Filed Pursuant to Rule 424B3
PROSPECTUS
ELECTROSOURCE, INC.
80,610 shares of Common Stock, $1.00 par value
The shares offered hereby are outstanding shares of the Common
Stock, $1.00 par value per share (OCommon StockO), of Electrosource,
Inc., a Delaware corporation (the OCompanyO), which are being sold
by the Selling Shareholder named herein. The Company will not
receive any part of the proceeds from the sale of such shares.
The Company has agreed to bear all costs of the preparation,
filing and prosecution of the registration statement of which this
Prospectus is a part. Such expenses are estimated to be
approximately $25,000 for the offering.
The Company has been advised that the sale of the shares may be
made from time to time by or for the account of the Selling
Shareholder in the over-the-counter market through broker-dealers.
These sales will be made at market prices prevailing at the time of
sale. The broker-dealers may act as agents of the Selling
Shareholder or may purchase any of the shares as principal and
thereafter may sell such shares from time to time in the over-the-
counter market at prices prevailing at the time of sale or at
negotiated prices. Neither the security to be offered nor the
selling method to be used may be varied.
Broker-dealers used by the Selling Shareholder may be deemed to be
OunderwritersO as defined in the Securities Act of 1933. In
addition, the Selling Shareholder may be deemed to be an underwriter
within the meaning of the Securities Act of 1933 with respect to the
Common Stock offered hereby.
The Common Stock is traded in the over-the-counter market and is
quoted on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") under the symbol "ELSId." On August 1,
1996, the closing price for a share of Common Stock as reported on
NASDAQ was $7.00 per share.
SEE "RISK FACTORS", ON PAGE 4 OF THIS PROSPECTUS, FOR A
DISCUSSION OF CERTAIN IMPORTANT FACTORS INVOLVED IN THIS
OFFERING.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August 2, 1996
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and in accordance therewith files reports and other information with
the Securities and Exchange Commission (the "Commission"). Such
reports, together with proxy statements and other information filed
by the Company, can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at certain of its Regional Offices
located at: 7 World Trade Center, New York, New York 10007; and Room
1204, Everett McKinley Dirksen Building, 219 South Dearborn Street,
Chicago, Illinois 60604. Copies of such material can also be
obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission a registration statement
under the Securities Act of 1933, as amended, with respect to the
securities offered hereby (the "Registration Statement"). As
permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings
contained in the Registration Statement. Such additional information
can be inspected at the principal office of the Commission, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
the Registration Statement can be obtained from the Commission at
prescribed rates by writing to the Commission at such address.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which are on file with the commission,
are hereby specifically incorporated by reference into this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995;
(2) The Company's Quarterly Report on Form 10Q for the three
months ended March 31, 1996.
(3) All other reports filed by the Company pursuant to Section
13(a) or Section 15(d) of the Exchange Act since December 31, 1995,
including the following:
(i) Form 8-K Current Report dated January 12, 1996;
(ii) Form 10-C Report by Issuer of Securities Quoted on
NASDAQ Interdealer Quotation System dated January 23, 1996;
(iii) Form 10-C Report by Issuer of Securities Quoted on
NASDAQ Interdealer Quotation System dated February 29, 1996;
and
(iv) Form 10-C Report by Issuer of Securities Quoted on
NASDAQ Interdealer Quotation System dated June 1, 1996.
(4) The description of the CompanyOs Common Stock set forth
under the captions "Description of Electrosource, Inc. Common Stock"
and Purposes and Effects of Certain Provisions of the Electrosource,
Inc. Certificate and the Electrosource, Inc. Bylaws" in the
Information Statement filed as Exhibit 28.1 to the Company's
Registration Statement on Form 10 filed October 19, 1987 (as amended
by Form 8 Amendments filed January 8, 1988 and January 13, 1988),
which description of the Company's Common Stock was incorporated by
reference into the Registration Statement on Form 10 in response to
Item 11, "Description of Registrant's Securities to be Registered."
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to December 31,
1995, and prior to the termination of the offering shall be deemed
to be incorporated by reference into this Prospectus.
The Company will provide without charge to each person, including
any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the
information that has been incorporated by reference in this
Prospectus (not including exhibits to the information that is
incorporated by reference unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests should be directed to Electrosource, Inc.,
Corporate Secretary, 3800B Drossett Drive, Austin, Texas 78744-1131,
telephone (512) 445-6606.
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by, and should
be read in conjunction with, the more detailed information and
financial statements contained elsewhere in this Prospectus and in
the documents incorporated by reference herein.
The Company
Electrosource, Inc. (the "Company") is engaged in the development
and commercial application of technologies related to lead-acid,
rechargeable storage batteries and ancillary products. The Company's
principal activity is the development, manufacture and sale of a new
lead-acid battery concept called Horizon. See "The Company," below.
The principal executive offices of the Company are located at
3800B Drossett Drive, Austin, Texas 78744-1131, and its telephone
number is (512) 445-6606.
Recent Developments
The Company amended its Certificate of Incorporation on July 22,
1996, to effect a ten-for-one reverse stock split.
The Company has received assistance in the form of a $3 million
payment from Chrysler Corporation for compensation for continued
capacity maintenance, engineering and development (R&D) effort and
ramp-up costs incurred by the Company in relation to its role as a
supplier to the automaker for its electric vehicle EPIC Minivan
Program.
See "Recent Developments", below.
The Offering
The shares offered hereby are 80,610 outstanding shares of the
CompanyOs Common Stock, $1.00 par value per share, which are being
sold by Mitsui Engineering & Shipbuilding Co., Ltd. ("Mitsui" or the
"Selling Shareholder"). The Company will not receive any part of the
proceeds from the sale of such shares.
The sale of the shares may be made from time to time by or for the
account of the Selling Shareholder in the over-the-counter market
through broker-dealers. These sales will be made at market prices
prevailing at the time of sale. The broker-dealers may act as agents
of the Selling Shareholder or may purchase any of the shares as
principal and thereafter may sell such shares from time to time in
the over-the-counter market at prices prevailing at the time of sale
or at negotiated prices. Neither the security to be offered nor the
selling method to be used may be varied.
The Company has agreed to bear all costs of preparing, filing and
processing the registration statement of which this Prospectus is a
part. Such expenses are estimated to be approximately $25,000 for
the offering.
RISK FACTORS
An investment in the Common Stock offered hereby involves a high
degree of risk. The following factors should be considered in
evaluating an investment in the Company.
Financial Constraints. In the absence of any additional financing
and without the generation of any significant revenue (other than
interest on cash investments), management anticipates that the
Company's cash will be substantially depleted in the fourth quarter,
1996. There can be no assurance that additional financing can be
obtained on terms satisfactory to the Company, if at all. The full
depletion of the Company's cash would likely lead to the Company's
ceasing all operations and activities and, ultimately, to its
dissolution and liquidation.
Contingencies Related to Business Plan and Commercialization of
Product.EIn June 1994 the Company made the decision to become the
North American manufacturer of the Horizon" battery, while
continuing its previous plans with respect to licensing of third
party manufacturers overseas. The shift from research and
development to manufacturing has required, and will continue to
require, significant additional outlays for capital equipment as
well as greatly increased managerial and production staffing, which
will in turn require significant amounts of new capital. There can
be no assurance that the Company will be able to raise this capital
on terms satisfactory to the Company, or at all. Development of the
Horizon" Battery and manufacturing processes continue, and there can
be no assurance that the battery will be successfully
commercialized.
Possible Loss of Trading Liquidity.EThe Company's Common Stock is
traded on the Over-the-Counter Market and is reported on NASDAQ. In
order to maintain listing by NASDAQ, the Company must maintain a
minimum $1 million of stockholders' equity. The Company is
currently in compliance with this requirement. If the minimum
required balance is not maintained, the NASDAQ may choose to delist
the Common Stock of the Company from trading which would restrict
the liquidity of the Common Stock. Ordinarily, before delisting,
NASDAQ would provide the Company notice and an opportunity to
present and carry out a plan for compliance. Delisting by NASDAQ
would be an Event of Default under the terms of the April 1995
Debentures and could trigger a requirement to repay the Debentures
immediately. April 1995 Debentures with a principal balance of
$250,000 were outstanding at March 31, 1996.
Termination of Technology License. The Company holds the rights to
develop and use certain coextrusion technology necessary to the
manufacture of its principal products under an exclusive license
from Blanyer-Mathews Associates, Inc. ("Blanyer-Mathews"). This
license is subject to termination by Blanyer-Mathews in the event
that the Company enters bankruptcy proceedings or defaults in its
obligation to pay royalties. Loss of the rights to the coextrusion
technology would have a severe adverse impact upon the Company's
continued viability.
Loss of Trade Secret Protection. The Company has elected to
protect certain aspects of its technology under state trade secret
laws, rather than under federal patent laws. Trade secret protection
requires that the Company preserve the confidentiality of the
technology subject to trade secret status. In the event that such
confidentiality cannot be maintained, or if third parties can
successfully "reverse-engineer" the affected technology, trade
secret status may be lost. Loss of trade secret protection would
allow third parties to utilize the technology without obtaining a
license from the Company.
Competition. The lead-acid battery industry is highly competitive
and includes a number of firms, many with greater financial,
technological, manufacturing, marketing and other resources and
longer operating histories than the Company. There is no assurance
that the Company will be able to compete successfully in this highly
competitive environment due to the Company's limited financial
resources and lack of established products.
Dependence on Key Personnel. Management of the Company is composed
primarily of Michael Semmens, President, Chief Executive Officer and
Chairman of the Board, William Griffin, Executive Vice President,
Chris Morris, Vice President-Technical Operations, James Rosel, Vice
President, Finance and General Counsel and Chief Financial Officer,
and Mary Beth Koenig, Chief Accounting Officer. The loss of any of
these executive officers could have a material adverse effect on the
Company. The Company does not have employment contracts with Ms.
Koenig or with Messrs. Rosel and Morris, and the employment
contracts between Mr. Semmens and the Company and Mr. Griffin and
the Company do not impose any material penalty in the event of
resignation.
Dilution. The market price of $7.00 per share of Common Stock as of
August 1, 1996, was substantially greater than the Company's actual
net negative tangible book value of ($.07) per outstanding share of
Common Stock at March 31, 1996, after giving effect to the reverse
split of July 22, 1996. Purchasers of Common Stock at the
recent market price will suffer an immediate dilution of $7.07 per
share, or 100%, measured by the difference between the market price
and the Company's net negative tangible book value per share. See
"Dilution."
Certain Antitakeover Effects. Certain provisions contained in the
Delaware General Corporation Law and in the Company's Restated
Certificate of Incorporation and bylaws may make it difficult for
any third party to effect or attempt an acquisition of the Company
without the approval of the CompanyOs Board of Directors. The
Restated Certificate of Incorporation also divides the CompanyOs
Board of Directors into three classes serving staggered terms. This
provision may hinder or delay any attempt to gain control of the
Company by replacing the Board of Directors. Such potential
antitakeover effects may depress the market value of the Common
Stock. In addition, certain provisions of the Company's Restated
Certificate of Incorporation and bylaws require the affirmative vote
of 90% of the Company's outstanding Common Stock.
Absence of Dividends. The Company has never declared or paid any
dividends on its outstanding Common Stock, and it is unlikely that
it will do so in the foreseeable future.
THE COMPANY
Electrosource, Inc. (the "Company") is engaged in the development
and commercial application of technologies related to lead-acid,
rechargeable storage batteries and ancillary products. The Company's
principal activity is the development, manufacture and sale of a new
lead-acid battery concept called Horizon. The Horizon battery
utilizes plate grids made from a patented coextruded wire. The
plates are oriented in a horizontal plane rather than the vertical
plane, as is the practice in conventional batteries. Current
activities are concentrated upon development of Horizon concept
batteries for use in electric vehicles. The Company is also
developing new processes for the energy-active material for use in
both Horizon and conventional batteries.
The continued development of the Horizon battery, as well as the
continued viability of the Company as a going concern, are
contingent upon the Company's ability to increase sales, increase
contractual activity or raise additional capital. There can be no
assurance that such sales, contracts or financing will be obtained.
The offering described in this Prospectus will not result in any
proceeds to the Company. See "Risk Factors."
The principal executive offices of the Company are located at
3800B Drossett Drive, Austin, Texas 78744-1131, and its telephone
number is (512) 445-6606.
RECENT DEVELOPMENTS
The Company's shareholders approved an amendment to the Company's
Restated Certificate of Incorporation that effected a one-for-ten
reverse stock split. Pursuant to this amendment, each ten shares of
Common Stock outstanding were reclassified as of July 22, 1996, the
Record Date for the reverse stock split, as one share of new Common
Stock. The par value per share of the Common Stock increased from
$0.10 per share to $1.00 per share as a result of the reverse stock
split.
The Company has received assistance in the form of a $3 million
payment from Chrysler Corporation for compensation for continued
capacity maintenance, engineering and development (R&D) effort and
ramp-up costs incurred by the Company in relation to its role as a
supplier to the automaker for its electric vehicle EPIC Minivan
Program. The Company has also submitted proposals to Chrysler for
additional R&D work, but there can be no assurance that an agreement
on such additional work can be reached.
THE OFFERING
The shares to be offered pursuant to this Prospectus are
outstanding shares of the Company's Common Stock, par value $1.00
per share, acquired by the Selling Shareholder upon conversion of
certain convertible promissory notes (see "Selling Security Holder",
below).
The shares of Common Stock offered hereby may be sold from time to
time by the Selling Shareholder. Such sales must be made in the over-
the-counter market through broker-dealers at the then prevailing
market price. Neither the security to be offered nor the selling
method may be varied.
The Selling Shareholder has agreed to limit its sales of Common
Stock hereunder to a maximum of 2,000 shares in any one day.
There is no underwriter or coordinating broker acting in
connection with this offering. The Selling Shareholder may be deemed
an "underwriter" within the meaning of the Securities Act of 1933
(the "Securities Act") with respect to the shares of Common Stock
offered hereunder. The Company and the Selling Shareholder have
agreed to indemnify one another against certain liabilities,
including liabilities under the Securities Act.
In effecting sales, brokers or dealers engaged by the Selling
Shareholder may arrange for other brokers or dealers to participate.
Brokers or dealers will receive commissions or discounts from
Selling Shareholder in amounts to be negotiated immediately prior to
the sale. Such brokers or dealers and any other participating
brokers or dealers may be deemed to be OunderwritersO within the
meaning of the Securities Act in connection with such sales.
The Company has agreed to bear all costs of preparing, filing and
processing the registration statement of which this Prospectus is a
part. Such expenses are estimated to be approximately $25,000 for
the offering.
SELLING SECURITY HOLDER
The shares of Common Stock covered by this Prospectus are being
offered by Mitsui Engineering & Shipbuilding Company, Inc.
("Mitsui"), a large Japanese industrial corporation. Mitsui has
received 80,610 shares offered hereunder upon conversion of
Convertible Notes (discussed below); these shares represent MitsuiOs
entire ownership of the Common Stock. Following the offering, and
assuming the sale of all shares offered hereby, Mitsui will own no
shares of Common Stock.
Distribution Agreement
The Company entered into a Distributorship Agreement with Mitsui
on July 7, 1994. This agreement granted to Mitsui the exclusive
right to distribute Horizon Batteries and related products in Japan,
with nonexclusive distribution rights in all other areas in which
the Company had not or did not subsequently grant exclusive rights
to a third party. Mitsui paid $1,000,000 in license fees at the time
of the signing of the Distributorship Agreement and agreed to pay an
additional $1,000,000 in two installments in August 1994 and August
1995. Payment of these amounts was subsequently postponed by
amendments to the agreement.
The Distributorship Agreement also granted Mitsui the option,
exercisable for a period of five years following the execution of
the agreement, to obtain a license to manufacture Horizon products
in Japan and elsewhere. Mitsui agreed to pay a license fee of
$3,000,000 to the Company in the event that it exercised this
option.
Note Purchase Agreement
On October 26, 1994, the Company and Mitsui entered into a Note
Purchase Agreement pursuant to which Mitsui purchased at face value
a 5% Convertible Promissory Note (the "Convertible Note" and,
together with the Interest Notes described below, the "Convertible
Notes") in the principal amount of $3,800,000. The note had a stated
maturity of ten years, subject to certain prepayment rights of the
Company discussed below and the right of Mitsui to accelerate
maturity in the event of a payment default or event of bankruptcy on
the part of the Company. Interest was payable semiannually in the
form of additional notes ("Interest Notes") having a principal
amount equal to the interest accrued and payable and otherwise
having terms identical to those of the Convertible Note. As of March
7, 1996, the Company had issued two Interest Notes having an
aggregate principal amount of $263,150 for a total aggregate of
$3,063,150. The Convertible Notes plus Interest were converted into
shares of Common Stock at a conversion price of $38.00 per share
(after giving effect to the reverse stock split which occurred in
July, 1996), subject to customary adjustments in the event of stock
splits, reorganizations, and similar events.
The Company had the option to prepay the Convertible Notes in
whole or part at any time following October 26, 1999 so long as the
market price of the Common Stock exceeded the conversion price by at
least twenty percent during the thirty trading days prior to notice
of prepayment.
Mitsui had the right under the Note Purchase Agreement to tender
Convertible Notes or shares of Common Stock acquired upon conversion
of Convertible Notes in payment of up to $4,000,000 in license fees
(but not sales-based royalties) due under the Distributorship
Agreement or any subsequent manufacturing license agreement between
the Company and Mitsui. The tender price of notes would be, at
MitsuiOs option, either the principal amount (plus accrued interest)
of the Convertible Notes tendered or the average market price of the
Common Stock into which the tendered notes were convertible over the
thirty trading days prior to the tender. The tender price of any
Common Stock tendered would be the average market price of the
Common Stock over the thirty trading days prior to the tender. In
the event that Mitsui elected to tender Convertible Notes or Common
Stock at a price determined in reference to the market price of the
Common Stock in payment of license fees other than the $1,000,000
payable in two installments under the Distributorship Agreement in
August 1994 and August 1995, the Company had the right to prepay at
face value all or any portion of the Convertible Notes not tendered
so long as the market price of the Common Stock exceeded the
conversion price by at least twenty percent during the thirty
trading days prior to notice of prepayment.
The Note Purchase Agreement granted Mitsui the right to require
the Company to register the shares issuable upon conversion of the
Convertible Notes on one occasion, and the right to participate on a
Opiggy-backO basis in other registrations of securities effected by
the Company.
Termination Agreement
Mitsui notified the Company of its intention to terminate the
Distributorship Agreement in December 1995, and on March 6, 1996,
the Company and Mitsui entered into a Termination Agreement to
settle all outstanding matters between the two companies. The
Termination Agreement terminated the Distributorship Agreement
effective as of January 4, 1996. Mitsui agreed to tender $1,000,000
in principal amount of Convertible Notes in payment of license fees
due under the Distributorship Agreement subject to the payment to
Mitsui of $100,000 in cash by the Company in respect of Japanese
withholding taxes. In March 1996, the company paid Mitsui the
$100,000 and issued a new Note for $2,800,000 plus interest in
replacement of the $3,800,000 Note which was canceled and returned
to the Company.
Mitsui agreed to pay, and subsequently did pay, the Company
approximately $19,000 for outstanding invoices on battery sales and
approximately $62,000 for canceled prototype battery orders. The
Company agreed to refund the payments for prototypes to the extent
that other buyers for these batteries could be found.
The Company granted Mitsui an option, exercisable on or prior to
March 6, 1998, to enter into a new license for manufacture or
distribution of Company products in Japan, and agreed to credit the
$2,000,000 in aggregate license fees paid under the Distributorship
Agreement against any license fees payable under the new license.
This option is subject to the terms of any license arrangements that
the Company may enter into with any third party in respect of
distribution or manufacturing in Japan prior to the time of Mitsui's
exercise.
Mitsui granted the Company the option to repurchase all
Convertible Notes at any time prior to October 1, 1996, at a price
equal to the greater of $15.00 (after giving effect to the reverse
stock split which occurred on July 22, 1996) times the number of
shares of Common Stock into which the Convertible Notes are then
convertible or the average per share closing market price of the
Common Stock over the five trading days prior to notice of exercise
times the number of shares of Common Stock into which the
Convertible Notes are then convertible. This option cannot be
exercised if Mitsui has entered into a binding agreement to sell the
Convertible Notes or the shares of Common Stock into which they are
convertible or has engaged an underwriter to effect their sale.
The Company agreed to register the shares of Common Stock issuable
upon conversion of the Convertible Notes upon Mitsui's request and
to keep such registration effective for a period of nine months. The
shares offered hereby are being registered pursuant to such a
request, and Mitsui has converted all outstanding Convertible Notes
into Common Stock upon the effectiveness of this registration
statement of which this Prospectus is a part. Mitsui has agreed to
limit its sales of Common Stock pursuant to this Prospectus to 2,000
shares or less in any one day. The registration provisions of the
Termination Agreement do not affect the registration rights granted
under the Note Purchase Agreement.
The Company agreed in the Termination Agreement to assist Mitsui
in finding a buyer or buyers for the Common Stock issuable upon
conversion of the Convertible Notes upon Mitsui's request.
USE OF PROCEEDS;
The Company will realize no proceeds from the offering. The
Company will bear all costs of preparing, filing and processing the
registration statement of which this Prospectus is a part.
DILUTION
At March 31, 1996, the Company had a net negative tangible book
value of ($.07) per share of Common Stock outstanding, after giving
effect to the reverse split of July 22, 1996. "Net tangible book value
per share" represents the amount of total tangible assets of the Company,
reduced by the amount of total liabilities of the Company, divided by the
number of shares of Common Stock outstanding, after giving effect to the
reverse split. Purchasers of Common Stock for cash at the assumed
offering price of $7.00 per share (based on the market price of a
share of Common Stock as quoted by NASDAQ on August 1, 1996) will
therefore incur an immediate dilution of $7.07 per share from the
assumed offering price measured by the difference between the
assumed offering price and the Company's net tangible book value per
share.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Restated Certificate of Incorporation provides that
a director of the Company will not be personally liable to the
Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except that such provisions will not
eliminate or limit the liability of a director (i) for a breach of
the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) with
respect to unlawful payments of dividends or unlawful stock
purchases or redemptions for which the director is liable under
Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derives an
improper personal benefit.
The Company's Bylaws provide that, to the extent permitted by law,
the Company will indemnify each of its directors, and authorize the
purchase of insurance with respect thereto. The Bylaws also provide
that the Company may indemnify its officers, employees or agents who
are made or threatened to be made defendants or respondents to any
threatened, pending or completed action, suit or proceeding due to
such person's service to the Company or to certain other entities at
the request of the Company, so long as such person acted in good
faith and in a manner he reasonably believed to be not opposed to
the best interests of the Company. Such indemnification may be made
only upon a determination that such indemnification is proper in the
circumstances because the person to be indemnified has met the
applicable standard of conduct to permit indemnification under the
law.
In addition to indemnification provided pursuant to the Company's
Restated Certificate of Incorporation and Bylaws, the Company has
entered into a Director Indemnification Agreement with each director
of the Company providing for, among other things, (i)
indemnification by the Company of each director to the full extent
authorized or permitted by Delaware statutes; (ii) maintenance by
the Company of director and officer insurance coverage for the
benefit of each director of up to $2,000,000, subject to
availability at premiums not substantially disproportionate to the
amount of coverage; (iii) indemnification by the Company of each
director in connection with settlements under certain circumstances;
(iv) procedures relating to independent review of determinations
regarding director indemnification (including special provisions in
case of a change in control of the Company); and (v) the advancement
of expenses to directors in connection with matters for which the
director is entitled to indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding)
is asserted against the Company by such director, officer or
controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of
such issue.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon
for the Company by Bret Van Earp, Attorney at Law, 100 Congress
Avenue, Suite 1800, Austin, Texas 78701.
EXPERTS
The financial statements of the Company appearing in the Company's
Annual Report (Form 10-K) for the year ended December 31, 1995, have
been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon (which contains an explanatory
paragraph with respect to substantial doubt about the Company's
ability to continue as a going concern) included therein and
incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and
auditing.
No dealer, salesman or other
person has been authorized to
give any information or to make
any representation not contained
in this Prospectus in connection
with the offer contained herein,
and, if given or made, such
information or representation
must not be relied upon as having
been authorized by the Company.
This Prospectus does not
constitute an offer to sell, or a
solicitation of an offer to buy,
any securities in any
jurisdiction to any person to
whom it is not lawful to make any
such offer or solicitation in
such jurisdiction. Neither the
delivery of this Prospectus nor ELECTROSOURCE, INC.
any sale made hereunder shall,
under any circumstances, create
an implication that there has
been no change in the affairs of
the Company since the date hereof
or that the information herein is
correct as of any time subsequent
to its date.
_________________________________
_____
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 2 80,610 Shares of
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE 2 Common Stock
SUMMARY OF PROSPECTUS 3
RISK FACTORS 4
THE COMPANY 5
RECENT DEVELOPMENTS 5
THE OFFERING 5
SELLING SECURITY HOLDER 6
DILUTION 8
INDEMNIFICATION OF OFFICERS AND
DIRECTORS 8
LEGAL MATTERS 9 August 2, 1996
EXPERTS 9
