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 March 31, 1996
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: 36,576,578 shares as of
May 13, 1996.
INDEX TO FINANCIAL STATEMENTS
March 31, 1996
Electrosource, Inc. Commission file number 0-16323
Condensed Balance Sheets at March 31, 1996 (Unaudited)
and December 31, 1995............................................. Page 3
Condensed Statements of Operations for the three months
ended March 31, 1996 and 1995 (Unaudited)......................... Page 4
Condensed Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 (Unaudited)............................... Page 5
Notes to Condensed Financial Statements............................. Page 6
Managements' Discussion and Analysis................................ Page 9
Exhibits to Form 10Q................................................ Page 14
Index to Exhibits .................................................. Page 15
Part I - Financial Information
Item I. Financial Statements
Electrosource, Inc.
Condensed Balance Sheets
March 31, 1996 December 31, 1995
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 848,503 $ 2,083,032
Trade receivables 247,991 1,535,749
Inventories 298,288 404,755
Prepaid expenses and other assets 340,474 245,133
TOTAL CURRENT ASSETS 1,735,256 4,268,669
PLANT AND EQUIPMENT (net of accumulated
depreciation of $1,797,009 in 1996 and
$1,538,899 in 1995) 5,672,024 6,009,334
INTANGIBLE ASSETS (net of accumulated
amortization of $1,862,253 in 1996 and
$1,613,973 in 1995) 3,599,307 3,847,587
RESTRICTED CASH 744,824 744,824
OTHER ASSETS 109,212 406,787
TOTAL ASSETS $11,860,623 $15,277,201
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 533,286 $ 876,746
Accrued salaries and employee benefits 254,289 306,579
Other accrued liabilities 772,562 931,341
Current portion of capital lease obligations 606,876 598,420
TOTAL CURRENT LIABILITIES 2,167,013 2,713,086
CONVERTIBLE NOTES PAYABLE 3,313,150 8,020,000
TECHNOLOGY LICENSE PAYABLE 2,023,126 2,178,014
CAPITAL LEASE OBLIGATIONS (less current portion) 1,020,107 1,126,252
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock par value $0.10 per share;
authorized 50,000,000 shares; shares
issued and outstanding: 35,282,134 in 1996
and 30,137,826 in 1995 3,528,213 3,013,782
Warrants 0 0
Paid in capital 37,797,017 33,685,800
Accumulated deficit (37,988,003) (35,459,733)
3,337,227 1,239,849
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $11,860,623 $15,277,201
See notes to condensed financial statements.
Electrosource, Inc.
Condensed Statements of Operations (Unaudited)
Three Months Ended March 31,
1996 1995
Revenues
Battery sales $ 327,968 $ 153,423
Project revenue 60,152 778,593
License fees 0 1,000,000
Interest income 13,382 26,779
401,502 1,958,795
Costs and expenses
Manufacturing 861,912 1,924,671
Selling, general and administrative 759,647 1,241,825
Research and development 469,787 1,089,802
Technology license and royalties 25,000 74,705
Depreciation and amortization 514,996 133,272
Interest expense 126,535 47,274
Loss on disposal of equipment 171,895 0
2,929,772 4,511,549
Loss before income taxes (2,528,270) (2,552,754)
Income taxes (foreign) 0 100,000
Net loss $(2,528,270) $(2,652,754)
Net loss per common share $ (0.08) $ (0.16)
Average common shares outstanding 33,530,756 16,855,203
See notes to condensed financial statements.
Electrosource, inc.
Condensed Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
1996 1995
OPERATING ACTIVITIES
Net loss $(2,528,270) $(2,652,754)
Adjustments to reconcile net loss to net
cash used in operating activities:
Common Stock issued for consulting
services 16,200 0
Technology license fee 0 19,000
Depreciation 266,716 133,272
Amortization of intangible assets 260,367 47,205
Interest expense converted to note
payable or paid in Common Stock 58,304 0
Loss on disposal of equipment 171,895 0
Non-cash compensation and other accruals 93,605 0
Decrease in deferred revenue 0 (1,000,000)
Changes in operating assets and liabilities:
Decrease in trade receivables 287,758 268,600
(Increase) decrease in inventories 106,467 (211,263)
Increase in prepaid expenses and
and other assets (95,341) (215,971)
Increase (decrease) in accounts payable,
accrued salaries and employee benefits
and accrued liabilities (571,478) 375,928
NET CASH USED IN OPERATING
ACTIVITIES (1,933,777) (3,235,983)
INVESTING ACTIVITES
Purchases of property and equipment, net (101,301) (1,896,586)
CASH USED IN INVESTING ACTIVITIES (101,301) (1,896,586)
FINANCING ACTIVITIES
Payments on capital lease obligations (97,693) (22,982)
Proceeds from issuance of common stock, net 898,242 4,000,000
CASH PROVIDED BY
FINANCING ACTIVITIES 800,549 3,977,018
DECREASE IN CASH AND
CASH EQUIVALENTS (1,234,529) (1,155,551)
Cash and cash equivalents at beginning of period 2,083,032 2,193,290
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 848,503 $1,037,739
See notes to condensed financial statements.
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, 1995.
Certain reclassifications have been made to the 1995 financial
statements to conform with the 1996 presentation.
NOTE B - INVENTORIES
March 31, December 31,
1996 1995
Raw materials $193,120 $289,725
Work In Progress 46,867 80,729
Finished Goods 58,301 34,301
$298,288 $404,755
NOTE C - PROPERTY AND EQUIPMENT
March 31, December 31,
1996 1995
Office Equipment $ 751,475 $ 739,677
Production Equipment 4,050,753 4,157,700
Lab Equipment 1,186,788 1,182,472
Leasehold Improvements 1,480,015 1,468,384
7,469,031 7,548,233
Less: Accumulated depreciation
and amortization (1,797,007) (1,538,899)
Total Property and Equipment $5,672,024 $6,009,334
NOTE D - 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 distribution rights of
the Horizon battery in Japan ($1,000,000 in 1994 and the
remaining $1,000,000 in 1995) and $3,000,000 if MES elected to
exercise its option for a manufacturing license. In January
1996, MES terminated the Distribution Agreement. In March 1996,
the Company and MES executed a Termination Agreement. In
accordance with the terms of the Agreement, MES applied
$1,000,000 of its Convertible Notes Payable to pay $1,000,000 of
outstanding license fees to the Company (see Note E).
Additionally, MES notified the Company of its intent to convert
the remainder of its Convertible Notes Payable (approximately $3
million), at $3.80 per share, into shares of Common Stock
contingent upon the effectiveness of a registration statement to
register the sale of such shares.
NOTE E - CONVERTIBLE NOTES PAYABLE
Convertible Notes Payable consist of the following:
March 31, December 31,
1996 1995
Convertible Notes - 5% $3,063,150 $3,990,000
Convertible Notes - 10% 250,000 250,000
Convertible Notes - 8% - 3,780,000
$3,313,150 $8,020,000
In October 1994, the Company entered into a 5% Convertible
Promissory Note with MES for $3,800,000 maturing in October 2004
with interest due and payable semi-annually in the form of
additional notes payable. A note payable in the amount of
$190,000 was issued in October 1995 for interest for the year
then ended with the same terms and conditions as the original
note. In March 1996, MES applied $1,000,000 of its Convertible
Notes Payable to pay $1,000,000 of outstanding license fees to
the Company (See Note D). A Replacement Note for $2,800,000 was
issued at this time with the same terms and conditions as the
original note. Concurrently, a note payable in the amount of
$73,150 was issued for accrued interest on all notes (principal
and interest) through the period ended March 6, 1996. MES may
convert the Notes (principal and interest) into shares of Common
Stock at a conversion price of $3.80 per share and has notified
the Company of its intent to do so contingent upon the
effectiveness of a registration statement to register the sale of
such shares. The Company may prepay the Notes anytime after
November 1999, provided that the Common Stock has reached a
specified level and that MES does not desire to convert the Notes
to Common Stock.
In April 1995, the Company issued $6,000,000 of 10% Convertible
Debentures (the "April 1995 Debentures") resulting in net
proceeds to the Company of $5,375,000. The April 1995 Debentures
are convertible into Common Stock at a conversion price equal to
80% of the average closing price of the Common Stock for the five
business days immediately preceding such time as the debentures
are converted and mature on April 5, 1997. Interest is payable
quarterly. 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 March 31, 1996, April
Debentures with a total principal amount of $5,750,000 were
converted into 3,795,447 shares of Common Stock. Delisting of the Company's
Common Stock in the Over-the-Counter Market would be an Event of Default
under the terms of the April 1995 Debentures and could trigger a requirement
to repay such debentures immediately (See Note G).
In November 1995, the Company issued $3,780,000 of 8% Convertible
Debentures (the "November 1995 Debentures") resulting in net
proceeds to the Company of $3,477,600. The November 1995
Debentures and related accrued interest were convertible into
Common Stock at a price equal to 75% of the average closing price
of the Common Stock for the five business days immediately
preceding the respective conversion date. In addition, warrants
to purchase 56,700 shares of Common Stock at a price of $1.56 per
share, exercisable until November 10, 1997, were issued to an
agent of the holders of the November 1995 Debentures. As of
March 31, 1996, all of the November 1995 Debentures with a
principal amount of $3,780,000 and accrued interest of $47,216
had been converted into 4,029,864 shares of Common Stock.
NOTE F - COMMON STOCK
On March 1, 1996, the Company sold 1,000,000 shares of Common
Stock which resulted in net proceeds to the Company of $898,242.
In addition, in connection with the conversion of $3,827,216 of
principal and accrued interest associated with the November 1995
Debentures, the Company issued 4,029,864 shares of Common Stock
(See Note E).
NOTE G - LIQUIDITY
Battery sales and project revenue in the first quarter of 1996
fell short of the Company's costs associated with providing
production capabilities in commercial quantities, and for
marketing requirements and research and development expenditures
to further develop and refine the Horizon battery. As a result,
the Company has continued to raise significant additional
capital. After the sale of 1,200,000 shares of Common Stock in
May 1996, the Company has approximately $1,000,000 of
unrestricted cash available as of May 13, 1996. Management is
continuing its efforts to control costs and believes that it has
sufficient cash to continue operations at current levels through
mid-June of 1996 based on funds received from the recent equity
financing combined with expected cash flow from battery sales and
project revenue. Therefore, it will be necessary to raise
additional financing before the end of June 1996. The Company
has historically been able to raise funds on a repeated basis to
sustain operations. Management is currently attempting to raise additional
funds; however, there can be no assurance that such funding can be
obtained on favorable terms to the Company, if at all. Equity
financing is presently limited by the number of unreserved shares
available for issuance. As of May 13, 1996, the Company had
approximately 3,700,000 shares of Common Stock which were
unreserved and 10,000,000 shares of unissued preferred stock.
The Board of Directors is soliciting shareholder approval at the
annual stockholders meeting on June 26, 1996 of a proposed
amendment to the Company's Restated Certificate of Incorporation
(the "Amendment") which will effect a one-for-ten reverse stock
split (the "Reverse Split") of the Company's outstanding shares
of Common Stock. The Board of Directors believes that a reverse
split is essential to the Company's continued growth and
development. The Reverse Split is expected to enhance the
marketability and acceptance of the Company's Common Stock in
financial markets. It is designed to facilitate different forms of
financings, including the ability to attract potential strategic
partners. It should facilitate possible inclusion on the
National Market Systems (NMS) of the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"). In
addition, the Reverse Split will result in an increase in the
number of unissued shares of Common Stock available for issuance
in the future for business combinations, strategic alliances,
equity offerings and other business opportunities. The proposed
increase in unissued shares will make it possible for the Company
to obtain additional capital resources to pursue the
commercialization of the Company's technology. The potential
increase in price may also encourage new interest and additional
trading in the Common Stock, and may open new and preferable
avenues of finance to the Company, which could reduce any future
dilution from financing activities. Without the reverse split,
the Company's options for any needed finance will be extremely
limited. Not all companies have maintained their market
capitalization after a reverse stock split. Management cannot
provide assurance of the effect on the market price of the Common
Stock as a result of the Reverse Split or any of the other
potentially favorable consequences.
The 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. There can be no assurance that this
minimum can be maintained in the second quarter of 1996 at the current
level of activity without additional equity finance, conversion of existing
debt or other transactions that increase shareholder equity. Management
is currently engaged in discussions for such transactions; however,
there is no assurance that they will be completed. 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, the 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.
NOTE H - SUBSEQUENT EVENT
On May 2, 1996, the Company sold 1,200,000 shares of Common Stock
which resulted in net proceeds to the Company of $1,140,000.
Results of Operations:
Revenues. For the three months ended March 31, 1996, the Company
had battery sales of approximately $328,000 compared to $153,000
for the three months ended March 31, 1995. Approximately 78% of
1996 battery sales were to Chrysler Corporation to fill orders
placed in accordance with the terms of the production purchase
order received in December 1995. The Company expects battery
sales under this purchase order and from others currently testing
the battery to increase in mid-1997. The timing of receipt of orders
from Chrysler Corporation under this order is uncertain and cannot be
assured due to market uncertainties.
The Company had project revenue of approximately $60,000 for the
three months ended March 31, 1996, as compared to $779,000 for
the three months ended March 31, 1995. The project revenue in
1996 was primarily generated from Chrysler Corporation for
various environmental and other tests performed on the Horizon
battery. The project revenue in 1995 was all generated from an
agreement with Chrysler for the retrofit of the Horizon Battery
for the NS mini-van program. This agreement concluded in the
first quarter of 1995 and resulted in the receipt of a production
purchase order from Chrysler in December 1995 which could result
in up to $80 million in battery sales cumulatively over the next
few years; however, Chrysler has the right to withhold or cancel
orders. Battery sales to date under this order have been less
than originally expected and cannot be assured due to market
uncertainties. Management is working with Chrysler Corporation
to finalize additional project agreements for further research
and testing of the Horizon battery and expects revenue from such
agreements to increase in late 1996. The Company is also
currently working with several potential customers to finalize
project agreements to provide prototype batteries for a variety
of electric vehicle and non-electric vehicle applications and
management expects project revenue from such agreements to
increase in late 1996 and early 1997.
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 distribution rights of
the Horizon battery in Japan ($1,000,000 in 1994 and $1,000,000
in 1995). In January 1996, MES terminated the Distribution
Agreement. In March 1996, the Company and MES executed a
Termination Agreement. In accordance with the terms of the
Agreement, MES applied $1,000,000 of its Convertible Notes
Payable to pay $1,000,000 of outstanding license fees to the
Company and notified the Company of its intent to convert the
remainder of its Convertible Notes Payable (approximately $3
million), at $3.80 per share, into shares of Common Stock
contingent upon the effectiveness of a registration statement to
register the sale of such shares.
Costs and Expenses. Total costs and expenses significantly
decreased in the three months ended March 31, 1996, as compared
to the three months ended March 31, 1995, as a result of
management's implementation of cost control measures to conserve
cash and to reduce expenses to a level more commensurate with
sales. However, certain non-cash costs and charges increased in
1996. Depreciation and amortization costs were higher in 1996 as
the Company recognized a full quarter of such costs based on a
larger equipment base associated with the automation of the San
Marcos facility in 1995 and a larger intangible base associated
with purchased technology obtained in the fourth quarter of 1995.
In addition, approximately $172,000 of equipment which is no
longer in use was disposed of in the first quarter of 1996.
Generally, total costs were higher in 1995 as compared to 1996 as
the Company began to purchase machinery and implement production
processes to manufacture the Horizon Battery in commercial
quantities and increased the sales, marketing and administrative
staffs accordingly. During 1995, significant technological
achievements were made and improvements realized in the
production process which have enabled the Company to produce its
product at high levels in an automated environment. These
achievements have enabled the Company to reduce its expenditure
levels and slow down the production output of the San Marcos
facility to react to a softer than expected market for electric
vehicle batteries. Staffing was reduced in January 1996
throughout the Company while still increasing the capacity of the
San Marcos plant through upgrades and further refinements of the
production processes. Manufacturing costs have remained high as
a percentage of battery sales due to the fact that the Company is
maintaining the minimum production level necessary to demonstrate
the ability to manufacture the Horizon battery in commercial
quantities in accordance with the terms of the Chrysler
production purchase order; however, battery sales have been less
than expected. Management expects manufacturing costs to
decrease as a percentage of battery sales when volume production
begins, which is uncertain based on current market conditions.
Management is continuing its efforts to control costs and reduce
monthly cash expenditures.
Liquidity and Capital Resources: As of May 13, 1996, the Company
had sold 2,200,000 shares of Common Stock which resulted in net
proceeds to the Company of $2,038,242 during 1996. These funds
have been used to fund the costs associated with maintaining
production capabilities and marketing requirements and research
and development expenditures to further develop and refine the
Horizon battery. Management is maintaining the minimum
production level necessary to demonstrate the ability to
manufacture the Horizon battery in commercial quantities in
accordance with the terms of the Chrysler production purchase
order.
As of March 31, 1996, several working capital items had changed
significantly since December 31, 1995. Accounts receivable have
decreased approximately $1,288,000 primarily due to the
application by Mitsui of $1,000,000 of its Convertible Notes
Payable to satisfy its obligation to pay $1,000,000 of
outstanding license fees to the Company. In addition, in
February 1996, the Company received $200,000 of outstanding
accounts receivable from the Electric Power Research Institute
("EPRI") in accordance with the terms of an amendment to a
research and development agreement completed in November 1995.
Accounts payable have decreased by approximately $365,000 due to
the payment in the first quarter of 1996 of outstanding accounts
payable associated with increased expenditures incurred in 1995
to increase production capacity of the San Marcos plant.
As of May 13, 1996, the Company has approximately $1,000,000 of
unrestricted cash available. Management is continuing its
efforts to control costs and believes that it has sufficient cash
to continue operations through mid-June of 1996 at current levels
based on funds received from the May equity financing combined
with expected cash flow from battery sales and project revenue.
Therefore, it will be necessary to raise additional financing in
the near term. Equity financing is limited by the number of
unreserved shares available for issuance. As of May 13, 1996,
the Company had approximately 3,700,000 shares of Common Stock
which were unreserved and 10,000,000 shares of unissued preferred
stock.
The Board of Directors is soliciting shareholder approval at the
annual stockholders meeting on June 26, 1996 of a proposed
amendment to the Company's Restated Certificate of Incorporation
(the "Amendment") which will effect a one-for-ten reverse stock
split (the "Reverse Split") of the Company's outstanding shares
of Common Stock. The Board of Directors believes that a reverse
split is essential to the Company's continued growth and
development. The Reverse Split is expected to enhance the
marketability and acceptance of the Company's Common Stock in
financial markets. It could facilitate different forms of
financings, including the ability to attract potential strategic
partners. It should facilitate possible inclusion on the
National Market Systems (NMS) of the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"). In
addition, the Reverse Split will result in an increase in the
number of unissued shares of Common Stock available for issuance
in the future for business combinations, strategic alliances,
equity offerings and other business opportunities. The proposed
increase in unissued shares will make it possible for the Company
to obtain additional capital resources to pursue the
commercialization of the Company's technology. The potential
increase in price may also encourage new interest and additional
trading in the Common Stock, and may open new and preferable
avenues of finance to the Company, which could reduce any future
dilution from financing activities. Without the reverse split,
the Company's options for any needed finance will be extremely
limited. Not all companies have maintained their market
capitalization after a reverse stock split. Management cannot
provide assurance of the effect on the market price of the Common
Stock as a result of the Reverse Split or any of the other
potentially favorable consequences.
The 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. There can be no assurance that this
minimum can be maintained in the second quarter of 1996 at the current
level of activity without additional equity finance, conversion of existing
debt or other transactions that increase shareholder equity. Management
is currently engaged in discussions for such transactions; however, there
is no assurance that they will be completed. 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.
Part II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Offshore Securities Subscription Agreement dated February 22, 1996
between Arbinter Omnivalor, S.A. and Electrosource, Inc.
4.2 Offshore Securities Subscription Agreement dated May 2, 1996 between
Arbinter-Omnivalor, S.A. and Electrosource, Inc.
4.3 Warrants to purchase up to 22,789 shares of Electrosource, Inc.,
Common Stock, issued to three principals of Pacific Shoreline date
October 20, 1995 and issued as of May 9, 1996.
4.4 Warrants to purchae up to 56,700 shares of Electrosource, Inc.,
Common Stock, issued to three principals of Pacific Shoreline dated
December 5, 1995 and issued as of May 9, 1996.
10.1 Memorandum of Understanding between Electrosource, Inc., and Lockheed
Martin Corporation dated March 15, 1996.
10.2 Employment Agreement dated March 25, 1996, between William F. Griffin
and Electrosource, Inc.
27. Financial Data Schedule
(b) Reports on Form 8-K.
Reports on Form 8-K filed during the quarter ended March 31, 1996 were:
January 12, 1996, Condensed Unaudited Financial Statements as of
November 30, 1995, which separately disclose equity transactions
completed by the Company in October and November 1995.
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: May 13, 1996 ELECTROSOURCE, INC.
/s/
Mary Beth Koenig
Chief Accounting Officer
Treasurer/Controller
/s/
Michael G. Semmens
Chairman, President
and Chief Executive 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
March 31, 1996 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
4.1 Offshore Securities Subscription Agreement dated February 22, 1996
between Arbinter Omnivalor, S.A. and Electrosource, Inc.
4.2 Offshore Securities Subscription Agreement dated May 2, 1996, between
Arbinter Omnivalor, S.A. and Electrosource, Inc.
4.3 Warrants to purchase up to 22,789 shares of Electrosource, Inc., Common
Stock, issued to three principals of Pacific Shoreline dated October 20,
1995 and issued as of May 9, 1995.
4.4 Warrants to purchase up to 56,700 shares of Electrosource, Inc., Common
Stock, issued to three principals of Pacific Shoreline dated December 5,
1995 and issued as of May 9, 1995.
10.1 Memorandum of Understanding between Electrosource, Inc., and Lockheed
Martin Corporation dated March 15, 1996.
10.2 Employment Agreement dated March 25, 1996, between William F. Griffin and
Electrosource, Inc.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
Reports on Form 8-K filed during the quarter ended March 31, 1996 were:
January 12, 1996, Condensed Unaudited Financial Statements as of
November 30, 1995, which separately disclose equity transactions
completed by the Company in October and November 1995.
EXHIBIT 4.1
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
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.
This Offshore Securities Subscription Agreement ("Agreement") is
made and entered into as of the last date entered on the
signature page hereof ("Acceptance Date") by and between
Electrosource, Inc., a corporation organized under the laws of
the State of Delaware, United States of America ("ISSUER") whose
principal place of business is 3800-b Drossett Dr., Austin, Texas
USA, and Arbinter Omnivalor, S.A. organized under the laws of
Switzerland, non-United States jurisdiction, whose principal
place of business is located in Geneva, Switzerland
("PURCHASER").
RECITALS
ISSUER's common stock, par value $.10 per share ("Shares"), is
publicly traded in the United States and quoted on the NASDAQ
stock exchange under the symbol "ELSI."
PURCHASER desires to subscribe for and purchase from ISSUER
and ISSUER desire to issue and sell to PURCHASER, Shares in
PRIVATE PLACEMENT in reliance upon the transaction exemption
afforded by Regulation S ("Regulation S") as promulgated by the
Securities and Exchange Commission ("SEC") under the Securities
Act of 1944, as amended (the "1933 Act").
NOW, THEREFORE, ISSUER AND PURCHASER agree as follows:
1. Agreement to Subscribe; Purchase Price
a. Purchaser hereby subscribes for the purchase of 1,000,000
(one million) newly issued Shares, at a price equal to $.984375
per share. The total subscription commitment of PURCHASER shall
be U.S. Nine Hundred Eighty-four thousand three hundred seventy-
five dollars ($984,375.00 U.S.) at the aforementioned per Share
price. The Shares shall be purchased, paid for and issued as
specified in Section 8 of this Agreement.
b. PURCHASER shall pay the purchase price by delivering good
funds in United States Dollars to the designated depository for
closing by delivery of securities versus acceptable payment.
2. Subscriber Representations
a. Domicile; Authority, etc. PURCHASER represents and
warrants to ISSUER as follows:
(i)PURCHASER is a (corporation, individual, trust) duly
organized and existing under the laws of Switzerland.
(ii) The execution and delivery of the Agreement by
PURCHASER and the consummation by PURCHASER of the
transactions contemplated hereby: (aa) have been duly
authorized by all requisite corporate action; (bb) do
not and will not constitute a violation under any non-
U.S. laws applicable to PURCHASER; (cc) do not and will
not require the prior consent or approval of any
governmental agency or other entity or person not a
party to this Agreement.
(iii) PURCHASER has all requisite power and authority
to enter into, execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and on
the Acceptance Date this Agreement will constitute the
valid, binding and enforceable obligation of PURCHASER.
(iv) Neither the execution and delivery of this
Agreement by PURCHASER, nor the consummation by
PURCHASER of the transaction contemplated hereby, is in
connection with or directly or indirectly part of any
contract, agreement, arrangement, or understanding
(written or oral) between or among PURCHASER or any of
its "affiliates" (as that term is defined under the 1933
Act) and any other person with respect to any tender
offer, takeover attempt or other transaction or series
of transactions intended in whole or in part to effect a
change in, or transfer of control of ISSUER (as such
term is defined under the 1933 Act).
b. Offshore Transaction. PURCHASER represents and warrants to
ISSUER as follows,
(i) PURCHASER is not U.S. person (whenever
such terms is used herein, it shall have the meaning
given in Regulation S).
(ii) At the time the buy order was originated,
PURCHASER was outside the United States and is
outside the United States as of the date of the
execution and delivery of this Agreement.
(iii) PURCHASER is not purchasing the Shares on
behalf of any U.S. person, and the sale has not been
prearranged with a purchaser in the United States.
(iv) Each distributor (if any) participating in
the offer of the Shares has agreed in writing (and a
copy thereof has been delivered to ISSUER) that all
offers and sales of the Shares prior to the
expiration of a period commencing on the applicable
closing date and ending 40 days thereafter (the
"Restricted Period") shall only be made in
accordance with the safe harbor provisions contained
in Rule 903 or Rule 904 as applicable, of Regulation
S, pursuant to registration under the 1933 Act, or
pursuant to an exemption from registration.
(v) PURCHASER represents and warrants and
hereby agrees that all offers and sales of the
Shares prior to the expiration of the Restricted
Period shall only be made in accordance with the
safe harbor provisions contained in Rule 903 or Rule
904, as applicable, of Regulation S, pursuant to
registration under the 1933 Act or pursuant to an
exemption from registration, and all offers and
sales after the Restricted Period shall be made only
pursuant to such a registration or to such exemption
from registration.
(vi) All offering documents received by
PURCHASER, include statements to the effect that the
Share have not been registered under the 1933 Act
and may not be offered or sold in the United States,
or to U.S. Persons, or for the account or benefit of
U.S. person (other then distributors as defined in
Regulation S) during the Restricted Period unless
the Shares are registered under the 1933 Act or an
exemption from the registration requirements is
available.
(vii) PURCHASER acknowledges that the purchase
of the Shares involves a high degree of risk and
further acknowledges that it can bear the economic
risk of the purchase of the Shares, including the
total loss of its investment.
(viii) PURCHASER understands that the Shares are
being offered and Sold to it in reliance on specific
exemptions from the registration requirements of
U.S. federal and state securities laws and that the
ISSUER is relying upon the truth and accuracy of the
representations, warranties, agreements,
acknowledgments and understandings of PURCHASER set
forth herein in order to determine the applicability
of such exemptions and the suitability of PURCHASER
to acquire the Shares.
(ix) PURCHASER is sufficiently experienced in
financial and business matters to be capable of
evaluating the merits and risks of its investments,
and to make an informed decision relating thereto.
(x) In evaluating its investment, PURCHASER
has consulted its own investment and/or legal and/or
tax advisors.
(xi) PURCHASER acknowledges that in the view of
the SEC the statutory basis for the exemption
claimed for the transactions contemplated by this
Agreement would not be present if the offering of
Shares, although in technical compliance with
Regulation S, is part of a plan or scheme to evade
the registration provision of the 1933 Act, and
PURCHASER represents and warrants that it is
acquiring the Shares hereunder for investment
purposes and has no present intention to sell the
Shares in the United States or to a U.S. Person, or
for the account or benefit of a U.S. Person either
now or promptly after the expiration of the
Restricted Period. PURCHASER hereby confirms that
the purposes of including the PURCHASER
Representation Letter (Appendix A) as provided in
paragraph 6, is in order to facilitate the transfer
of the certificates representing the Shares into
street name to enable PURCHASER to comply with the
requirements of certain offshore portfolio
management regulations, and the security
requirements of offshore lenders for margin loans
and to enable ISSUER to determine the availability
of the exemption from registration under Regulation
S.
(xii) PURCHASER is not an underwriter of, or
dealer in, the Shares and PURCHASER is not
participating in any distribution of the Shares,
either directly or through any affiliate. If
PURCHASER is purchasing the Shares subscribed for
hereby in representative or fiduciary capacity, the
representations and warranties in this Offshore
Securities Subscription Agreement shall be deemed to
have been made on behalf of person or persons whom
PURCHASER is so purchasing.
c. Survival. The foregoing representations and warranties in
this Offshore Securities Subscription Agreement shall be deemed
to have been made on behalf of person or persons whom PURCHASER
is so purchasing.
d. Current Public Information. PURCHASER acknowledged that
PURCHASER has been furnished with or has acquired copies of the
Company's most recent Annual Report, Form 10-K as filed with the
SEC, Form 10-Q for the Quarters ending September, 1995 as filed
with the SEC, and all Form 8-K filed thereafter (collectively,
the "SEC Filings"), and other publicly available documents.
e. Independent Investigation Access. PURCHASER acknowledges
that PURCHASER, in making the decision to purchase the Shares
subscribed for, has relied upon independent investigations made
by it and its purchaser representatives, if any, and PURCHASER
and such representatives, if any, have, prior to any sale to it,
been given access and the opportunity to examine all material
books and records of the ISSUER, all material contracts and
documents relating to this offering, and an opportunity to ask
questions of, and to receive answers from ISSUER or any person
acting on its behalf concerning the terms and conditions of this
offering. PURCHASER and its advisors, if any, have been
furnished with access to all publicly available materials
relating to the business, finances and operations of ISSUER and
materials relating to the offer and sale of the Shares which have
been requested. PURCHASER and its advisors, if any, have
received complete and satisfactory answers to any such inquiries.
f. No Government Recommendation or Approval. PURCHASER
understands that no federal or state agency has passed on or made
any finding or determination relating to the fairness for
investment in the Shares, nor has passed on or made, nor will
pass on or make, any recommendation or endorsement of the Shares.
g. Entity Purchases. If PURCHASER is a partnership,
corporation or trust, then each person executing this Agreement
on its behalf represents and warrants that:
(i) He or she has made due inquiry to
determine the accuracy and truthfulness of the
representations and warrants made pursuant to this
Agreement, and has no knowledge of any facts or
circumstances which would cause them to be
inaccurate OR UNTRUE.
(ii) He or she is duly authorized (if the
undersigned is a trust, by the trust agreement) to
make this investment and to enter into and execute
this Agreement on behalf of such entity.
h. 45 Day Hold Period. Although PURCHASER recognizes that the
restricted period for the shares expires at the end of 40 days,
PURCHASER agrees and warrants to refrain from selling or shorting
the stock or entering into any transaction that would cause the
stock to be sold or shorted for a period of 45 days from the day
this offering closes. Additionally the purchaser warrants that
no short sale has been entered into in anticipation of a
contemplated offering.
3. Issuer Representations.
a. Reporting Company Status. ISSUER, is a reporting issuer as
defined in Rule 902(1) of Regulation S.
b. Offshore Transaction. Assuming the truthfulness and
accuracy of purchaser' representations and warranties contained
herein to its knowledge, ISSUER has knot offered these securities
to any persons in the United States or to any U.S. person or for
the account or benefit of any U.S. person.
c. No Directed Selling Efforts. In regard to this
transaction, ISSUER has not conducted any "directed selling
efforts" as that term is defined in Rule 902 of Regulation S nor
has ISSUER conducted any general solicitation relating to the
offer and sale of the within securities to persons resident
within the United States or elsewhere.
4. Expiration of Restricted Period. The transaction restriction
in connection with this offshore offer and sale restrict
PURCHASER from offering and selling to U.S. persons or for the
account or benefit of a U.S. person, for a forty (40) days period
from the later of the date that the shares were first offered to
persons other than "distributors" (as defined in Regulation S)
and the date that the offering of which the sale contemplated by
this agreement is a part has been completed. Rule 903(c)(2)
governs the forty (40) day transaction restriction. ISSUER shall
send prompt written notice to PURCHASER stating the date on which
the restricted period begins.
5. Exemption; Reliance on Representations. PURCHASER understands
that the offer and sale of the Shares is not being registered
under the 1933 Act, that the Issuer is relying on the rules
governing offers and sales made outside the United States
pursuant to Regulation S, and that Rules 901 through 904 of
Regulation S govern this transaction.
6. Transfer Agent Instruction. ISSUER's Transfer Agent will be
instructed to issue one or more share certificates representing
Shares without restrictive legend in the names of PURCHASERS to
be specified prior to closing and that the Shares have been
issued pursuant to Regulation S. ISSUER further warrants that no
stop transfer instructions other than a stop transfer for 40 days
to U.S. persons or to persons in the U.S. (to the extent not
constituting an "offshore transaction" as defined in Rule 902(i)
of Regulation S), or instructions other than instructions to
issue the Shares have been given to the Transfer Agent and that
these Shares shall be freely transferable on the books and
records of ISSUER subject to compliance with the requirements of
Regulation S and other applicable securities laws. Upon the
applicable closing and upon the expiration of the applicable
Restricted Period, the ISSUER agrees to accept a PURCHASER
Representation Letter from the PURCHASER in the form of Appendix
"A" attached as evidence that the PURCHASER has complied with the
requirements of Regulation S and other applicable securities laws
and upon receipt of such a letter shall promptly instruct the
Transfer Agent to transfer the Shares into "Street Name" as
expeditiously as practical after receipt of the certificates and
the PURCHASER Representation Letter; provided, however, that
ISSUER shall not be required to deliver such instructions if it
knows or reasonably believes, any of the representations made in
the PURCHASER Representation Letter to be false.
7. Stock Delivery Instructions. The share certificates shall be
delivered to the PURCHASER on a delivery versus payment basis at
such times and places to be mutually agreed.
8. Closing; Closing Dates. The closing of each issuance and sale
of Shares hereunder shall be deemed to have occurred at the
offices of IBJ Schroeder, account number 10-0500-01-06 ("Closing
Agent") as of the date on which delivery of good funds in full
payment for the purchase of such Shares is cleared ;in the
account of the Closing Agent and written confirmation of same is
delivered to Purchaser (the "Closing Date").
The subscription evidenced by this Agreement shall be closed with
one payment of $984,375.00. The forty day restricted period will
start on the date the Issuer receives the money for this
transaction.
9. Conditions to the Company's Obligations to Sell. The
obligations of ISSUER to sell any Shares hereunder is conditioned
upon the following:
a. The receipt by ISSUER of a duly executed PURCHASER
Representation Letter (in the form attached as Appendix "A"
hereto) duly executed by or on behalf of PURCHASER or PURCHASER's
designee.
b. The receipt by ISSUER of irrevocable written confirmation
from the Closing Agent of receipt of good funds in U.S. dollars
in full payment for the Shares then being purchased.
c. The transfer of such purchase price funds from the Closing
Agent's account to the account of ISSUER simultaneously with the
release and delivery of any certificates evidencing the Shares so
purchased.
d. The truth and accuracy as of such Closing Date of all
representations and warranties made by PURCHASER in this
Agreement, and all representations and warranties contained in
the PURCHASER Representation Letter delivered to issuer in
connection with such closing.
10. Conditions to PURCHASER's Obligation to Purchase. ISSUER
understands that PURCHASER'S obligation to purchase Shares is
conditioned upon delivery of shares of common stock without
restrictive legend.
11. Governing Law; Jurisdiction. This Agreement shall be
governed by and construed and interpreted in accordance with the
laws of the State of Texas. The parties to this Agreement and
any other person claiming by, through or under them, hereby
attorn and submit to the personal jurisdiction of the U.S.
federal and state courts of the State of Texas, United States, as
the sole and exclusive venue and jurisdiction for the enforcement
of all rights and obligations under this Agreement. Each such
party hereby waives any and all objections to such jurisdiction
and venue and agrees that any proceedings for enforcement of this
Agreement may be initiated by service of process on such party by
substitute service upon the Secretary of State of the State of
Texas.
12. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereof with repeat to the subject
matter hereof and supersedes an and all prior or contemporaneous
representations, warranties, agreements and understandings in
connection therewith. This Offshore Securities Subscription
Agreement may be amended only by writing executed by all parties
hereto, and a signed facsimile transmission shall be deemed
binding of all parties hereto.
IN WITNESS WHEREOF, this Offshore Securities Subscription
Agreement was duly executed on and as of the date last written
below.
Dated this 15th day of the month of February, 1996
ARBINTER-OMNIVALOR S.A. - Lender
By: /s/ M.P. deCastillon /s/ M. E. Ballard
Director Director
Accepted this 22 day of the month of February, 1996.
ELECTROSOURCE, INC.
By: /s/ James M. Rosel
Vice President & General Counsel
EXHIBIT 4.2
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
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.
This Offshore Securities Subscription Agreement ("Agreement") is
made and entered into as of the last date entered on the
signature page hereof ("Acceptance Date") by and between
Electrosource, Inc., a corporation organized under the laws of
the State of Delaware, United States of America ("ISSUER") whose
principal place of business is 3800-b Drossett Dr., Austin, Texas
USA, and Arbinter Omnivalor, S.A. organized under the laws of
Switzerland, non-United States jurisdiction, whose principal
place of business is located in Geneva, Switzerland
("PURCHASER").
RECITALS
ISSUER's common stock, par value $.10 per share ("Shares"), is
publicly traded in the United States and quoted on the NASDAQ
stock exchange under the symbol "ELSI."
PURCHASER desires to subscribe for and purchase from ISSUER
and ISSUER desire to issue and sell to PURCHASER, Shares in
PRIVATE PLACEMENT in reliance upon the transaction exemption
afforded by Regulation S ("Regulation S") as promulgated by the
Securities and Exchange Commission ("SEC") under the Securities
Act of 1944, as amended (the "1933 Act").
NOW, THEREFORE, ISSUER AND PURCHASER agree as follows:
1. Agreement to Subscribe; Purchase Price
a. Purchaser hereby subscribes for the purchase of 1,200,000
(one million two hundred thousand) newly issued Shares, at a
price equal to $1.00 per share. The total subscription
commitment of PURCHASER shall be U.S. One million two-hundred
thousand dollars ($1,200,000 U.S.) at the aforementioned per
Share price. The Shares shall be purchased, paid for and issued
as specified in Section 8 of this Agreement.
b. PURCHASER shall pay the purchase price by delivering good
funds in United States Dollars to the designated depository for
closing by delivery of securities versus acceptable payment.
2. Subscriber Representations
a. Domicile; Authority, etc. PURCHASER represents and
warrants to ISSUER as follows:
(i)PURCHASER is a (corporation, individual, trust) duly
organized and existing under the laws of Switzerland.
(ii) The execution and delivery of the Agreement by
PURCHASER and the consummation by PURCHASER of the
transactions contemplated hereby: (aa) have been duly
authorized by all requisite corporate action; (bb) do
not and will not constitute a violation under any non-
U.S. laws applicable to PURCHASER; (cc) do not and will
not require the prior consent or approval of any
governmental agency or other entity or person not a
party to this Agreement.
(iii) PURCHASER has all requisite power and authority
to enter into, execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and on
the Acceptance Date this Agreement will constitute the
valid, binding and enforceable obligation of PURCHASER.
(iv) Neither the execution and delivery of this
Agreement by PURCHASER, nor the consummation by
PURCHASER of the transaction contemplated hereby, is in
connection with or directly or indirectly part of any
contract, agreement, arrangement, or understanding
(written or oral) between or among PURCHASER or any of
its "affiliates" (as that term is defined under the 1933
Act) and any other person with respect to any tender
offer, takeover attempt or other transaction or series
of transactions intended in whole or in part to effect a
change in, or transfer of control of ISSUER (as such
term is defined under the 1933 Act).
b. Offshore Transaction. PURCHASER represents and warrants to
ISSUER as follows,
(i) PURCHASER is not U.S. person (whenever
such terms is used herein, it shall have the meaning
given in Regulation S).
(ii) At the time the buy order was originated,
PURCHASER was outside the United States and is
outside the United States as of the date of the
execution and delivery of this Agreement.
(iii) PURCHASER is not purchasing the Shares on
behalf of any U.S. person, and the sale has not been
prearranged with a purchaser in the United States.
(iv) Each distributor (if any) participating in
the offer of the Shares has agreed in writing (and a
copy thereof has been delivered to ISSUER) that all
offers and sales of the Shares prior to the
expiration of a period commencing on the applicable
closing date and ending 40 days thereafter (the
"Restricted Period") shall only be made in
accordance with the safe harbor provisions contained
in Rule 903 or Rule 904 as applicable, of Regulation
S, pursuant to registration under the 1933 Act, or
pursuant to an exemption from registration.
(v) PURCHASER represents and warrants and
hereby agrees that all offers and sales of the
Shares prior to the expiration of the Restricted
Period shall only be made in accordance with the
safe harbor provisions contained in Rule 903 or Rule
904, as applicable, of Regulation S, pursuant to
registration under the 1933 Act or pursuant to an
exemption from registration, and all offers and
sales after the Restricted Period shall be made only
pursuant to such a registration or to such exemption
from registration.
(vi) All offering documents received by
PURCHASER, include statements to the effect that the
Share have not been registered under the 1933 Act
and may not be offered or sold in the United States,
or to U.S. Persons, or for the account or benefit of
U.S. person (other then distributors as defined in
Regulation S) during the Restricted Period unless
the Shares are registered under the 1933 Act or an
exemption from the registration requirements is
available.
(vii) PURCHASER acknowledges that the purchase
of the Shares involves a high degree of risk and
further acknowledges that it can bear the economic
risk of the purchase of the Shares, including the
total loss of its investment.
(viii) PURCHASER understands that the Shares are
being offered and Sold to it in reliance on specific
exemptions from the registration requirements of
U.S. federal and state securities laws and that the
ISSUER is relying upon the truth and accuracy of the
representations, warranties, agreements,
acknowledgments and understandings of PURCHASER set
forth herein in order to determine the applicability
of such exemptions and the suitability of PURCHASER
to acquire the Shares.
(ix) PURCHASER is sufficiently experienced in
financial and business matters to be capable of
evaluating the merits and risks of its investments,
and to make an informed decision relating thereto.
(x) In evaluating its investment, PURCHASER
has consulted its own investment and/or legal and/or
tax advisors.
(xi) PURCHASER acknowledges that in the view of
the SEC the statutory basis for the exemption
claimed for the transactions contemplated by this
Agreement would not be present if the offering of
Shares, although in technical compliance with
Regulation S, is part of a plan or scheme to evade
the registration provision of the 1933 Act, and
PURCHASER represents and warrants that it is
acquiring the Shares hereunder for investment
purposes and has no present intention to sell the
Shares in the United States or to a U.S. Person, or
for the account or benefit of a U.S. Person either
now or promptly after the expiration of the
Restricted Period. PURCHASER hereby confirms that
the purposes of including the PURCHASER
Representation Letter (Appendix A) as provided in
paragraph 6, is in order to facilitate the transfer
of the certificates representing the Shares into
street name to enable PURCHASER to comply with the
requirements of certain offshore portfolio
management regulations, and the security
requirements of offshore lenders for margin loans
and to enable ISSUER to determine the availability
of the exemption from registration under Regulation
S.
(xii) PURCHASER is not an underwriter of, or
dealer in, the Shares and PURCHASER is not
participating in any distribution of the Shares,
either directly or through any affiliate. If
PURCHASER is purchasing the Shares subscribed for
hereby in representative or fiduciary capacity, the
representations and warranties in this Offshore
Securities Subscription Agreement shall be deemed to
have been made on behalf of person or persons whom
PURCHASER is so purchasing.
c. Survival. The foregoing representations and warranties in
this Offshore Securities Subscription Agreement shall be deemed
to have been made on behalf of person or persons whom PURCHASER
is so purchasing.
d. Current Public Information. PURCHASER acknowledged that
PURCHASER has been furnished with or has acquired copies of the
Company's most recent Annual Report, Form 10-K as filed with the
SEC, Form 10-Q for the Quarters ending September, 1995 as filed
with the SEC, and all Form 8-K filed thereafter (collectively,
the "SEC Filings"), and other publicly available documents.
e. Independent Investigation Access. PURCHASER acknowledges
that PURCHASER, in making the decision to purchase the Shares
subscribed for, has relied upon independent investigations made
by it and its purchaser representatives, if any, and PURCHASER
and such representatives, if any, have, prior to any sale to it,
been given access and the opportunity to examine all material
books and records of the ISSUER, all material contracts and
documents relating to this offering, and an opportunity to ask
questions of, and to receive answers from ISSUER or any person
acting on its behalf concerning the terms and conditions of this
offering. PURCHASER and its advisors, if any, have been
furnished with access to all publicly available materials
relating to the business, finances and operations of ISSUER and
materials relating to the offer and sale of the Shares which have
been requested. PURCHASER and its advisors, if any, have
received complete and satisfactory answers to any such inquiries.
f. No Government Recommendation or Approval. PURCHASER
understands that no federal or state agency has passed on or made
any finding or determination relating to the fairness for
investment in the Shares, nor has passed on or made, nor will
pass on or make, any recommendation or endorsement of the Shares.
g. Entity Purchases. If PURCHASER is a partnership,
corporation or trust, then each person executing this Agreement
on its behalf represents and warrants that:
(i) He or she has made due inquiry to
determine the accuracy and truthfulness of the
representations and warrants made pursuant to this
Agreement, and has no knowledge of any facts or
circumstances which would cause them to be
inaccurate OR UNTRUE.
(ii) He or she is duly authorized (if the
undersigned is a trust, by the trust agreement) to
make this investment and to enter into and execute
this Agreement on behalf of such entity.
h. 45 Day Hold Period. Although PURCHASER recognizes that the
restricted period for the shares expires at the end of 40 days,
PURCHASER agrees and warrants to refrain from selling or shorting
the stock or entering into any transaction that would cause the
stock to be sold or shorted for a period of 45 days from the day
this offering closes. Additionally the purchaser warrants that
no short sale has been entered into in anticipation of a
contemplated offering.
3. Issuer Representations.
a. Reporting Company Status. ISSUER, is a reporting issuer as
defined in Rule 902(1) of Regulation S.
b. Offshore Transaction. Assuming the truthfulness and
accuracy of purchaser' representations and warranties contained
herein to its knowledge, ISSUER has knot offered these securities
to any persons in the United States or to any U.S. person or for
the account or benefit of any U.S. person.
c. No Directed Selling Efforts. In regard to this
transaction, ISSUER has not conducted any "directed selling
efforts" as that term is defined in Rule 902 of Regulation S nor
has ISSUER conducted any general solicitation relating to the
offer and sale of the within securities to persons resident
within the United States or elsewhere.
4. Expiration of Restricted Period. The transaction restriction
in connection with this offshore offer and sale restrict
PURCHASER from offering and selling to U.S. persons or for the
account or benefit of a U.S. person, for a forty (40) days period
from the later of the date that the shares were first offered to
persons other than "distributors" (as defined in Regulation S)
and the date that the offering of which the sale contemplated by
this agreement is a part has been completed. Rule 903(c)(2)
governs the forty (40) day transaction restriction. ISSUER shall
send prompt written notice to PURCHASER stating the date on which
the restricted period begins.
5. Exemption; Reliance on Representations. PURCHASER understands
that the offer and sale of the Shares is not being registered
under the 1933 Act, that the Issuer is relying on the rules
governing offers and sales made outside the United States
pursuant to Regulation S, and that Rules 901 through 904 of
Regulation S govern this transaction.
6. Transfer Agent Instruction. ISSUER's Transfer Agent will be
instructed to issue one or more share certificates representing
Shares without restrictive legend in the names of PURCHASERS to
be specified prior to closing and that the Shares have been
issued pursuant to Regulation S. ISSUER further warrants that no
stop transfer instructions other than a stop transfer for 40 days
to U.S. persons or to persons in the U.S. (to the extent not
constituting an "offshore transaction" as defined in Rule 902(i)
of Regulation S), or instructions other than instructions to
issue the Shares have been given to the Transfer Agent and that
these Shares shall be freely transferable on the books and
records of ISSUER subject to compliance with the requirements of
Regulation S and other applicable securities laws. Upon the
applicable closing and upon the expiration of the applicable
Restricted Period, the ISSUER agrees to accept a PURCHASER
Representation Letter from the PURCHASER in the form of Appendix
"A" attached as evidence that the PURCHASER has complied with the
requirements of Regulation S and other applicable securities laws
and upon receipt of such a letter shall promptly instruct the
Transfer Agent to transfer the Shares into "Street Name" as
expeditiously as practical after receipt of the certificates and
the PURCHASER Representation Letter; provided, however, that
ISSUER shall not be required to deliver such instructions if it
knows or reasonably believes, any of the representations made in
the PURCHASER Representation Letter to be false.
7. Stock Delivery Instructions. The share certificates shall be
delivered to the PURCHASER on a delivery versus payment basis at
such times and places to be mutually agreed.
8. Closing; Closing Dates. The closing of each issuance and sale
of Shares hereunder shall be deemed to have occurred at the
offices of IBJ Schroeder, account number 10-0500-01-06 ("Closing
Agent") as of the date on which delivery of good funds in full
payment for the purchase of such Shares is cleared ;in the
account of the Closing Agent and written confirmation of same is
delivered to Purchaser (the "Closing Date").
The subscription evidenced by this Agreement shall be closed with
one payment of $1,200,000.00. The forty-one day restricted
period will start on the date the Issuer receives the money for
this transaction.
9. Conditions to the Company's Obligations to Sell. The
obligations of ISSUER to sell any Shares hereunder is conditioned
upon the following:
a. The receipt by ISSUER of a duly executed PURCHASER
Representation Letter (in the form attached as Appendix "A"
hereto) duly executed by or on behalf of PURCHASER or PURCHASER's
designee.
b. The receipt by ISSUER of irrevocable written confirmation
from the Closing Agent of receipt of good funds in U.S. dollars
in full payment for the Shares then being purchased.
c. The transfer of such purchase price funds from the Closing
Agent's account to the account of ISSUER simultaneously with the
release and delivery of any certificates evidencing the Shares so
purchased.
d. The truth and accuracy as of such Closing Date of all
representations and warranties made by PURCHASER in this
Agreement, and all representations and warranties contained in
the PURCHASER Representation Letter delivered to issuer in
connection with such closing.
10. Conditions to PURCHASER's Obligation to Purchase. ISSUER
understands that PURCHASER'S obligation to purchase Shares is
conditioned upon delivery of shares of common stock without
restrictive legend.
11. Governing Law; Jurisdiction. This Agreement shall be
governed by and construed and interpreted in accordance with the
laws of the State of Texas. The parties to this Agreement and
any other person claiming by, through or under them, hereby
attorn and submit to the personal jurisdiction of the U.S.
federal and state courts of the State of Texas, United States, as
the sole and exclusive venue and jurisdiction for the enforcement
of all rights and obligations under this Agreement. Each such
party hereby waives any and all objections to such jurisdiction
and venue and agrees that any proceedings for enforcement of this
Agreement may be initiated by service of process on such party by
substitute service upon the Secretary of State of the State of
Texas.
12. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereof with repeat to the subject
matter hereof and supersedes an and all prior or contemporaneous
representations, warranties, agreements and understandings in
connection therewith. This Offshore Securities Subscription
Agreement may be amended only by writing executed by all parties
hereto, and a signed facsimile transmission shall be deemed
binding of all parties hereto.
IN WITNESS WHEREOF, this Offshore Securities Subscription
Agreement was duly executed on and as of the date last written
below.
Dated this 29th day of the month of April, 1996
ARBINTER-OMNIVALOR S.A. - Lender
By: /s/ M.P. deCastillon /s/ M. E. Ballard
Director Director
Accepted this 29th day of the month of April, 1996.
ELECTROSOURCE, INC.
By: /s/ Michael G. Semmens
President & CEO
EXHIBIT 4.3
ELECTROSOURCE, INC.
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON
THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER (THE "SECURITIES ACT"). THIS WARRANT AND
THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION UNDER THE SECURITIES ACT OR UNLESS SUCH OFFER, SALE
OR TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: December 5, 1995
Warrants No. W9-101/103
to Purchase _______ Shares
of Common Stock, $0.10 Par Value Per Share
ELECTROSOURCE, INC., a Delaware corporation (the "Company"),
hereby certifies
that_________________________________________________, its
permissible transferees, designees, successors and assigns
(collectively, the "Holder"), for value received, is entitled to
purchase from the Company at any time commencing on December 5,
1995, and expiring December 4, 1997, up to __________ shares (the
"Shares") of the Company's common stock, par value $0.10 per
share (the "Common Stock"), at $1.594 per share (the "Exercise
Price").
1. Exercise of Warrants.
(a) The Holder may exercise this Warrant, in whole or in
part, as follows:
(i) By presentation and surrender of this Common Stock
Purchase Warrant Certificate ("Warrant Certificate" or this
"Certificate"), to the Company at its principal executive
offices or at the office of its stock transfer agent, if any,
with the Election to Purchase Form annexed hereto
duly executed and accompanied by payment of the
full Exercise Price for each Share to be purchased;
or
(ii) By presentation and surrender of this Certificate 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 Holder
shall exchange its warrant for that number of shares of
Common Stock determined by multiplying the total number of
Shares represented by this Common Stock Purchase Warrant
Certificate 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
1, the then current market price per share of
Common Stock at any date shall be deemed to be the
average last sale prices of the Common Stock on the
three business days prior to the date of the
Cashless Exercise or, in case no such reported
sales take place on such day(s), the average of the
last reported bid and asked prices of the Common
stock on such day(s), in either case on the
principal national securities 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 presentation and surrender of this Certificate with
the attached Election to Purchase Form duly executed, at
the principal office of the Company at 3800-B Drossett
Drive, Austin, Texas 78744, together with a check payable
to the Company in the amount of the Exercise Price multiplied
by the number of Shares being purchased or in the event of a
Cashless Exercise, with the Cashless Exercise Form duly executed,
the Company, or the Company's transfer agent as the case may be,
shall deliver to the Holder hereof, certificates of
Common Stock which in the aggregate represent the number
of Shares for which this Warrant is being exercised. If
at the time this Warrant is exercised a Registration
Statement is not in effect to register under the
Securities Act the Shares issuable upon exercise of this
Warrant, the Company may require the Holder to make such
representations, and may place such legends on
certificates representing Shares as may be reasonably
required in the opinion of counsel to the Company to
permit the Shares to be issued without registration.
All or less than all of the Warrant represented by this
Certificate may be exercised and, in case of the
exercise of less than all, the Company, upon surrender
hereof, will deliver to the Holder a new Warrant
Certificate or Certificates of like tenor and dated the
date hereof entitling said Holder to purchase the number
of Shares represented by this Certificate which have not
been exercised.
2. Exchange and Transfer.
This Certificate at any time prior to the exercise
hereof, upon presentation and surrender to the Company, may
be exchanged, alone or with other Certificates of like tenor
registered in the name of the same holder, for another
Certificate or Certificates of like tenor in the name of
such holder exercisable for the aggregate number of Shares
as the Certificate or Certificates surrendered.
3. Rights and Obligations of Holders of this Certificate.
(a) The Holder of this Certificate shall not, by
virtue hereof, be entitled to any rights of a
stockholder in the Company, either at law or in equity;
provided, however, that in the event any certificate
representing shares of Common Stock or other securities
is issued to the Holder hereof upon exercise of some or
all of the Warrant, such Holder shall, for all purposes,
be deemed to have become the holder of record of such
Common Stock on the date on which this Certificate,
together with a duly executed Purchase Form, was
surrendered and payment of the aggregate Exercise Price
was made, irrespective of the date of delivery of such
share certificate.
(b) In case the Company shall
(i) pay a dividend in Common Stock or make a distribution
in Common Stock,
(ii) subdivide its outstanding Common Stock into a
greater number of shares, or
(iii) combine its outstanding Common Stock into a smaller
number of shares (including a recapitalization in connection
with a consolidation or merger in which the Company is the
continuing corporation), then
(x) the Exercise Price on the record date of such division
or the effective date of such action shall be adjusted by
multiplying such Exercise Price by a fraction, the numerator
of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which
is the number of shares of Common Stock outstanding
immediately after such event and (y) the number of shares of
Common Stock for which this Warrant Certificate may be
exercised immediately before such event shall be adjusted
by multiplying such number by a fraction, the numerator of
which is the Exercise Price immediately before such event and
the denominator of which is the Exercise Price immediately
after such event.
(c) In case of any consolidation or merger of the Company with or
into another corporation (other than any consolidation or merger
in which the Company is the continuing corporation and which does not
result in any reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of
Common Stock into shares or other stock or other
securities or property), or the sale or transfer of the
property of the Company as an entirety or substantially
as an entirety, there shall be deliverable upon exercise
of the Warrant Certificate (in lieu of the number of
shares of Common Stock theretofore deliverable) the
number of shares of stock or other securities or
property to which a holder of the number of shares of
Common Stock which would otherwise have been deliverable
upon the exercise of this Warrant Certificate would have
been entitled upon such action if this Warrant
Certificate had been exercised immediately prior to such
action.
4. Common Stock.
(a) The Company covenants and agrees that all
shares of Common Stock issuable upon exercise of this
Warrant Certificate will, upon delivery, be duly and
validly authorized and issued, fully-paid and non-
assessable.
(b) The Company covenants and agrees that it will
at all times reserve and keep available an authorized
number of shares of its Common Stock and other
applicable securities sufficient to permit the exercise
in full of all outstanding options, warrants and rights,
including the Warrants.
5. Registration Rights.
In the event the Company files a registration statement
with the Securities and Exchange Commission on Form S-3 for
registration of the sale of any shares of the Company's
Common Stock, the Company agrees to use reasonable efforts
to include the number of Shares of Common Stock represented
by this Common Stock Purchase Warrant Certificate in one
such registration statement, subject to the pre-existing
rights of other shareholders, option or warrant holders and
any other contractual rights existing on the date hereof
that would limit such registration. Holder shall pay the
additional cost of adding its shares to the registration
statement. This registration right is non-assignable.
6. Issuance of Certificates.
As soon as possible after full or partial exercise of
this Warrant, but in any event not more than three (3)
business days, the Company, at its expense, will cause to be
issued in the name of and delivered to the Holder of this
Warrant, a certificate or certificates for the number of
fully paid and non-assessable Shares of Common Stock to
which that Holder shall be entitled on such exercise. No
fractional Shares will be issued on exercise of this
Warrant. If on any exercise of this Warrant a fraction of a
Share results, the Company will pay the cash value of that
fractional share, calculated on the basis of the Exercise
Price. Prior to registration of the Shares of Common Stock
underlying this Warrant Certificate, as provided in Section
5 hereof, all such certificate shall bear a restrictive
legend to the effect that the Shares represented by such
Certificate have not been registered under the Securities
Act of 1933, as amended, and the Shares may not be sold or
transferred in the absence of such registration or an
exemption therefrom, such legend to be substantially in the
form of the bold face language appearing on Page 1 of this
Warrant Certificate.
7. Disposition of Warrants or Shares.
The Holder of this Warrant Certificate, each transferee
hereof and any holder and transferee of any Shares, by his
or its acceptance thereof, agrees that no public
distribution of Warrant or Shares will be made in violation
of the provisions of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder
(collectively, the "Act"). Furthermore, it shall be a
condition to the transfer of the Warrant that any transferee
thereof deliver to the Company his or its written agreement
to accept and be bound by all of the terms and conditions
contained in this Warrant Certificate.
8. Notices.
Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required
or desired to be given hereunder shall only be effective if
given in writing by certified or registered mail, return
receipt requested, postage prepaid, or by U. S. express mail
service, or by private overnight mail service (e.g. Federal
Express). Any such notice shall be deemed to have been
given:
(a) on the business day immediately subsequent to
mailing, if sent by U. S. express mail service or
private overnight mail service, or
(b) three (3) business days following the mailing
thereof, if mailed by certified or registered mail,
postage prepaid, return receipt requested, and all such
notices shall be sent to the following addresses (or to
such other address or addresses as a party may have
advised the other in the manner provided in this Section 8):
If to the Company:
James M. Rosel
Electrosource, Inc.
3800-B Drossett Drive
Austin, TX 78744
If to the Holder:
_______________________
_______________________
_______________________
_______________________
9. Governing Law.
This Warrant Certificate and all rights and obligations
hereunder shall be deemed to be made under and governed by
the laws of the State of Texas without giving effect to the
conflicts of laws provisions. The Holder hereby irrevocably
consents to the venue and jurisdiction of the State and
Federal Courts located in the State of Texas, County of
Travis.
10. Successors and Assigns.
This Warrant Certificate shall be binding upon and shall
inure to the benefit of the parties hereto and their
respective successors and assigns.
11. Headings.
The headings of various sections of this Warrant
Certificate have been inserted for reference only and shall
not be a part of this Certificate.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or by facsimile, by one
of its officers thereunto duly authorized.
ELECTROSOURCE, INC.
Date: May 9, 1996 By: /s/
James M. Rosel
Vice President/General Counsel
ELECTION TO PURCHASE
To Be Executed by the Holder
in Order to Exercise the Common Stock
Purchase Warrant Certificate
The undersigned Holder hereby irrevocably elects to exercise
_______ of the Warrants represented by this Common Stock Warrant
Certificate, and to purchase the shares of Common Stock issuable
upon the exercise of such Warrants and requests that certificates
for securities be issued in the name of:
_________________________________________________
(Please type or print name and address)
_________________________________________________
_________________________________________________
_________________________________________________
(Social Security or tax identification number)
and delivered to ________________________________________________
_________________________________________________________________
(Please type or print name and address
and, if such number of Warrants shall not be all the Warrants
evidenced by this Common Stock Warrant Certificate, that a new
Common Stock Warrant Certificate for the balance of such Warrants
be registered in the name of, and delivered to, the Holder at the
address stated below.
In full payment of the purchase price with respect to the
Warrants exercised and transfer taxes, if any, the undersigned
hereby tenders payment of $__________ by check or money order
payable in United States currency to the order of Electrosource,
Inc.
[HOLDER]
Dated:___________________ By:_________________________________
Name:
Title:
_____________________________________
(Address)
_____________________________________
_____________________________________
(Social Security or tax identification number)
CASHLESS EXERCISE FORM
To Be Executed by the Holder Upon Exercise of Warrant
Pursuant to Section 1
The undersigned hereby irrevocably elects to exchange its
Warrants for such Shares of Common Stock pursuant to the Cashless
Exercise provisions of the within Common Stock Purchase Warrant
Certificate, as provided for in Section 1 of such Warrant
Certificate.
Please issue a certificate or certificates for such Common
Stock in the name of:
_________________________________________________
(Please type or print name and address)
_________________________________________________
_________________________________________________
_________________________________________________
(Social Security or tax identification number)
and delivered to _______________________________________________
________________________________________________________________
(Please type or print name and address)
NOTE: The above signature should correspond exactly with the
name on the first page of this Warrant Certificate.
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.
In full payment of the purchase price, the Common Stock
Purchase Warrant Certificate is surrendered herewith.
[HOLDER]
Dated:___________________ By:_________________________________
Name:
Title:
_____________________________________
(Address)
_____________________________________
_____________________________________
(Social Security or tax identification number)
WARRANTS ISSUED TO THE FOLLOWING PARTICIPANTS:
W9-101 Harlan P. Kleiman 41,958 shares
Shoreline Pacific, 3 Harbor Drive, Suite 211
Sausalito CA 94965
W9-102 Wayne Colson 567 shares
Same Address
W9-103 Robert K. Schacter 14,175 shares
Same Address
EXHIBIT 4.4
ELECTROSOURCE, INC.
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON
THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER (THE "SECURITIES ACT"). THIS WARRANT AND
THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION UNDER THE SECURITIES ACT OR UNLESS SUCH OFFER, SALE
OR TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: October 20, 1995
Warrants No. W9-104/106
to Purchase _______ Shares
of Common Stock, $0.10 Par Value Per Share
ELECTROSOURCE, INC., a Delaware corporation (the "Company"),
hereby certifies
that_________________________________________________, its
permissible transferees, designees, successors and assigns
(collectively, the "Holder"), for value received, is entitled to
purchase from the Company at any time commencing on October 20,
1995, and expiring October 19, 1997, up to __________ shares (the
"Shares") of the Company's common stock, par value $0.10 per
share (the "Common Stock"), at $1.925 per share (the "Exercise
Price").
1. Exercise of Warrants.
(a) The Holder may exercise this Warrant, in whole or in part,as follows:
(i) By presentation and surrender of this Common Stock Purchase
Warrant Certificate ("Warrant Certificate" or this
"Certificate"), to the Company at its principal executive
offices or at the office of its stock transfer agent, if any,
with the Election to Purchase Form annexed hereto
duly executed and accompanied by payment of the
full Exercise Price for each Share to be purchased;
or
(ii) By presentation and surrender of this Certificate 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 Holder shall exchange its warrant for that
number of shares of Common Stock determined by
multiplying the total number of Shares represented
by this Common Stock Purchase Warrant Certificate
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
1, the then current market price per share of
Common Stock at any date shall be deemed to be the
average last sale prices of the Common Stock on the
three business days prior to the date of the
Cashless Exercise or, in case no such reported
sales take place on such day(s), the average of the
last reported bid and asked prices of the Common
stock on such day(s), in either case on the
principal national securities 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 presentation and surrender of this Certificate with the
attached Election to Purchase Form duly executed, at the principal
office of the Company at 3800-B Drossett Drive, Austin, Texas 78744,
together with a check payable to the Company in the amount of the
Exercise Price multiplied by the number of Shares being
purchased or in the event of a Cashless Exercise, with
the Cashless Exercise Form duly executed, the Company,
or the Company's transfer agent as the case may be,
shall deliver to the Holder hereof, certificates of
Common Stock which in the aggregate represent the number
of Shares for which this Warrant is being exercised. If
at the time this Warrant is exercised a Registration
Statement is not in effect to register under the
Securities Act the Shares issuable upon exercise of this
Warrant, the Company may require the Holder to make such
representations, and may place such legends on
certificates representing Shares as may be reasonably
required in the opinion of counsel to the Company to
permit the Shares to be issued without registration.
All or less than all of the Warrant represented by this
Certificate may be exercised and, in case of the
exercise of less than all, the Company, upon surrender
hereof, will deliver to the Holder a new Warrant
Certificate or Certificates of like tenor and dated the
date hereof entitling said Holder to purchase the number
of Shares represented by this Certificate which have not
been exercised.
2. Exchange and Transfer.
This Certificate at any time prior to the exercise
hereof, upon presentation and surrender to the Company, may
be exchanged, alone or with other Certificates of like tenor
registered in the name of the same holder, for another
Certificate or Certificates of like tenor in the name of
such holder exercisable for the aggregate number of Shares
as the Certificate or Certificates surrendered.
3. Rights and Obligations of Holders of this Certificate.
(a) The Holder of this Certificate shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company,
either at law or in equity; provided, however, that in the
event any certificate representing shares of Common Stock
or other securities is issued to the Holder hereof upon exercise
of some or all of the Warrant, such Holder shall, for all purposes,
be deemed to have become the holder of record of such
Common Stock on the date on which this Certificate,
together with a duly executed Purchase Form, was
surrendered and payment of the aggregate Exercise Price
was made, irrespective of the date of delivery of such
share certificate.
(b) In case the Company shall
(i) pay a dividend in Common Stock or make a distribution in
Common Stock,
(ii) subdivide its outstanding Common Stock into a greater
number of shares, or
(iii) combine its outstanding Common Stock into a smaller number
of shares (including a recapitalization in connection with
a consolidation or merger in which the Company is the
continuing corporation), then
(x) the Exercise Price on the record date of such division
or the effective date of such action shall be adjusted by
multiplying such Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately before such event and the
denominator of which is the number of shares
of Common Stock outstanding immediately after
such event and (y) the number of shares of
Common Stock for which this Warrant
Certificate may be exercised immediately
before such event shall be adjusted by
multiplying such number by a fraction, the
numerator of which is the Exercise Price
immediately before such event and the
denominator of which is the Exercise Price
immediately after such event.
(c) In case of any consolidation or merger of the Company with or into
another corporation (other than any consolidation or merger in
which the Company is the continuing corporation and which does not
result in any reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of
Common Stock into shares or other stock or other
securities or property), or the sale or transfer of the
property of the Company as an entirety or substantially
as an entirety, there shall be deliverable upon exercise
of the Warrant Certificate (in lieu of the number of
shares of Common Stock theretofore deliverable) the
number of shares of stock or other securities or
property to which a holder of the number of shares of
Common Stock which would otherwise have been deliverable
upon the exercise of this Warrant Certificate would have
been entitled upon such action if this Warrant
Certificate had been exercised immediately prior to such
action.
4. Common Stock.
(a) The Company covenants and agrees that all shares of Common
Stock issuable upon exercise of this Warrant Certificate will,
upon delivery, be duly and validly authorized and issued, fully-paid
and non-assessable.
(b) The Company covenants and agrees that it will at all times reserve
and keep available an authorized number of shares of its Common Stock
and other applicable securities sufficient to permit the exercise
in full of all outstanding options, warrants and rights,
including the Warrants.
5. Registration Rights.
In the event the Company files a registration statement
with the Securities and Exchange Commission on Form S-3 for
registration of the sale of any shares of the Company's
Common Stock, the Company agrees to use reasonable efforts
to include the number of Shares of Common Stock represented
by this Common Stock Purchase Warrant Certificate in one
such registration statement, subject to the pre-existing
rights of other shareholders, option or warrant holders and
any other contractual rights existing on the date hereof
that would limit such registration. Holder shall pay the
additional cost of adding its shares to the registration
statement. This registration right is non-assignable.
6. Issuance of Certificates.
As soon as possible after full or partial exercise of
this Warrant, but in any event not more than three (3)
business days, the Company, at its expense, will cause to be
issued in the name of and delivered to the Holder of this
Warrant, a certificate or certificates for the number of
fully paid and non-assessable Shares of Common Stock to
which that Holder shall be entitled on such exercise. No
fractional Shares will be issued on exercise of this
Warrant. If on any exercise of this Warrant a fraction of a
Share results, the Company will pay the cash value of that
fractional share, calculated on the basis of the Exercise
Price. Prior to registration of the Shares of Common Stock
underlying this Warrant Certificate, as provided in Section
5 hereof, all such certificate shall bear a restrictive
legend to the effect that the Shares represented by such
Certificate have not been registered under the Securities
Act of 1933, as amended, and the Shares may not be sold or
transferred in the absence of such registration or an
exemption therefrom, such legend to be substantially in the
form of the bold face language appearing on Page 1 of this
Warrant Certificate.
7. Disposition of Warrants or Shares.
The Holder of this Warrant Certificate, each transferee
hereof and any holder and transferee of any Shares, by his
or its acceptance thereof, agrees that no public
distribution of Warrant or Shares will be made in violation
of the provisions of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder
(collectively, the "Act"). Furthermore, it shall be a
condition to the transfer of the Warrant that any transferee
thereof deliver to the Company his or its written agreement
to accept and be bound by all of the terms and conditions
contained in this Warrant Certificate.
8. Notices.
Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required
or desired to be given hereunder shall only be effective if
given in writing by certified or registered mail, return
receipt requested, postage prepaid, or by U. S. express mail
service, or by private overnight mail service (e.g. Federal
Express). Any such notice shall be deemed to have been
given:
(a) on the business day immediately subsequent to
mailing, if sent by U. S. express mail service or
private overnight mail service, or
(b) three (3) business days following the mailing
thereof, if mailed by certified or registered mail,
postage prepaid, return receipt requested, and all such
notices shall be sent to the following addresses (or to
such other address or addresses as a party may have
advised the other in the manner provided in this Section 8):
If to the Company:
James M. Rosel
Electrosource, Inc.
3800-B Drossett Drive
Austin, TX 78744
If to the Holder:
_______________________
_______________________
_______________________
_______________________
9. Governing Law.
This Warrant Certificate and all rights and obligations
hereunder shall be deemed to be made under and governed by
the laws of the State of Texas without giving effect to the
conflicts of laws provisions. The Holder hereby irrevocably
consents to the venue and jurisdiction of the State and
Federal Courts located in the State of Texas, County of
Travis.
10. Successors and Assigns.
This Warrant Certificate shall be binding upon and shall
inure to the benefit of the parties hereto and their
respective successors and assigns.
11. Headings.
The headings of various sections of this Warrant
Certificate have been inserted for reference only and shall
not be a part of this Certificate.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or by facsimile, by one
of its officers thereunto duly authorized.
ELECTROSOURCE, INC.
Date: May 9,1996 By:_________________________________
James M. Rosel
Vice President/General Counsel
ELECTION TO PURCHASE
To Be Executed by the Holder
in Order to Exercise the Common Stock
Purchase Warrant Certificate
The undersigned Holder hereby irrevocably elects to exercise
_______ of the Warrants represented by this Common Stock Warrant
Certificate, and to purchase the shares of Common Stock issuable
upon the exercise of such Warrants and requests that certificates
for securities be issued in the name of:
_________________________________________________
(Please type or print name and address)
_________________________________________________
_________________________________________________
_________________________________________________
(Social Security or tax identification number)
and delivered to _______________________________________________
_________________________________________________________________
(Please type or print name and address
and, if such number of Warrants shall not be all the Warrants
evidenced by this Common Stock Warrant Certificate, that a new
Common Stock Warrant Certificate for the balance of such Warrants
be registered in the name of, and delivered to, the Holder at the
address stated below.
In full payment of the purchase price with respect to the
Warrants exercised and transfer taxes, if any, the undersigned
hereby tenders payment of $__________ by check or money order
payable in United States currency to the order of Electrosource,
Inc.
[HOLDER]
Dated:___________________ By:_________________________________
Name:
Title:
_____________________________________
(Address)
_____________________________________
_____________________________________
(Social Security or tax identification number)
CASHLESS EXERCISE FORM
To Be Executed by the Holder Upon Exercise of Warrant
Pursuant to Section 1
The undersigned hereby irrevocably elects to exchange its
Warrants for such Shares of Common Stock pursuant to the Cashless
Exercise provisions of the within Common Stock Purchase Warrant
Certificate, as provided for in Section 1 of such Warrant
Certificate.
Please issue a certificate or certificates for such Common
Stock in the name of:
_________________________________________________
(Please type or print name and address)
_________________________________________________
_________________________________________________
_________________________________________________
(Social Security or tax identification number)
and delivered to ________________________________________________
_________________________________________________________________
(Please type or print name and address
NOTE: The above signature should correspond exactly with the
name on the first page of this Warrant Certificate.
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.
In full payment of the purchase price, the Common Stock
Purchase Warrant Certificate is surrendered herewith.
[HOLDER]
Dated:___________________ By:_________________________________
Name:
Title:
_____________________________________
(Address)
_____________________________________
_____________________________________
(Social Security or tax identification number)
WARRANTS ISSUED TO THE FOLLOWING PARTICIPANTS:
W9-104 Harlan P. Kleiman 16,864 shares
Shoreline Pacific, 3 Harbor Drive, Suite 211
Sausalito CA 94965
W9-105 Wayne Colson 228 shares
Same Address
W9-106 Robert K. Schacter 5.697 shares
Same Address
EXHIBIT 10.1
Memorandum of Understanding
Between
Electrosource, Inc.
and
Lockheed Martin Corporation
March 15, 1996
WHEREAS Lockheed Martin Corporation acting through its Control
Systems business hereinafter referred to as `LMCS" has embarked
on an effort to develop a high performance, cost effective Hybrid
Electric Vehicle System for specific Hybrid Electric Vehicles,
and
WHEREAS Electrosource has initiated a Hybrid Electric Vehicle
Battery Development program with the goal of designing and
producing a high powered long life battery for identified Hybrid
Electric Vehicles, and
WHEREAS it is the desire of LMCS to have the best available
battery technology for their Hybrid Electric Vehicle(s), meeting
program technical and price requirements, and
WHEREAS it is the desire of Electrosource to develop and produce
a battery that meets LMCS Hybrid Electric Vehicle requirements.
NOW, THEREFORE it is agreed that LMCS shall supply Electrosource
with their program battery specifications including program
performance specifications, dimensional requirements and price
targets, and
Electrosource shall provide LMCS with charging requirements and
battery management issues, and
LMCS and Electrosource shall work together on obtaining third
party funding for the development of a customized Hybrid Electric
Battery for use in LMCS Hybrid Electric Vehicle(s), and
While pursuing the development of the custom Hybrid Electric
Vehicle Battery for LMCS, Electrosource shall give preferential
pricing to LMCS on the present production batteries for use in
their Hybrid Electric Vehicle(s).
FURTHERMORE, LMCS and Electrosource intend to enter into an
agreement that intends to outline the specific responsibilities
of each company with regard to pursuing broad base Hybrid
Electric Vehicle programs that are of interest to both companies,
and
Intend to include provisions for the sharing of technical
information between Electrosource's and LMCS's Hybrid Electric
Vehicle Developmental programs, and
Electrosource and LMCS intend to execute a Proprietary
Information Agreement.
This Memorandum of Understanding supersedes and replaces all
prior agreements and understandings between the Parties on these
matters.
This is a nonbinding statement of the parties intent.
For Electrosource, Inc.
/s/
Michael G. Semmens
President, CEO, Chairman of the Board
For Lockheed Martin Corporation
/s/
James D. Scanlon
President, Control Systems
EXHIBIT 10.2
March 25, 1996
Mr. William F. Griffin
10938 Blue Roan Road
Oakton VA 22124
Dear Bill:
It is with great excitement and pleasure that I offer for you to
join Electrosource as Executive Vice President, Marketing and
Development. In this capacity you will report directly to me and
be responsible for all marketing and sales activities, and will
participate in the determination of the strategic direction of
the Company. The terms of the offer are as follows:
SALARY: The salary for the position is $144,000 per annum, paid
biweekly.
BONUS: You will participate in the Electrosource Management
Incentive Program which includes annual performance reviews which
result, assuming successful performance, in cash and stock option
awards. Based on anticipated performance, your target bonus for
the balance of 1996 is $25,000.
STOCK OPTIONS: Upon signing, you will receive 280,000 options,
priced on the date approved by the compensation committee, which
will vest as follows: 130,000 six months after your employment
date, 75,000 one year from the first vesting date, and 75,000 one
year thereafter.
RELOCATION: No relocation is required at this time.
Electrosource will pay for your travel as required for business
and your stay in Austin, your assigned location. Should
relocation become necessary in the future, you will be relocated
as an employee and a budget defined at the appropriate time.
EMPLOYEE BENEFITS: The benefit coverage of the offered position
is summarized in the attached benefit package.
TERMINATION: Electrosource agrees to, in the event of non-
voluntary termination (for reasons other than cause e.g. illegal,
destruction or dishonest conduct), pay three months of salary and
benefits, either on regular pay periods or in a lump sum at
Electrosource discretion.
We would like you to transition from consultant to full time
employee as soon as possible. Please indicate your acceptance by
signing below. This offer is subject to final Board approval.
Very truly yours,
/s/
Michael G. Semmens
President and CEO
Accepted: /s/
William F. Griffin
Date: 3/25/96
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