional capital in 1996 and
1997 through private placement of its equity securities and possible corporate
alliances, either or both of which are likely to result in further dilution to
the Company's existing stockholders. See "Management's Discussion and Analysis
or Plan of Operations--Plan of Operation for the Company."
SHARES ELIGIBLE FOR FUTURE SALES. Of the 15,784,438 shares of Common
Stock presently outstanding, approximately 11,370,778 shares are "restricted
securities" as defined by Rule 144. The restricted securities and the shares
which may be sold by the Selling Shareholders underlying warrants or options may
be resold in the future only pursuant to registration under the Securities Act
of 1933 (the "Act"), an exemption from the registration provisions of the Act,
or pursuant to Rule 144. The sale of such shares under Rule 144, pursuant to
this Prospectus or otherwise, may have a depressive effect on the market price
of the Common Stock, and such sales, if substantial, might also adversely affect
the Company's ability to raise additional capital.
After the date of this Prospectus, the Company intends to register
(a) approximately 236,770 shares of Common Stock in connection with a
contemplated offering to certain employees (subject to the execution of lock-up
agreements to be negotiated between the Company and such individuals) and (b)
1,350,014 shares of Common Stock underlying director and employee options that
are reserved for issuance pursuant to the Company's Directors Stock Option Plan
and the 1994 Stock Incentive Plan. See "Executive Compensation".
POTENTIAL ANTI-TAKEOVER EFFECT OF AUTHORIZED PREFERRED STOCK. The
Company is authorized to issue 100,000 shares of $0.01 par value preferred stock
with the rights, preferences, privileges and restrictions thereof to be
determined by the Board of Directors of the Company. Preferred Stock can thus be
issued without the vote of the holders of Common Stock. Rights could be granted
to the holders of preferred stock which could reduce the attractiveness of the
Company as a potential takeover target, make the removal of management more
difficult, or adversely impact the rights of holders of Common Stock. No
preferred stock is currently outstanding, and the Company has no present plans
for the issuance thereof of any shares of preferred stock.
16
<PAGE> 21
USE OF PROCEEDS
Because the Shares offered hereby are being sold by the Selling
Shareholders, the Company will not receive any proceeds from the sale of the
Shares. The Company will receive proceeds from the issuance of the Underlying
Shares upon the exercise of the Warrants or Options held by certain Selling
Shareholders. In the event that all of the Warrants and Options constituting the
Underlying Shares are exercised, the gross proceeds to be received by the
Company upon such exercise will be approximately $3,176,810. The Company will
use the proceeds from the issuance and sale of the Underlying Shares, if any,
for research and development activities of the Company, to provide working
capital, and for general corporate purposes.
SELLING SHAREHOLDERS
The following table sets forth as of June 28, 1996, except as
otherwise indicated in the notes thereto, the following information regarding
each Selling Shareholder who is offering Shares pursuant to this Prospectus: the
name of each Selling Shareholder; any position, office, or other material
relationship which the Selling Shareholder has had within the past three years
with the Company or any of its predecessors or affiliates; and the number of
shares of Common Stock owned by each Selling Shareholder before the offering
pursuant to this Prospectus, the amount of shares to be offered for each Selling
Shareholder's account, and the amount and percentage of the Common Stock to be
owned by each Selling Shareholder after the offering pursuant to this Prospectus
is complete.
<TABLE>
<CAPTION>
Total Number of Shares Shares to be Owned
to be Offered for Selling Upon Completion of
Name of Selling Shares Owned Prior Shareholder's Offering(2),(3)
Shareholder to Offering(1) Account
- ----------- ----------- ------- --------
Percentage
Number of Class
------ --------
<S> <C> <C> <C> <C>
Group III Capital, Inc. (4) 1,500,000 (5) 1,500,000 0 *
Mitsubishi Materials 394,773 394,773 0 *
Corporation
Mitsui & Co., Ltd. 236,864 236,864 0 *
</TABLE>
17
<PAGE> 22
<TABLE>
<CAPTION>
Total Number of Shares Shares to be Owned
to be Offered for Selling Upon Completion of
Name of Selling Shares Owned Prior Shareholder's Offering(2),(3)
Shareholder to Offering(1) Account
- ----------- ----------- ------- --------
Percentage
Number of Class
------ --------
<S> <C> <C> <C> <C>
PCGI Advisory Services, Inc. 740,087 740,087 0 *
Edelson Technology Partners 1,568,518 1,568,518 0 *
III L.P. (6)
Alan R. Cohen 67,325 67,325 0 *
Gerald M. Labush (7) 268,319 (8) 264,986 3,333 *
D. Stephen Rosenbloom 35,063 35,063 0 *
Jerome M. St. John 25,658 25,658 0 *
Ezra Grayman 17,325 17,325 0 *
Noble Blackman 86,622 86,622 0 *
Donald B. Campbell 22,190 22,190 0 *
William D. Walker (9) 180,977 (10) 155,976 25,001 *
Ralph D. Ketchum (11) 93,289 (12) 86,622 6,667 *
Joseph E. Kuhar, DDS 43,311 43,311 0 *
William Evans 28,152 28,152 0 *
Kevin McNamara 32,483 32,483 0 *
John L. Bordo 5,198 5,198 0 *
Franklyn R. Basile 8,531 8,531 0 *
Warren Vogel 4,332 4,332 0 *
John Valcarcel 3,465 3,465 0 *
George H. McGovern, III 86,622 86,622 0 *
Thomas L. Elliott 34,649 34,649 0 *
</TABLE>
18
<PAGE> 23
<TABLE>
<CAPTION>
Total Number of Shares Shares to be Owned
to be Offered for Selling Upon Completion of
Name of Selling Shares Owned Prior Shareholder's Offering(2),(3)
Shareholder to Offering(1) Account
- ----------- ----------- ------- --------
Percentage
Number of Class
------ --------
<S> <C> <C> <C> <C>
Thomas M. Galvin 177,149 177,149 0 *
William Foley 67,649 67,649 0 *
Thomas F. Flynn 43,311 43,311 0 *
Robert A. and Kathleen A. 8,663 8,663 0 *
Johannesen
Christopher J. and Juliann 316,758 316,758 0 *
Lange
Richard J. and Eileen K. Lang 8,663 8,663 0 *
Theodore and Katherine Volz 8,663 8,663 0 *
James Elsner (13) 386,645 (14) 386,645 (14) 0 *
Herring Tractor & Truck Co. 283,422 283,422 0 *
Dr. Reed Moskowitz 436,502 436,502 0 *
James High 42,514 42,514 0 *
David Hughes (15) 335,179 (16) 331,846 3,333 *
John D. McKey, Jr. and 562,534 (18) 559,201 3,333 *
Candace McKey (17)
Deryl O'Briant 170,054 170,054 0 *
Peter G. Seiden 120,497 120,497 0 *
James A. Fisher, Jr. and 153,628 153,628 0 *
Margaret M. Fisher
Anthony B. Fisher (19) 420,082 (20) 420,082 (20) 0 *
</TABLE>
19
<PAGE> 24
<TABLE>
<CAPTION>
Total Number of Shares Shares to be Owned
to be Offered for Selling Upon Completion of
Name of Selling Shares Owned Prior Shareholder's Offering(2),(3)
Shareholder to Offering(1) Account
- ----------- ----------- ------- --------
Percentage
Number of Class
------ --------
<S> <C> <C> <C> <C>
Paramount Capital Group, Inc. 126,288 126,288 0 *
Bruce and Kathryn Evans 597,826 597,826 0 *
Robert J. Mailey 90,775 90,775 0 *
Guy Castranova and Charles 56,175 56,175 0 *
Crow
Susan C. Kreusser 30,875 30,875 0 *
Francis and Marion McGowen 64,140 64,140 0 *
Paul L. Weidner and/or Upper 416,390 373,895 42,495 *
Bucks Orthopedic Profit
Sharing Plan FBO
Paul L. Weidner
Irrevocable Trust of James A. 177,470 177,470 0 *
Fisher and Margaret M. Fisher
Robert Pfeffer 600,000 (21) 600,000 0 *
Frank E. Barnes, III, IRA 12,348 12,348 0 *
Robert J. Ciskanik 30,408 30,408 0 *
Thomas M. Conlin 5,015 5,015 0 *
Lawrence J. Kent 49,428 47,619 1,809 *
Maurice D. Kent 24,609 24,609 0 *
Jay Marcus 10,747 10,747 0 *
Fran McGowen C/F 4,902 4,902 0 *
Matthew R. McGowen
UGMAPA
Fran McGowen C/F 4,902 4,902 0 *
Daniel P. McGowen
UGMAPA
</TABLE>
20
<PAGE> 25
<TABLE>
<CAPTION>
Total Number of Shares Shares to be Owned
to be Offered for Selling Upon Completion of
Name of Selling Shares Owned Prior Shareholder's Offering(2),(3)
Shareholder to Offering(1) Account
- ----------- ----------- ------- --------
Percentage
Number of Class
------ --------
<S> <C> <C> <C> <C>
Fran I. McGowen C/F 4,902 4,902 0 *
Molly M. McGowen
UGMAPA
Raymond H. Welsh 61,983 61,983 0 *
Donald S. White 9,663 9,663 0 *
George and Patricia Wilson 24,929 23,810 1,119 *
Coastal Leasing & Investment, 21,833 21,833 0 *
Inc.
Ralph Geiger 15,044 15,044 0 *
Trinity American Corp. 71,145 71,145 0 *
Lynn Dixon 57,145 53,645 3,500 *
Harris Hester 14,167 14,167 0 *
John H. Jacobs 20,000 20,000 0 *
Group III Capital Ventures, 1,030,000 1,030,000 0 *
Inc. (22)
Valentina D. Mancuso 10,000 10,000 0 *
Donald C. Taylor (23) 50,000 50,000 0 *
Nanele Services, Inc. 150,000 (24) 150,000 0 *
Delaware Charter Guarantee 109,067 109,067 0 *
& Trust f/b/o Bruce Evans
</TABLE>
21
<PAGE> 26
<TABLE>
<CAPTION>
Total Number of Shares Shares to be Owned
to be Offered for Selling Upon Completion of
Name of Selling Shares Owned Prior Shareholder's Offering(2),(3)
Shareholder to Offering(1) Account
- ----------- ----------- ------- --------
Percentage
Number of Class
------ --------
<S> <C> <C> <C> <C>
Bruce L. Evans c/f Jacqueline 16,667 16,667 0 *
Evans, UGMA/PA
James J. Cahill 8,333 8,333 0 *
David C. Freinberg 16,666 16,666 0 *
Patricia A. Giordano 13,833 13,833 0 *
Michael S. Jacobs 4,233 4,233 0 *
J. Joseph McClatchy 8,333 8,333 0 *
Kevin T. McFeeley 4,800 4,800 0 *
Robert E. and Josephine 22,833 22,833 0 *
McFeeley
Joan Seiden 5,000 5,000 0 *
Judith Levi 5,000 5,000 0 *
David J. Ambrose 8,333 8,333 0 *
Boenning & Scattergood, Inc. 4,167 4,167 0 *
Salary Deferral (401(k)) Trust
f/b/o David Treat DeWitt,
Trustee
Merlin P. Callender 4,167 4,167 0 *
Steven J. Campbell 20,833 20,833 0 *
David T. DeWitt 4,167 4,167 0 *
Catherine M. Evans 12,500 12,500 0 *
Mr. and Mrs. Charles B. 3,333 3,333 0 *
Herman, Jr.
</TABLE>
22
<PAGE> 27
<TABLE>
<CAPTION>
Total Number of Shares Shares to be Owned
to be Offered for Selling Upon Completion of
Name of Selling Shares Owned Prior Shareholder's Offering(2),(3)
Shareholder to Offering(1) Account
- ----------- ----------- ------- --------
Percentage
Number of Class
------ --------
<S> <C> <C> <C> <C>
Mark Herman 3,333 3,333 0 *
Norma M. Herman 3,333 3,333 0 *
Timothy S. Herman 3,333 3,333 0 *
Heather Hay and James J. 20,833 20,833 0 *
Murren
Robert Johannesen 8,333 8,333 0 *
Mitchell Kupfer 4,167 4,167 0 *
Christopher J. Lange 41,667 41,667 0 *
James McLaughlin 1,667 1,667 0 *
Noubar G. Megerian 8,333 8,333 0 *
Thomas A. Ponticelli 4,167 4,167 0 *
Katherine F. O'Donovan and 8,333 8,333 0 *
Timothy F. O'Donovan
Kevin J. and Marcia H. 3,333 3,333 0 *
Rehnberg
Mark Sklar 16,667 16,667 0 *
Donald T. Wargo and Susan 20,833 20,833 0 *
T. Wargo
Joseph A. Williamson 8,333 8,333 0 *
John Wilson 16,667 16,667 0 *
William Cothery 10,013 10,013 0 *
</TABLE>
23
<PAGE> 28
<TABLE>
<CAPTION>
Total Number of Shares Shares to be Owned
to be Offered for Selling Upon Completion of
Name of Selling Shares Owned Prior Shareholder's Offering(2),(3)
Shareholder to Offering(1) Account
- ----------- ----------- ------- --------
Percentage
Number of Class
------ --------
<S> <C> <C> <C> <C>
Anne Hanson 5,307 5,307 0 *
Charles Herman 10,613 10,613 0 *
Sea Island Clothiers Profit 6,133 6,133 0 *
Sharing Plan
Stephen Hope (25) 1,957,946 (26) 78,167 1,879,779 10.2%
Gotlin & Jaffe 10,833 10,833 0 *
Ernest Jacquet 40,000 40,000 0 *
Prudential Securities, c/f 53,013 53,013 0 *
Kathryn Evans
Georgia Pine Clothiers 6,347 6,347 0 *
Jacqueline Hayes 10,613 10,613 0 *
G. David Rosenblum 31,787 31,787 0 *
John Showers 16,933 16,933 0 *
Prudential Securities, c/f 10,613 10,613 0 *
Warren Vogel, IRA
James Finegan, Jr. 8,333 8,333 0 *
</TABLE>
Footnotes:
(1) Includes shares of Common Stock underlying warrants or stock options
exercisable as of June 28, 1996, or exercisable within 60 days after
June 28, 1996, unless otherwise indicated.
(2) Asterisk indicates less than 1%.
(3) Assumes the sale of all Shares by each Selling Shareholder. Based on
15,784,438 shares of Common Stock issued and outstanding on June 28,
1996 plus 2,694,503 shares to be issued upon the exercise of all the
Warrants and Options to the maximum extent.
(4) Group III Capital, Inc. is the holder of a warrant to purchase
1,500,000 Shares without regard to shares of Common Stock owned, or
which may be acquired, by Donald C. Taylor and/or Group III Capital
Ventures, Inc. Donald C. Taylor, a consultant and a former director
of the Company from August, 1995 to May, 1996, is the President and
a director of Group III Capital, Inc. and the President and a
director of Group III Capital Ventures, Inc.
24
<PAGE> 29
(5) Includes 1,500,000 Shares issuable upon exercise of outstanding
Warrants. Of these Warrants, 320,000 are vested and the remaining
1,180,000 vest on May 1, 1997, provided that such 1,180,000 Warrants
will immediately vest upon the Company's completion of a financing
or a joint venture agreement resulting in gross proceeds of $5
million to the Company.
(6) Mr. Edelson is a General Partner of Edelson Technology Partners
III, L.P. Mr. Edelson is a director of the Company.
(7) Mr. Labush is a director of the Company.
(8) Includes 3,333 shares issuable upon exercise of outstanding options
which vest on August 8, 1996.
(9) Mr. Walker is the Company's Treasurer and Chief Financial Officer.
(10) Includes 25,001 shares issuable upon exercise of outstanding stock
options.
(11) Mr. Ketchum is a director of the Company.
(12) Includes 6,667 shares issuable upon exercise of outstanding stock
options.
(13) Mr. Elsner is a former Director, President and Chief Executive
Officer of the Company.
(14) Includes 386,645 shares issuable upon exercise of outstanding stock
options.
(15) Mr. Hughes is a director of the Company.
(16) Includes 3,333 shares issuable upon exercise of outstanding stock
options which vest on August 8, 1996.
(17) Mr. McKey is a director of the Company.
(18) Includes 3,333 shares issuable upon exercise of outstanding stock
options which vest on August 8, 1996.
(19) Mr. Fisher is a former Director of the Company.
(20) Includes 57,858 shares issuable upon exercise of a warrant.
(21) Includes 600,000 shares issuable upon exercise of outstanding
warrants.
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<PAGE> 30
(22) Donald C. Taylor, a former director of the Company, is the President
and a director of Group III Capital Ventures, Inc.
(23) Excludes the securities owned by Group III Capital, Inc. and Group
III Capital Ventures, Inc. See notes 4 and 22 for details. Mr.
Taylor is a former director of the Company and is currently a
consultant to the Company.
(24) Includes 150,000 shares issuable upon exercise of outstanding
warrants.
(25) Mr. Hope is a director of the Company.
(26) Includes 193,334 shares of Common Stock held by Hope Lithographic
Enterprises, Inc. The Estate of Henry Hope owns 51%, and Stephen F.
Hope owns 36.5%, of the outstanding capital stock of Hope
Lithographic Enterprises, Inc., and therefore both may be deemed to
be the beneficial owners of the Company's stock held by that entity.
Includes 1,347,001 shares of Common Stock owned by the Estate of
Henry Hope.
Information set forth in the foregoing table regarding the
securities owned by each Selling Shareholder is provided to the best knowledge
of the Company based on information furnished to the Company by the respective
Selling Shareholder and/or available to the Company through its stock transfer
records.
The Company has entered into lock-up agreements with certain Selling
Shareholders with respect to certain of the Shares offered for sale in this
prospectus. Approximately, three million Shares will be subject to such lock-up
until March 31, 1997 (provided that 825,000 Warrant Shares would be released
from such lock-up prior to March 31, 1997 immediately upon the Company's
completion of a $5.0 million financing); approximately two million Shares will
be subject to such lock-up until June 30, 1997; and approximately three million
Shares will be subject to such lock-up until September 30, 1997. Approximately 6
million Shares will not be subject to lock-up provisions and will be freely
tradeable upon the effective date of this prospectus. The Company reserves the
right in its sole discretion to waive any of the lock-up provisions.
PLAN OF DISTRIBUTION
The securities offered hereby may be sold by the Selling
Shareholders or by pledgees, donees, transferees or other successors-in-interest
(including sales after exercise of warrants). Such sales may be made in the
over-the-counter market, in privately negotiated transactions, or otherwise, at
prices and at terms then prevailing, at prices related to the then current
market prices or at negotiated prices. The shares may be sold by one or more of
the following methods: (a) a block trade in which the broker or dealer so
engaged will attempt to sell the shares as agent but may position and resell a
portion of the block as principal in order to consummate the transaction; (b) a
purchase by a broker or dealer as principal, and the resale by such broker or
dealer for its account pursuant to this Prospectus, including resale to another
broker or dealer; or (c) ordinary brokerage transactions and transactions in
which the broker solicits purchasers. In effecting sales, brokers or dealers
engaged by a Selling Shareholder may arrange for other brokers or dealers to
participate. Any such brokers or dealers will receive commissions or discounts
from a Selling Stockholder in amounts to be negotiated immediately prior to the
sale. Such brokers or dealers and any other participating brokers or dealers may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
as amended. Any gain realized by such a broker or dealer on the sale of shares
which it purchases as a principal may be deemed to be compensation to the broker
or dealer in addition to any commission paid to the broker by a Selling
Shareholder.
Some of the securities covered by this Prospectus may be sold under
Rule 144 instead of under this Prospectus. The Company will not receive any
portion of the proceeds of the securities sold by the Selling Shareholders, but
will receive amounts upon exercise of warrants and/or options, which funds will
be used for working capital. There is no assurance that the Selling Shareholders
will sell any or all of the securities offered hereby.
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<PAGE> 31
The Selling Shareholders have been advised that during the time each
is engaged in distribution of the securities covered by this Prospectus, each
must comply with, among other things, Rule 10b-6 under the Securities Exchange
Act of 1934, as amended, and pursuant thereto: (i) shall not engage in any
stabilization activity in connection with the Company's securities; (ii) shall
furnish each broker through which securities covered by this Prospectus may be
offered the number of copies of this Prospectus which are required by each
broker; and (iii) shall not bid for or purchase any securities of the Company or
attempt to induce any person to purchase any of the Company's securities other
than as permitted under the Securities Exchange Act of 1934, as amended.
SELECTED FINANCIAL INFORMATION
The following table contains selected financial information derived
from the financial statements set forth elsewhere in this Prospectus, and should
be read in conjunction with such financial statements and notes thereto.
The unaudited financial information of the Company as of March 31,
1996 and for the three months then ended have been prepared on the same basis as
the audited financial statements of the Company and, in the opinion of
management, include all adjustments necessary to present fairly the financial
position and the results of operations of the Company.
SUMMARY STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
Three Months Ended Year Ended December 31
-------------------------- -----------------------
March 31, March 31,
1996 1995 1995 1994
--------- --------- -------- ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Costs and expenses $967,000 $542,000 $2,472,000 $2,133,000
Net Loss $(967,000) $(542,000) $(2,472,000) $(2,133,000)
Net Loss Per Common $(.12) $(.08) $(.36) $(.36)
Share
</TABLE>
27
<PAGE> 32
SUMMARY BALANCE SHEET DATA
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
Working capital (deficit) $ 882,000 $(2,386,000)
Total assets $2,998,000 $1,165,000
Long-term debt - 0 - $300,000
Total liabilities $1,349,000 $2,957,000
Stockholders' equity $1,649,000 $(1,792,000)
(deficiency)
</TABLE>
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<PAGE> 33
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
Prospectus.
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 nor during the
twelve months commencing on the date of this Prospectus. The Company believes
that its battery technology, which is currently in the pre-prototype
development phase, is capable of providing four to six 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, and constructing a manufacturing
plant. The Company's commercialization focus is on the rapidly growing
portable electronics market segment (notebook and palmtop computers and
wireless communications 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 MARCH 31, 1996. At March 31, 1996, the Company had cash of
$2,223,000, prepaid and other current assets of $8,000, fixed assets of
$700,000 and other assets of $67,000. The Company's total liabilities were
$1,349,000, 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 working
capital of $882,000 on March 31, 1996.
The Company's stockholder's equity was $1,649,000 at March 31, 1996,
after giving effect to an accumulated deficit of $(14,305,000) which consisted
of $(7,440,000) accumulated deficit during the development stage from July 21,
1989 through March 31, 1996 and $(6,865,000)
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<PAGE> 34
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 Prospectus. 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. 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 Prospectus, 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.
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, the Consortium purchased 631,637 shares of the Company's
Common Stock for $2.4 million,
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<PAGE> 35
prior to payment of placement costs of approximately $212,000, which funds have
been invested in treasury bills. The Consortium currently holds a 4% equity
position in the Company.
AS OF DECEMBER 31, 1995. At December 31, 1995, the Company had cash
of $217,000, prepaid and other current assets of $54,000, fixed assets of
$653,000 and other assets of $241,000. The Company's total liabilities were
$2,957,000, consisting of $1,373,000 in accounts payable and accrued expenses
and $300,000 due to the holders of the 7% convertible promissory notes and
$1,284,000 due to holders of the 12% convertible term notes. The Company had a
working capital deficiency of $2,386,000 at December 31, 1995.
The Company's stockholder's deficiency was $(1,792,000) at December
31, 1995, after giving effect to an accumulated deficit of $(13,338,000) which
consisted of $(6,473,000) accumulated deficit during the development stage from
July 21, 1989 through December 31, 1995 and $(6,865,000) accumulated deficit
from prior periods.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994. The Company had no revenues
for the years ended December 31, 1995 and 1994. Engineering, research and
development expenses were $1,080,000 for the year ended December 31, 1995
compared to $505,000 in 1994. The increase was primarily the result of (i)
increased salary costs as the Company increased its research and development
staff from one employee to eight employees and accelerated its
commercialization efforts and (ii) increased depreciation expenses of $157,000
reflecting the late 1994 purchase of equipment and instrumentation as the
Company outfitted its modern research and development facility.
General and administrative expenses were $1,307,000 for the year ended
December 31, 1995 compared to $1,617,000 in 1994. The decrease of $310,000 was
due to decreased patent costs, discontinuance of a director's consulting
agreement, termination of certain investment banking services, (See "Legal
Proceedings" and "Certain Relationships and Related Transactions -- Consulting
Agreements"), a decrease in costs associated with regulatory compliance,
increased amortization relating to the 1995 sale of 12% Convertible Promissory
Notes, decreased amortization relating to the 1994 exchange of convertible debt
for Series B convertible preferred stock, increased amortization relating to
the 1995 conversion of 7% convertible promissory notes into 577,961 shares of
Common Stock, increased rent, increased insurance costs, decreased employment
costs and a decrease in promotional costs.
Interest expense increased to $85,000 for the year ended December 31,
1995 compared to $11,000 in 1994. The increase in interest expense for the
comparable periods is primarily attributable to the Company's 7% convertible
promissory notes and 12% convertible term notes.
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<PAGE> 36
THREE MONTHS ENDED MARCH 31, 1996 AND 1995. The Company had no
revenues for the three months ended March 31, 1996 and 1995. Engineering,
research and development expenses were $256,000 for the three months ended
March 31, 1996 compared to $285,000 in 1995. The decrease was the result of
decreased salary costs of one individual who left the Company's employ and was
not replaced.
General and administrative expenses were $655,000 for the three months
ended march 31, 1996 compared to $238,000 in 1995. The increase of $417,000
was due to increased legal costs associated with the termination of certain
investment banking services, increased amortization of debt issue costs of
$220,000 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, decreased patent costs and decreased
employment costs.
Interest expense increased to $56,000 for the three months ended March
31, 1996 compared to $19,000 in 1995. The increase in interest expense for the
comparable periods is primarily attributable to the Company's 12% convertible
term notes.
Two newly issued accounting standards were adopted in the first
quarter of 1996 and are not expected to have a material effect on financial
position or results of operations of the Company. A summary of these standards
follows.
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.
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, palmtop computers and
wireless communications 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
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<PAGE> 37
Company's on-going research and development phase or to undertake the design
and construction of the Demonstration Manufacturing Facility 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.
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 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 hand made battery packs for
OEMS in 1998;
(v) installation of a pilot manufacturing line in early 1998;
(vi) expansion of the pilot manufacturing line in late 1998 by
automating the backend 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") --
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<PAGE> 38
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 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 Prospectus, 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 Prospectus. 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
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<PAGE> 39
commercialization plan milestones through the last quarter of 1996 based on the
Company's current strategies and subject to the uncertainties discussed in this
Prospectus.
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, although the Company has no
commitments for new capital investment as of the date of the Prospectus other
than the letter of intent with an unrelated third-party investor as discussed
herein. See "Business -- Overview and Recent Developments" for details. The
Company is currently seeking a $5.0 million private placement to cover planned
equipment expenses as well as certain other operating expenses and to retire
short term debt. The Company will also seek 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, including such $5.0 million private placement, will be available to
the Company on a timely basis or on acceptable terms.
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<PAGE> 40
BUSINESS
OVERVIEW AND RECENT DEVELOPMENTS
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 believes that its battery technology, which
is currently in the pre-prototype development phase, is capable of providing
four to six 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, and
constructing a manufacturing plant. The Company's commercialization focus is
on the rapidly growing portable electronics market segment (notebook and
palmtop computers and wireless communication devices).
Until 1993, the Company had been named Hope Technologies, Inc. (HTI),
consisting of two subsidiaries: Hope Industries, Inc. (Industries) and
Lithion. Industries was the operating arm of the Company and it manufactured
professional and industrial photoprocessing and X-ray equipment. Lithion was
engaged in rechargeable battery research and development. 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 the Company products on a worldwide basis. The Company currently
has one subsidiary, Lithion Corporation, which is wholly-owned by the Company.
During the last two years, the Company has recruited a new management
team and a core technical staff with commercialization and battery technology
expertise. A modern research facility has been leased and research and product
development is continuing. 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 of Operations and
Chief Technical Officer.
On March 29, 1996, the Company entered into a Technology Development
Agreement and Stock Purchase Agreement with a Japanese consortium consisting of
Mitsubishi Materials Corporation and Mitsui & Co., Ltd. (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 investor will join the Consortium or do so on terms favorable and
acceptable to the Company. Under the Technology Development 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
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<PAGE> 41
performance requirements for portable electronics applications. The principal
objective is to take the patented technology to the manufacturing scale-up
stage. The Technology Development Agreement gave the Consortium exclusive
option rights to license the Company's technology for manufacturing in the far
East and Oceania, and co-exclusive option rights along with the Company for
manufacturing in Europe and the Americas, where the parties' strategy includes
establishing joint ventures for manufacturing operations. The Technology
Development Agreement also gives the Consortium an exclusive option for
worldwide distribution and sales of the Company's products. For these
considerations, the Consortium purchased 631,637 shares of the Company's Common
Stock for $2,400,000, representing a 4% equity position in the Company.
The Company's operating results consist solely of operating losses
attributable to research and development and general and administrative
expenses. The Company has generated no revenues from operations.
On July 5, 1996 the Company entered into a letter of intent with an
unrelated third-party investor. This letter of intent contemplates a
$5.0 million preferred stock investment in the Company including certain
registration, redemption and conversion rights and a right of first refusal
relative to the Company's private equity financings. The letter of intent
further contemplates closing on the first $3.75 million not later than July 31,
1996. The completion of this transaction is subject to several conditions
including the investor's due diligence and the negotiation of mutually
satisfactory definitive agreements. There is no assurance that this $5.0
million investment, or portion thereof, will be consummated.
The Company is a corporation organized under the laws of the State of
Delaware on December 28, 1995. The Company's predecessor -- Lithium Technology
Corporation (a Nevada corporation) -- merged with and into the Company in a
reincorporation merger that became effective on February 8, 1996. In
connection with the reincorporation on February 8, 1996, the Company also
implemented a recapitalization of its outstanding Common Stock and convertible
preferred stock, a reverse stock split, the ratification of an amendment to the
Company's 1994 Stock Incentive Plan, and ratification of a Directors Stock
Option Plan.
MARKET SUMMARY
The worldwide battery market consists of a variety of segments, such
as household "disposable" batteries, automotive batteries, and high performance
rechargeable batteries for portable electronic devices. Virtually all segments
are growing and experiencing a technological revolution with the important
driving forces being technology/portability and environmental issues. In
particular, miniaturization of electronic devices has fueled explosive market
growth in mobile electronic products, including notebook and palmtop computers,
wireless communications handsets, camcorders and medical applications. Battery
power, size and shape shortcomings have been the limiting factors in product
engineering and design. Improved batteries are necessary to increase operating
times and mobility. There is also increasing demand for environmentally
friendly batteries. Lead-acid, alkaline and nickel cadmium (NiCd) batteries,
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<PAGE> 42
unlike the Company's battery, contain metals such as lead, mercury and cadmium,
which have become environmental and public health concerns.
This growth has created a worldwide search for advanced rechargeable
battery systems with much longer run times with light weight and low cost, and
which are environmentally friendly. The Company believes that its
lithium-polymer battery technology may be capable of filling these demands.
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 Manufacturing
Facility discussed below and other manufacturing-related facilities.
THE BATTERY TECHNOLOGY
The Company's lithium-polymer rechargeable battery design is based
upon an integrated approach employing a patented and proprietary lithium alloy
anode, a flexible solid polymer composite electrolyte, and a composite oxide
cathode. One advantage of this approach is the use of a solid polymer
electrolyte rather than the traditional liquid electrolyte technology. Unlike
the liquid electrolyte used in most batteries, the Company's battery
electrolyte is a thin, flat, solid plastic which reduces weight and volume, and
improves safety. The Company's research and development and marketing strategy
is to seek to distinguish the Company's battery product from competitors'
products as to the following features: energy density, self-discharge
frequency, design flexibility, cost, user safety and environmental safety. The
Company's ability to implement this strategy is highly dependent upon the
Company's ability to achieve its technology research and development and
financing objectives and overcome the related uncertainties as discussed
herein.
The ability to manufacture so called "laminated batteries" (See
"Glossary") with consistent high quality and low cost is a critical
commercialization challenge and the Company believes its key advantage lies in
its manufacturing approach. Its composite electrolyte and composite cathode
technology lends itself to the use of commonly used manufacturing equipment and
proven process methodology. These composites act as traveling carriers in the
manufacturing process, starting as rolls that are then coated with electrolyte
or oxide materials using existing and proven coating technology. Such
traveling carriers are usually called "traveling webs" or simply "webs". "Web"
processing is a common practice in the paper, textile, thin film, barrier
plastics, floor covering, and packing industries. Other companies also
attempting to commercialize lithium-polymer batteries do not use this
Company-patented approach and therefore use more complex and hence costly
manufacturing methods.
INTELLECTUAL PROPERTY
The Company holds 19 issued U.S. patents and 8 pending patent
applications on its technology. The Company also has other proprietary
knowledge that is in the patent disclosure
38
<PAGE> 43
stage or that it protects as trade secrets. The Company's early patents relate
to materials and construction for lightweight solid-state rechargeable
batteries. The later patents and applications relate to improvements to the
technology contained in the first patent or to other aspects of rechargeable
battery technology.
There are other companies with lithium-polymer battery technology
patents; however, the Company believes its patents to be unique from those of
its competitors in that they focus upon composite cathode structure, composite
electrolyte structure, alloy anode and packaging. The earliest of the
Company's patents expires 2003. There is no current or, to the Company's
knowledge, threatened litigation on its patents. See "Description of Business
- - Competition".
The following table sets forth the patents currently held by the Company:
<TABLE>
<CAPTION>
Patent Number Description Year of Expiration
------------- ----------- ------------------
<S> <C> <C>
4,576,883 Electrode Construction for Solid State Electrochemical Cell 2003
4,794,059 Lightweight Solid Rechargeable Batteries 2005
4,808,496 Electrode Construction for Solid State Electrochemical Cell 2006
4,816,357 Intensification of Ion Exchange in Lithium Batteries 2006
4,861,690 Lightweight Battery Construction 2006
4,888,206 Method and Apparatus for Coating a Substrate with Alkaline 2006
or Alkaline Earth Metals
4,960,655 Lightweight Batteries 2007
5,006,431 Solid State Polymer Electrolyte for Batteries 2008
5,053,295 Lightweight Electroconductive Solderless Internal Cell 2008
Connector for Alkaline or Alkaline Earth Metal Batteries
5,057,385 Battery Packing Construction 2008
5,057,651 Lightweight Electroconductive Wire 2008
5,006,554 Fire and Moisture Proof Anode Construction for Alkaline 2008
Metal or Alkaline Earth Metal Batteries
5,102,752 Solid State Composite Electrolyte for Batteries 2009
</TABLE>
39
<PAGE> 44
<TABLE>
<CAPTION>
Patent Number Description Year of Expiration
------------- ----------- ------------------
<S> <C> <C>
5,350,647 Electrodes for Electrochemical Devices 2011
5,378,558 Solid State Composite Electrolyte for Electrochemical 2012
Devices
5,422,200 Battery Packaging Construction for Alkali Metal Multicell 2012
Batteries
5,443,602 Apparatus and Method for Automatic Mass Production and 2012
Packaging of Electrochemical Cells
5,521,023 Composite Electrolytes for Electrochemical Devices 2013
08/341,622 Lightweight Composite Polymeric Electrolytes for 2013
Electrochemical Devices
</TABLE>
TECHNOLOGY DEVELOPMENT HISTORY
The Company's advanced rechargeable battery technology is based on
nearly eleven years of specific research and development and nearly forty years
of experience in plastics, thin films and emulsions. With the divestiture of
Industries in late 1993, the Company successfully raised capital from outside
sources, narrowed the Company's focus, and renewed development of its
rechargeable battery technology. During 1994, the Company was re-staffed with
needed technical personnel and critical research including historical test data
such as capacity and cycle life was reconfirmed. During 1995, the Company
concentrated its efforts on improving its base line technology in the crucial
areas of weight reduction, design flexibility, rechargeability, self-discharge,
safety, capacity and cycle life. Research and development effort has also been
expended on the carbon fiber web used to build the cathode structure, the
proprietary lithium metal alloy used as the anode structure, the polymer
electrolyte structure, and thermal curing of the polymer as opposed to
expensive and complicated electron beam methodology. Improvements have also
been made in sealing which has resulted in a patented, fireproof anode concept
and improved current-collection technology has been developed through
lightweight, embedded fiber construction. The Company has also advanced its
technology by developing a solid state lithium-ion battery using proprietary
web structures in both the anode and cathode with excellent cycle life and
which demonstrate the utility of the Company's manufacturing technology for use
in other battery chemistries.
For the period July 1989 through October 1993, the Company had
accumulated net losses attributable to activities associated with the battery
technology of $1,801,000. For the period November 1993 through March 1996, the
Company had accumulated net losses of $5,639,000 of which $2,133,000 was
incurred during 1994, $2,472,000 was incurred during 1995, and $967,000 was
incurred in the first quarter of 1996. Therefore, the Company's aggregate
40
<PAGE> 45
accumulated losses for the battery technology through March 1996 are
$7,440,000. The Company spent approximately $505,000 and $1,080,000 on
research and development activities during 1994 and 1995, respectively, and has
spent $256,000 thus far in 1996 (through March) on research and development.
These funds were derived from the Company's debt and equity financings as
discussed in this Prospectus as opposed to operating revenues.
BUSINESS STRATEGY
The challenge facing the Company, as indicated above, is the
commercialization of its battery technology, i.e., moving from laboratory-scale
product prototypes and related prototype manufacturing processes to full scale
market introduction and the construction of a manufacturing plant.
Consummation of corporate alliances is an important step in the
commercialization plan. The Company's strategy contemplates that these
corporate partners will bring technology and funding support through equity,
licensing of the technology, and manufacturing and distribution rights.
Extensive discussions have been held with numerous potential corporate partners
from the United States, the Pacific Rim and Europe. As noted above, on March
29, 1996, the Company entered into the Technology Development Agreement with
the Japanese Consortium of Mitsubishi and Mitsui. The Consortium has also been
granted options on market specific, exclusive manufacturing and distribution
rights. The Company and the Consortium anticipate that the Technology
Development Agreement is the first step in a broad strategic alliance for the
research and development, manufacture, distribution, promotion and sale of the
Company's lithium-polymer batteries. It is the Company's and the Consortium's
strategy that the Consortium will assist the Company in the development,
production and distribution of its lithium-polymer battery product line with
the Company taking advantage of the Consortium's expertise and experience in
the development of other high-tech products, familiarity with the geographic
markets for such products, experience in developing new markets, and existing
relationships with global OEMs.
With the reconfirmation of historical test data during 1994, the
Company continues to work on improving product performance and refining its
manufacturing concepts. During 1995, the Company delivered test cells and test
data to certain potential customers and alliance partners that demonstrate its
laboratory results. The efforts of further developing the technology to meet
product application specific parameters will be ongoing.
During March 1996, a benchtop continuous flow coating/laminating line
- -- referred to above 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
41
<PAGE> 46
construct in the 1998 time frame. The pilot manufacturing facility, according
to the Company's current strategy, will be located within the Company's
existing facility in Plymouth Meeting, Pennsylvania. Ultimately, the pilot
manufacturing line would be replaced with a larger scale second tier
manufacturing capability. Construction of the pilot manufacturing line will
require approximately 12 months. 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 stage at approximately
the end of 1998 (which $25 million includes the aforementioned estimated $7.5
million cost of the pilot manufacturing line).
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.
The Company believes that the "web" construction of its battery (See
"Glossary") is unique compared to other emerging lithium-polymer approaches.
It allows the Company to use proven and well understood equipment from the
textile and plastics industries. This manufacturing approach presents the
flexibility to utilize alternative component chemistries as required to meet
specific OEMs' application operating parameters. While the Company is
confident that this approach increases the probability of success in
commercializing the technology, there can be no assurances of that success.
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 has thus
far successfully raised approximately $7.1 million through the private sale of
its securities including $2,400,000 from the Consortium, prior to payment of
placement costs of $212,000. There can be no assurances that the incremental
capital needed for attaining commercial viability of the Company's battery
technology will be obtained (which the Company currently estimates at
approximately $25 million). 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. See "Management's Discussion and Analysis --
Liquidity, Capital Resources, and Financial Conditions".
COMPETITION
Competition in the battery industry is intense. The industry consists
of developmental stage companies and major domestic and international
companies, many of which have financial, technical, marketing, sales,
manufacturing, distribution and other resources significantly greater
42
<PAGE> 47
than those of the Company, excluding the resources of the Company's Japanese
Consortium partners.
The Company believes that its lightweight, thin, low-cost, high
energy, rechargeable battery is uniquely appropriate for the high-growth
portable electronics market (notebook computers, cellular telephones and other
wireless devices). Longer term, its technology may have significant potential
for the emerging Electric Vehicle (EV) market.
These markets are currently served mainly by Nickel-Cadmium ("NiCd")
batteries. NiCd batteries suffer from lower energy density, memory effect,
short shelf life, and environmental problems. It is anticipated, however, that
NiCd batteries will continue to be a force in the marketplace for the
foreseeable future.
Nickel-Metal-Hydride ("NiMH") batteries are an alternative to NiCd
batteries, since they have a somewhat higher energy density than NiCd
batteries. However, they too have a short shelf life and they cost more than
NiCd batteries. Liquid electrolyte ("Lithium-Ion") batteries are just now
entering the marketplace. These batteries have higher energy density but
suffer from short shelf life and higher cost.
The Company's test data has demonstrated that the Company's
lithium-polymer rechargeable battery test cells offer three to four times the
energy density of NiCd batteries, two to three times that of NiMH batteries,
and one and one-half to two times that of lithium-ion batteries. Additionally,
the Company believes that its technology and approach to manufacturing offer
significantly lower production costs. The competition from these current
technologies will be difficult because the products using such technologies are
entrenched and produced by large companies such as Eveready, Sanyo, Duracell
and Panasonic that have large resource bases.
Competition in the high energy density arena comes mainly from other
emerging companies such as AER (Air-Zinc), licensees of Bellcore lithium ion
polymer technology, including Ultralife and Valence, Moltech (Li-Polymer) and
Poly-Plus (Li-Polymer). A number of these competitors are seeking to move
their technologies from the laboratory to commercialization and face similar
challenges as LTC faces. The Company believes that its focus on the
manufacturing process presents superior commercialization potential, since it
has a lower cost potential and can be readily adapted to run various component
chemistries including lithium-ion polymer. Additionally, its "web"
construction has the inherent ability to provide higher energy densities and to
accept future technological advances. The Company believes that its
lithium-polymer battery products will be competitively superior -- from an
environmental point of view -- compared to other batteries because the
company's batteries can be disposed of with less risk of adverse impact on the
environment due to the design features and the materials utilized in the
Company's product.
43
<PAGE> 48
RAW MATERIALS
Certain materials used in the Company's products are available only
from a limited number of sources. The industry currently has sufficient
capacity to meet the Company's needs. However, there can be no assurances that
the currently adequate supply of raw materials will continue.
EQUIPMENT AND FACILITIES
The Company has outfitted a modern research and development facility
with appropriate equipment and instrumentation. At 12,400 square feet, this
modern facility has sufficient space to meet the Company's near-term needs,
including the DMF. The Company had leased from the Hope family certain
machinery and equipment acquired by Henry Hope in connection with the
development of battery technology. The Company terminated these leases in
1994. See "Certain Relationships and Related Transactions".
EMPLOYEES
During 1994, the Company hired a new management team and a core
technical staff that numbered thirteen full-time employees. The staff has the
required expertise in technology, commercialization, process, development,
battery engineering, electrochemistry and strategic alliance development. At
December 31, 1995, the Company had a total of 11 employees, of whom ten were
employed full-time by the Company. The Company anticipates that it will need
to hire approximately six technical employees and approximately one management
employee in order to advance the Company's research and development projects in
1996, and that the Company will have approximately 27 employees by mid-1997.
The Company believes that individuals having appropriate expertise are readily
available in the workforce at compensation levels consistent with the Company's
business plan and compensation policies.
GOVERNMENT REGULATION, SAFETY, ENVIRONMENTAL COMPLIANCE
The Company's products incorporate lithium, which is known to cause
explosions and fires if not properly handled. Although the Company believes
that its batteries do not present safety risks substantially different from
those inherent in currently marketed lithium ion batteries, there can be no
assurance that safety problems will not develop in the future. The Company
intends to incorporate safety policies in its manufacturing processes designed
to minimize safety risks, although there can be no assurance that an accident
in its facilities will not occur. Any accident, whether occasioned by the use
of a battery or the Company's manufacturing operations, could result in
significant production delays or claims for damages resulting from injuries,
which would adversely affect the Company's operations and financial condition.
Prior to the commercial introduction of the Company's batteries into a
number of markets, the Company will seek to obtain approval of its products by
one or more of the organizations engaged in testing product safety, such as
Underwriters Laboratories. Such approvals could
44
<PAGE> 49
require significant time and resources from the Company's technical staff and,
if redesign were necessary, result in a delay in the introduction of the
Company's products.
Pursuant to the regulations of the United States Department of
Transportation ("DOT"), a permit is required to transport lithium across state
lines. The International Air Transport Association ("IATA") similarly
regulates the international shipment of lithium. Although the Company believes
that DOT has granted permits for, and IATA has allowed, the transport of
rechargeable lithium-based batteries to be shipped or used by the general
public, there can be no assurance that DOT or IATA will grant such a permit to
the Company or that changes in such regulations, or in their enforcement, will
not impose costly requirements or otherwise impede the transport of lithium.
In addition, the DOT and IATA approval processes will require significant time
and resources from the Company's technical staff and if redesign were
necessary, could delay the introduction of the Company's products.
Various regulatory agencies will have jurisdiction over the operation
of any manufacturing facilities established by the Company. Because of the
risks generally associated with the use of lithium, the Company expects
rigorous enforcement. No assurance can be given that the Company will not
encounter any difficulties in complying with applicable health and safety
regulations.
Federal, state and local regulations impose various environmental
controls on the storage, use and disposal of certain chemicals and metals used
in the manufacture of lithium-polymer batteries. Although the Company believes
its activities will conform to current environmental regulations, there can be
no assurances that changes in such regulations will not impose costly equipment
or other requirements. Any failure by the Company to adequately control the
discharge of hazardous wastes could also subject it to future liabilities.
45
<PAGE> 50
PROPERTY
The Company leases a 12,400 square foot research facility and
corporate headquarters in a free-standing building at 5115 Campus Drive in
Plymouth Meeting, Pennsylvania, near Philadelphia. This facility includes
sufficient laboratory and office space to allow the Company to expand its
research efforts and to construct its DMF. The lease commenced on November 1,
1994 for a term of 5 years with a base rent of $122,400 per year. Management
expects that the facility will be suitable for the Company's currently planned
operations. The Company believes that its properties and assets are adequately
covered by appropriate insurance.
LEGAL PROCEEDINGS
As of the date of this Prospectus, there are no legal proceedings
pending against the Company.
46
<PAGE> 51
MANAGEMENT
The following table sets forth information concerning the directors
and executive officers of the Company as of the date of this Prospectus:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Thomas R. Thomsen 60 Chairman of the Board and
Chief Executive Officer
J. Paul Bagley, III 53 Director
Harry Edelson 59 Director
L. Wayne Harber 43 Director
Stephen F. Hope 51 Director
David H. Hughes 52 Director
Ralph D. Ketchum 70 Director
Gerald M. Labush 49 Director
John D. McKey, Jr. 52 Director
David J. Cade 59 President and Chief
Operating Officer
George R. Ferment 56 Executive Vice President
of Operations and Chief
Technical Officer
Susan M. Gustafson 37 Vice President of
Administration and
Secretary
William D. Walker 55 Treasurer and Chief
Financial Officer
</TABLE>
Thomas R. Thomsen was appointed Chief Executive Officer of the Company
on May 9, 1996. Mr. Thomsen was elected a director of the Company, effective
February 22, 1995, and was elected Chairman of the Board of the Company,
effective August 7, 1995. Mr. Thomsen was President of AT&T Technology
Systems from 1983 to 1990 and was a director of AT&T Credit Corp., Sandia
Corporation and Rennselear Polytechnic Institute from 1984 to 1990. Mr.
Thomsen currently serves as a director of Transcript International and the
Pioneer Foundation and is on the Executive Committee of the University of
Nebraska Technology Park, L.L.C.
J. Paul Bagley, III was elected a director of the Company, effective
September 8, 1995. He is Chairman of Fiduciary Capital Management Company
(since 1989), Chief Executive Officer of Laidlaw Holdings (since February 1995),
and Managing Director of Stone Pine Capital (since 1994), all investment-related
companies. Mr. Bagley is Chairman of Silver Screen
47
<PAGE> 52
Management (since October 1982), a film-related Company. He currently serves
as a director of America First Financial Corporation.
Harry Edelson was elected a director of the Company, effective May 9,
1996. Since July 1984, Mr. Edelson has been the Managing Partner of Edelson
Technology Partners ("ETP"), a venture capital fund managing money for six
corporations: AT&T, Ford Motor, Paramount Communications, 3-M, Asea Brown
Boveri and Cincinnati Bell. ETP has invested in more than 70 companies
involved in a wide range of technologies including telecommunications,
computers, semi-conductors, specialty chemicals and environmental. Mr.
Edelson has served as a Director of Advanced Oxygen Technology since 1990.
L. Wayne Harber was elected a director of the Company, effective May
9, 1996. Since 1994, Mr. Harber has been a Managing Director of Stone Pine
Capital, L.L.C. and Stone Pine China, L.L.C., both investment banking funds.
Mr. Harber also serves as Executive Vice President of Fiduciary Asset Managers,
L.L.C., the advisor to a $200 million mezzanine and private equity fund. From
1990 to 1993, Mr. Harber was the Senior Vice President of Marketing for Aegis
Holdings Corporation, an asset management and investment banking concern
specializing in asset securitization and structured finance. From 1980 to
1990, Mr. Harber was a Vice President and National Sales Manager for Franchise
Finance Corporation of America. Mr. Harber is also a Director of Laidlaw
Holdings Asset Management.
Stephen F. Hope currently serves as a director of the Company and was
a President, Chairman of the Board and Treasurer of the Company from October
1990 through April 1994. He is a director of Lithion Corporation ("Lithion"),
a wholly-owned subsidiary of the Company. Mr. Hope has an ongoing consulting
arrangement with the Company with respect to the battery technology that is
being developed by the Company. He received a B.A. from Dartmouth University
in 1965 and is a member of the Society of Manufacturing Engineers and the
Society of Photo-Finishing Engineers. Mr. Hope was a Director and the
President of Hope Industries, Inc. ("Industries"), a previously wholly-owned
subsidiary of the Company, from 1985 through December 1993. Industries filed
for reorganization under the Bankruptcy Code in April 1993 and its Plan of
Reorganization was confirmed on May 6, 1994.
David H. Hughes was elected a director of the Company, effective
September 8, 1995. Since 1972, Mr. Hughes has been Chairman and Chief Executive
Officer of Hughes Supply, Inc., a building supply company whose shares are
traded on the New York Stock Exchange, for over ten years. Mr. Hughes is also a
director of SunTrust Banks, Inc.
Ralph D. Ketchum was elected a director of the Company, effective July
1, 1994. He has been President of RDK Capital, Inc. ("RDK Capital") since
January 1987. RDK Capital is the general partner of RDK Capital Limited
Partnership, an investment limited partnership. Mr.
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<PAGE> 53
Ketchum served as Chief Executive Officer and Chairman of the Board of Heintz
Corporation ("Heintz"), a majority owned subsidiary of RDK Capital Limited
Partnership. In August 1993, Heintz filed for protection under Chapter 11 of
the United States Bankruptcy Code in the Bankruptcy Court of the Eastern
District of Pennsylvania. Mr. Ketchum was Senior Vice President and Group
Executive of the Lighting Group, General Electric Company from 1980 to 1987.
He also serves as a director of Metropolitan Savings Bank, Oglebay-Norton
Corporation, Thomas Industries and Pacific Scientific, Inc.
Gerald M. Labush was elected a director of the Company, effective
December 6, 1995. Since 1979, he has been an attorney in private practice at
the law offices of Gerald M. Labush in New York City.
John D. McKey, Jr. was elected a director of the Company, effective
September 8, 1995. He has since September 1993, been a partner at the law firm
of McCarthy, Summers, Bobko & McKey, P.A., and, from June 1986 to September
1993, was a partner at Kohn, Bobko, McKey & Higgins, P.A. Mr. McKey currently
serves as a director of Publishing Company of North America and Laidlaw
Holdings, Inc.
David J. Cade was appointed President and Chief Operating Officer of
the Company in May 1996. Mr. Cade served as the Company's Vice President of
Marketing from August 1994 to May 1996 and was elected as an officer in October
1994. Mr. Cade has over thirty years of experience in senior business
development, marketing, and sales in global telecommunications systems and
information technologies. From February 1988 to October 1992, Mr. Cade was
Vice President of Marketing and Business Development for COMSAT Systems
Division and from October 1992 until April 1994, Mr. Cade was Vice President of
Marketing and Sales at Interdigital Communications Corporation, a Philadelphia
company that manufactures wireless telephone systems for customers worldwide.
Previously, Mr. Cade held managerial positions with AT&T, Martin Marietta (now
Lockheed Martin) and the Department of Defense. Mr. Cade holds an MBA from
Syracuse University and an undergraduate degree from the University of
Illinois.
George R. Ferment, Ph.D. was appointed Executive Vice President of
Operations and Chief Technical Officer of the Company in May 1996. Dr.
Ferment previously served as the Company's Vice President of Technology and
Engineering from July 1994 to May 1996 and from March 1994 through July 1994,
as Director of Technology Development. Dr. Ferment has over 25 years of
technology experience in product and process development with extensive
background in plastic and polymer science. His early experience was in
research and development of fibers and polymers at Celanese Corporation. Dr.
Ferment spent 14 years at GAF/Tarkett Corporation where he rose to the
position of General Manager (October 1983 - May 1988). From October 1989 to
November 1993, Dr. Ferment was a Group Director of Campbell Soup Company where
he had worldwide responsibility for the company's diverse packaging technology
development programs. Dr. Ferment received his Master's Degree and Ph.D. in
Chemical Engineering from the New Jersey Institute of Technology.
49
<PAGE> 54
Susan M. Gustafson was elected Secretary of the Company in April 1994
and Vice President of Administration, effective November 22, 1995. From July
1992 through April 1994, Ms. Gustafson was Executive Assistant to the President
and Chief Executive Officer of Severn Trent (U.S.) Inc. From March 1991
through July 1992, Ms. Gustafson was Executive Assistant to the Chief Executive
Officer of Therapeutic Systems, Inc. From September 1986 through March 1991,
Ms. Gustafson was Executive Assistant to the Chief Executive Officer of Real
Estate Financial Partnership in Philadelphia, Pennsylvania.
William D. Walker was elected Treasurer and Chief Financial Officer of
the Company, effective September 8, 1995. Mr. Walker was Vice President of
Finance of Simon LG Industries, Inc., a manufacturer of machinery for the paper
industry, from October 9, 1990 to March 31, 1994. Mr. Walker was, from May
1994 until September 1995, an independent financial consultant, including to
the Company (from August, 1994 to his election as Treasurer and Chief Financial
Officer). On October 6, 1995, Mr. Walker was elected Chairman of LG
Industries, Inc., the successor of Simon LG Industries, Inc.
The Company's directors hold office until the next annual meeting of
the Company's stockholders and until their successors have been duly elected
and qualified. The Company's directors do not receive compensation for their
services in that capacity.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid by the Company during the three years ended on December 31, 1995 to (i)
the Chief Executive Officer of the Company and (ii) all other executive
officers of the Company, or any of its subsidiaries, who were serving in such
capacity on December 31, 1995 and received total salary and bonus in excess of
$100,000 during fiscal year 1995 (collectively, "Named Executive Officers").
Unless otherwise noted, the figures used in this "Executive Compensation"
section have been adjusted to reflect the effect of the Company's
one-for-thirty reverse stock split.
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<PAGE> 55
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
- -----------------------------------------------------------------------------------------------------------------------------------
Awards Payouts
- -----------------------------------------------------------------------------------------------------------------------------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas R. Thomsen, 1995 0 0 0 0 13,334(2) 0 0
Chairman of the 1994 0 0 0 0 0 0 0
Board of 1993 0 0 0 0 0 0 0
Directors(1)
- -----------------------------------------------------------------------------------------------------------------------------------
James A. Elsner, 1995 $75,720 0 0 0 0 0 0
President and Chief 1994 $185,000 $100,000 0 0 522,020(4) 0 $185,000(5)
Executive Officer 1993 0 0 0 0 0 0 0
(Resigned effective
August 7, 1995)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
George R. Ferment, 1995 $120,000 $28,000 0 0 200,001(7) 0 0
Exec. Vice President 1994 $94,385 0 0 0 133,333 0 0
of Technology and 1993 0 0 0 0 0 0 0
Engineering(6)
- -----------------------------------------------------------------------------------------------------------------------------------
David J. Cade, Vice 1995 $125,000 $11,000 0 0 266,667(9) 0 0
President of 1994 $45,513 0 0 0 66,667 0 0
Marketing(8) 1993 0 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Footnotes to this Summary Compensation Table appear on the following page.
51
<PAGE> 56
FOOTNOTES TO THE SUMMARY COMPENSATION TABLE APPEARING ON THE PREVIOUS PAGE
(1) The Company did not have a Chief Executive Officer at the fiscal year
end December 31, 1995; however, Thomas R. Thomsen had performed
certain of the typical CEO duties (without compensation therefor)
since the resignation of James A. Elsner as the Company's President
and CEO in August 1995. On May 9, 1996, Mr. Thomsen was appointed CEO
of the Company.
(2) Mr. Thomsen was granted 13,334 stock options on February 22, 1995
exercisable at $3.00 per share. Such stock options were cancelled on
February 8, 1996 pursuant to the Directors Plan and replaced the same
day with a grant of 13,334 stock options exercisable at $0.90 per
share. (See "Executive Compensation - Directors Stock Option Plan"
for details).
(3) James A. Elsner resigned as Chief Executive Officer and President of
the Company, effective August 7, 1995.
(4) In 1994, Mr. Elsner was granted options to purchase 522,020 shares of
Common Stock from the Company under the Company's 1994 Stock Incentive
Plan. As of the date of his resignation (August 7, 1995), options to
purchase 386,645 shares had vested.
(5) In connection with Mr. Elsner's resignation, Mr. Elsner drew on the
irrevocable letter of credit, issued for his benefit, in the amount of
$185,000.
(6) On May 9, 1996, Dr. Ferment was appointed the Company's Executive Vice
President of Operations and Chief Technical Officer. As required by
the applicable regulations of the Securities and Exchange Commission,
the Summary Compensation Table reflects Dr. Ferment's position with
the Company at the fiscal year end December 31, 1995.
(7) Dr. Ferment was granted 33,334 stock options on March 15, 1995
exercisable at $0.085 per share. Such stock options, and the 133,333
stock options granted in fiscal year 1994 exercisable at an average
price of $0.19 per share were cancelled on September 8, 1995 and
replaced the same day with a grant of 166,667 stock options
exercisable at $0.03 per share, the then estimated fair market value
of the Company's Common Stock. Such exercise price was later adjusted
to $0.90 per share, pursuant to the reverse stock split. (See
"Executive Compensation - Stock Options Repricing" for details).
(8) On May 9, 1996, Mr. Cade was appointed the Company's President and
Chief Operating Officer. As required by the applicable regulations of
the Securities and Exchange Commission, the Summary Compensation Table
reflects Mr. Cade's position with the Company at the fiscal year end
December 31, 1995.
52
<PAGE> 57
(9) Mr. Cade was granted 100,000 stock options on March 15, 1995
exercisable at $0.085 per share. Such stock options, and the 66,667
stock options granted in the fiscal year 1994 exercisable at $0.18 per
share were cancelled on September 8, 1995 and replaced the same day
with a grant of 166,667 stock options exercisable at $0.03 per share,
the then estimated fair market value of the Company's Common Stock.
Such exercise price was later adjusted to $0.90 per share, pursuant to
the reverse stock split. (See "Executive Compensation - Stock Option
Repricing" for details).
OPTION GRANTS IN FISCAL YEAR 1995
The following table sets forth stock options granted to each of the
Named Executive Officers during fiscal year 1995 to purchase shares of Common
Stock (including options repriced during fiscal year 1995).
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL OPTIONS/
UNDERLYING SARS GRANTED TO EXERCISE MARKET PRICE
OPTIONS/SARS EMPLOYEES IN OR BASE ON DATE OF EXPIRATION
NAME GRANTED (#) FISCAL YEAR PRICE ($/Sh.) GRANT DATE
---- ----------- ----------- ------------- ----- ----
<S> <C> <C> <C> <C> <C>
Thomas R. Thomsen(1) 13,334 1.1% $0.90 $0.90 2/22/05
James A. Elsner 0 0 0 0 0
David J. Cade(2) 100,000 8.4% $2.55 $2.55 3/15/05
166,667 13.9% $0.90 $0.90 3/15/05
George F. Ferment(3) 33,334 2.8% $2.55 $2.55 3/15/05
166,667 13.9% $0.90 $0.90 3/15/05
</TABLE>
(1) Mr. Thomsen was granted 13,334 stock options on February 22, 1995
exercisable at $3.00 per share. Such stock options were cancelled on
February 8, 1996 pursuant to the Directors Plan and replaced the same day
with a grant of 13,334 stock options exercisable at $0.90 per share. (See
"Executive Compensation - Directors Stock Option Plan" for details).
One-fourth (approximately 3,333) of Mr. Thomsen's options will become
exercisable on February 22, 1996 and an additional one-fourth will become
exercisable on February 22, 1997, February 22, 1998 and February 22, 1999.
(2) Mr. Cade was granted 100,000 stock options on March 15, 1995 exercisable at
$0.085 per share. Such options, and the 66,667 stock options granted in
fiscal year 1994 exercisable at $0.18 per share, were cancelled on
September 8, 1995 and replaced the same day with a grant of 166,667 stock
options exercisable at $0.03 per share, the then estimated fair market
value of the Company's Common Stock. Such exercise price was later
adjusted to $0.90 per share, pursuant to the reverse stock split. (See
"Executive Compensation - Repricing of Stock Options" for details and
"Options Exercised and Options Outstanding" for vesting information).
53
<PAGE> 58
(3) Dr. Ferment was granted 33,334 stock options on March 15, 1995 exercisable
at $0.085 per share. Such options, and the 133,333 stock options granted
in fiscal year 1994 exercisable at an average price of $0.19 per share,
were cancelled on September 8, 1995 and replaced the same day with a grant
of 166,667 stock options exercisable at $0.03 per share, the then estimated
fair market value of the Company's Common Stock. Such exercise price was
later adjusted to $0.90 per share, pursuant to the reverse stock split.
(See "Executive Compensation - Repricing of Stock Options" for details and
"Options Exercised and Options Outstanding" for vesting information).
OPTIONS EXERCISED AND OPTIONS OUTSTANDING
The following table sets forth information with respect to (i) options
exercised by each of the Named Executive Officers in fiscal year 1995 and (ii)
the number and value of options held by each of the Named Executive Officers at
the end of fiscal year 1995.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN THE MONEY
OPTIONS/SARs AT OPTIONS/SARs AT
SHARES FY-END ($) FY-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ------------ ------------ ------------- ----------------
<S> <C> <C> <C> <C>
Thomas R. Thomsen(2) 0 0 0/13,334 0/$74,004
James A. Elsner 0 0 386,645/0 $2,300,151/0
David J. Cade(3) 0 0 0/166,667 0/$925,002
George F. Ferment(4) 0 0 0/166,667 0/$925,002
</TABLE>
(1) The exercise price of the options for Messrs. Thomsen, Cade and
Ferment is $0.90 per share, and for Mr. Elsner is $0.501 per share,
and, for the purposes of this calculation only, the fair market value
of the shares of Common Stock underlying the options is deemed to be
$6.45 per share, the high "bid" price for the Common Stock on the OTC
Bulletin Board on December 29, 1995 after giving effect to the reverse
stock split on February 8, 1996.
(2) One-fourth (approximately 3,333) of Mr. Thomsen's options designated
in this table as unexercisable as of December 31, 1995 will become
exercisable on February 22, 1996 and an additional one-fourth will
vest on February 22, 1997, February 22, 1998 and February 22, 1999.
54
<PAGE> 59
(3) 66,667 of Mr. Cade's stock options are exercisable at any time on or
after the later of July 1, 1996 or the date of receipt by the Company
of $2 million in cash from a strategic alliance initiated, developed
and completed by Mr. Cade and exercisable as to another 33,333 shares
on the date of receipt by the Company of a further $1 million in cash
from a strategic alliance initiated, developed and completed by Mr.
Cade, but no earlier than July 1, 1996. The remaining 66,667 options
vest on July 1, 1996 (16,667 options), August 15, 1996 (16,667
options), August 15, 1997 (16,667 options), and August 15, 1998
(16,666 options).
(4) 33,334 of Dr. Ferment's options will become exercisable at any time on
or after the later of July 1, 1996 or the date of completion of
construction by the Company of a Demonstration Manufacturing Facility.
The remaining 133,333 options vest on July 1, 1996 (50,000 options),
September 19, 1996 (16,667 options), April 7, 1997 (16,667 options),
September 19, 1997 (16,667 options), April 7, 1998 (16,666 options),
and September 19, 1998 (16,666 options).
STOCK INCENTIVE PLAN
In February 1994 the Board of Directors of the Company established the
1994 Stock Incentive Plan (the "Stock Plan") to aid the Company in attracting,
retaining and motivating officers and key employees, whether or not they are
directors of the Company, and consultants and other advisors to the Company by
providing them with incentives for making significant contributions to the
growth and profitability of the Company. In February 1994, Majestic, as the
majority stockholder, approved the adoption of the Stock Plan and on February
8, 1996 ratified an amendment to the Stock Plan, increasing from 1,333,333 to
2,666,667 (after giving effect to the 1 for 30 reverse stock split on February
8, 1996) the number of shares available for issuance in respect of awards
granted under the Stock Plan.
Set forth below is a brief description of the principal features of
the Stock Plan.
The Stock Plan authorizes the Company to grant stock options, both
incentive stock options (within the meaning of Section 422 of the Internal
Revenue Code) and non-qualified stock options, SARs and awards payable in
stock, restricted stock or cash. All of such awards may be granted singly, in
combination or in tandem, or in substitution for awards granted previously
under the Stock Plan or any other Stock Plan of the Company. In addition, the
Stock Plan permits the Company to extend dividend equivalency rights to awards
made thereunder. The payment or exercise of any awards, including stock
options, under the Stock Plan may be conditioned on the satisfaction of various
criteria, such as the achievement of specific business objectives, attainment
of growth rates and other comparable measurements of the Company's performance.
It is expected that, while some or all other types of awards referred to above
may be made from time to time, the Company will grant principally stock options
under the Stock Plan.
The Stock Plan provides for a maximum of 2,666,667 shares of the
Company's Common Stock to be available for issuance in respect of awards
granted under the Stock Plan, which
55
<PAGE> 60
terminates in February 2004, provided that the aggregate number of shares of
Common Stock which may be the subject of an award for any participant may not
exceed 666,667 shares in any fiscal year of the Company. Shares related to
awards (or portions thereof) that are forfeited, canceled or terminated, expire
unexercised, are surrendered in exchange for other awards, or are settled in
cash in lieu of shares or in any other manner such that shares covered by an
award are not and will not be issued, will be restored to the total number of
shares available for issuance pursuant to awards granted under the Stock Plan.
As of July 1, 1996, there were outstanding options with respect to 1,630,821
shares of Common Stock under the Stock Plan. As of July 1, 1996, options with
respect to 657,901 shares of Common Stock were fully vested.
The Stock Plan provides that, in the event of a stock split, stock
dividend, combination or reclassification of shares, recapitalization, merger
or similar event, proportional adjustments will be made in (a) the number of
shares of the Company's Common Stock (i) reserved for issuance under the Stock
Plan, (ii) available for options or other awards and (iii) covered by
outstanding awards, (b) the prices related to outstanding awards, and (c) the
appropriate fair market value and other price determinations for such awards.
In addition, equitable adjustments will be made in the event of any other
change affecting the Company's Common Stock or any distribution (other than
normal cash dividends) to stockholders of the Company.
The Stock Plan provides that it shall be administered by a committee
designated by the Board of Directors, consisting of at least two directors who
are not officers or employees of the Company or any of its subsidiaries. The
committee that administers the Stock Plan (the "Stock Plan Committee") consists
of Messrs. Harber and Ketchum. The Stock Plan Committee has the sole authority,
among other things, to grant awards; determine the term, conditions and
limitations of awards; establish rules, procedures, regulations and guidelines
relating to the Stock Plan generally and to interpret the Stock Plan and award
agreements entered into pursuant to the Stock Plan. The Stock Plan Committee
may also effect the continuation, acceleration or modification of awards under
the Stock Plan in certain circumstances including events that might constitute a
change in control of the Company.
Officers, key employees and directors who are also officers or
employees of the Company or its subsidiaries or who have been designated by the
Board of Directors of the Company as eligible to receive awards under the Stock
Plan, are eligible to participate in the Stock Plan. Key employees are those
employees who hold positions of responsibility or whose performance, in the
judgment of the Stock Plan Committee, can have a significant effect on the
growth and profitability of the Company.
Generally, a Stock Plan participant may exercise or receive payment of
an award only while employed by or associated with the Company or a subsidiary
of the Company, except that, under some circumstances, and subject to
restrictions and limitations imposed by the Stock Plan Committee, the Stock Plan
Committee may permit exercise by, or payment to, participants who have retired
or become disabled, or who otherwise have had their employment or association
terminated. In addition, if a participant dies while still employed or
associated with the Company or a subsidiary thereof, the estate, and heirs or
beneficiaries of the deceased participant may, subject to restrictions and
limitations imposed by the Stock Plan Committee, exercise or receive payment in
respect of awards held by
56
<PAGE> 61
the participant at the time of death. In general, awards granted under the
Stock Plan are not assignable or transferable by a participant, except under
the limited circumstances contemplated by the Stock Plan.
The exercise price of an option granted under the Stock Plan will be
not less than the fair market value of the Company's Common stock on the date of
grant. The exercise price of an option must be paid in full in cash at the time
of exercise, or, if permitted by the Stock Plan Committee, may be paid in whole
or in part by (a) tendering shares of Common Stock or surrendering another award
granted under the Stock Plan or another benefit Stock Plan of the Company, (b)
delivering a promissory note issued by the participant to the Company containing
terms and conditions determined by the Stock Plan Committee or (c) any other
means acceptable to the Stock Plan Committee. In order to enable the Company to
satisfy any tax payment obligations resulting from any exercise of, or other
payment on, an award under the Stock Plan, the Company has the right, among
other things, to withhold an appropriate amount from such payment or to withhold
an appropriate number of shares of the Company's Common Stock receivable by the
participant, for payment thereof.
The Stock Plan may not, without the approval of the stockholders as
set forth therein, be amended to (i) materially increase the aggregate number
of shares of the Company's Common Stock that may be issued under the Stock Plan
(except for adjustment pursuant to Section 14 of the Stock Plan), as described
above, (ii) materially increase the benefits accruing to participants or (iii)
materially modify the eligibility requirements of the Stock Plan. The Stock
Plan may not be changed in such a way as to alter, impair, amend, modify,
suspend or terminate any rights of a participant or any obligations of the
Company under any award theretofore granted in any manner adverse to such
participant without the consent of such participant.
No options have been exercised since the Stock Plan was adopted.
STOCK OPTION REPRICING
In September 1995, the Board of Directors approved a program whereby
all options held by each employee were cancelled and new options were granted
under the Company's 1994 Stock Plan with such new options having an exercise
price of $0.03 per share, the then estimated fair market value of the Company's
Common Stock. The Board of Directors determined such repricing to be
appropriate in order to sustain the incentivization of all of its employees
since the outstanding options had exercise prices well in excess of the then
market price of the Company's Common Stock. As a condition for such repricing,
such new options do not become exercisable until the later of July 1, 1996 or
the original vesting schedule of such options, except that newly issued options
which replaced vested options retained their vested status. As a result of
this stock option repricing, the Company cancelled a total of 780,000 stock
options and granted the same number of new stock options at the aforementioned
exercise price of $0.03 per share. Such exercise price was later adjusted to
$0.90 per share, pursuant to the Company's one-for-thirty reverse stock split.
57
<PAGE> 62
COMPENSATION OF DIRECTORS
Directors receive no cash compensation for serving on the Company's
Board of Directors. Each Non-Employee Director receives an initial option to
purchase 13,334 shares of Common Stock as described below under the caption
"Directors Stock Option Plan."
DIRECTORS STOCK OPTION PLAN
In August 1995, the Board of Directors adopted the Directors Stock
Option Plan (the "Directors Plan") and on February 8, 1996, Majestic, 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. The Directors Plan authorizes the granting
of up to 333,333 options. The members of the Committee administering the
Directors Plan are Thomas R. Thomsen, Ralph Ketchum, and Wayne Harber, who also
comprise the Company's Compensation Committee.
The purpose of the Directors Plan is to aid the Company in attracting,
retaining and motivating independent directors by providing them with
incentives for making significant contributions to the growth and profitability
of the Company. The Directors Plan is designed to accomplish this goal by the
granting of stock options, thereby providing participants with a proprietary
interest in the growth, profitability and success of the Company.
Directors of the Company who are not officers or employees of the
Company or any subsidiary thereof ("Non-Employee Directors") are eligible to
receive grants of stock options pursuant to the Directors Plan. Under the
Directors Plan, non-qualified stock options to purchase shares of the Company's
Common Stock shall be granted automatically to Non-Employee Directors at the
times specified in the Directors Plan. Each Non-Employee Director receives an
initial option to purchase 13,334 shares of the Common Stock on the date on
which such director first becomes eligible to participate in the Directors
Plan. Thereafter, as long as a Non-Employee Director remains eligible to
participate in the Directors Plan, such director will receive on the date the
Company consummates a joint venture agreement with an investment in the Company
of at least $3,000,000, options to acquire up to an additional 20,000 shares.
Notwithstanding the foregoing, no stock option shall be granted to any person
whose service as a director of the Company has ceased. The exercise price of
any stock option granted pursuant to the Directors Plan is the fair market
value of the Common Stock on the date of grant. 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 $.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.
EMPLOYMENT AGREEMENTS AND CERTAIN EMPLOYEE MATTERS
Effective April 15, 1994, the Company elected James A. Elsner as its
President and Chief Executive Officer. Upon commencement of Mr. Elsner's
employment, the Company paid him
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<PAGE> 63
a one-time bonus of $100,000. Mr. Elsner resigned as President and Chief
Executive Officer, effective as of August 7, 1995. In connection with the
separation arrangement between the Company and Mr. Elsner, Mr. Elsner drew on
the irrevocable letter of credit, issued for his benefit, in the amount of
$185,000. In addition, the Company paid Mr. Elsner's health insurance premiums
until January 1996. At the time of his resignation, Mr. Elsner had vested
options to acquire 386,645 shares of Common Stock, which options are exercisable
(a) as to one-half until the 90th day following the later of (i) the effective
date of this registration statement or (ii) the date that the Company notifies
Mr. Elsner in writing that the registration statement has become effective, (b)
as to one-fourth until the close of business on the 90th day following March 31,
1997, and (c) as to one-fourth until the 90th day following September 30, 1997.
As part of the separation arrangement, Mr. Elsner waived all claims against the
Company for back pay and accrued bonuses.
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.
In March 1994, the Company entered into a letter agreement by which it
employed George R. Ferment as its Director of Technology Development, at a
minimum annual salary of $120,000, with a target bonus of approximately 25% of
Dr. Ferment's annual salary for the preceding fiscal year, such bonus to be
determined by the Board of Directors of the Company in accordance with
performance thresholds to be set by the Board of Directors for such fiscal
year. If Dr. Ferment's employment is terminated without cause and other than
due to disability or death, the Company will be obligated to continue to pay
Dr. Ferment's salary for an additional six months past the date of termination.
In July 1994, Dr. Ferment was appointed the Company's Vice President of
Technology and Engineering and he became the Company's Executive Vice President
of Operations and Chief Technical Officer in May 1996.
In July 1994, the Company entered into a letter agreement by which it
employed David J. Cade as its Vice President of Marketing, at a minimum annual
salary of $125,000, with a target bonus of approximately 25% of Mr. Cade's
annual salary for the preceding fiscal year, such bonus to be determined by the
Board of Directors of the Company in accordance with
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<PAGE> 64
performance thresholds to be set by the Board of Directors for such fiscal
year. If Mr. Cade's employment is terminated without cause and other than due
to disability or death, the Company will be obligated to continue to pay Mr.
Cade's salary for an additional six months past the date of termination. In
May 1996, Mr. Cade was appointed the Company's President and Chief Operating
Officer.
On November 15, 1995, the Company's Board of Directors authorized the
issuance of up to 299,440 shares of the Company's Common stock to certain
employees in exchange for such employees' forgiveness of accrued salaries and
bonuses totalling approximately $150,000 (the "Restricted Shares"). The
offering and issuance of the Restricted Shares is subject to the completion of
blue sky securities compliance and the execution and delivery of definitive
legal documentation. The Restricted Shares will be subject to a risk of
forfeiture in the event that the recipient's employment is terminated for any
reason (other than death or disability) prior to the vesting of all of the
Restricted Shares held by such employee. Two Named Executive Officers, David
Cade and George Ferment, will be eligible to receive 55,981 and 88,037
Restricted Shares respectively. The Restricted Shares will vest upon the
earlier of (i) the shares becoming eligible to be resold pursuant to a
registration statement being filed and declared effective by the U.S.
Securities and Exchange Commission or (ii) January 1, 1997. Furthermore, the
Restricted Shares, when issued, will be restricted securities within the
meaning of the Securities Act of 1933 as amended.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of June 28, 1996 with
respect to the equity securities of the Company known by the Company to be
beneficially owned by each beneficial owner of more than five percent of the
Company's Common Stock, by each director and Named Executive Officer (as
defined in applicable SEC regulations), and by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Name and Address Number of Shares
of Beneficial Owner(1) Beneficially Owned(2) Percent of Class(2)
------------------- ------------------ ----------------
<S> <C> <C>
Thomas R. Thomsen 203,333(3) 1.27
J. Paul Bagley, III 3,333(4) *
Harry Edelson 1,568,518(5) 9.94
L. Wayne Harber -0- *
Stephen F. Hope 1,957,946(6) 12.40
David H. Hughes 335,179(7) 2.12
Ralph D. Ketchum 93,289(8) *
</TABLE>
60
<PAGE> 65
<TABLE>
<CAPTION>
Name and Address Number of Shares
of Beneficial Owner(1) Beneficially Owned(2) Percent of Class(2)
------------------- ------------------ ----------------
<S> <C> <C>
Gerald M. Labush 268,319(9) 1.70
John D. McKey, Jr. 562,534(10) 3.56
David J. Cade 133,334(11) *
George R. Ferment 50,001(12) *
Susan M. Gustafson 28,334(13) *
William D. Walker 180,977(14) 1.14
James E. Elsner 386,645(15) 2.39
Edelson Technology Partners III 1,568,518 9.94
Group III Capital Ventures, Inc. 1,030,000 6.53
Donald C. Taylor 1,400,000(16) 8.69
Estate of Henry Hope 1,540,335(17) 9.76
All Directors and Officers as a 5,385,097 33.15
Group (13 persons)+
</TABLE>
------------------------
* Less than 1%.
+ Includes the Company's directors and officers on June 28, 1996.
(1) The address of each beneficial owner is c/o Lithium Technology
Corporation, 5115 Campus Drive, Plymouth Meeting, PA 19462 except for
Edelson Technology Partners III: Whiteweld Centre, 300 Tice Boulevard,
Woodcliff Lake, NJ 07675; Group III Capital Ventures, Inc. and Donald
C. Taylor: 475 Park Avenue South, Suite 330, New York, NY 10016.
(2) Includes shares of Common Stock underlying outstanding warrants,
options and convertible securities which are exercisable by the
beneficial owner with respect to whom the calculation is made, but
does not include shares of Common Stock that may be acquired within
more than 60 days after June 28, 1996 upon the exercise or conversion
of warrants, options or convertible securities.
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<PAGE> 66
(3) Includes vested options to acquire 3,333 shares of Common Stock, and
non-vested options to acquire 200,000 shares of Common Stock which
become exercisable within 60 days of June 28, 1996.
(4) Includes options to acquire 3,333 shares of Common Stock which become
exercisable within 60 days of June 28, 1996.
(5) Includes 1,568,518 shares of Common Stock held by Edelson Technology
Partners III, L.P. ("ETP"). Mr. Edelson is a General Partner and
significant shareholder of ETP and, therefore, may be deemed to be the
beneficial owner of the Company's Common Stock held by ETP.
(6) Includes 193,334 shares of Common Stock held by Hope Lithographic
Enterprises, Inc. The Estate of Henry Hope owns 51%, and Stephen F.
Hope owns 36.5%, of the outstanding capital stock of Hope Lithographic
Enterprises, Inc., and therefore both may be deemed to be the
beneficial owners of the Company's stock held by that entity.
Includes 1,347,001 shares of Common Stock owned by the Estate of Henry
Hope.
(7) Includes options to acquire 3,333 shares of Common Stock which become
exercisable within 60 days of June 28, 1996.
(8) Includes vested options to acquire 3,333 shares of Common Stock, and
non-vested options to acquire 3,334 shares of Common Stock which
become exercisable within 60 days of June 28, 1996.
(9) Includes options to acquire 3,333 shares of Common Stock which become
exercisable within 60 days of June 28, 1996.
(10) Includes options to acquire 3,333 shares of Common Stock which become
exercisable within 60 days of June 28, 1996.
(11) Includes options to acquire 133,334 shares of Common Stock which
become exercisable within 60 days of June 28, 1996.
(12) Includes options to acquire 50,001 shares of Common Stock which become
exercisable within 60 days of June 28, 1996.
(13) Includes options to acquire 28,334 shares of Common Stock which become
exercisable within 60 days of June 28, 1996.
(14) Includes options to acquire 25,001 shares of Common Stock which become
exercisable within 60 days of June 28, 1996.
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<PAGE> 67
(15) Includes vested options to acquire 386,645 shares of Common Stock.
Mr. Elsner resigned as President and Chief Executive Officer and a
director of the Company, effective August 7, 1995.
(16) Includes 1,030,000 shares of Common Stock owned by Group III Capital
Ventures, Inc., and 320,000 shares of Common Stock underlying a
warrant beneficially owned by Group III Capital, Inc. Excludes
1,180,000 shares of Common Stock underlying a warrant beneficially
owned by Group III Capital, Inc. not exercisable within 60 days after
June 28, 1996 in the absence of specified vesting events.
(17) Includes 193,334 shares of Common Stock held by Hope Lithgraphic
Enterprises, Inc. The Estate of Henry Hope owns 51%, and Stephen F.
Hope owns 36.5%, of the outstanding capital stock of Hope Lithographic
Enterprises, Inc., and therefore both may be deemed to be the
beneficial owners of the Company's stock held by that entity.
Includes 808,667 shares held by Hazel Hope, as Executrix of the Estate
of Henry Hope.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS IN THE COMPANY'S SECURITIES
Convertible Promissory Note. As of December 1993, the Company owed
Stephen F. Hope and his family approximately $445,000; at that time the Company
issued to Stephen F. Hope, a director of the Company, and to members of Stephen
F. Hope's family, a convertible promissory note in exchange for outstanding
indebtedness of the Company to such individuals in the aggregate principal
amount of $321,110. The balance of such indebtedness constituted accrued rent
on property and equipment leases owed to Stephen F. Hope and his family by the
Company. This convertible promissory note had the same terms and provisions as
the convertible promissory notes issued to private investors, and was
convertible into 642,220 shares of Common Stock. Pursuant to an agreement with
the Company entered into as of May 1994, Stephen F. Hope agreed to surrender
and cancel this promissory note (including the conversion rights associated
therewith) and agreed to terminate certain leases of real property and
equipment and cancel the indebtedness owed by the Company with respect thereto
(described below under "Leases with Related Parties").
63
<PAGE> 68
OTHER COMPENSATION
In connection with assisting the Company in its efforts in 1995 to
restructure its finances, Anthony B. Fisher, a former director of the Company,
and Group III Capital, Inc., of which Donald C. Taylor, a former director of
the Company, is a principal stockholder, were paid consulting fees of $118,550
and $205,725, respectively, plus a warrant to be issued to Mr. Fisher with
respect to 57,858 shares of Common Stock.
LEASES WITH RELATED PARTIES
From 1989 through 1994, the Company had leased equipment related to
battery research and development from the Estate of Henry Hope and had leased a
research laboratory in Willow Grove, Pennsylvania from Stephen F. Hope and
other members of his family. Pursuant to an agreement with the Company entered
into as of May 1994, Stephen F. Hope and the Estate of Henry Hope terminated
the equipment lease and the real property lease, and granted to the Company a
purchase option with respect to all or part of such equipment. The Company
notified Stephen F. Hope of the exercise of such option with respect to the
designated equipment. Upon the consummation of such purchase, the Company
issued 83,334 shares of Common Stock for such equipment having an appraised
value of $250,000. In addition, Stephen F. Hope agreed to waive any claims
to accrued rent with respect to the equipment and property leases, and in
consideration therefor and the settlement of certain other contingencies, the
Company agreed to issue to Stephen F. Hope an additional 78,167 shares of
Common Stock of the Company.
CONSULTING AGREEMENTS
Effective December 10, 1993, the Company entered into a consulting
agreement with Stephen F. Hope, pursuant to which the Company agreed to employ
Mr. Hope as an independent consultant at a rate of $150,000 per year, of which
compensation at the rate of only $50,000 per year shall be payable until such
time as the Company has sufficient capital. If, at any time in the future, the
Company has sufficient capital to employ Mr. Hope as a consultant at a rate of
$150,000 per year, Mr. Hope will not be entitled to any back compensation for
the difference between his $150,000 stated per annum consulting salary and the
$50,000 actually paid him during any such year. Mr. Hope will only act as a
battery technology consultant for so long as the Board of Directors determines
his services to be necessary. No consulting services were rendered by Mr. Hope
during 1995 and 1996 and no compensation has been paid to Mr. Hope for such
periods.
From December 1993 through April 1995, Matthew Stuart & Co., Inc.
("Matthew Stuart") provided certain consulting and advisory services to the
Company. For these services, Matthew Stuart has been paid approximately
$112,000 exclusive of commissions and accrued amounts in connection with
various private placements. Matthew Stuart and Robert Pfeffer, a former
principal in Matthew Stuart, commenced litigation claiming they were also
entitled to further fees and certain warrants. The Company has disputed the
issuance of these warrants to Matthew Stuart, Mr. Pfeffer, and Richard Perlman,
formerly a vice president of Matthew Stuart, and the Company has declared the
1993 warrant agreement and related warrant documents void. Mr. Perlman served
as a director of the Company from July 1994 until his resignation in September
64
<PAGE> 69
1995. Effective April 1995, the Company terminated any continuing relationship
with Matthew Stuart. On June 20, 1996, the Company entered into a Settlement
Agreement with Matthew Stuart and Mr. Pfeffer thereby terminating the
litigation and pursuant to which the Company issued a warrant entitling Mr.
Pfeffer to purchase up to 600,000 shares of the Company's Common Stock.
On May 9, 1996, the Company entered into a Consulting Agreement with
former director Donald C. Taylor who will provide investment advisory services,
shareholder relations and related consulting services to the Company. As
consideration for such services, Mr. Taylor will receive $7,000 a month over
the term of the Consulting Agreement. The Consulting Agreement is for a period
of one year and is automatically renewable for not more than two additional
years unless either party to the Agreement provides notice to the contrary. In
addition, in consideration for past and prospective services provided to the
Company by Group III Capital, Inc., of which Mr. Taylor is the President and a
director, the Company issued to Group III Capital, Inc. a warrant to purchase
1,500,000 shares of the Company's Common Stock at an exercise price of $1.54
per share. Mr. Taylor served as a director of the Company from August 1995 to
May 1996.
STOCK OPTIONS
As of July 1, 1996, the Company has issued and outstanding stock
options to purchase 1,744,577 shares of the Company's Common Stock, comprised
of (a) options to acquire 106,672 shares pursuant to the Directors Stock Option
Plan (the "Directors Plan") (See "Executive Compensation--Directors Stock
Option Plan" for details), (b) options to acquire 1,630,821 shares pursuant to
the 1994 Stock Incentive Plan (the "Stock Plan") (See "Executive
Compensation--Stock Incentive Plan" for details), and (c) 7,084 options granted
to consultants.
In 1995, the Board of Directors approved a program whereby all
options held by each employee were cancelled and new options were granted under
the Company's 1994 Stock Plan with such new options having an exercise price of
$0.03 per share (without giving effect to the subsequent reverse stock split),
the then fair market value of the Company's Common Stock. The Board of
Directors determined such repricing to be appropriate in order to sustain the
incentivization of all of its employees since the outstanding options had
exercise prices well in excess of the then market price of the Company's Common
Stock. As a condition for such repricing, such new options do not become
exercisable until the later of July 1, 1996 or the original vesting schedule of
such options, except that newly issued options which replaced vested options
retained their vested status. As a result of this stock option repricing, the
Company cancelled a total of 780,000 stock options having exercise prices in
excess of the then market price of the Company's Common Stock and granted the
same number of new stock options at the aforementioned $0.90 exercise price per
share ($0.03 without taking into account the reverse stock split).
Pursuant to the Majority Consent of Stockholders dated February 8,
1996, the following directors each exchanged options to purchase 13,334 shares
of Common Stock, previously granted to each of them by the Company, for the
same number of options to be granted under the
65
<PAGE> 70
Directors Plan at a purchase price of $0.90 per share, with vesting schedules
substantially similar to the vesting schedules of the surrendered options:
Messrs. J. Paul Bagley, III; Anthony B. Fisher; David H. Hughes; Ralph D.
Ketchum; John D. McKey, Jr.; Donald C. Taylor and Thomas R. Thomsen. Mr.
Taylor has since waived his rights to such options.
CERTAIN EMPLOYEE MATTERS
On November 15, 1995, the Company's Board of Directors authorized the
issuance of up to 299,440 shares of the Company's Common stock to certain
employees in exchange for such employees' forgiveness of accrued salaries and
bonuses totalling approximately $150,000 (the "Restricted Shares"). The
offering and issuance of the Restricted Shares is subject to the completion of
blue sky securities compliance and the execution and delivery of definitive
legal documentation. The Restricted Shares will be subject to a risk of
forfeiture in the event that the recipient's' employment is terminated for any
reason (other than death or disability) prior to the vesting of all of the
Restricted Shares held by such employee. The Restricted Shares will vest upon
the earlier of (i) the shares becoming eligible to be resold pursuant to a
registration statement being filed and declared effective by the U.S.
Securities and Exchange Commission or (ii) January 1, 1997. Furthermore, the
Restricted Shares, when issued, will be restricted securities within the
meaning of the Securities Act of 1933 as amended.
DESCRIPTION OF SECURITIES
Unless otherwise noted, the figures used in this "Description of
Securities" have been adjusted to reflect the effect of the Company's
one-for-thirty reverse stock split.
COMMON STOCK
The Company has 50,000,000 shares of authorized Common Stock, par
value $.01 per share, 15,784,438 shares of which were issued and outstanding as
of June 28, 1996. Each share of Common Stock entitles the holder to one vote
on all matters that are required or otherwise come before a vote of the
stockholders of the Company. The Common Stock carries no cumulative voting,
preemptive, conversion, redemption or similar rights. The shares of Common
Stock outstanding are fully paid and non-assessable and will share equally in
all dividends as, when and if declared by the Board of Directors out of funds
legally available therefor and any assets available to the Company's
stockholders upon liquidation. The Company has never paid any dividends and if
and when the Company has funds legally available therefor, it intends to invest
such available funds in the further development of the Company's business.
PREFERRED STOCK
The Company is authorized to issue up to 100,000 shares of preferred
stock, all of which is undesignated and may be divided and issued from time to
time in one or more series as may be designated by the Board of Directors from
time to time. In the event of liquidation,
66
<PAGE> 71
dissolution or winding up of the Company, the holders of the preferred stock
will be entitled to a liquidation preference over the Common Stock.
The preferred stock will be entitled to such dividends, redemption
rights, liquidation rights, conversion rights and voting rights as the Board of
Directors, in its discretion, may determine, in a resolution or resolutions
providing for the issuance of any such stock. No shares of preferred stock are
outstanding. Preferred stock can thus be issued without the vote of the
holders of Common Stock. Rights could be granted in the future to the holders
of preferred stock which could reduce the attractiveness of the Company as a
potential takeover target, make the removal of management more difficult, or
adversely impact the rights of holders of Common Stock.
The Board of Directors had originally designated 14,151 shares of such
undesignated preferred stock as Series B Convertible Preferred Stock, par value
$.01 per share (the "Series B Stock"), all of which was issued during 1994 and
all such shares have been converted into 754,720 shares of Common Stock as of
June 28, 1996 after giving effect to the Reverse Stock Split. Each share of
Series B Stock was convertible into 53.3334 shares of Common Stock. The Series
B Stock was not entitled to dividends, and carried no voting, preemptive,
redemption or similar rights.
The Board of Directors had designated 10,000 shares of such
undesignated preferred stock as Series C Convertible Preferred Stock, par value
$.01 per share (the "Series C Stock"), all of which was issued during 1994 and
all such shares have been converted into 83,334 shares of Common Stock as of
June 28, 1996 after giving effect to the Reverse Stock Split. Each share of
Series C Stock was convertible into 8.3334 shares of Common Stock. The Series
C Stock was not entitled to dividends, and carries no voting, preemptive,
redemption or similar rights.
MISCELLANEOUS
The Company is governed by the provisions of Section 203 of the
General Corporation Law of the State of Delaware. In general, Section 203
prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed
manner. "Business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the
67
<PAGE> 72
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock.
MARKET PRICES
The Company's Common Stock is traded only in the over-the-counter
markets, and "bid" and "asked" price quotations of dealers who make a market in
the Common Stock are quoted in the OTC Bulletin Board. The Company's Common
Stock is traded under the symbol "LITH". The following table sets forth
certain information with respect to the high and low bid prices for the
Company's Common Stock as of the close of each of the four calendar quarters of
1994 and 1995 and the first two calendar quarters of 1996. Such quotations
reflect inter-dealer prices, without retail mark-ups, mark-downs or
commissions, and may not represent actual transactions.
<TABLE>
<CAPTION>
Bid Prices for Common Stock*
---------------------------
1996 High Low
---- ---- ---
<S> <C> <C>
Second Quarter $4.625 $2.125
First Quarter
February 8, 1996 to March 31, $5.56 $1.88
1996 --------------------------------
[*No adjustment has been made ]
[ to reflect the one-for-thirty ]
[ reverse stock split on ]
[ February 8, 1996. ]
--------------------------------
January 1, 1996 to February 7, $ .25 $ .05
1996
1995
----
Fourth Quarter $ .39 $.085
Third Quarter $ .14 $ .06
Second Quarter $ .11 $ .03
First Quarter $ .13 $ .03
1994
----
Fourth Quarter $ .19 $ .03
Third Quarter $ .22 $ .05
Second Quarter $ .20 $ .10
First Quarter $ .28 $ .06
</TABLE>
As of June 28, 1996, there were approximately 604 holders of record of
the Company's Common Stock.
68
<PAGE> 73
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does
not presently anticipate paying cash dividends in the foreseeable future. It
is anticipated that earnings, if any, will be retained for use in the business
of the Company for an indefinite period. Payments of dividends in the future,
if any, will depend, among other things, on the Company's ability to generate
earnings, its need for capital, and its financial condition. Additionally, the
Company's ability to pay dividends is limited by applicable state law.
Declaration of dividends in the future will remain within the discretion of the
Company's Board of Directors which will review its dividend policy from time to
time.
TRANSFER AGENT
The transfer agent for the Company's Common Stock is StockTrans, Inc.,
7 E. Lancaster Avenue, Ardmore, Pennsylvania 19003. The transfer agent's phone
numbers are (610) 649-7300 and (800) 733-1121.
LEGAL MATTERS
Mason, Briody, Gallagher & Taylor, 104 Carnegie Center, Suite 201,
Princeton, New Jersey 08540, counsel to the Company, will render an opinion
with respect to the valid issuance and non-assessability of the Shares.
EXPERTS
The financial statements for the years ended December 31, 1995 and
1994 included in this Prospectus and the related financial statement schedules
included elsewhere in the Registration Statement have been audited by Wiss &
Company, LLP, independent certified public accountants, and have been so
included in reliance upon the reports given upon the authority of that firm as
experts in auditing and accounting.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
There are no indemnification provisions for directors, officers or
controlling persons of the Company against liability under the Securities Act
of 1933. However, as permitted by Section 145 of the Delaware General
Corporation Law (the "DGCL"), Article V of the Company's By-laws provides for
the indemnification of an "authorized representative" of the Company (a)
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person, by reason of the fact that such person was
or is an authorized representative of the Company, in connection with a
threatened, pending or completed third party proceeding, whether civil or
criminal, administrative or investigative, if such
69
<PAGE> 74
individual acted in good faith and in a manner such person reasonably believed
to be in, or not opposed to, the best interests of the Company, and, if the
action was a criminal proceeding, if such person had no reasonable cause to
believe that such person's conduct was unlawful; and (b) against expenses
actually and reasonably incurred by such person in connection with the defense
or settlement of a threatened, pending or completed corporate proceeding, by
reason of the fact such person was or is an authorized representative of the
Company, if such person acted under the standards set froth in section (a)
above and if such person was not found liable to the Company (or if so found
liable, if a proper court found such person to be fairly and reasonably
entitled to indemnification). The Company's By-laws further provide for
mandatory indemnification of authorized representatives of the Company who have
been successful in defense of any third party or corporate proceeding or in
defense of any claim, issue or matter therein, against expenses actually and
reasonably incurred in connection with such defense. An "authorized
representative" of the Company includes a director, employee or agent of the
Company, or a person serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
In addition, Article Ninth of the Company's Certificate of
Incorporation provides that, to the full extent that the DGCL permits the
limitation or elimination of the liability of directors or officers of a
corporation, directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages. As a result of this
provision, the Company and its stockholders may be unable to obtain monetary
damages from a director for breach of his duty of care. Although stockholders
may continue to seek injunctive or other equitable relief for an alleged breach
of fiduciary duty by a director, stockholders may not have any effective remedy
against the challenged conduct if equitable remedies are unavailable.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of
the Company in the successful defense of any action, suit or proceeding) is
asserted against the Company by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
70
<PAGE> 75
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report F-2
Consolidated Financial Statements (December 31, 1995):
Consolidated Balance Sheets at December 31, 1995 F-3
Consolidated Statements of Operations for the Years Ended December 31, 1995
and 1994 and the Period from July 21, 1989 (Date of Inception)
to December 31, 1995 F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
for the Years Ended December 31, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995 and 1994 and the Period from July 21,
1989 (Date of Inception) to December 31, 1995 F-6
Notes to Consolidated Financial Statements F-7 to F-19
Consolidated Financial Statements (Unaudited) (March 31, 1996):
Consolidated Balance Sheets - March 31, 1996 and December
31, 1995 (Unaudited) F-20
Consolidated Statements of Operations - Three Months Ended March 31,
1996 and 1995, and Period from July 21, 1989 (Date of Inception) to
March 31, 1996 (Unaudited) F-21
Consolidated Statements of Changes in Stockholders' Equity
(Deficiency) - Three Months Ended March 31, 1996 (Unaudited) F-22
Consolidated Statements of Cash Flows - Three Months ended March 31,
1996 and 1995 and Period from July 21, 1989 (Date of Inception) to
March 31, 1996 (Unaudited) F-23
Notes to Consolidated Financial Statements - March 31, 1996 (Unaudited) F-24 to F-27
</TABLE>
F-1
<PAGE> 76
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Lithium Technology Corporation and Subsidiary
(Development Stage Companies)
We have audited the consolidated balance sheet of Lithium Technology
Corporation and subsidiary (Development Stage Companies) as of December 31,
1995, the related consolidated statements of operations and cash flows for the
years ended December 31, 1995 and 1994 and for the period July 21, 1989 (date
of inception) to December 31, 1995, and the related consolidated statements of
changes in stockholders' equity (deficit) for the years ended December 31, 1995
and 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Lithium
Technology Corporation and subsidiary (Development Stage Companies) as of
December 31, 1995 and the results of their operations and their cash flows for
the years ended December 31, 1995 and 1994 and for the period July 21, 1989
(date of inception) to December 31, 1995 in conformity with generally accepted
accounting principles.
WISS & COMPANY, LLP
Livingston, New Jersey
March 12, 1996, except as to Note 8
for which the date is March 29, 1996
F-2
<PAGE> 77
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 217,000
Prepaid expenses and other current assets 54,000
-----------
Total Current Assets $ 271,000
PROPERTY AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION OF $177,000 653,000
OTHER ASSETS:
Restricted cash 47,000
Debt issue costs, less accumulated amortization of $100,000 174,000
Security deposits 20,000
-----------
241,000
------------
$ 1,165,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
12% convertible promissory notes $ 1,284,000
Accounts payable 891,000
Due to related parties 327,000
Accrued salaries 155,000
-----------
Total Current Liabilities $ 2,657,000
7% CONVERTIBLE PROMISSORY NOTES, DUE DECEMBER 1999 300,000
------------
Total Liabilities 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 - 6,942 shares -
Series C convertible preferred stock, par value $.01 per share:
Authorized 10,000 shares, issued and outstanding 10,000 shares -
Common stock, par value $.01 per share:
Authorized - 50,000,000 shares
Issued and outstanding - 7,543,000 shares 75,000
Additional paid-in capital 11,471,000
Accumulated deficit (6,865,000)
Deficit accumulated during development stage (6,473,000)
-----------
Total Stockholders' Equity (Deficiency) (1,792,000)
------------
$ 1,165,000
============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 78
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period From
July 21, 1989
Year Ended (Date of
December 31, Inception) to
------------------------------------ December 31,
1995 1994 1995
----------------- ----------------- ------------------
<S> <C> <C> <C>
COSTS AND EXPENSES:
Engineering, research and development $ 1,080,000 $ 505,000 $ 2,634,000
General and administrative 1,307,000 1,617,000 3,743,000
Interest expense, net of interest income of $13,000
(1995) and $10,000 (1994) 85,000 11,000 96,000
------------- ------------ -----------
2,472,000 2,133,000 6,473,000
------------- ------------ -----------
NET LOSS $ (2,472,000) $ (2,133,000) $(6,473,000)
============= ============ ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,923,000 5,961,000
============= ============
NET LOSS PER SHARE $(.36) $ (.36)
====== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 79
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
SERIES B SERIES C
CONVERTIBLE PREFERRED STOCK CONVERTIBLE PREFERRED STOCK
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1993 - $ - - $ -
YEAR ENDED DECEMBER 31, 1994:
Change in par value of Class B common
stock to $.0001 - - - -
Issuance of common stock:
For services relating to warrants
exercised in 1995 - - - -
Upon cancellation of indebtedness - - - -
In exchange for advances repayable
only out of proceeds of public
offering - - - -
Upon exercise of option - - - -
For cash, less related costs of $152,000 - - - -
Upon conversion of $162,000 of 7%
convertible promissory notes and
accrued interest thereon - - - -
Upon exercise of option to acquire
laboratory equipment and forgiveness
of related accrued rent - - - -
Upon conversion of preferred stock (815) - - -
Issuance of convertible preferred stock:
In exchange for convertible
promissory notes 14,151 - - -
For cash - - 10,000 -
Net loss - - - -
------------ ------------ ------------ -------------
BALANCES AT DECEMBER 31, 1994 13,336 - 10,000 -
YEAR ENDED DECEMBER 31, 1995:
Issuance of common stock:
Upon conversion of convertible
preferred stock (6,394) - - -
Upon conversion of 7% convertible
promissory notes and accrued interest
thereon - - - -
Upon exercise of warrants - - - -
Recapitalization of common stock
(Note 7) - - -
Net loss - - - -
------------ ------------ ------------ -------------
BALANCES AT DECEMBER 31, 1995 6,942 $ - 10,000 $ -
============ ============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
----------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ---------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1993 3,333,000 $ 10,000 1,887,000 $ 3,000
YEAR ENDED DECEMBER 31, 1994:
Change in par value of Class B common
stock to $.0001 - - - 3,000
Issuance of common stock:
For services relating to warrants
exercised in 1995 - - 22,000 -
Upon cancellation of indebtedness - - 78,000 -
In exchange for advances repayable
only out of proceeds of public
offering - - 133,000 -
Upon exercise of option - - 17,000 -
For cash, less related costs of $152,000 - 907,000 3,000
Upon conversion of $162,000 of 7%
convertible promissory notes and
accrued interest thereon - - 79,000 -
Upon exercise of option to acquire
laboratory equipment and forgiveness
of related accrued rent - - 83,000 1,000
Upon conversion of preferred stock - - 43,000 -
Issuance of convertible preferred stock:
In exchange for convertible
promissory notes - - - -
For cash - - - -
Net loss - - - -
------------ ---------- -------------- --------------
BALANCES AT DECEMBER 31, 1994 3,333,000 10,000 3,249,000 10,000
YEAR ENDED DECEMBER 31, 1995:
Issuance of common stock:
Upon conversion of convertible
preferred stock - - 341,000 1,000
Upon conversion of 7% convertible
promissory notes and accrued interest
thereon - - 500,000 1,000
Upon exercise of warrants - - 120,000 1,000
Recapitalization of common stock
(Note 7) (3,333,000) (10,000) (4,210,000) (13,000)
Net loss - - - -
------------ ---------- -------------- --------------
BALANCES AT DECEMBER 31, 1995 - $ - - $ -
============ ========== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Common Stock Additional
----------------------------- Paid-In
Shares Amount Capital
------------ -------------- --------------
<S> <C> <C> <C>
BALANCES AT DECEMBER 31, 1993 - $ - $7,386,000
YEAR ENDED DECEMBER 31, 1994:
Change in par value of Class B common
stock to $.0001 - - (3,000)
Issuance of common stock:
For services relating to warrants
exercised in 1995 - - 88,000
Upon cancellation of indebtedness - 445,000
In exchange for advances repayable
only out of proceeds of public
offering - - 471,000
Upon exercise of option - - 8,000
For cash, less related costs of $152,000 - - 933,000
Upon conversion of $162,000 of 7%
convertible promissory notes and
accrued interest thereon - - 165,000
Upon exercise of option to acquire
laboratory equipment and forgiveness
of related accrued rent - - 271,000
Upon conversion of preferred stock - - -
Issuance of convertible preferred stock:
In exchange for convertible
promissory notes - - 356,000
For cash - - 100,000
Net loss - - -
------------ -------------- --------------
BALANCES AT DECEMBER 31, 1994 - - 10,220,000
YEAR ENDED DECEMBER 31, 1995:
Issuance of common stock:
Upon conversion of convertible
preferred stock - - (1,000)
Upon conversion of 7% convertible
promissory notes and accrued interest
thereon - - 1,050,000
Upon exercise of warrants - - 254,000
Recapitalization of common stock
(Note 7) 7,543,000 75,000 (52,000)
Net loss - - -
------------ -------------- --------------
BALANCES AT DECEMBER 31, 1995 7,543,000 $ 75,000 $11,471,000
============ ============== ==============
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING
ACCUMULATED DEVELOPMENT
DEFICIT STAGE
--------------- --------------
<S> <C> <C>
BALANCES AT DECEMBER 31, 1993 $(6,865,000) $(1,868,000)
YEAR ENDED DECEMBER 31, 1994:
Change in par value of Class B common
stock to $.0001 - -
Issuance of common stock:
For services relating to warrants
exercised in 1995 - -
Upon cancellation of indebtedness - -
In exchange for advances repayable
only out of proceeds of public
offering - -
Upon exercise of option - -
For cash, less related costs of $152,000 - -
Upon conversion of $162,000 of 7%
convertible promissory notes and
accrued interest thereon - -
Upon exercise of option to acquire
laboratory equipment and forgiveness
of related accrued rent - -
Upon conversion of preferred stock - -
Issuance of convertible preferred stock:
In exchange for convertible
promissory notes - -
For cash - -
Net loss - (2,133,000)
--------------- --------------
BALANCES AT DECEMBER 31, 1994 (6,865,000) (4,001,000)
YEAR ENDED DECEMBER 31, 1995:
Issuance of common stock:
Upon conversion of convertible
preferred stock - -
Upon conversion of 7% convertible
promissory notes and accrued interest
thereon - -
Upon exercise of warrants - -
Recapitalization of common stock
(Note 7) - -
Net loss - (2,472,000)
--------------- --------------
BALANCES AT DECEMBER 31, 1995 $(6,865,000) $(6,473,000)
=============== ==============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 80
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JULY 21, 1989
YEAR ENDED (DATE OF
DECEMBER 31, INCEPTION) TO
------------------------------------ DECEMBER 31,
1995 1994 1995
--------------- --------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,472,000) $ (2,133,000) $ (7,102,000)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation 167,000 10,000 177,000
Amortization of debt issue costs 179,000 66,000 245,000
Other - 25,000 25,000
Loss from discontinued operations - - 629,000
Fair value of warrants and option granted for services
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 (30,000) (24,000) (49,000)
Security deposits - (20,000) (20,000)
Accounts payable and accrued expenses 94,000 589,000 1,333,000
Due to related parties 160,000 167,000 209,000
--------------- --------------- ----------------
Net cash provided by (used in) operating
activities (1,902,000) (1,320,000) (4,330,000)
--------------- --------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (580,000) (580,000)
Restricted cash 183,000 (230,000) (47,000)
Net advances from (to) discontinued operations - - 94,000
--------------- --------------- ----------------
Net cash provided by (used in) investing
activities 183,000 (810,000) (533,000)
--------------- --------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net advances repayable only out of proceeds of public offering - - 471,000
Proceeds received upon issuance of common stock - 936,000 1,032,000
Proceeds received from issuance of preferred stock - 100,000 100,000
Proceeds received upon exercise of warrants, net of costs 343,000 8,000 472,000
Net advances by former principal stockholder - - 321,000
Proceeds from sale of convertible debt 1,760,000 1,027,000 3,108,000
Debt issue costs (273,000) (99,000) (419,000)
--------------- --------------- ----------------
Net cash provided by financing activities 1,830,000 1,972,000 5,085,000
--------------- --------------- ----------------
NET CHANGE IN CASH AND EQUIVALENTS 111,000 (158,000) 222,000
CASH AND EQUIVALENTS, BEGINNING OF YEAR 106,000 264,000 -
--------------- --------------- ----------------
CASH AND EQUIVALENTS, END OF YEAR $ 217,000 $ 106,000 $ 222,000
=============== =============== ================
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 $ 445,000
=============== =============== ================
Issuance of common stock for services $ - $ 88,000 $ 88,000
=============== =============== ================
Exchange of equipment and accrued rent for common stock $ - $ 271,000 $ 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 $ 356,000
=============== =============== ================
Conversion of convertible debt and accrued interest
into common stock $ 1,051,000 $ 165,000 $ 1,215,000
=============== =============== ================
Exchange of advances repayable only out of
proceeds of public offering for common stock $ - $ 471,000 $ 471,000
=============== =============== ================
Deferred offering costs on warrants exercised $ 88,000 $ - $ 88,000
=============== =============== ================
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 81
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Lithium Technology Corporation ("LTC") and its wholly-owned
subsidiary, Lithion Corporation ("Lithion"), collectively
referred to as the "Company", are development stage companies
in the process of commercializing a unique, solid-state,
lithium-polymer rechargeable battery, and are engaged in
research, development and engineering activities to further
develop and exploit this battery technology and hold various
patents relating to such batteries. The Company believes that
its battery technology, which is currently in the
pre-prototype development phase, is capable of providing four
to six 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, and
constructing a manufacturing plant. The Company's
commercialization focus is on the rapidly growing portable
electronics market segment (notebook and palmtop computers and
wireless communications 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.
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 the reverse stock split (see Note 7).
ESTIMATES AND UNCERTAINTIES - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results, as determined at a later date, could
differ from those estimates.
FINANCIAL INSTRUMENTS - Financial instruments include cash,
other assets, accounts payable and promissory notes payable.
The amounts reported for financial instruments are considered
to be reasonable approximations of their fair values. The fair
value estimates presented herein were based on market
information available to management. The use of different
market
F-7
<PAGE> 82
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
assumptions and/or estimation methodologies could have a
material effect on the estimated fair value amounts.
CONSOLIDATION - As indicated above, the consolidated financial
statements include the accounts of LTC and Lithion. All
significant intercompany accounts and transactions have been
eliminated.
CASH AND EQUIVALENTS - The Company considers all highly liquid
debt instruments purchased with a maturity of three months or
less to be cash equivalents.
PROPERTY AND EQUIPMENT - Property and equipment are recorded
at cost. Furniture and fixtures, computer equipment and
software and laboratory equipment are depreciated primarily
using the straight-line method over their estimated useful
lives of 3 to 7 years. Leasehold improvements are amortized
over the period of the respective lease using the
straight-line method.
CONCENTRATION OF CREDIT RISK - The Company maintains its cash
balances in several financial institutions. The accounts at
each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1995, uninsured
balances were approximately $24,000. In addition, the Company
has a money market account in a non-financial institution
totalling approximately $47,000 at December 31, 1995.
DEBT ISSUE COSTS - Costs related to the issuance of
convertible promissory notes are capitalized. Such costs are
amortized over the term of the related debt.
ENGINEERING, RESEARCH AND DEVELOPMENT - Costs related to new
product development and improvement or support of existing
products are expensed as incurred.
INCOME TAXES - Deferred tax assets and liabilities are
computed annually for temporary differences between the
financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the
periods in which the temporary differences are expected to
affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount
expected to be realized.
NET INCOME (LOSS) PER COMMON SHARE - Net income (loss) per
common share is based upon the weighted average number of
outstanding common shares. The shares issuable upon the
exercise of outstanding warrants and options have been
excluded since the assumed conversion would be antidilutive
due to net losses for all periods presented.
F-8
<PAGE> 83
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEW ACCOUNTING PRONOUNCEMENTS - Statement of Financial
Accounting Standards 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
possible impairment and written down to fair value, if
appropriate. The Company will adopt this new pronouncement in
1996 and the impact of adoption is not expected to have a
material effect on the Company's financial statements.
Statement of Financial Accounting Standards 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
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. The Company has not yet
determined if it will adopt this new pronouncement in 1996 or
provide only proforma disclosure. The effects of this new
pronouncement, if adopted, have not been determined.
Statements of Financial Accounting Standards (SFAS No. 106)
"Employers' Accounting for Post-Retirement Benefits Other Than
Pensions" and (SFAS No. 112) "Employers' Accounting for
Post-employment Benefits" were issued in December 1990 and
November 1992, respectively. SFAS 106 requires the accrual of
post retirement benefits (principally post-retirement health
care benefits) as a form of deferred compensation rather than
recognizing such benefits when paid. SFAS 112 requires the
accrual of certain benefits to be paid to former or inactive
employees when they leave the Company other than by reason of
retirement, such as salary continuation, severance benefits
and continuation of benefits such as life insurance coverage.
The Company presently has no benefit plans that would be
subject to these standards.
NOTE 2 - OPERATING AND LIQUIDITY DIFFICULTIES AND MANAGEMENT'S PLANS TO
OVERCOME :
The Company has been unprofitable since inception and expects
to incur substantial additional operating losses over the next
several years. The Company has generated no revenues nor has
it had any commercial operations to date and does not expect
to generate any revenues from operations during 1996.
The Company has experienced liquidity difficulties since
inception and in order to continue the development of the
Company's technology, needs significant additional financing.
The Company has financed its operations since December 1993
with the proceeds from the sale of convertible debt and
private placements of common and preferred stock.
F-9
<PAGE> 84
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT'S PLANS - During 1994, the Company recruited a new
management team and a core technical staff with needed
commercialization and battery technology expertise. The staff
has expertise in technology, commercialization, process
development, battery engineering and strategic alliance
development. A modern research facility was leased and
product development commenced. The Company's operating
results to date are solely attributable to research and
development activities and general and administrative
expenses.
Management's operating plan seeks to minimize the Company's
capital requirements, but commercialization of the Company's
battery technology will require substantial amounts of
additional capital. The Company expects that research and
development 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 raised approximately $1,830,000 (1995) and
$1,972,000 (1994) through the sale of convertible debt and
common and preferred stock. The Company raised an additional
$500,000 in January 1996 through the sale of convertible debt.
In March 1996, the Company sold a 4% equity position to a
Japanese Consortium for approximately $2,400,000 (see Note 8).
As a result, the Company believes that it has sufficient
capital resources to meet the Company's needs and satisfy the
Company's obligations for the next twelve months, based on the
Company's current strategies.
There can be no assurance that the capital needed for
attaining commercial viability of the Company's battery
technology will continue to be obtained, which the Company
currently estimates at $15 to 20 million. 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.
Reference should be made to "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
included elsewhere herein for additional information.
F-10
<PAGE> 85
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 is summarized as
follows:
<TABLE>
<S> <C>
Laboratory equipment $714,000
Furniture and fixtures 80,000
Leasehold improvements 36,000
--------
830,000
Less: Accumulated depreciation and
amortization 177,000
--------
$653,000
========
</TABLE>
NOTE 4 - RELATED PARTY TRANSACTIONS:
The Company previously engaged in a number of transactions
with the former majority stockholders of the Company. These
transactions, including advances, patent agreements, leases
and other arrangements, were carried out under terms and
conditions which have varied during the periods presented.
Such terms and conditions may not have been the same as those
which would have resulted from transactions among unrelated
parties
LEASES - From 1989 through 1994, the Company had leased
equipment related to battery research and development from
Henry Hope (and from his Estate) and had leased a research
laboratory in Willow Grove, Pennsylvania from Stephen Hope and
other members of his family. The Hopes were the former
principal stockholders of the Company. Pursuant to an
agreement with the Company entered into as of May 1994,
Stephen Hope and the Estate of Henry Hope terminated the
equipment lease and the real property lease and granted to the
Company a purchase option with respect to all or part of such
equipment. The Company exercised such option with respect to
the designated equipment and the leases were terminated in
December 1994. Upon the consummation of such purchase, the
Company issued 83,334 shares of common stock for such
equipment having an independent appraised value of $250,000.
In addition, Stephen Hope agreed to waive any claims to
accrued rent with respect to the equipment and property
leases.
Rent accrued under the above leases totalled $22,000 during
the year ended December 31, 1994.
AGREEMENT WITH FORMER PRINCIPAL STOCKHOLDER - Through December
31, 1993, the Company had received net advances of
approximately $445,000 from its former principal stockholder,
Stephen Hope. In December 1993,
F-11
<PAGE> 86
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stephen Hope exchanged $321,000 of this indebtedness (see Note
7) for convertible promissory notes of the Company,
convertible into approximately 642,000 shares of the Company's
common stock. In May 1994, the Company and Stephen Hope
agreed to the cancellation of the $321,000 convertible
promissory note, the surrender of the conversion right
included in the promissory note and the conversion of the
remaining amount due from the Company ($124,000) into 100,000
shares of common stock. Such agreement was subsequently
amended to provide for the issuance of 78,167 shares of common
stock and also provided for the cancellation of certain leases
and the execution of a new lease relating to certain
laboratory equipment then owned by Stephen Hope (see above).
CONSULTING AGREEMENTS - The Company entered into a consulting
agreement with Stephen Hope in December 1993, effective
January 1994. The agreement provided for annual compensation
of $50,000 for consulting services in connection with the
battery technology for a period to be determined by the
Company's Board of Directors and only if the Board determines
his services to be necessary. Upon the Company's raising of
sufficient additional capital, annual compensation was to be
increased to $150,000. The Company paid $44,000 to Stephen
Hope during 1994 pursuant to this agreement. No payments were
made during 1995.
During 1994, the Company had a consulting agreement with an
investment banking firm, whose former Executive Vice-President
was a former Director of the Company. The investment banking
firm acted as the Company's financial consultant providing
advisory services with respect to raising capital, developing
an alliance strategy, resolving outstanding obligations of the
Company for periods prior to 1994 and recruiting key
executives for the Company. The investment banking firm
provided services totalling $21,000 (1995) and $143,000 (1994)
for consulting, $119,000 related to the 1994 sale of 906,667
shares of common stock to private investors and $99,000
related to the sale of its 7% convertible promissory notes.
Amounts unpaid at December 31, 1995 and 1994 totalled $114,000
and $167,000, respectively. In addition, the Company paid
$35,000 to the investment banking firm prior to 1994 relating
to the sale of $356,000 of convertible promissory notes. The
firm also received five year warrants to acquire up to 6.75%
(on a fully-diluted basis) of the Company's common stock
outstanding. In April 1995, the Company terminated its
relationship with the investment banking firm. In September
1995, the Executive Vice President of the investment banking
firm resigned as a Director of the Company. See "Legal
Proceedings" included elsewhere herein and Note 6 -
"Contingencies" for information regarding certain claims filed
against the Company.
In connection with assisting the Company in its efforts in
1995 to restructure its finances, a consultant, who is a
director of the Company, and a corporation,
F-12
<PAGE> 87
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
whose principal stockholder is a director of the Company,
earned consulting fees of $119,000 and $206,000, respectively,
of which a total of $171,000 remains unpaid at December 31,
1995.
NOTE 5 - INCOME TAXES:
Deferred income taxes reflect the net effects of temporary
differences between the amounts of assets and liabilities for
financial reporting purposes and the amounts used for income
tax purposes. The principal temporary difference arises from
the net operating loss carryforwards and results in a deferred
tax asset of approximately $2,444,000 at December 31, 1995 and
$1,432,000 at December 31, 1994.
A valuation allowance is provided when it is more likely than
not that some portion of the deferred tax asset will not be
realized. The Company has determined, based on its recurring
net losses, lack of a commercially viable product and it being
a development stage company, that a full valuation allowance
is appropriate at December 31, 1995 and 1994.
A reconciliation of the provision (benefit) for income taxes
computed at the federal statutory rate of 34% and the
effective tax rate of income (loss) before income taxes is as
follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
------------------------------
1995 1994
----------- ---------
<S> <C> <C>
Computed tax on net loss at federal
statutory rate $ (840,000) $(725,000)
State income taxes, net of federal
income tax benefits (200,000) (172,000)
Tax effect of net operating losses not
currently usable 1,040,000 897,000
----------- ---------
Provision (benefit) for income taxes $ - $ -
=========== =========
</TABLE>
At December 31, 1995, the Company had net operating loss
carryforwards of approximately $5,819,000 expiring in the
years 2004 through 2010.
Current tax law limits the use of net operating loss
carryforwards after there has been a substantial change in
ownership (as defined) during a three year period. Because of
the possible future changes in common stock, the use of the
Company's net operating loss carryforwards may be subject to
an annual limitation. To the extent amounts available under
the annual limitation are not
F-13
<PAGE> 88
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
used, they may be carried forward for the remainder of 15
years from the year the losses were originally incurred.
NOTE 6 - 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 AGREEMENTS - In February 1994, the Company entered
into a five year employment agreement with its former
President/Chief Executive Officer. The agreement provided
for, among other things, annual compensation, bonuses and
stock options. Effective August 1995, the President/Chief
Executive Officer resigned, received $185,000, and waived all
claims against the Company for back pay and accrued bonuses.
The Company also has a four year employment agreement with its
Director of Research providing for annual compensation of
$125,000 through January 1998.
In addition, the Company has two separate letter agreements,
by which it employs its Director of Technology Development and
its Vice-President of Marketing. The agreements provide for
total annual compensation of $245,000 with annual bonuses as
determined by the Company's Board of Directors.
See Note 7 for information on certain stock options issued in
connection with the employment agreements.
LEGAL PROCEEDINGS -There is presently pending litigation in
the United States District court of the Southern District of
New York against the Company instituted by the investment
banking firm described in Note 4 (and a former principal of
the firm) that allegedly provided services to the Company.
Such action was instituted on February 7, 1996. The complaint
alleges monetary damages relating to certain warrants of the
Company that have not been registered and to which he claims
entitlement and also alleges entitlement to compensation for
services allegedly rendered to the Company. This action is in
discovery and the Company is vigorously defending this matter.
The Company is also contesting the issuance of these warrants
and raising other applicable defenses and claims.
NOTE 7 - STOCKHOLDERS' EQUITY:
MERGER AND REVERSE STOCK SPLIT - Pursuant to the January 1996
merger, as described in Note 1, the Company's existing Class A
and Class B common stock
F-14
<PAGE> 89
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
were combined into a single new class of common stock (the
"New Common Stock"). Each 30 outstanding shares of Class A
and Class B common stock were automatically converted into one
share of New Common Stock, each share of which has one vote.
In addition, each outstanding share of Series B and Series C
Convertible Preferred Stock was automatically converted into
one share of newly issued Series B Convertible Preferred Stock
and Series C Convertible Preferred Stock, respectively. Such
recapitalization has been reflected in the accompanying
consolidated financial statements as if it had occurred on
December 31, 1995. Retroactive effect has been given to the
weighted average number of shares outstanding for purposes of
computing net loss per share.
COMMON AND PREFERRED STOCK - On all matters that are required
or otherwise came before a vote of the stockholders prior to
the merger as described above, each share of Class B common
stock had one vote and each share of Class A common stock had
three votes.
In July 1989, 697,000 shares of the Company's common stock
were sold for $8,000 and the Company received an interest-free
advance of $792,000 from a financial consultant who provided
services to the Company, including introducing Lithion to the
Company. In June 1994 and as amended in October 1994, the
Company agreed to issue 133,333 shares of common stock to this
financial consultant in exchange for the remaining balance of
the $471,000 advance. In November 1994, the Company issued
21,833 shares of its common stock to this consultant in
exchange for services provided relating to warrants exercised.
Each share of Series C preferred stock is convertible into
8.33 shares of common stock (total of 83,333 shares issuable).
The Series C preferred stock is not entitled to dividends and
carries no voting, preemptive, redemption or similar rights.
In January 1996, the Company revised its authorized shares of
common stock to 50,000,000 and its preferred stock to 100,000,
respectively, and changed the par value of its common stock
from $.0001 to $.01 per share.
CONVERTIBLE DEBT - In December 1993 and January 1994, the
Company sold 6% convertible promissory notes totalling
$677,000 of which $321,000 was issued in exchange for other
Company indebtedness owed to the Hopes. In June 1994, the
holders of $356,000 of these convertible promissory notes
agreed to exchange such notes for shares of the Company's
Series B convertible preferred stock. Each share of Series B
preferred stock is convertible into approximately 53 shares of
the Company's common stock. During December 1994 through
December 1995, approximately 7,200 shares of the preferred
F-15
<PAGE> 90
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
stock were converted into approximately 384,000 shares of the
Company's common stock.
During September 1994 through April 1995, the Company sold 7%
convertible promissory notes totalling approximately
$1,468,000. A total of up to approximately 699,000 shares of
the Company's common stock may be issued upon conversion of
these notes. Through December 1995, promissory notes
totalling approximately $1,168,000 were converted to 577,967
shares of common stock, together with related accrued interest
of $48,000. The remaining $300,000 of these promissory notes
were converted to 152,038 shares of common stock in January
1996.
During August through October 1995, the Company issued and
sold to a group of private investors, including certain
Directors and an officer, an aggregate principal amount of
$1,000,000 convertible promissory notes. Such notes bear
interest at 12% per annum, mature on August 3, 1996 and are
convertible into an aggregate of 30% of the then outstanding
common stock of the Company on a fully diluted basis. Such
notes, and related accrued interest, were converted into
5,617,492 shares of common stock in connection with the
Company's March 1996 transaction with the Japanese Consortium
(see Note 8).
The Company also issued and sold to a group of private
investors, including certain Directors and an officer, an
aggregate principal amount of $800,000 in convertible
promissory notes in December 1995 ($284,000) and January 1996
($516,000). Such notes bear interest at 12% per annum, mature
on November 30, 1996 and are convertible into 1,333,333 shares
of the Company's common stock. The shares to be issued upon
conversion may be adjusted for any additional stock issuances
by the Company due to antidilutive provisions. Such notes,
and related accrued interest, were converted into 1,385,954
shares of common stock in connection with the Company's March
1996 transaction with the Japanese Consortium (see Note 8).
STOCK INCENTIVE PLAN - The Company's Board of Directors
adopted the 1994 Stock Incentive Plan (the "1994 Stock Plan")
in February. The purpose of the 1994 Stock Plan is to aid the
Company in attracting, retaining and motivating officers, key
employees, consultants and other advisors of the Company by
providing them with incentives for making significant
contributions to the growth, profitability and success of the
Company. The 1994 Stock Plan shall terminate ten years after
its initial effective date, unless terminated earlier by the
Board of Directors. A total of 1,333,333 shares of common
stock shall be reserved and available for grants. Shares
available for issuance under the 1994 Stock Plan were
increased to 2,666,667 pursuant to a Plan amendment adopted by
the Company's Board of Directors in December 1995. Stock
options permitting the holder to purchase a specified number
of shares of common stock will be granted at an exercise price
not less than 100% of the
F-16
<PAGE> 91
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
fair value of such stock on the date of grant. The stock
options may be in the form of an incentive stock option or a
non-qualified stock option. Options granted will be cancelled
immediately upon termination of the grantee's employment or
association with the Company, except in certain situations
such as retirement, death or disability.
In February 1994, pursuant to the 1994 Stock Plan, the Company
granted to the former President/Chief Executive Officer a
ten-year non-qualified stock option to purchase an aggregate
of 522,020 shares of common stock at an exercise price of $.50
per share. Upon the resignation of the President/Chief
Executive Officer in August 1995, approximately 386,645
options have vested and the expiration date of such options
was extended until 90 days following the registration of the
underlying shares on a Form S-8 Registration Statement. Such
registration statement has not yet been filed.
STOCK OPTION REPRICING - In September 1995, the Board of
Directors approved the exchange of options held by each
employee (including executive officers) under the Company's
Stock Plan for new options. The new options provide for an
exercise price of $0.03 per share, the then estimated fair
market value of the common stock. The Board of Directors
determined such change to be appropriate in order to sustain
the incentivization of all of its employees. As a condition
for such repricing, such new options do not become exercisable
until the later of July 1, 1996 or the original vesting
schedule of such options. As a result of this stock options
repricing, the Company cancelled a total of 780,000 stock
options and granted the same number of new stock options at
the aforementioned $.03 exercise price per share. Such
exercise price was adjusted to $.90 per share, pursuant to the
reverse stock split.
Options under the 1994 Stock Plan are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Options outstanding, beginning of year 816,000 -
Options granted ($.501 - $2.55 per share) 437,000 816,000
Options cancelled (153,000) -
-------------- --------------
Options outstanding, end of year
($.501 -$.2.55 per share) 1,100,000 816,000
============== ==============
Options available for grant, end of year 1,567,000 517,000
============== ==============
Options exercisable, end of year 403,000 139,000
============== ==============
</TABLE>
Since inception, no options granted under the plan have been
exercised.
F-17
<PAGE> 92
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS STOCK OPTION PLAN- In August 1995, the Board of
Directors adopted the Directors Stock Option Plan (the
"Directors Plan"). The purpose of the Directors Plan is to
aid the Company in attracting, retaining and motivating
independent directors by providing them with incentives for
making significant contributions to the growth and
profitability of the Company. The Directors Plan shall
terminate ten years after its initial effective date, unless
terminated earlier by the Board of Directors. A total of
333,333 shares of the Company's common stock shall be reserved
and available for grant. Stock options permitting the holder
to purchase a specified number of shares of common stock will
be granted at an exercise price equalling the then fair market
value of the common stock on the date of grant. Upon the
termination of a participant's association with the Company,
options granted will remain exercisable for a period of three
months or until the stated expiration of the stock option, if
earlier.
Options under the Directors Plan at December 31, 1995 are
summarized as follows:
<TABLE>
<S> <C>
Options outstanding, beginning of year -
Options granted ($.90 per share) 106,672
---------
Options outstanding, end of year ($.90 per share) 106,672
=========
Options available for grant, end of year 226,661
=========
Options exercisable, end of year -
=========
</TABLE>
Since inception, no options granted under the plan have been
exercised.
RIGHTS OF SHAREHOLDERS - The Company has 75,849 shares of
authorized undesignated preferred stock at December 31, 1995,
which may be issued with such rights and preferences as the
Board of Directors may determine upon issuance. Therefore,
the undesignated preferred stock may be issued with
liquidation, dividend, voting and other rights superior to
those of existing shareholders, including the right to elect a
controlling number of directors as a class.
OTHER WARRANTS AND OPTIONS - During the periods presented, the
Company had outstanding 632,833 warrants which entitled the
holders thereof to purchase one share of common stock at $2.85
per share, such price being reduced from $4.41 per share by a
Board of Directors' resolution in January 1995. During
February and March 1995, 120,167 warrants were exercised. The
remaining warrants expired March 17, 1995.
During the periods presented, the Company granted to various
consultants options to purchase 78,333 shares of the Company's
common stock at prices ranging from $.90 to $4.20 per share.
The options have vesting schedules substantially similar to
the vesting schedules of the 1994 Stock Plan and the Directors
Plan.
F-18
<PAGE> 93
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - SUBSEQUENT EVENT:
TECHNOLOGY DEVELOPMENT AGREEMENT - 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. Negotiations are continuing with a third party
interested in joining 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 or portable electronics
applications. The principal objective is to take the patented
technology to the manufacturing scale-up state. 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 option 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
631,367 shares of the Company's Common Stock (representing a
4% equity position in the Company), the Consortium paid
$2,400,000. In addition, $1,800,000 of convertible promissory
notes and related accrued interest (see Note 7) were converted
into approximately 7,000,000 shares of the Company 's common
stock in connection with the Agreement.
NOTE 9 - EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED):
As more fully described in Notes 2 and 8, the Company believed
it had sufficient capital resources to meet its needs and
satisfy its obligations for 1996. The Company now believes
that its capital resources are only sufficient to meet its
requirements through approximately the last quarter of 1996.
The Company also believes that the capital needed for attaining
commercial viability of its battery technology now approximates
$25 million. However, there can be no assurances that such
capital can be obtained. If the Company is unable to raise
sufficient capital, it will be forced to curtail research and
development expenditures which will delay, and could prevent,
the completion of the commercialization process and the
Company's ability to continue in existence. Reference should
be made to "Management's Discussion and Analysis or Plan of
Operation" included elsewhere herein for additional
information.
F-19
<PAGE> 94
LITHIUM TECHNOLOGY CORPORATION AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
------------- -------------
CURRENT ASSETS: (Unaudited)
<S> <C> <C>
Cash and equivalents $ 2,223,000 $ 217,000
Prepaid expenses and other current assets 8,000 54,000
------------ ------------
Total Current Assets 2,231,000 271,000
------------ ------------
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION OF
$220,000 at March 31, 1996 and $177,000 at December 31, 1995 700,000 653,000
------------ ------------
OTHER ASSETS:
Restricted cash 47,000 47,000
Debt issue costs, less accumulated amortization of $100,000 -- 174,000
Security deposits 20,000 20,000
------------ ------------
67,000 241,000
------------ ------------
$ 2,998,000 $ 1,165,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
12% convertible promissory notes $ -- $ 1,284,000
Accounts payable 1,103,000 891,000
Due to related parties 94,000 327,000
Accrued salaries 152,000 155,000
------------ ------------
Total Current Liabilities 1,349,000 2,657,000
7% CONVERTIBLE PROMISSORY NOTES, DUE DECEMBER 1999 -- 300,000
------------ ------------
Total Liabilities 1,349,000 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 - 795 shares at March 31, 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 - 10,000 shares
Common stock par value $.01 per share:
Authorized - 50,000,000 shares
Issued and outstanding - 15,658,704 shares at March 31, 1996 and 7,542,795 shares at
December 31, 1995 157,000 75,000
Additional paid-in capital 15,797,000 11,471,000
Accumulated deficit (6,865,000) (6,865,000)
Deficit accumulated during development stage (7,440,000) (6,473,000)
------------ ------------
Total Stockholders' Equity (Deficiency) 1,649,000 (1,792,000)
------------ ------------
$ 2,998,000 $ 1,165,000
============ ============
</TABLE>
See notes to consolidated financial statements
F-20
<PAGE> 95
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Period from
March 31, July 21, 1989
------------------------------ (Date of Inception)
1996 1995 to March 31, 1996
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
COSTS AND EXPENSES:
Engineering, research and development $ 256,000 $ 285,000 $ 2,890,000
General and administrative 655,000 238,000 4,398,000
Interest expense, net of interest income
of $4,000 (1996) and $2,000 (1995) 56,000 19,000 152,000
----------- ----------- -----------
$ 967,000 $ 542,000 $ 7,440,000
----------- ----------- -----------
NET LOSS $ (967,000) $ (542,000) $(7,440,000)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 8,013,000 6,626,000
=========== ===========
NET LOSS PER SHARE $ (.12) $ (.08)
=========== ===========
</TABLE>
See notes to consolidated financial statements
F-21
<PAGE> 96
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY) - (UNAUDITED)
<TABLE>
<CAPTION>
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
THREE MONTHS ENDED
MARCH 31, 1996:
Issuance of Common Stock:
Upon conversion of convertible
preferred stock (6,147) - - - 328,000 3,000
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
Net Loss
------ ------ ------ ---- ----------- --------
BALANCES AT
MARCH 31, 1996 795 $ - 10,000 $ - 15,659,000 $157,000
====== ====== ====== ==== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Paid-In Accumulated Development
Capital Deficit Stage
------- ------- -----
<S> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1995 $11,471,000 $(6,865,000) $(6,473,000)
THREE MONTHS ENDED
MARCH 31, 1996:
Issuance of Common Stock:
Upon conversion of convertible
preferred stock (3,000)
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
Net Loss (967,000)
----------- ----------- -----------
BALANCES AT
MARCH 31, 1996 $15,797,000 $(6,865,000) $(7,440,000)
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements
F-22
<PAGE> 97
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Three Months Ended July 21, 1989
March 31, (Date of Inception) to
-----------------------
1996 1995 March 31, 1996
---------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Net loss $ (967,000) $(542,000) $(8,069,000)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation 43,000 42,000 220,000
Amortization of debt issue costs 225,000 5,000 470,000
Other -- -- 25,000
Loss from discontinued operations -- -- 629,000
Fair value of warrants and option granted for services 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 46,000 12,000 (8,000)
Security deposits -- -- (20,000)
Accounts payable and accrued expenses 209,000 (36,000) 1,542,000
Due to related parties (113,000) -- 96,000
---------- --------- -----------
Net cash provided by (used in) operating activities (557,000) (519,000) (4,892,000)
---------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (90,000) (7,000) (670,000)
Restricted cash -- -- (47,000)
Net advances from (to) discontinued operations -- -- 94,000
---------- --------- -----------
Net cash provided by (used in) investing activities (90,000) (7,000) (623,000)
---------- --------- -----------
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 -- 278,000 472,000
Net advances by former principal stockholder -- -- 321,000
Proceeds from sale of convertible debt 516,000 405,000 3,624,000
Debt issue costs (51,000) (41,000) (470,000)
---------- --------- -----------
Net cash provided by financing activities 2,653,000 642,000 7,738,000
---------- --------- -----------
NET CHANGE IN CASH AND EQUIVALENTS 2,006,000 116,000 2,223,000
CASH AND EQUIVALENTS, BEGINNING OF YEAR 217,000 106,000 --
---------- --------- -----------
CASH AND EQUIVALENTS, END OF YEAR $2,223,000 $ 222,000 $ 2,223,000
========== ========= ===========
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 $2,201,000 $ 25,000 $ 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 $ 88,000
========== ========= ===========
</TABLE>
See notes to consolidated financial statements
F-23
<PAGE> 98
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31,1996
I. 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 month period ended March
31, 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
believes that its battery technology, which is currently in the
pre-prototype development phase, is capable of providing four to six 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, and constructing
a manufacturing plant. The Company's commercialization focus is on the
rapidly growing portable electronics
F-24
<PAGE> 99
market segment (notebook and palmtop computers and wireless communications
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 three
months ended March 31, 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>
March 31, December 31,
1996 1995
------------ --------------
<S> <C> <C>
Laboratory equipment $ 800,000 $ 714,000
Furniture and fixtures 82,000 80,000
Leasehold improvements 38,000 36,000
------------ --------------
920,000 830,000
Less: Accumulated depreciation and amortization 220,000 177,000
------------ --------------
$ 700,000 $ 653,000
============ ==============
</TABLE>
F-25
<PAGE> 100
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.
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 (refer to Part II, Item 2).
WARRANTS - At March 31, 1996, the Company had warrants outstanding to
purchase 522,289 shares of Common Stock at an exercise price of $0.501 per
share which expire in December 1998 (see Note 5).
SERIES B CONVERTIBLE PREFERRED STOCK - The 795 shares outstanding at March
31, 1996 are convertible into 42,400 shares of Common Stock.
SERIES C CONVERTIBLE PREFERRED STOCK - The 10,000 shares outstanding at
March 31, 1996 are convertible 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 - Pursuant to a written consent of
majority stockholders dated February 8, 1996, the following directors (then
in office) each exchanged options to purchase 13,334 shares of Common
Stock, previously granted to each of them by the Company, for the same
number of options to be granted under the Directors Stock Option Plan at a
purchase price of $0.90 per share, with vesting schedules substantially
similar to the vesting schedules of the surrendered options: Messrs. J.
Paul Bagley, Jr.; Anthony B. Fisher; David H. Hughes; Ralph D. Ketchum;
Gerald M. Labush; John D. McKey, Jr.; Donald C. Taylor; and Thomas R.
Thomsen.
F-26
<PAGE> 101
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. Negotiations are
continuing with a third party interested in joining 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 or 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 631,367 shares of the Company's Common Stock
(representing a 4% equity position in the Company), 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.
F-27
<PAGE> 102
<TABLE>
<S> <C>
=================================================== ===============================================
No dealer, salesman or other person has been
authorized to give any information or to make any
representations, other than those contained or
incorporated by reference in this Prospectus, in
connection with the offering contained herein,
and, if given or made, such information and LITHIUM TECHNOLOGY
representations must not be relied upon as having CORPORATION
been authorized by the Company or the Selling
Shareholder. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful
to make such offer in such jurisdiction. Neither
the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any Common Stock
implication that there has been no change in the
affairs of the Company since the date hereof.
----------------
PROSPECTUS
TABLE OF CONTENTS
----------------
Page
----
PROSPECTUS SUMMARY . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . 7
USE OF PROCEEDS . . . . . . . . . . . . . . . 17
SELLING SHAREHOLDERS . . . . . . . . . . . . 17
PLAN OF DISTRIBUTION . . . . . . . . . . . . 26 July , 1996
SELECTED FINANCIAL INFORMATION . . . . . . . 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS . . . . . . . . . . . 29
BUSINESS . . . . . . . . . . . . . . . . . . 36
PROPERTY . . . . . . . . . . . . . . . . . . 46
LEGAL PROCEEDINGS . . . . . . . . . . . . . . 46
MANAGEMENT . . . . . . . . . . . . . . . . . 47
EXECUTIVE COMPENSATION . . . . . . . . . . . 50
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . 60
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 63
DESCRIPTION OF SECURITIES . . . . . . . . . . 66
MARKET PRICES . . . . . . . . . . . . . . . . 68
LEGAL MATTERS . . . . . . . . . . . . . . . . 69
EXPERTS . . . . . . . . . . . . . . . . . . . 69
DISCLOSURE OF COMMISSION POSITION
ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES . . . . . . . . . . . . . . . 69
FINANCIAL STATEMENTS . . . . . . . . . . . . F-1
=================================================== ===================================================
</TABLE>
72
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law
(the "DGCL"), Article V of the Company's By-laws provides for the
indemnification of an "authorized representative" of the Company (a) against
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person, by reason of the fact that such person was
or is an authorized representative of the Company, in connection with a
threatened, pending or completed third party proceeding, whether civil or
criminal, administrative or investigative, if such, individual acted in good
faith and in a manner such person reasonably believed to be in, or not opposed
to, the best interests of the Company, and, if the action was a criminal
proceeding, if such person had no reasonable cause to believe that such
person's conduct was unlawful; and (b) against expenses actually and reasonably
incurred by such person in connection with the defense or settlement of a
threatened, pending or completed corporate proceeding, by reason of the fact
such person was or is an authorized representative of the Company, if such
person acted under the standards set forth in section (a) above and if such
person was not found liable to the Company (or if so found liable, if a proper
court found such person to be fairly and reasonably entitled to
indemnification). The Company's By-laws further provide for mandatory
indemnification of authorized representatives of the Company who have been
successful in defense of any third party or corporate proceeding or in defense
of any claim, issue or matter therein, against expenses actually and reasonably
incurred in connection with such defense. An "authorized representative" of
the Company includes a director, employee or agent of the Company, or a person
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
In addition, Article Ninth of the Company's Certificate of
Incorporation provides that, to the full extent that the DGCL permits the
limitation or elimination of the liability of directors or officers of a
corporation, directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages. As a result of this
provision, the Company and its stockholders may be unable to obtain monetary
damages from a director for breach of his duty of care. Although stockholders
may continue to seek injunctive or other equitable relief for an alleged breach
of fiduciary duty by a director, stockholders may not have any effective remedy
against the challenged conduct if equitable remedies are unavailable.
The Company carries directors' and officers' liability insurance
covering losses up to $1,000,000 (subject to certain deductible amounts).
73
<PAGE> 104
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION+
<TABLE>
<S> <C>
Registration Fee - Securities and Exchange Commission . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,793.15
Printing of Registration Statement, Prospectus, etc. . . . . . . . . . . . . . . . . . . . . . . . . . *
-----------
Blue Sky Fee and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
-----------
Accounting Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
-----------
Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
-----------
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
-----------
</TABLE>
- ---------------------------------
+ No portion of these expenses will be borne by Selling Shareholders.
* To be filed by amendment.
74
<PAGE> 105
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
a) In the three years preceding this Registration Statement, the
Company has issued the following securities which were not registered under the
Securities Act of 1933, as amended*:
1) Recent Sales of Securities. In order to provide
additional funds for the Company to meet its short-term obligations, in
December 1993, the Company sold convertible promissory notes in the aggregate
principal amount of $356,000 to several private investors. The Company used
the proceeds from the sale of such notes for the payment of accounting, legal
and other professional fees necessary to complete past due audits of the
Company's financial statements and to restore the Company to compliance with
its reporting obligations under federal securities laws. In June 1994, the
holders of the convertible notes exchanged such notes for 14,151 shares of the
Company's Series B Convertible Preferred Stock. The notes were cancelled and
the consideration originally paid for the notes was contributed to capital.
Each share of Series B Convertible Preferred Stock was convertible into 53.3334
shares of the Company's Common Stock and all such shares have been converted
into 754,720 shares of Common Stock.
During fiscal 1990 and most of fiscal 1991,
Industries was indebted to Stephen Hope and the Estate of Henry Hope in the
amount of approximately $1,000,000. The notes representing these loans accrued
interest at an annual rate of 5%. During fiscal 1991, interest in the amount
of $82,000 had been accrued in accordance with the terms of the notes.
Effective October 10, 1991, $1,000,000 of the total debt and accrued interest
was exchanged for 10,000 shares of the Company's Series A Preferred Stock, and
therefore no longer accrued interest. In July, 1989, $2,300,000 of debt owed
to Stephen Hope was exchanged for 23,000 shares of the Company's Series A
Preferred Stock. The Series A Preferred Stock had a liquidation preference of
$100 per share. On November 16, 1993, the Company exchanged the outstanding
shares of Series A Preferred Stock, having a stated capital value of
$3,300,000, for 20,000,000 (pre-split) newly issued shares of Class B Common
Stock and 30,000,000 (pre-split) newly issued shares of Class A Common Stock.
In April, May and June, 1994, the Company sold an
aggregate of 27,200,000 (pre-split) shares of Common Stock at $.04 per share,
to a group of private investors. The proceeds of $1,088,000, prior to the
payment of the expenses of the offering, were used by the Company, in part, to
purchase the equipment necessary to build its second generation laboratory in
Plymouth Meeting, Pennsylvania.
In order to provide additional funds for the Company
to meet its short-term obligations, in June 1994, the Company sold 10,000
shares of its Series C Convertible Preferred Stock for an aggregate purchase
price of $100,000. Each share of Series C Convertible Preferred Stock was
convertible into 8.3334 shares of Common Stock and all such shares have been
converted into 83,334 shares of the Company's Common Stock.
- -----------------------------------
* All share amounts reflected in this Item 26 are post-split (1 for 30 Reverse
Stock Split on February 8, 1996) unless otherwise indicated.
75
<PAGE> 106
Between August 1994 and April 1995, the Company sold
7% convertible promissory notes in the aggregate principal amount of $1,467,750
to several private investors. The proceeds, prior to the payment of the
expenses of the offering, were used by the Company, in part, to purchase the
equipment necessary to build its second generation laboratory in Plymouth
Meeting, Pennsylvania. All such 7% notes were converted into 729,999 shares of
Common Stock.
In August 1995 and October 1995, the Company issued
and sold to a group of private investors an aggregate principal amount of
$1,000,000 convertible promissory notes. Such notes earned interest at 12.0%
per annum, matured on August 3, 1996 and were convertible into an aggregate of
30.0% of the outstanding Common Stock of the Company on a fully diluted basis
at the date of conversion. Such notes were secured by a first priority lien on
all the Company's assets including all patents and patent applications. On
March 29, 1996, the Company entered into a Technology Development Agreement and
a Stock Purchase Agreement with the Consortium and such notes, and accrued
interest thereon, were converted into 5,617,492 shares of Common Stock and all
liens and security interests held by the Noteholders were released and
discharged. See "Business -- Business Strategy" and "Management's Discussion
and Analysis or Plan of Operation".
In December 1995, the Company issued and sold to a
group of private investors an aggregate principal amount of $800,000
convertible promissory notes. Such notes earned interest at 12.0% per annum,
matured on November 30, 1996 and were convertible into an aggregate of
1,333,334 shares of Common Stock of the Company. Such notes were secured by a
second priority lien on all the Company's assets including all patents and
patent applications. On March 29, 1996, the Company entered into a Technology
Development Agreement and a Stock Purchase Agreement with the Consortium and
such notes, and accrued interest thereon, were converted into 1,385,954 shares
of Common Stock and all liens and security interests held by the Noteholders
were released and discharged. See "Business -- Business Strategy" and
"Management's Discussion and Analysis or Plan of Operation".
On March 29, 1996, the Company entered into a
Technology Development Agreement and a Stock Purchase Agreement with the
Consortium and simultaneously sold an aggregate of 631,637 shares of Common
Stock to the Consortium for $2,400,000. See "Business -- Business Strategy"
and "Management's Discussion and Analysis or Plan of Operation".
2) Grant of Securities for Services Rendered to Company.
Several persons were granted Common Stock of the Company, or securities
convertible into Common Stock such as stock options or warrants, for services
rendered to the Company. The issuance of the securities was in lieu of amounts
owed by the Company for such services or was consideration for such services as
initially agreed upon by the Company and the provider of such services. All
76
<PAGE> 107
such persons who received securities for services performed (excluding persons
described in Item 26(a)(3)) are listed below along with the amount and type of
security received:
<TABLE>
<CAPTION>
Number of Shares
of Common Stock or
Number of Shares
of Common Stock
Issuable Upon Exercise
Name of Security Holder Date of Grant of Warrant or Option Exercise Price
----------------------- ------------- ---------------------- --------------
<S> <C> <C> <C>
Erwin L. Pincus(1) 12/9/93 16,667 (option) $.501
Televentures, Inc. 7/8/94 5,000 (option) $4.20
1/24/95 2,500 (option) $3.15
Coastal Leasing and 11/1/94 21,833 N/A
Investment, Inc.
Mitsubishi Trust and 1/18/95 3,334 (option) $3.60
Banking Corporation
Anthony Rinaldo 3/30/95 1,000 N/A
Mitchell Kaduboski 4/21/95 1,667 (option) $3.00
Anthony Fisher 9/8/95 57,858 (warrant) $1.54
Nanele Services, Inc. 5/9/96 150,000 (warrant) $2.56
Group III Capital, Inc. 5/9/96 1,500,000 (warrant) $1.54
Robert Pfeffer 6/20/96 600,000 (warrant) $0.51
</TABLE>
3) Grant of Securities to Director and Employees. From
February 1994 through June 1996, pursuant to the Company's 1994 Stock Incentive
Plan and Directors Stock Option Plan, the Company issued options to purchase
1,952,038 shares of Common Stock to employees and directors at exercise prices
ranging from $.501 to $6.60. As of July 1, 1996, options to purchase 1,630,821
shares of Common Stock are currently outstanding under the 1994 Stock Incentive
Plan and options to purchase 106,672 shares of Common Stock are currently
outstanding under the Directors Plan.
4) Stock Split. On November 16, 1993, in connection
with the exchange of the Series A Preferred Stock, the Board of Directors of
the Company declared a 1.7 for 1 stock split for all outstanding shares of
Class B Common Stock for all shareholders of record on such
- --------------------------
(1) On February 8, 1994, Mr. Pincus exercised all such options upon
payment of the exercise price of $8,350.
77
<PAGE> 108
date. At that time, there were 21,532,900 (pre-split) shares of Class B Common
Stock outstanding; after giving effect to the stock split, an additional
15,073,030 (pre-split) shares of Class B Common Stock were to be issued. In
addition, the outstanding warrants to acquire an aggregate of 14,992,600
(pre-split) shares of Class B Common Stock were deemed to be amended to permit
the holders thereof to acquire an aggregate of 25,487,420 (pre-split) shares of
Class B Common Stock, with the exercise price thereof adjusted accordingly.
On February 8, 1996, pursuant to the approval of the
Company's then majority shareholder, Majestic, the Company implemented a
recapitalization whereby the existing shares of Class A and Class B Common
Stock were combined into a single new class of Common Stock. In addition, the
Company performed a 1 for 30 reverse stock split for all outstanding shares of
Class A and Class B Common Stock for all shareholders of record on such date.
Following the recapitalization, an aggregate of 7,380,250 shares of the new
Common Stock were issued and outstanding.
5) Transactions with Related Parties. As of December
1993, the Company owed Stephen F. Hope and his family approximately $445,000;
at that time the Company issued to Stephen F. Hope, a director of the Company,
and to members of Stephen F. Hope's family, a convertible promissory note in
exchange for outstanding indebtedness of the Company to such individuals in the
aggregate principal amount of $321,110. The balance of such indebtedness
constituted accrued rent on property and equipment leases owed to Stephen F.
Hope and his family by the Company. This convertible promissory note had the
same terms and provisions as the convertible promissory notes issued to private
investors, and was convertible into 642,220 shares of Common Stock of the
Company. Pursuant to an agreement with the Company entered into as of May
1994, Stephen F. Hope agreed to surrender and cancel this promissory note
(including the conversion rights associated therewith) and agreed to terminate
certain leases of real property and equipment and cancel the indebtedness owed
by the Company with respect thereto.
From 1989 through 1994, the Company had leased
equipment related to battery research and development from the Estate of Henry
Hope and had leased a research laboratory in Willow Grove, Pennsylvania from
Stephen F. Hope and other members of his family. Pursuant to an agreement with
the Company entered into as of May 1994, Stephen F. Hope and the Estate of
Henry Hope terminated the equipment lease and the real property lease, and
granted to the Company a purchase option with respect to all or part of such
equipment. The Company subsequently notified Stephen F. Hope of the exercise
of such option with respect to the designated equipment. Upon the consummation
of such purchase, the Company issued 83,334 shares of Common Stock for such
equipment having an appraised value of $250,000. In addition, Stephen F. Hope
agreed to waive any claims to accrued rent with respect to the equipment and
property leases, and in consideration therefor and the settlement of certain
other contingencies, the Company agreed to issue to Stephen F. Hope an
additional 78,167 shares of Common Stock of the Company.
78
<PAGE> 109
6) Trinity Loan. In connection with the Company's
original acquisition of Industries and Lithion, Trinity American Corporation
("Trinity") and certain individuals for whom Trinity acted as nominee,
purchased an aggregate 697,000 shares (the "Trinity Shares") of the Company's
Common Stock for $8,000 and provided an interest-free $792,000 advance to the
Company, repayable only, from gross proceeds from exercise of the Company's
outstanding warrants. Aside from arranging the advance, Trinity has also
provided other financial services to LTC, Industries and Lithion, including
introducing Industries and Lithion to LTC. At October 31, 1993, the
outstanding balance of the advance was $471,000. In June 1994, Trinity agreed
to contribute the balance of the advance to the capital of the Company and in
exchange therefor, the Company agreed to issue 133,333 shares of Common Stock
to Trinity. The Company, therefore, has no future obligation to repay the
outstanding balance of such advance. Holders of the Trinity Shares have the
right to include the Trinity Shares in any registration statement filed by the
Company with the SEC to the same extent as Henry Hope, Stephen Hope and Hope
Lithographic include shares in such registration statement.
7) Industries. In November 1993, the Company's Board of
Directors determined that, because of Industries' bankruptcy and the Plan to be
implemented, the Company's investment in Industries was worthless. After
giving effect to the sale of assets and the funding of the Plan, the Board of
Directors of the Company recognized that there would be no remaining assets
with which to make a distribution under the Plan to the Company, as the sole
shareholder of Industries. Accordingly, LTC transferred and assigned all of
the stock of Industries to the Company's then principal stockholder, Stephen F.
Hope, who had agreed to fund, in part, the obligations of Industries under the
Plan out of the proceeds from the sale of 2,000,000 shares of the Company's
Common Stock then owned by Stephen F. Hope and his family.
b) There were no underwriters employed in connection with any of the
transactions set forth in Item 26(a).
c) The sales and issuances of Common Stock described in Item 26(a)(3)
were deemed to be exempt under the Securities Act by virtue of Rule 701
promulgated thereunder in that they were offered and sold either pursuant to
written compensatory benefit plans or pursuant to a written contract relating
to compensation, as provided by Rule 701.
All other transactions described in Item 26(a) were, in the opinion of
the Company, exempt from registration under the Securities Act by reasons of
Section 4(2) thereof, since the sale of such securities did not involve any
public offering. Each person who purchased such securities represented that
such shares were purchased for investment and not with a view to any
distribution thereof. The purchasers of these securities were officers or
directors of the Company or persons who were sophisticated in financial matters
and had access to information about the Company and an opportunity to ask
questions of the directors and officers of the Company.
79
<PAGE> 110
ITEM 27. EXHIBITS
(a) The following Exhibits are filed as part of this Report:
<TABLE>
<S> <C>
3.1 Certificate of Incorporation.(1)
3.2 By-Laws, as amended.(1)
4.1 Specimen Common Stock Certificate.(2)
5.1 Legal Opinion of Mason, Briody, Gallagher & Taylor.*
10.1 Memorandum of Agreement dated February 9, 1989, among Trinity American Corporation, Lithion, Industries, Coastal
Leasing and Investments, Inc., Hope Lithographic Enterprises, Inc., Henry F. Hope and Stephen F. Hope, with
Amendment dated May 24, 1989.(3)
10.2 Stock for Debt Exchange Agreement dated as of October 10, 1991 among the Company, Stephen F. Hope and Hazel Hope as
Executrix of the Estate of Henry Hope.(4)
10.3 Exchange Agreement and Patent Assignment among Industries, Henry Hope and Stephen F. Hope.(3)
10.4 Exchange Agreement and Patent Assignment among Lithion, Stephen F. Hope and Henry Hope, dated July 20, 1989.(3)
10.5 Stock Purchase Agreement, dated as of November 17, 1993, by and among Stephen F. Hope, the Estate of Henry Hope,
and Majestic Hopes, L.L.C., as amended on December 10, 1993.(2)
10.6 Stockholders Agreement, dated as of December 10, 1993, among Stephen F. Hope, Hope Technologies, Inc., and Majestic
Hopes, L.L.C.(2)
10.7 Reserved.
10.8 1994 Stock Incentive Plan, as amended.(1)
10.9 Directors Stock Option Plan.(1)
10.10 Agreement, dated as of May 31, 1994, by and among Stephen F. Hope, Hope Industries, Inc., Hope Technologies, Inc.,
and Majestic Hopes, L.L.C.(2)
</TABLE>
80
<PAGE> 111
<TABLE>
<S> <C>
10.11 Consulting Letter Agreement, dated December 10, 1993, between Majestic Hopes, L.L.C. and Stephen F. Hope.(2)
10.12 Employment Letter Agreement, dated July 19, 1994, between David Cade and the Company.(2)
10.13 Employment Letter Agreement, dated February 28, 1994, between George Ferment and the Company.(2)
10.14** Technology Development Agreement, dated March 29, 1996, between Mitsubishi Materials Corporation, Mitsui & Co.,
Ltd. and the Company.(6)
10.15 Stock Purchase Agreement, dated March 29, 1996, between Mitsubishi Materials Corporation, Mitsui & Co., Ltd. and
the Company.(6) (without exhibits)
10.16 Form of Stock Option Agreement relating to the Company's 1994 Stock Incentive Plan, as amended.(6)
10.17 Form of Stock Option Agreement relating to the Company's Directors Stock Option Plan.(6)
10.18 Lease Agreement, dated July 22, 1994, between PMP Whitemarsh Associates and the Company and Addendum thereto dated
July 22, 1994.(6)
10.19 Consulting Agreement, dated January 18, 1995, between Mitsubishi Trust and Banking Corporation and the Company.(6)
10.20 Agreement between the Company and Coastal Leasing & Investment, Inc. dated November 1, 1994.(6)
10.21 Agreement dated June 6, 1994, by and among Stephen F. Hope, Hope Industries, Inc., Lithion Corporation, Hope
Technologies, Inc., Trinity American Corporation, with amendments dated November 1, 1994.(6)
10.22 Separation Agreement, dated August 7, 1995 between James A. Elsner and the Company.(6)
10.23 Agreement and Plan of Merger of Lithium Technology Corporation (a Nevada corporation) and Lithium Technology
Corporation (a Delaware corporation) dated February 28, 1996.(1)
10.24 Warrant to Purchase Common Stock issued to Robert Pfeffer dated June 20, 1996.
</TABLE>
81
<PAGE> 112
<TABLE>
<S> <C>
10.25 Agreement of Settlement and Release, dated June 20, 1996, by and between Matthew Stuart & Co., Inc., Robert
Pfeffer and the Company.
10.26 Employment Agreement, dated May 9, 1996, between Thomas R. Thomsen and the Company.
10.27 Stock Option Agreement, dated May 9, 1996, between Thomas R. Thomsen and the Company.
10.28 Consulting Agreement, dated May 9, 1996, between Donald Taylor and the Company.
10.29 Warrant to Purchase Common Stock issued to Group III Capital, Inc. dated May 9, 1996.
10.30 Warrant to Purchase Common Stock issued to Nanele Services, Inc., dated May 9, 1996.
21.1 List of Subsidiaries.(2)
23.1 Consent of Wiss & Co., LLP
23.2 Consent of Mason, Briody, Gallagher & Taylor.
24.1 Power of Attorney (included on pages 85 and 86).
</TABLE>
(1) Incorporated herein by reference to the exhibits contained in the Company's
Information Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934, dated January 19, 1996.
(2) Incorporated herein by reference to the exhibits contained in the Company's
Form SB-2 Registration Statement under the Securities Act of 1933
(Post-Effective Amendment No. 9).
(3) Incorporated herein by reference to the exhibits contained in the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 1989.
(4) Incorporated herein by reference to the exhibits contained in the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 1991.
82
<PAGE> 113
(5) Incorporated herein by reference to the exhibits contained in the Company's
Report on Form 8-K, dated November 23, 1994.
(6) Incorporated herein by reference to the exhibits contained in the Company's
Form 10-KSB for the fiscal year ended December 31, 1995.
* To be filed by amendment.
** The material has been filed separately with the Commission pursuant to an
application for confidential treatment as to certain portions thereof.
83
<PAGE> 114
ITEM 28. UNDERTAKINGS
The undersigned registrant will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental
change in the information in the registration
statement; and notwithstanding the foregoing, any
increase or decrease in volume of securities offered
(if the total dollar value of securities offered
would not exceed that which was registered) and any
deviation from the low or high end of the estimated
maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to
Rule 424(b) (#230.424(b) of this chapter) if, in the
aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
(iii) Include any addition or changed material on the plan
of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted against the Company by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
84
<PAGE> 115
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Plymouth Meeting, Commonwealth of Pennsylvania,
on July 15, 1996.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ Thomas R. Thomsen By: /s/ William D. Walker
------------------------ ----------------------------
Thomas R. Thomsen, Chief William D. Walker, Treasurer
Executive Officer and Chief Financial Officer
(Principal Executive Officer (Principal Financial and
Accounting Officer)
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons and in the
capacities and on the dates stated.
Each person, in so signing, also makes, constitutes and appoints
Thomas R. Thomsen, Chairman and Chief Executive Officer, his true and lawful
attorney-in-fact, in his name, place and stead to execute and cause to be filed
with the Securities and Exchange Commission any or all amendments to this
Registration Statement, with all exhibits and any and all documents required to
be filed with respect thereto, and to do and perform each and every act and
thing necessary to effectuate the same.
85
<PAGE> 116
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Thomas R. Thomsen Chairman of the Board July 15, 1996
- ---------------------
Thomas R. Thomsen
/s/ J. Paul Bagley, III Director July 15, 1996
- -----------------------
J. Paul Bagley, III
/s/ Harry Edelson Director July 15, 1996
- -----------------
Harry Edelson
/s/ L. Wayne Harber Director July 15, 1996
- -------------------
L. Wayne Harber
/s/ Stephen F. Hope Director July 15, 1996
- -------------------
Stephen F. Hope
/s/ David H. Hughes Director July 15, 1996
- -------------------
David H. Hughes
/s/ Ralph D. Ketchum Director July 15, 1996
- --------------------
Ralph D. Ketchum
/s/ Gerald M. Labush Director July 15, 1996
- --------------------
Gerald M. Labush
/s/ John D. McKey, Jr. Director July 15, 1996
- ----------------------
John D. McKey, Jr.
/s/ William D. Walker Treasurer and July 15, 1996
- --------------------- Chief Financial Officer
William D. Walker (Principal Financial
and Accounting Officer)
</TABLE>
86
<PAGE> 1
EXHIBIT 10.24
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO DISTRIBUTION, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO
LITHIUM TECHNOLOGY CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
OR SUCH LAWS.
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME ON DECEMBER 31, 1998.
JUNE 20, 1996
LITHIUM TECHNOLOGY CORPORATION
WARRANTS TO PURCHASE COMMON STOCK
THIS CERTIFIES that Robert Pfeffer or his registered heirs, successors
and assigns (hereinafter called the "Holder"), is the registered holder of the
aggregate number of Warrants entitling the Holder to purchase from Lithium
Technology Corporation, a corporation organized and existing under the laws of
the State of Delaware (the "Company"), subject to the terms and conditions set
forth hereinafter, up to 600,000 shares (each a "Warrant Share") of the Common
Stock of the Company, (subject to adjustment as provided in Section 3, the
"Common Stock"), at the price per Warrant Share of $0.51 (subject to adjustment
as provided herein, the "Purchase Price"). The Holder shall be entitled to
exercise the Warrants, in whole or in part, upon surrender of this Warrant
Certificate, and with the subscription form annexed hereto duly executed, and
payment in lawful money of the United States of the subscription price for the
Warrants being exercised (subject to the credit of $100,000 as set forth in the
settlement agreement dated June 20, 1996 between the Holder, Matthew Stuart &
Co., Inc. and the Company (the "Settlement Agreement"), at any time on or after
the date hereof and at or prior to 5:00 P.M. (Eastern Standard Time) on
December 31, 1998, at the office of the Company or, if the Company shall
designate a warrant transfer agent, at the office of such warrant transfer
agent. Upon the partial exercise of the Warrants evidenced by this
Certificate, the Company shall issue or cause to be issued to the Holder a
certificate evidencing the balance of the Warrants not then exercised. The
Warrants represented by this Warrant Certificate may not be exercised as to a
fraction of a Warrant Share. Payment of the subscription price shall be made
in cash or by certified or official bank check.
1. Upon the surrender of this Warrant Certificate and payment of
the subscription price, as herein provided, the Warrants shall be deemed to
have been exercised and the person exercising
<PAGE> 2
the same shall become the Holder of record of the Warrant Shares so purchased
for all purposes on the date of such surrender and payment; provided, however,
that if such date is a date on which the stock transfer books of the Company
are closed, such person shall be deemed to have become the record Holder of
such shares of Common Stock on the next succeeding date on which the stock
transfer books are open. As soon as practicable after such surrender and
payment, the Company shall issue and deliver to, or upon the order of, the
Holder a certificate or certificates representing the Warrant Shares so
purchased and, in the case of a fractional interest in a Warrant Share, cash as
provided herein. Upon surrender of this Warrant Certificate to the Company (or
its warrant transfer agent, if any), the Company (or warrant transfer agent)
shall cancel this Warrant Certificate, and to the extent there is a partial
exercise of the Warrants evidenced hereby, the Holder of the Warrant
Certificate shall receive a replacement Warrant Certificate of like tenor and
date evidencing the number of Warrants that shall not have been exercised,
unless such Warrants shall have expired.
2. Notwithstanding the foregoing, if the Company shall give
notice to its stockholders of the liquidation, dissolution or winding up of the
Company, the right to exercise the Warrants evidenced hereby shall terminate at
the close of business on the third full business day prior to the date
specified in such notice as the record date for determining the Company's
stockholders entitled to receive any distribution upon liquidation, dissolution
or winding up.
3. The number and kinds of shares of stock of the Company
issuable upon exercise of the Warrants evidenced hereby are subject to
modification and adjustment upon the happening of certain events set forth as
follows:
(a) If, at any time after the date hereof, the Company
shall declare or pay a dividend or make a distribution to its
stockholders consisting of Common Stock of the Company, the Holder
shall, upon the exercise of such Warrants after the record date for
such dividend, receive, in addition to the Warrant Shares otherwise
issuable upon such exercise, the number of shares of Common Stock as
to which such Holder would have been entitled to receive had such
Holder exercised such Warrants immediately prior to the record date
for such dividend.
(b) If, at any time after the date hereof, the Company
shall, by subdivision, combination or reclassification of Common
Stock, or through merger or consolidation, or otherwise, alter or
modify the number, kind or class of shares of Common Stock, or other
securities or property of the Company, then, as of the record date of
such alteration or modification, the Warrant Shares issuable upon the
exercise of
2
<PAGE> 3
a Warrant shall be adjusted so as to consist of the number of shares
of capital stock or other securities or property of the Company that
the Holder would have owned or would have been entitled to receive had
the Warrants evidenced hereby been exercised immediately prior to the
record date for such subdivision, combination or reclassification of
Common Stock, or merger or consolidation, or other alteration or
modification.
(c) If, at any time after the date hereof, the Company
shall make any distribution of its assets upon or partial liquidating
dividend (other than a liquidation, dissolution, or winding up of the
Company as provided for in paragraph 5, or other than as a cash
dividend payable out of earnings legally available for dividends under
the laws of the State of Delaware), the Holder shall, upon the
exercise of such Warrants after the record date for such distribution
or, in the absence of a record date, after the date of such
distribution, receive, in addition to the Warrant Shares issuable upon
such exercise, the amount of such assets that would have been
distributed to such Holder had such Holder exercised such Warrants
immediately prior to the record date for such distribution or, in the
absence of a record date, immediately prior to the date of such
distribution.
(d) Unless the context otherwise indicates, all
references to Warrant Shares in this Warrant Certificate shall, in the
event of an adjustment hereunder, be deemed to refer also to any other
securities or property receivable upon exercise of the Warrants
pursuant to such adjustment.
(e) The Warrant Certificate need not be amended because
of any adjustment in the number and/or content of Warrant Shares
pursuant thereto, and any Warrant Certificate delivered after such
adjustment may state the same number of Warrant Shares as is stated in
the Warrant Certificate originally delivered. However, the Company
may, with the prior written consent of the Holder, amend the form of
Warrant Certificate, provided such amendment in form does not affect
the substance thereof; and any Warrant Certificate thereafter
countersigned and delivered, whether in exchange or substitution for
an outstanding Warrant Certificate or otherwise, may be in the form as
so amended.
(f) The Company shall not be required to issue fractional
shares of Common Stock upon exercise of the Warrant. If, by reason of
the calculation of the number of Warrant Shares issuable upon exercise
of the Warrant, or any adjustment made pursuant to the terms hereof,
the Holder would be entitled, upon the exercise thereof, to receive a
fractional interest in a share of Common Stock, the Company shall,
upon such exercise, purchase such fractional interest
3
<PAGE> 4
for an amount in cash equal to the Purchase Price with respect to
such fractional interest.
(g) The Holder shall not, upon the exercise thereof, be
entitled to any dividends that may have accrued with respect to the
Warrant Shares issuable in respect thereof, or to any interest that
may have accrued upon any evidence of indebtedness included in the
Warrant Shares, prior to the exercise date, except as otherwise
provided above.
(h) Whenever the number and/or content of Warrant Shares
is adjusted pursuant to the terms hereof, the Company shall promptly
mail to the Holder at the address registered with the Company a notice
setting forth the adjusted number and/or content of Warrant Shares.
(i) In the event that any of the circumstances described
in clauses (a) and (b) above occur, the Purchase Price of the Warrant
Shares shall be adjusted accordingly and the Company shall promptly
mail to the Holder at the address registered with the Company a notice
setting forth the adjusted Purchase Price of the Warrant Shares.
(j) Except as provided in this Section 3, there shall be
no adjustment to the number of shares of stock of the Company issuable
upon exercise of the Warrants evidenced hereby.
4. This Warrant Certificate may be exchanged either separately or
in combination with one or more other Warrant Certificates evidencing Warrants
for one or more new certificates of like tenor and date for the same aggregate
number of Warrants as are evidenced by the Warrant Certificate of Warrant
Certificates exchanged.
5. In the event of the liquidation, dissolution, or winding up of
the Company (which shall not include an event described in paragraph 6), a
notice thereof shall be filed by the Company with the warrant transfer agent,
if any shall have been designated by the Company, at least thirty (30) days
prior to the record date (which date shall be specified in such notice) for
determining security holders of the Company entitled to receive any
distribution upon such liquidation, dissolution, or winding up. Such notice
also shall specify the date on which the right to exercise the Warrants shall
expire. A copy of such notice shall be mailed to the Holder at the address
registered with the Company not more than thirty (30) nor less than twenty (20)
days before such record date.
6. In the case of any consolidation or merger of the Company with
or into another corporation (other than a consolidation or merger in which the
Company is the continuing corporation and which does not result in any
reclassification or change of outstanding
4
<PAGE> 5
shares of the class or classes of the Warrant Shares), or in the case of any
sale or transfer to another corporation of the property of the Company in its
entirety or substantially in its entirety, the Holder, upon the exercise
thereof at any time after such consolidation, merger, sale or transfer, shall
be entitled to receive the kind and amount of shares of Common Stock and other
securities and property which the Holder would have received upon such
consolidation, merger, sale, or transfer had the Holder exercised its Warrants
immediately prior thereto.
7. The issue of any shares of Common Stock or other certificates
upon the exercise of the Warrants shall be made without charge to the Holder
for any tax in respect of the issue thereof. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of any certificate in a name other than that
of the Holder, and the Company shall not be required to issue or deliver any
such certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
8. This Warrant Certificate and all rights hereunder are
transferable on the books of the Company only upon compliance with the
provisions of the Securities Act of 1933, as amended (the "Act"), and
applicable state securities laws or by an opinion of counsel satisfactory to
the Company that registration is not required under the Act or such laws, upon
surrender of this Warrant Certificate, with the form of assignment attached
hereto duly executed by the Holder or by its attorney duly authorized in
writing, to the Company at its principal executive offices, or at the office of
the warrant transfer agent, if any, as shall have been designated by the
Company, and thereupon there shall be issued in the name of the transferee or
transferees, in exchange for this Warrant Certificate, a new Warrant
Certificate or Warrant Certificates of like tenor and date, representing in the
aggregate the number of Warrants evidenced hereby.
9. (a) The Holder shall have the registration rights with
respect to the Warrant Shares set forth in the Settlement Agreement and:
(a) If, at any time, the Company proposes to register any
shares of the Common Stock or any class of common stock issued with
respect therefor or in exchange therefor under the Act or similar
federal statute (other than on Form S-8 or any successor to be offered
to employees of an issuer pursuant to an employee benefit plan), the
Company shall give at least 45 days' prior written notice thereof to
the Holder and, upon the request of the Holder, include in such
registration, at the cost and expense of the Company, any Warrant
Shares; provided, however, that the Company shall not be obligated to
do so more
5
<PAGE> 6
that once; and provided, further, that if any such registration
relates to a firmly underwritten offering for the account of the
Company and if the managing underwriter of such offering advises the
Company in writing that, in its opinion, inclusion of such Warrant
Shares as requested by the Holder would adversely affect such
offering, then such Warrant Shares shall, to such extent, be excluded
from such registration. The Company shall effect such registration
referred to in this paragraph 9 at its own cost and expense and shall
maintain the effectiveness of such registration so long as the expense
of doing so is not unduly burdensome and, in any event, for a period
of six months subsequent to the effective date of such registration.
(b) In connection with any registration referred to in
this paragraph 9, the Company shall comply with all applicable rules
and regulations of the Securities and Exchange Commission, or of any
similar federal commission, including the Rules and Regulations under
the Act, and shall make available to the Holder, as soon as
practicable, an earnings statement (which need not be audited)
covering a period of at least 12 months, but not more than 18 months,
beginning with the first month after the effective date of the
registration statement, which earnings statement will satisfy the
provisions of Section 11(a) of the Act.
(c) The Company agrees to furnish to the Holder, at its
own expense, such number of prospectuses conforming to the
requirements of the Act or any similar federal statute, and the rules
and Regulations thereunder, relating to the Warrant Shares subject
thereto as may from time to time be requested by the Holder. Further,
the Company shall, at its own expense in connection with any
registration under this paragraph 9:
(1) use its best efforts to register or qualify
the securities covered by such registration statement
under the securities or blue sky laws of such
jurisdictions as the Holder shall reasonably request,
and do any and all other acts and things which may be
necessary or advisable to enable the Holder or any
underwriter to offer such Warrant Shares for them to
consummate the disposition thereof in such
jurisdictions, during a period of nine months
subsequent to the effective date of such registration
statement; provided, however, that in no event shall
the Company be obligated to qualify to do business in
any jurisdiction where it is not then so qualified or
to take any action which would subject it to the
service of process in suits other than those arising
out of the offer or sale of the securities covered by
such registration
6
<PAGE> 7
statement in any jurisdiction where it is not then so
subject;
(2) (A) notify the Holder, at any time when a
prospectus relating to Holder's Warrant Shares is
required to be delivered under the Act, of the
happening of any event which the Company, in its best
judgment, believes would make a supplement to, or an
amendment of, such prospectus necessary or
appropriate, and (B) at the request of the Holder,
prepare and furnish thereto a reasonable number of
copies of any supplement to, or any amendment of,
such prospectus that may be necessary so that, as
thereafter delivered to the purchasers of its shares
of Common Stock, such prospectus shall not include
any untrue statement of a material fact or omit to
state a material fact required to be stated therein
or necessary to make the statements therein not
misleading in the light of the circumstances then
existing.
(d) In the event of the registration of any Warrant
Shares, the Company shall indemnify the Holder selling such Warrant
Shares, and shall hold the Holder harmless against any losses, claims,
damages or liabilities, joint or several, to which the Holder may
become subject under the Act or any similar federal statute, or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of, or are based upon, any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Warrant
Shares are registered under the Act or similar federal statute, any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of, or are based upon,
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse the Holder for any legal
or any other expenses reasonably incurred by them in connection with
investigation or defending any such loss, claim, damage, liability or
action; provided, however, that to the extent that any such loss,
claim, damage or liability arises out of, or is based upon, an actual
or alleged untrue statement or omission made in such registration
statement, preliminary prospectus, final prospectus, amendment or
supplement in reliance upon, and in conformity with, written
information furnished to the Company through an instrument duly
executed by the Holder specifically for use in the preparation
thereof, the Company shall not be so liable to the Holder.
(e) It shall be a condition precedent to the obligation
of the Company to take any action pursuant to this paragraph
7
<PAGE> 8
9 relating to the registration of any Warrant Shares, that the Company
shall have received from the Holder who wishes the registration of any
Warrant Shares of Common Stock, and from each underwriter of such
shares of common Stock, (i) one or more written statements setting
forth all information with respect to the Holder or underwriter, the
Holder's shares of Common Stock and the transaction or transactions
which the Holder contemplates with respect thereto, which any law,
rule or regulation requires to be included in any registration
statement with respect thereto, and (ii) an agreement satisfactory to
the Company to indemnify and hold harmless, the Company, each director
of the Company, each officer of the Company who signs such
registration statement, and any person who controls the Company within
the meaning of the Act, with respect to any actual or alleged untrue
statement in, or omission from, such registration statement, any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, if such actual or alleged untrue
statement or omission was made in reliance upon, and in conformity
with, any written statement furnished to the Company pursuant to this
Section by the Holder or underwriter specifically for use in the
preparation of such registration statement, preliminary prospectus,
final prospectus or amendment or supplement.
10. If this Warrant Certificate shall be lost, stolen, mutilated
or destroyed, the Company shall, on such terms as to indemnify or otherwise
protect the Company as the Company may in its discretion impose, issue a new
Warrant Certificate of like denomination, tenor and date as the Warrant
Certificate so lost, stolen, mutilated or destroyed. Any such new Warrant
Certificate shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant
Certificate shall be at any time enforceable by anyone.
11. The Company may deem and treat the Holder of this Warrant
Certificate as the absolute owner of this Warrant Certificate for all purposes
and shall not be affected by any notice to the contrary.
12. This Warrant Certificate and the Warrants evidenced hereby
shall not entitle the Holder to any rights of a stockholder of the Company
either at law in or equity including, without limitation, the right to vote, to
receive dividends and other distributions, to exercise any preemptive rights or
to receive any notice of meetings of stockholders or of any other proceedings
of the Company, except as provided herein.
13. This Warrant Certificate, in all events, shall be wholly void
and have no effect after 5:00 P.M. (Eastern Standard Time) on December 31,
1998.
8
<PAGE> 9
14. In the event that one or more of the provisions of this
Warrant Certificate shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Warrant Certificate, but this
Warrant Certificate shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
15. This Warrant Certificate shall be binding upon any successors
or assigns of the Company.
16. This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
provisions thereof governing conflicts of law.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed and delivered by its officer hereunder duly authorized.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ THOMAS R. THOMSEN
-------------------------------------
Thomas R. Thomsen Chairman and
Chief Executive Officer
Countersigned:
/s/ SUE GUSTAFSON
- -------------------------------
Sue Gustafson
Secretary
9
<PAGE> 10
[Form of Subscription]
(To be Exercised by the Holder Desiring to Exercise
Warrants Evidenced by the Within Warrant Certificate)
To: LITHIUM TECHNOLOGY CORPORATION
The undersigned hereby irrevocably elects to exercise _______________
Warrants, evidenced by the within Warrant Certificate, for, and to purchase
thereunder, ________________ full shares of Class B Common Stock of Lithium
Technology Corporation issuable upon exercise of said Warrants and delivery of
$________________ in cash.
The undersigned requests that certificates for such shares by issued
in the name of ____________________.
SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER:_____________________________________
- ------------------------------
- ------------------------------
(Please print name and address)
- ------------------------------
- ------------------------------
----------------------------------
(Signature)
- -----------------------------------------------------------------------------
If said number or Warrants shall not be all of the Warrants evidenced
by the within Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to:
- -------------------------------------------------
(Please print name and address)
- -------------------------------------------------
- -------------------------------------------------
- -------------------------------------------------
(Signature)
10
<PAGE> 11
NOTICE: The signature on this subscription form must correspond with
the name as written upon the face of the within Warrant
Certificate, or upon the assignment thereof, in every
particular, without alteration, enlargement, or any change
whatsoever and must be guaranteed by a bank, other than a
savings bank, or trust company having an office or
correspondent in New York, New York, or by a firm having
membership on a regional securities exchange and an office in
New York, New York.
11
<PAGE> 1
EXHIBIT 10.25
AN AGREEMENT OF SETTLEMENT AND RELEASE
BY AND BETWEEN MATTHEW STUART & CO., INC.,
ROBERT PFEFFER AND LITHIUM TECHNOLOGY CORPORATION
This Settlement Agreement entered into this 20th day of June, 1996 by
and between Matthew Stuart & Co., Inc., Robert Pfeffer (collectively,
"Plaintiffs") and Lithium Technology Corporation ("Lithium") on the following
terms and conditions:
WHEREAS, on or about February 7, 1996, Plaintiffs filed a Complaint
against Lithium in the United States District Court for the Southern District
of New York bearing Civil Action Number 96 Civ. 0930 (the "Lawsuit");
WHEREAS, on or about May 13, 1996, Lithium filed an Amended Answer and
Counterclaims against Plaintiffs;
WHEREAS, Lithium to date has vigorously defended the Lawsuit and
denies the allegations in the Lawsuit and further denies liability for any
damages allegedly incurred by Plaintiffs;
WHEREAS, without any implication regarding the merits of their
respective positions, and without any admission of liability or finding of
wrongdoing by any party, Plaintiffs and Lithium desire to settle the Lawsuit
and all their disputes;
WHEREAS; Plaintiffs and Lithium agree that all allegations of the
Complaint and Counterclaims remain undetermined and, therefore, the terms of
this Settlement Agreement shall have absolutely no preclusive effect, by means
of collateral estoppel, res judicata and/or any other legal theory, as against
any claims Lithium has, had or may come to have against Richard Perlman,
Christy & Viener, Steven Berger, Esq., William Gray, Esq., Franklin Velie, Esq.
and/or any other entity or individual, except for the specific Plaintiffs,
which may arise from or be related in any way to the issues raised in the
Lawsuit including all claims contained in both the Complaint and Counterclaims.
NOW, THEREFORE, based upon the foregoing, Plaintiffs and Lithium
hereby agree:
1. On the date of this Settlement Agreement, the undersigned counsel for
Lithium will submit for filing a Stipulation of Dismissal of the
Lawsuit with prejudice to the Clerk of the United States District
Court for the Southern District of New York.
2. This Settlement Agreement may be executed by fax transmission and in
counterparts. The parties shall exchange manually signed, original
counterpart signature pages within ten (10) days after the date
hereof.
<PAGE> 2
In addition, Plaintiffs and Lithium hereby agree as follows:
A. Common stock purchase warrants No. W-3 and W-4
(constituting all of the warrants alleged by Plaintiffs to be
currently outstanding and issued to the Plaintiffs) are
surrendered herewith by Pfeffer and shall be cancelled and
deemed void ab initio, and (contemporaneously with the
execution and delivery of this Settlement Agreement) a warrant
constituting a newly issued security shall be issued to Robert
Pfeffer for 600,000 Warrant Shares (as defined below) (post
reverse split) at an exercise price of $.51 per share in
substantially the form annexed hereto and made part of this
Settlement Agreement (the "Warrants").
B. Lithium shall pay to the Plaintiffs the sum of
$150,000, of which $50,000 shall be paid by wire transfer to
Matthew Stuart & Co., Inc. on or before June 21, 1996, and of
which $100,000 shall be paid to Robert Pfeffer as an offset
against the exercise price due upon exercise of the Warrants
when and if the Warrants or any portion thereof are exercised
by him or by his assignee provided that in the event the
registration statement referred to in the following paragraph
is not declared effective on or before November 1, 1996,
Lithium shall pay the following amounts (against the said sum
of $100,000 and with corresponding reductions of the offsets
against the exercise price of the Warrants) until the
registration is declared effective:
<TABLE>
<S> <C>
November 1, 1996 $35,000
December 1, 1996 35,000
January 1, 1997 30,000
</TABLE>
C. Lithium shall prepare and file with the Securities
and Exchange Commission (the "Commission") a registration
statement on or before July 15, 1996, which registration
statement shall include the shares underlying exercise of the
Warrants ("Warrant Shares") and shall thereafter use its best
efforts to have such registration statement declared effective
at the earliest possible time and remain effective until the
earlier of nine months from the effective date or the date on
which all the Warrant Shares are sold or become capable of
being publicly sold without registration under the Securities
Act of 1933, as amended (the "1933 Act") (the "Effective
Period"). Lithium shall prepare and file with the Commission
such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective
throughout the Effective Period and to comply with the
provisions of the 1933 Act with respect to the sale or
2
<PAGE> 3
other disposition of the Warrant Shares covered by such
registration statement whenever the Holder or Holders of such
securities shall desire to sell or otherwise dispose of the
same (including prospectus supplements with respect to the
sales of the Warrant Shares from time to time in connection
with a registration statement pursuant to Rule 415 of the
Commission). Lithium shall not file any other registration
statement until the foregoing registration statement is filed.
D. The Plaintiffs agree that they and their assignees,
if any, shall not sell more than 400,000 of the Warrant Shares
within the period ending six months from June 14, 1996.
The terms and covenants of this Settlement Agreement shall constitute
full satisfaction of any and all claims Plaintiffs or any related
entity or individual have, had or may come to have against Lithium or
any related or affiliated entity or individual. Lithium reserves, and
Plaintiffs hereby acknowledge, Lithium's right to attack in subsequent
litigation against any party other than the specific Plaintiffs named
herein the validity of any warrants and any related securities other
than the Warrants and the Warrant Shares.
3. Also in consideration of their mutual obligations set forth in
paragraph 2, the parties to this Settlement Agreement agree never
directly or indirectly to commence or prosecute or assist in the
filing, commencement or prosecution of, any action, proceeding or
charge against the other in any federal, state or local court or
administrative agency or arbitration proceeding with respect to any of
the matters released herein.
4. By its execution of this Settlement Agreement, Lithium hereby releases
Plaintiffs including, without limitation, Matthew Stuart & Co., Inc.'s
current and former shareholders, directors, officers, agents,
attorneys, and employees (except Richard Perlman and Christy & Viener
and the current and former partners and associates in Christy &
Viener) from any and all claims, damages, demands, obligations, causes
of action or rights of action which Lithium has, had or may come to
have against Plaintiffs including, without limitation, Matthew Stuart
& Co., Inc.'s current and former shareholders, directors, officers,
agents, attorneys, and employees (except Richard Perlman and Christy &
Viener and the current and former partners and associates in Christy &
Viener). Notwithstanding the foregoing, Lithium does not release or
discharge Plaintiffs from any claim, loss, damages, demand,
obligation, causes of action or rights of action arising out of this
Settlement Agreement or any breach or default hereunder.
3
<PAGE> 4
5. By their execution of this Settlement Agreement, Plaintiffs hereby
release Lithium and/or any related or affiliated entity or individual
including without limitation Lithium's current and former
shareholders, directors, officers, agents, attorneys and employees
(except Richard Perlman, Christy and Viener and the current and former
partners and associates in Christy & Viener) from any and all claims,
damages, demands, obligations, cause of action or rights of action
which Plaintiffs have, had or may come to have against Lithium and/or
any related or affiliated entity or individual including without
limitation Lithium's current and former shareholders, directors,
officers, agents, attorneys and employees (except Richard Perlman,
Christy and Viener and the current and former partners and associates
in Christy & Viener) including any and all claims that were or could
have been brought in the Lawsuit. Notwithstanding the foregoing,
Plaintiffs do not release or discharge Lithium and/or any related or
affiliated entity or individual from any claim, loss, damages, demand,
obligation, causes of action or rights of action arising out of this
Settlement Agreement or any breach or default hereunder.
6. This Settlement Agreement constitutes the entire agreement and
understanding between Plaintiffs and Lithium and supersedes and
replaces all negotiations and all proposed agreements whether oral or
written, between the parties relating to the subject matter of this
Settlement Agreement.
7. This Settlement Agreement and any controversy which might arise
herefrom will in all respects be interpreted, enforced and governed by
the laws of the State of New York. The parties agree that this
Settlement Agreement will be construed as a whole according to its
fair meaning and is not to be strictly construed for or against either
of the parties hereto.
8. This Settlement Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective heirs,
representatives, successors and assigns, however, in no event shall
the Settlement Agreement inure to the benefit of Richard Perlman,
Christy & Viener, Steven Berger, Esq., William Gray, Esq., Franklin
Velie, Esq. and/or any other entity or individual, except for the
specific Plaintiffs and Lithium.
9. If any covenant, condition or other provision herein contained is held
to be invalid, void or illegal by any court of competent jurisdiction,
such covenant, condition or provision will be deemed severed from the
remainder of this Settlement Agreement. Such severance will in no way
affect, impair or invalidate any other covenant, condition or other
provision herein. If such condition, covenant or other provision is
deemed invalid due to its scope or breadth, such condition,
4
<PAGE> 5
covenant or other provision will be deemed valid to the extent of the
scope or breadth permitted by law.
10. No breach of any provision hereof can be waived unless in writing.
Waiver of any one breach of any provision hereof shall not be deemed
to be a waiver of any other breach of the same or any other provision
hereof.
11. This Settlement Agreement may be amended only by a written agreement
executed by or on behalf of each of the parties hereto.
12. Plaintiffs represent and declare that in executing this Settlement
Agreement they rely solely upon their own judgment, belief and
knowledge and on the advice and recommendations of their own
independently selected counsel, Silverman, Collura & Chernis, P.C.,
concerning the nature, extent and duration of their rights and claims,
and they have not been influenced to any extent whatsoever in
executing the Settlement Agreement by any promises, covenants,
representations or warranties covering any matter made by Lithium or
by any person representing them except that Lithium represents to
Plaintiffs that Lithium had 15,658,704 shares of common stock issued
and outstanding as of May 1, 1996 and 18,801,120 shares of common
stock would be issued and outstanding on a fully diluted basis as of
the date hereof.
13. Lithium represents and declares that in executing this Settlement
Agreement, it relies solely upon its own judgment, belief and
knowledge, and on the advice and recommendations of its own
independently selected counsel, Mason, Briody, Gallagher & Taylor, St.
John & Wayne, and Sean F. O'Shea concerning the nature, extent and
duration of its rights and claims, and that it has not been influenced
to any extent whatsoever in executing the Settlement Agreement by any
promises, covenants, representations or warranties covering any matter
made by Plaintiffs or by any person representing them.
14. Each party hereto further represents and warrants that it has
carefully read this Settlement Agreement and knows the contents hereof
and that it has signed this Settlement Agreement freely and
voluntarily.
15. Each party hereto further represents and declares that each of the
persons executing this Settlement Agreement on its behalf is and will
be duly empowered and authorized to do so.
16. All notices sent pursuant to this Settlement Agreement will be
delivered by certified mail, return receipt requested:
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<PAGE> 6
Notices to Plaintiffs must be delivered to:
Peter R. Silverman, Esq.
Silverman, Collura & Chernis, P.C.
381 Park Avenue South
New York, New York 10016
Notices to Defendant must be delivered to:
Thomas P. Gallagher, Esq.
Mason, Briody, Gallagher & Taylor
104 Carnegie Center, Suite 201
Princeton, New Jersey 08540
Either party signatory may change the address to which notices must be
sent to it by notifying the other parties' signatory as set forth in
this paragraph.
17. The existence and the terms of this Settlement Agreement shall remain
confidential and shall not be revealed to anyone by Plaintiffs and/or
Lithium except to their respective attorneys or accountants; except to
Pfeffer's stock brokers or financial advisors (but not Christy &
Viener and/or Richard Perlman in either of the foregoing capacities or
otherwise); except disclosure pursuant to a lawful order of any court
or governmental agency; except disclosure by Lithium pursuant to its
reporting obligations as a public company; or except by Pfeffer
pursuant to his disclosure obligations under applicable law in
connection with any registration statement pertaining to the Warrant
Shares. The terms of the Warrants shall be kept confidential by
Plaintiffs and shall not be revealed by Plaintiffs to anyone except as
permitted in the immediately preceding sentence. Plaintiffs expressly
represent and warrant that they have not, and they hereby agree that
they will not, directly or indirectly publicize in any manner, either
personally or through an agent or representative, or undertake to aid
or assist any third party in publicizing or exploiting in any form
whatsoever, by any means whatsoever, in any medium whatsoever, the
fact that a payment has been made or other covenants have been agreed
to by Lithium herein and in the Warrants as part of the consideration
flowing under this Settlement Agreement, or the amount of such payment
or the nature and substance of such terms.
In the event disclosure is necessary pursuant to this paragraph,
Plaintiffs shall notify Lithium in writing at least ten (10) days in
advance of such required disclosure and Plaintiffs shall apprise the
third party to whom such disclosure is made of the confidential nature
of the information, and Plaintiffs shall use their best efforts to
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<PAGE> 7
secure and assure the confidentiality and non-disclosure of the
information by the third party.
18. Each of Pfeffer and Matthew Stuart & Co., Inc. hereby sells, assigns,
transfers, and conveys unto Lithium jointly and severally any and all
claims or causes of action that he, it, or both has, had or may have
against Christy & Viener and Christy and Viener's current and former
partners and associates. Plaintiffs agree to execute and deliver to
Lithium any and all further documentation furnished by Lithium as may
be reasonably requested to evidence and/or effectuate this assignment.
19. This Settlement Agreement shall not be utilized or relied upon by the
Plaintiffs in any manner which would have any preclusive effect, by
means of collateral estoppel, res judicata and/or any other legal
theory, as against any claims Lithium has, had or may come to have
against Richard Perlman, Christy & Viener, Steven Berger, Esq.,
William Gray, Esq., Franklin Velie, Esq. and/or any other entity or
individual, which may arise from or be related in any way to the
issues raised in the Lawsuit including all claims contained in both
the Complaint and Counterclaims.
20. Lithium represents and warrants that the terms set forth herein have
been ratified and approved by the Board of Directors of Lithium.
21. Pfeffer and Matthew Stuart & Co., Inc. represent and warrant that the
terms set forth above have been ratified and approved by plaintiff
Robert Pfeffer, individually, and by the Board of Directors of Matthew
Stuart & Co., Inc.
/s/ ROBERT PFEFFER
--------------------------------
Dated: June 20, 1996 Robert Pfeffer
MATTHEW STUART & CO., INC.
By: /s/ ROBERT PFEFFER
--------------------------
Dated: June 20, 1996 Name: Robert Pfeffer
Title: President
LITHIUM TECHNOLOGY CORPORATION
By: /s/ THOMAS R. THOMSEN
-----------------------------
Dated: June 20, 1996 Name: Thomas R. Thomsen
Title: President/CEO
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<PAGE> 1
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
AGREEMENT made as of May 9th, 1996, by and between LITHIUM TECHNOLOGY
CORPORATION, a Delaware corporation (the "Corporation"), having an address at
5115 Campus Drive, Plymouth Meeting, Pennsylvania 19462, and THOMAS R. THOMSEN
("Executive"), residing at 26 Bellinghamshire Place, New Hope, Pennsylvania
18938.
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 Executive 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 Executive shall not be required to be on-site at
the Corporation's offices during operating business hours and 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 $185,000 per year.
(b) During each fiscal year of the Term, Executive shall be
eligible to receive a target bonus of up to 40% 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 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.
(f) 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
2
<PAGE> 3
group accident or health policies, other than those which reimburse for actual
medical expenses.
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") a
ten-year non-qualified option to purchase 400,000 shares of its Common Stock,
exercisable at $2.5625 per share, which option shall become exercisable as to
one-half of such shares on the 90-day anniversary of the Commencement Date and
as to one-half of such shares on the 180-day anniversary of the Commencement
Date and shall have such other terms and conditions as are customary for stock
options issued by the Corporation under such Plan. The Corporation hereby
agrees that in the event that during the Term the Corporation 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 Executive
may include in such registration statement all shares underlying options
theretofore granted to Executive under the Plan. The Corporation covenants
that it will keep such registration statement current until Executive is no
longer employed by the Corporation; provided, however, that if Executive's
employment is terminated hereunder other than pursuant to Sections 5 (a) or
(b), then Executive shall have until 90 days following the termination of his
employment to exercise any such vested options which he owned at the time of
such termination, and the Corporation shall maintain the effectiveness of such
registration statement for such period. The Corporation also hereby agrees
that in the event that during the Term the Corporation causes to be filed with
the Securities and Exchange Commission a registration statement on a form other
than Form S-8, Executive shall have "piggyback" registration rights to include
in such registration statement all the shares underlying options granted to
Executive 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 Corporation's underwriter determines that such cutback is necessary to
prevent an adverse effect on the Corporation's offering.
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
3
<PAGE> 4
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 then non-exercisable options shall
immediately and automatically terminate. 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 then non-exercisable options shall
immediately and automatically vest and become exercisable for a period of three
years commencing upon such death or termination provided that no options shall
be extended beyond their initial term as set forth the option agreement and
(iv) in the event of the death of Executive, any and all options (whether
vested or unvested) shall be transferred in accordance with Executive's will.
(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 then exercisable
options and all then unexercisable options shall immediately become exercisable
on the date of
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<PAGE> 5
termination, and all of the same shall remain exercisable for a period of three
years commencing on the date of termination.
(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 then non-exercisable options shall immediately and
automatically terminate upon such termination of employment.
(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 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,
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<PAGE> 6
distributors, licensees, franchisees, subsidiaries and joint ventures).
8. Non-Competition. 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) 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 during the term of his employment therewith, 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 during the term of Executive's
employment therewith or dealt in by Executive during his employment
with the Corporation;
(ii) 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;
(iii) otherwise divert or attempt to divert from the
Corporation any business whatsoever;
(iv) solicit or attempt to solicit for any business
endeavor any employee of the Corporation;
(v) interfere with any employment relationship or other
business relationship between the Corporation and any other
individual, person, or other entity;
(vi) use the name of the Corporation or a name similar
thereto; or
(vii) 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.
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.
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<PAGE> 7
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.
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.
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
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<PAGE> 8
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/ DONALD C. TAYLOR
-------------------------------
Donald C. Taylor
Authorized Signatory
Executive:
/s/ THOMAS R. THOMSEN
----------------------------------
Thomas R. Thomsen
8
<PAGE> 1
EXHIBIT 10.27
LITHIUM TECHNOLOGY CORPORATION
NON-QUALIFIED STOCK OPTION
For valuable consideration, receipt of which is hereby acknowledged,
LITHIUM TECHNOLOGY CORPORATION, a Delaware corporation (the "Company"), grants
to THOMAS R. THOMSEN (the "Optionee"), who resides at 26 Bellinghamshire Place,
New Hope, Pennsylvania 18938, a non-qualified stock option ("Option"), subject
to the terms and conditions hereof, to purchase from the Company an aggregate
of four hundred thousand (400,000) shares of the Common Stock of the Company
(the "Common Stock"), at the price of $2.5625 per share (the "Option Price").
The Option is granted pursuant to the Company's 1994 STOCK INCENTIVE PLAN (THE
"PLAN") and is subject to the terms and conditions thereof. The Option shall
have the following additional terms and conditions:
1. 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 the day (the "Termination Date") preceding the
tenth anniversary of the date hereof. Subject to provisions contained
elsewhere in this Agreement, the Option may be exercised as to one-half of the
shares of Common Stock subject hereto after the 90-day anniversary of the
Commencement Date (as defined in the employment agreement of even date herewith
by and between the Company and the Optionee), and as to one-half of such shares
on the 180-day anniversary of the Commencement Date.
2. 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.
3. The right of the Optionee to purchase shares hereunder,
subject to any vesting requirements set forth herein, may be exercised in whole
at any time or in part time to time after the vesting of such options and prior
to the Termination Date, except as otherwise provided herein. This Option may
be exercised only with respect to full shares.
4. Subject to the provisions of this Option, this Option may be
exercised by written notice (the "Notice") to the Company stating the number of
shares of Common Stock with respect to which
<PAGE> 2
it is being exercised. The Notice shall be accompanied by the Optionee's
payment in full of the Option Price for each of the shares to be purchased by
the Optionee, such payment to be made by (a) certified or bank cashier's check
payable to the order of the Company or (b) any other means acceptable to the
Committee.
5. As soon as practicable after receipt of the Notice and
payment, and subject to the next two paragraphs, the Company shall 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.
6. 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.
7. 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 Exchange Commission promulgated thereunder, or any applicable
state laws relating to the authorization, issuance or sale of securities.
8. 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, or applicable state securities laws 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.
9. 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.
10. During the Optionee's lifetime, this Option shall be
exercisable only by the Optionee (except as otherwise provided below), and
neither this Option nor any right hereunder shall be
2
<PAGE> 3
assignable or transferable otherwise than by will or the laws of descent and
distribution (as provided below), or be subject to attachment, execution or
other similar process. In the event of any attempt by the Optionee to alienate,
assign, pledge, hypothecate or otherwise dispose of this Option or of any right
hereunder, except as provided for herein, or in the event of any levy or any
attachment, execution or similar process upon the rights or interest hereby
conferred, the Company may terminate this Option by notice to the Optionee, and
it shall become null and void.
11. If, prior to the Termination Date, the Optionee's employment
by the Company or its direct or indirect subsidiaries is terminated:
(a) for "cause" (as hereinafter defined) by the Company,
all then non-exercisable installments of this Option and all rights
hereunder with respect to such installments shall immediately
terminate and become null and void;
(b) by reason of Optionee's "disability" (as hereinafter
defined) or death, all then non-exercisable options shall immediately
and automatically vest and become exercisable and all of the shares
shall remain exercisable for a period of three years commencing on the
date of termination, and, in the event of the death of the Optionee,
any and all options (whether vested or unvested) shall be transferred
in accordance with Optionee's will and all of the same shall remain
exercisable by the Optionee's estate for a period of three years
commencing on the date of death; provided, however, in no event will
the option term be extended beyond the Termination Date;
(c) by the Optionee, then all then non-exercisable
options shall immediately and automatically terminate upon such
termination of employment; and
(d) for any reason other than those referred to in
clauses (a), (b), or (c) hereof, all then exercisable options and all
then unexercisable options shall immediately become exercisable on the
date of termination, and all of the same shall remain exercisable for
a period of three years commencing on the date of termination.
For purposes of this Agreement, (i) "cause" shall mean the breach or continued
gross neglect by Optionee, or gross negligence or willful misconduct by
Optionee in the performance of any of his duties or obligations of employment;
and (ii) "disability" shall mean permanent and total disability as determined
under the Company's long-term disability program or, if no such program has
been adopted, the continuous absence of Optionee for 187 consecutive days or
more due to physical or mental illness or incapacity. In the event that the
Company provides the Optionee
3
<PAGE> 4
with 30-day notice of termination due to such disability and in the further
event that the Optionee is able to and recommences rendering services and
performing his employment duties for the Company under the aforementioned
employment agreement, the consequences of Section 11(b) hereof resulting from
such disability shall be without effect. Notwithstanding the foregoing, no
portion of this Option may be exercised later than the Termination Date.
12. 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. 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 the substitution of 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.
13. 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 any other rights of a stockholder with respect
to any shares of 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.
14. 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, and shall become effective when received by the Secretary.
All notices to the Optionees 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.
15. Neither the adoption of the Plan nor the granting of this
Option confers on the Optionee any right to continued employment or
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<PAGE> 5
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.
IN WITNESS WHEREOF, LITHIUM TECHNOLOGY CORPORATION has caused this
Option to be executed by its officers, thereunto duly authorized, as of the 9th
day of May, 1996.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ DONALD C. TAYLOR
------------------------------
Donald C. Taylor
Authorized Signatory
ACCEPTED AND AGREED:
/s/ THOMAS R. THOMSEN
- ------------------------------
Thomas R. Thomsen
5
<PAGE> 1
EXHIBIT 10.28
CONSULTING AND FINANCIAL SERVICES AGREEMENT BETWEEN
LITHIUM TECHNOLOGY CORPORATION, INC.
AND DONALD C. TAYLOR
THIS CONSULTING AND FINANCIAL SERVICES AGREEMENT is made as of the 9th
day of May, 1996 between LITHIUM TECHNOLOGY CORPORATION, INC., its successors
or subsidiaries (the "Corporation") and DONALD C. TAYLOR ("Consultant").
WHEREAS, the Corporation is in need of the special expertise of
Consultant in connection with investment advisory services, general financial
advice, and related matters; and
WHEREAS, Consultant is recognized for its credentials, judgment and
experience in such fields, and the parties desire to enter into this Agreement
for their mutual benefit.
1. RESPONSIBILITIES OF CONSULTANT. In consideration for the
benefits provided in paragraph 3 of this Agreement:
(a) Consultant will be designated a corporate consultant
to the Corporation;
(b) Consultant will provide advisory services,
shareholder relations and related consulting services to the Corporation;
(c) Consultant will perform such duties for the
Corporation as are herein identified on a four-day per month basis, provided
that in any month where the Company requires more than four days of service
from Consultant pursuant to this Agreement,
<PAGE> 2
the Company and Consultant shall mutually agree on a per diem fee for such
additional days, to set-off days in subsequent months, or on another mutually
satisfactory arrangement; and
(d) Consultant will periodically report to the Board of
Directors of the Corporation as requested from time to time.
2. DUTIES OF CONSULTANT. Consultant will from time to
time perform the duties described below for the Corporation and such other
duties as are reasonably related to the scope of Consultant's engagement as
directed by the Corporation:
(a) Provide professional advice regarding shareholder
relations, general financial advice and related consulting services to the
Corporation;
(b) Develop a program of capital formation initiatives
for the Board's and/or Chief Executive Officer's consideration and assist in
the implementation of such program;
(c) Provide assistance in continuing negotiations with
the Consortium;
(d) Provide advice in connection with the Corporation's
financial strategies;
(e) Assist in financial initiatives;
(f) Assist in long range financial planning; and
(g) perform such other services as are requested of
Consultant by the Corporation and which are reasonably related to the scope of
the Consultant's engagement.
3. COMPENSATION TO CONSULTANT. In consideration for the
consulting services provided by Consultant as specified in Section
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<PAGE> 3
1 and Section 2 above, and other good and valuable consideration, the
Corporation agrees that:
(a) Consultant shall receive a payment of seven thousand
dollars ($7,000) per month. All such compensation shall be payable on the
first calendar day of the month for the month then commencing;
(b) Consultant shall be entitled to reimbursement for all
reasonable business expenses incurred on behalf of the Corporation upon
submission of appropriate written receipts therefor.
4. DURATION. This Agreement will be in effect for a period of
one (1) year, subject to automatic renewals of one (1) year unless either party
to this 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 this Agreement. In no event shall this 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.
5. VOLUNTARY RESIGNATION. Consultant has the option to resign
voluntarily at any time for any reason upon sixty (60) days' written notice.
6. TERMINATION OF AGREEMENT.
(a) WITHOUT CAUSE. The Corporation may terminate this
Agreement at any time upon written notice; however, in the event this provision
is exercised by the Corporation, Consultant shall
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<PAGE> 4
not receive less compensation and benefits than would otherwise be due to
Consultant for the remainder of the term of this Agreement.
(b) WITH CAUSE. The Corporation may terminate this
Agreement for cause, effective upon written notice, and upon such a termination
the Corporation shall be obligated to pay Consultant consulting fees and any
expense reimbursement only through the date of termination. For purposes of
this paragraph, "cause" shall mean that Consultant has: (i) knowingly acted
fraudulently in Consultant's relations with the Corporation, (ii)
misappropriated or done material, intentional damage to the property of the
Corporation, (iii) been convicted of a felony, (iv) willfully and materially
failed to follow a legal and reasonable order or directive by the Chairman of
the Board of Directors of the Corporation (which order or directive is
consistent with the provisions of this Agreement), or (v) been grossly
negligent in the performance of the duties as described herein.
7. CONFIDENTIALITY AND NON-COMPETITION.
(a) Consultant hereby agrees that during the term of this
Agreement and at all times thereafter, Consultant shall: (i) keep secret and
confidential and not make any written or oral announcement or disclosure of
(other than as permitted herein) Consultant's discussions with the Corporation
or any information about, or directly or indirectly pertaining to, the
business, strategy, properties, or prospects of the Corporation or any of its
subsidiaries or affiliates supplied to, or received or developed by, Consultant
from any source, whether disclosed orally or in
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<PAGE> 5
writing ("Confidential Information") except to those employees of the
Consultant or its subsidiaries who have a direct need to know such information
and for whom the Consultant hereby agrees to be liable and responsible in the
event of any breach of this Section 7 by any such employee; (ii) not, without
the Corporation's prior written consent, discuss any Confidential Information
with any third parties; (iii) not use any Confidential Information for any
other purposes other than in Consultant's capacity as a consultant to the
Corporation, and not to obtain a commercial, trading or other advantage; (iv)
at any time on written request from the Corporation or without request if this
Agreement is terminated for any reason, return any written record of any
Confidential Information or other record in any form in Consultant's possession
without keeping any copies, extracts or other reproductions thereof and either
hand over to the Corporation or destroy all notes and memoranda prepared by
Consultant or any third party and any stored information of any kind kept by
Consultant or any third party regarding any Confidential Information; and (v)
promptly notify the Corporation if any Confidential Information is required to
be disclosed by reason of law or governmental or other regulation and cooperate
with the Corporation regarding the manner of such disclosure or any action
which the Corporation, at its sole cost and expense, may elect to take to
challenge legally the validity of such requirement.
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<PAGE> 6
(b) The above undertakings shall not apply to information
which: (i) becomes generally available to the public other than as a result of
disclosure by Consultant or any party to whom Consultant has disclosed it or
other than by way of any breach of any obligation of confidentiality; (ii)
Consultant can demonstrate was in Consultant's possession at the time of
disclosure to Consultant and which Consultant lawfully acquired other than from
the Corporation or any of its subsidiaries; (iii) was otherwise available in
the public domain; or (iv) was disclosed with the Corporation's consent.
(c) Non-Competition. Consultant agrees that, for a period
commencing on the date hereof and ending one year after the termination of this
Agreement for any reason, Consultant shall not, anywhere in North America,
directly or indirectly:
(i) engage, directly or indirectly, as a consultant or 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 this Agreement, 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 during the term of this Agreement;
(ii) solicit or attempt to solicit business of any
customers of the Corporation (including prospective customers
solicited by the Corporation) for products or services the
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<PAGE> 7
same or similar to those offered, sold, produced or under development
by the Corporation during the term of this Agreement;
(iii) otherwise divert or attempt to divert from the
Corporation any business whatsoever;
(iv) solicit or attempt to solicit for any business
endeavor any employee of the Corporation;
(v) interfere with any employment relationship or other
business relationship between the Corporation and any other
individual, person, or other entity;
(vi) use the name of the Corporation or a name similar
thereto; or
(vii) 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 Consultant would violate
this Section 7(c).
(d) Consultant further acknowledges that damages will not
be an adequate remedy in the event of any breach or violation of Section 7(a)
and/or Section 7(c) hereof, and that the Corporation and its subsidiaries will
be entitled to injunctive relief and specific performance for any such breach
in addition to any other remedies which may be available at law or in equity
and the Corporation shall not be required to plead and/or prove the inadequacy
of money damages.
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<PAGE> 8
8. SEVERABILITY. Each paragraph and subparagraph of this
Agreement shall be construed and considered separate and separable from the
validity and enforceability of any other provision contained in this Agreement.
9. ASSIGNMENT. The Consultant may assign all or any of its
rights, duties or obligations under this Agreement without prior written
consent of the Corporation.
10. NOTICES. All notices, requirements, demands and other
communications shall be in writing and shall be deemed to have been duly given
if hand delivered, sent via overnight mail (e.g. Federal Express) or if mailed
by registered mail, postage prepaid, to the following addresses:
If to Consultant, addressed to Consultant at:
Donald C. Taylor
c/o Group III Capital, Inc.
475 Park Avenue South
Suite 330
New York, NY 10016
If to the Corporation, addressed to it at:
5115 Campus Drive
Plymouth Meeting, Pennsylvania 19462-1129
Attn: Mr. Thomas R. Thomsen, Chairman
with a copy to:
Thomas P. Gallagher, Esq.
Mason, Briody, Gallagher & Taylor
104 Carnegie Center, Suite 201
Princeton, New Jersey 08540
or to such other address as any party hereto may request by notice given as
aforesaid to the other party hereto.
11. TITLES AND HEADINGS. Titles and headings to paragraphs hereof
are for purposes of reference only and shall in no way
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<PAGE> 9
limit, define or otherwise affect the provisions hereof.
12. PENNSYLVANIA LAW. This Agreement is intended to be performed
in part in the State of Pennsylvania, and shall be governed by and construed in
accordance with the laws of the State of Pennsylvania without giving effect to
any conflicts of law doctrines.
13. COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. It shall not
be necessary in making proof of this Agreement to produce or account for more
than one counterpart.
14. CUMULATIVE RIGHTS. Each and all of the various rights, powers
and remedies of the Corporation, or any of its successors or subsidiaries, in
this Agreement shall be considered as cumulative with and in addition to any
other rights, powers or remedies of the Corporation, or any of its successors
or subsidiaries, and no one of the rights, powers or remedies of the
Corporation, or any of its successors or subsidiaries, is exclusive of any
other rights, powers or remedies allowed by law. The exercise or partial
exercise of any right, power or remedy shall neither constitute the election
thereof nor the waiver of any other right, power or remedy.
15. ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties hereto and may be modified or amended only by a
written instrument executed by both parties hereto.
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ THOMAS R. THOMSEN
-------------------------------------
Thomas R. Thomsen, Chairman
/s/ DONALD C. TAYLOR
-------------------------------------
Donald C. Taylor
10
<PAGE> 1
EXHIBIT 10.29
*****************************************************************
COMMON STOCK PURCHASE WARRANT
TO PURCHASE COMMON STOCK OF
LITHIUM TECHNOLOGY CORPORATION
IN FAVOR OF
GROUP III CAPITAL, INC.
*****************************************************************
<PAGE> 2
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD,
ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, OR, IF AN EXEMPTION FROM REGISTRATION SHALL BE
AVAILABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. New York Time, on May 9, 2006.
Warrant to Purchase 1,500,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
LITHIUM TECHNOLOGY CORPORATION
This is to certify that Group III Capital, Inc. (the "Holder") is
entitled to purchase, subject to the provisions of this Warrant, from the
Company, 1,500,000 fully paid, validly issued and nonassessable shares of
Common Stock, $.01 par value, of the Company ("Common Stock") at a price of
$1.54 per share on or before May 9, 2006 (the "Expiration Date"). The number
of shares of Common Stock to be received upon the exercise of this Warrant and
the price to be paid for each share of Common Stock may be adjusted from time
to time as hereinafter set forth. The shares of Common Stock deliverable upon
such exercise, and as adjusted from time to time, are hereinafter sometimes
referred to as "Warrant Shares" and the exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price".
1. VESTING; EXERCISE OF WARRANT.
(a) This Warrant shall vest and be exercisable with
respect to the first 320,000 shares immediately and with respect to the balance
of the shares on May 1, 1997; provided, however, all of the shares purchasable
upon exercise of this Warrant shall vest and be exercisable immediately upon
the closing of (i) any public or private debt or equity financing of the
Company resulting in gross proceeds to the Company of Five Million ($5,000,000)
Dollars or more or (ii) any joint venture, licensing or other similar
transaction resulting in gross proceeds to the Company of Five Million
($5,000,000) Dollars or more including a further investment by a certain
Consortium consisting of Mitsubishi Materials Corporation, Mitsui & Co., Ltd.
or Mitsui Comtek or any other investor(s). Nothwithstanding the foregoing, in
the event the Holder shall be deemed the beneficial owner of 9.9% or more of
the common stock of the Company this Warrant shall not vest with respect to
such number of shares in excess of 9.9% until such time
<PAGE> 3
as the Holder shall beneficially own less than 9.9% of the Common Stock of the
Company.
(b) This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office with the Purchase Form
annexed hereto duly executed and accompanied by payment of the Exercise Price
for the number of Warrant Shares specified in such form. As soon as
practicable after each such exercise of the Warrants, but no later than seven
(7) days from the date of such exercise, the Company shall issue and deliver to
the Holder a certificate or certificates for the Warrant Shares issuable upon
such exercise, registered in the name of the Holder. Upon receipt by the
Company of this Warrant at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be physically delivered to the Holder.
(c) Compliance with the Securities Act.
(1) The Holder may exercise its Warrants if it is
an "accredited investor" or a "qualified institutional buyer", as defined in
Regulation D and Rule 144A under the Securities Act, respectively, provided
each of the following conditions is satisfied:
(a) The Holder establishes to the reasonable
satisfaction of the Company that it is an "accredited
investor" or "qualified institutional buyer"; and
(b) The Holder represents that it is acquiring
the underlying common stock for its own account and
that it is not acquiring such underlying common stock
with a view to, or for offer or sale in connection
with, any distribution thereof (within the meaning of
the Securities Act) that would be in violation of the
securities laws of the United States or any state
thereof, but subject, nevertheless, to the
disposition of its property being at all times within
its control.
(2) In the event of a proposed exercise that does
not qualify under Section (c)(1) above, the Holder may exercise its Warrants
only if:
(i) the Holder gives written notice to
the Company of its intention to exercise, which
notice (A) shall describe the manner and
circumstances of the proposed transaction in
reasonable detail and
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(B) shall designate the counsel for the Holder, which
counsel shall be satisfactory to the Company;
(ii) counsel for the Holder shall render an
opinion, in form and substance satisfactory to the
Company, to the effect that such proposed exercise
may be effected without registration under the
Securities Act or under applicable Blue Sky laws; and
(iii) the Holder complies with Sections
(c)(1)(a) and (c)(1)(b) above.
(3) All stock certificates issued
pursuant to the exercise of the Warrants shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. SUCH SHARES MAY BE OFFERED, SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS
OF SUCH ACT AND OF ANY APPLICABLE STATE SECURITIES
LAWS.
2. RESERVATION OF SHARES. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of
shares of its Common Stock as shall be required for issuance and delivery upon
exercise of the Warrants.
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant.
4. LOSS OF WARRANT. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be
at any time enforceable by anyone.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof,
be entitled to any rights of a shareholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein.
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<PAGE> 5
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) In case the Company shall (i) declare a dividend or
make a distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price determined
by multiplying the Exercise Price by a fraction, the denominator of which shall
be the number of shares of Common Stock outstanding after giving effect to such
action, and the numerator of which shall be the number of shares of Common
Stock immediately prior to such action. Such adjustment shall be made each
time any event listed above shall occur.
(b) If the Company shall issue rights, options or
warrants exercisable into Common Stock to all holders of its Common Stock
entitling them to subscribe for, purchase or receive shares of Common Stock,
the Exercise Price shall be subject to adjustment as follows. If the price at
which Common Stock is issuable pursuant to such rights, options or warrants
(the "Subscription Price") is less than the current market price of the Common
Stock (as defined in Subsection (h) below) on the record date for such
distribution, the Exercise Price in effect immediately prior to such issuance
shall be multiplied by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date plus the
number of additional shares of Common Stock which the aggregate Subscription
Price of the total number of shares of Common Stock issuable upon exercise of
such rights, options or warrants would purchase at the then current market
price of the Common Stock, and the denominator of which shall be the number of
shares of Common Stock outstanding on such record date plus the number of
shares of Common Stock issuable upon exercise of such rights, options or
warrants. If the Subscription Price is greater than or equal to the current
market price (as defined in Subsection (h) below) of the Common Stock on the
record date for such distribution, but less than the then effective Exercise
Price, the Exercise Price in effect immediately prior to such issuance shall be
multiplied by a fraction, the numerator of which shall be the sum of the number
of shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock which the aggregate Subscription Price of the
total number of shares of Common Stock issuable upon exercise of such rights or
options would purchase at the Exercise Price in effect immediately prior to
such issuance, and the denominator of which shall be the number of shares of
Common Stock
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<PAGE> 6
outstanding on such record date plus the number of shares of
Common Stock issuable upon exercise of such rights, options or warrants. If the
Subscription Price is greater than or equal to the current market price of the
Common Stock on the record date for such distribution, and greater than or
equal to the then effective Exercise Price, then there shall be no adjustment
under this Subsection. Such adjustment shall be made each time such rights,
warrants or options are issued and shall become effective immediately after the
record date for the determination of Shareholders entitled to receive such
rights, warrants or options; and to the extent that any such rights, warrants
or options expire or are redeemed without the exercise or conversion thereof,
the Exercise Price shall be readjusted to the Exercise Price which would then
be in effect had the adjustments been made upon the basis of the issuance of
only the number of shares of Common Stock actually issued.
(c) If the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets (excluding
cash dividends or distributions and dividends or distributions referred to in
Subsection (a) above) or subscription rights or warrants (excluding those
referred to in Subsection (b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the total number of shares of Common Stock outstanding multiplied by the
current market price per share of Common Stock (as defined in Subsection (h)
below), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of
such rights or warrants, and the denominator of which shall be the total number
of shares of Common Stock outstanding multiplied by such current market price
per share of Common Stock. Such adjustment shall be made each time such a
record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(d) If the Company shall issue shares of its Common
Stock, (excluding shares issued (i) in any transactions described in Subsection
(a) above, (ii) upon exercise of existing or future stock options granted to
the Company's employees, (iii) upon exercise of this Warrant, and (iv) to the
shareholders of any corporation which merges into the Company in proportion to
their stockholdings of such corporation immediately prior to such merger, or
(v) in a bona fide public offering pursuant to a firm commitment underwriting)
and if no adjustment is required under any other subsection of this Section 6
(without regard to Subsection (j) below), the Exercise Price shall be subject
to adjustment as follows. If the price at which Common Stock is issued (the
"Offering Price") is less then the current market price of the
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<PAGE> 7
Common Stock (as defined in Subsection (h) below) on the record date for such
distribution, the Exercise Price in effect immediately prior to such issuance
shall be multiplied by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date plus the
number of additional shares of Common Stock which the aggregate Offering Price
of the total number of shares of Common Stock so issued would purchase at the
then current market price of the Common Stock, and the denominator of which
shall be the number of shares of Common Stock outstanding on such record date
plus the number of shares of Common Stock so issued. If the Subscription Price
is greater than or equal to the current market price (as defined in Subsection
(h) below) of the Common Stock on the date of such issuance, but less than the
then effective Exercise Price, the Exercise Price in effect immediately prior
to such issuance shall be multiplied by a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock which the
aggregate Offering Price of the total number of shares of Common Stock so
issued would purchase at the Exercise Price in effect immediately prior to such
issuance and the denominator of which shall be the number of shares outstanding
on such record date plus the number of shares of Common Stock so issued. If
the Offering Price is greater than or equal to the current market price of the
Common Stock on the record date for such distribution, and greater than or
equal to the then effective Exercise Price, then there shall be no adjustment
under this Subsection. Such adjustment shall be made each time such an
issuance is made.
(e) If the Company shall issue any securities convertible
into or exchangeable into Common Stock (excluding securities issued in
transactions, described in Subsections (b) and (d) above) the Exercise Price
shall be subject to adjustment as follows. If the price at which Common Stock
is issuable pursuant to such convertible securities (the "Conversion Price") is
less than the current market price on the record date for such distribution,
the Exercise Price in effect immediately prior to such issuance shall be
multiplied by a fraction, the numerator of which shall be the sum of the number
of shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock which the aggregate Conversion Price of the
total number of shares of Common Stock issuable upon conversion of the
convertible securities would purchase at the then current market price of the
Common Stock, and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares of
Common Stock issuable upon conversion of such convertible securities. If the
Conversion Price is greater than or equal to the current market price (as
defined in Subsection (h) below) of the Common Stock on the record date for
such distribution, but less than the then effective Exercise Price, the
Conversion Price in effect immediately prior to such issuance shall be
multiplied by a fraction, the numerator of which shall be
6
<PAGE> 8
the sum of the number of shares of Common Stock outstanding on such record date
plus the number of additional shares of Common Stock which the aggregate
Conversion Price of the total number of shares of Common Stock issuable upon
conversion of the securities at the Exercise Price in effect immediately prior
to such issuance and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares of
Common Stock issuable upon conversion of such convertible securities. If the
Conversion Price is greater than or equal to the current market price of the
Common Stock on the record date for such distribution, and greater than or
equal to the then effective Exercise Price, then there shall be no adjustment
under this Subsection. Such adjustment shall be made each time such
convertible securities are issued and shall become effective immediately after
the record date for the determination of holders entitled to receive such
convertible securities; and to the extent that any such convertible securities
expire or are redeemed without the conversion thereof, the Exercise Price shall
be readjusted to the Exercise Price which would then be in effect had the
adjustments been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued.
(f) Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to Subsections (a), (b), (c), (d) and (e)
above, the number of Shares purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of Shares initially
issuable upon exercise of this Warrant by the Exercise Price in effect on the
date hereof and dividing the product so obtained by the Exercise Price, as
adjusted.
(g) For purposes of any computation respecting
consideration received pursuant to Subsections (d) and (e) above, the following
shall apply:
(1) in the case of the issuance of shares of
Common Stock for cash, the consideration shall be the amount
of such cash, provided that in no case shall any deduction be
made for any commissions, discounts or other expenses incurred
by the Company for any underwriting of the issue or otherwise
in connection therewith;
(2) in the case of the issuance of shares of
Common Stock for a consideration in whole or in part other
than cash, the consideration other than cash shall be deemed
to be the fair market value thereof as determined in good
faith by the Board of Directors of the Company (irrespective
of the accounting treatment thereof), whose determination
shall be conclusive; and
(3) in the case of the issuance of securities
convertible into or exchangeable for shares of Common Stock,
the aggregate consideration received therefor
7
<PAGE> 9
shall be deemed to be the consideration received by the
Company for the issuance of such securities plus the
additional minimum consideration, if any, to be received by
the Company upon the conversion or exchange thereof the
consideration in each case to be determined in the same manner
as provided in clauses (1) and (2) of this Subsection (g).
(h) For the purpose of any computation under Subsections
(b), (c), (d) and (e) above, the current market price per share of Common Stock
at any date shall be deemed to be the lower of (i) the average of the mean of
the high and low bid prices for 30 consecutive business days before such date
or (ii) the mean of the high and low bid price on the business day immediately
preceding such date, as reported by the Trading and Market Services Division of
the Nasdaq Stock Market, Inc. or, if the stock is then listed on the OTC
Bulletin Board, by the National Association of Securities Dealers, Inc., if the
stock is listed on the Nasdaq system is no longer reporting such information,
or if not so available, the fair market price as determined by the Board of
Directors in good faith in the exercise of their best business judgment taking
into account all relevant information known to them.
(i) All calculations under this Section 6 shall be made
to the nearest cent or to the nearest one-hundredth of a share, as the case may
be. Anything in this Section 6 to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such changes in the
Exercise Price in addition to those required by this Section 6, as it shall
determine, in its sole discretion, to be advisable in order that any dividend
or distribution in shares of Common Stock, or any subdivision, reclassification
or combination of Common Stock, hereafter made by the Company shall not result
in any Federal Income tax liability to the holders of the Common Stock or
securities convertible into Common Stock (including warrants).
(j) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant to be mailed to the Holder, at its last address appearing in the
Warrant Register. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section 6, and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
(k) In the event that any time, as a result of an
adjustment made pursuant to Subsection (a) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable
upon exercise of this Warrant shall
8
<PAGE> 10
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in Subsections (a) to (j), inclusive above.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office, an officer's certificate showing the adjusted Exercise
Price determined as herein provided, setting forth in reasonable detail the
facts requiring such adjustment, including a statement of the number of
additional shares of Common Stock, if any, and such other facts as shall be
necessary to show the reason for and the manner of computing such adjustment.
Each such officer's certificate shall be made available at all reasonable times
for inspection by the Holder or any holder of a Warrant executed and delivered
pursuant to Section 1 and the Company shall, forthwith after each such
adjustment, mail a copy by certified mail of such certificate to the Holder or
any such holder.
8. NOTICES TO WARRANT HOLDER. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger
of the Company with or into another corporation, sale, lease or transfer of all
or substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall
cause to be mailed by certified mail to the Holder, at least fifteen days prior
to the date specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed action and stating the date on
which (x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding
up is to take place and the date, if any is to be fixed, as of which the
holders of Common Stock or other securities shall receive cash or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of
the Company with or into another corporation (other than the merger with the
Holder or a merger with a subsidiary in which merger the Company is the
continuing
9
<PAGE> 11
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an
entirety, the Company shall, as a condition precedent to such transaction,
cause effective provisions to be made so that the Holder shall have the right
thereafter by exercising this Warrant, at any time prior to the expiration of
the Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which said Holder would have
received if he had exercised this Warrant immediately prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments of this
Section 9 and shall similarly apply to successive reclassification, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances. In the event that in connection
with any such capital reorganization or reclassification, consolidation,
merger, sale or conveyance, additional shares of Common Stock shall be issued
in exchange, conversion, substitution or payment, in whole or in part, for a
security of the Company other than Common Stock, any such issue shall be
treated as an issue of Common Stock covered by the provisions of Subsection (a)
of Section 6 hereof.
10. REGISTRATION RIGHTS.
(a) Definitions. As used in this Section, the following
terms shall have the following respective meanings:
"Commission" means the Securities and Exchange
Commission, or any other Federal agency at the time administering the
Securities Act (as hereinafter defined).
"Exchange Act" means the Securities Exchange Act of
1934, as amended, or any successor federal statute, and the rules and
regulations of the Commission issued thereunder, as they each may from time to
time, be in effect.
"Registration Statement" means a registration
statement filed by the Company with the Commission for a public offering and
sale of securities of the Company (other than a registration statement on Form
S-8 or Form S-4, or their successors, or any other forms for a limited purpose,
or any registration statement covering securities proposed to be issued in
exchange for securities or assets of another corporation.)
"Registration Expenses" means all expenses incurred
by the Company in complying with this Section 10, including without
10
<PAGE> 12
limitation, all registration and filing fees, exchange listing fees, printing
expenses, fees and disbursements of counsel for the Company, state Blue Sky
fees and expenses, and the expense of any special audits incident to or
required by any such registration, but excluding underwriting discounts and
selling commissions relating to Registrable Shares (as hereinafter defined)
sold by the Shareholders under a Registration Statement and the fees and
expenses of Shareholders' counsel.
"Registrable Shares" means all of the Warrant Shares
and any other shares of Common Stock of the Company issued in respect of such
shares (because of stock splits, stock dividends, reclassification,
recapitalization, or similar events).
"Securities Act" means the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission issued thereunder, as they each may, from time to time, be in
effect.
(b) Piggyback Registration.
(i) From and after the date hereof until May 9,
2006 whenever the Company proposes to file a Registration Statement at any time
and from time to time, it will prior to such filing, give written notice to the
Holders of its intention to do so and, upon the written request of the Holders,
given within thirty (30) days after the Company provides such notice (which
request shall state the intended method of disposition of such Registrable
Shares), the Company shall use its best efforts to cause all Registrable Shares
which the Company has been requested by the Holders to register to be
registered under the Securities Act to the extent necessary to permit their
sale or other disposition in accordance with the intended methods of
distribution specified in the request of the Company.
(ii) In connection with any offering under this
subsection (b) involving an underwriting, the Company shall not be required to
include any Registrable Shares in such Registration Statement unless the
Holders accepts the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it (provided the terms of such
underwriting agreement are typical and customary).
(iii) In connection with an offering under this
subsection (b), if the total amount of securities that all holders of the
Company's Common Stock (or securities convertible into or exchangeable or
exercisable for Common Stock) requested to be included in such offering exceeds
the amount of securities that the underwriters in their sole discretion believe
compatible with the success of the offering (or exceeds the amount of
securities that along with the securities the Company proposes to register, can
be registered on the form that the Company proposes to use) the
11
<PAGE> 13
Company shall only be required to include in the offering so many of the
securities of the selling holders as will not, in the written opinion of the
underwriters, jeopardize the success of the offering (or so many of the
securities as can be registered on the proposed form along with the securities
the Company proposes to register), the securities so included to be
apportioned, to the extent available, pro-rata among the other holders of
Registrable Shares according to the total amount of Registrable Shares owned by
said other selling holders, or in such other proportions as shall be mutually
agreed to by such other selling holders, provided that no such reduction shall
be made with respect to any securities offered by the Company for its own
account.
(c) Registration Procedures. If and to the
extent that the Company is required by the provisions of this Agreement to use
its best efforts to effect the registration of any of the Registrable Shares
under the Securities Act, the Company shall:
(i) file with the Commission a
Registration Statement with respect to such Registrable Shares and use its best
efforts to cause that Registration Statement to become effective; and
(ii) as expeditiously as possible prepare
and file with the Commission any amendments or supplements to the Registration
Statement and the prospectus included in the Registration Statement as may be
necessary to keep the Registration Statement effective (a) for a period of not
less than one hundred eighty (180) days following the effective date or, (b) in
the event the Registrable Shares include warrants or options, for as long as
said warrants or options are exercisable; and
(iii) as expeditiously as possible furnish
to the Holders such reasonable numbers of copies of the prospectus including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as Company may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares;
(iv) as expeditiously as possible use its
best efforts to register or qualify the Registrable Shares covered by the
Registration Statement under the Securities or Blue Sky laws of such states as
the Holders shall reasonably request and to do any and all other acts and
things that may be necessary or desirable to enable the Holders to consummate
the public sale or other disposition of such Registrable Shares in such states;
and
(v) If the Company has delivered
preliminary or final prospectuses to the Holders and after having done so the
prospectus is amended to comply with the requirements of the Securities Act,
the Company shall promptly notify the Holders and, if requested, the Holders
shall immediately cease making offers of
12
<PAGE> 14
Registrable Shares and return all prospectuses then in their possession to the
Company. The Company shall promptly provide the Holders with revised
prospectuses and the Holders shall be free to resume making offers of the
Registrable Shares.
(d) Allocation of Expenses. The Company will pay
all Registration Expenses of all registrations under this Agreement.
(e) Indemnification. In the event any
Registrable Shares are included in a Registration Statement under this
Agreement:
(i) To the extent permitted by law, the
Company will indemnify and hold the Holders, any agent or underwriter (as
defined in the Securities Act) for the Holders, and each person, if any, who
controls the Holders or any such agent or underwriter within the meaning of the
Securities Act, against any losses, claims, damages, or liabilities, joint or
several, to which the Holders or any of them may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based on any
untrue or alleged untrue statement of a material fact contained in the
registration statement, including the preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, or
arises out of or based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or arise out of any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company and relating to action or inaction required of the Company in
connection with any such registration; and will reimburse Holders and any such
agent, underwriter, or controlling person for any legal or other expenses
reasonably incurred by the Holders in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the Indemnity agreement contained in this Section 5 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld) nor shall the Company be
liable in any case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in connection with such
registration statement, preliminary prospectus, final prospectus, or amendments
or supplements thereto, in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
(a) the Holders' Registrable Shares or registration rights hereunder, or any
agent, underwriter, or controlling person of the Holders or any transferee of
the Holders, or (b) by any other person (excluding the Company's directors,
each of its officers who has signed the registration
13
<PAGE> 15
statement, each person, if any, who controls the Company within the meaning of
the Act and each agent of any underwriter for the Company).
(ii) To the extent permitted by law, the
Holders will indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Securities Act, and
each agent or any underwriter of the Company (within the meaning of the
Securities Act) against any losses, claims, damages, or liabilities to which
the Company or any such director, officer, controlling person, agent, or
underwriter may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such registration statement, including any
preliminary prospectus contained therein or any amendments or supplements
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such registration statement,
preliminary or final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished by the
Holders expressly for use in connection with such registration; and the Holders
will reimburse any legal or other expenses reasonably incurred by the Company
or any such director, officer, controlling person, agent, or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 5 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the Holders' consent (which consent shall not be unreasonably withheld);
provided, however that the obligation of the Holders hereunder shall be limited
to an amount equal to the gross proceeds received by the Holders pursuant to
the sale of the Registrable Shares.
(iii) Promptly after receipt by an
indemnified party under this paragraph of notice of commencement of any action,
such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this paragraph, notify the indemnifying
party in writing of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties. The
failure to notify an indemnifying party promptly of the commencement of any
such action, if prejudicial to his ability to defend such action, shall relieve
such indemnifying party of any
14
<PAGE> 16
liability to indemnified party under this paragraph, but the omission so to
notify the indemnifying party will not relieve him of any liability that he may
have to any indemnified party otherwise than under this paragraph.
(f) Underwritten Offerings. In the event that
Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering, the Holders agrees to enter into an underwriting
agreement with such underwriter or underwriters containing customary
representations and warranties with respect to the business and operations of
the Company, and customary representations and warranties of a selling holder,
respectively, as well as customary covenants and agreements to be performed by
each of the Company and the Holders, including without limitation customary
provisions with respect to indemnification of the underwriter by the Company
and the Holders.
(g) Information by the Holders. The Holders
shall furnish to the Company in writing such information regarding the Holders
as in the reasonable opinion of the Company or counsel to the Company may be
requested as being required in connection with the provisions of the Securities
Act.
11. ASSIGNMENT OF WARRANT. This Warrant may be assigned in
whole or part by the Holder without regard to whether the Warrant has vested in
whole or in part provided that, unless such transfer is made pursuant to an
effective registration statement under the Securities Act, the transferring
Holder will, if reasonably requested by the Company, deliver to the Company an
opinion of counsel, satisfactory in form and substance to the Company, that
such transfer is being made in accordance with an exemption from registration
under the Securities Act; and provided further that any request for transfer be
accompanied by a written instrument of transfer in form reasonably acceptable
to the Company.
Dated: May 9, 1996
ATTEST: LITHIUM TECHNOLOGY CORPORATION
By: /s/ SUSAN M. GUSTAFSON By: /s/ THOMAS R. THOMSEN
----------------------- ---------------------------
Susan M. Gustafson, Thomas R. Thomsen, Chairman
Secretary and Chief Executive Officer
15
<PAGE> 1
EXHIBIT 10.30
*****************************************************************
WARRANT TO PURCHASE COMMON STOCK
OF
LITHIUM TECHNOLOGY CORPORATION
IN FAVOR OF
NANELE SERVICES, INC.
*****************************************************************
<PAGE> 2
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD,
ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, OR, IF AN EXEMPTION FROM REGISTRATION SHALL BE
AVAILABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. New York Time, on May 9, 2002.
Warrant to Purchase 150,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
LITHIUM TECHNOLOGY CORPORATION
This is to certify that Nanele Services, Inc. (the "Holder") is
entitled to purchase, subject to the provisions of this Warrant, from the
Company, 150,000 fully paid, validly issued and nonassessable shares of Common
Stock, $.01 par value, of the Company ("Common Stock") at a price of $2.56 per
share on or before May 9, 2002 (the "Expiration Date"). The number of shares
of Common Stock to be received upon the exercise of this Warrant and the price
to be paid for each share of Common Stock may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price".
1. VESTING; EXERCISE OF WARRANT.
(a) This Warrant shall vest and be exercisable with
respect to the 150,000 shares immediately.
(b) This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office with the Purchase Form
annexed hereto duly executed and accompanied by payment of the Exercise Price
for the number of Warrant Shares specified in such form. As soon as
practicable after each such exercise of the Warrants, but no later than seven
(7) days from the date of such exercise, the Company shall issue and deliver to
the Holder a certificate or certificates for the Warrant Shares issuable upon
such exercise, registered in the name of the Holder. Upon receipt by the
Company of this Warrant at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the
<PAGE> 3
Company shall then be closed or that certificates representing such shares of
Common Stock shall not then be physically delivered to the Holder.
(c) Compliance with the Securities Act.
(1) The Holder may exercise its Warrants if it is
an "accredited investor" or a "qualified institutional buyer", as defined in
Regulation D and Rule 144A under the Securities Act, respectively, provided
each of the following conditions is satisfied:
(a) The Holder establishes to the reasonable
satisfaction of the Company that it is an "accredited
investor" or "qualified institutional buyer"; and
(b) The Holder represents that it is acquiring
the underlying common stock for its own account and
that it is not acquiring such underlying common stock
with a view to, or for offer or sale in connection
with, any distribution thereof (within the meaning of
the Securities Act) that would be in violation of the
securities laws of the United States or any state
thereof, but subject, nevertheless, to the
disposition of its property being at all times within
its control.
(2) In the event of a proposed exercise that does
not qualify under Section (c)(1) above, the Holder may exercise its Warrants
only if:
(i) the Holder gives written notice to
the Company of its intention to exercise, which
notice (A) shall describe the manner and
circumstances of the proposed transaction in
reasonable detail and (B) shall designate the counsel
for the Holder, which counsel shall be satisfactory
to the Company;
(ii) counsel for the Holder shall render an
opinion, in form and substance satisfactory to the
Company, to the effect that such proposed exercise
may be effected without registration under the
Securities Act or under applicable Blue Sky laws; and
(iii) the Holder complies with Sections
(c)(1)(a) and (c)(1)(b) above.
(3) All stock certificates issued pursuant to the
exercise of the Warrants shall bear the following legend:
2
<PAGE> 4
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. SUCH SHARES MAY BE OFFERED, SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS
OF SUCH ACT AND OF ANY APPLICABLE STATE SECURITIES
LAWS.
2. RESERVATION OF SHARES. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of
shares of its Common Stock as shall be required for issuance and delivery upon
exercise of the Warrants.
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant.
4. LOSS OF WARRANT. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be
at any time enforceable by anyone.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof,
be entitled to any rights of a shareholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) In case the Company shall (i) declare a dividend or
make a distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price determined
by multiplying the Exercise Price by a fraction, the denominator of which shall
be the number of shares of Common Stock outstanding after giving effect to such
action, and the numerator
3
<PAGE> 5
of which shall be the number of shares of Common Stock immediately prior to
such action. Such adjustment shall be made each time any event listed above
shall occur.
(b) If the Company shall issue rights, options or
warrants exercisable into Common Stock to all holders of its Common Stock
entitling them to subscribe for, purchase or receive shares of Common Stock,
the Exercise Price shall be subject to adjustment as follows. If the price at
which Common Stock is issuable pursuant to such rights, options or warrants
(the "Subscription Price") is less than the current market price of the Common
Stock (as defined in Subsection (h) below) on the record date for such
distribution, the Exercise Price in effect immediately prior to such issuance
shall be multiplied by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date plus the
number of additional shares of Common Stock which the aggregate Subscription
Price of the total number of shares of Common Stock issuable upon exercise of
such rights, options or warrants would purchase at the then current market
price of the Common Stock, and the denominator of which shall be the number of
shares of Common Stock outstanding on such record date plus the number of
shares of Common Stock issuable upon exercise of such rights, options or
warrants. If the Subscription Price is greater than or equal to the current
market price (as defined in Subsection (h) below) of the Common Stock on the
record date for such distribution, but less than the then effective Exercise
Price, the Exercise Price in effect immediately prior to such issuance shall be
multiplied by a fraction, the numerator of which shall be the sum of the number
of shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock which the aggregate Subscription Price of the
total number of shares of Common Stock issuable upon exercise of such rights or
options would purchase at the Exercise Price in effect immediately prior to
such issuance, and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares of
Common Stock issuable upon exercise of such rights, options or warrants. If the
Subscription Price is greater than or equal to the current market price of the
Common Stock on the record date for such distribution, and greater than or
equal to the then effective Exercise Price, then there shall be no adjustment
under this Subsection. Such adjustment shall be made each time such rights,
warrants or options are issued and shall become effective immediately after the
record date for the determination of Shareholders entitled to receive such
rights, warrants or options; and to the extent that any such rights, warrants
or options expire or are redeemed without the exercise or conversion thereof,
the Exercise Price shall be readjusted to the Exercise Price which would then
be in effect had the adjustments been made upon the basis of the issuance of
only the number of shares of Common Stock actually issued.
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<PAGE> 6
(c) If the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets (excluding
cash dividends or distributions and dividends or distributions referred to in
Subsection (a) above) or subscription rights or warrants (excluding those
referred to in Subsection (b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the total number of shares of Common Stock outstanding multiplied by the
current market price per share of Common Stock (as defined in Subsection (h)
below), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of
such rights or warrants, and the denominator of which shall be the total number
of shares of Common Stock outstanding multiplied by such current market price
per share of Common Stock. Such adjustment shall be made each time such a
record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(d) If the Company shall issue shares of its Common
Stock, (excluding shares issued (i) in any transactions described in Subsection
(a) above, (ii) upon exercise of existing or future stock options granted to
the Company's employees, (iii) upon exercise of this Warrant, and (iv) to the
shareholders of any corporation which merges into the Company in proportion to
their stockholdings of such corporation immediately prior to such merger, or
(v) in a bona fide public offering pursuant to a firm commitment underwriting)
and if no adjustment is required under any other subsection of this Section 6
(without regard to Subsection (j) below), the Exercise Price shall be subject
to adjustment as follows. If the price at which Common Stock is issued (the
"Offering Price") is less then the current market price of the Common Stock (as
defined in Subsection (h) below) on the record date for such distribution, the
Exercise Price in effect immediately prior to such issuance shall be multiplied
by a fraction, the numerator of which shall be the sum of the number of shares
of Common Stock outstanding on such record date plus the number of additional
shares of Common Stock which the aggregate Offering Price of the total number
of shares of Common Stock so issued would purchase at the then current market
price of the Common Stock, and the denominator of which shall be the number of
shares of Common Stock outstanding on such record date plus the number of
shares of Common Stock so issued. If the Subscription Price is greater than or
equal to the current market price (as defined in Subsection (h) below) of the
Common Stock on the date of such issuance, but less than the then effective
Exercise Price, the Exercise Price in effect immediately prior to such issuance
shall be multiplied by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on such
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<PAGE> 7
record date plus the number of additional shares of Common Stock which the
aggregate Offering Price of the total number of shares of Common Stock so
issued would purchase at the Exercise Price in effect immediately prior to such
issuance and the denominator of which shall be the number of shares outstanding
on such record date plus the number of shares of Common Stock so issued. If
the Offering Price is greater than or equal to the current market price of the
Common Stock on the record date for such distribution, and greater than or
equal to the then effective Exercise Price, then there shall be no adjustment
under this Subsection. Such adjustment shall be made each time such an
issuance is made.
(e) If the Company shall issue any securities convertible
into or exchangeable into Common Stock (excluding securities issued in
transactions, described in Subsections (b) and (d) above) the Exercise Price
shall be subject to adjustment as follows. If the price at which Common Stock
is issuable pursuant to such convertible securities (the "Conversion Price") is
less than the current market price on the record date for such distribution,
the Exercise Price in effect immediately prior to such issuance shall be
multiplied by a fraction, the numerator of which shall be the sum of the number
of shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock which the aggregate Conversion Price of the
total number of shares of Common Stock issuable upon conversion of the
convertible securities would purchase at the then current market price of the
Common Stock, and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares of
Common Stock issuable upon conversion of such convertible securities. If the
Conversion Price is greater than or equal to the current market price (as
defined in Subsection (h) below) of the Common Stock on the record date for
such distribution, but less than the then effective Exercise Price, the
Conversion Price in effect immediately prior to such issuance shall be
multiplied by a fraction, the numerator of which shall be the sum of the number
of shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock which the aggregate Conversion Price of the
total number of shares of Common Stock issuable upon conversion of the
securities at the Exercise Price in effect immediately prior to such issuance
and the denominator of which shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock
issuable upon conversion of such convertible securities. If the Conversion
Price is greater than or equal to the current market price of the Common Stock
on the record date for such distribution, and greater than or equal to the then
effective Exercise Price, then there shall be no adjustment under this
Subsection. Such adjustment shall be made each time such convertible
securities are issued and shall become effective immediately after the record
date for the determination of holders entitled to receive such convertible
securities; and to the extent that any such convertible securities expire or
are redeemed without the conversion thereof,
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<PAGE> 8
the Exercise Price shall be readjusted to the Exercise Price which would then
be in effect had the adjustments been made upon the basis of the issuance of
only the number of shares of Common Stock actually issued.
(f) Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to Subsections (a), (b), (c), (d) and (e)
above, the number of Shares purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of Shares initially
issuable upon exercise of this Warrant by the Exercise Price in effect on the
date hereof and dividing the product so obtained by the Exercise Price, as
adjusted.
(g) For purposes of any computation respecting
consideration received pursuant to Subsections (d) and (e) above, the following
shall apply:
(1) in the case of the issuance of shares of
Common Stock for cash, the consideration shall be the amount
of such cash, provided that in no case shall any deduction be
made for any commissions, discounts or other expenses incurred
by the Company for any underwriting of the issue or otherwise
in connection therewith;
(2) in the case of the issuance of shares of
Common Stock for a consideration in whole or in part other
than cash, the consideration other than cash shall be deemed
to be the fair market value thereof as determined in good
faith by the Board of Directors of the Company (irrespective
of the accounting treatment thereof), whose determination
shall be conclusive; and
(3) in the case of the issuance of securities
convertible into or exchangeable for shares of Common Stock,
the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the
conversion or exchange thereof the consideration in each case
to be determined in the same manner as provided in clauses (1)
and (2) of this Subsection (g).
(h) For the purpose of any computation under Subsections
(b), (c), (d) and (e) above, the current market price per share of Common Stock
at any date shall be deemed to be the lower of (i) the average of the mean of
the high and low bid prices for 30 consecutive business days before such date
or (ii) the mean of the high and low bid price on the business day immediately
preceding such date, as reported by the Trading and Market Services Division of
the Nasdaq Stock Market, Inc. or, if the stock is then listed on the OTC
Bulletin Board, by the National Association of Securities
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<PAGE> 9
Dealers, Inc., if the stock is listed on the Nasdaq system is no longer
reporting such information, or if not so available, the fair market price as
determined by the Board of Directors in good faith in the exercise of their
best business judgment taking into account all relevant information known to
them.
(i) All calculations under this Section 6 shall be made
to the nearest cent or to the nearest one-hundredth of a share, as the case may
be. Anything in this Section 6 to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such changes in the
Exercise Price in addition to those required by this Section 6, as it shall
determine, in its sole discretion, to be advisable in order that any dividend
or distribution in shares of Common Stock, or any subdivision, reclassification
or combination of Common Stock, hereafter made by the Company shall not result
in any Federal Income tax liability to the holders of the Common Stock or
securities convertible into Common Stock (including warrants).
(j) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant to be mailed to the Holder, at its last address appearing in the
Warrant Register. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section 6, and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
(k) In the event that any time, as a result of an
adjustment made pursuant to Subsection (a) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable
upon exercise of this Warrant shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock contained in Subsections (a) to (j), inclusive
above.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office, an officer's certificate showing the adjusted Exercise
Price determined as herein provided, setting forth in reasonable detail the
facts requiring such adjustment, including a statement of the number of
additional shares of Common Stock, if any, and such other facts as shall be
necessary to show the reason for and the manner of computing such adjustment.
Each such officer's certificate shall be made available at all reasonable times
for inspection by the Holder or any holder of a Warrant executed and delivered
pursuant
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<PAGE> 10
to Section 1 and the Company shall, forthwith after each such adjustment, mail
a copy by certified mail of such certificate to the Holder or any such holder.
8. NOTICES TO WARRANT HOLDER. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or
any other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger
of the Company with or into another corporation, sale, lease or transfer of all
or substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall
cause to be mailed by certified mail to the Holder, at least fifteen days prior
to the date specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed action and stating the date on
which (x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding
up is to take place and the date, if any is to be fixed, as of which the
holders of Common Stock or other securities shall receive cash or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of
the Company with or into another corporation (other than the merger with the
Holder or a merger with a subsidiary in which merger the Company is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise of this Warrant) or in case of any sale, lease
or conveyance to another corporation of the property of the Company as an
entirety, the Company shall, as a condition precedent to such transaction,
cause effective provisions to be made so that the Holder shall have the right
thereafter by exercising this Warrant, at any time prior to the expiration of
the Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which said Holder would have
received if he had exercised this Warrant immediately prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments of this
Section 9 and shall
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<PAGE> 11
similarly apply to successive reclassification, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection (a) of Section 6 hereof.
10. REGISTRATION RIGHTS.
(a) Definitions. As used in this Section, the following
terms shall have the following respective meanings:
"Commission" means the Securities and Exchange
Commission, or any other Federal agency at the time administering the
Securities Act (as hereinafter defined).
"Exchange Act" means the Securities Exchange Act of
1934, as amended, or any successor federal statute, and the rules and
regulations of the Commission issued thereunder, as they each may from time to
time, be in effect.
"Registration Statement" means a registration
statement filed by the Company with the Commission for a public offering and
sale of securities of the Company (other than a registration statement on Form
S-8 or Form S-4, or their successors, or any other forms for a limited purpose,
or any registration statement covering securities proposed to be issued in
exchange for securities or assets of another corporation.)
"Registration Expenses" means all expenses incurred
by the Company in complying with this Section 10, including without limitation,
all registration and filing fees, exchange listing fees, printing expenses,
fees and disbursements of counsel for the Company, state Blue Sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, but excluding underwriting discounts and selling commissions
relating to Registrable Shares (as hereinafter defined) sold by the
Shareholders under a Registration Statement and the fees and expenses of
Shareholders' counsel.
"Registrable Shares" means all of the Warrant Shares
and any other shares of Common Stock of the Company issued in respect of such
shares (because of stock splits, stock dividends, reclassification,
recapitalization, or similar events).
"Securities Act" means the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and
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<PAGE> 12
regulations of the Commission issued thereunder, as they each may, from time to
time, be in effect.
(b) Piggyback Registration.
(i) From and after the date hereof until May 9,
2002 whenever the Company proposes to file a Registration Statement at any time
and from time to time, it will prior to such filing, give written notice to the
Holders of its intention to do so and, upon the written request of the Holders,
given within thirty (30) days after the Company provides such notice (which
request shall state the intended method of disposition of such Registrable
Shares), the Company shall use its best efforts to cause all Registrable Shares
which the Company has been requested by the Holders to register to be
registered under the Securities Act to the extent necessary to permit their
sale or other disposition in accordance with the intended methods of
distribution specified in the request of the Company.
(ii) In connection with any offering under this
subsection (b) involving an underwriting, the Company shall not be required to
include any Registrable Shares in such Registration Statement unless the
Holders accepts the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it (provided the terms of such
underwriting agreement are typical and customary).
(iii) In connection with an offering under this
subsection (b), if the total amount of securities that all holders of the
Company's Common Stock (or securities convertible into or exchangeable or
exercisable for Common Stock) requested to be included in such offering exceeds
the amount of securities that the underwriters in their sole discretion believe
compatible with the success of the offering (or exceeds the amount of
securities that along with the securities the Company proposes to register, can
be registered on the form that the Company proposes to use) the Company shall
only be required to include in the offering so many of the securities of the
selling holders as will not, in the written opinion of the underwriters,
jeopardize the success of the offering (or so many of the securities as can be
registered on the proposed form along with the securities the Company proposes
to register), the securities so included to be apportioned, to the extent
available, pro-rata among the other holders of Registrable Shares according to
the total amount of Registrable Shares owned by said other selling holders, or
in such other proportions as shall be mutually agreed to by such other selling
holders, provided that no such reduction shall be made with respect to any
securities offered by the Company for its own account.
(c) Registration Procedures. If and to the
extent that the Company is required by the provisions of this Agreement to
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<PAGE> 13
use its best efforts to effect the registration of any of the Registrable
Shares under the Securities Act, the Company shall:
(i) file with the Commission a
Registration Statement with respect to such Registrable Shares and use its best
efforts to cause that Registration Statement to become effective; and
(ii) as expeditiously as possible prepare
and file with the Commission any amendments or supplements to the Registration
Statement and the prospectus included in the Registration Statement as may be
necessary to keep the Registration Statement effective (a) for a period of not
less than one hundred eighty (180) days following the effective date or, (b) in
the event the Registrable Shares include warrants or options, for as long as
said warrants or options are exercisable; and
(iii) as expeditiously as possible furnish
to the Holders such reasonable numbers of copies of the prospectus including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as Company may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares;
(iv) as expeditiously as possible use its
best efforts to register or qualify the Registrable Shares covered by the
Registration Statement under the Securities or Blue Sky laws of such states as
the Holders shall reasonably request and to do any and all other acts and
things that may be necessary or desirable to enable the Holders to consummate
the public sale or other disposition of such Registrable Shares in such states;
and
(v) If the Company has delivered
preliminary or final prospectuses to the Holders and after having done so the
prospectus is amended to comply with the requirements of the Securities Act,
the Company shall promptly notify the Holders and, if requested, the Holders
shall immediately cease making offers of Registrable Shares and return all
prospectuses then in their possession to the Company. The Company shall
promptly provide the Holders with revised prospectuses and the Holders shall be
free to resume making offers of the Registrable Shares.
(d) Allocation of Expenses. The Company will pay
all Registration Expenses of all registrations under this Agreement.
(e) Indemnification. In the event any
Registrable Shares are included in a Registration Statement under this
Agreement:
(i) To the extent permitted by law, the
Company will indemnify and hold the Holders, any agent or
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<PAGE> 14
underwriter (as defined in the Securities Act) for the Holders, and each
person, if any, who controls the Holders or any such agent or underwriter
within the meaning of the Securities Act, against any losses, claims, damages,
or liabilities, joint or several, to which the Holders or any of them may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based on any untrue or alleged untrue statement of a material fact
contained in the registration statement, including the preliminary prospectus
or final prospectus contained therein or any amendments or supplements
thereto, or arises out of or based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arise out of any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration; and will reimburse Holders
and any such agent, underwriter, or controlling person for any legal or other
expenses reasonably incurred by the Holders in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the Indemnity agreement contained in this Section 5 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld) nor shall the Company be
liable in any case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in connection with such
registration statement, preliminary prospectus, final prospectus, or amendments
or supplements thereto, in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
(a) the Holders' Registrable Shares or registration rights hereunder, or any
agent, underwriter, or controlling person of the Holders or any transferee of
the Holders, or (b) by any other person (excluding the Company's directors,
each of its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Act and each agent of
any underwriter for the Company).
(ii) To the extent permitted by law, the
Holders will indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Securities Act, and
each agent or any underwriter of the Company (within the meaning of the
Securities Act) against any losses, claims, damages, or liabilities to which
the Company or any such director, officer, controlling person, agent, or
underwriter may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any untrue
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<PAGE> 15
statement or alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus contained therein
or any amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary or final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written
information furnished by the Holders expressly for use in connection with such
registration; and the Holders will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, agent, or underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 5 shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the Holders' consent (which consent shall not be
unreasonably withheld); provided, however that the obligation of the Holders
hereunder shall be limited to an amount equal to the gross proceeds received by
the Holders pursuant to the sale of the Registrable Shares.
(iii) Promptly after receipt by an
indemnified party under this paragraph of notice of commencement of any action,
such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this paragraph, notify the indemnifying
party in writing of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties. The
failure to notify an indemnifying party promptly of the commencement of any
such action, if prejudicial to his ability to defend such action, shall relieve
such indemnifying party of any liability to indemnified party under this
paragraph, but the omission so to notify the indemnifying party will not
relieve him of any liability that he may have to any indemnified party
otherwise than under this paragraph.
(f) Underwritten Offerings. In the event that
Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering, the Holders agrees to enter into an underwriting
agreement with such underwriter or underwriters containing customary
representations and warranties with respect to the business and operations of
the Company, and customary representations and warranties of a selling holder,
respectively, as well as customary covenants and agreements to be performed by
each of the Company and the Holders, including without limitation
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<PAGE> 16
customary provisions with respect to indemnification of the underwriter by the
Company and the Holders.
(g) Information by the Holders. The Holders
shall furnish to the Company in writing such information regarding the Holders
as in the reasonable opinion of the Company or counsel to the Company may be
requested as being required in connection with the provisions of the Securities
Act.
11. ASSIGNMENT OF WARRANT. This Warrant may be assigned in
whole or part by the Holder provided that, unless such transfer is made
pursuant to an effective registration statement under the Securities Act, the
transferring Holder will, if reasonably requested by the Company, deliver to
the Company an opinion of counsel, satisfactory in form and substance to the
Company, that such transfer is being made in accordance with an exemption from
registration under the Securities Act; and provided further that any request
for transfer be accompanied by a written instrument of transfer in form
reasonably acceptable to the Company.
ATTEST: LITHIUM TECHNOLOGY CORPORATION
By: /s/ SUSAN M. GUSTAFSON By: /s/ THOMAS R. THOMSEN
----------------------- ---------------------------
Susan M. Gustafson, Thomas R. Thomsen, Chairman
Secretary and Chief Executive Officer
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form SB-2 of our report dated March 12, 1996
(March 29, 1996 as to Note 8) relating to the consolidated financial statements
of Lithium Technology Corporation which appears in such Prospectus.
WISS & COMPANY, LLP
Woodbridge, New Jersey
July 15, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF COUNSEL
Lithium Technology Corporation
5115 Campus Drive
Plymouth Meeting, Pennsylvania 19462-1129
We hereby consent to the reference to our firm under the caption
"Experts" in the Prospectus contained in the Registration Statement.
MASON, BROIDY, GALLAGHER & TAYLOR
Princeton, New Jersey
July 15, 1996
