FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission file number 0-16323
ELECTROSOURCE, INC.
(Exact name of Registrant as specified in its charter.)
Delaware 742466304
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3800-B Drossett Drive
Austin, Texas 78744-1131
(Address of principal (Zip Code)
executive offices)
(512) 445-6606
(Registrant's telephone number, including area code)
__________________________________________
(Former name, former address and former fiscal year,
if changes since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes __ No __
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 21,764,286 shares as of August 10, 1995.
INDEX TO FORM 10-Q
June 30, 1995
Electrosource, Inc. Commission file number 0-16323
Part I Financial Information
Condensed Balance Sheets at June 30, 1995 (Unaudited)
and December 31, 1994. Page 3
Condensed Statements of Operations for the three
and six months ended June 30, 1995
and 1994 (Unaudited). Page 4
Condensed Statements of Cash Flows for the six months
ended June 30, 1995 and 1994 (Unaudited) Page 5
Notes to Condensed Financial Statements Page 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations Page10
Part II Other Information Page13
Index to Exhibits Page16
Part I - Financial Information
Item 1. Financial Statements
Electrosource, Inc.
Condensed Balance Sheets
June 30, December 31,
1995 1995
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,480,646 $ 2,193,290
Trade receivables 1,805,706 2,478,311
Inventories 481,842 231,656
Prepaid and other expenses
476,628 24,651
TOTAL CURRENT ASSETS 4,244,822 4,927,908
PLANT AND EQUIPMENT (net of accumulated
depreciation of $962,690 in 1995 5,806,741 2,632,049
and $694,307 in 1994)
TECHNOLOGY LICENSE AGREEMENT (net of
accumulated amortization of $1,385,514
in 1995 and $1,291,104 in 1994) 1,663,160 1,757,570
RESTRICTED CASH 478,285 0
OTHER 171,091 0
TOTAL ASSETS $12,364,099 $ 9,317,527
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable, accrued liabilities
and other $ 3,287,991 $ 1,896,296
Deferred revenue 0 1,000,000
TOTAL CURRENT LIABILITIES 3,287,991 2,896,296
CONVERTIBLE NOTE PAYABLE 7,200,000 3,800,000
TECHNOLOGY LICENSE PAYABLE 2,661,679 3,271,343
CAPITAL LEASE OBLIGATIONS (less current
portion) 839,923 35,337
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.10 per
share; authorized 50,000,000 shares;
shares issued and outstanding
19,342,826 in 1995 and
15,134,463 in 1994 1,934,283 1,513,446
Warrants 0 0
Paid in capital 21,964,206 15,356,043
Retained earnings (deficit) (25,523,983) (17,554,938)
(1,625,494) (685,449)
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 12,364,099 $ 9,317,527
See notes to condensed financial statements.
<TABLE>
Electrosource, Inc.
Condensed Statements of Operations (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues
Battery sales $ 398,917 $ 0 $ 552,340 $ 0
Project revenue 100,000 702,476 878,593 2,023,899
License fees 0 0 1,000,000 0
Revenue from joint venture partner 0 228,146 0 410,414
Royalty revenue 0 25,000 0 50,000
Interest income 43,725 7,784 70,504 13,872
542,642 963,406 2,501,437 2,498,184
Costs and expenses
Manufacturing 2,865,418 0 4,790,089 0
Research and development 1,516,759 341,654 2,606,561 1,193,816
Selling, general and administrative 1,246,940 862,248 2,536,039 1,428,590
Technology license and royalties 74,705 74,705 149,410 149,410
Depreciation and amortization 135,111 42,658 268,383 94,260
(5,838,933) (1,321,265) (10,350,482) (2,866,076)
Loss before income taxes (5,296,291) (357,859) (7,849,045) (367,891)
Income taxes (foreign) 20,000 0 120,000 0
Net loss $(5,316,291) $ (357,859) $(7,969,045) $ (367,891)
Net loss per common share $ (0.29) $ (0.03) $ (0.45) $ (0.03)
Average common shares outstanding 18,197,596 13,422,450 17,530,184 13,353,717
See notes to condensed financial statements.
</TABLE>
<TABLE>
Electrosource, Inc.
Condensed Statements of Cash Flows (Unaudited)
<CAPTION>
Six Months Ended June 30,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss $(7,969,045) $ (367,891)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 268,383 94,260
Amortization of technology license agreement 94,410 94,410
Changes in operating assets and liabilities:
(Increase) decrease in receivables 672,605 (138,779)
Increase in prepaid expenses and other (264,066) (35,340)
Increase in inventories (250,186) 0
Increase in accounts payable and accrued liabilities 1,148,265 35,772
Increase (decrease) in deferred revenue (1,000,000) 12,500
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (7,299,634) (305,068)
INVESTING ACTIVITIES
Purchases of plant and equipment (3,279,867) (152,516)
CASH USED IN INVESTING ACTIVITIES (3,279,867) (152,516)
FINANCING ACTIVITIES
Proceeds from convertible notes payable 5,400,000 0
Proceeds from issuance of common stock 4,060,334 2,369,335
Proceeds from capital leases 991,702 0
Increase in restricted cash (478,285) 0
Payment on capital lease obligations (106,894) (13,843)
CASH PROVIDED BY FINANCING ACTIVITIES 9,866,857 2,355,492
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (712,644) 1,897,908
Cash and cash equivalents at beginning of period 2,193,290 1,000,723
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,480,646 $ 2,898,631
See notes to condensed financial statements.
</TABLE>
Electrosource, Inc.
June 30, 1995
Item 2. Notes to Condensed Financial Statements (Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they
do not include all of the information and notes 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 interim financial
statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
Certain reclassifications have been made to the 1994 financial
statements to conform with the 1995 presentation.
NOTE B - DEVELOPMENT STAGE COMPANY
Prior to 1995 the Company had been a "development stage company"
for financial reporting purposes. In 1995 the Company began to
increase activity at its San Marcos, Texas manufacturing facility
and expects to earn significant revenue from its intended
operations. Accordingly, the Company no longer will report as a
"development stage company".
NOTE C - PROPERTY AND EQUIPMENT
December 31,
June 30, 1995 1994
Office Equipment $ 903,397 $ 269,957
Production Equipment 3,740,617 1,404,052
Lab Equipment 628,854 519,543
Leasehold Improvements 1,496,563 1,132,804
6,769,431 3,326,356
Less: Accumulated depreciation 962,690 694,307
and amortization
Total Property and Equipment $ 5,806,741 $ 2,632,049
NOTE D - RESTRICTED CASH
In connection with capital lease transactions completed during
the second quarter, the Company was required to secure these
obligations by establishing standby letters-of-credit in the
amount of $478,285. These letters-of-credit are collateralized
by certificates of deposit of an equal amount.
NOTE E - CONVERTIBLE NOTE PAYABLE
In April 1995 the Company completed an offering of 240
Convertible Debentures ("the Debentures") with a total value of
$6,000,000. The net proceeds to the Company for the issuance of
the Debentures was $5,400,000. Each $25,000 Convertible
Debenture is convertible into Electrosource, Inc., Common Stock,
par value $.10 per share. The Conversion Price of the debentures
will be equal to 80 percent of the Market Price (average closing
price of the Common Stock for the five business days immediately
preceding such time as the debentures are converted). Conversion
of 50 percent of the debentures may be effected 60 days after
issue and the remaining 50 percent 30 days thereafter subject to
earlier conversion upon certain events. In addition, Warrants to
purchase 54,237 shares of Common Stock were issued at a price
of $3.6875 per share exercisable until April 5, 2000. As of
June 30, 1995, 104 of the Debentures, with a value of $2,600,000,
were converted into 1,232,749 shares of Common Stock.
NOTE F - TECHNOLOGY LICENSE PAYABLE
During the fourth quarter of 1994, the Company finalized the
Technology License Agreement with BDM Technologies, Inc. ("BDM").
Under the terms of this agreement, the Company obtained an
exclusive license to use certain technologies under development
by BDM for the manufacture of batteries. The Company agreed to
pay BDM: $80,000 cash, issue 1,700,000 shares of Common Stock in
thirty-six equal installments; issue 200,000 additional shares of
Common Stock if the Company decides to maintain the license
beyond the original three year term; grant 1,000,000 options to
purchase shares of Common Stock exercisable at $4.00 per share;
and buy BDM's interest in a corporate joint venture ("HBTI"),
previously created by BDM and the Company, for 100,000 shares of
Common Stock. During the first six months 1995, the Company
issued 383,332 shares of Common Stock to BDM under the terms of
this agreement and has recorded a $609,664 increase to
shareholders' equity and a corresponding reduction to the
Technology License Payable.
NOTE G - CAPITAL LEASE OBLIGATIONS
In April 1995, the Company completed an agreement to sell and
lease back $991,702 of capital equipment. The agreement is for a
three-year period, has monthly lease payments of $32,934 and has
been accounted for as a capital lease. The lease is
collateralized by a letter-of-credit in the amount of $396,680.
The agreement also provides the lessor with an option to extend
the lease term to four years, at reduced monthly rental rates, at
the end of the first year. In addition, the amount of the letter-
of-credit can be reduced if the Company achieves six consecutive
quarters of profitability or completes an offering of securities
with net proceeds of $20 million or more. In connection with
this transaction, the Lessor was granted warrants to purchase
50,000 shares of Common Stock at an exercise price of $4.00 per
share. Also during the second quarter the Company completed an
agreement to lease $163,208 of furniture for a 5 year term with
monthly payments of $3,411. This agreement is collateralized by
a letter-of-credit in the amount of $81,604.
NOTE H - COMMON STOCK
In January 1995, the Company sold 2,051,282 shares of Common
Stock which resulted in net proceeds to the Company of
$3,000,000. In March 1995, the Company sold 500,000 shares of
Common Stock which resulted in net proceeds to the Company of
$1,000,000. In addition, in connection with the conversion of
104 of the Debentures, the Company issued 1,232,749 shares of
Common Stock during June 1995.
NOTE I - LICENSE FEES
During 1994, the Company and Mitsui Engineering and Shipbuilding
Co. Ltd. ("MES") signed a distribution agreement whereby MES
agreed to pay the Company $2,000,000 for the distribution rights
of the Horizon battery in Japan and an option for a manufacturing
license. The Company recognized $1,000,000 of this license fee
as revenue in the first quarter of 1995 and $800,000 in the third
quarter of 1994. Previously, HBTI had recognized $200,000 of
this license fee.
NOTE J - LIQUIDITY
During the second quarter of 1995, the Company discovered problems
with certain of the batteries that were produced late in 1994 and in
early 1995. The problems were due to some early developmental problems
encountered in the manufacturing process that caused the batteries
not to perform as expected. The Company has determined the cause, and
corrected, all of these problems. However, due to the problems encountered,
the Company decided to replace approximately 1,700 batteries at no cost
to the customer. The batteries replaced represent less than 45 percent
of the batteries shipped from San Marcos. These replacements will result
in lost revenue, and corresponding cash flow, of approximately $900,000.
This combined with the increases in costs during the second quarter,
which were necessary to achieve the Company's manufacturing objectives
and correct the above problems, have significantly depleted the cash
resources of the Company. The achievements made during the second
quarter have enabled the Company to react to the changing market and
have allowed the Company to conclude the bulk of the manufacturing
development and be in a position to reduce its expenditures. As
a result, the Company reduced its workforce approximately 30 percent
as of July 31, 1995, and believes it is now in a position to adjust
the output of the San Marcos facility to better match market conditions
while continuing to increase the capacity through further automation
and improvements.
After the sale of the New Debentures in July 1995 (see Note K), and the
payment of certain accounts payable, the Company has approximately
$1,780,000 of unrestricted cash available as of August 7, 1995. The
Company is in discussions with several parties regarding potential
sources of additional capital which could include international licenses.
If the Company is able to achieve its sales forecasts and close certain
of these transactions, it believes that the proceeds will be sufficient
enough to continue operating for the remainder of 1995. However, if the
Company is not able to complete these or similar transactions, it may not
be able to continue operations. As a result of this situation, management
is continuing to devote substantial effort to pursue additional funding
sources.
The Company Common Stock is traded in the Over-the-Counter Market
and is reported on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") under the symbol "ELSI."
In order to maintain listing by NASDAQ, the Company must maintain
a minimum $1-million of stockholders' equity. As of June 30,
1995, the Company was not in compliance with this requirement;
however, as shown in Note K of the financial statements, with the
conversion of the Debentures that occurred subsequent to June 30,
the Company is in compliance with the requirement. The Company
expects that improve financial performance during the last six
months of 1995 and the conversion of the New Debentures will
result in maintaining compliance with this requirement; however,
there can be no assurance that this minimum can be maintained.
If the minimum required balance is not maintained, the NASDAQ may
choose to delist the Company which would restrict the liquidity
of the Common Stock. Delisting by NASDAQ would be an Event of
Default under the terms of the Debentures and the New Debentures
(See Note K). An Event of Default could trigger a requirement to
repay the notes immediately.
NOTE K - SUBSEQUENT EVENT
During July 1995, the holders of 120 Debentures elected to
convert their Debentures into 2,457,803 shares of Common Stock.
In addition, during July 1995 the Company issued $3,000,000 of
new Convertible Debentures (the "New Debentures") resulting in
net proceeds to the Company of $2,700,000. The New Debentures are
convertible into Common Stock at a price equal to 80 percent of
the closing price of the Common Stock on the business day
immediately preceding such time as the debentures are converted;
however, under no circumstances can the conversion price be
greater than 120 percent of the closing bid price on July 27,
1995. Conversion of 50 percent of the debentures may be effected
60 days after issue and the remaining 50 percent 30 days thereafter.
In addition, Warrants to purchase 1,000,000 shares of Common
Stock at a price of $3.00 per share, and an additional 1,000,000
shares at a price of $4.00 per share, exercisable until January
27, 1998, were issued to certain holders of the New Debentures.
Warrants to purchase 250,000 shares of Common Stock at a price of
$1.53 per share, the closing bid price on July 27, 1995,
exercisable until July 27, 2000 were issued to the agent for this
transaction.
The following shows the pro-forma effect of these transactions as
if they had occurred at June 30, 1995:
June 30, Pro-
1995
Actual Adjustments Forma
CURRENT ASSETS $4,244,822 3,000,000 (b) $7,244,822
LONG-TERM ASSETS 8,119,277 8,119,277
TOTAL ASSETS $12,364,099 $15,364,099
CURRENT LIABILITIES $3,287,991 $3,287,991
CONVERTIBLE NOTE PAYABLE 7,200,000 (3,000,000) (a) 7,200,000
3,000,000 (b)
OTHER LONG-TERM
LIABILITIES 3,501,602 3,501,602
SHAREHOLDERS' EQUITY (1,625,494) 3,000,000 (a) $ 1,374,506
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $12,364,099 $15,364,099
Adjustments:
(a) - To record the conversion of 120 Debentures into 2,457,803
shares of Common Stock
(b) - To record the issuance of the New Debentures with a
value of $3,000,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Unaudited)
Revenues. The Company had revenue of $398,917 and $552,340, for
the three and six months ended June 30, 1995, respectively.
There was no revenue from battery sales in the first six months
of 1994. The Company has substantially increased the capacity of
the San Marcos, Texas production facility during the first six
months of 1995 and expects that this increase in capacity will
allow us to meet an expected increase in battery sales. However,
as the Company still continues to develop the battery and
manufacturing technology, the timing of the battery sales can not
be assured. During the second quarter of 1995, the Company
discovered problems with certain of the batteries that were produced
late in 1994 and early in 1995. The problems were due to some early
developmental problems encountered in the manufacturing process
that caused the batteries not to perform as expected.
The Company has determined the cause, and corrected all of these
problems. However, due to these problems, the Company has
decided to replace approximately 1,700 batteries at no cost to the
customers. The batteries replaced represent less than 45 percent
of the batteries shipped from San Marcos. These replacements will
result in lost revenue of approximately $900,000. The Company does
not recognize any revenue for sales to affected customers until
replacement batteries are sent. The Company expects to complete the
replacement of all affected batteries during the third quarter of
1995.
The Company had project revenue of $100,000 and $878,593 for the
three and six months ended June 30, 1995, respectively, as
compared to $702,476 and $2,023,899 for the three and six months
ended June 30, 1994, respectively. The $100,000 of revenue
during the second quarter of 1995 was generated from a program to
perform a Preliminary Design Review ("PDR") on behalf of Horizon
Battery Technologies, Ltd. ("HBTL"), of Bombay, India, for a
potential manufacturing facility in India. The Company and HBTL
had previously signed an agreement that could lead to the
distribution and manufacture of Horizon batteries in India. The
Company will earn an additional $150,000 of revenue during the
third quarter to conclude the PDR. If the Company and HBTL
execute collateral agreements to effectuate and amend the
definitive license agreement previously executed in September,
1994, it is expected that the cash received from the PDR will be
applied against the license fee payable. The remaining revenue
in 1995 was generated from an agreement with the Chrysler
Corporation for the retrofit of the Horizon Battery for their NS
mini-van program. This agreement concluded in the first quarter
of 1995 and resulted in the selection of the Company as the
preferred supplier of batteries for the Chrysler electric mini-
van program. Pursuant to this selection, Chrysler may purchase
up to $75 million of Horizon batteries over a three-year period
beginning in 1996, subject to issuance of firm purchase orders.
The project revenue in 1994 was all generated from an agreement
with the Electric Power Research Institute ("EPRI") for the
development and commercialization of the Company's proprietary
advanced lead-acid battery. The EPRI agreement ended in 1994;
however, the Company is continuing to pursue other project
agreements.
During 1994, the Company and Mitsui Engineering and Shipbuilding
Co. Ltd. ("MES") signed a distribution agreement whereby MES
agreed to pay the Company $2,000,000 for the distribution rights
of the Horizon battery in Japan and an option for a manufacturing
license. The Company recognized $1,000,000 of this license fee
as revenue in the first quarter of 1995 and $800,000 in the
third quarter of 1994. Previously HBTI had recognized $200,000
of this license fee.
Costs and Expenses. Costs and expenses increased substantially
during the three and six months ended June 30, 1995 as compared
to the three and six months ended June 30, 1994, primarily as a
result of the assumption of operational control of the low rate
initial production facility in San Marcos, Texas in July 1994,
and its subsequent expansion. The assumption of operational
control of the San Marcos facility corresponded with the decision
by the Company to become the North American manufacturer of the
Horizon battery. Previously the Company planned to license the
manufacturing to third parties, and to use the San Marcos
facility as the first manufacturing plant in North America. As
the manufacturer of the Horizon battery, the Company began
incurring production costs for the first time in its history and
increased the sales, marketing and administrative staffs
significantly. In addition, the Company is pursuing
opportunities to license the manufacturing and distribution of
the Horizon battery outside of North America which also results
in the need for additional marketing and administrative
expenditures. The Company also plans to continue to carry out
research and development to improve the battery and manufacturing
process. During the three months ended June 30, 1995, the
production capacity and output of the San Marcos facility
increased significantly. The drive to increase production
capacity and capability resulted in a significant increase in
manufacturing costs as compared to the first three months of
1995. However, as discussed above, during the second quarter of
1995 the Company replaced batteries previously shipped to
customers; therefore, a substantial portion of the revenue that
was expected to offset these manufacturing costs did not
materialize.
The Company believes that the high level of activity undertaken
during early 1995, particularly the three months ended June 30,
1995, has demonstrated that it can produce its product at high
levels in an automated manufacturing environment. These
achievements now enable the Company to reduce the expenditure
levels, slow down the production output at its San Marcos
facility to react to a temporarily softened market for electric
vehicle batteries, and reduce the staffing throughout the Company
while still increasing the capacity of the San Marcos plant.
During July 1995, the Company reduced its workforce by
approximately 30% by eliminating 57 positions, but because of the
achievements made in the second quarter, the Company believes
that it is now in a position to continually adjust the output
levels at the facility to correspond with the market demands for
its products and expects that, if sales increae as expected,
production costs as a percentage of total revenue will stabilize.
In addition, the Company will continue to work on development of
new products that will enable it to enter markets other than
electric vehicles and will continue to pursue opportunities to
expand internationally either on its own or with partners.
Liquidity and Capital Resources. During the first six months of
1995 the Company sold 2,961,282 shares of Common Stock which
resulted in net proceeds to the Company of $4,060,337. In April
1995 and July 1995 the Company completed offerings of Convertible
Debentures that resulted in net proceeds to the Company of
$5,400,000 and $2,700,000, respectively. Also in April 1995, the
Company completed a sale and leaseback agreement for $991,702 of
capital equipment. The lease agreement required a letter-of-
credit as collateral in the amount of $396,680; therefore, the
net proceeds to the Company were $595,022. The funds from these
sources have been used to fund the substantially increased
working capital and capital expenditure needs of the Company that
resulted from the decision to become the North American
manufacturer of the Horizon battery. The working capital and
capital expenditures were necessary to increase the production
capacity of the San Marcos facility to a level that management
believes is the minimum necessary to demonstrate the ability to
manufacture the Horizon battery in commercial quantities.
As of June 30, 1995, several working capital items had changed
significantly since December 31, 1994. Accounts receivable had
decreased approximately $700,000 due to the fact that a
substantial portion of the production output from the San Marcos
facility was being used to replace previously shipped batteries;
therefore these shipments were not generating new receivables.
In addition, the Company received payment of $850,000 from
Chrysler for work on the program to retrofit the Horizon Battery
for their NS mini-van program. Inventory had increased
approximately $250,000 due to the increased production activity
in San Marcos while accounts payable increased approximately $1.1-
million as a result of the increased expenditure level and closer
management of cash resources. Approximately $340,000 of the
increase in prepaid and other expenses was the result of the
financing costs associated with the issuance of Debentures.
These costs will be amortized over the life of the Debentures or
reclassified as a reduction to paid-in capital if the Debentures
are converted into Common Stock.
As described above, during the second quarter of 1995, the
Company discovered problems with certain of the batteries that were
produced late in 1994 and early 1995. The problems were due to some
early developmental problems encountered in the manufacturing process
that caused the batteries not to perform as expected. The Company
has determined the cause, and corrected, all of these problems.
However, due to the problems encountered, the Company has decided to
replace approximately 1,700 batteries at no cost to the customer. The
batteries replaced represent less than 45 percent of the batteries shipped
from San Marcos. These replacements will result in lost revenue, and
corresponding cash flow, of approximately $900,000. This combined with
the increases in costs during the second quarter, which were necessary
to achieve the Company's manufacturing objectives and correct the above
problems, have significantly depleted the cash resources of the Company.
The achievements made during the second quarter have enabled the Company
to react to the changing market and have allowed the Company to conclude
the bulk of the manufacturing development and be in a position to reduce
its expenditures. As a result, the Company reduced its workforce
approximately 30 percent as of July 31, 1995, and believes it is
now in a position to adjust the output of the San Marcos facility
to better match market conditions while continuing to increase
the capacity through further automation and improvements.
After the sale of the New Debentures in July 1995 (see Note K), and
the payment of certain accounts payable, the Company has approximately
$1,780,000 of unrestricted cash available as of August 7, 1995. The
Company is in discussions with several parties regarding potential
sources of additional capital which could include international licenses.
If the Company is able to achieve its sales forecasts and close certain
of these transactions, it believes that the proceeds will be sufficient
enough to continue operating for the remainder of 1995. However, if the
Company is not able to complete these or similar transactions, it may not
be able to continue operations. As a result of this situation, management
is continuing to devote substantial effort to pursue additional
funding sources.
The Company Common Stock is traded in the Over-the-Counter Market
and is reported on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") under the symbol "ELSI."
In order to maintain listing by NASDAQ, the Company must maintain
a minimum $1-million of stockholders' equity. As of June 30,
1995, the Company was not in compliance with this requirement;
however, as shown in Note K of the financial statements, with the
conversion of the Debentures that occurred subsequent to June 30,
the Company is in compliance with the requirement. The Company
expects that improved financial performance during the last six
months of 1995 and the conversion of the New Debentures will
result in maintaining compliance with this requirement; however,
there can be no assurance that this minimum can be maintained.
If the minimum required balances are not maintained, the NASDAQ
may choose to delist the Company which would restrict the
liquidity of the Common Stock. Delisting by NASDAQ would be an
Event of Default under the terms of the Debentures and the New
Debentures (See Note K). An Event of Default could trigger a
requirement to repay the notes immediately.
Part II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
At the Company's Annual Meeting of Shareholders on May 31,
1995, the Shareholders approved an amendment to the
Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 30-million
to 50-million. In addition the Restated Certificate of
Incorporation was amended to effect the elimination of
Certificate of Designation, Preferences, Rights and
Limitations of 1992 Series A Preferred Stock and 1992 Series
A1 Preferred Stock.
Item 3. Defaults on Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on May 31,
1995, the following items were voted on:
PROPOSITION FOR AGAINST ABSTAIN NON-VOTE
1. Directors
Butler, Frank 12,657,808 1,495,883 N/A N/A
Malone, John D. 13,514,416 699,275 N/A N/A
Wilson, Thomas S. 13,320,458 833,233 N/A N/A
2. Amend Certificate of
Incorporation 13,476,241 573,365 104,085 0
Increasing authorized
from 30-million shares
to 50-million shares
3. Approve 1994 Stock 9,072,567 727,649 117,510 4,235,965
Option Plan
4. Amend 1988 Non-Employee
Director Stock Option 12,249,414 869,850 125,408 908,019
Plan
5. Approve Ernst & Young
as independent 13,974,870 114,666 64,155 0
auditors for fiscal
1995
Item 5 Other Information
During July 1995 the Company issued $3,000,000 of new
Convertible Debentures (the "New Debentures") resulting in
net proceeds to the Company of $2,700,000. The New
Debentures are convertible into Common Stock at a price
equal to 80 percent of the closing price of the Common Stock
on the business day immediately preceding such time as the
debentures are converted; however, under no circumstances
can the conversion price be greater than 120 percent of the
closing bid price on July 27, 1995 ($1.53 per share).
Conversion of 50 percent of the debentures may be effected
60 days after issue and the remaining 50 percent 30 days
thereafter. In addition, Warrants to purchase 1,000,000
shares of Common Stock at a price of $3.00 per share, and an
additional 1,000,000 shares at a price of $4.00 per share,
exercisable until January 27, 1998, were issued to certain
holders of the New Debentures. Warrants to purchase 250,000
shares of Common Stock at a price of $1.53 per share, the
closing bid price on July 27, 1995, exercisable until July
27, 2000 were issued to the agent for this transaction.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amendment to the Restated Certificate of Incorporation of
Electrosource filed as of June 15, 1995
3.2 Elimination of Certificate of Designation, Preferences,
Rights and Limitations of 1992 Series A Preferred Stock and
1992 Series A1 Preferred Stock
4.1 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated April 17, 1995, between Electrosource, Inc. and
Ally Capital Management, Inc.
4.2 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated April 28, 1995, between Electrosource, Inc., and
Oppenheimer & Co., Inc.
4.3 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated April 5, 1995, between Electrosource, Inc., and
Rosehouse Ltd. (filed as an Exhibit to the Company's April
12, 1995, Form 8-K and incorporated herein by reference)
4.4 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated July 27, 1995, between Electrosource, Inc., and
Rosehouse Ltd.
4.5 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated July 27, 1995, between Electrosource, Inc., and
ACM Advisors (Warrant No. W7-101)
4.6 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated July 27, 1995, between Electrosource, Inc., and
ACM Advisors (Warrant No. W8-101)
4.7 Letter Agreement dated July 25, 1995, between Electrosource,
Inc., and Rosehouse Ltd.
4.8 Letter Agreement dated July 27, 1995, between Electrosource,
Inc., and ACM Advisors, Zurich, Switzerland.
4.9 10 % Convertible Debentures Due July 27, 1996, in the amount
of $100,000 each to Three Separate Buyers in amounts as
shown on Debenture Register
4.10 Offshore Securities Subscription Agreement entered into with
Rosehouse, Ltd., by Electrosource, Inc., dated July 27, 1995
4.11 Offshore Securities Subscription Agreement entered into with
Rosehouse, Ltd., by Electrosource, Inc., dated April 5, 1995
(filed as an Exhibit to the Company's April 12, 1995, Form 8-
K and incorporated herein by reference)
4.12 Form of Convertible Debenture issued in $25,000 segments to
10 buyers for an aggregate of $6-million (filed as an
Exhibit to the Company's April 12, 1995, Form 8-K and
incorporated herein by reference)
10.1 Director Indemnification Agreement dated June 22, 1995,
between Electrosource, Inc., and William R. Graham.
10.2 Director Indemnification Agreement dated June 22, 1995,
between Electrosource, Inc., and Nathan Morton.
10.3 Amendment No. 4 to 1988 Non-Employee Director Stock Option
Plan
10.4 1994 Stock Option Plan of Electrosource, Inc.
27. Financial Data Schedule
(b) Reports on Form 8-K.
Reports on Form 8-K filed during the quarter ended June 30,
1995 were:
April 3, 1995, Proforma financial statements as of February
28, 1995 which gave effect to equity transactions completed
by the Company in January and March 1995.
April 12, 1995, Offshore Securities Subscription Agreement
entered into with Rosehouse Ltd. by Electrosource, Inc.,
dated April 5, 1995 and Convertible Debentures offering for
240 debentures at $25,000.00 each to Rosehouse Ltd., and
Electrosource, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.
Date: August 10, 1995 ELECTROSOURCE, INC.
/s/
Michael G Semmens
Chairman, President and
Chief Executive Officer
(Executive Officer)
/s/
Michael Rosen
Vice President and Chief
Financial Officer
(Chief Accounting Officer)
Form 10-Q
Securities and Exchange Commission
Washington, D.C. 20549
EXHIBITS TO
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission file
June 30, 1995 Number 0-16323
ELECTROSOURCE, INC.
(Exact name of Registrant as specified in its charter)
Delaware 742466304
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3800B Drossett Drive
Austin, Texas 78744-1131
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including
area code: (512) 445-6606
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
INDEX TO EXHIBITS
3.1 Amendment to the Restated Certificate of Incorporation of
Electrosource filed as of June 15, 1995
3.2 Elimination of Certificate of Designation, Preferences,
Rights and Limitations of 1992 Series A Preferred Stock and
1992 Series A1 Preferred Stock
4.1 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated April 17, 1995, between Electrosource, Inc. and
Ally Capital Management, Inc.
4.2 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated April 28, 1995, between Electrosource, Inc., and
Oppenheimer & Co., Inc.
4.3 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated April 5, 1995, between Electrosource, Inc., and
Rosehouse Ltd. (filed as an Exhibit to the Company's April
12, 1995, Form 8-K and incorporated herein by reference)
4.4 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated July 27, 1995, between Electrosource, Inc., and
Rosehouse Ltd.
4.5 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated July 27, 1995, between Electrosource, Inc., and
ACM Advisors (Warrant No. W7-101)
4.6 Warrant to Purchase Shares of Common Stock of Electrosource,
Inc., dated July 27, 1995, between Electrosource, Inc., and
ACM Advisors (Warrant No. W8-101)
4.7 Letter Agreement dated July 25, 1995, between Electrosource,
Inc., and Rosehouse Ltd.
4.8 Letter Agreement dated July 27, 1995, between Electrosource,
Inc., and ACM Advisors, Zurich, Switzerland.
4.9 10 % Convertible Debentures Due July 27, 1996, in the amount
of $100,000 each to Three Separate Buyers in amounts as
shown on Debenture Register
4.10 Offshore Securities Subscription Agreement entered into with
Rosehouse, Ltd., by Electrosource, Inc., dated July 27, 1995
4.11 Offshore Securities Subscription Agreement entered into with
Rosehouse, Ltd., by Electrosource, Inc., dated April 5, 1995
(filed as an Exhibit to the Company's April 12, 1995, Form 8-
K and incorporated herein by reference)
4.12 Form of Convertible Debenture issued in $25,000 segments to
10 buyers for an aggregate of $6-million (filed as an
Exhibit to the Company's April 12, 1995, Form 8-K and
incorporated herein by reference)
10.1 Director Indemnification Agreement dated June 22, 1995,
between Electrosource, Inc., and William R. Graham.
10.2 Director Indemnification Agreement dated June 22, 1995,
between Electrosource, Inc., and Nathan Morton.
10.3 Amendment No. 4 to 1988 Non-Employee Director Stock Option
Plan
10.4 1994 Stock Option Plan of Electrosource, Inc.
27. Financial Data Schedule
(b) Reports on Form 8-K.
Reports on Form 8-K filed during the quarter ended June 30,
1995 were:
April 3, 1995, Proforma financial statements as of February
28, 1995 which gave effect to equity transactions completed
by the Company in January and March 1995.
April 12, 1995, Offshore Securities Subscription Agreement
entered into with Rosehouse Ltd. by Electrosource, Inc.,
dated April 5, 1995 and Convertible Debentures offering for
240 debentures at $25,000.00 each to Rosehouse Ltd., and
Electrosource, Inc.
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
ELECTROSOURCE, INC.
Electrosource, Inc. (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of
the State of Delaware, does hereby certify:
1. That the Board of Directors of the Company duly adopted
and a resolution setting forth a proposed amendment to the
Certificate of Incorporation of said corporation at a meeting
held on November 2, 1994, declaring said amendment to be
advisable and calling for the consideration by the shareholders
of the Company of such amendment at the annual meeting of
shareholders held on May 31, 1995. The resolutions setting forth
the proposed amendment are as follows:
Resolved, that the Board of Directors has determined that it
is advisable that Article Four of the Restated Certificate
of Incorporation of the Company be amended to increase the
number of authorized shares of Common Stock from 30,000,000
to 50,000,000, and be it further
Resolved, that the initial paragraph of Article Four of the
Restated Certificate of Incorporation of the Company be
amended to read in its entirety as follows:
The Corporation shall have authority to issue two
classes of stock, and the total number authorized shall
be fifty million (50,000,000) shares of Common Stock of
the par value of Ten Cents ($0.10) each, and ten
million (10,000,000) shares of Preferred Stock of the
par value of One and no/100 Dollars ($1.00) each. A
description of the different classes of stock of the
Corporation and a statement of the designations and the
powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, in respect of each
class of such stock are as follows:
; and be it further
Resolved, that the foregoing resolution be considered at the
next annual meeting of the stockholders of the Company.
2. That thereafter such amendment was approved by the
affirmative vote of the holders of a majority of the outstanding
stock entitled to vote thereon.
3. That said amendment was duly adopted in accordance with
section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Electrosource, Inc., has caused this
Certificate to be signed by Michael G. Semmens, its President,
and attested by Audrey T. Dearing, its Secretary, on this 12th
day of June 1995.
ELECTROSOURCE, INC. ATTEST:
By: /S/ /S/
Michael G. Semmens Audrey T. Dearing
President Secretary
EXHIBIT 3.2
ELECTROSOURCE, INC.
CERTIFICATE
OF ELIMINATION OF CERTIFICATE OF DESIGNATION
PREFERENCES, RIGHTS AND LIMITATIONS OF
1992 SERIES A PREFERRED STOCK
AND 1992 SERIES A1 PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law of the
State of Delaware and Article Four of its Restated Certificate of
Incorporation, Electrosource, Inc., a corporation organized and
existing under the laws of the State of Delaware (the
"Corporation").
DOES HEREBY CERTIFY that pursuant to the authority conferred upon
the Board of Directors of the Corporation by the Restated
Certificate of Incorporation of the Corporation and by the
General Corporation Law of the State of Delaware, said Board of
Directors, at a meeting duly called and held on October 25, 1994,
adopted a resolution providing for the elimination from the
Restated Certificate of Incorporation of all matters set forth in
the Certificate of Designation, Preferences, Rights and
Limitations of 1992 Series A Preferred Stock and 1992 Series A1
Preferred Stock of Electrosource, Inc., filed in the Office of
the Secretary of State of Delaware on January 15, 1992, which
resolution reads in its entirety as follows:
RESOLVED, that no issued shares of 1992 Series A Preferred Stock
remain outstanding, and no shares of 1992 Series A1 Preferred
Stock have been issued, and that none of the authorized shares of
1992 Series A Preferred Stock or 1992 Series A1 Preferred Stock
will be issued subject to the certificate of designation
previously filed with respect to such series.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal
to be affixed hereunto and this Certificate to be signed by its
President and Secretary this 12th day of June, 1995.
ELECTROSOURCE, INC. ATTEST:
By: /S/ /S/
Michael G. Semmens Audrey T. Dearing
President Secretary
EXHIBIT 4.1
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE
STATE SECURITIES LAWS ("BLUE SKY LAWS") AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED
THEREUNDER OR EXEMPT FROM REGISTRATION.
WARRANT TO PURCHASE SHARES OF COMMON STOCK OF
ELECTROSOURCE, a Delaware corporation
(the "Company")
3800-B Drossett Drive
Austin, TX 78744-1131
Issuance Date: April 17, 1995
Defined terms are indexed in Section 11.5.
1. Right to Acquire Securities.
1.1 Price, Quantity and Term.
(a) Grant. This Warrant certifies that for value
received (including the execution and delivery of an Equipment
Lease Agreement between Company and an affiliate of Holder (the
"Lease")) ALLY CAPITAL MANAGEMENT, INC., a Delaware corporation,
and its registered assigns (collectively, "Holder"), are entitled
at any time, and from time to time, before Expiration, to
purchase from Company up to 50,000 shares (the "Exercise
Quantity") of Company's Common Stock, at a price of $4.00 per
share (the "Exercise Price"). The term "Warrant Shares" means
Common Stock and the shares of any class of securities resulting
from any reclassifications of Common Stock, or from any event
described in Section 4.1.
(b) Expiration. This Warrant expires ("Expiration")
5:00 p.m., Sausalito time, on the fifth anniversary of the
Issuance Date.
(c) Cost Adjustment. Whenever the total cost of
equipment financed under the Lease exceeds $1,000,000 (an
"Overage"), then the Exercise Quantity will automatically
increase by a number equal to the quotient of (i) the product of
(A) the amount of the Overage times (B) the Exercise Quantity,
divided by (ii) $1,000,000, and further adjusted as provided in
Section 4.1.
1.2 Right to Exercise.
(a) Notice. Holder may exercise all or a portion
hereof at any time, and from time to time, before Expiration, by
delivering a written notice of exercise to Company, specifying
(i) the number of Warrant Shares to be purchased, (ii) the
proposed registered holders of Warrant Shares and any Related
Warrants, and (iii) a date of exercise determined by Holder (the
"Exercise Date") not less than one nor more than twenty business
days thereafter.
(b) Exercise. On the Exercise Date, (i) Holder will
present to Company this Warrant and a certified check or wire
transfer for the aggregate Exercise Price of the Warrant Shares
purchased and (ii) Company will give Holder (A) certificate(s)
for the Warrant Shares issuable upon such exercise; (B) any cash
and non-cash consideration, including securities, to which Holder
is entitled under Section 4.1 with respect to the Warrant Shares
(collectively, "Other Consideration") and, if applicable, (C) a
Related Warrant representing the unexercised portion hereof.
1.3 Right to Convert.
(a) Notice. Holder may require Company to convert all
or a portion hereof into Warrant Shares without payment by Holder
of any money or other consideration (the "Conversion Right") at
any time, and from time to time, before Expiration, by delivering
a written notice of exercise to Company, specifying (i) the
proportion to be converted (the "Converted Portion"), (ii) the
proposed registered holders of Warrant Shares and any Related
Warrants and (iii) a date of conversion determined by Holder (the
"Conversion Date") not less than one nor more than twenty
business days thereafter.
(b) Conversion. On the Conversion Date, (i) Holder
will surrender this Warrant and (ii) Company will give Holder (A)
certificate(s) for that number of Warrant Shares equal to the
quotient obtained by dividing (x) the Value of the Converted
Portion (which equals (1) the product of the Exercised Quantity
in the Converted Portion times the Fair Market Value of a Warrant
Share on the Conversion Date, minus (2) the product of the
Exercise Quantity in the Converted Portion times the Exercise
Price) by (y) the Fair Market Value of a Warrant Share on the
Conversion Date; (B) any Other Consideration and, if applicable,
(C) a Related Warrant representing the unconverted portion
hereof.
1.4 Fair Market Value. "Fair Market Value" of a share of
Common Stock as of a particular date means: (a) if traded on an
exchange or quoted on the NASDAQ National Market System, then the
prior trading day's closing price, (b) if conversion or exercise
is on a date from the filing of, through to the effective date
of, the registration statement for an underwritten public
offering registered under the Securities Act, the initial public
offering price (before deducting commissions, discounts or
expenses) per share sold in such offering (c) if listed by the
National Daily Quotation Service "Pink Sheets," then the average
of the most-recently reported bid and ask prices and (d)
otherwise, the price, not less than book value, determined in
good faith and in such reasonable manner as prescribed by a
majority of Company's Directors who are not Company officers or
employees (the "Outside Directors"); provided, however, that (i)
Company will notify Holder of such price within ten business
days; (ii) Holder will have ten business days after receipt of
such notice to dispute such price by written notice to Company;
and (iii) Holder will thereafter appoint an appraiser reasonably
acceptable to Company to determine Fair Market Value, the costs
of which Company will bear if the appraisal is 110% or more of
that determined by the Outside Directors.
1.5 Authorization. Company will at all times reserve and
keep available out of its authorized but unissued capital stock,
and will take all such action and obtain all such permission
necessary to enable Company lawfully to issue, the full number of
Warrant Shares deliverable upon exercise or conversion hereof or
deliverable upon any permitted conversion of the Warrant Shares,
as such number may change from time to time. Company will not
create a Warrant Share with a par value higher than the then-
current Exercise Price.
2. Transfer Restricted. The following restrictions are
intended to ensure compliance with the Securities Act.
(a) Legend. Until otherwise permitted hereunder, this
Warrant, each Related Warrant and each certificate or other
document evidencing any of the Warrant Shares will bear a legend
substantially similar to that hereupon.
(b) Particular Transfer. Neither this Warrant nor the
Warrant Shares may be transferred, and Company need not register
any transfer, unless:
(i) The transfer involves no consideration and is
to an affiliate of Holder that is not an individual;
(ii) Company receives a reasonably acceptable
legal opinion stating that the contemplated transfer is exempt
from registration under the Securities Act and the rules and
regulations of the Securities and Exchange Commission (the "SEC")
promulgated thereunder and under applicable state law. Within
ten business days after it receives a proposed legal opinion,
Company will either tell Holder that such opinion is
unsatisfactory in its counsel's reasonable opinion (specifying in
detail the supporting legal analysis) or authorize Company or
Company's transfer agent to make the requested transfer; or
(iii) Company receives from the SEC, in
response to a written request reasonably acceptable to Company, a
letter stating that it will take no action concerning the
contemplated transfer.
(c) Unrestricted Transfer. Section 2(b) will no
longer apply once this Warrant and the Warrant Shares have been
effectively registered and sold under the Securities Act or may
be sold under Rule 144 thereunder, and Holder or its transferee
may thereupon receive promptly from Company, at Company's
expense, Related Warrants not bearing the legend hereupon.
(d) Cooperation. Company will supply the information
Holder reasonably requests to complete any forms required for
exemption from the Securities Act or Blue Sky Laws for the
transfer of this Warrant or the Warrant Shares.
3. Registration Rights. Holder and holders of the Warrant
Shares have the registration rights set forth in the Registration
Rights Agreement (Piggy-back and S-3) of even date herewith, by
and between Company and Holder. No person or entity other than
Holder shall have any rights of first refusal with respect to the
purchase, sale or other disposition of this Warrant or the
Warrant Shares.
4. Adjustments. The Exercise Price and the Exercise
Quantity will be adjusted from time to time as provided herein
and by law.
4.1 Capitalization.
(a) Subdivision or Combination. If Company subdivides
or combines, by reclassification, stock split or dividend, or
otherwise, the number of Warrant Shares outstanding into a
greater or lesser number, simultaneously in each such case the
Exercise Price and the Exercise Quantity shall both be
proportionately adjusted.
(b) Capitalization. If Company recapitalizes, or
reorganizes or reclassifies its capital stock, this Warrant shall
thereafter be exercisable or convertible for those shares of
stock, other securities or property which a holder of the
Exercise Quantity of Warrant Shares could have received
thereupon, as further adjusted according to the terms hereof.
(c) Distributions. If Company declares, pays or
distributes any cash or property dividends on, or rights to
acquire, capital stock, or evidences of its indebtedness or
assets to holders of shares of its capital stock, Holder shall,
without additional cost, be entitled to receive upon conversion
or exercise, in addition to the Warrant Shares, the cash,
property, evidences of indebtedness and rights which Holder could
have received had Holder been a record holder of Warrant Shares
on the record dates for any such event.
(d) Merger, Consolidation, or Liquidation.
(i) If (A) Company (x) consolidates with or
merges into another entity and is not the survivor, (y) receives
notice that a purchase tender or exchange offer has been made to
the holders of more than 50 percent of the outstanding Common
Stock (on an as converted basis), or (z) sells or conveys
substantially all of its property, and (B) in connection
therewith, shares of stock, other securities, property, or cash
(collectively, "Merger Consideration") are issuable or
deliverable in exchange for Company's capital stock, then (C)
Company will give Holder 30 days prior written notice of the
consummation of such transaction and (D) Holder may thereafter
acquire in lieu of the Exercise Quantity of Warrant Shares the
Merger Consideration which Holder could have received had Holder
then exercised this Warrant in its entirety.
(ii) Company will, prior to the consummation of
any such transaction, cause any successor entity upon
consolidation, merger, conveyance of substantially all of
Company's assets, or voting securities exchange to assume by
written instrument, in form and substance satisfactory to Holder,
Company's obligations hereunder.
4.2 Notice of Adjustment. Whenever events require
adjustment to the Exercise Price or Exercise Quantity, Company
will, at its expense, promptly prepare and mail to Holder a
certificate of its chief financial officer calculating the
adjusted Exercise Price and Exercise Quantity and fully setting
forth in reasonable detail the relevant facts.
5. Notice of Certain Events. In the event (a "Notice
Event"): (a) Company authorizes the issuance to all holders of
any class of its capital stock rights or warrants to subscribe
for or purchase shares of its capital stock, or any other
subscription rights or warrants; (b) Company authorizes the
distribution to all holders of any class of its capital stock
evidences of its indebtedness or assets; (c) of any capital
reorganization or reclassification of the Warrant Shares or
Company's Common Stock, other than a subdivision or combination
of the outstanding Common Stock and other than a change in par
value of the Common Stock; (d) of any consolidation or merger to
which Company is a party and for which approval of any of
Company's stockholders is required, other than a consolidation or
merger in which Company is the continuing corporation and that
does not result in any reclassification or change of the Warrant
Shares or Common Stock outstanding; (e) of the conveyance or
transfer of Company's properties and assets substantially as an
entirety; (f) of Company's voluntary or involuntary dissolution,
liquidation or winding-up; (g) of any offer to purchase all or
substantially all of any class of Company's capital stock; or (h)
Company proposes to take any action that would require an
adjustment of the Exercise Price pursuant to Section 4; then
Company will send by certified mail to Holder, at least 30 days
(or 10 days in case specified in clause (a) or (b) above) prior
to the applicable record or effective date hereinafter specified,
a notice stating the dates as of which (x) the holders of capital
stock of record to be entitled to receive any such rights,
warrants or distributions are to be determined, (y) such Notice
Event is expected to become effective, and (z) it is expected
that holders of Warrant Shares or Common Stock of record will be
entitled to exchange or sell their Warrant Shares or Common Stock
for securities or other property, if any, deliverable upon such
Notice Event.
6. Financial Reporting. Company will deliver to Holder:
(a) audited financial statements for each fiscal year within 90
days after such year ends; (b) unaudited financial statements for
each fiscal quarter within 45 days after such quarter ends and
(c) such other reports and proxy statements as are delivered to
holders of Company's capital stock at the same time of such
delivery.
7. Listing on Securities Exchanges; NASD Fees. Company
will list on each national securities exchange on which any
Common Stock is at any time listed, subject to official notice of
issuance, and will maintain, so long as any other shares of its
Common Stock will be so listed, all shares of Common Stock from
time to time issuable upon the conversion of the Warrant Shares;
and Company will so list on each national securities exchange,
and will maintain such listing of any shares of Company's capital
stock, including Warrant Shares issuable upon the exercise or
conversion hereof if and so long as Company lists any shares of
capital stock of the same class on such national securities
exchange. Any such listing will be at Company's expense.
Company shall pay all such fees and file all such applications,
notices and forms required to be filed by or with any such
securities exchange or the National Association of Securities
Dealers such that Warrant Shares shall be deliverable on the
conversion Date or Exercise Date set by Holder.
8. Record Holder. This Warrant will be deemed to have
been exercised or converted, as appropriate, and Holder will be
the record holder of the Warrant Shares issued thereupon,
immediately before the close of business on the Exercise Date or
Conversion Date, as applicable. Company may deem and treat the
registered holder as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary. Other than as set
forth herein, this Warrant does not give Holder rights as a
Company stockholder.
9. Transfer and Exchange. Holder may transfer all or a
portion hereof on Company's books maintained for such purpose
upon properly endorsed surrender and compliance with Section 2
and 10. Company will issue and deliver Related Warrants to
Holder with respect to the untransferred portion, and to
transferee, who thereupon will also become a Holder, with respect
to the transferred portion. Holder may exchange or subdivide
this Warrant into Related Warrants for the same aggregate number
of Warrant Shares, each new Related Warrant to represent the
right to purchase the Exercise Quantity of Warrant Shares
designated by Holder. "Related Warrant" means a new Warrant
identical hereto (except for Exercise Quantity and as provided in
Section 2(c)) issued to Holder or its transferee in accordance
with the terms hereof.
10. Taxes. Company will pay all taxes and other
governmental charges imposed in connection with the issue or
delivery of Warrant Shares, other than those on the issuance of
Warrant Shares in a name other than Holder's. Company need not
issue or deliver any certificate until the applicable transfer
tax or other charge, if any, has been paid.
11. Miscellaneous.
11.1 Fractional shares. If a fractional Warrant Share would
be issuable upon exercise or conversion, Company will instead pay
in cash a sum equal to the product of such fraction and a full
Warrant Share's Fair Market Value.
11.2 Entire Agreement. This Warrant constitutes the entire
agreement between the parties with respect to its subject matter
and may only be modified in writing. Each provision hereof is
severable from every other provision when determining legal
enforceability. The terms and conditions hereof will inure to
the benefit of and be binding upon the parties' respective
successors and assigns, except as expressly provided otherwise
herein. This Warrant has been entered into in Sausalito,
California and is governed by Delaware law.
11.3 Notices. All notices will be in writing and delivered
personally, by telefacsimile confirmed by letter, or by reliable
nationally-recognized overnight courier, postage paid at
Company's expense, addressed, until further notice, (a) if to
Holder, to 2330 Marinship Way, Sausalito, CA 94965-2853,
Attention: Vice President - Venture Investments, with a copy to
Jeremy D. Weinstein, Esq., 1657 North California Blvd., Suite
201, Walnut Creek, CA 94596, (b) if to Company, to Company's
Office, Attention: Corporate Secretary, or (c) if to a holder of
a Related Warrant or Warrant Shares, to the most recent address
of which said holder has notified Company, and are effective upon
receipt.
11.4 Waivers and Amendments. Holder's remedies hereunder,
by law or otherwise, are cumulative and not exclusive. Holder's
delay or omission to exercise any right or remedy does not impair
or waive the same. A Waiver of one breach or default does not
waive any other breach or default. Any waiver, permit, consent
or approval is effective only to the extent specifically written.
This Warrant may only be amended with Holder's written consent.
11.5 Definitions. Sections and subsections are titled for
convenience, and not for construction. "Hereof," "herein,"
"hereunder," and similar words refer to this Warrant in its
entirety. "Or" is not necessarily exclusive. Terms used in more
than one Section and not defined in Section 1.1 or the legend are
defined in the indicated Sections.
Articles 4.2
Conversion Date 1.3(a)
Conversion Right 1.3(a)
Converted Portion 1.3(a)
Exercise Date 1.2(a)
Fair Market Value 1.4
Other Consideration 1.2(b)
Related Warrant 9
Value of the Converted Portion 1.3(b)
IN WITNESS WHEREOF, Company has caused this Warrant to be
signed by its duly authorized officer and issued as of the
Issuance Date.
ELECTROSOURCE, INC.
("Company")
By: /S/ James M. Rosel
Its: Vice President
WARRANT CONVERSION, EXERCISE AND ASSIGNMENT FORM
CONVERSION OR EXERCISE FORM
The undersigned hereby irrevocably elects to exercise [check
where applicable]
_____ the Conversion Right set forth in the within Warrant
to the extent of that number of Warrant Shares (as defined in the
Warrant) into which ____% of the Warrant may be converted,
_____ the within Warrant to the extent of purchasing ______
Warrant Shares, and hereby tenders $_____ in payment of the
exercise price thereof,
to occur on ____________.
ASSIGNMENT FORM
FOR VALUE RECEIVED, Holder hereby sells, assigns and
transfers unto ____________________ [name] of
________________________________ [address] its right to purchase
_______ Warrant Shares and does hereby irrevocably constitute and
appoint ________________________ attorney, to transfer the same
on Company's books, with full power of substitution in the
premises.
INSTRUCTIONS FOR REGISTRATION
OF STOCK OR TRANSFER OF RELATED WARRANT
Name ___________________________ Name _________________________
Address ________________________ Address ______________________
Signature ______________________ Signature ____________________
SIGNATURE OF HOLDER
Date: ___________________, 199___.
Signature __________________________
Name _______________________________
Addresss ___________________________
REGISTRATION RIGHTS AGREEMENT
(PIGGY-BACK AND S-3)
This REGISTRATION RIGHTS AGREEMENT (PIGGY-BACK AND S-3)
(this "Agreement") is made as of March ___, 1995, by and between
ELECTROSOURCE, INC., Delaware corporation ("Company"), and ALLY
CAPITAL MANAGEMENT, INC., a Delaware corporation ("Ally"), in
connection with the Warrant (as defined below), and the Lease (as
defined in the Warrant). In order to induce Ally to enter into
the Lease and acquire the Warrant, and in consideration of the
mutual promises herein contained, the parties hereto agree as
follows:
1. Definitions.
(a) "Holder" means the entities or persons, including
Ally or assignee, collectively or individually, that own or have
the right to acquire Registrable Securities immediately before a
sale contemplated hereby.
(b) "Register," "registered," and "registration" refer
to a registration effected by filing a registration statement on
a form permitting the public sale and distribution of Registrable
Securities generally in compliance with the Securities Act of
1933, as amended (the "Act"), and the rules and regulations of
the Securities Exchange Commission (the "SEC") thereunder, and
the declaration or ordering of effectiveness thereof. "Exchange
Act" means the Securities Exchange Act of 1934, as amended.
"Rule 144" means Rule 144 under the Act.
(c) "Registrable Securities" means, collectively, the
Warrant Shares (as defined in the Warrant) and any other shares,
or equity securities, warrants, rights or any other security
issued as a dividend, distribution, exchange, replacement or in
conversion of, on or for Registrable Securities; but not
securities that may be sold pursuant to Rule 144(k).
"Registrable Securities then outstanding" includes Registrable
Securities and the shares of Company's capital stock outstanding
or issuable pursuant to exercisable or convertible Registrable
Securities.
(d) "Warrant" means the Warrant issued to Ally on the
date hereof by Company pursuant to the Lease.
(e) Initially capitalized terms used and not otherwise
defined herein are defined in the Warrant. Headings are used for
convenience only and are without legal meaning or effect.
"Hereof," "herein," "hereunder," and similar words refer to this
Agreement in its entirety. "Or" is not necessarily exclusive.
2. Piggy-Back Registration. (a) Company shall promptly
give Holder written notice each time it proposes a registration,
for shareholders other than or including Holder, of any of its
stock or other securities under the Act in connection with the
underwritten public offering of such securities (except debt
instruments) solely for cash (unless on Form S-8 or any similar
form not including the information required by a registration
statement covering the public sale of Registrable Securities).
Upon Holder's written request given within twenty days after such
notice, Company shall cause to be registered under the Act all of
the Registrable Securities Holder so requests to be registered (a
"Piggy-Back Registration").
(b) Holder's right to Piggy-Back Registration is
conditioned on its participation in the applicable underwriting.
If Holder proposes to distribute securities through such
underwriting, Holder, Company and the other persons so
distributing securities shall enter into and fully perform a
customary underwriting agreement. The underwriter may, if it
determines that market conditions so require, limit the included
number of Registrable Securities. Company shall so advise
Holder, and the included Registrable Securities shall be
allocated among Holders in direct proportion to their respective
otherwise available Registrable Securities. A Holder
disapproving of the terms of such underwriting may withdraw from
both the underwriting and registration by written notice to
Company and the underwriter. In the event that the number of
shares of Common Stock included in any registration is to be
reduced pursuant to this section:
(i) If the registration in question is one
initiated by the Company in order to allow the sale of Common
Stock for the account of the Company, then any reduction may be
made only by the managing underwriter of such offering in the
number of shares to be included in such registration and shall
first affect only shares other than securities requested to be
included in the registration by persons pursuant to the Business
Alliance Agreement with the Electric Power Research Institute
("EPRI Holders"); and
(ii) If the registration in question is one
initiated by any person or persons that is other than the Company
and is exercising demand registration rights in order to allow
the sale of Common Stock for the account of such person or
persons, then any reduction in the number of shares to be
included in such registration may be made only by the managing
underwriter of such offering and shall first affect only shares
other than the share of Common Stock requested to be included by
the person or persons initiating the registration by the exercise
of demand registration rights and shares requested to be included
in the registration by EPRI Holders; and,
(iii) In the event that the managing
underwriter of such offering requires that the number of shares
to be included in such registration be further reduced, such
reduction shall be applied pro rata among all other parties
having registration rights in proportion to the number of shares
requested to be registered by each such party.
Company shall not be required to include any Registrable
Securities in any registration to the extent that the inclusion
thereof would result in the managing underwriter of such offering
requiring (x) a reduction in the total number of shares included
in the registration by the person or persons (including the
Company) initiating the registration in question or (y) a
reduction in the per share price of the offering; provided,
however, that (z) this sentence shall only apply (a) if the
managing underwriter of such offering is (i) a nationally
recognized underwriter, (ii) without a record of material
disciplinary proceedings, (iii) traditionally in the business of
making "firm commitment" underwritten public offerings and (iv)
before or after repeal of the Glass-Steagel Act, free of material
conflict of interest, and (b) such reduction is made in good
faith pursuant to a letter from such managing underwriter to Ally
setting forth the reasons for such reduction being essential to
the success of such offering. The Company may, in its sole
discretion and without the consent of Holder, withdraw such
registration statement and abandon the proposed offering in which
Holder had requested to participate.
(c) So long as all other persons with registration
rights with respect to Company's securities, whether or not
pursuant hereto, enter into similar agreements, Holder shall not,
to the extent requested in writing by Company and the underwriter
of such registration, sell or otherwise transfer or dispose of
any Common Stock by public sale for 90 days after the effective
date of the registration statement; provided, however, that the
foregoing shall not interfere with or limit Holder's exercise of
the Conversion Right (as that term is defined in the Warrant) and
the free and immediate transferability of the proceeds to Holder
thereupon. Company may enforce the foregoing by imposing stop-
transfer instructions with respect to the Registrable Securities,
and the shares of securities of every other person subject to the
foregoing restrictions until the end of such 90 day period.
3. Form S-3 Registration. (a) If Company receives a
written request from Holder or Holders to effect a registration
on Form S-3 or successor short-form registration statement
(collectively, "Form S-3") and any related blue sky or other
qualification or compliance with respect to at least 33% of all
or a part of the Registrable Securities initially owned by Ally,
then Company will, as soon as practicable, effect such
registration and all such qualifications and compliances so
requested and as would permit or facilitate the sale and
distribution of all or such portion of Holder's Registrable
Securities as are specified in such request (a "Form S-3
Registration").
(b) Company need not effect any Form S-3 Registration
if it is not qualified as a registrant entitled to use Form S-3.
Additionally, if Company gives Holder a certificate signed by
Company's President stating that, in the good faith judgment of
Company's Board of Directors, a Form S-3 Registration would be
seriously detrimental to Company and its shareholders at that
time, then Company may defer filing the same for one period of up
to 120 days after receipt of Holder's request; provided, however,
that Company shall not use this right more than once in any
twelve-month period.
4. Company's Obligations. Whenever required hereunder to
register any Registrable Securities, Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC the specified
registration statement with respect thereto and use its best
reasonable efforts to cause that registration statement to become
effective, and, upon Holder's request, stay effective for up to
120 days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and related prospectus
as may be necessary to comply with the Act with respect to the
disposition of all securities covered thereby.
(c) Give Holder such prospectus, including a
preliminary prospectus, conforming with the Act, and such other
documents as Holder may reasonably request to facilitate the
disposition of Registrable Securities.
(d) Use it s best efforts to register and qualify the
securities covered by a registration statement under such
securities or blue sky laws of the jurisdictions it will file in
with regard to the Piggy-Back Registration, or if an S-3
Registration, in such reasonable number of jurisdictions as
Holder shall reasonably request, provided that Company need not
qualify to do business or file a general consent to service of
process in such jurisdiction. If any such jurisdiction requires
that selling shareholders bear the expenses incurred qualifying
the securities therein, then Holder shall pay such expenses to
the extent so required.
(e) Furnish, at its expense, on Holder's request, on
the day Registrable Securities are delivered to the underwriter
for sale in connection with a registration, if such securities
are being sold through an underwriter, or otherwise on the day
the registration statement with respect to such securities
becomes effective, an opinion of counsel and a letter from
independent certified public accountants, both in form and
substance as is customarily given to underwriters in an
underwritten public offering, addressed to the underwriters, if
any, and to Holder.
5. Furnish Information. Holder must furnish Company such
information regarding Registrable Securities and their ownership
and planned disposition as shall be required to effect the
registration and as Company shall request in writing.
6. Expenses of Registration. Company shall pay all
expenses relating to, connected with, or arising from any and all
Piggy-Back or Form S-3 Registrations, including, without
limitation, all printers', accounting, accountants' and
attorneys' (including Holder's reasonable attorneys') fees and
costs, but excluding underwriting discounts and commissions
relating to Registrable Securities.
7. Indemnification. If any Registrable Securities are
included in a registration statement hereunder, then to the
extent permitted by law:
(a) Company will indemnify and hold harmless Holder
and its officers, directors, partners, underwriters (within the
meaning of the Act, hereafter "Underwriter") and each person, if
any, who controls a Holder or Underwriter against any and every
loss, claim, damage, liability (joint or several) or action to
which such indemnitee may become subject under the Act, the
Exchange Act or other federal or state law, insofar as the same
arise out of or are based on any of the following (as
"Violation"): (i) an alleged untrue statement of material fact
contained in such registration statement, any preliminary or
final prospectus contained therein or any amendments or
supplements thereto; (ii) an alleged omission to state therein a
material fact required to be stated therein, or necessary to make
the statements therein not misleading; or (iii) an alleged
violation by Company of the Act, The Exchange Act, any state
securities law, or any rule or regulation promulgated thereunder.
(b) Holder will indemnify and hold harmless Company,
each of its officers and directors who has signed the
registration statement, each person, if any, who controls Company
within the meaning of the Act, any Underwriter for Company or a
Holder or any person who controls such Underwriter, against any
and every loss, claim, damage, or liability (join or several) or
action to which such indemnitee may become subject, under the
Act, the Exchange Act or other federal or state law, insofar as
the same arise out of or are based on any Violation, in each case
to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information
furnished to Company by such Holder expressly for use in
connection with such registration. Notwithstanding the
foregoing, no Holder shall be required to indemnify any person to
the extent that such loss, claim, damage, liability or action is
in connection with information supplied by such Holder which was
subsequently corrected in a final prospectus required to be
delivered under the Act.
(c) Promptly after receipt by an indemnitee of notice
of the commencement of any claim or action, including any
governmental action, such indemnitee will, if a claim in respect
thereof is to be made against any indemnitor, notify the
indemnitor in writing of such commencement, and the indemnitor
may participate therein, and, to the extent the indemnitor so
desires, jointly with any other indemnitors similarly noticed,
assume the defense thereof with counsel mutually satisfactory to
the parties; provided, however, that an indemnitee may retain its
own counsel, with its fees and expenses paid by the indemnitor,
if representation of such indemnitee by the counsel retained by
the indemnitor would be inappropriate due to actual or potential
materially differing interests between such indemnitee and any
other party represented by such counsel in such proceeding. The
failure to notify an indemnitor within a reasonable time of the
commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnitor of any
liability to the indemnitor specifically arising under this
Section. The indemnitor shall reimburse its respective
indemitees for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the
indemnity shall not apply to amounts paid in settlement thereof
without the indemnitor's consent, which shall not be unreasonably
withheld.
8. Reports Under the Exchange Act. Company, to make
available to Holder the benefits of Rule 144 and any other SEC
rule or regulation permitting the Holder to sell Company's
securities to the public without registration, covenants and
agrees to:
(a) Make and keep available public information, as
those terms are understood and defined in Rule 144, at all times
after 90 days after the effective date of the first registration
statement filed by Company;
(b) Use its reasonable best efforts to file with the
SEC in a timely manner all reports and other documents required
of Company under the Act, pursuant to any undertaking of Company
concomitant with the effectiveness of a registration statement
thereunder, and under the Exchange Act; and
(c) Furnish to Holder so long as it owns any
Registrable Securities, forthwith upon request (i) a written
statement of compliance with the reporting requirements of Rule
144, the Act and the Exchange Act as applicable; (ii) a copy of
Company's most recent annual or quarterly report and such other
reports and documents Company files or furnishes to its
shareholders; and (iii) such other information as may be
reasonably requested in availing Holder of any SEC rule or
regulation permitting the sale of any such securities without
registration.
9. Assignment. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of Company,
Holder, and the persons described in Section 7. The rights to
cause Company to register Registrable Securities pursuant hereto
may be assigned to a transferee or assignee of all or 25% or more
of the warrant shares initially covered a portion of the Warrant
or the Registrable Securities, and for all purposes hereunder
Company consents to such transferee or assignee becoming a party
hereto entitled to the benefits and subject to the obligations of
a Holder hereunder.
10. Remedies. Holder may exercise all rights granted by
law and equity, including recovery of damages and specific
performance. Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach
by it hereof and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
11. Entire Agreement. This Agreement may be executed in
counterparts, each of which when taken together shall constitute
one and the same original agreement. This Agreement is the
complete expression of the agreement of the parties with respect
to its subject matter and supersedes all prior agreements and
understandings with respect thereto. Except as otherwise
provided herein, the provisions hereof may not be amended,
modified or supplemented without the written consent of Company
and the Holders of a majority of the Registrable Securities then
outstanding. Each provision hereof shall be severable from every
other provision when determining its legal enforceability.
12. Notices. All notices and other communications
hereunder shall be in writing and delivered in accordance with
the Notices Section of the Warrant and shall be effective upon
receipt.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
ELECTROSOURCE, INC. ALLY CAPITAL MANAGEMENT, INC.
a Delaware corporation a Delaware corporation
("Company") ("Ally")
By: /S/James M. Rosel By:__________________________
James M. Rosel
Its: Vice President Its:_________________________
EXHIBIT 4.2
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON ITS
EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS WARRANT
MAY NOT BE EXERCISED, AND NEITHER THIS WARRANT NOR THE SECURITIES
ISSUABLE UPON ITS EXERCISE MAY BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND SUCH LAWS. NEITHER THE OFFERING OF
THIS WARRANT NOR ANY OFFERING MATERIALS HAVE BEEN REVIEWED BY ANY
ADMINISTRATOR UNDER SUCH ACT OR ANY APPLICABLE STATE LAW.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON APRIL 28, 2000 OR IF NOT
A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME,
ON THE NEXT FOLLOWING BUSINESS DAY.
WARRANT TO PURCHASE
90,000 SHARES OF COMMON STOCK
NO. 1
WARRANT TO PURCHASE
COMMON STOCK
OF
ELECTROSOURCE, INC.
TRANSFER RESTRICTED -- SEE SECTION 5.02
This certifies that, for good and valuable consideration,
Oppenheimer & Co., Inc., and its registered, permitted assigns
(collectively, the "Warrantholder"), is entitled to purchase from
Electrosource, a Delaware corporation (the "Company"), subject to
the terms and conditions hereof, at any time on or after
9:00A.M., New York time, on April 28, 1996, and before 5:00P.M.,
New York time, on April 28, 2000 (or, if such day is not a
Business Day, at or before 5:00 P.M., New York time on the next
following Business Day), the number of fully paid and non-
assessable shares of Common Stock stated above at the Exercise
Price. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as provided
in Article III hereof.
ARTICLE I
Definitions
Section 1.01: Definition of Terms. As used in this Warrant, the
following capitalized terms shall have the following respective
meanings:
(a) Business Day: A day other than a Saturday, Sunday
or other day on which banks in the State of New York are
authorized by law to remain closed.
(b) Common Stock: Common Stock, $.01 par value per
share, of the Company.
(c) Common Stock Equivalents: Securities that are
convertible into or exercisable for shares of Common Stock.
(d) Demand Registration: See Section 6.02.
(e) Exchange Act: The Securities Exchange Act of 1934,
as amended.
(f) Exercise Price: $3.250 per Warrant Share, as such
price may be adjusted from time to time pursuant to Article III
hereof.
(g) Expiration Date: 5:00 P.M., New York time, on April
28, 2000 or if such day is not a Business Day, the next
succeeding day which is a Business Day.
(h) Holder: A Holder of Registrable Securities.
(i) NASD: National Association of Securities Dealers,
Inc., and NASDAQ: NASD Automatic Quotation System.
(j) Person: An individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or
any department or agency thereof.
(k) Piggyback Registration: See Section 6.01.
(l) Prospectus: Any prospectus included in any
Registration Statement, as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering
of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments and all
material incorporated by reference in such Prospectus.
(m) Public Offerings: A public offering of any of the
Company's equity or debt securities pursuant to a registration
statement under the Securities Act.
(n) Registration Expenses: Any and all expenses
incurred in connection with any registration or action incident
to performance of or compliance by the Company with Article VI,
including, without limitation, (I) all SEC, national securities
exchange and NASD registration and filing fees; all listing fees
and all transfer agent fees; (ii) all fees and expenses of
complying with state securities or blue sky laws (including the
fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable
Securities) (iii) all printing, mailing, messenger and delivery
expenses and (iv) all fees and disbursements of counsel for the
Company and of its accountants, but excluding underwriting
discounts and commissions, brokerage fees and transfer taxes, if
any, and fees of counsel or accountants retained by the holders
of Registrable Securities to advise them in their capacity as
Holders of Registrable Securities.
(o) Registrable Securities: Any Warrant Shares issued
to Oppenheimer & Co., Inc. and/or its designees or transferees as
permitted under Section 5.02 and/or other securities that may be
or are issued by the Company upon exercise of this Warrant,
including those which may thereafter be issued by the Company in
respect of any such securities by means of any stock splits,
stock dividends, recapitalizations, reclassifications or the
like, and as adjusted pursuant to Article III hereof.
(p) Registration Statement: Any registration statement
of the Company filed or to be filed with the SEC which covers any
of the Registrable Securities pursuant to the provision of this
Agreement, including all amendments (including post-effective
amendments) and supplements thereto, all exhibits thereto and all
material incorporated therein by reference.
(q) SEC: The Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act
or the Exchange Act.
(r) Securities Act: The Securities Act of 1933, as
amended.
(s) Transfer: See Section 5.02.
(t) Warrants: This Warrant and all other warrants that
may be issued in its place (together evidencing the right to
purchase an aggregate of 90,000 shares of Common Stock),
originally issued as set forth in the definition of Registrable
Securities.
(u) Warrantholder: The person(s) or entity(ies) to whom
this Warrant is originally issued, or any successor in interest
thereto, or any permitted assignee or transferee thereof, in
whose name this Warrant is registered upon the books to be
maintained by the Company for that purpose.
(v) Warrant Shares: Common Stock, Common Stock
Equivalents and other securities purchased or purchasable upon
exercise of the Warrants.
ARTICLE II
Duration and Exercise of Warrant
Section 2.01: Duration of Warrant. Subject to the
limitations specified in 2.02.(a)(ii) regarding a Cashless
Exercise, the Warrantholder may exercise this Warrant at any time
and from time to time after 9:00 A.M., New York time, on April
28, 1996, and before 5:00 P.M., New York time, on the Expiration
Date. If this Warrant is not exercised on or prior to the
Expiration Date, it shall become void, and all rights hereunder
shall thereupon cease.
Section 2.02.: Exercise of Warrant.
(a) The Warrantholder may exercise this Warrant, in whole
or in part, as follows:
(i) By presentation and surrender of this Warrant to
the Company at its principal executive offices or at
the office of its stock transfer agent, if any, with
the Subscription Form annexed hereto duly executed and
accompanied by payment of the full Exercise Price for
each Warrant Share to be purchased; or
(ii) By presentation and surrender of this Warrant to
the Company at its principal executive offices with a
Cashless Exercise Form annexed hereto duly executed (a
"Cashless Exercise"). In the event of a Cashless
Exercise, the Warrantholder shall exchange its warrant
for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares by a fraction,
the numerator of which shall be the amount by which the
then current market price per share of Common Stock
exceeds the Exercise Price, and the denominator of
which shall be the then current market price per share
of Common Stock. For purposes of any computation under
this Section 2.02(a)(ii), the then current market price
per share of Common Stock at any date shall be deemed
to be the last sale price of the Common Stock on the
business day prior to the date of the Cashless Exercise
or, in case no such reported sales take place on such
day, the average of the last reported bid and asked
prices of the Common Stock on such day, in either case
on the principal national securities exchange on which
the Common Stock is admitted to trading or listed, or
if not listed or admitted to trading on any such
exchange, the representative closing bid price of the
Common Stock as reported by NASDAQ, or other similar
organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market
price of the Common Stock as determined by the Board of
Directors.
(b) upon receipt of the Warrant, in the case of Section
2.02 (a) (i), with the Subscription Form duly executed and
accompanied by payment of the aggregate Exercise Price for the
Warrant Shares for which this Warrant is then being exercised,
or, in the case of Section 2.02 (a) (ii), with the Cashless
Exercise Form duly executed, the Company shall cause to be issued
certificates for the total number of whole shares of Common Stock
for which this Warrant is being exercised (adjusted to reflect
the effect of the anti-dilution provisions contained in Article
III hereof, if any, and as provided in Section 2.04 hereof) in
such denominations as are requested for delivery to the
Warrantholder, and the Company shall thereupon deliver such
certificates to the Warrantholder. The Warrantholder 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 actually delivered to the Warrantholder. If at the time
this Warrant is exercised, a Registration Statement is not in
effect to register under the Securities Act the Warrant Shares
issuable upon exercise of this Warrant, the Company may require
the Warrantholder to make such representations, and may place
such legends on certificates representing the Warrant Shares, as
may be reasonably required in the opinion of counsel to the
Company to permit the Warrant Shares to be issued without such
registration.
(c) In case the Warrantholder shall exercise this Warrant
with respect to less than all of the Warrant Shares that may be
purchased under this Warrant, the Company shall execute a new
warrant in the form of this Warrant for the balance of such
Warrant Shares and deliver such new warrant to the Warrantholder.
(d) The Company shall pay any and all stock transfer and
similar taxes which may be payable in respect of the issue of
this Warrant or in respect of the issue of any Warrant Shares.
Section 2.03.: Reservation of Shares. The Company hereby
agrees that at all times there shall be reserved for issuance and
delivery upon exercise of this Warrant such number of shares of
Common Stock or other shares of capital stock of the Company from
time to time issuable upon exercise of this Warrant. All such
shares shall be duly authorized, and when issued upon such
exercise, shall be validly issued, fully paid and nonassessable,
free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of
all preemptive rights (except the restrictions imposed by the
legend appearing at the top of Page 1 of this Warrant).
Section 2.04.: Fractional Shares. The Company shall not be
required to issue any fraction of a share of its capital stock in
connection with the exercise of this Warrant, and in any case
where the Warrantholder would, except for the provisions of this
Section 2.04, be entitled under the terms of this Warrant to
receive a fraction of a share upon the exercise of this Warrant,
the Company shall, upon the exercise of this Warrant and tender
of the Exercise Price (as adjusted to cover the balance of the
share), issue the larger number of whole shares purchasable upon
exercise of this Warrant. The Company shall not be required to
make any cash or other adjustment in respect of such fraction of
a share to which the Warrantholder would otherwise be entitled.
Section 2.05.: Listing. Prior to the issuance of any shares
of Common Stock upon exercise of this Warrant, the Company shall
secure the listing of such shares of Common Stock upon each
nation securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to
official notice of issuance upon exercise of this Warrant) and
shall maintain, so long as any other shares of Common Stock shall
so be listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or
automated quotation system, and shall maintain such listing of,
any other shares of capital stock of the Company issuable upon
the exercise of this Warrant if and so long as any shares of the
same class shall be listed on such national securities exchange
or automated quotation system.
ARTICLE III
Adjustment of Shares of Common Stock
Purchasable and of Exercise Price
The Exercise price and the number and kind of Warrant Shares
shall be subject to adjustment from time to time upon the
happening of certain events as provided in this Article III.
Section 3.01.: Mechanical Adjustments. (a) If at any time
prior to the exercise of this Warrant in full, the Company shall
(i) declare a dividend or make a distribution on the Common Stock
payable in shares of its capital stock (whether share of Common
Stock or of capital stock of any other class); (ii) subdivide,
reclassify or recapitalize outstanding Common Stock into a
greater number of shares; (iii) combine, reclassify or
recapitalize its outstanding Common Stock into a smaller number
of shares; or (iv) issue any shares of its capital stock by
reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or a merger
in which the Company is the continuing corporation), the Exercise
Price in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or
recapitalization shall be adjusted so that the Warrantholder
shall be entitled to receive the aggregate number and kind of
shares which, if this Warrant had been exercised in full
immediately prior to such event, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
distribution, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this paragraph 3.01
(a) shall be made successively immediately after the record date,
in the case of a dividend or distribution, or the effective date,
in the case of a subdivision, combination, reclassification or
recapitalization to allow the purchase of such aggregate number
and kind of shares.
(b) If at any time prior to the exercise to this Warrant in
full, the Company shall fix a record date for the issuance or
making a distribution to all holders of Common Stock (including
any such distribution to be made in connection with a
consolidation or merger in which the Company is to be the
continuing corporation) of evidences of its indebtedness, any
other securities of the Company or any cash, property or other
assets (excluding a combination, reclassification or
recapitalization referred to in Section 3.01 (a), regular cash
dividends or cash distributions paid out of net profits legally
available therefor and in the ordinary course of business and
subscription rights, options or warrants for Common Stock or
Common Stock Equivalents (excluding those referred to in Section
3.01 (b)) (any such nonexcluded event being herein called a
"Special Dividend"), (i) the Exercise Price shall be decreased
immediately after the record date for such Special Dividend to a
price determined by multiplying the Exercise Price then in effect
by a fraction, the numerator of which shall be the then current
market price of the Common Stock (as defined in Section 3.01 (f))
on such record date less the fair market value (as determined by
the Company's Board of Directors) of the evidences of
indebtedness, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of
Common Stock or of such subscription rights, options or warrants
applicable to one share of Common Stock and the denominator of
which shall be such then current market price per share of Common
Stock (as so determined) and (ii) the number of shares of Common
Stock subject to purchase upon exercise of this Warrant shall be
increased to a number determined by multiplying the number of
shares of Common Stock subject to purchase immediately before
such Special Dividend and the denominator of which shall be the
Exercise Price in effect immediately after such Special Dividend.
Any adjustment required by this paragraph 3.01 (c) shall be made
successively whenever such a record date is fixed and in the
event that such distribution is not made, the Exercise Price
shall again be adjusted to be the Exercise Price that was in
effect immediately prior to such record date.
(c) Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to one or more of paragraphs
(a) and (b) of this Section 3.01, the Warrant Shares shall
simultaneously be adjusted by multiplying the number of Warrant
Shares initially issuable upon exercise of each Warrant by the
Exercise of each Warrant by the Exercise Price in effect on the
date of such adjustment and dividing the product so obtained by
the Exercise Price, as adjusted.
(d) For the purpose of any computation under this Section
3.01, the current market price per share of Common Stock at any
date shall be deemed to be the average of the daily closing
prices for 20 consecutive trading days commencing 30 trading days
before such date as designated by Oppenheimer. The closing price
for each day shall be the last sale price regular way or, in case
no such reported sales take place on such day, the average of the
last reported bid and asked prices regular way, in either case on
the pincipal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or
admitted to trading on any such exchange, the representative
closing bid price as reported by NASDAQ, or other similar
organization if NASDAQ is no longer reporting such information,
or if not so available, the fair market price as determined by
the Board of Directors of the Company.
(e) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of
at least ten cents ($.10) in such price; provided, however, that
any adjustments which by reason of this paragraph (e) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 3.01 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
Notwithstanding anything in this Section 3.01 to the contrary,
the Exercise Price shall not be reduced to less than the then
existing par value of the Common Stock as a result of any
adjustment made hereunder.
(f) In the event that at any time, as a result of any
adjustment made pursuant to Section 3.01 (a), the Warrantholder
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 any 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 Section 3.01 (a).
(g) In the case of an issue of additional Common Stock or
Common Stock Equivalents for cash, the consideration received by
the Company therefor, after deducting therefrom any discount or
commission or other expenses paid by the Company for any
underwriting of, or otherwise in connection with, the issuance
thereof, shall be deemed to be the amount received by the Company
therefor. The term "issue" shall include the sale or other
disposition of shares held by or on account of the Company or in
the treasury of the Company but until sold or otherwise disposed
of such shares shall not be deemed outstanding.
Section 3.02: Notice of Adjustment. Whenever the number of
Warrant Shares or the Exercise Price is adjusted as herein
provided, the Company shall prepare and deliver forthwith to the
Warrantholder a certificate signed by its President, and by any
Vice President, Treasurer or Secretary, setting forth the
adjusted number of shares purchasable upon the exercise of this
Warrant and the Exercise Price of such shares after such
adjustment, a brief statement of the facts requiring such
adjustment and the computation by which adjustment was made.
Section 3.03: No Adjustment for Dividends. Except as
provided in Section 3.01 of this Agreement, no adjustment in
respect of any cash dividends paid by the Company shall be made
during the term of this Warrant or upon the exercise of this
Warrant.
Section 3.04: Preservation of Purchase Rights in Certain
Transactions. In case of any reclassification, capital
reorganization or other change of outstanding shares of Common
Stock (other than a subdivision or a combination of the
outstanding Common Stock and other than a change in the par value
of the Common Stock or in case of any consolidation or merger of
the Company with or into another corporation (other than a merger
with a subsidiary in which the Company is the continuing
corporation and said merger 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,
transfer or conveyance to another corporation of the property and
assets of the Company as an entirety or substantially as an
entirety, the Company shall accelerate the date of exercise of
the warrant from April 28, 1996 to the date of any such
transaction and use reasonable efforts to cause such successor or
purchasing corporation, as the case may be, to execute with the
Warrantholder an agreement granting the Warrantholder the right
thereafter, upon payment of the Exercise Price in effect
immediately prior to such action, to receive upon exercise of
this Warrant the kind and amount of shares and other securities
and property which he would have owned or have been entitled to
receive after the happening of such reclassification, change,
consolidation, merger, sale or conveyance had this Warrant been
exercised immediately prior to such action. Such agreement shall
provide for adjustments in respect of such shares of stock and
other securities and property, which shall be as nearly
equivalent as may be practicable to the adjustments provided for
in this Article III. In the event that in connection with any
such reclassification, capital reorganization, change,
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, or of, 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 Article III. The provisions of this Section 3.04
shall similarly apply to successive reclassification, capital
reorganizations, consolidation, mergers, sales or conveyances.
Section 3.05: Form of Warrant After Adjustments. The Form of
this Warrant need not be changed because of any adjustments in
the Exercise Price or the number or kind of the Warrant Shares,
and Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are
stated in this Warrant, as initially issued.
Section 3.06: Treatment of Warrantholder. Prior to due
presentment for registration of transfer of this Warrant, the
Company may deem and treat the Warrantholder as the absolute
owner of this Warrant, (notwithstanding any notation of ownership
or other writing hereon) for all purposes and shall not be
affected by any notice to the contrary.
ARTICLE IV
Other Provisions Relating
to Rights of Warrantholder
Section 4.01: No Rights as Shareholders; Notice to
Warrantholders. Nothing contained in this Warrant shall be
construed as conferring upon the Warrantholder or his or its
transferees the right to vote or to receive dividends or to
consent to or receive notice as a shareholder in respect of any
meeting of shareholders for the election of directors of the
Company or any other matter, or any other rights whatsoever as
shareholders of the Company. The Company shall give notice to
the Warrantholder by registered mail if at any time prior to the
expiration or exercise in full of the Warrants, any of the
following events shall occur:
(a) the Company shall authorize the payment of any
dividend upon shares of Common Stock payable in any securities or
authorize the making of any distribution (other than a cash
dividend subject to the parenthetical set forth in Section
3.01(c)) to all holders of Common Stock;
(b) the Company shall authorize the issuance to all
holders of Common Stock of any additional shares of Common Stock
or Common Stock Equivalents or of rights, options or warrants to
subscribe for or purchase Common Stock Equivalents or of any
other subscription rights, options or warrants;
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger,
or sale or conveyance of the property of the Company as an
entirety or substantially as an entirety); or
(d) a capital reorganization or reclassification of
the Common Stock (other than a subdivision or combination of the
outstanding Common Stock and other than a change in the par value
of the Common Stock) or 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 that does not result in any reclassification or
change of common Stock outstanding) or in the case of any sale or
conveyance to another corporation of the property of the Company
as an entirety or substantially as an entirety.
Such giving of notice shall be initiated (i) at least 10 Business
Days prior to the date fixed as a record date or effective date
or the date of closing of the Company's stock transfer books for
the determination of the shareholders entitled to such dividend,
distribution or subscription rights, or for the determination of
the shareholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or
winding up. Such notice shall specify such record date or the
date of closing the stock transfer books, as the case may be.
Failure to provide such notice shall not affect the validity of
any action taken in connection with such dividend, distribution
or subscription rights, or proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up.
Section 4.02: Lost, Stolen, Mutilated or Destroyed Warrants.
If this Warrant is lost, stolen, mutilated or destroyed, the
Company may, on such terms as to indemnity or otherwise as it may
in its discretion impose (which shall, in the case of a mutilated
Warrant, include the surrender thereof), issue a new Warrant of
like denomination and tenor as and in substitution for this
Warrant.
ARTICLE V
Split-Up, Combination
Exchange and Transfer of Warrants
Section 5.01: Split-Up, Combination, Exchange and Transfer
of Warrants. Subject to the provisions of Section 5.02 hereof,
this Warrant may be split up, combined or exchanged for another
Warrant or Warrants containing the same terms to purchase a like
aggregate number of Warrant Shares. If the Warrantholder desires
to split up, combine or exchange Warrants, he or it shall make
such request in writing delivered to the Company and shall
surrender to the Company any Warrants to be so split up, combined
or exchanged. Upon any such surrender for a split up,
combination or exchange, the Company shall execute and deliver to
the person entitled thereto a Warrant or Warrants, as the case
may be, as so requested. The Company shall not be required to
effect any split up, combination or exchange which will result in
the issuance of a Warrant entitling the Warrantholder to purchase
upon exercise a fraction of a share of Common Stock or a
fractional Warrant. The Company may require such Warrantholder
to pay a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any split up, combination
or exchange of Warrants.
Section 5.02: Restriction on Transfer. Neither this Warrant
nor the Warrant Shares may be disposed of or encumbered (any such
action, a "Transfer"), except (I) to Oppenheimer & Co., Inc.,
any successor to the business of such company, or any officer of
such company, or (ii) to any underwriter in connection with a
Public Offering of the Common Stock, provided (as to (ii)) that
this Warrant is exercised upon such Transfer and the shares of
Common Stock issued upon such exercise are sold by such
underwriter as part of such Public Offering and, as to both (i)
and (ii), only in accordance with and subject to the provisions
of the Securities Act and the rules and regulations promulgated
thereunder. If at the time of a Transfer, a Registration
Statement is not in effect to register this Warrant or the
Warrant Shares, the Company may require the Warrantholder to make
such representations, provide an appropriate legal opinion, (from
in-house or outside counsel) and may place such legends on
certificates representing this Warrant, as may be reasonably
required in the opinion of counsel to the Company to permit a
Transfer without such registration.
ARTICLE VI
Registration under the Securities Act of 1933
Section 6.01: Piggyback Registration
(a) Right to Include Registrable Securities. If at
any time or from time to time after April 28, 1995 and prior to
the Expiration Date, the Company proposes to register any of its
securities under the Securities Act on any form for the
registration of securities under such Act, whether or not for its
own account (other than by a registration statement on Form S-8
or other form which does not include substantially the same
information as would be required in a form for the general
registration of securities or would not be available for the
Registrable Securities) (a "Piggyback registration"), it shall as
expeditiously as possible give written notice to all Holders of
its intention to do so and of such Holders' rights under this
Section 6.01. Such rights are referred to hereinafter as
"Piggyback Registration Rights." Upon the written request of any
such Holder made within 20 days after receipt of any such notice
(which request shall specify the Registrable Securities intended
to be disposed of by such Holder), the Company will use
reasonable efforts to include in the Registration Statement the
Registrable Securities which the company has been so requested to
register by the Holders thereof and the Company will use
reasonable efforts to keep such registration statement in effect
and maintain compliance with each Federal and state law or
regulation for the period necessary for such Holder to effect the
proposed sale or other disposition (but in no event for a period
greater than 120 days).
(b) Withdrawal of Piggyback Registration by Company.
If, at any time after giving written notice of its intention to
register any securities in a Piggyback Registration but prior to
the effective date of the related Registration Statement, the
Company shall determine for any reason not to register such
securities, the Company shall give written notice of such
determination to each Holder and, thereupon, shall be relieved of
its obligation to register any Registrable Securities in
connection with such Piggyback Registration. All best efforts
obligations of the Company pursuant to Section 6.04 shall cease
in the Company determines to terminate prior to such effective
date any registration where Registrable Securities are being
registered pursuant to this Section 6.01.
(c) Piggyback Registration of Underwritten Public
Offerings. If a Piggyback Registration involves an offering by
or through underwriters, then, (i) all Holders requesting to have
their Registrable Securities included in the Company's
Registration Statement must sell their Registrable Securities to
the underwriters selected by the Company on the same terms and
conditions as apply to other selling shareholders and (ii) any
Holder requesting to have his or its Registrable Securities
included in such Registration Statement may elect in writing, not
later than three Business Days prior to the effectiveness of the
Registration Statement filed in connection with such
registration, not to have his or its Registrable Securities so
included in connection with such registration.
(d) Payment of Registration Expenses for Piggyback
Registration. The Company shall pay all Registration Expenses in
connection with each registration of Registrable Securities
requested pursuant to a Piggyback Registration Right contained in
this Section 6.01.
(e) Priority in Piggyback Registration. If a Piggyback
Registration involves an offering by or through underwriters, the
Company shall not be required to include Registrable Shares
therein if and to the extent the underwriter managing the
offering reasonably believes in good faith and advises each
Holder requesting to have
Registrable Securities included in the Company's Registration
Statement that such inclusion would materially adversely affect
such offering; provided that (i) if other selling shareholders
who are employees, officers or directors of the Company have
requested registration of securities in the proposed offering,
the Company will reduce or eliminate such other selling
shareholders' securities before any reduction or elimination of
Registrable Securities; (ii) any such reduction of elimination
(after taking into account the effect of clause (i)) shall be
subject to and subordinate to previous registration rights
granted by the Company to others pro rata to all other holders
of the securities of the Company exercising "piggyback
registration rights" similar to those set forth herein in
proportion to the respective number of shares they have requested
to be registered, and (iii) in such event, such Holders may delay
any offering by them of all Registrable Shares requested to be
included (or that portion of such Registrable Shares eliminated
for such period, not to exceed 60 days as the managing
underwriter shall request) and the Company shall file such
supplements and post-effective amendments and take such other
action necessary under Federal and state law or regulation as may
be necessary to permit such Holders to make their proposed
offering for a period of 90 days following such period of delay.
Section 6.02 Demand Registration -S-3
(a) Request for Registration. Unless previously
registered, if, at any time subsequent to April 28, 1996 and
prior to the Expiration Date, any 75% of Holders request that the
Company file an S-3 registration statement under the Securities
Act, the Company as soon as practicable shall use its best
efforts to file an S-3 registration statement with respect to all
Warrant Shares that it has been so requested to include and
obtain the effectiveness thereof, and to take all other action
necessary under any Federal or state law or regulation to permit
the Warrant Shares that are then held and/or that may be acquired
upon the exercise of the Warrants specified in the notices of the
Holders or holders to be sold or otherwise disposed of, and the
Company shall endeavor to maintain such compliance with each such
Federal and state law and regulation for the period necessary for
such Holders or holders to effect the proposed sale or other
distribution (but in no event for more than 120 days); provided,
however, the Company shall be entitled to defer such registration
for a period of up to 60 days if and to the extent that its Board
of Directors shall determine that such registration would
interfere with a pending corporate transaction. The Company
shall also promptly give written notice to the Holder and the
holders of any other Warrants and/or the holders of any Warrant
and/or the holders of any Warrant Shares who or that have not
made a request to the Company pursuant to the provisions of this
subsection (a) of its intention to effect any required
registration or qualification and shall use its best efforts to
effect as expeditiously as possible such registration or
qualification of all other such Warrant Shares that are then held
and/or that may be acquired upon the exercise of the Warrants,
the Holder or holders of which have requested such registration
or qualification, within 15 days after such notice has been given
by the Company, as provided in the preceding sentence. The
Company shall be required to effect a registration or
qualification pursuant to this subsection (a) on one occasion
only.
(b) Payment of Registration Expenses for Demand
Registration. The Company and Oppenheimer shall each pay one
half of all Registration Expenses in connection with the Demand
Registration.
Section 6.03: Buy-outs of Registration Demand. In lieu of
carrying out its obligations to effect a Piggyback Registration
of any Registrable Securities pursuant to this Article VI, the
Company may carry out such obligation by offering to purchase and
purchasing such Registrable Securities requested to be registered
at an amount in cash equal to the difference between (a) the last
sale price of the Common Stock on the day the request for
registration is made and (b) the Exercise Price in effect on such
day.
Section 6.04: Registration Procedures. If and whenever the
Company is required to use its best efforts to take action
pursuant to any Federal or state law or regulation to permit the
sale or other disposition of any Warrant Shares that are then
held or that may be acquired upon exercise of the Warrants, in
order to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Article
VI, the Company shall, as expeditiously as practicable:
(a) furnish to each selling Holder of Registrable
Securities and the underwriters, if any, without charge, as many
copies of the Registration Statement, the Prospectus or the
Prospectuses (including each preliminary prospectus) and any
amendment or supplement thereto as they may reasonably request;
(b) the Company shall have sole control in connection
with the preparation, filing, withdrawal, amendment or
supplementing of each Registration Statement, the selection of
underwriters, and the distribution of any preliminary prospectus
included in the Registration Statement, and may include within
the coverage thereof additional shares of Common Stock or other
securities for its own account or for the account of one or more
of its other security holders;
Each seller of Registrable Securities as to which any
registration is being effected shall furnish to the Company such
information regarding the distribution of such securities and
such other information as may otherwise be required by the
Securities Act to be included in such Registration Statement.
Section 6.05: Indemnification.
(a) Indemnification by Company. In connection with
each Registration Statement relating to disposition of
Registrable Securities, the Company shall indemnify and hold
harmless each Holder and each underwriter of Registrable
Securities of each Person, if any, who controls such Holder or
underwriter (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) against any and all
losses, claims, damages and liabilities, joint or several
(including any reasonable investigation , legal and other
expenses incurred in connection with, and any amount paid in
settlement of any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject
under the Securities Act, the Exchange Act or other Federal or
state law or regulation, at common law or otherwise, except
insofar as such losses, claims, damages or liabilities arise out
of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration
Statement, Prospectus or preliminary prospectus or any amendment
thereof or supplement thereto, or arise out of or are based upon
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that such indemnity
shall not inure to the benefit of any Holder or underwriter (or
any Person controlling such Holder or underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) on account of any losses, claims, damages or
liabilities arising from the sale of Registrable Securities if
such untrue statement or omission or alleged untrue statement or
omission was made in such Registration Statement, Prospectus or
preliminary prospectus, or such amendment or supplement, in
reliance upon and in conformity with information furnished in
writing to the Company by the Holder or underwriter specifically
for use therein. The Company shall also indemnify selling
brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers
and directors and each Person who controls such Persons (within
the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) to the same extent as provided above with
respect to the indemnification of the Holders of Registrable
Securities, if requested. This indemnity agreement shall be in
addition to any liability which the Company may otherwise have.
(b) Indemnification by Holder. In connection with
each Registration Statement, each Holder shall indemnify, to the
same extent as the indemnification provided by the Company in
Section 6.05(a), the Company, its directors and each officer who
signs the Registration Statement and each Person who controls
the Company (within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act) but only insofar as such
losses, claims, damages and liabilities arise out of or based
upon any untrue statement or omission or alleged untrue statement
or omission which was made in the Registration Statement, the
Prospectus or preliminary prospectus or any amendment thereof or
supplement thereto, in reliance upon and in conformity with
information furnished in writing by such Holder to the Company
specifically for use therein. In no event shall the liability of
any selling Holder of Registrable Securities hereunder be greater
in amount than the dollar amount of the net proceeds received by
such Holder upon the sale of the Registrable Securities giving
rise to such indemnification obligation. The Company shall be
entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same
extent as provided above, with respect to information so
furnished in writing by such Persons specifically for inclusion
in any Prospectus, Registration Statement or preliminary
prospectus or any amendment thereof or supplement thereto.
(c) Conduct of Indemnification Procedure. Any party
that proposes to assert the right to be indemnified hereunder
will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which
a claim is to be made against an indemnifying party or parties
under this Section, notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy
of all papers served. No indemnification provided for in Section
6.05(a) or 6.05(b) shall be available to any party who shall fail
to give notice as provided in this Section 6.05(c) if the party
to whom notice was not given was unaware of the proceeding to
which such notice would have related and was prejudiced by the
failure to give such notice, but the omission so to notify such
indemnifying party of any such action, suit or proceeding shall
not relieve it from any liability that it may have to any
indemnified party for contribution or otherwise than under this
Section. In case any such action, suit or proceeding shall be
brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in, and, to the extent
that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so
to assume the defense thereof and the approval by the
indemnifying party to such indemnified party of its election so
to assume the defense thereof an the approval by the indemnified
party of such counsel, the indemnifying party shall not be liable
to such indemnified party for any legal or other expenses, except
as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in
connection with the defense thereof. The indemnified party shall
have the right to employ its counsel in any such action, but the
fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of counsel by such
indemnified party has been authorized in writing by the
indemnifying parties, (ii) the indemnified party shall have
reasonably concluded that there may be a conflict of interest
between the indemnifying parties and the indemnified party in the
conduct of the defense of such action (in which case the
indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party) or
(iii) the indemnifying parties shall not have employed counsel to
assume the defense of such action within a reasonable time after
notice of the commencement thereof, in each of which cases the
fees and expenses of counsel shall be at the expense of the
indemnifying parties. An indemnifying party shall not be liable
for any settlement of any action, suit, proceeding or claim
effected without its written consent.
(d) Contribution. In connection with each
Registration Statement relating to the disposition of Registrable
Securities, if the indemnification provided for in subsection (a)
hereof is unavailable to an indemnified party thereunder in
respect of any losses, claims, damages or liabilities referred to
therein, then the Company shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims,
damages or liabilities. The amount to be contributed by the
Company hereunder shall be an amount which is in the same
proportionate relationship to the total amount of such losses,
claims, damages or liabilities as the total net proceeds from the
offering (before deducting expenses) of the Registrable
Securities bears to the total price to the public (including
underwriters' discounts) for the offering of the Registrable
Securities covered by such registration.
(e) Special Performance. The Company and the Holder
acknowledge that remedies at law for the enforcement of this
Section 6.05 may be inadequate and intend that this Section 6.05
shall be specifically enforceable.
ARTICLE VII
Other Matters
Section 7.01: Amendments and Waivers. The provisions of
this Warrant, including the provisions of this sentence, may not
be amended, modified or supplemented, and waiver or consents to
departures from the provisions hereof may not be given unless the
Company has obtained the written consent of holders of at least a
majority of the outstanding Registrable Securities. Holders
shall be bound by any consent authorized by this Section whether
or not certificates representing such Registrable Securities have
been marked to indicate such consent.
Section 7.02: Counterparts. This Warrant may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which so executed shall be deemed to be an
original and all of which taken together shall constitute one and
the same agreement.
Section 7.03: Governing Law. This Warrant shall be
governed by and construed in accordance with the laws of the
State of New York.
Section 7.04: Severability. In the event that any one or
more of the provisions contained herein, or the application
thereof in any circumstances, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any
such provisions in every other respect and of the remaining
provisions contained herein shall not be affected or impaired
thereby.
Section 7.05: Attorneys' Fees. In any action or proceeding
brought to enforce any provisions of this Warrant, or where any
provisions hereof or thereof is validly asserted as a defense,
the successful party shall be entitled to recover reasonable
attorneys' fees and disbursements in addition to its costs and
expenses and any other available remedy.
Section 7.06: Computations of Consent. Whenever the
consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable
Securities held by the Company or its affiliates (other than the
Warrantholder or subsequent Holders if they are deemed to be such
affiliates solely by reason of their holdings of such Registrable
Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required
percentage.
Section 7.07: Notice. Any notices or certificates by the
Company to the Holder and by the Holder to the Company shall be
deemed delivered if in writing and delivered in person or by
registered mail (return receipt requested) to the Holder
addressed to him in care of Oppenheimer & Co., Inc., Oppenheimer
Tower, World Financial Center, New York, New York 10281 or, if
the Holder has designated, by notice in writing to the Company,
any other address, to such other address, and if to the Company,
addressed to it at 3800 B Drossett Drive, Austin, TX, 78744-1131.
The Company may change its address by written notice to the
Holder and the Holder may change his or its address by written
notice to the Company.
IN WITNESS WHEREOF, this Warrant has been duly executed
by the Company under its corporate seal as of the _____ day of
__________, 1995.
By:________________________
Name:
Title:
Attest:_________________________
Secretary
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, ______________ hereby sells, assigns and
transfers unto _____________ the within Warrant Certificate,
together with all right, title and interest therein, and does
hereby irrevocably consititute and appoint _____________________
attorney, to transfer said Warrant Certificate on the books of
the within-named Company with respect to the number of Warrants
set forth below, with full power of substitution in the premises:
Name (s) of
Assignees (s) Address No. of Warrants
And if said number of Warrants shall not be all the Warrants
represented by the Warrant Certificate, a new Warrant Certificate
is to be issued in the name of said undersigned for the balance
remaining of the Warrants represented by said Warrant Certificate
Dated: _______________, 19___
____________________________________
Note: The above signature should
correspond exactly with the name
on the face of this Warrant Certificate.
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant
pursuant to Section 2.02 (a) (I))
The undersigned hereby irrevocably elects to exercise
the right of purchase represented by within Warrant Certificate
for, and to purchase thereunder ____________ shares of Common
Stock, as provided for therein, and tenders herewith payment of
the purchase price in full in the form of cash or a certified or
official bank check in the amount of $ .
Please issue a certificate or certificates for such
Common Stock in the name of:
Name_____________________________
(Please print name, address, and Social Security Number)
Signature__________________________
NOTE: The above signature should respond exactly with the name
on the first page of this Warrant Certificate or with the name of
the assignee appearing in the assignment form below.
And if the said number of shares shall not be all the shares
purchasable under the within Warrant Certificate, a new Warrant
Certificate is to be issued in the name of said undersigned for
the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 2.02 (a) (ii))
The undersigned hereby irrevocably elects to Exchange its
Warrant for such shares of Common Stock pursuant to the Cashless
Exercise provisions of the within Warrant Certificate, as
provided for in Section 2.02 (a) (ii) of such Warrant
Certificate.
Please issue a certificate or certificates for
such Common Stock in the name of:
Name____________________________________
(Please Print Name, Address and Social Security Number)
Signature__________________________________
NOTE: The above signature should correspond exactly with the
name on the first page of this Warrant Certificate or with the
name of the assignee appearing in the assignment form below.
And if said number of shares shall not be all the shares
exchangeable or purchasable under the within Warrant Certificate,
a new Warrant Certificate is to be issued in the name of the
undersigned for the balance remaining of the shares purchasable
rounded up to the next higher number of shares.
EXHIBIT 4.4
FORM OF WARRANT
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED OR SOLD IN
THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR
TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN
REGULATION S UNDER THE ACT) EXCEPT PURSUANT TO REGISTRATION UNDER
THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND APPLICABLE STATE SECURITIES LAWS. MOREOVER, THIS WARRANT
MAY NOT BE EXERCISED BY OR ON BEHALF OF A U.S. PERSON UNLESS
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
Warrant No. W6-101 Dated: July 27, 1995
WARRANT
To Purchase Shares of Common Stock of
ELECTROSOURCE, INC.
Expiring July 27, 2000
THIS IS TO CERTIFY THAT, for value received, Rosehouse,
Ltd., located at 306 Commerce Building, 1 Chancery Lane, Hamilton
HM 12 Bermuda, a corporation organized under the laws of Bermuda,
a non-U.S.A. jurisdiction, or registered assigns (the "Holder")
is entitled to purchase from Electrosource, Inc., a Delaware
corporation (the "Company"), at any time or from time to time
after 10:00 a.m., Central Standard Time, on the date hereof and
prior to 5:00 p.m. Central Standard Time, on July 27, 2000 (the
"Exercise Period"), at the Exercise Price (as defined below),
250,000 shares (the "Shares") of the Company's common stock, U.S.
$0.10 par value per share (the "Common Stock"), all subject to
adjustment and upon the terms and conditions as hereinafter
provided, and is entitled also to exercise the other appurtenant
rights, powers and privileges hereinafter described. The
"Exercise Price" shall be the closing bid price of the Common
Stock as reported by The NASDAQ Stock Market on the date hereof.
ARTICLE I
EXERCISE AND CONVERSION OF WARRANTS
2.1 Method of Exercise. To exercise this Warrant
in whole or in part, the Holder shall deliver to the Company,
(a) this Warrant, (b) a written notice, in substantially the form
of the Subscription Notice attached hereto, of such Holder's
election to exercise this Warrant, which notice shall specify the
number of Shares to be purchased, the denominations of the share
certificate or certificates desired and the name or names in
which such certificates are to be registered and (c) payment of
the Exercise Price with respect to such shares. Such payment may
be made, at the option of the Holder, by cash, money order,
certified or bank cashier's check or wire transfer. Each
exercise notice, if delivered by certified mail, shall be deemed
to have been given by the Holder on the date of the postmark
thereon for the purpose of establishing the date of exercise.
The Company shall, as promptly as practicable and in
any event within seven Business Days thereafter, execute and
deliver or cause to be executed and delivered, in accordance with
such notice, a certificate or certificates representing the
Shares, or such portion thereof, as specified in such notice.
The stock certificate or certificates so delivered shall be in
such denominations as may be specified in such notice or, if such
notice shall not specify denominations, shall be in the amount of
the number of Shares for which the Warrant is being exercised,
and shall be issued in the name of the Holder or such other name
or names as shall be designated in such notice. Such certificate
or certificates shall be deemed to have been issued, and such
Holder or any such person so designated to be named therein shall
be deemed for all purposes to have become a holder of record of
such shares, as of the date the aforementioned notice is received
by the Company. If this Warrant shall have been exercised only
in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant
evidencing the rights to purchase the remaining Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical to this Warrant, or, at the request of the Holder,
appropriate notation may be made on this Warrant which shall then
be returned to the Holder. The Company shall pay all expenses,
taxes (if any) and other charges payable in connection with the
preparation, issuance and delivery of stock certificates and new
Warrants, except that, if stock certificates or new Warrants
shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a
result of such transfer shall be paid by the Holder at the time
of delivering the aforementioned notice of exercise or promptly
upon receipt of a written request of the Company for payment.
2.2 Shares to Be Fully Paid and Nonassessable.
The Shares, and any portion thereof, issued upon the exercise of
this Warrant shall be validly issued, fully paid and
nonassessable and free from all preemptive rights of any
stockholder, and from all taxes, liens and charges with respect
to the issue thereof (other than transfer taxes).
2.3 No Fractional Shares to Be Issued. The
Company shall not be required to issue fractions of shares of
Common Stock upon exercise of this Warrant. If any fraction of a
share would, but for this Section, be issuable upon any exercise
of this Warrant, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to such
fraction of Exercise Price per share on the business day
immediately prior to the date of such exercise.
2.4 Reservation; Authorization. Company has
reserved and will keep available for issuance upon exercise of
the Warrants the total number of the Shares deliverable upon
exercise of all Warrants from time to time outstanding. The
issuance of the Shares has been duly and validly authorized and,
when issued and sold in accordance with the Warrants, the Shares
will be duly and validly issued, fully paid and nonassessable.
ARTICLE II
TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANTS
2.5 Ownership of Warrant. The Company may deem
and treat the person in whose name this Warrant is registered as
the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by any person other than the
Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for
registration of transfer as provided in this Article II.
2.6 Transfer of Warrant. The Company shall
maintain books for the registration of transfers of the Warrant,
and transfer of this Warrant and all rights hereunder shall be
registered, in whole or in part, on such books, upon surrender of
this Warrant, together with a written assignment of this Warrant
duly executed by the Holder or his duly authorized agent or
attorney, with (unless the Holder is the original Warrant holder
or an institutional investor) signatures guaranteed by a bank or
trust company or a broker or dealer registered with the National
Association of Securities Dealers, and funds sufficient to pay
any transfer taxes payable upon such transfer. Upon surrender
the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denominations
specified in the instrument of assignment, and this Warrant shall
promptly be cancelled. Notwithstanding the foregoing, a Warrant
may be exercised by a new holder without having a new Warrant
issued. Any transfer of this Warrant pursuant to this Section
2.2 shall be accomplished in accordance with all applicable
federal and state securities laws.
2.7 Division of Warrants. The Holder of this
Warrant may divide this Warrant by providing the Company with a
written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the
holders hereof and thereof or the respective duly authorized
agents or attorneys. Subject to compliance with Section 2.2 as
to any transfer which may be involved in the division, the
Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. Any division or divisions of this
Warrant pursuant to this Section 2.3 shall be accomplished in
accordance with all applicable federal and state securities laws.
2.8 Loss, Theft, Destruction or Mutilation of
Warrants. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any Warrant and,
in the case of any such loss, theft or destruction, upon receipt
of indemnity or security reasonably satisfactory to the Company,
or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver,
in lieu of such lost, stolen, destroyed or mutilated Warrant, a
new Warrant of like tenor and representing the right to purchase
the same aggregate number of shares of Common Stock as provided
for in such lost, stolen, destroyed or mutilated Warrant.
2.9 Expenses of Delivery of Warrants. The
Company shall pay all expenses, taxes (other than transfer taxes)
and other charges payable in connection with the preparation,
issuance and delivery of Warrants and the Shares hereunder.
ARTICLE III
ANTI-DILUTION PROVISIONS
The Exercise Price and the number of the Shares that
may be purchased upon the exercise hereof, will be subject to
change or adjustment as follows:
3.1 Stock Dividends and Stock Splits. If at any time
after the date of the issuance of this Warrant and before 5:00
p.m., Central Time, on the last day of the Exercise Period,
(i) the Company shall fix a record date for the issuance of any
stock dividend payable in shares of Common Stock or (ii) the
number of shares of Common Stock shall have been increased by a
subdivision or split-up of shares of Common Stock, then, on the
record date fixed for the determination of holders of Common
Stock entitled to receive such dividend or immediately after the
effective date of such subdivision or split-up, as the case may
be, the number of the Shares to be delivered upon exercise of
this Warrant will be appropriately increased so that each Holder
thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately
following such action had this Warrant been exercised immediately
prior thereto, and the Exercise Price will be appropriately
adjusted. The time of occurrence of an event giving rise to an
adjustment made pursuant to this Section 3.1 shall, in the case
of a subdivision or split-up, be the effective date thereof and
shall, in the case of a stock dividend, be the record date
thereof.
3.2 Combination of Stock. If the number of shares of
Common Stock outstanding at any time after the date of the
issuance of this Warrant and before 5:00 p.m., Central Time, on
the last day of the Exercise Period, shall have been decreased by
a combination of the outstanding shares of Common Stock, then,
immediately after the effective date of such combination, the
number of shares of Common Stock to be delivered upon exercise of
this Warrant will be appropriately decreased so that each Holder
thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately
following such action had this Warrant been exercised immediately
prior thereto, and the Exercise Price will be appropriately
adjusted. The time of occurrence of an event giving rise to an
adjustment made pursuant to this Section 3.2 shall be the
effective date thereof.
3.3 Reorganization, etc. If any capital
reorganization of the Company, or any reclassification of the
Common Stock, or any consolidation of the Company with or merger
of the Company with or into any other person or any sale, lease
or other transfer of all or substantially all of the assets of
the Company to any other person (including any individual,
partnership, joint venture, corporation, trust or group thereof),
shall be effected in such a way that the holders of Common Stock
shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, upon exercise
of this Warrant in accordance with Section 1 hereof, each Holder
shall have the right to receive the kind and amount of stock,
securities or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale, lease or other
transfer by a holder of the number of shares of Common Stock that
such Holder would have been entitled to receive upon exercise of
this Warrant pursuant to Section 1 hereof had this Warrant been
exercised immediately before such reorganization,
reclassification, consolidation, merger or sale, lease or other
transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for
in this Section 3. The time of occurrence of an event giving
rise to an adjustment made pursuant to this Section 3.3 shall be
the effective date thereof.
3.4 Special Dividends. If the Company at any time
after the date of issuance of this Warrant and before 5:00 p.m.,
Central Time, on the last day of the Exercise Period shall
distribute to all holders of its Common Stock cash, debt
securities or other assets (including other evidences of
indebtedness), except to the extent paid out of current or
accumulated earnings, the Exercise Price will be adjusted so that
immediately following the date fixed by the Company as the record
date in respect of such issuance it shall equal the price
determined by multiplying the Exercise Price in effect
immediately prior to the close of business on the record date for
the determination of the shareholders entitled to receive such
dividend by a fraction, the numerator of which shall be the
closing sales price per share of the Company's Common Stock, as
reported on The NASDAQ Stock Market on such record date (the
"Closing Price"), less the then fair market value as determined
by the Board of Directors of the Company, whose determination
shall be conclusive, of the portion of the securities or assets
distributed applicable to one share of Common Stock and the
denominator of which shall be such Closing Price. Such
adjustment shall become effective on such record date.
3.5 No Adjustments to Exercise Price. No adjustment
in the Exercise Price in accordance with the provisions of
Sections 3.1, 3.2, 3.3 or 3.4 above need be made if such
adjustment would amount to a change in such Exercise Price of
less than $0.10; provided, however, that the amount by which any
adjustment is not made by reason of the provisions of this
section shall be carried forward and taken into account at the
time of any subsequent adjustment in the Exercise Price.
3.6 Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued to any Holder in connection with
the exercise of this Warrant. Instead of any fractional shares
of Common Stock that would otherwise be issuable to such Holder,
the Company will pay to such Holder a cash adjustment in respect
of such fractional interest in an amount equal to that fractional
interest of the then current Closing Price per share of Common
Stock.
3.7 Definition of Common Stock. For purposes of this
Section 3, the term "Common Stock" shall mean (i) the class of
stock designated as the Common Stock of the Company on the date
hereof, or (ii) any other class of stock resulting from
successive changes or reclassification of such shares consisting
solely of changes in par value, or from par value to no par
value, or from no par value to par value.
ARTICLE IV
MISCELLANEOUS
4.1 Notices. Notices and other communications
provided for herein shall be in writing and shall be deemed to
have been duly made when delivered personally or three (3)
business days following deposit in the United States mails,
certified mail, return receipt requested or one (1) business day
following delivery to a recognized overnight courier service, or
upon transmittal by telecopy, addressed as set forth below.
4.2 Waivers. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power.
The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise
have.
No notice or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in
similar or other circumstances.
4.3 Governing Law. This Warrant shall be construed in
accordance with and governed by the laws of the State of
Delaware.
4.4 Binding Effect. This Warrant shall be binding
upon the Company, and shall inure to the benefit of the Holder
hereof and its successors and assigns.
4.5 Severability. In case any one or more of the
provisions contained in this Warrant shall be invalid, illegal or
unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. The Company and
the Holder hereof shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
4.6 Section Headings. The sections headings used
herein are for convenience of reference only, are not part of
this Warrant and are not to affect the construction of or be
taken into consideration in interpreting this Warrant.
4.7 No Rights as Stockholder. This Warrant shall not
entitle the Holder to any rights as a stockholder of the Company.
4.8 Attorneys' Fees. In any litigation to interpret
or enforce this Warrant, the prevailing party shall be entitled
to recover its reasonable attorneys' fees and costs.
IN WITNESS WHEREOF, Electrosource, Inc. has caused this
Warrant to be executed in its corporate name by one of its
officers thereunto duly authorized, and its corporate seal to be
hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
ELECTROSOURCE, INC.
By: /S/
[Corporate Seal] Michael G. Semmens, President
Attest:
/S/
Audrey T. Dearing, Corporate Secretary
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To Electrosource, Inc.:
The undersigned hereby certifies
that the undersigned is not a U.S. person, within the meaning of
Regulation S, promulgated under the Securities Act of 1933, as
amended, and that the attached Warrant is not being exercised on
behalf of a U.S. person. The undersigned hereby further
certifies that the Warrant is not being exercised in the United
States (as defined in Regulation S) and that the securities
issuable upon exercise of the Warrant are not to be delivered
within the United States (as so defined).
The undersigned hereby
irrevocably elects to exercise the right of purchase represented
by the attached Warrant for, and to purchase
thereunder,__________ shares of Common Stock, as provided for
therein, and tenders herewith payment of the Exercise Price for
such shares in full in the form of cash, money order, certified
or bank cashier's check or wire transfer.
Please issue a certificate or
certificates for such shares of Common Stock in the following
name or names and denominations:
If said number of shares shall
not be all the shares issuable upon exercise of the attached
Warrant, a new Warrant is to be issued in the name of the
undersigned for the balance remaining of such shares less any
fraction of a share paid in cash.
Dated: ____________, 19__
EXHIBIT 4.5
FORM OF WARRANT
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED OR SOLD IN
THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR
TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN
REGULATION S UNDER THE ACT) EXCEPT PURSUANT TO REGISTRATION UNDER
THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND APPLICABLE STATE SECURITIES LAWS. MOREOVER, THIS WARRANT
MAY NOT BE EXERCISED BY OR ON BEHALF OF A U.S. PERSON UNLESS
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
Warrant No. W7-101 Dated: July 27, 1995
WARRANT
To Purchase Shares of Common Stock of
ELECTROSOURCE, INC.
Expiring January 27, 1998
THIS IS TO CERTIFY THAT, for value received, ACM
Advisors, Birmensdorfer Strasse 140, CH08003, Zurich,
Switzerland, organized under the laws of Panama, a non-U.S.A.
jurisdiction, or registered assigns (the "Holder") is entitled to
purchase from Electrosource, Inc., a Delaware corporation (the
"Company"), at any time or from time to time after 10:00 a.m.,
Central Time, on the date hereof and prior to 5:00 p.m. Central
Time, on January 27, 1998 (the "Exercise Period"), at the
Exercise Price (as defined below), one million (1,000,000) shares
(the "Shares") of the Company's common stock, U.S. $0.10 par
value per share (the "Common Stock"), all subject to adjustment
and upon the terms and conditions as hereinafter provided, and is
entitled also to exercise the other appurtenant rights, powers
and privileges hereinafter described. The "Exercise Price" shall
be U.S. $4.00 per share, subject to adjustment as provided
herein.
ARTICLE I
EXERCISE AND CONVERSION OF WARRANTS
2.1 Method of Exercise. To exercise this Warrant
in whole or in part, the Holder shall deliver to the Company,
(a) this Warrant, (b) a written notice, in substantially the form
of the Subscription Notice attached hereto, of such Holder's
election to exercise this Warrant, which notice shall specify the
number of Shares to be purchased, the denominations of the share
certificate or certificates desired and the name or names in
which such certificates are to be registered and (c) payment of
the Exercise Price with respect to such shares. Such payment may
be made, at the option of the Holder, by cash, money order,
certified or bank cashier's check or wire transfer. Each
exercise notice, if delivered by certified mail, shall be deemed
to have been given by the Holder on the date of the postmark
thereon for the purpose of establishing the date of exercise.
The Company shall, as promptly as practicable and in
any event within seven Business Days thereafter, execute and
deliver or cause to be executed and delivered, in accordance with
such notice, a certificate or certificates representing the
Shares, or such portion thereof, as specified in such notice.
The stock certificate or certificates so delivered shall be in
such denominations as may be specified in such notice or, if such
notice shall not specify denominations, shall be in the amount of
the number of Shares for which the Warrant is being exercised,
and shall be issued in the name of the Holder or such other name
or names as shall be designated in such notice. Such certificate
or certificates shall be deemed to have been issued, and such
Holder or any such person so designated to be named therein shall
be deemed for all purposes to have become a holder of record of
such shares, as of the date the aforementioned notice is received
by the Company. If this Warrant shall have been exercised only
in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant
evidencing the rights to purchase the remaining Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical to this Warrant, or, at the request of the Holder,
appropriate notation may be made on this Warrant which shall then
be returned to the Holder. The Company shall pay all expenses,
taxes (if any) and other charges payable in connection with the
preparation, issuance and delivery of stock certificates and new
Warrants, except that, if stock certificates or new Warrants
shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a
result of such transfer shall be paid by the Holder at the time
of delivering the aforementioned notice of exercise or promptly
upon receipt of a written request of the Company for payment.
2.2 Shares to Be Fully Paid and Nonassessable.
The Shares, and any portion thereof, issued upon the exercise of
this Warrant shall be validly issued, fully paid and
nonassessable and free from all preemptive rights of any
stockholder, and from all taxes, liens and charges with respect
to the issue thereof (other than transfer taxes).
2.3 No Fractional Shares to Be Issued. The
Company shall not be required to issue fractions of shares of
Common Stock upon exercise of this Warrant. If any fraction of a
share would, but for this Section, be issuable upon any exercise
of this Warrant, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to such
fraction of Exercise Price per share on the business day
immediately prior to the date of such exercise.
2.4 Reservation; Authorization. Company has
reserved and will keep available for issuance upon exercise of
the Warrants the total number of the Shares deliverable upon
exercise of all Warrants from time to time outstanding. The
issuance of the Shares has been duly and validly authorized and,
when issued and sold in accordance with the Warrants, the Shares
will be duly and validly issued, fully paid and nonassessable.
ARTICLE II
TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANTS
2.5 Ownership of Warrant. The Company may deem
and treat the person in whose name this Warrant is registered as
the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by any person other than the
Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for
registration of transfer as provided in this Article II.
2.6 Transfer of Warrant. The Company shall
maintain books for the registration of transfers of the Warrant,
and transfer of this Warrant and all rights hereunder shall be
registered, in whole or in part, on such books, upon surrender of
this Warrant, together with a written assignment of this Warrant
duly executed by the Holder or his duly authorized agent or
attorney, with (unless the Holder is the original Warrant holder
or an institutional investor) signatures guaranteed by a bank or
trust company or a broker or dealer registered with the National
Association of Securities Dealers, and funds sufficient to pay
any transfer taxes payable upon such transfer. Upon surrender
the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denominations
specified in the instrument of assignment, and this Warrant shall
promptly be cancelled. Notwithstanding the foregoing, a Warrant
may be exercised by a new holder without having a new Warrant
issued. Any transfer of this Warrant pursuant to this Section
2.2 shall be accomplished in accordance with all applicable
federal and state securities laws.
2.7 Division of Warrants. The Holder of this
Warrant may divide this Warrant by providing the Company with a
written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the
holders hereof and thereof or the respective duly authorized
agents or attorneys. Subject to compliance with Section 2.2 as
to any transfer which may be involved in the division, the
Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. Any division or divisions of this
Warrant pursuant to this Section 2.3 shall be accomplished in
accordance with all applicable federal and state securities laws.
2.8 Loss, Theft, Destruction or Mutilation of
Warrants. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any Warrant and,
in the case of any such loss, theft or destruction, upon receipt
of indemnity or security reasonably satisfactory to the Company,
or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver,
in lieu of such lost, stolen, destroyed or mutilated Warrant, a
new Warrant of like tenor and representing the right to purchase
the same aggregate number of shares of Common Stock as provided
for in such lost, stolen, destroyed or mutilated Warrant.
2.9 Expenses of Delivery of Warrants. The
Company shall pay all expenses, taxes (other than transfer taxes)
and other charges payable in connection with the preparation,
issuance and delivery of Warrants and the Shares hereunder.
ARTICLE III
ANTI-DILUTION PROVISIONS
The Exercise Price and the number of the Shares that
may be purchased upon the exercise hereof, will be subject to
change or adjustment as follows:
3.1 Stock Dividends and Stock Splits. If at any time
after the date of the issuance of this Warrant and before 5:00
p.m., Central Time, on the last day of the Exercise Period,
(i) the Company shall fix a record date for the issuance of any
stock dividend payable in shares of Common Stock or (ii) the
number of shares of Common Stock shall have been increased by a
subdivision or split-up of shares of Common Stock, then, on the
record date fixed for the determination of holders of Common
Stock entitled to receive such dividend or immediately after the
effective date of such subdivision or split-up, as the case may
be, the number of the Shares to be delivered upon exercise of
this Warrant will be appropriately increased so that each Holder
thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately
following such action had this Warrant been exercised immediately
prior thereto, and the Exercise Price will be appropriately
adjusted. The time of occurrence of an event giving rise to an
adjustment made pursuant to this Section 3.1 shall, in the case
of a subdivision or split-up, be the effective date thereof and
shall, in the case of a stock dividend, be the record date
thereof.
3.2 Combination of Stock. If the number of shares of
Common Stock outstanding at any time after the date of the
issuance of this Warrant and before 5:00 p.m., Central Time, on
the last day of the Exercise Period, shall have been decreased by
a combination of the outstanding shares of Common Stock, then,
immediately after the effective date of such combination, the
number of shares of Common Stock to be delivered upon exercise of
this Warrant will be appropriately decreased so that each Holder
thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately
following such action had this Warrant been exercised immediately
prior thereto, and the Exercise Price will be appropriately
adjusted. The time of occurrence of an event giving rise to an
adjustment made pursuant to this Section 3.2 shall be the
effective date thereof.
3.3 Reorganization, etc. If any capital
reorganization of the Company, or any reclassification of the
Common Stock, or any consolidation of the Company with or merger
of the Company with or into any other person or any sale, lease
or other transfer of all or substantially all of the assets of
the Company to any other person (including any individual,
partnership, joint venture, corporation, trust or group thereof),
shall be effected in such a way that the holders of Common Stock
shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, upon exercise
of this Warrant in accordance with Section 1 hereof, each Holder
shall have the right to receive the kind and amount of stock,
securities or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale, lease or other
transfer by a holder of the number of shares of Common Stock that
such Holder would have been entitled to receive upon exercise of
this Warrant pursuant to Section 1 hereof had this Warrant been
exercised immediately before such reorganization,
reclassification, consolidation, merger or sale, lease or other
transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for
in this Section 3. The time of occurrence of an event giving
rise to an adjustment made pursuant to this Section 3.3 shall be
the effective date thereof.
3.4 Special Dividends. If the Company at any time
after the date of issuance of this Warrant and before 5:00 p.m.,
Central Time, on the last day of the Exercise Period shall
distribute to all holders of its Common Stock cash, debt
securities or other assets (including other evidences of
indebtedness), except to the extent paid out of current or
accumulated earnings, the Exercise Price will be adjusted so that
immediately following the date fixed by the Company as the record
date in respect of such issuance it shall equal the price
determined by multiplying the Exercise Price in effect
immediately prior to the close of business on the record date for
the determination of the shareholders entitled to receive such
dividend by a fraction, the numerator of which shall be the
closing sales price per share of the Company's Common Stock, as
reported on The NASDAQ Stock Market on such record date (the
"Closing Price"), less the then fair market value as determined
by the Board of Directors of the Company, whose determination
shall be conclusive, of the portion of the securities or assets
distributed applicable to one share of Common Stock and the
denominator of which shall be such Closing Price. Such
adjustment shall become effective on such record date.
3.5 No Adjustments to Exercise Price. No adjustment
in the Exercise Price in accordance with the provisions of
Sections 3.1, 3.2, 3.3 or 3.4 above need be made if such
adjustment would amount to a change in such Exercise Price of
less than $0.10; provided, however, that the amount by which any
adjustment is not made by reason of the provisions of this
section shall be carried forward and taken into account at the
time of any subsequent adjustment in the Exercise Price.
3.6 Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued to any Holder in connection with
the exercise of this Warrant. Instead of any fractional shares
of Common Stock that would otherwise be issuable to such Holder,
the Company will pay to such Holder a cash adjustment in respect
of such fractional interest in an amount equal to that fractional
interest of the then current Closing Price per share of Common
Stock.
3.7 Definition of Common Stock. For purposes of this
Section 3, the term "Common Stock" shall mean (i) the class of
stock designated as the Common Stock of the Company on the date
hereof, or (ii) any other class of stock resulting from
successive changes or reclassification of such shares consisting
solely of changes in par value, or from par value to no par
value, or from no par value to par value.
ARTICLE IV
MISCELLANEOUS
4.1 Notices. Notices and other communications
provided for herein shall be in writing and shall be deemed to
have been duly made when delivered personally or three (3)
business days following deposit in the United States mails,
certified mail, return receipt requested or one (1) business day
following delivery to a recognized overnight courier service, or
upon transmittal by telecopy, addressed as set forth below.
4.2 Waivers. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power.
The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise
have.
No notice or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in
similar or other circumstances.
4.3 Governing Law. This Warrant shall be construed in
accordance with and governed by the laws of the State of
Delaware.
4.4 Binding Effect. This Warrant shall be binding
upon the Company, and shall inure to the benefit of the Holder
hereof and its successors and assigns.
4.5 Severability. In case any one or more of the
provisions contained in this Warrant shall be invalid, illegal or
unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. The Company and
the Holder hereof shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
4.6 Section Headings. The sections headings used
herein are for convenience of reference only, are not part of
this Warrant and are not to affect the construction of or be
taken into consideration in interpreting this Warrant.
4.7 No Rights as Stockholder. This Warrant shall not
entitle the Holder to any rights as a stockholder of the Company.
4.8 Attorneys' Fees. In any litigation to interpret
or enforce this Warrant, the prevailing party shall be entitled
to recover its reasonable attorneys' fees and costs.
IN WITNESS WHEREOF, Electrosource, Inc. has caused this
Warrant to be executed in its corporate name by one of its
officers thereunto duly authorized, and its corporate seal to be
hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
ELECTROSOURCE, INC.
By:
[Corporate Seal]
Attest:
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To Electrosource, Inc.:
The undersigned hereby certifies
that the undersigned is not a U.S. person, within the meaning of
Regulation S, promulgated under the Securities Act of 1933, as
amended, and that the attached Warrant is not being exercised on
behalf of a U.S. person. The undersigned hereby further
certifies that the Warrant is not being exercised in the United
States (as defined in Regulation S) and that the securities
issuable upon exercise of the Warrant are not to be delivered
within the United States (as so defined).
The undersigned hereby
irrevocably elects to exercise the right of purchase represented
by the attached Warrant for, and to purchase
thereunder,__________ shares of Common Stock, as provided for
therein, and tenders herewith payment of the Exercise Price for
such shares in full in the form of cash, money order, certified
or bank cashier's check or wire transfer.
Please issue a certificate or
certificates for such shares of Common Stock in the following
name or names and denominations:
If said number of shares shall
not be all the shares issuable upon exercise of the attached
Warrant, a new Warrant is to be issued in the name of the
undersigned for the balance remaining of such shares less any
fraction of a share paid in cash.
Dated: ____________, 19__
EXHIBIT 4.6
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED OR SOLD IN
THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR
TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN
REGULATION S UNDER THE ACT) EXCEPT PURSUANT TO REGISTRATION UNDER
THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND APPLICABLE STATE SECURITIES LAWS. MOREOVER, THIS WARRANT
MAY NOT BE EXERCISED BY OR ON BEHALF OF A U.S. PERSON UNLESS
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
Warrant No. W8-101 Dated: July 27, 1995
WARRANT
To Purchase Shares of Common Stock of
ELECTROSOURCE, INC.
Expiring January 27, 1998
THIS IS TO CERTIFY THAT, for value received, ACM
Advisors, Birmensdorfer Strasse 140, CH08003, Zurich,
Switzerland, organized under the laws of Panama, a non-U.S.A.
jurisdiction, or registered assigns (the "Holder") is entitled to
purchase from Electrosource, Inc., a Delaware corporation (the
"Company"), at any time or from time to time after 10:00 a.m.,
Central Time, on the date hereof and prior to 5:00 p.m. Central
Time, on January 27, 1998 (the "Exercise Period"), at the
Exercise Price (as defined below), one million (1,000,000) shares
(the "Shares") of the Company's common stock, U.S. $0.10 par
value per share (the "Common Stock"), all subject to adjustment
and upon the terms and conditions as hereinafter provided, and is
entitled also to exercise the other appurtenant rights, powers
and privileges hereinafter described. The "Exercise Price" shall
be U.S. $3.00 per share, subject to adjustment as provided
herein.
ARTICLE I
EXERCISE AND CONVERSION OF WARRANTS
2.1 Method of Exercise. To exercise this Warrant
in whole or in part, the Holder shall deliver to the Company,
(a) this Warrant, (b) a written notice, in substantially the form
of the Subscription Notice attached hereto, of such Holder's
election to exercise this Warrant, which notice shall specify the
number of Shares to be purchased, the denominations of the share
certificate or certificates desired and the name or names in
which such certificates are to be registered and (c) payment of
the Exercise Price with respect to such shares. Such payment may
be made, at the option of the Holder, by cash, money order,
certified or bank cashier's check or wire transfer. Each
exercise notice, if delivered by certified mail, shall be deemed
to have been given by the Holder on the date of the postmark
thereon for the purpose of establishing the date of exercise.
The Company shall, as promptly as practicable and in
any event within seven Business Days thereafter, execute and
deliver or cause to be executed and delivered, in accordance with
such notice, a certificate or certificates representing the
Shares, or such portion thereof, as specified in such notice.
The stock certificate or certificates so delivered shall be in
such denominations as may be specified in such notice or, if such
notice shall not specify denominations, shall be in the amount of
the number of Shares for which the Warrant is being exercised,
and shall be issued in the name of the Holder or such other name
or names as shall be designated in such notice. Such certificate
or certificates shall be deemed to have been issued, and such
Holder or any such person so designated to be named therein shall
be deemed for all purposes to have become a holder of record of
such shares, as of the date the aforementioned notice is received
by the Company. If this Warrant shall have been exercised only
in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant
evidencing the rights to purchase the remaining Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical to this Warrant, or, at the request of the Holder,
appropriate notation may be made on this Warrant which shall then
be returned to the Holder. The Company shall pay all expenses,
taxes (if any) and other charges payable in connection with the
preparation, issuance and delivery of stock certificates and new
Warrants, except that, if stock certificates or new Warrants
shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a
result of such transfer shall be paid by the Holder at the time
of delivering the aforementioned notice of exercise or promptly
upon receipt of a written request of the Company for payment.
2.2 Shares to Be Fully Paid and Nonassessable.
The Shares, and any portion thereof, issued upon the exercise of
this Warrant shall be validly issued, fully paid and
nonassessable and free from all preemptive rights of any
stockholder, and from all taxes, liens and charges with respect
to the issue thereof (other than transfer taxes).
2.3 No Fractional Shares to Be Issued. The
Company shall not be required to issue fractions of shares of
Common Stock upon exercise of this Warrant. If any fraction of a
share would, but for this Section, be issuable upon any exercise
of this Warrant, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to such
fraction of Exercise Price per share on the business day
immediately prior to the date of such exercise.
2.4 Reservation; Authorization. Company has
reserved and will keep available for issuance upon exercise of
the Warrants the total number of the Shares deliverable upon
exercise of all Warrants from time to time outstanding. The
issuance of the Shares has been duly and validly authorized and,
when issued and sold in accordance with the Warrants, the Shares
will be duly and validly issued, fully paid and nonassessable.
ARTICLE II
TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANTS
2.5 Ownership of Warrant. The Company may deem
and treat the person in whose name this Warrant is registered as
the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by any person other than the
Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for
registration of transfer as provided in this Article II.
2.6 Transfer of Warrant. The Company shall
maintain books for the registration of transfers of the Warrant,
and transfer of this Warrant and all rights hereunder shall be
registered, in whole or in part, on such books, upon surrender of
this Warrant, together with a written assignment of this Warrant
duly executed by the Holder or his duly authorized agent or
attorney, with (unless the Holder is the original Warrant holder
or an institutional investor) signatures guaranteed by a bank or
trust company or a broker or dealer registered with the National
Association of Securities Dealers, and funds sufficient to pay
any transfer taxes payable upon such transfer. Upon surrender
the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denominations
specified in the instrument of assignment, and this Warrant shall
promptly be cancelled. Notwithstanding the foregoing, a Warrant
may be exercised by a new holder without having a new Warrant
issued. Any transfer of this Warrant pursuant to this Section
2.2 shall be accomplished in accordance with all applicable
federal and state securities laws.
2.7 Division of Warrants. The Holder of this
Warrant may divide this Warrant by providing the Company with a
written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the
holders hereof and thereof or the respective duly authorized
agents or attorneys. Subject to compliance with Section 2.2 as
to any transfer which may be involved in the division, the
Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. Any division or divisions of this
Warrant pursuant to this Section 2.3 shall be accomplished in
accordance with all applicable federal and state securities laws.
2.8 Loss, Theft, Destruction or Mutilation of
Warrants. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any Warrant and,
in the case of any such loss, theft or destruction, upon receipt
of indemnity or security reasonably satisfactory to the Company,
or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver,
in lieu of such lost, stolen, destroyed or mutilated Warrant, a
new Warrant of like tenor and representing the right to purchase
the same aggregate number of shares of Common Stock as provided
for in such lost, stolen, destroyed or mutilated Warrant.
2.9 Expenses of Delivery of Warrants. The
Company shall pay all expenses, taxes (other than transfer taxes)
and other charges payable in connection with the preparation,
issuance and delivery of Warrants and the Shares hereunder.
ARTICLE III
ANTI-DILUTION PROVISIONS
The Exercise Price and the number of the Shares that
may be purchased upon the exercise hereof, will be subject to
change or adjustment as follows:
3.1 Stock Dividends and Stock Splits. If at any time
after the date of the issuance of this Warrant and before 5:00
p.m., Central Time, on the last day of the Exercise Period,
(i) the Company shall fix a record date for the issuance of any
stock dividend payable in shares of Common Stock or (ii) the
number of shares of Common Stock shall have been increased by a
subdivision or split-up of shares of Common Stock, then, on the
record date fixed for the determination of holders of Common
Stock entitled to receive such dividend or immediately after the
effective date of such subdivision or split-up, as the case may
be, the number of the Shares to be delivered upon exercise of
this Warrant will be appropriately increased so that each Holder
thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately
following such action had this Warrant been exercised immediately
prior thereto, and the Exercise Price will be appropriately
adjusted. The time of occurrence of an event giving rise to an
adjustment made pursuant to this Section 3.1 shall, in the case
of a subdivision or split-up, be the effective date thereof and
shall, in the case of a stock dividend, be the record date
thereof.
3.2 Combination of Stock. If the number of shares of
Common Stock outstanding at any time after the date of the
issuance of this Warrant and before 5:00 p.m., Central Time, on
the last day of the Exercise Period, shall have been decreased by
a combination of the outstanding shares of Common Stock, then,
immediately after the effective date of such combination, the
number of shares of Common Stock to be delivered upon exercise of
this Warrant will be appropriately decreased so that each Holder
thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately
following such action had this Warrant been exercised immediately
prior thereto, and the Exercise Price will be appropriately
adjusted. The time of occurrence of an event giving rise to an
adjustment made pursuant to this Section 3.2 shall be the
effective date thereof.
3.3 Reorganization, etc. If any capital
reorganization of the Company, or any reclassification of the
Common Stock, or any consolidation of the Company with or merger
of the Company with or into any other person or any sale, lease
or other transfer of all or substantially all of the assets of
the Company to any other person (including any individual,
partnership, joint venture, corporation, trust or group thereof),
shall be effected in such a way that the holders of Common Stock
shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, upon exercise
of this Warrant in accordance with Section 1 hereof, each Holder
shall have the right to receive the kind and amount of stock,
securities or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale, lease or other
transfer by a holder of the number of shares of Common Stock that
such Holder would have been entitled to receive upon exercise of
this Warrant pursuant to Section 1 hereof had this Warrant been
exercised immediately before such reorganization,
reclassification, consolidation, merger or sale, lease or other
transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for
in this Section 3. The time of occurrence of an event giving
rise to an adjustment made pursuant to this Section 3.3 shall be
the effective date thereof.
3.4 Special Dividends. If the Company at any time
after the date of issuance of this Warrant and before 5:00 p.m.,
Central Time, on the last day of the Exercise Period shall
distribute to all holders of its Common Stock cash, debt
securities or other assets (including other evidences of
indebtedness), except to the extent paid out of current or
accumulated earnings, the Exercise Price will be adjusted so that
immediately following the date fixed by the Company as the record
date in respect of such issuance it shall equal the price
determined by multiplying the Exercise Price in effect
immediately prior to the close of business on the record date for
the determination of the shareholders entitled to receive such
dividend by a fraction, the numerator of which shall be the
closing sales price per share of the Company's Common Stock, as
reported on The NASDAQ Stock Market on such record date (the
"Closing Price"), less the then fair market value as determined
by the Board of Directors of the Company, whose determination
shall be conclusive, of the portion of the securities or assets
distributed applicable to one share of Common Stock and the
denominator of which shall be such Closing Price. Such
adjustment shall become effective on such record date.
3.5 No Adjustments to Exercise Price. No adjustment
in the Exercise Price in accordance with the provisions of
Sections 3.1, 3.2, 3.3 or 3.4 above need be made if such
adjustment would amount to a change in such Exercise Price of
less than $0.10; provided, however, that the amount by which any
adjustment is not made by reason of the provisions of this
section shall be carried forward and taken into account at the
time of any subsequent adjustment in the Exercise Price.
3.6 Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued to any Holder in connection with
the exercise of this Warrant. Instead of any fractional shares
of Common Stock that would otherwise be issuable to such Holder,
the Company will pay to such Holder a cash adjustment in respect
of such fractional interest in an amount equal to that fractional
interest of the then current Closing Price per share of Common
Stock.
3.7 Definition of Common Stock. For purposes of this
Section 3, the term "Common Stock" shall mean (i) the class of
stock designated as the Common Stock of the Company on the date
hereof, or (ii) any other class of stock resulting from
successive changes or reclassification of such shares consisting
solely of changes in par value, or from par value to no par
value, or from no par value to par value.
ARTICLE IV
MISCELLANEOUS
4.1 Notices. Notices and other communications
provided for herein shall be in writing and shall be deemed to
have been duly made when delivered personally or three (3)
business days following deposit in the United States mails,
certified mail, return receipt requested or one (1) business day
following delivery to a recognized overnight courier service, or
upon transmittal by telecopy, addressed as set forth below.
4.2 Waivers. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power.
The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise
have.
No notice or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in
similar or other circumstances.
4.3 Governing Law. This Warrant shall be construed in
accordance with and governed by the laws of the State of
Delaware.
4.4 Binding Effect. This Warrant shall be binding
upon the Company, and shall inure to the benefit of the Holder
hereof and its successors and assigns.
4.5 Severability. In case any one or more of the
provisions contained in this Warrant shall be invalid, illegal or
unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. The Company and
the Holder hereof shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
4.6 Section Headings. The sections headings used
herein are for convenience of reference only, are not part of
this Warrant and are not to affect the construction of or be
taken into consideration in interpreting this Warrant.
4.7 No Rights as Stockholder. This Warrant shall not
entitle the Holder to any rights as a stockholder of the Company.
4.8 Attorneys' Fees. In any litigation to interpret
or enforce this Warrant, the prevailing party shall be entitled
to recover its reasonable attorneys' fees and costs.
IN WITNESS WHEREOF, Electrosource, Inc. has caused this
Warrant to be executed in its corporate name by one of its
officers thereunto duly authorized, and its corporate seal to be
hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
ELECTROSOURCE, INC.
By: /S/
[Corporate Seal] Michael G. Semmens, President
Attest:
/S/
Audrey T. Dearing, Corporate Secretary
EXHIBIT 4.7
July 25, 1995
Electrosource, Inc.
3800 B Drossett Drive
Austin, Texas 78744
Attention:
Gentlemen:
This letter (the "Letter Agreement") will confirm the
understanding and agreement between Rosehouse Ltd. ("Rosehouse")
and Electrosource, Inc. (the "Company") as follows:
Engagement. The Company hereby engages Rosehouse as
the Company's exclusive agent on a "best efforts" basis in
connection with the proposed offshore offering of its 10%
Convertible Debentures Due July 1996 (the "Debentures") having an
aggregate original principal amount of U.S. $3,000,000 and
warrants (the "Warrants") to purchase an aggregate of 2,000,000
shares of the Company's common stock, $0.10 par value per share
(the "Common Stock"). Rosehouse hereby accepts the engagement
upon the terms and conditions set forth in this agreement.
Offers and sales of the Debentures and the Warrants
will be made in accordance with the Regulation S safe harbor
exemption from registration ("Regulation S") under the federal
Securities Act of 1933, as amended (the "Act").
Investors will be persons who are not U.S. Persons (as
defined in Regulation S). Rosehouse anticipates commencement of
the offering on the date hereof and a closing on or prior to July
26, 1995. Rosehouse will work with the Company in identifying
potential eligible investors and will use Rosehouse's best
efforts to assist in arranging sales of the Debentures to
qualified foreign investors.
The Company will cooperate with Rosehouse in connection
with, and shall make available to Rosehouse, such documents and
other information as Rosehouse shall reasonably require to
perform its obligations hereunder. Any such information
designated by the Company as confidential will be held in
confidence by Rosehouse, except as may be necessary to disclose
pursuant to subpoena or other judicial or administrative order or
process or as may be appropriate in connection with the offering
to prospective investors.
The Company may in its discretion postpone, modify or
abandon the offering prior to closing. Rosehouse may decline to
participate in the offering if it reasonably determines that the
offering has become impractical. The Company will not make any
commitment with any other securities broker/dealer to participate
in or conduct this offering without Rosehouse's prior written
consent. With the prior consent of the Company and at no cost to
the Company, Rosehouse has the right to retain foreign
representatives to act on its behalf for offers to non-U.S.
Persons (as defined in Regulation S).
Compensation.
Fees. Rosehouse will be paid in cash at the
closing a fee of ten percent (10%) of the original principal
amount of all Debentures sold in the offering. Rosehouse shall
pay for all of its out-of-pocket expenses relating to the
offering. For a period of 180 days after the final closing,
Rosehouse shall have a right of first refusal with respect to any
subsequent offering by the Company pursuant to Regulation S.
Warrant. As compensation for its services in
connection with the offering, Rosehouse will receive a warrant
(the "Rosehouse Warrant") to purchase 250,000 shares of the
Company's Common Stock, substantially in the form attached hereto
as Exhibit A; provided, Debentures in an aggregate principal
amount of $3,000,000 are sold.
Representations and Warranties of the Company. The
representations and warranties to be made by the Company and
contained in paragraphs 3(a), (b), (c), (d), (e), (f), (g) and
(h) of those certain Offshore Securities Subscription Agreements
between the Company and each of the "Buyers" of the Debentures
named therein, dated as of July 1995 (the "Subscription
Agreements"), the representations and warranties to be made by
the Company in that certain Letter Agreement between the Company
and Adar Equities, dated as of July 1995, are incorporated by
reference as if fully set forth herein and Rosehouse is deemed to
be a third party beneficiary of all such representations and
warranties.
Representations and Warranties of Rosehouse. Rosehouse
represents, warrants and agrees that:
(a) Rosehouse has not conducted and shall not
conduct any "directed selling efforts" as that term is defined in
Rule 902(b) of Regulation S, nor has Rosehouse conducted any
general solicitation relating to the offer and sale of any
securities in the United States or elsewhere; and
(b) This Agreement has been duly authorized,
validly executed and delivered on behalf of Rosehouse and
constitutes a valid and binding agreement in accordance with its
terms.
(c) To the best of Rosehouse's knowledge after
reasonable inquiry, the Buyers who are parties to the
Subscription Agreements are not U.S. Persons for the purposes of
Regulation S.
(d) Rosehouse represents and warrants to, and
covenants and agrees with, the Company as follows:
(i) Rosehouse is not organized
under the laws of any jurisdiction within the
United States, was not formed by a U.S. Person (as
defined in Section 902(o) of Regulation S) for the
purpose of investing in Regulation S securities
and is not otherwise a U.S. Person. Rosehouse is
not, and on the closing date will not be, an
affiliate of Seller;
(ii) At the time the buy order for
the Rosehouse Warrant was originated, Rosehouse
was outside the United States and is outside of
the United States as of the date of the execution
and delivery of this Letter Agreement;
(iii) No offer to purchase the
Rosehouse Warrant or the Common Stock issuable
upon exercise of the Rosehouse Warrant
(collectively, the "Securities"), was made by
Rosehouse in the United States;
(iv) Rosehouse is purchasing the
Securities for its own account or for the account
of persons (who are not U.S. Persons), each of
whom has entered into an offshore securities
subscription agreement with Rosehouse in a form
substantially similar to the Subscription
Agreements, and Rosehouse is qualified to purchase
the Securities under the laws of its residence,
and the offer and sale of the Securities will not
violate the securities or other laws of such
jurisdiction;
(v) All offers and sales of any of
the Securities, the Debentures or the Warrants by
Rosehouse prior to the end of the Restricted
Period (as hereinafter defined) shall be made in
compliance with any applicable securities laws of
any applicable jurisdiction and in accordance with
Rule 903 or 904, as applicable, of Regulation S or
pursuant to registration of securities under the
1933 Act or pursuant to an exemption from
registration. In any case, none of the
Securities, the Debentures or the Warrants have
been or will be offered or sold by Rosehouse to,
or for the account or benefit of, a U.S. Person or
within the United States until after the end of
the forty (40) day period commencing on the later
of the date of final closing of the offering of
the Securities, or the date of the first offer of
the Securities to persons other than distributors
(the "Restricted Period"), as certified by
Rosehouse to Seller;
(vi) The transactions contemplated
by this Agreement (a) have not been and will not
be pre-arranged by Rosehouse with a purchaser
located in the United States or a purchaser which
is a U.S. Person, and (b) are not and will not be
part of a plan or scheme by Rosehouse to evade the
registration provisions of the 1933 Act;
(vii) Rosehouse understands
that the Securities are not registered under the
1933 Act and are being offered and sold to it in
reliance on specific exclusions from the
registration requirements of Federal and State
securities laws, and that Seller is relying in
part upon the truth and accuracy of the
representations, warranties, agreements,
acknowledgements and understandings of Rosehouse
set forth herein in order to determine the
applicability of such exclusions and the
suitability of Rosehouse and any purchaser from
Rosehouse to acquire the Securities and to
determine the suitability of any investor
identified by Rosehouse to acquire the Debentures
and the Warrants;
(viii) Rosehouse shall take all
reasonable steps to ensure its compliance with
Regulation S and shall promptly send to each
purchaser who acts as a distributor, dealer or a
person receiving a selling concession, fee or
other remuneration in respect of any of the
Securities, the Debentures or the Warrants, who
purchases prior to the expiration of the
Restricted Period referred to in subparagraph (v)
above, a confirmation or other notice to the
purchaser stating that the purchaser is subject to
the same restrictions on offers and sales as
Rosehouse pursuant to Section 903(c)(2)(iv) of
Regulation S;
(ix) The execution and delivery of
this Agreement and the consummation of the
purchase of the Securities, and the transactions
contemplated by this Agreement do not and will not
conflict with or result in a breach by Rosehouse
of any of the terms or provisions of, or
constitute a default under, the articles of
incorporation or by-laws (or similar constitutive
documents) of Rosehouse or any indenture,
mortgage, deed of trust, or other material
agreement or instrument to which Rosehouse is a
party or by which it or any of its properties or
assets are bound, or any existing applicable law,
rule or regulation of the United States or any
State thereof or any applicable decree, judgment
or order of any Federal or State court, Federal or
State regulatory body, administrative agency or
other United States governmental body having
jurisdiction over Rosehouse or any of its
properties or assets;
(x) All invitations, offers and
sales of or in respect of, any of the Securities,
by Rosehouse and any distribution by Rosehouse of
any documents relating to any offer by it of any
of the Securities will be in compliance with
applicable laws and regulations and will be made
in such a manner that no prospectus need be filed
and no other filing need be made by Seller with
any regulatory authority or stock exchange in any
country or any political sub-division of any
country;
(xi) Rosehouse will not make any
offer or sale of any of the Securities by any
means which would not comply with the laws and
regulations of the territory in which such offer
or sale takes place or to which such offer or sale
is subject or which would in connection with any
such offer or sale impose upon Seller any
obligation to satisfy any public filing or
registration requirement or provide or publish any
information of any kind whatsoever or otherwise
undertake or become obliged to do any act; and
(xii) Neither Rosehouse nor any
of its affiliates has entered, has the intention
of entering, or will during the Restricted Period
enter into any put option, short position or other
similar instrument or position with respect to any
of the Securities, the Debentures or the Warrants
or securities of the same class as the Securities,
the Debentures or the Warrants.
Opinion of Counsel. The Company will, at the closing,
furnish Rosehouse with an opinion of its counsel substantially in
the form attached hereto as Exhibit B.
Notices. All notices or communications hereunder,
except as otherwise provided by notice, will be in writing and
mailed or delivered as follows:
If to Rosehouse:
Rosehouse Ltd.
306 Commerce Building
1 Chancery Lane
Hamilton HM 12 Bermuda
Attention: Richard Prichard-Jones
If to the Company:
Electrosource, Inc.
3800 B Drossett Drive
Austin, Texas 78744
Attention: President
Miscellaneous. This Letter Agreement, together with
Exhibits A and B, contains our entire agreement concerning the
proposed offering and supersedes any prior understanding and
agreements. It will be governed by Bermuda law. Any amendment
hereto or any waiver of any right or obligation hereunder must be
in writing and signed by the party to be charged.
Please confirm that the foregoing correctly and
completely sets forth our understanding, by signing and returning
to us the enclosed duplicate of this Letter Agreement.
Sincerely,
Rosehouse Ltd.
By: /S/
Richard Prichard-Jones
Title: President
Agreed and accepted this 25th day
of July, 1995
Electrosource, Inc.
By: /S/
Michael G. Semmens
Title: President
EXHIBIT 4.8
July 27, 1995
Electrosource, Inc.
3800 B Drossett Drive
Austin, Texas 78744
Attention:
Gentlemen:
This letter (the "Letter Agreement") will confirm the
understanding and agreement between ACM Advisors, organized under
the laws of Panama, with its principal executive offices located
at Birmensdorfer Strasse 140, CH08003, Zurich, Switzerland
("ACM") and Electrosource, Inc., a corporation organized under
the laws of the state of Delaware, with its principal executive
offices located at 3800 B Drossett Drive, Austin, Texas 78744
(the "Company") as follows:
This Letter Agreement is executed in reliance upon the
exemption from registration afforded by Regulation S
("Regulation S") as promulgated by the Securities and Exchange
Commission ("SEC"), under the Securities Act of 1933, as amended.
Capitalized terms used herein and not defined shall have the
meanings given to them in Regulation S.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN
REGULATION S OF THE 1933 ACT) OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S
OF THE 1933 ACT) EXCEPT PURSUANT TO REGISTRATION UNDER
OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE 1933 ACT.
1. Engagement; Purchase of Warrants;
Distribution.
(a) Engagement. The Company hereby
engages ACM as the Company's distributor in connection with the
offshore offering of its warrants (the "Warrants") to purchase an
aggregate of 2,000,000 shares of the Company's common stock,
$0.10 par value per share (the "Common Stock"), substantially in
the forms attached as Exhibits B and C hereto. ACM hereby
accepts the engagement upon the terms and conditions set forth in
this agreement.
(b)
(b) Purchase of Warrants. ACM hereby
agrees to purchase the Warrants for U.S. $1.00 and other good and
valuable consideration.
(c) Offshore Distribution. As further
consideration for the Warrants, ACM hereby agrees to assist the
Company in distributing the Warrants offshore under the following
conditions:
(i) Offers and sales of the
Warrants by ACM will be made in accordance with
the Regulation S safe harbor exemption from
registration ("Regulation S") under the federal
Securities Act of 1933, as amended (the "Act").
(ii) Investors will be persons who
are not U.S. Persons (as defined in Regulation S).
ACM anticipates commencement of the offering on
the date hereof and a closing on July 26, 1995, or
such later date as is mutually agreed to by the
parties hereto.
(iii) The Company will
cooperate with ACM in connection with, and shall
make available to ACM, such documents and other
information as ACM shall reasonably require to
perform its obligations hereunder. Any such
information designated by the Company as
confidential will be held in confidence by ACM,
except as may be necessary to disclose pursuant to
subpoena or other judicial or administrative order
or process or as may be appropriate in connection
with the offering to prospective investors.
(iv) The Company may in its
discretion postpone, modify or abandon the
offering prior to closing. ACM may decline to
participate in the offering if it reasonably
determines that the offering has become
impractical.
2. ACM Representations; Access to Information.
(a) Offshore Transaction. In
connection with the purchase and sale of the Warrants, ACM
represents and warrants to, and covenants and agrees with, the
Company as follows:
(i) ACM is not a natural person
and is not organized under the laws of any
jurisdiction within the United States, was not
formed by a U.S. Person (as defined in Section
902(o) of Regulation S) for the purpose of
investing in Regulation S securities and is not
otherwise a U.S. Person. ACM is not, and on the
closing date will not be, an affiliate of the
Company;
(ii) At the time the buy order was
originated, ACM was outside the United States and
is outside of the United States as of the date of
the execution and delivery of this Agreement;
(iii) No offer to purchase the
Warrants, or the Common Stock issuable upon
exercise of the Warrants (collectively, the
"Securities"), was made by ACM in the United
States;
(iv) ACM is purchasing the
Securities for its own account and ACM is
qualified to purchase the Securities under the
laws of its jurisdiction of residence, and the
offer and sale of the Securities will not violate
the securities or other laws of such jurisdiction;
(v) All offers and sales of any of
the Securities by ACM prior to the end of the
Restricted Period (as hereinafter defined) shall
be made in compliance with any applicable
securities laws of any applicable jurisdiction and
in accordance with Rule 903 or 904, as applicable,
of Regulation S or pursuant to registration of
securities under the 1933 Act or pursuant to an
exemption from registration. In any case, none of
the Securities have been and will be offered or
sold by ACM to, or for the account or benefit of,
a U.S. Person or within the United States until
after the end of the forty (40) day period
commencing on the later of (x) the date of closing
of the offering of the Securities (or if later,
the date on which the last closing of the sale of
Warrants takes place, pursuant to that certain
letter agreement dated July , 1995 between
Rosehouse Ltd. and the Company) or (y) the date of
the first offer of the Securities to persons other
than distributors (the "Restricted Period"), as
certified by ACM to the Company;
(vi) The transactions contemplated
by this Agreement (a) have not been and will not
be pre-arranged by ACM with a purchaser located in
the United States or a purchaser which is a U.S.
Person, and (b) are not and will not be part of a
plan or scheme by ACM to evade the registration
provisions of the 1933 Act;
(vii) ACM understands that the
Securities are not registered under the 1933 Act
and are being offered and sold to it in reliance
on specific exclusions from the registration
requirements of Federal and State securities laws,
and that the Company is relying upon the truth and
accuracy of the representations, warranties,
agreements, acknowledgements and understandings of
ACM set forth herein in order to determine the
applicability of such exclusions and the
suitability of ACM and any purchaser from ACM to
acquire the Securities;
(viii) ACM shall take all
reasonable steps to ensure its compliance with
Regulation S and shall promptly send to each
purchaser who acts as a distributor, dealer or a
person receiving a selling concession, fee or
other remuneration in respect of any of the
Securities, who purchases prior to the expiration
of the Restricted Period referred to in
subparagraph (v) above, a confirmation or other
notice to the purchaser stating that the purchaser
is subject to the same restrictions on offers and
sales as ACM pursuant to Section 903(c)(2)(iv) of
Regulation S;
(ix) ACM has not conducted and
shall not conduct any "directed selling efforts"
as that term is defined in Rule 902(b) of
Regulation S, nor has ACM conducted any general
solicitation relating to the offer and sale of any
of the Securities in the United States or
elsewhere;
(x) This Agreement has been duly
authorized, validly executed and delivered on
behalf of ACM and is a valid and binding agreement
in accordance with its terms, subject to general
principles of equity and to bankruptcy or other
laws affecting the enforcement of creditors'
rights generally;
(xi) The execution and delivery of
this Agreement and the consummation of the
purchase of the Securities, and the transactions
contemplated by this Agreement do not and will not
conflict with or result in a breach by ACM of any
of the terms or provisions of, or constitute a
default under, the articles of incorporation or by-
laws (or similar constitutive documents) of ACM or
any indenture, mortgage, deed of trust, or other
material agreement or instrument to which ACM is a
party or by which it or any of its properties or
assets are bound, or any existing applicable law,
rule or regulation of the United States or any
State thereof or any applicable decree, judgment
or order of any Federal or State court, Federal or
State regulatory body, administrative agency or
other United States governmental body having
jurisdiction over ACM or any of its properties or
assets;
(xii) All invitations, offers
and sales of or in respect of, any of the
Securities, by ACM and any distribution by ACM of
any documents relating to any offer by it of any
of the Securities will be in compliance with
applicable laws and regulations and will be made
in such a manner that no prospectus need be filed
and no other filing need be made by the Company
with any regulatory authority or stock exchange in
any country or any political sub-division of any
country;
(xiii) ACM will not make any
offer or sale of any of the Securities by any
means which would not comply with the laws and
regulations of the territory in which such offer
or sale takes place or to which such offer or sale
is subject or which would in connection with any
such offer or sale impose upon the Company any
obligation to satisfy any public filing or
registration requirement or provide or publish any
information of any kind whatsoever or otherwise
undertake or become obliged to do any act; and
(xiv) Neither ACM nor any of
its affiliates has entered, has the intention of
entering, or will during the Restricted Period
enter or into any put option, short position or
other similar instrument or position with respect
to any of the Securities or securities of the same
class as the Securities.
(b) No Government Recommendation or
Approval. ACM understands that no Federal or State or foreign
government agency has passed on or made any recommendation or
endorsement of the Securities.
(c) Current Public Information. ACM
acknowledges that it and its advisors, if any, have been
furnished with all materials relating to the business, finances
and operations of the Company and all materials relating to the
offer and sale of the Securities which have been requested by
ACM. ACM further acknowledges that it and its advisors, if any,
have received complete and satisfactory answers to such
inquiries.
(d) ACM's Sophistication. ACM
acknowledges that the purchase of the Securities involves a high
degree of risk, including the total loss of ACM's investment.
ACM has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of
purchasing the Securities.
(e) Tax Status. ACM is not a "10-
percent Shareholder" (as defined in Section 871(h)(3)(B) of the
U.S. Internal Revenue Code) of the Company.
3. Company Representations.
(a) Reporting Company Status. The
Company is a "Reporting Issuer" as defined by Rule 902 of
Regulation S. The Company has registered the Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Common Stock is listed and
trades on The NASDAQ Stock Market. The Company has filed all
material required to be filed pursuant to all reporting
obligations under either Section 13(a) or 15(d) of the Exchange
Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the Securities (or for such
shorter period that the Company has been required to file such
material).
(b) Current Public Information. The
Company has furnished ACM with copies of its most recent reports
filed under the Exchange Act referred to in Section 2(c) above,
and other publicly available documents.
(c) Offshore Transaction. The Company
has not offered any of the Securities to any person in the United
States, any identifiable groups of U.S. citizens abroad, or to
any U.S. Person, as such terms are used in Regulation S.
(i) At the time the buy order was
originated, the Company and/or its agents
reasonably believe ACM was outside of the United
States and was not a U.S. person, based on the
representations of ACM.
(ii) the Company and/or its agents
reasonably believe that the transaction has not
been pre-arranged with a buyer in the United
States, based on the representations of ACM.
(iii) No offer to buy or sell
the Securities was or will be made by the Company
to any person in the United States.
(iv) The sale of the Securities by
the Company pursuant to this Agreement will be
made in accordance with the provisions and
requirements of Regulation S, provided that the
representations and warranties of ACM in Section
2(a) hereof are true and correct.
(v) The transactions contemplated
by this Agreement (a) have not been
and will not be pre-arranged by the
Company with apurchaser located in
the United States or a purchaser
which is a U.S. Person, and (b) are
not and will not be part of a plan
or scheme by the Company to evade
the registration provisions of the
1933 Act.
(d) No Directed Selling Efforts. In
regard to this transaction, the Company has not conducted any
"directed selling efforts" as that term is defined in Rule 902 of
Regulation S nor has the Company conducted any general
solicitation relating to the offer and sale of any of the
Securities in the United States or elsewhere.
(e) Concerning the Securities. The
issuance, sale and delivery of the Warrants have been duly
authorized by all required corporate action on the part of the
Company, and when issued, sold and delivered in accordance with
the terms hereof and thereof for the consideration expressed
herein and therein, will be duly and validly issued, fully paid
and non-assessable. The Common Stock issuable upon exercise of
the Warrants has been duly and validly reserved for issuance and,
upon issuance in accordance with the terms of the Warrants shall
be duly and validly issued, fully paid, and non-assessable and
will not subject the holders thereof, if such persons are non-
U.S. Persons, to personal liability by reason of being such
holders. There are no preemptive rights of any shareholder of
the Company.
(f) Subscription Agreement. This
Agreement has been duly authorized, validly executed and
delivered on behalf of the Company and is a valid and binding
agreement in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting
the enforcement of creditors' rights generally.
(g) Non-contravention. The execution
and delivery of this Agreement and the consummation of the
issuance of the Securities and the transactions contemplated by
this Agreement do not and will not conflict with or result in a
breach by the Company of any of the terms or provisions of, or
constitute a default under, the articles of incorporation or by-
laws of the Company, or any indenture, mortgage, deed of trust,
or other material agreement or instrument to which the Company is
a party or by which it or any of its properties or assets are
bound, or any existing applicable law, rule or regulation of the
United States or any State thereof or any applicable decree,
judgment or order of any Federal or State court, Federal or State
regulatory body, administrative agency or other United States
governmental body having jurisdiction over the Company or any of
its properties or assets.
(h) Approvals. The Company is not
aware of any authorization, approval or consent of any
governmental body which is legally required for the issuance and
sale of the Warrants and the Common Stock issuable upon exercise
thereof to persons who are non-U.S. Persons, as contemplated by
this Agreement.
4. Exemption: Reliance on Representations. ACM
understands that the offer and sale of the Securities are not
being registered under the 1933 Act. The Company and ACM are
relying on the rules governing offers and sales made outside the
United States pursuant to Regulation S.
5. Transfer Agent Instructions.
(a) Warrants. Upon exercise of the
Warrants, the holder thereof shall submit such Warrants to the
Company, and the Company shall, within five (5) business days of
receipt of the Warrants, instruct the Company's transfer agent to
issue one or more certificates representing that number of shares
of Common Stock for which the Warrants or Warrants are then being
exercised in accordance with the provisions regarding exercise
set forth in Exhibits A and B hereto, as applicable.
(b) Shares to be Issued Without
Restrictive Legend. Upon the exercise of either of the Warrants
by a person who is a non-U.S. Person, the Company shall instruct
the Company's transfer agent to issue stock certificates without
restrictive legend in the name of ACM (or its nominee (being a
non-U.S. Person) or such non-U.S Persons as may be designated by
ACM prior to the closing) and in such denominations to be
specified at conversion or upon exercise representing the number
of shares of Common Stock issuable upon such conversion, as
applicable. The Company warrants that no instructions other than
these instructions and instructions to impose a "stop transfer"
instruction with respect to the certificates until the end of the
Restricted Period have been or will be given to the transfer
agent and that the Shares shall otherwise be freely transferable
on the books and records of the Company. Nothing in this Section
5, however, shall affect in any way ACM's or such nominee's
obligations and agreement to comply with all applicable
securities laws upon resale of the Securities.
6. Piggyback Registration. The Company hereby
agrees that, in the event a demand is made by a majority in
interest of holders of debentures (the "Debentures") issued
pursuant to those certain Offshore Securities Subscription
Agreements, dated July 1995, by and between the Company and the
purchasers named therein, as a result of a regulatory development
including, but not limited to, an amendment or proposed amendment
of Regulation S, or any "no-action" or interpretive guidance
whether oral or written from the Securities and Exchange
Commission, which calls into question the ability of buyers to
resell the Securities without registration, which causes Seller
to file and cause to become effective a registration statement on
Form S-3 under the 1933 Act covering the resale of the
Debentures, the Company shall promptly give written notice of
such registration to all holders of the Warrants ("Holders").
Any Holder by written request given within 20 days after receipt
of such written notice from the Company may require, subject to
pre-existing registration rights in other parties, all or a
portion of such Holder's Warrants to be included in the
registration (the Warrants and the Debentures being referred to
for the purposes of this paragraph 6 as, the "Registrable
Securities"). Any such registration statement shall remain
effective for up to one hundred twenty (120) days or until all of
the Registrable Securities are sold, whichever is later. The
Company shall provide ACM with such numbers of copies of the
prospectus as shall be reasonably requested to facilitate the
sale of the Registrable Securities. The Company shall bear and
pay all expenses incurred in connection with any such
registration, excluding discounts and commissions.
7. Delivery Instructions. The Warrants being
purchased hereunder shall be delivered to ACM at such time and
place as shall be mutually agreed by the Company and ACM;
provided that such Warrants shall be made available for
inspection at such reasonable time as ACM may request prior to
the Closing Date.
8. Opinion of Counsel. The Company will, at the
closing, furnish ACM with an opinion of its counsel substantially
in the form attached hereto as Exhibit C.
9. Form W-8. ACM will, at the closing, furnish
the Company with an executed IRS Form W-8.
10. Notices. All notices or communications
hereunder, except as otherwise provided by notice, will be in
writing and mailed or delivered as follows:
If to ACM:
ACM Advisors
Birmensdorfer Strasse 140
CH08003
Zurich, Switzerland
Attention:
If to the Company:
Electrosource, Inc.
3800 B Drossett Drive
Austin, Texas 78744
Attention: President
11. Miscellaneous. This Letter Agreement,
together with Exhibits A, B and C, contains our entire agreement
concerning the proposed offering and supersedes any prior
understanding and agreements. It will be governed by Bermuda
law. Any amendment hereto or any waiver of any right or
obligation hereunder must be in writing and signed by the party
to be charged.
Please confirm that the foregoing correctly and
completely sets forth our understanding, by signing and returning
to us the enclosed duplicate of this Letter Agreement.
Sincerely,
ACM Equities
By: /S/
Title: President
Agreed and accepted this ____th
day of July, 1995
Electrosource, Inc.
By: /S/
Michael G. Semmens
President
DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT")
AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED
IN REGULATIONS S UNDER THE ACT) OR TO OR FOR THE ACCOUNT OR
BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE
ACT) EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND
APPLICABLE STATE SECURITIES LAWS.
No.__________ $100,000
U.S.
ELECTROSOURCE, INC.
10% CONVERTIBLE DEBENTURES DUE JULY 27, 1996
THIS DEBENTURE is one of a duly authorized issue of
Debentures of Electrosource, Inc., a corporation duly organized
and existing under the laws of the State of Delaware (the
"Company") designated as its 10% Convertible Debentures Due July
27, 1996.
FOR VALUE RECEIVED, the Company promises to pay to
________________, the registered holder hereof and its successors
and registered assigns (the "Holder"), the principal sum of One
Hundred Thousand United States Dollars (U.S. $100,000) on July
27, 1996, (the "Maturity Date") and to pay interest on the
principal sum outstanding, at the rate of 10% per annum due and
payable at the earlier of the date of conversion or the Maturity
Date. Accrual of interest shall commence on the first business
day to occur after the date hereof and shall continue until
payment in full of the principal sum has been made or duly
provided for. The principal of this Debenture is payable in such
coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private
debts. The Company may, at its option, pay the interest on this
Debenture by delivery of fully paid and non-assessable shares of
its common stock, U.S. $0.10 par value per share (the "Common
Stock") valued at the Market Price (as defined below) on the date
of payment, to the person in whose name this Debenture is
registered on the records of the Company regarding registration
and transfers of the Debentures (the "Debenture Register");
provided, however, that the Company's obligation to a transferee
of this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions
of the Offshore Securities Subscription Agreement dated as of
July 27, 1995, between the Company and the original purchaser
hereof (the "Subscription Agreement"). The Company will pay the
principal of and all accrued and unpaid interest due upon this
Debenture on the Maturity Date, less any amounts required by law
to be deducted or withheld, to the Holder of this Debenture as of
the tenth day prior to the Maturity Date and addressed to such
Holder at the last address appearing on the Debenture Register.
The forwarding of such payment and Common Stock, if any, shall
constitute a payment of principal and interest hereunder and
shall satisfy and discharge the liability for principal and
interest on this Debenture to the extent
of the sum represented by such payment and Common Stock, if any,
plus any amounts so deducted.
This Debenture is subject to the following additional
provisions:
1. The Debentures are issuable in denominations of
One Hundred Thousand Dollars (U.S. $100,000) and integral
multiples thereof. The Debentures are exchangeable for an equal
aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holders surrendering the same.
No service charge will be made for such registration or transfer
or exchange.
2. The Company shall be entitled to withhold from all
payments of principal of, and interest on, this Debenture any
amounts required to be withheld under the applicable provisions
of the United States income tax or other applicable laws at the
time of such payments.
3. This Debenture has been issued subject to
investment representations of the original purchaser hereof and
may be transferred or exchanged in the U.S. only in compliance
with the Securities Act of 1933, as amended (the "Act") and
applicable state securities laws. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly
registered on the Company's Debenture Register as the owner
hereof for the purpose of receiving payment as herein provided
and all other purposes, whether or not this Debenture be overdue,
and neither the Company nor any such agent shall be affected by
notice to the contrary.
4. The Holder of this Debenture is entitled, at it
option, at any time commencing on September 11, 1995 to convert
up to fifty percent (50%) of the original principal amount of
this Debenture, plus accrued and unpaid interest thereon, into
shares of Common Stock, at a conversion price equal to the lower
of (i) eighty percent (80%) of the Market Price (as defined
below) of the Common Stock on the date of conversion, or (ii)
120% of the closing bid price of the Common Stock as reported by
the NASDAQ Stock Market (as adjusted for stock splits, stock
dividends, recapitalizations, and similar events) on the date
hereof. Thereafter the remaining fifty percent (50%) of the
original principal amount of this Debenture shall become
convertible on the twentieth day after such date on the same
terms. The "Market Price" shall be the closing bid price of the
Common Stock for the trading day immediately preceding the
conversion date, as reported by The NASDAQ Stock Market. Such
conversion shall be effectuated by surrendering the Debentures to
be converted to the Company, with the form of conversion notice
attached hereto as Exhibit 1, executed by the Holder of this
Debenture evidencing such Holder's intention to convert this
Debenture or a specified portion hereof, and accompanied, if
required by the Company, by proper assignment hereof in blank.
No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable
shall be rounded to the nearest whole share, with the fraction
paid in cash at the discretion of the Company, valuing such
fractional share at the conversion price. The date on which
notice of conversion is given shall be deemed to be the date on
which the Holder has delivered this Debenture, with the
conversion notice duly executed, to the Company, or, if earlier,
the date set forth in such notice of conversion if this Debenture
is received by the Company within five (5) business days
thereafter.
5. No provision of this Debenture shall alter or
impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, and interest on, this
Debenture at the time, place and rate, and in the coin or
currency, herein prescribed.
6. The Company hereby expressly waives demand and
presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of acceleration or intent to
accelerate, bringing of suit and diligence in taking any action
to collect amounts called for hereunder and shall be directly and
primarily liable for the payment of all sums owing and to be
owing hereon, regardless of and without any notice, diligence,
act or omission as or with respect to the collection of any
amount called for hereunder.
7. The Company agrees to pay all costs and expenses,
including reasonable attorneys' fees, which may be incurred by
the Holder in collecting any amount due under this Debenture.
8. If one or more of the following described "Events
of Default" shall occur:
(a) The Company shall default in the payment of
principal or interest on this Debenture; or
(b) Any of the representations or warranties made
by the Company herein, in the Subscription
Agreement, or in any certificate or financial
or other statements heretofore or hereafter
furnished by or on behalf of the Company in
connection with the execution and delivery of
this Debenture or the Subscription Agreement
shall be false or misleading in any material
respect at the time made; or
(c) The Company shall fail to perform or observe
any other covenant, term, provision,
condition, agreement or obligation of the
Company under this Debenture and such failure
shall continue uncured for a period of seven
(7) days after notice from the Holder of such
failure; or
(d) The Company shall (1) become insolvent; (2)
admit in writing its inability to pay its
debts generally as they mature; (3) make an
assignment for the benefit of creditors or
commence proceedings for its dissolution; or
(4) apply for or consent to the appointment
of a trustee, liquidator or receiver for it
or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be
appointed for the Company or for a
substantial part of its property or business
without its consent and shall not be
discharged within thirty (30) days after such
appointment; or
(f) Any governmental agency or any court of
competent jurisdiction at the instance of any
governmental agency shall assume custody or
control of the whole or any substantial
portion of the properties or assets of the
Company and shall not be dismissed within
thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of
attachment, or similar process in excess of
Two Hundred Thousand Dollars ($200,000) in
the aggregate shall be entered or filed
against the Company or any of its properties
or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period
of fifteen (15) days or in any event later
than five (5) days prior to the date of any
proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or
liquidation proceedings or other proceedings
for relief under any bankruptcy law or any
law for the relief of debtors shall be
instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within thirty (30) days after such
institution or the Company shall by any
action or answer approve of, consent to, or
acquiesce in any such proceedings or admit
the material allegations of, or default in
answering a petition filed in any such
proceeding; or
(I) The Company shall have its Common Stock
delisted from an exchange or over-the-counter
market or suspended from trading.
Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by
the Holder (which waiver shall not be deemed to be a waiver of
any subsequent default) at the option of the Holder and in the
Holder's sole discretion, the Holder may consider this Debenture
immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to
the contrary notwithstanding, and the Holder may immediately, and
without expiration of any period of grace, enforce any and all of
the Holder's rights and remedies provided herein or any other
rights or remedies afforded by law.
9. No recourse shall be had for the payment of the
principal of, or the interest on, this Debenture, or for any
claim based hereon, or otherwise in respect hereof, against any
incorporator, shareholder, officer or director, as such, past,
present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and
released.
10. The Holder of this Debenture, by acceptance
hereof, agrees that this Debenture is being acquired for
investment and that such Holder will not offer, sell or otherwise
dispose of this Debenture or the shares of Common Stock issuable
upon exercise thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky
law or similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by
a court of competent jurisdiction to be excessive in scope or
otherwise invalid or unenforceable, such provision shall be
adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
12. This Debenture and the agreements referred to in
this Debenture constitute the full and entire understanding and
agreement between the Company and the Holder with respect to the
subject hereof. Neither this Debenture nor any term hereof may
be amended, waived, discharged or terminated other than by a
written instrument signed by the Company and the Holder.
13. This Debenture shall be governed by and construed
in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed by an officer thereunto duly
authorized.
Date: July 27, 1995
Electrosource, Inc.
By: _____________________________
James M. Rosel
Title: Vice President/General
Counsel
DEBENTURE REGISTER
July 27, 1995
Debenture
Number Amount Holder
D296-101 $ 100,000 FTS Worldwide Corporation
D296-102 $ 100,000 FTS Worldwide Corporation
D296-103 $ 100,000 FTS Worldwide Corporation
D296-104 $ 100,000 FTS Worldwide Corporation
D296-105 $ 100,000 FTS Worldwide Corporation
D296-106 $ 100,000 FTS Worldwide Corporation
D296-107 $ 100,000 FTS Worldwide Corporation
D296-108 $ 100,000 FTS Worldwide Corporation
D296-109 $ 100,000 FTS Worldwide Corporation
D296-110 $ 100,000 FTS Worldwide Corporation
D396-101 $ 100,000 Euro Factors International Inc.
D396-102 $ 100,000 Euro Factors International Inc.
D396-103 $ 100,000 Euro Factors International Inc.
D396-104 $ 100,000 Euro Factors International Inc.
D396-105 $ 100,000 Euro Factors International Inc.
D396-106 $ 100,000 Euro Factors International Inc.
D396-107 $ 100,000 Euro Factors International Inc.
D396-108 $ 100,000 Euro Factors International Inc.
D396-109 $ 100,000 Euro Factors International Inc.
D396-110 $ 100,000 Euro Factors International Inc.
D496-101 $ 100,000 NEPO Invest Trade
D496-102 $ 100,000 NEPO Invest Trade
D496-103 $ 100,000 NEPO Invest Trade
D496-104 $ 100,000 NEPO Invest Trade
D496-105 $ 100,000 NEPO Invest Trade
D496-106 $ 100,000 NEPO Invest Trade
D496-107 $ 100,000 NEPO Invest Trade
D496-108 $ 100,000 NEPO Invest Trade
D496-109 $ 100,000 NEPO Invest Trade
D496-110 $ 100,000 NEPO Invest Trade
EXHIBIT 4.10
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated
as of July 27, 1995 (this "Agreement"), is executed in reliance
upon the exemption from registration afforded by Regulation S
("Regulation S") as promulgated by the Securities and Exchange
Commission ("SEC"), under the Securities Act of 1933, as amended.
Capitalized terms used herein and not defined shall have the
meanings given to them in Regulation S.
This Agreement has been executed by the undersigned
("Buyer") in connection with the private placement of 10%
Convertible Debentures of Electrosource, Inc., a corporation
organized under the laws of the state of Delaware, with its
principal executive offices located at 3800 B Drossett Drive,
Austin, Texas 78744 (hereinafter referred to as "Seller"). Buyer
hereby represents and warrants to, and agrees with Seller:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN
REGULATION S OF THE 1933 ACT) OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S
OF THE 1933 ACT) EXCEPT PURSUANT TO REGISTRATION UNDER
OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE 1933 ACT.
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) Subscription. The undersigned Buyer
hereby subscribes for and agrees to purchase the Seller's 10%
Convertible Debentures substantially in the form of the Debenture
attached as Exhibit A hereto and having an aggregate original
principal amount of U.S. $ 1,000,000, (singly, a "Debenture," and
collectively, the "Debentures"), at an aggregate purchase price
as set forth in subsection (b) herein.
(b) Payment. The aggregate purchase price
for the Debentures shall be One Million United States Dollars
(U.S. $1,000,000)(the "Purchase Price"), which shall be payable
at closing by delivering immediately available funds in United
States Dollars by wire transfer to the designated depository for
closing by delivery of securities versus payment.
(c) Closing. Subject to the satisfaction of
the conditions set forth in Sections 7 and 8 hereof, the closing
of the transactions contemplated by this Agreement shall occur on
July 26, 1995, or such earlier or later date as is mutually
agreed to in writing by Buyer and Seller (the "Closing Date").
2. BUYER REPRESENTATIONS; ACCESS TO INFORMATION.
(a) Offshore Transaction. In connection
with the purchase and sale of the Debentures, Buyer represents
and warrants to, and covenants and agrees with, Seller as
follows:
(i) Buyer is not a natural person and is
not organized under the laws of any jurisdiction
within the United States, was not formed by a U.S.
Person (as defined in Section 902(o) of Regulation
S) for the purpose of investing in Regulation S
securities and is not otherwise a U.S. Person.
Buyer is not, and on the closing date will not be,
an affiliate of Seller;
(ii) At the time the buy order was
originated, Buyer was outside the United States and
is outside of the United States as of the date of
the execution and delivery of this Agreement;
(iii) No offer to purchase the
Debentures or the Common Stock issuable upon
conversion of the Debentures (collectively, the
"Securities"), was made by Buyer in the United
States;
(iv) Buyer is purchasing the
Securities for its own account and Buyer is
qualified to purchase the Securities under the laws
of its jurisdiction of residence, and the offer and
sale of the Securities will not violate the
securities or other laws of such jurisdiction;
(v) All offers and sales of any of the
Securities by Buyer prior to the end of the
Restricted Period (as hereinafter defined) shall be
made in compliance with any applicable securities
laws of any applicable jurisdiction and in
accordance with Rule 903 or 904, as applicable, of
Regulation S or pursuant to registration of
securities under the 1933 Act or pursuant to an
exemption from registration. In any case, none of
the Securities have been and will be offered or sold
by Buyer to, or for the account or benefit of, a
U.S. Person or within the United States until after
the end of the forty (40) day period commencing on
the later of (x) the date of closing of the offering
of the Securities (or if later, the date on which
the last closing of the sale of Debentures takes
place, pursuant to that certain letter agreement
dated July , 1995 between Rosehouse Ltd. and
the Company) or (y) the date of the first offer of
the Securities to persons other than distributors
(the "Restricted Period"), as certified by Buyer to
Seller;
(vi) The transactions contemplated by
this Agreement (a) have not been and will not be pre-
arranged by Buyer with a purchaser located in the
United States or a purchaser which is a U.S. Person,
and (b) are not and will not be part of a plan or
scheme by Buyer to evade the registration provisions
of the 1933 Act;
(vii) Buyer understands that the
Securities are not registered under the 1933 Act and
are being offered and sold to it in reliance on
specific exclusions from the registration
requirements of Federal and State securities laws,
and that Seller is relying upon the truth and
accuracy of the representations, warranties,
agreements, acknowledgements and understandings of
Buyer set forth herein in order to determine the
applicability of such exclusions and the suitability
of Buyer and any purchaser from Buyer to acquire the
Securities;
(viii) Buyer shall take all reasonable
steps to ensure its compliance with Regulation S and
shall promptly send to each purchaser who acts as a
distributor, dealer or a person receiving a selling
concession, fee or other remuneration in respect of
any of the Securities, who purchases prior to the
expiration of the Restricted Period referred to in
subparagraph (v) above, a confirmation or other
notice to the purchaser stating that the purchaser
is subject to the same restrictions on offers and
sales as Buyer pursuant to Section 903(c)(2)(iv) of
Regulation S;
(ix) Buyer has not conducted and
shall not conduct any "directed selling efforts" as
that term is defined in Rule 902(b) of Regulation S,
nor has Buyer conducted any general solicitation
relating to the offer and sale of any of the
Securities in the United States or elsewhere;
(x) This Agreement has been duly
authorized, validly executed and delivered on behalf
of Buyer and is a valid and binding agreement in
accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights
generally;
(xi) The execution and delivery of
this Agreement and the consummation of the purchase
of the Securities, and the transactions contemplated
by this Agreement do not and will not conflict with
or result in a breach by Buyer of any of the terms
or provisions of, or constitute a default under, the
articles of incorporation or by-laws (or similar
constitutive documents) of Buyer or any indenture,
mortgage, deed of trust, or other material agreement
or instrument to which Buyer is a party or by which
it or any of its properties or assets are bound, or
any existing applicable law, rule or regulation of
the United States or any State thereof or any
applicable decree, judgment or order of any Federal
or State court, Federal or State regulatory body,
administrative agency or other United States
governmental body having jurisdiction over Buyer or
any of its properties or assets;
(xii) All invitations, offers and
sales of or in respect of, any of the Securities, by
Buyer and any distribution by Buyer of any documents
relating to any offer by it of any of the Securities
will be in compliance with applicable laws and
regulations and will be made in such a manner that
no prospectus need be filed and no other filing need
be made by Seller with any regulatory authority or
stock exchange in any country or any political sub-
division of any country;
(xiii) Buyer will not make any offer or
sale of any of the Securities by any means which
would not comply with the laws and regulations of
the territory in which such offer or sale takes
place or to which such offer or sale is subject or
which would in connection with any such offer or
sale impose upon Seller any obligation to satisfy
any public filing or registration requirement or
provide or publish any information of any kind
whatsoever or otherwise undertake or become obliged
to do any act; and
(xiv) Neither Buyer nor any of its
affiliates has entered, has the intention of
entering, or will during the Restricted Period enter
into any put option, short position or other similar
instrument or position with respect to any of the
Securities or securities of the same class as the
Securities.
(b) No Government Recommendation or
Approval. Buyer understands that no Federal or State or foreign
government agency has passed on or made any recommendation or
endorsement of the Securities.
(c) Current Public Information. Buyer
acknowledges that it and its advisors, if any, have been
furnished with all materials relating to the business, finances
and operations of Seller and all materials relating to the offer
and sale of the Securities which have been requested by Buyer.
Buyer further acknowledges that it and its advisors, if any, have
received complete and satisfactory answers to such inquiries.
(d) Buyer's Sophistication. Buyer
acknowledges that the purchase of the Securities involves a high
degree of risk, including the total loss of Buyer's investment.
Buyer has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of
purchasing the Securities.
(e) Tax Status. Buyer is not a "10-percent
Shareholder" (as defined in Section 871(h)(3)(B) of the U.S.
Internal Revenue Code) of Seller.
3. SELLER REPRESENTATIONS.
(a) Reporting Company Status. Seller is a
"Reporting Issuer" as defined by Rule 902 of Regulation S.
Seller has registered the Common Stock pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Common Stock is listed and trades on the NASDAQ
Stock Market. Seller has filed all material required to be filed
pursuant to all reporting obligations under either Section 13(a)
or 15(d) of the Exchange Act for a period of at least twelve (12)
months immediately preceding the offer or sale of the Securities
(or for such shorter period that Seller has been required to file
such material).
(b) Current Public Information. Seller has
furnished Buyer with copies of its most recent reports filed
under the Exchange Act referred to in Section 2(c) above, and
other publicly available documents.
(c) Offshore Transaction. Seller has not
offered any of the Securities to any person in the United States,
any identifiable groups of U.S. citizens abroad, or to any U.S.
Person, as such terms are used in Regulation S.
(i) At the time the buy order was
originated, Seller and/or its agents reasonably
believe Buyer was outside of the United States and
was not a U.S. person, based on the representations
of Buyer.
(ii) Seller and/or its agents
reasonably believe that the transaction has not been
pre-arranged with a buyer in the United States,
based on the representations of Buyer.
(iii) No offer to buy or sell the
Securities was or will be made by Seller to any
person in the United States.
(iv) The sale of the Securities by
Seller pursuant to this Agreement will be made in
accordance with the provisions and requirements of
Regulation S, provided that the representations and
warranties of Buyer in Section 2(a) hereof are true
and correct.
(v) The transactions contemplated by this
Agreement (a) have not been and will not be pre-
arranged by Seller with a purchaser located in the
United States or a purchaser which is a U.S. Person,
and (b) are not and will not be part of a plan or
scheme by Seller to evade the registration
provisions of the 1933 Act.
(d) No Directed Selling Efforts. In regard
to this transaction, Seller has not conducted any "directed
selling efforts" as that term is defined in Rule 902 of
Regulation S nor has Seller conducted any general solicitation
relating to the offer and sale of any of the Securities in the
United States or elsewhere.
(e) Concerning the Securities. The
issuance, sale and delivery of the Debentures have been duly
authorized by all required corporate action on the part of
Seller, and when issued, sold and delivered in accordance with
the terms hereof and thereof for the consideration expressed
herein and therein, will be duly and validly issued, fully paid
and non-assessable. The Common Stock issuable upon conversion of
the Debentures has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the
Debentures, shall be duly and validly issued, fully paid, and non-
assessable and will not subject the holders thereof, if such
persons are non-U.S. Persons, to personal liability by reason of
being such holders. There are no preemptive rights of any
shareholder of Seller.
(f) Subscription Agreement. This Agreement
has been duly authorized, validly executed and delivered on
behalf of Seller and is a valid and binding agreement in
accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(g) Non-contravention. The execution and
delivery of this Agreement and the consummation of the issuance
of the Securities and the transactions contemplated by this
Agreement do not and will not conflict with or result in a breach
by Seller of any of the terms or provisions of, or constitute a
default under, the articles of incorporation or by-laws of
Seller, or any indenture, mortgage, deed of trust, or other
material agreement or instrument to which Seller is a party or by
which it or any of its properties or assets are bound, or any
existing applicable law, rule or regulation of the United States
or any State thereof or any applicable decree, judgment or order
of any Federal or State court, Federal or State regulatory body,
administrative agency or other United States governmental body
having jurisdiction over Seller or any of its properties or
assets.
(h) Approvals. Seller is not aware of any
authorization, approval or consent of any governmental body which
is legally required for the issuance and sale of the Debentures
and the Common Stock issuable upon conversion thereof to persons
who are non-U.S. Persons, as contemplated by this Agreement.
4. EXEMPTION: RELIANCE ON REPRESENTATIONS. Buyer
understands that the offer and sale of the Shares are not being
registered under the 1933 Act. Seller and Buyer are relying on
the rules governing offers and sales made outside the United
States pursuant to Regulation S.
5. TRANSFER AGENT INSTRUCTIONS.
(a) Debentures. Upon the conversion of the
Debentures, the holder thereof shall submit such Debenture to
Seller, and Seller shall, within five (5) business days of
receipt of such Debenture, instruct Seller's transfer agent to
issue one or more certificates representing that number of shares
of Common Stock into which the Debenture or Debentures are
convertible in accordance with the provisions regarding
conversion set forth in Exhibit A hereto. The Seller shall act
as Debenture Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each
Debenture.
(b) Shares to be Issued Without Restrictive
Legend. Upon the conversion of any Debenture by a person who is
a non-U.S. Person, Seller shall instruct the Seller's transfer
agent to issue stock certificates without restrictive legend in
the name of Buyer (or its nominee (being a non-U.S. Person) or
such non-U.S Persons as may be designated by Buyer prior to the
closing) and in such denominations to be specified at conversion
representing the number of shares of Common Stock issuable upon
such conversion, as applicable. Seller warrants that no
instructions other than these instructions and instructions to
impose a "stop transfer" instruction with respect to the
certificates until the end of the Restricted Period have been or
will be given to the transfer agent and that the Shares shall
otherwise be freely transferable on the books and records of the
Seller. Nothing in this Section 5, however, shall affect in any
way Buyer's or such nominee's obligations and agreement to comply
with all applicable securities laws upon resale of the
Securities.
6. DELIVERY INSTRUCTIONS. The Debentures being
purchased hereunder shall be delivered to the Buyer at such time
and place as shall be mutually agreed by Seller and Buyer;
provided that such Debentures shall be made available for
inspection at such reasonable time as Buyer may request prior to
the Closing Date.
7. CONDITIONS TO SELLER'S OBLIGATION TO SELL.
Seller's obligation to sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Buyer of
this Agreement as evidenced by execution of this Agreement by
Buyer.
(b) Delivery into the closing depository of
good funds by Buyer as payment in full of the aggregate Purchase
Price of the Debentures.
(c) The receipt by Seller of an executed IRS
Form W-8 from Buyer.
8. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE.
Buyer's obligation to purchase the Debentures is conditioned on:
(a) The receipt and acceptance by Seller of
this Agreement as evidenced by execution of this Agreement by the
duly authorized officer of Seller.
(b) Delivery of the Debentures as described
herein.
(c) Delivery of an opinion of counsel to
Seller substantially in the form of Exhibit D hereto.
9. REGISTRATION OF THE SECURITIES. Seller hereby
agrees that, upon demand of a majority in interest of holders of
the Securities as a result of a regulatory development including,
but not limited to, an amendment or proposed amendment of
Regulation S, or any "no-action" or interpretive guidance whether
oral or written from the Securities and Exchange Commission,
which calls into question the ability of buyers to resell the
Securities without registration, Seller will file and cause to
become effective a registration statement on Form S-3 under the
1933 Act covering the resale of the Securities. Any such
registration statement shall remain effective for up to one
hundred twenty (120) days or until all of the Securities are
sold, whichever is later. The Seller shall provide the Buyer
with such numbers of copies of the prospectus as shall be
reasonably requested to facilitate the sale of the Securities.
The Seller shall bear and pay all expenses incurred in connection
with any such registration, excluding discounts and commissions.
10. OFFERING MATERIALS. All offering materials
and documents used in connection with the offer and sale of the
Securities prior to the expiration of the Restricted Period
referred to in Section 2(a)(v) hereof shall include statements to
the effect that the Securities have not been registered under the
1933 Act or applicable state securities laws, and that neither
Buyer, nor any direct or indirect purchaser of the Securities
from Buyer, may directly or indirectly offer or sell the
Securities in the United States or to U.S. Persons (other than
distributors) unless the Securities are registered under the 1933
Act and any applicable state securities laws, or an exemption
from the registration requirements of the 1933 Act or such state
securities laws is available. Such statements shall appear (1)
on the cover of any prospectus or offering circular used in
connection with the offer or sale of the Securities, (2) in the
underwriting section of any prospectus or offering circular used
in connection with the offer or sale of the Securities, and (3)
in any advertisement made or issued by Seller, Buyer, any of
their respective affiliates, or any person acting on behalf of
any of the foregoing.
11. FURTHER OFFERINGS; RIGHT OF FIRST REFUSAL.
(a) Seller agrees that, for a period of
sixty-five (65) days from the Closing Date, it will not offer for
sale or sell any securities unless, in the opinion of Seller's
counsel, such offer or sale does not jeopardize the availability
of exemptions from the registration and qualification
requirements under all applicable securities laws with respect to
the Shares. Seller hereby warrants that it has not engaged in
any such offering during the six months prior to the Closing
Date, except as disclosed to Rosehouse, Ltd.
(b) If, within sixty-five (65) days after
the Closing Date, Seller determines pursuant to Section 11(a)
herein to make one or more additional offerings pursuant to
Regulation S or Regulation D promulgated under the Securities Act
of 1933, as amended, Buyer shall have the right of first refusal
to purchase any securities offered thereunder on the same terms
and conditions offered to or by a qualified bona fide third party
purchaser. This right shall be exercisable by written notice
given by Buyer within 10 business days after Seller gives buyer
written notice of such proposed offering.
12. NO SHAREHOLDER APPROVAL. Seller hereby agrees
that from the Closing Date until the issuance of Common Stock
upon the conversion of the Debentures, Seller will not take any
action which would require Seller to seek shareholder approval of
such issuance.
13. MISCELLANEOUS.
(a) This Agreement constitutes the entire
contract between the parties, and neither party shall be liable
or bound to the other in any manner by any warranties,
representations or covenants except as specifically set forth
herein. Any previous agreement among the parties related to the
transactions described herein is superseded hereby. The terms
and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the
parties hereto. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties
hereto, and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
(b) Buyer is an independent contractor and
is not the agent of Seller. Buyer is not authorized to bind
Seller, or to make any representations or warranties on behalf of
Seller.
(c) Seller makes no representation or
warranty with respect to Seller, its finances, assets, business
prospects or otherwise. Buyer will advise each purchaser and
potential purchaser, if any, of the Securities of the foregoing
sentence, and that such purchaser is relying on its own
investigation with respect to all such matters, and that such
purchaser will be given access to any and all documents and
Seller personnel it may reasonably request for such
investigation.
(d) All representations and warranties
contained in this Agreement by Seller and Buyer shall survive the
closing of the transactions contemplated by this Agreement.
(e) This Agreement shall be construed in
accordance with the internal laws of Bermuda and shall be binding
upon the successors and assigns of each party hereto. This
Agreement may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Agreement shall
be effective as an original.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.
Official Signatory of Seller:
ELECTROSOURCE, INC.
By: /S/
Michael G. Semmens
Title: President
EXHIBIT A
DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT")
AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED
IN REGULATIONS S UNDER THE ACT) OR TO OR FOR THE ACCOUNT OR
BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE
ACT) EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND
APPLICABLE STATE SECURITIES LAWS.
No.__________ $100,000
U.S.
ELECTROSOURCE, INC.
10% CONVERTIBLE DEBENTURES DUE JULY 27, 1996
THIS DEBENTURE is one of a duly authorized issue of
Debentures of Electrosource, Inc., a corporation duly organized
and existing under the laws of the State of Delaware (the
"Company") designated as its 10% Convertible Debentures Due July
27, 1996.
FOR VALUE RECEIVED, the Company promises to pay to
________________, the registered holder hereof and its successors
and registered assigns (the "Holder"), the principal sum of One
Hundred Thousand United States Dollars (U.S. $100,000) on July
27, 1996, (the "Maturity Date") and to pay interest on the
principal sum outstanding, at the rate of 10% per annum due and
payable at the earlier of the date of conversion or the Maturity
Date. Accrual of interest shall commence on the first business
day to occur after the date hereof and shall continue until
payment in full of the principal sum has been made or duly
provided for. The principal of this Debenture is payable in such
coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private
debts. The Company may, at its option, pay the interest on this
Debenture by delivery of fully paid and non-assessable shares of
its common stock, U.S. $0.10 par value per share (the "Common
Stock") valued at the Market Price (as defined below) on the date
of payment, to the person in whose name this Debenture is
registered on the records of the Company regarding registration
and transfers of the Debentures (the "Debenture Register");
provided, however, that the Company's obligation to a transferee
of this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions
of the Offshore Securities Subscription Agreement dated as of
July 27, 1995, between the Company and the original purchaser
hereof (the "Subscription Agreement"). The Company will pay the
principal of and all accrued and unpaid interest due upon this
Debenture on the Maturity Date, less any amounts required by law
to be deducted or withheld, to the Holder of this Debenture as of
the tenth day prior to the Maturity Date and addressed to such
Holder at the last address appearing on the Debenture Register.
The forwarding of such payment and Common Stock, if any, shall
constitute a payment of principal and interest hereunder and
shall satisfy and discharge the liability for principal and
interest on this Debenture to the extent of the sum represented
by such payment and Common Stock, if any, plus any amounts so
deducted.
This Debenture is subject to the following additional
provisions:
1. The Debentures are issuable in denominations of
One Hundred Thousand Dollars (U.S. $100,000) and integral
multiples thereof. The Debentures are exchangeable for an equal
aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holders surrendering the same.
No service charge will be made for such registration or transfer
or exchange.
2. The Company shall be entitled to withhold from all
payments of principal of, and interest on, this Debenture any
amounts required to be withheld under the applicable provisions
of the United States income tax or other applicable laws at the
time of such payments.
3. This Debenture has been issued subject to
investment representations of the original purchaser hereof and
may be transferred or exchanged in the U.S. only in compliance
with the Securities Act of 1933, as amended (the "Act") and
applicable state securities laws. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly
registered on the Company's Debenture Register as the owner
hereof for the purpose of receiving payment as herein provided
and all other purposes, whether or not this Debenture be overdue,
and neither the Company nor any such agent shall be affected by
notice to the contrary.
4. The Holder of this Debenture is entitled, at it
option, at any time commencing on September 11, 1995 to convert
up to fifty percent (50%) of the original principal amount of
this Debenture, plus accrued and unpaid interest thereon, into
shares of Common Stock, at a conversion price equal to the lower
of (i) eighty percent (80%) of the Market Price (as defined
below) of the Common Stock on the date of conversion, or (ii)
120% of the closing bid price of the Common Stock as reported by
the NASDAQ Stock Market (as adjusted for stock splits, stock
dividends, recapitalizations, and similar events) on the date
hereof. Thereafter the remaining fifty percent (50%) of the
original principal amount of this Debenture shall become
convertible on the twentieth day after such date on the same
terms. The "Market Price" shall be the closing bid price of the
Common Stock for the trading day immediately preceding the
conversion date, as reported by The NASDAQ Stock Market. Such
conversion shall be effectuated by surrendering the Debentures to
be converted to the Company, with the form of conversion notice
attached hereto as Exhibit 1, executed by the Holder of this
Debenture evidencing such Holder's intention to convert this
Debenture or a specified portion hereof, and accompanied, if
required by the Company, by proper assignment hereof in blank.
No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable
shall be rounded to the nearest whole share, with the fraction
paid in cash at the discretion of the Company, valuing such
fractional share at the conversion price. The date on which
notice of conversion is given shall be deemed to be the date on
which the Holder has delivered this Debenture, with the
conversion notice duly executed, to the Company, or, if earlier,
the date set forth in such notice of conversion if this Debenture
is received by the Company within five (5) business days
thereafter.
5. No provision of this Debenture shall alter or
impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, and interest on, this
Debenture at the time, place and rate, and in the coin or
currency, herein prescribed.
6. The Company hereby expressly waives demand and
presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of acceleration or intent to
accelerate, bringing of suit and diligence in taking any action
to collect amounts called for hereunder and shall be directly and
primarily liable for the payment of all sums owing and to be
owing hereon, regardless of and without any notice, diligence,
act or omission as or with respect to the collection of any
amount called for hereunder.
7. The Company agrees to pay all costs and expenses,
including reasonable attorneys' fees, which may be incurred by
the Holder in collecting any amount due under this Debenture.
8. If one or more of the following described "Events
of Default" shall occur:
(a) The Company shall default in the payment of
principal or interest on this Debenture; or
(b) Any of the representations or warranties made
by the Company herein, in the Subscription
Agreement, or in any certificate or financial
or other statements heretofore or hereafter
furnished by or on behalf of the Company in
connection with the execution and delivery of
this Debenture or the Subscription Agreement
shall be false or misleading in any material
respect at the time made; or
(c) The Company shall fail to perform or observe
any other covenant, term, provision,
condition, agreement or obligation of the
Company under this Debenture and such failure
shall continue uncured for a period of seven
(7) days after notice from the Holder of such
failure; or
(d) The Company shall (1) become insolvent; (2)
admit in writing its inability to pay its
debts generally as they mature; (3) make an
assignment for the benefit of creditors or
commence proceedings for its dissolution; or
(4) apply for or consent to the appointment
of a trustee, liquidator or receiver for it
or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be
appointed for the Company or for a
substantial part of its property or business
without its consent and shall not be
discharged within thirty (30) days after such
appointment; or
(f) Any governmental agency or any court of
competent jurisdiction at the instance of any
governmental agency shall assume custody or
control of the whole or any substantial
portion of the properties or assets of the
Company and shall not be dismissed within
thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of
attachment, or similar process in excess of
Two Hundred Thousand Dollars ($200,000) in
the aggregate shall be entered or filed
against the Company or any of its properties
or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period
of fifteen (15) days or in any event later
than five (5) days prior to the date of any
proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or
liquidation proceedings or other proceedings
for relief under any bankruptcy law or any
law for the relief of debtors shall be
instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within thirty (30) days after such
institution or the Company shall by any
action or answer approve of, consent to, or
acquiesce in any such proceedings or admit
the material allegations of, or default in
answering a petition filed in any such
proceeding; or
(I) The Company shall have its Common Stock
delisted from an exchange or over-the-counter
market or suspended from trading.
Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by
the Holder (which waiver shall not be deemed to be a waiver of
any subsequent default) at the option of the Holder and in the
Holder's sole discretion, the Holder may consider this Debenture
immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to
the contrary notwithstanding, and the Holder may immediately, and
without expiration of any period of grace, enforce any and all of
the Holder's rights and remedies provided herein or any other
rights or remedies afforded by law.
9. No recourse shall be had for the payment of the
principal of, or the interest on, this Debenture, or for any
claim based hereon, or otherwise in respect hereof, against any
incorporator, shareholder, officer or director, as such, past,
present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and
released.
10. The Holder of this Debenture, by acceptance
hereof, agrees that this Debenture is being acquired for
investment and that such Holder will not offer, sell or otherwise
dispose of this Debenture or the shares of Common Stock issuable
upon exercise thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky
law or similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by
a court of competent jurisdiction to be excessive in scope or
otherwise invalid or unenforceable, such provision shall be
adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
12. This Debenture and the agreements referred to in
this Debenture constitute the full and entire understanding and
agreement between the Company and the Holder with respect to the
subject hereof. Neither this Debenture nor any term hereof may
be amended, waived, discharged or terminated other than by a
written instrument signed by the Company and the Holder.
13. This Debenture shall be governed by and construed
in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed by an officer thereunto duly
authorized.
Date: July 27, 1995
Electrosource, Inc.
By: _____________________________
James M. Rosel
Title:VicePresident/General Counsel
EXHIBIT 10.1
DIRECTOR INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made this 22nd of June, 1995, between
Electrosource, Inc., a Delaware corporation ("Corporation") and
WILLIAM R. GRAHAM ("Director").
WITNESSETH:
WHEREAS, Director is a member of the Board of Directors
of Corporation and in such capacity is performing a valuable
service for Corporation; and
WHEREAS, the Bylaws of the Corporation (the "Bylaws")
provide for the indemnification of the officers, directors,
agents and employees of Corporation; and
WHEREAS, such Bylaws and Section 145 of the Delaware
General Corporation Laws, as amended to date (the "State
Statutes"), specifically provide that they are not exclusive, and
thereby allow that contracts may be entered into between
Corporation and the members of its Board of Directors with
respect to indemnification of such directors; and
WHEREAS, in accordance with the authorization provided
by the State Statutes, Corporation has purchased and presently
maintains a policy or policies of Directors and Officers
Liability Insurance ("D&O Insurance") covering certain
liabilities which may be incurred by its directors and officers
in the performance of their services for Corporation; and
WHEREAS, recent developments with respect to the terms
and availability of D&O Insurance and with respect to the
application, amendment and enforcement of statutory and bylaw
indemnification provisions generally have raised questions
concerning the adequacy and reliability of the protection
afforded to directors thereby; and
WHEREAS, in order to resolve such questions and thereby
induce Director to continue to serve as a member of the Board of
Directors of Corporation, Corporation has determined and agreed
to enter into this Agreement with Director;
NOW THEREFORE, in consideration of Director's continued
service as a Director after the date hereof, the parties hereto
agree as follows:
1. Indemnity of Director.
Corporation shall hold harmless and indemnify Director to
the full extent authorized or permitted by the provisions of the
State Statutes, or by any amendment thereof or other statutory
provisions authorizing or permitting such indemnification which
is adopted after the date hereof.
2. Maintenance of Insurance and Self Insurance.
(a) Corporation represents that it presently has in force
and effect a policy of D&O Insurance with the insurance
company and in the amount as follows (the "Insurance
Policy"):
Insurer Policy No. Amount Deductible
National Union Fire Insurance Co. #4452661 $2,000,000 $100,000
Subject only to the provisions of Section 2(b) hereof,
Corporation hereby agrees that, so long as Director shall
continue to serve as a director of Corporation (or shall
continue at the request of Corporation to serve as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) and
thereafter so long as Director shall be subject to any
possible claim or threatened, pending or completed action,
suit or proceeding, whether civil, criminal or
investigative, by reason of the fact that Director was a
director of Corporation (or served in any of said other
capacities), Corporation will purchase and maintain in
effect for the benefit of Director one or more valid,
binding and enforceable policy or policies of D&O Insurance
providing, in all respects, coverage at least comparable to
that presently provided pursuant to the Insurance Policy.
(b) Corporation shall not be required to maintain said
policy or policies of D&O Insurance in effect if said
insurance is not reasonably available or if, in the
reasonable business judgment of the then directors of
Corporation, either (i) the premium cost for such insurance
is substantially disproportionate to the amount of coverage;
or (ii) the coverage provided by such insurance is so
limited by exclusions that there is insufficient benefit
from such insurance.
(c) In the event Corporation does not purchase and maintain
in effect said policy or policies of D&O Insurance pursuant
to the provisions of Section 2(b) hereof, Corporation agrees
to hold harmless and indemnify Director to the full extent
of the coverage which would otherwise have been provided for
the benefit of Director pursuant to the Insurance Policy.
3. Additional Indemnity.
Subject only to the limitations set forth in Section 4
hereof, and without limitation to Section 1 above, Corporation
shall further hold harmless and indemnify Director:
(a) Against any and all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by Director in connection
with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of
the Corporation) to which Director is or was a party or is
threatened to be made a party by reason of the fact that
Director is, was or at any time becomes a director of the
Corporation, or is or was serving or at any time serves at
the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise; and
(b) Otherwise to the fullest extent that may be provided to
Director by Corporation under the nonexclusivity provisions
of Section 10.5 of the Bylaws of the Corporation and the
State Statutes.
4. Limitations on Additional Indemnity.
No indemnity pursuant to Section 3 hereof shall be paid by
Corporation:
(a) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the amount of such losses for
which the Director is indemnified either pursuant to
Sections 1 or 2 hereof or pursuant to any D&O Insurance
purchased and maintained by the Corporation; or
(b) in respect to remuneration paid to Director if it shall
be determined by the Reviewing Party (as defined in Section
5 below), or by a final judgment or other final
adjudication, that such remuneration was in violation of
law; or
(c) if a determination of the Reviewing Party is made, or
if a judgment is rendered against a Director, that an
accounting must be made for profits made from the purchase
or sale by Director of securities of Corporation in
violation of the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory
law; or
(d) on account of Director's conduct which is determined by
the Reviewing Party, or by a final judgment or other final
adjudication, to have been knowingly fraudulent,
deliberately dishonest or of willful misconduct; or
(e) if the Reviewing Party or a Court having jurisdiction
in the matter shall determine that such indemnification is
not lawful.
5. Reviewing Party.
"Reviewing Party" means:
(a) the Board of Directors, provided that a majority of
directors are not parties to the claim, or
(b) special, independent counsel selected and appointed by
the Board of Directors; or
(c) special, independent counsel approved or chosen
pursuant to Section 6 below.
Any determination by the Reviewing Party shall be conclusive
and binding on Corporation and Director. If the Reviewing Party
determines that Director would not be permitted to be indemnified
in whole or in part, Director shall have the right to commence
litigation in the State of Delaware in any court of proper
jurisdiction seeking an order or judgment by the court
equivalent to the determination of the Reviewing Party or
challenging any such determination by the Reviewing Party or any
aspect thereof.
6. Change in Control of Corporation.
If there is a change in control of Corporation (as defined
below), then with respect to all matters thereafter arising
concerning the rights of Director to indemnity payments and
expense advances under this Agreement, or any other agreements or
Bylaws now or hereafter in effect relating to director
indemnification, Corporation shall seek legal advice and shall
retain a Reviewing Party only from special, independent counsel
selected by Director and approved by Corporation (which approval
shall not be unreasonably withheld), and who has not otherwise
performed services for Corporation or Director. In the event
that Director and Corporation are unable to agree on the
selection of the special, independent counsel, such special,
independent counsel shall be selected by lot from among at least
five law firms designated by Director, each of such law firms
having more than 35 attorneys and having a rating of "av" or
better in the then current Martindale-Hubbell Law Directory.
Such selection shall be made in the presence of Director (and
Director's legal counsel or either of them, as Director may
elect). Such special, independent counsel, among other relevant
appropriate matters, shall determine whether and to what extent
Director would be permitted to be indemnified under applicable
law and shall render its written opinion to Corporation and
Director to such effect. Corporation shall pay the reasonable
fees of the special, independent counsel and shall fully
indemnify such counsel against any and all costs and expenses
arising out of or relating to this Agreement or its engagement
pursuant hereto.
"Change in control" of Corporation shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Act")), other than a trustee or other fiduciary
holding securities under an employee benefit plan of Corporation,
is or becomes the "beneficial owner" (as defined in rule 13d-3
under the Act), directly or indirectly, of securities of
Corporation representing 20% or more of the total voting power
represented by Corporation's then outstanding voting securities;
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors
of Corporation and any new director whose election by the Board
of Directors or nomination for election by Corporation's
shareholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination
for election was previously so approved, cease, for any reason,
to constitute a majority of the Board of Directors; or (iii) the
shareholders of Corporation approve a merger or consolidation of
Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of
Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 80% of
the total voting power represented by the voting securities of
Corporation or the surviving entity, as the case may be, or an
agreement for sale or disposition by Corporation of all or
substantially all Corporation's assets.
7. Continuation of Indemnity.
All agreements and obligations of Corporation contained
herein shall continue during the period Director is a director of
Corporation (or is or was serving at the request of Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise), and shall
continue thereafter so long as Director shall be subject to any
possible claim or threatened, pending or completed action, suit
or proceeding, whether, civil, criminal or investigative, by
reason of the fact that Director was a director of Corporation or
serving in any other capacity referred to herein.
8. Notification and Defense of Claim.
Promptly after receipt by Director of notice of the
commencement of any action, claim, suit or proceeding, Director
will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the
commencement thereof; but the omission so to notify Corporation
will not relieve it from any liability which it may have to
Director otherwise than under this Agreement. With respect to
any such action, suit or proceeding as to which Director notifies
Corporation of the commencement thereof;
(a) Corporation will be entitled to participate therein at
its own expense, and;
(b) Except as otherwise provided below, to the extent that
it may wish, Corporation jointly with any other indemnifying
party similarly notified will be entitled to assume the
defense thereof, with counsel satisfactory to Director.
After notice from Corporation to Director of its election so
to assume the defense thereof, Corporation will not be
liable to Director under this Agreement for any legal or
other expenses subsequently incurred by Director in
connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below.
Director shall have the right to employ counsel in such
action, suite or proceeding, but the fees and expenses of
such counsel incurred after notice from Corporation of its
assumption of the defense thereof shall be at the expense of
Director unless (i) the employment of counsel by Director
has been authorized by Corporation; (ii) Director shall
have reasonably concluded that there may be a conflict of
interest between Corporation and Director in the conduct of
the defense of such action; or (iii) Corporation shall not
in fact have employed counsel to assume the defense of such
action, in each of which cases the fees and expenses of
counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of Corporation or
as to which Director shall have made the conclusion provided
for in (i) above.
(c) Corporation shall not be liable to indemnify Director
under this Agreement for any amounts paid in settlement of
any action or claim effected without its written consent.
Corporation shall not settle any action or claim in any
manner which would impose any penalty or limitation on
Director without Director's written consent. Neither
Corporation nor Director will unreasonably withhold its
consent to any proposed settlement.
9. Advancement of Expenses.
Upon the request of Director, and except as limited by
paragraph 8(b) above, Corporation shall reimburse Director for
all reasonable expenses paid by Director in defending any claim,
civil or criminal action, suit or proceeding for which Director
is entitled to be indemnified by Corporation for such expenses
under the provisions of the State Statutes, the Bylaws, this
Agreement or otherwise.
10. Repayment of Expenses.
Director shall reimburse Corporation for all reasonable
expenses paid or advanced to Director by Corporation in defending
any claim, civil or criminal action, suit or proceeding against
Director in the event and only to the extent that it shall be
determined by the Reviewing Party that Director is not entitled
to be indemnified by Corporation for such expenses under the
provisions of the State Statutes, the Bylaws, this Agreement or
otherwise.
11. Enforcement.
(a) Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations
imposed on Corporation hereby in order to induce Director to
continue as a director of Corporation, and acknowledges that
Director is relying upon this Agreement in continuing in
such capacity.
(b) In the event Director is required to bring any action
to enforce rights or to collect moneys due under this
Agreement and is successful in such action, Corporation
shall reimburse Director for all of Director's reasonable
fees and expenses in bringing and pursuing such action.
12. Severability.
Each of the provisions of this Agreement is a separate and
distinct agreement and independent of the others, so that if any
provision hereof shall be held to be valid or unenforceable for
any reason, such invalidity or unenforceability shall not affect
the validity or enforceability of the other provisions hereof.
13. Governing Law; Binding Effect; Amendment and Termination.
(a) This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
(b) This Agreement shall be binding upon Director and upon
Corporation, its successors and assigns, and shall inure to
the benefit of Director, his heirs, personal representatives
and assigns and to the benefit of Corporation, its
successors and assigns.
(c) No amendment, modification, termination or cancellation
of this Agreement shall be effective unless in writing,
signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on and as of the day and year first above written.
ELECTROSOURCE, INC.
By: /S/
Michael G. Semmens
President
DIRECTOR
/S/
WILLIAM R. GRAHAM
EXHIBIT 10.2
DIRECTOR INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made this 22nd of June, 1995, between
Electrosource, Inc., a Delaware corporation ("Corporation") and
NATHAN MORTON ("Director").
WITNESSETH:
WHEREAS, Director is a member of the Board of Directors
of Corporation and in such capacity is performing a valuable
service for Corporation; and
WHEREAS, the Bylaws of the Corporation (the "Bylaws")
provide for the indemnification of the officers, directors,
agents and employees of Corporation; and
WHEREAS, such Bylaws and Section 145 of the Delaware
General Corporation Laws, as amended to date (the "State
Statutes"), specifically provide that they are not exclusive, and
thereby allow that contracts may be entered into between
Corporation and the members of its Board of Directors with
respect to indemnification of such directors; and
WHEREAS, in accordance with the authorization provided
by the State Statutes, Corporation has purchased and presently
maintains a policy or policies of Directors and Officers
Liability Insurance ("D&O Insurance") covering certain
liabilities which may be incurred by its directors and officers
in the performance of their services for Corporation; and
WHEREAS, recent developments with respect to the terms
and availability of D&O Insurance and with respect to the
application, amendment and enforcement of statutory and bylaw
indemnification provisions generally have raised questions
concerning the adequacy and reliability of the protection
afforded to directors thereby; and
WHEREAS, in order to resolve such questions and thereby
induce Director to continue to serve as a member of the Board of
Directors of Corporation, Corporation has determined and agreed
to enter into this Agreement with Director;
NOW THEREFORE, in consideration of Director's continued
service as a Director after the date hereof, the parties hereto
agree as follows:
1. Indemnity of Director.
Corporation shall hold harmless and indemnify Director to
the full extent authorized or permitted by the provisions of the
State Statutes, or by any amendment thereof or other statutory
provisions authorizing or permitting such indemnification which
is adopted after the date hereof.
2. Maintenance of Insurance and Self Insurance.
(a) Corporation represents that it presently has in force
and effect a policy of D&O Insurance with the insurance
company and in the amount as follows (the "Insurance
Policy"):
Insurer Policy No. Amount Deductible
National Union Fire Insurance Co. #4452661 $2,000,000 $100,000
Subject only to the provisions of Section 2(b) hereof,
Corporation hereby agrees that, so long as Director shall
continue to serve as a director of Corporation (or shall
continue at the request of Corporation to serve as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) and
thereafter so long as Director shall be subject to any
possible claim or threatened, pending or completed action,
suit or proceeding, whether civil, criminal or
investigative, by reason of the fact that Director was a
director of Corporation (or served in any of said other
capacities), Corporation will purchase and maintain in
effect for the benefit of Director one or more valid,
binding and enforceable policy or policies of D&O Insurance
providing, in all respects, coverage at least comparable to
that presently provided pursuant to the Insurance Policy.
(b) Corporation shall not be required to maintain said
policy or policies of D&O Insurance in effect if said
insurance is not reasonably available or if, in the
reasonable business judgment of the then directors of
Corporation, either (i) the premium cost for such insurance
is substantially disproportionate to the amount of coverage;
or (ii) the coverage provided by such insurance is so
limited by exclusions that there is insufficient benefit
from such insurance.
(c) In the event Corporation does not purchase and maintain
in effect said policy or policies of D&O Insurance pursuant
to the provisions of Section 2(b) hereof, Corporation agrees
to hold harmless and indemnify Director to the full extent
of the coverage which would otherwise have been provided for
the benefit of Director pursuant to the Insurance Policy.
3. Additional Indemnity.
Subject only to the limitations set forth in Section 4
hereof, and without limitation to Section 1 above, Corporation
shall further hold harmless and indemnify Director:
(a) Against any and all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by Director in connection
with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of
the Corporation) to which Director is or was a party or is
threatened to be made a party by reason of the fact that
Director is, was or at any time becomes a director of the
Corporation, or is or was serving or at any time serves at
the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise; and
(b) Otherwise to the fullest extent that may be provided to
Director by Corporation under the nonexclusivity provisions
of Section 10.5 of the Bylaws of the Corporation and the
State Statutes.
4. Limitations on Additional Indemnity.
No indemnity pursuant to Section 3 hereof shall be paid by
Corporation:
(a) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the amount of such losses for
which the Director is indemnified either pursuant to
Sections 1 or 2 hereof or pursuant to any D&O Insurance
purchased and maintained by the Corporation; or
(b) in respect to remuneration paid to Director if it shall
be determined by the Reviewing Party (as defined in Section
5 below), or by a final judgment or other final
adjudication, that such remuneration was in violation of
law; or
(c) if a determination of the Reviewing Party is made, or
if a judgment is rendered against a Director, that an
accounting must be made for profits made from the purchase
or sale by Director of securities of Corporation in
violation of the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory
law; or
(d) on account of Director's conduct which is determined by
the Reviewing Party, or by a final judgment or other final
adjudication, to have been knowingly fraudulent,
deliberately dishonest or of willful misconduct; or
(e) if the Reviewing Party or a Court having jurisdiction
in the matter shall determine that such indemnification is
not lawful.
5. Reviewing Party.
"Reviewing Party" means:
(a) the Board of Directors, provided that a majority of
directors are not parties to the claim, or
(b) special, independent counsel selected and appointed by
the Board of Directors; or
(c) special, independent counsel approved or chosen
pursuant to Section 6 below.
Any determination by the Reviewing Party shall be conclusive
and binding on Corporation and Director. If the Reviewing Party
determines that Director would not be permitted to be indemnified
in whole or in part, Director shall have the right to commence
litigation in the State of Delaware in any court of proper
jurisdiction seeking an order or judgment by the court
equivalent to the determination of the Reviewing Party or
challenging any such determination by the Reviewing Party or any
aspect thereof.
6. Change in Control of Corporation.
If there is a change in control of Corporation (as defined
below), then with respect to all matters thereafter arising
concerning the rights of Director to indemnity payments and
expense advances under this Agreement, or any other agreements or
Bylaws now or hereafter in effect relating to director
indemnification, Corporation shall seek legal advice and shall
retain a Reviewing Party only from special, independent counsel
selected by Director and approved by Corporation (which approval
shall not be unreasonably withheld), and who has not otherwise
performed services for Corporation or Director. In the event
that Director and Corporation are unable to agree on the
selection of the special, independent counsel, such special,
independent counsel shall be selected by lot from among at least
five law firms designated by Director, each of such law firms
having more than 35 attorneys and having a rating of "av" or
better in the then current Martindale-Hubbell Law Directory.
Such selection shall be made in the presence of Director (and
Director's legal counsel or either of them, as Director may
elect). Such special, independent counsel, among other relevant
appropriate matters, shall determine whether and to what extent
Director would be permitted to be indemnified under applicable
law and shall render its written opinion to Corporation and
Director to such effect. Corporation shall pay the reasonable
fees of the special, independent counsel and shall fully
indemnify such counsel against any and all costs and expenses
arising out of or relating to this Agreement or its engagement
pursuant hereto.
"Change in control" of Corporation shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Act")), other than a trustee or other fiduciary
holding securities under an employee benefit plan of Corporation,
is or becomes the "beneficial owner" (as defined in rule 13d-3
under the Act), directly or indirectly, of securities of
Corporation representing 20% or more of the total voting power
represented by Corporation's then outstanding voting securities;
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors
of Corporation and any new director whose election by the Board
of Directors or nomination for election by Corporation's
shareholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination
for election was previously so approved, cease, for any reason,
to constitute a majority of the Board of Directors; or (iii) the
shareholders of Corporation approve a merger or consolidation of
Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of
Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 80% of
the total voting power represented by the voting securities of
Corporation or the surviving entity, as the case may be, or an
agreement for sale or disposition by Corporation of all or
substantially all Corporation's assets.
7. Continuation of Indemnity.
All agreements and obligations of Corporation contained
herein shall continue during the period Director is a director of
Corporation (or is or was serving at the request of Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise), and shall
continue thereafter so long as Director shall be subject to any
possible claim or threatened, pending or completed action, suit
or proceeding, whether, civil, criminal or investigative, by
reason of the fact that Director was a director of Corporation or
serving in any other capacity referred to herein.
8. Notification and Defense of Claim.
Promptly after receipt by Director of notice of the
commencement of any action, claim, suit or proceeding, Director
will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the
commencement thereof; but the omission so to notify Corporation
will not relieve it from any liability which it may have to
Director otherwise than under this Agreement. With respect to
any such action, suit or proceeding as to which Director notifies
Corporation of the commencement thereof;
(a) Corporation will be entitled to participate therein at
its own expense, and;
(b) Except as otherwise provided below, to the extent that
it may wish, Corporation jointly with any other indemnifying
party similarly notified will be entitled to assume the
defense thereof, with counsel satisfactory to Director.
After notice from Corporation to Director of its election so
to assume the defense thereof, Corporation will not be
liable to Director under this Agreement for any legal or
other expenses subsequently incurred by Director in
connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below.
Director shall have the right to employ counsel in such
action, suite or proceeding, but the fees and expenses of
such counsel incurred after notice from Corporation of its
assumption of the defense thereof shall be at the expense of
Director unless (i) the employment of counsel by Director
has been authorized by Corporation; (ii) Director shall
have reasonably concluded that there may be a conflict of
interest between Corporation and Director in the conduct of
the defense of such action; or (iii) Corporation shall not
in fact have employed counsel to assume the defense of such
action, in each of which cases the fees and expenses of
counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of Corporation or
as to which Director shall have made the conclusion provided
for in (i) above.
(c) Corporation shall not be liable to indemnify Director
under this Agreement for any amounts paid in settlement of
any action or claim effected without its written consent.
Corporation shall not settle any action or claim in any
manner which would impose any penalty or limitation on
Director without Director's written consent. Neither
Corporation nor Director will unreasonably withhold its
consent to any proposed settlement.
9. Advancement of Expenses.
Upon the request of Director, and except as limited by
paragraph 8(b) above, Corporation shall reimburse Director for
all reasonable expenses paid by Director in defending any claim,
civil or criminal action, suit or proceeding for which Director
is entitled to be indemnified by Corporation for such expenses
under the provisions of the State Statutes, the Bylaws, this
Agreement or otherwise.
10. Repayment of Expenses.
Director shall reimburse Corporation for all reasonable
expenses paid or advanced to Director by Corporation in defending
any claim, civil or criminal action, suit or proceeding against
Director in the event and only to the extent that it shall be
determined by the Reviewing Party that Director is not entitled
to be indemnified by Corporation for such expenses under the
provisions of the State Statutes, the Bylaws, this Agreement or
otherwise.
11. Enforcement.
(a) Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations
imposed on Corporation hereby in order to induce Director to
continue as a director of Corporation, and acknowledges that
Director is relying upon this Agreement in continuing in
such capacity.
(b) In the event Director is required to bring any action
to enforce rights or to collect moneys due under this
Agreement and is successful in such action, Corporation
shall reimburse Director for all of Director's reasonable
fees and expenses in bringing and pursuing such action.
12. Severability.
Each of the provisions of this Agreement is a separate and
distinct agreement and independent of the others, so that if any
provision hereof shall be held to be valid or unenforceable for
any reason, such invalidity or unenforceability shall not affect
the validity or enforceability of the other provisions hereof.
13. Governing Law; Binding Effect; Amendment and Termination.
(a) This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
(b) This Agreement shall be binding upon Director and upon
Corporation, its successors and assigns, and shall inure to
the benefit of Director, his heirs, personal representatives
and assigns and to the benefit of Corporation, its
successors and assigns.
(c) No amendment, modification, termination or cancellation
of this Agreement shall be effective unless in writing,
signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on and as of the day and year first above written.
ELECTROSOURCE, INC.
By: /S/
Michael G. Semmens
President
DIRECTOR
/S/
NATHAN MORTON
EXHIBIT 10.3
Amendment No. 4 to
1988 Non-Employee Director Stock Option Plan
Reference is made to that certain 1988 Non-Employee Director
Stock Option Plan (the "Plan"), adopted by the Board of Directors
of Electrosource, Inc., a Delaware corporation (the "Company") on
April 27, 1988, as amended by that certain Amendment No. 1 to Non-
Employee Director Stock Option Plan of Electrosource, Inc., dated
as of March 1, 1990, that certain Amendment No. 2 to Non-Employee
Director Stock Option Plan dated as of February 19, 1992, and
that certain Amendment No. 3 to Non-Employee Director Stock
Option Plan.
Section VI(c) of the Plan is hereby amended to read in its
entirety as follows:
"(c) The term of each option shall be for ten years from the
date of grant thereof, and shall be subject to earlier
termination as herein provided."
Section VI(d)(i) of the Plan is hereby amended to read in
its entirety as follows:
"(I) the expiration of ten years from the date of grant of
such option."
This amendment shall be effective as of February 8, 1995,
but shall be subject to approval by the holders of at least a
majority of the outstanding shares of the voting stock of the
Company present and voting at the annual meeting of the Company's
shareholders to be held in May 1995.
Executed to be effective as of February 8, 1995
ELECTROSOURCE, INC.
By: /S/
Michael G. Semmens
Title: President
EXHIBIT 10.4
1994 Stock Option Plan
Adopted by the Board of Directors
November 2, 1994
1. The purpose of the plan. This stock option plan (the
"Plan") is intended to provide an opportunity for officers,
directors and key employees of Electrosource, Inc. (the
"Corporation") and its present and future subsidiary corporations
(individually a "subsidiary" and collectively "subsidiaries"), to
acquire shares of the Corporation's stock. The Plan provides for
the grant of "Incentive Stock Options," as defined in Section 422
of the Internal Revenue code of 1986 (the "Code"), and stock
options not qualifying as Incentive Stock Options ("Non-Qualified
Stock Options"), providing an equity interest in the
Corporation's business, as an incentive to service or continued
service with the Corporation and to aid the Corporation in
obtaining and retaining key personnel of outstanding ability.
2. Stock Subject to the Plan. The maximum number of
shares of the common stock, $.10 par value, of the Corporation
(the "Stock") which may be issued pursuant to Incentive Stock
Options and Non-Qualified Stock Options granted under the Plan
(collectively referred to herein as "Options") shall be a total
of 1,500,000 shares of Stock, which may be either authorized and
unissued Stock or Stock held in the treasury of the Corporation,
as shall be determined from time to time by the committee of the
Board of Directors of the Corporation described below. If an
Option expires or terminates for any reason without being
exercised in full, the unpurchased shares of Stock subject to
such Option shall again be available for purposes of the Plan.
3. Administration of the Plan. This plan shall be
administered by a committee of the Board of Directors consisting
of not less than three directors, none of whom are officers of
the Corporation or any of its "affiliates" (as such terms are
used in Rule 16b-3 promulgated by the Securities and Exchange
Commission) and none of whom shall be eligible for awards under
the Plan or the 1987 Stock Option Plan during his tenure on the
Committee or during the one year term prior to serving on the
Committee. As used herein, the term "Committee" refers to such
committee. The Committee shall have full authority in its
discretion to determine the officers and key employees of the
Corporation and its subsidiaries to whom Options (as defined
below) shall be granted, the number of shares of Stock covered
thereby and the terms and provisions thereof, subject to the
Plan. In making such determinations, the Committee may take into
account the nature of the services rendered and to be rendered by
the respective officers and key employees, their present and
potential contributions to the Corporation and its subsidiaries
and any other factors which the Committee deems relevant. The
Committee shall have full and conclusive authority to interpret
the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of
the respective Option agreements; and to make all other
determinations necessary or advisable for the proper
administration of the Plan. The Committee's determinations under
the Plan need not be uniform and may be made by it selectively
among persons who receive, or are eligible to receive, Options
under the Plan (whether or not such persons are similarly
situated). The Committee's decisions shall be final and binding
on all participants in the Plan.
4. Eligibility and Limits. Options to purchase Stock,
(hereinafter referred to "Options") may be granted only to
officers, directors (other than those on the Committee), and
other key employees of the Corporation and its present or future
subsidiary corporations. Any Incentive Stock Option granted to
any person who, at any time such Options are granted, owns (as
defined in Sections 422 and 424 of the Code) stock possessing
more than ten percent (10%) of the total combined voting power of
all classes of stock of the Corporation or one of its parent (if
any) or subsidiary corporations shall comply with any applicable
provisions of Section 422 of the Code. In the case of Incentive
Stock Options, the aggregate fair market value (determined at the
time an Incentive Stock Option is granted) of the Stock with
respect to which Incentive Stock Options are exercisable for the
first time by an individual during any calendar year under the
Plan and all other plans of the Corporation and its parent and
subsidiary corporations (within the meaning of Sections 422 and
424 of the Code) shall not exceed $100,000.
5. Incentive Stock Options and Non-Qualified Stock
Options. At the time any Option is granted under the Plan, the
Committee shall determine whether the Option is to be an
Incentive Stock Option or a Non-Qualified Stock Option, and the
Option shall be clearly identified as to its status as an
Incentive Stock Option or a Non-Qualified Stock Option. The
number of shares as to which Incentive Stock Options and Non-
Qualified Stock Options shall be granted shall be determined by
the Committee in its sole discretion, subject to the provisions
of Section 2 as to the total number of shares available for Stock
Options granted under the Plan.
6. Terms and Conditions of Options. Subject to the
following provisions and other provisions of the Plan, all
Options shall be in such form and upon such terms and conditions
as the Committee in its discretion may from time to time
determine.
(a) Option Term. An Option shall in no event be
exercisable after the expiration of ten years from the date
of grant of such Option.
(b) Payment. Payment for all shares purchased pursuant to
exercise of an Option shall be made by cash, check, that
number of shares of the Company's Common Stock having an
aggregate market value (as determined by the closing price
per share on the National Association of Securities Dealers
Quotation Market on the date of exercise) equal to such
purchase price, or any combination of the foregoing.
Subject to the provisions of Section 6(e), such payment
shall be made at the time that the Option or any part
thereof is exercised, and no shares of Stock shall be issued
or delivered until full payment therefor has been made.
(c) Nontransferability of Options. An Option shall not be
transferable or assignable except by will or by the laws of
descent and distribution and shall be exercisable, during
the holder's lifetime, only by the holder.
(d) Termination of Employment or Death. Upon any
termination of employment of the holder for any reason other
than death or disability, any Option held at the date of
such termination may, to the extent exercisable, be
exercised within three months after the date of such
termination. Upon any termination of employment of the
holder by reason of disability, any Option held at the date
of such termination may, to the extent exercisable, be
exercised within twelve months after the date of such
termination. If the holder of an Option dies, any Option
held at the date of death may, to the extent exercisable, be
exercised by a legatee or legatees of the holder under the
holder's last will, or by the holder's personal
representatives or distributees, within twelve months after
the holder's death. This Section 6(d) shall not extend the
term of the Option specified in or pursuant to Section 6(a).
For purposes of this Section 6(d), employment of a holder
shall not be deemed terminated so long as the holder is
employed by the Corporation, by a subsidiary of the
Corporation or by another corporation (or a parent or
subsidiary corporation of such other corporation) which has
assumed the Option of the holder. For purposes of this
Section 6(d), the extent to which an Option is exercisable
shall be determined as of the date of termination of
employment.
(e) Special Procedure for Certain Credit Assisted
Transactions. To the extent not inconsistent with the
provisions of Section 422 of the Code or the provisions of
Rule 16b-3 issued by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended (the
"Act"), any Option holder desiring to obtain credit from a
broker, dealer or other "creditor" as defined in Regulation
T issued by the Board of Governors of the Federal Reserve
System to assist in exercising an Option may deliver to such
creditor a written exercise notice executed by such holder
with respect to such Option, together with written
instruction to the Corporation to deliver the Stock Issued
upon such exercise of the Option to the creditor for deposit
into an account designated by the Option holder; upon
receipt of such exercise notice and instructions in a form
acceptable to the Corporation, the Corporation shall confirm
to the creditor that it will deliver to the creditor on
behalf of the Option holder the Stock issued upon such
exercise of the Option and covered by such instruction
promptly following receipt of the exercise price from the
creditor. To the extent not inconsistent with the
provisions of Section 422 of the code or the provisions of
Rule 16b-3 issued by the Securities and Exchange Commission
under the Act, upon written request, the Corporation may in
its discretion, but shall not be obligated, to deliver to
the creditor on behalf of the Option holder shares of Stock
resulting from such a credit assisted exercise prior to
receipt of the exercise price for such shares if the
creditor has delivered to the Corporation, in addition to
the other documents contemplated by this Section 6(e), the
creditor's written agreement to pay the Corporation such
exercise price in cash within five days after delivery of
such shares. The credit assistance contemplated by this
Section 6(e) may include a margin loan by the creditor
secured by the stock purchased upon exercise of an Option
or, in the case of an Option holder who is not subject to
Section 16 of the Act, an immediate sale of some or all of
such Stock by the creditor to obtain or recover the exercise
price which the creditor has committed to pay to the
Corporation on behalf of the Option holder.
7. Terms and Conditions of Options. Subject to the
following provisions and other provisions of the Plan, all
Options shall be in such form and upon such terms and conditions
as the Committee in its discretion may from time to time
determine.
(a) Option Price. Subject to Section 8 and other
provisions of this Section 7(a), the Option price per share
of Stock purchasable under any Option granted under the Plan
shall be fixed by the Committee and set forth in the
applicable Option agreement. With respect to each grant of
an Incentive Stock Option, the option price per share shall
not be less than the fair market value of a share of Stock
(as determined in good faith by the Committee) on the date
such Option is granted. The date a Option is granted shall
be the date on which the Committee has approved the terms
and conditions of an Option agreement evidencing the Option
and has determined the recipient of the Option and the
number of shares covered by the Option and has taken all
such other action as is necessary to complete the grant of
the Option. In the event that the Stock is listed on NASDAQ
or an established stock exchange, its fair market value
shall be deemed to be the closing price of the Stock on such
exchange on the date the Option is granted, or if no sale of
Stock shall have been made on such date, its fair market
value shall be deemed to be such price for the next
preceding date on which a sale has have occurred.
(b) Conditions to Exercise of Option. Each Option granted
under the Plan shall be exercisable at such time or times,
or upon the occurrence of such event or events, and in such
amounts as the Committee shall specify in the Option
agreement, except that no Option when initially granted
shall provide that it may be exercisable to any extent
during the first six months following the date of grant;
provided, however, that subsequent to the grant of a Option,
the Committee at any time before complete termination of
such Option, may accelerate the time or times at which such
Option may be exercised in whole or in part.
8. Change in Capitalization; Merger; Liquidation. The
number of shares of Stock as to which Options may be granted, the
number of shares covered by each outstanding Option, and the
price per share of each outstanding Option shall be
proportionately adjusted for any increase or decrease in the
number of issued shares of Stock resulting from a subdivision or
combination of shares or the payment of a stock dividend in
shares of Stock to holders of outstanding shares of Stock or any
other increase or decrease in the number of such shares effected
without receipt of consideration by the Corporation. If the
Corporation shall be the surviving corporation in any merger or
consolidation, recapitalization, reclassification of shares or
similar reorganization, the holder of each outstanding Option
shall be entitled to purchase, at the same times and upon the
same terms and conditions as are then provided in the Option, the
number and class of shares of stock or other securities to which
a holder of the number of shares of Stock subject to the Option
at the time of such transaction would have been entitled to
receive as a result of such transaction. In the event of any
such changes in capitalization of the Corporation, the Committee
may make such additional adjustments in the number and class of
shares of Stock or other securities with respect to which
outstanding Options are exercisable and with respect to which
future Options may be granted as the Committee in its sole
discretion shall deem equitable or appropriate, subject to the
provisions of Section 14, to prevent dilution or enlargement of
rights. Any adjustment pursuant to this Section 8 may provide,
in the Committee's discretion, for the elimination of any
fractional shares that might otherwise become subject to any
Option without payment therefor. The optionee shall have the
right, immediately prior to dissolution, liquidation, merger or
consolidation of the Corporation, to exercise his Options in full
without regard to any installment exercise provisions, to the
extent that it shall not be exercised. In the event of a
dissolution or liquidation of the Corporation or a merger or
consolidation in which the Corporation is not the surviving
corporation, each outstanding Option shall terminate upon the
effective date thereof, except to the extent that another
corporation assumes such Option or substitutes another option
therefor. In the event of a change of the Corporation's shares
of Stock with par value into the same number of shares with a
different par value or without par value, the shares resulting
from any such change shall be deemed to be the Stock within the
meaning of the Plan. Except as expressly provided in this
Section 8, the holder of an Option shall have no rights by reason
or any subdivision or combination of shares of Stock of any class
or the payment of any stock dividend or any other increase or
decrease in the number of shares of Stock of any class or by
reason of any dissolution, liquidation, merger or consolidation
or distribution to the Corporation's shareholders of assets or
stock of another corporation. Except as expressly provided
herein, any issue by the Corporation of shares of stock of any
class, or securities convertible into shares of stock of any
class, shall not effect, and no adjustment by reason thereof
shall be made with regard to, the number or price of shares of
Stock subject to any Option. The existence of the Plan and
Options granted pursuant to the Plan shall not affect in any way
the right or power of the Corporation to make or authorize any
adjustment, reclassification, reorganization or other change in
its capital or business structure, any merger or consolidation of
the Corporation, any issue of debt or equity securities having
preferences or priorities as to the Stock or the rights thereof,
the dissolution of the Corporation, any sale or transfer of all
or part of its business or assets, or any other corporate act or
proceeding.
9. Compliance with Code; Compliance with Rule 16b-3. All
Incentive Stock Options granted hereunder are intended to comply
with Section 422 and, to the extent applicable, Section 424 of
the Code, and all provisions of this Plan and all Incentive Stock
Options granted hereunder shall be construed in such manner as to
effectuate that intent. This Plan and all Options granted
hereunder are intended to satisfy the conditions of Rule 16b-3
issued by the Securities and Exchange Commission under the Act
and all provisions of this Plan and all Options granted hereunder
shall be construed in such manner as to effectuate that intent.
10. Right to Terminate Employment; No Rights as
Stockholder. Nothing in the Plan or in any Option granted under
the Plan shall confer upon any holder thereof the right to
continue as an employee of the Corporation or any of its
subsidiaries or affect the right of the Corporation or any of its
subsidiaries to terminate the holder's employment at any time,
The holder of an Option shall, as such, have none of the rights
of a stockholder.
11. Leaves of Absence. Except as otherwise provided by law
or regulation with respect to Incentive Stock Options, the
committee may in its discretion determine whether any leave of
absence constitutes a termination of employment for purposes of
the Plan and the impact, if any, of such leave of absence on
Options previously granted to a holder who takes a leave of
absence.
12. Restrictions on Delivery and Sale of Shares. Each
Option granted under the Plan is subject to the condition that if
at any time the Committee, in its discretion, shall determine
that the listing, registration or qualification of the shares
covered by such Option upon any securities exchange or under any
state or federal law is necessary or desirable as a condition of
or in connection with the granting of such Option or the purchase
or delivery of shares thereunder, the delivery of any or all
shares pursuant to such Option may be withheld unless and until
such listing, registration or qualification shall have been
effected. If a registration statement is not in effect under the
Securities Act of 1933 and any applicable state securities laws
with respect to the shares of Stock Purchasable or otherwise
deliverable under Options then outstanding, the Committee may
require, as a condition of exercise of any Option, that the
optionee or other recipient of an Option represent, in writing,
that the shares received pursuant to the Option are being
acquired for investment and not with a view to distribution and
agree that the shares will not be disposed of except pursuant to
an effective registration statement, unless the Corporation shall
have received an opinion of council that such disposition is
exempt from such requirement under the Securities Act of 1933 and
any applicable state securities laws. The Corporation may
endorse on certificates representing shares delivered pursuant to
an Option such legends referring to the foregoing representations
or restrictions or any other applicable restrictions or resale as
the Corporation, in its discretion, shall deem appropriate.
13. Termination and Amendments of the Plan. The Plan shall
terminate on November 1, 2004, the date ten years after adoption
of the Plan by the Board of Directors, and no Options shall be
granted under the Plan after that date, but Options granted
before termination of the Plan shall remain exercisable
thereafter until they expire or lapse according to their terms.
The Plans may be terminated, modified or amended by the
shareholders or the Board of Directors of the Corporation;
provided, however, that:
(a) no such termination, modification or amendment without
the consent of the holder of the Option shall adversely
affect his rights under such Option;
(b) any modification or amendment which would (I)
materially increase the benefits accruing to participate
(ii) materially increase the number of securities which may
be issued under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the
Plan, within the meaning of Rule 16b-3 issued by the
Securities and Exchange Commission under the Act, shall be
effective only if it is approved by the shareholders of the
Corporation at the next annual meeting of shareholders after
the date of adoption by the Board of Directors of such
modification or amendment.
14. Effective Date of Plan; Shareholder Approval. The Plan
shall become effective on November 2, 1994, the date of its
adoption by the Board of Directors, subject, however, to the
approval of the Plan by the Corporation's shareholders at their
next annual meeting. Options granted hereunder prior to such
approval shall be conditional upon such approval. Unless such
approval is obtain by November 2, 1995, this Plan and any Options
granted hereunder shall become void thereafter.
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