As filed with the Securities and Exchange Commission on April 18, 1997
Registration No. 333-20103
AMENDMENT NO. 1
to
FORM S-3
SECURITIES AND EXCHANGE COMMISSION
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ELECTROSOURCE, INC.
(Exact name of issuer as specified in its charter)
Delaware 3690 742466304
(State or other (Primary Standard (IRS Employer
jurisdiction Industrial Identification
of incorporation or Classification Code No.)
organization) Number)
Michael G. Semmens, President
Electrosource, Inc.
2809 Interstate 35 South 2809 Interstate 35 South
San Marcos, Texas 78666 San Marcos, Texas 78666
(512) 753-6500 (512) 753-6500
(Address, including zip code, and (Name, address, including zip
telephone number, including code, and telephone number,
area code, of registrant's including area code, of agent
principal executive office) for service)
Copy to:
Bret Van Earp
Attorney at Law
100 Congress Avenue, Suite 1800
Austin, Texas 78701
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this Registration Statement
becomes effective.
If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box.
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. This box is checked.
The Registrant may amend this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Page 1 of 28 Pages.
An Exhibit Index appears on Page 17
ELECTROSOURCE, INC.
CROSS REFERENCE SHEET
Information Required by Form S-3 Caption in Prospectus
Item 1. Forepart of the Registration Outside Front Cover
Statement and Outside Front Cover Page of Prospectus
Page of Prospectus
Item 2. Inside Front and Outside Back Cover Inside Front and
Pages of Prospectus Outside Back Cover
Pages of Prospectus
Item 3. Summary Information, Risk Factors Summary of Prospectus;
and Ratio of Risk Factors
Earnings to Fixed Charges
Item 4. Use of Proceeds Not Applicable
Item 5. Determination of Offering Price Not Applicable
Item 6. Dilution Dilution
Item 7. Selling Security Holders Selling Security
Holders
Item 8. Plan of Distribution The Offering
Item 9. Description of Securities to be Not Applicable
Registered
Item 10. Interests of Named Experts and Not Applicable
Counsel
Item 11. Material Changes Recent Developments
Item 12. Incorporation of Certain Inside Front Cover
Information by Reference Page of Prospectus
Item 13. Disclosure of Commission Position Indemnification of
on Indemnification for Securities Officers and Directors
Act Liabilities
SUBJECT TO COMPLETION, DATED APRIL 18, 1997
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
PROSPECTUS
ELECTROSOURCE, INC.
127,500 Shares of Common Stock, $1.00 par value
The shares offered hereby are outstanding shares of the
Common Stock, $1.00 par value per share ("Common Stock"), of
Electrosource, Inc., a Delaware corporation (the "Company"),
which are being sold by the Selling Shareholders named herein.
The Company will not receive any part of the proceeds from the
sale of such shares.
The Company has agreed to bear all costs of the preparation,
filing and prosecution of the registration statement of which
this Prospectus is a part. Such expenses are estimated to be
approximately $6,650 for the offering.
The Company has been advised that the sale of the shares may
be made from time to time by or for the account of the Selling
Shareholders in the over-the-counter market through broker-
dealers. These sales will be made at market prices prevailing at
the time of sale. The broker-dealers may act as agents of the
Selling Shareholders or may purchase any of the shares as
principal and thereafter may sell such shares from time to time
in the over-the-counter market at prices prevailing at the time
of sale or at negotiated prices. Neither the security to be
offered nor the selling method to be used may be varied.
Broker-dealers used by the Selling Shareholders may be
deemed to be "underwriters" as defined in the Securities Act of
1933. In addition, the Selling Shareholders may be deemed to be
an underwriter within the meaning of the Securities Act of 1933
with respect to the Common Stock offered hereby.
The Common Stock is traded in the over-the-counter market
and is quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") under the symbol "ELSI."
On April 14, 1997, the closing price for a share of Common Stock
as reported on NASDAQ was $5.875 per share.
SEE "RISK FACTORS," ON PAGE 5 OF THIS PROSPECTUS, FOR A
DISCUSSION OF CERTAIN IMPORTANT FACTORS INVOLVED IN THIS
OFFERING.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is April 18, 1997.
AVAILABLE INFORMATION
The Company is subject to the information requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, together with proxy statements and
other information filed by the Company, can be inspected and
copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, NW, Washington, DC 20549, and at
certain of its Regional Offices located at: 7 World Trade
Center, New York, New York 10007; and Room 1204, Everett McKinley
Dirksen Building, 219 South Dearborn Street, Chicago, Illinois
60604. Copies of such information can also be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, NW,
Washington, DC 20549 at prescribed rates.
The Company has filed with the Commission a registration
statement under the Securities Act of 1933, as amended, with
respect to the securities offered hereby (the "Registration
Statement"). As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information, exhibits
and undertakings contained in the Registration Statement. Such
additional information can be inspected at the principal office
of the Commission, Room 1024, 450 Fifth Street, NW, Washington,
DC 20549, and copies of the Registration Statement can be
obtained from the Commission at prescribed rates by writing to
the Commission at such address. The Commission maintains a Web
site, http://www.sec.gov, that contains reports, proxy and
information statements and other information regarding the
Company.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which are on file with the
Commission, are hereby specifically incorporated by reference
into this prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996;
(2) All other reports filed by the Company pursuant to
Section 13(a) or Section 15(d) of the Exchange Act since
December 31, 1996, including the following:
(i) Form 8-K Current Report dated March 10, 1997;
(ii) Form 8-KA1 Current Report dated April 2, 1997; and
(iii)Form 8-K Current Report dated April 3, 1997.
(3) The description of the Company's Common Stock set forth
under the captions "Description of Electrosource, Inc. Common
Stock" and "Purposes and Effects of Certain Provisions of the
Electrosource, Inc. Certificate and the Electrosource, Inc.
Bylaws" in the Information Statement filed as Exhibit 28.1 to the
Company's Registration Statement on Form 10 filed October 19,
1987 (as amended by Form 8 Amendments filed January 8, 1988 and
January 13, 1988), which description of the Company's Common
Stock was incorporated by reference into the Registration
Statement on Form 10 in response to Item 11, "Description of
Registrant's Securities to be Registered."
All documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
December 31, 1996, and prior to the termination of the offering
shall be deemed to be incorporated by reference into this
prospectus.
The Company will provide without charge to each person,
including any beneficial owner, to whom this prospectus is
delivered, upon written or oral request of such person, a copy of
any and all of the information that has been incorporated by
reference in this prospectus (not including exhibits to the
information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the
information that this prospectus incorporates). Requests should
be directed to Electrosource, Inc., Corporate Secretary, 2809
Interstate 35 South, San Marcos, Texas 78666, telephone (512) 753-
6500.
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information
and financial statements contained elsewhere in this prospectus
and in the documents incorporated by reference herein.
The Company
Electrosource, Inc. (the "Company") is engaged in the
development and commercial application of technologies related to
lead-acid, rechargeable storage batteries and ancillary products.
The Company's principal activity is the development, manufacture
and sale of a new lead-acid battery concept called Horizonr. See
"The Company," below.
The principal executive offices of the Company are located
at 2809 Interstate 35 South, San Marcos, Texas 78666 and its
telephone number is (512) 753-6500.
Recent Developments
The Company received a loan of $4,000,000 from a Fortune 500
company (the "Investor") in March 1997. The loan is convertible
into common stock, and the Company has granted options to the
Investor to purchase additional shares of common stock. The
Company and the Investor are discussing other possible business
arrangements. See "Recent Developments" below.
The Company completed a private placement of common stock
and warrants (in total representing 725,780 shares of the
Company's common stock) with its executive officers and certain
other accredited investors to raise approximately $680,000 for
general corporate purposes. See "Recent Developments" below.
The Company has filed suit in Travis County, Texas for a
declaratory judgment with respect to demands and claims from an
Indian entity. See "Recent Developments" below.
The Offering
The shares offered hereby are 127,500 outstanding shares of
the Company's Common Stock, $1.00 par value per share ("Common
Stock"), which are being sold by Ally Capital Corporation, a
domestic leasing corporation organized under Massachusetts law
("Ally") as the agent for Environmental Allies, N.V. and
Environmental Allies International, N.V., each a trust organized
under the laws of the Netherlands Antilles (the "Selling
Shareholders"). The Company will not receive any part of the
proceeds from the sale of such shares. See "The Offering" below.
RISK FACTORS
An investment in the Common Stock offered hereby involves a
high degree of risk. The following factors should be considered
in evaluating an investment in the Company.
History of Losses and Going Concern Qualification. The
company has a significant accumulated deficit of $45,887,851 as
of December 31, 1996 and a history of losses since inception in
1987. Additionally, the independent accountants' report on the
Company's financial statements for 1996 includes a going concern
qualification. The Company's ability to successfully
commercialize its technology and generate sufficient cash flow to
fund operations is uncertain. Historically the Company has been
unable to generate enough cash from orders and development work
to fund all operations and may not be able to do so in the
future.
Consumer Concentration. A significant portion of the
Company's total revenue (81% and 43% in 1996 and 1995,
respectively) was generated from Chrysler Corporation
("Chrysler"). Loss of this customer could have an adverse impact
on operations.
Financial Constraints. In the absence of additional
financing and without the generation of significant revenue from
operations or offsetting cost reductions, the Company's cash will
be substantially depleted in the first quarter of 1998. There
can be no assurance that significant revenues or additional
financing can be obtained on terms satisfactory to the Company,
if at all. The full depletion of the Company's cash could lead
to the Company's ceasing all operations and activities and,
ultimately, to its dissolution and liquidation.
Contingencies Related to Business Plan and Commercialization
of Product. In June 1994 the Company made the decision to become
the North American manufacturer of the Horizonr battery, while
continuing its previous plans with respect to licensing of third
party manufacturers overseas. The shift from research and
development to manufacturing has required, and will continue to
require, significant additional outlays for capital equipment as
well as greatly increased managerial and production staffing,
which will in turn require significant amounts of new capital.
There can be no assurance that the Company will be able to raise
this capital on terms satisfactory to the Company, or at all.
Development of the Horizonr Battery and manufacturing processes
continue, and there can be no assurance that the battery will be
successfully commercialized.
Possible Loss of Trading Liquidity. 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 $1 million of stockholders' equity. The Company is
currently in compliance with this requirement. If the minimum
required balance is not maintained, the NASDAQ may choose to
delist the Common Stock of the Company from trading which would
restrict the liquidity of the Common Stock. Ordinarily, before
delisting, NASDAQ would provide the Company notice and an
opportunity to present and carry out a plan for compliance. In
the event that the Common Stock were no longer traded on the
NASDAQ market, and its share price fell below $5.00 per share,
brokers and dealers effecting trades in the Common Stock would
become subject to Securities and Exchange Commission rules
covering trading in Openny stocks.O These rules generally require
that such broker-dealers make specified disclosures to customers
including information on available bid and asked prices for the
stock in question and compensation to the broker-dealer and his
associates with respect to the proposed trade, and provide
periodic reports as to the market value of a customerOs position
in penny stocks. The rules also impose heightened Oknow your
customerO requirements that require broker-dealers to obtain
information, including personal financial information, from
customers sufficient to allow the broker-dealer to make a
determination that investment in penny stocks is suitable for the
customer and that the customer is capable of assessing the risks
of such an investment. Broker-dealers may be less willing to
effect trades in any security subject to these rules due to the
additional disclosure, record-keeping and other requirements
imposed by the rules. In addition, some potential investors in
penny stocks may be reluctant to provide the required personal
financial information to broker-dealers, which may reduce the
number of potential investors. These factors could further reduce
trading liquidity in the Common Stock.
Termination of Technology License. The Company holds the
rights to develop and use certain coextrusion technology
necessary to the manufacture of its principal products under an
exclusive license from Blanyer-Mathews Associates, Inc. ("Blanyer-
Mathews"). This license is subject to termination by Blanyer-
Mathews in the event that the Company enters bankruptcy
proceedings or defaults in its obligation to pay royalties. Loss
of the rights to the coextrusion technology would have a severe
adverse impact upon the Company's continued viability.
Loss of Trade Secret Protection. The Company has elected to
protect certain aspects of its technology under state trade
secret laws, rather than under federal patent laws. Trade secret
protection requires that the Company preserve the confidentiality
of the technology subject to trade secret status. In the event
that such confidentiality cannot be maintained, or if third
parties can successfully "reverse engineer" the affected
technology, trade secret status may be lost. Loss of trade
secret protection would allow third parties to utilize the
technology without obtaining a license from the Company.
Competition. The lead-acid battery industry is highly
competitive and includes a number of firms, many with greater
financial, technological, manufacturing, marketing and other
resources and longer operating histories than the Company. There
is no assurance that the Company will be able to compete
successfully in this highly competitive environment due to the
Company's limited financial resources and lack of established
products.
Dependence on Key Personnel. Management of the Company is
composed primarily of Michael Semmens, President, Chief Executive
Officer and Chairman of the Board, William Griffin, Executive
Vice President, Chris Morris, Vice President-Technical
Operations, James M. Rosel, Vice President-Finance, General
Counsel and Chief Financial Officer, and Mary Beth Koenig,
Treasurer and Chief Accounting Officer. The loss of any of these
executive officers could have a material adverse effect on the
Company. The Company does not have employment contracts with Ms.
Koenig or with Messrs. Rosel and Morris, and the employment
contracts between Mr. Semmens and the Company and Mr. Griffin and
the Company do not impose any material penalty in the event of
resignation.
Dilution. The market price of $5.875 per share of Common
Stock as of April 14, 1997, was substantially greater than the
Company's actual net tangible book value of $0.26 per
outstanding share of Common Stock at December 31, 1996.
Purchasers of Common Stock at the recent market price will suffer
an immediate dilution of $5.615 per share, measured by the
difference between the market price and the Company's net
tangible book value per share. See "Dilution."
Certain Antitakeover Effects. Certain provisions contained
in the Delaware General Corporation Law and in the Company's
Restated Certificate of Incorporation and bylaws may make it
difficult for any third party to effect or attempt an acquisition
of the Company without the approval of the Company's Board of
Directors. The Restated Certificate of Incorporation also
divides the Company's Board of Directors into three classes
serving staggered terms. This provision may hinder or delay any
attempt to gain control of the Company by replacing the Board of
Directors. Such potential antitakeover effects may depress the
market value of the Common Stock. In addition, certain
provisions of the Company's Restated Certificate of Incorporation
and bylaws require the affirmative vote of 90% of the Company's
outstanding Common Stock.
Absence of Dividends. The Company may, under Delaware
corporation law, declare and pay dividends upon its Common Stock
either (1) out of the excess, if any, of total shareholders'
equity over the aggregate par value of its Common Stock issued
and outstanding or (2) from net income for the current and the
immediately preceding fiscal year. The Company has reported net
losses in each of the two most recent fiscal years and the par
value of the Company's Common Stock is in excess of total
shareholders' equity at December 31, 1996. The Company has paid
no dividends on its Common Stock to date and does not anticipate,
currently or in the foreseeable future, paying dividends on the
Common Stock. Future cash dividends, if any, will be determined
by the Board of Directors in light of the Company's earnings,
financial condition, and capital requirements.
THE COMPANY
Electrosource, Inc. (the "Company") is engaged in the
development and commercial application of technologies related to
lead-acid, rechargeable storage batteries and ancillary products.
The Company's principal activity is the development, manufacture
and sale of a new lead-acid battery concept called Horizonr. The
Horizonr battery utilizes plate grids made from a patented
coextruded wire. The plates are oriented in a horizontal plane
rather than the vertical plane, as is the practice in
conventional batteries. Current activities are concentrated upon
development of Horizonr concept batteries for use in electric
vehicle and non-electric vehicle applications. The Company is
also developing new processes for the energy-active material for
use in both Horizonr and conventional batteries.
The continued development of the Horizonr battery, as well
as the continued viability of the Company as a going concern, are
contingent upon the Company's ability to increase sales, increase
contractual activity or raise additional capital. There can be
no assurance that such sales, contracts or financing can be
obtained. The offering described in this prospectus will not
result in any proceeds to the Company. See "Risk Factors."
The principal executive offices of the Company are located
at 2809 Interstate 35 South, San Marcos, Texas 78666, and its
telephone number is (512) 753-6500.
RECENT DEVELOPMENTS
In March 1997, the Company entered into a loan agreement
with a Fortune 500 manufacturing company (the "Investor"). The
agreement provides for a $4,000,000, five year loan bearing
interest at 5%. The loan is convertible into Common Stock at the
option of the Investor at a conversion price of $5.50 per share.
A $500,000 loan to the Company previously provided by the
Investor was canceled and refinanced as part of the $4,000,000
loan. The Company granted the Investor an option to purchase up
to 275,000 shares of Common Stock at $7.00 per share and an
option to purchase up to 225,000 shares of Common Stock at $9.00
per share. These options are exercisable until March 1999. The
Company is also discussing other potential business arrangements
with the Investor.
The Company completed a private placement of Common Stock
with certain of its executive officers and other accredited
investors in January 1997 which raised $680,508 for general
corporate purposes. The offering was conducted in two parts.
The terms for the first part, in which the executive officers
participated, were $6.56 per share of Common Stock purchased
(80,897 shares) and one warrant at an exercise price of $7.56 per
share for each dollar invested (530,883 warrants) for proceeds of
$530,883 to the Company. The terms of the second part were $5.25
per share of Common Stock purchased (28,500 shares), with three
warrants per share (85,500 warrants), for proceeds of $149,625.
One-half of the warrants are exercisable at a price of $5.25 per
share and one-half at $6.25 per share. All warrants have a two
year term from date of issue.
In 1994, the Company signed a "Know-How License Agreement"
(the "Agreement") with Horizon Battery Technologies, Ltd.
("HBTL"), of Bombay, India, calling for the completion of several
detailed subordinate agreements with the ultimate purpose to
license the manufacture and sale of batteries in India. The
effectiveness of the Agreement was conditioned upon the
subsequent execution of these related agreements, none of which
were executed. The Company believes, therefore, the Agreement
never became effective and has no force or effect. Separately in
1995, HBTL agreed to pay the Company $250,000 for a Preliminary
Design Review ("PDR") for a potential manufacturing facility in
India which was required to complete one of the subordinate
agreements. The Company received $100,000 from HBTL and
completed the PDR in 1995. The remaining $150,000 was never paid
by HBTL, in spite of repeated demands by the Company.
In September 1996, the Company received a demand from HBTL
to arbitrate damage claims for alleged breach of the Agreement
between the Company and HBTL. HBTL claims damages of
approximately $5.1 million for its expenses and lost profits
related to the project. The Company disputes the claim for
damages and has filed a petition in Travis County, Texas,
seeking, among other things, a declaratory judgment that HBTL has
no right to arbitration or monetary relief. HBTL is contesting
jurisdiction and is seeking removal of the proceedings to the
U.S. Federal Courts. No liability has been recorded in the
financial statements at December 31, 1996 for this uncertainty as
management is unable to express an opinion with respect to the
likelihood of an unfavorable outcome of this matter or to
estimate the amount or range of potential loss should the outcome
be unfavorable. Resolution of this matter by the courts in favor
of HBTL could have a material adverse effect on the financial
position of the Company.
THE OFFERING
The shares to be offered pursuant to this prospectus are
outstanding shares of the Company's Common Stock issued to Ally
Capital Corporation ("Ally") as agent for Environmental Allies
N.V. ("EANV") and Environmental Allies International N.V.
("EAINV"), and together with EANV, the "Selling Shareholders") to
satisfy obligations of the Company under an equipment lease
agreement (the "Lease Agreement").
The shares of Common Stock offered hereby may be sold from
time to time by the Selling Shareholders. Such sales must be
made in the over-the-counter market through broker-dealers at the
then prevailing market price. Neither the security to be offered
nor the selling method may be varied.
There is no underwriting or coordinating broker acting in
connection with this offering. The Selling Shareholders and
Ally, their agent in effecting sales hereunder, may be deemed
"underwriters" within the meaning of the Securities Act of 1933
(the "Securities Act") with respect to the shares of Common Stock
offered hereunder. The Company and the Selling Shareholders have
agreed to indemnify one another against certain liabilities,
including liabilities under the Securities Act.
In effecting sales, brokers or dealers engaged by the
Selling Shareholders may arrange for other brokers or dealers to
participate. Brokers or dealers will receive commissions or
discounts from Selling Shareholders in amounts to be negotiated
immediately prior to the sale. Such brokers or dealers and any
other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in
connection with such sales.
The Company has agreed to bear all costs of preparing,
filing and processing the registration statement of which this
prospectus is a part. Such expenses are estimated to be
approximately $6,650 for the offering.
SELLING SHAREHOLDERS
The shares of Common Stock covered by this Prospectus are
being offered by Ally as agent for the Selling Shareholders.
Ally entered into the Lease Agreement with the Company in
April 1995. The Lease Agreement provided for the sale and
leaseback by the Company of certain equipment valued for purposes
of the Lease Agreement at $1,658,050. The terms of the Lease
Agreement called for thirty-six (36) monthly payments of
$55,063.85 each plus a final payment of $165,805.03 (10% of the
original lease amount) to exercise an option to purchase the
equipment at the end of the lease. The Lease Agreement is
secured by the leased equipment and, in addition, the Company
pledged cash deposits totaling $663,220 to secure its obligations
under the Lease Agreement. In connection with the Lease
Agreement, the Company granted an option (the "Option") to Ally
to purchase 8,290 shares of Common Stock at a price of $40.00 per
share; this Option expires in April 2000. Ally has "piggyback"
registration rights and demand
registration rights on a Form S-3 for shares underlying the
Options. Ally assigned the Lease Agreement and the Option to
EANV (37.0811%) and EAINV (62.9189%) in April 1995.
In December 1996, the Company and Ally, acting as agent for
the Selling Shareholders, entered into an agreement whereby the
Company would issue shares of its Common Stock to Ally in an
amount sufficient, when sold, to generate proceeds for the
repayment of the Company's obligations under the Lease Agreement,
which totaled $1,142,467 at the time of the agreement, including
exercise of the option to purchase the equipment at the end of
the Lease Agreement. The Company issued 160,000 shares of Common
Stock to the Selling Shareholders under this agreement; the
Selling Shareholders subsequently surrendered 32,500 shares to
the Company in consideration of additional regular monthly
payments totaling $220,255.40 made by the Company under the Lease
Agreement. The Selling Shareholders currently own 127,500 shares
of Common Stock in the Company, of which 47,278 shares are owned
by EANV and 80,222 shares are owned by EAINV. Such shares
represent approximately 1% and 2%, respectively, of the Company's
outstanding shares.
If the proceeds of the sale of the shares offered hereunder
do not equal the outstanding balance owed by the Company under
the Lease Agreement, including the option to purchase the
equipment, the Company will, at the option of the Company, on a
one time basis issue additional shares or pay cash to the Selling
Shareholders to make up the deficiency. Following the offering,
and assuming the sale of all shares offered hereby, neither Ally
nor the Selling Shareholders will own shares of Common Stock;
however, EANV and EAINV will retain options to purchase 3,074 and
5,216 shares of Common Stock, respectively.
The Company agreed to register the shares of Common Stock
issuable upon prepayment of the Lease Agreement upon the Selling
Shareholders request and to keep such registration effective for
a period of 120 days after being declared effective. The shares
offered hereby are being registered pursuant to such a request.
USE OF PROCEEDS
The Company will realize no proceeds from the offering. The
Company will bear all costs of preparing, filing and processing
the registration statement of which this prospectus is a part.
DILUTION
At December 31, 1996, the Company had a net tangible book
value of $0.26 per share of Common Stock outstanding. "Net
tangible book value per share" represents the amount of total
tangible assets of the Company, reduced by the amount of total
liabilities of the Company, divided by the number of shares of
Common Stock outstanding. Purchasers of Common Stock for cash at
the assumed offering price of $5.875 per share (based on the
market price of a share of Common Stock as quoted by NASDAQ on
April 14, 1997) will therefore incur an immediate dilution of
$5.615 per share from the assumed offering price measured by the
difference between the assumed offering price and the Company's
net tangible book value per share.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Restated Certificate of Incorporation provides
that a director of the Company will not be personally liable to
the Company or its stockholders for monetary damages for breach
of fiduciary duty as a director, except that such provisions will
not eliminate or limit the liability of a director (i) for a
breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) with respect to unlawful payments of dividends or
unlawful stock purchases or redemptions for which the director is
liable under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the
director derives an improper personal benefit.
The Company's Bylaws provide that, to the extent permitted
by law, the Company will indemnify each of its directors, and
authorize the purchase of insurance with respect thereto. The
Bylaws also provide that the Company may indemnify its officers,
employees or agents who are made or threatened to be made
defendants or respondents to any threatened, pending or completed
action, suit or proceeding due to such person's service to the
Company or to certain other entities at the request of the
Company, so long as such person acted in good faith and in a
manner he reasonably believed to be not opposed to the best
interests of the Company. Such indemnification may be made only
upon a determination that such indemnification is proper in the
circumstances because the person to be indemnified has met the
applicable standard of conduct to permit indemnification under
the law.
In addition to indemnification provided pursuant to the
Company's Restated Certificate of Incorporation and Bylaws, the
Company has entered into a Director Indemnification Agreement
with each director of the Company providing for, among other
things, (i) indemnification by the Company of each director to
the full extent authorized or permitted by Delaware statutes;
(ii) maintenance by the Company of director and officer insurance
coverage for the benefit of each director of up to $2,000,000,
subject to availability at premiums not substantially
disproportionate to the amount of coverage; (iii) indemnification
by the Company of each director in connection with settlements
under certain circumstances; (iv) procedures relating to
independent review of determinations regarding director
indemnification (including special provisions in case of a change
in control of the Company); and (v) the advancement of expenses
to directors in connection with matters for which the director is
entitled to indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted against
the Company by such director, officer or controlling person in
connection with the securities being registered, the Company
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
LEGAL MATTERS
The validity of the securities offered hereby will be passed
upon for the Company by Bret Van Earp, Attorney at Law, 100
Congress Avenue, Suite 1800, Austin, Texas 78701.
EXPERTS
The financial statements of the Company appearing in the
Company's Annual Report (Form 10-K) for the year ended December
31, 1996, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an
explanatory paragraph with respect to substantial doubt about the
Company's ability to continue as a going concern) included
therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in
accounting and auditing.
No dealer, salesman or other
person has been authorized to
give any information or to make
any representation not contained
in this prospectus in connection
with the offer contained herein, ELECTROSOURCE, INC.
and, if given or made, such
information or representation
must not be relied upon as having
been authorized by the Company.
This prospectus does not
constitute an offer to sell, or a
solicitation of an offer to buy,
any securities in any
jurisdiction to any person to
whom it is not lawful to make any
such offer or solicitation in
such jurisdiction. Neither the
delivery of this prospectus nor
any sale made hereunder shall,
under any circumstances, create 127,500 Shares of
an implication that there has
been no change in the affairs of Common Stock
the Company since the date hereof
or that the information herein is
correct as of any time subsequent
to its date
___________________________
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 4
INCORPORATION OF CERTAIN April 18, 1997
INFORMATION BY REFERENCE 4
SUMMARY OF PROSPECTUS 5
RISK FACTORS 5
THE COMPANY 7
RECENT DEVELOPMENTS 8
THE OFFERING 8
SELLING SHAREHOLDERS 9
USE OF PROCEEDS 10
DILUTION 10
INDEMNIFICATION OF OFFICERS
AND DIRECTORS 10
LEGAL MATTERS 11
EXPERTS 11
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following sets forth the estimated expenses expected to
be incurred in connection with the issuance and distribution of
the securities registered hereby:
SEC Registration Fee $ 500.00
Printing Costs 0.00
Legal Fees and Expenses 3,000.00
Accounting Fees and Expenses 3,150.00
Blue Sky Fees and Expenses 0.00
Total $6,650.00
Item 15. Indemnification of Directors and Officers.
See "Indemnification of Officers and Directors" in the
Prospectus, which is hereby incorporated by reference.
Item 16. Exhibits.
The following exhibits are filed with or incorporated by
reference into this registration statement:
4.1 Restated Certificate of Incorporation of Electrosource,
Inc. (filed as Exhibit 3.1 to Electrosource, Inc.,
Registration Statement on Form 10 filed October 19, 1987,
as amended by Form 8 Amendments filed January 8, 1988 and
January 13, 1988 (hereinafter referred to as "Form 10")
and incorporated herein by reference).
4.2 Amendment to Restated Certificate of Incorporation of
Electrosource, Inc. (filed as Exhibit 3.1 to
Electrosource, Inc. Quarterly Report on Form 10-Q filed
August 14, 1995 and incorporated herein by reference).
4.3 Amendment to Restated Certificate of Incorporation of
Electrosource, Inc. (filed as Exhibit 3.1 to
Electrosource, Inc., Quarterly Report n Form 10-Q filed
August 14, 1996 and incorporated hereby by reference).
4.4 Bylaws of Electrosource, Inc. (filed as Exhibit 3.2 to
Electrosource, Inc., Registration Statement on Form 10
filed October 19, 1987, as amended by Form 8 Amendments
filed January 8, 1988 and January 13, 1988 (hereinafter
referred to as "Form 10") and incorporated herein by
reference).
4.5 Amendment to Bylaws of Electrosource, Inc. pursuant to a
Certificate of Secretary dated May 25, 1990 (filed as
Exhibit 3.3 to Electrosource, Inc., Annual Report on Form
10-K for the period ended December 31, 1991, and
incorporated herein by reference).
4.6 Amendment to Bylaws of Electrosource, Inc. (filed as
Exhibit 3.3 to Electrosource, Inc., Annual Report on Form
10-K for the period ended December 31, 1993, and
incorporated herein by reference).
4.7 Amendment to Bylaws of Electrosource, Inc. (filed as
Exhibit 3.6 to Electrosource, Inc., Annual Report on Form
10-K for the period ended December 31, 1994, and
incorporated herein by reference).
4.8 Amendment to Bylaws of Electrosource, Inc. as approved by
the Board of Directors on November 13, 1996 (filed as
Exhibit 3.10 to Electrosource, Inc., Annual Report on Form
10-K for the period ended December 31, 1996, and
incorporated herein by reference).
4.9 Letter of Agreement between Electrosource, Inc., and Ally
Capital Corporation dated December 18, 1996.
4.10 Amendment dated January 20, 1997 to Letter Agreement
between Electrosource, Inc., and Ally Capital Corporation
dated December 18, 1996.
4.11 Amendment dated April 10, 1997 to Letter Agreement between
Electrosource, Inc., and Ally Capital Corporation dated
December 18, 1996.
5.1 Opinion of Bret Van Earp.
24.1 Consent of Ernst & Young LLP.
24.2 Consent of Bret Van Earp.
25. Power of Attorney.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i)To include any prospectus required by section
10(a)(3) of the Securities Act of 1933 (to the extent
that the information required to be included in a
post-effective amendment is contained in periodic
reports filed with or furnished to the Securities and
Exchange Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by
reference in this registration statement);
(ii)To reflect in the prospectus any facts or events ari
sing after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, reflect a fundamental change in the
information set forth in the registration statement
(to the extent that the information required to be
included in a post-effective amendment is contained
in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant
pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated
by reference in this registration statement); and
(iii)To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
(b)That, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered herein, and
the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c)To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bon fide offering thereof.
With respect to the undertaking required by paragraph (h) of
Item 512 of Regulation S-K, see "Indemnification of Officers and
Directors" in the Prospectus, which is incorporated herein by
reference.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of San Marcos, State of Texas, on April 17, 1997.
ELECTROSOURCE, INC.
By: /s/
Michael G. Semmens,
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ President, Chief Executive April 15, 1997
Michael G. Semmens Officer and Chairman of the Board
(Principal Executive Officer)
/s/ Director April 15, 1997
Richard Balzhiser
/s/ Director April 15, 1997
William R. Graham
/s/ Director April 15, 1997
Norman Hackerman
/s/ Director April 15, 1997
John D. Malone
/s/ Director April 15, 1997
Charles L. Mathews
/s/ Director April 15, 1997
Nathan Morton
Director April ___, 1997
Richard S. Williamson
/s/ Director April 15, 1997
Thomas S. Wilson
/s/ Vice President Finance April 15, 1997
James M. Rosel and General Counsel
(Chief Financial Officer)
/s/ Treasurer and Controller April 15, 1997
Mary Beth Koenig (Principal Accounting Officer)
EXHIBIT INDEX
Sequentially
Exhibit Number Numbered Page
4.1 Restated Certificate of Incorporation of
Electrosource, Inc. (filed as Exhibit 3.1 to
Electrosource, Inc., Registration Statement on
Form 10 filed October 19, 1987, as amended by
Form 8 Amendments filed January 8, 1988 and
January 13, 1988 (hereinafter referred to as
"Form 10") and incorporated herein by
reference). --
4.2 Amendment to Restated Certificate of
Incorporation of Electrosource, Inc. (filed as
Exhibit 3.1 to Electrosource, Inc. Quarterly
Report on Form 10-Q filed August 14, 1995 and
incorporated herein by reference). --
4.3 Amendment to Restated Certificate of
Incorporation of Electrosource, Inc. (filed as
Exhibit 3.1 to Electrosource, Inc., Quarterly
Report n Form 10-Q filed August 14, 1996 and
incorporated hereby by reference). --
4.4 Bylaws of Electrosource, Inc. (filed as Exhibit
3.2 to Electrosource, Inc., Registration
Statement on Form 10 filed October 19, 1987, as
amended by Form 8 Amendments filed January 8,
1988 and January 13, 1988 (hereinafter referred
to as "Form 10") and incorporated herein by
reference). --
4.5 Amendment to Bylaws of Electrosource, Inc.
pursuant to a Certificate of Secretary dated May
25, 1990 (filed as Exhibit 3.3 to Electrosource,
Inc., Annual Report on Form 10-K for the period
ended December 31, 1991, and incorporated herein
by reference). --
4.6 Amendment to Bylaws of Electrosource, Inc.
(filed as Exhibit 3.3 to Electrosource, Inc.,
Annual Report on Form 10-K for the period ended
December 31, 1993, and incorporated herein by
reference). --
4.7 Amendment to Bylaws of Electrosource, Inc.
(filed as Exhibit 3.6 to Electrosource, Inc.,
Annual Report on Form 10-K for the period ended
December 31, 1994, and incorporated herein by
reference). --
4.8 Amendment to Bylaws of Electrosource, Inc. as
approved by the Board of Directors on November
13, 1996 (filed as Exhibit 3.10 to
Electrosource, Inc., Annual Report on Form 10-K
for the period ended December 31, 1996, and
incorporated herein by reference). --
4.9 Letter of Agreement between Electrosource, Inc.,
and Ally Capital Corporation dated December 18,
1996. 18
4.10 Amendment dated January 20, 1997, to Letter of
Agreement between Electrosource, Inc., and Ally
Capital Corporation dated December 18, 1996. 26
4.11 Amendment dated April 10, 1997 to Letter
Agreement between Electrosource Inc., and Ally
Capital Corporation dated December 18, 1996. 27
5.1 Opinion of Bret Van Earp *
24.1 Consent of Ernst & Young LLP. 28
24.2 Consent of Bret Van Earp (included in opinion
filed as Exhibit 5.1) --
25. Power of Attorney. *
*Previously filed.
EXHIBIT 4.9
December 18, 1996
Steve Pickens, Vice President
Ally Capital Markets Group
Marina Plaza
2330 Marinship Way, Suite 300
Sausalito, California 94965-2853
RE: Prepayment of Lessors
Dear Steve:
Here is a further revised proposal for your consideration on
behalf of Environmental Allies, NV and Environmental Allies
International, NV ("Purchasers").
Electrosource (the "Company") offers to prepay the Lease of April
6, 1995 ("Lease") consisting of Lease Schedules 1871001, 1872001
and 1872002. The Company will issue and deliver shares of
unregistered common stock to Ally on behalf of the Purchasers, in
an amount calculated to be sufficient to satisfy all obligations
under the Lease as of February 1, 1997, being 160,000 shares
based upon the market price as of this date of $6.75 per share,
less associated costs. The number of shares may be adjusted to
the date of delivery of the shares to account for changes in
market value of the shares and anticipated lease payments. The
Company will file a registration statement on Form S-3 to permit
the sale of such shares by Ally on behalf of the Purchasers (see
"Registration Rights" below). The Company will use its best
reasonable efforts to file an S-3 within 20 days after issue of
the shares. All proceeds from the sale of the shares shall be
credited against The Company's obligations as set out in
Attachment A hereto as of December 1, 1996. If the sale of such
shares results in proceeds of less than the amount necessary to
satisfy all such obligations, then The Company shall, at its
option, issue additional shares of unregistered common stock to
Ally on behalf of the Purchasers in the amount of the deficiency,
and promptly undertake to register such additional shares for
sale, or pay the deficiency in cash. If Ally realizes more from
the sale of the shares than the amount due, the surplus shall be
for the Purchasers' account.
Upon receipt and application by Ally on behalf of the Purchasers
of the net proceeds from sale of the shares in an amount
sufficient to fully satisfy all obligations, the Lease will be
deemed paid in full and The Company will be the owner of the
equipment, free and clear of any and all liens or charges arising
by, through or under Ally or the Purchasers. Electrosource shall
continue to be responsible for and continue to make payments
under the lease until Ally has received and applied net proceeds
from the sale of shares equal to the obligations then
outstanding, after taking into account lease payments received in
the normal course of business. Ally shall immediately apply all
proceeds received. Ally and Purchasers shall promptly thereafter
release or cause to be released their respective interests, if
any, in all collateral and security interests, if any, in such
equipment. Proportionate releases of part or all of the
collateral may be made in Ally's discretion prior to satisfaction
in full of all amounts due and applied net.
The balance of this letter deals with the details of the issue,
registration and sale of the common stock and representations
necessary to carry out the transactions.
THE OFFERING OF SECURITIES OF ELECTROSOURCE, INC. HEREUNDER HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), IN RELIANCE UPON THE AVAILABILITY OF
EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 4(2) OF SAID ACT
AND REGULATION D OF THE GENERAL RULES AND REGULATIONS PROMULGATED
THEREUNDER. THERE ARE SUBSTANTIAL RESTRICTIONS UPON TRANSFER OF
THE SECURITIES. ACCORDINGLY, THE SECURITIES ARE NOT FREELY
TRANSFERABLE AND MAY HAVE TO BE HELD UNTIL TRANSFER MAY BE MADE
PURSUANT TO A REGISTERED TRANSACTION OR AN EXEMPTION FROM
REGISTRATION.
1. Company Representations.
(a) Corporate Power. The Company has all requisite legal
and corporate power to execute and deliver this Agreement,
and all requisite and legal corporate power to sell and
issue the common stock ("Shares") and to carry out and
perform its obligations under the terms of this Agreement.
(b) Authorization. All corporate action on the part of The
Company necessary for the authorization, execution, delivery
and performance of this Agreement, the authorization, sale,
issuance and delivery of the Shares and the performance of
the company's obligations hereunder has been taken or will
be taken prior to issuance of the shares. This Agreement,
when executed and delivered, shall constitute the valid and
binding obligation of the Company, enforceable in accordance
with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of
debtors, rules of law governing specific performance,
injunctive relief or other equitable remedies, and
limitations of public policy. The Shares, issued in
compliance with the provisions of this Agreement, will be
validly issued, fully paid and non-assessable and free of
any liens or encumbrances; provided, however, that the
Shares are subject to restrictions on transfer under state
and/or federal securities laws as set forth herein. The
shares are not subject to any preemptive rights or rights of
first refusal.
2. Purchasers and Ally Representations.
The Purchasers and Ally hereby represent and warrant to the
Company as follows, and acknowledges and agrees that the Company
will rely upon such representations and warranties in accepting
the subscription of the undersigned for the purchase of the
shares:
(a) The Purchasers are each an "Accredited Investor," as
such term is defined in Rule 501 promulgated under the
Securities Act, which is a corporation, Massachusetts or
similar business trust, or partnership, not formed for the
specific purpose of acquiring the Shares, with total assets
in excess of $5,000,000. The proposed investment of the
Purchasers in the securities of the Company represents less
than 20% of the each Purchaser's net worth.
(b) No representations or warranties have been made to the
Purchasers or Ally by the Company, or any agent, employee or
affiliate of the Company, and in entering into this
transaction the Purchasers and Ally are not relying upon any
information other than the information contained in the
documents and reports filed by the Company with the
Securities and Exchange Commission under the Securities
Exchange Act of 1934 (the "SEC filings"), or resulting from
their own independent investigation. The Purchasers and
Ally, before the date hereof, have had an opportunity to ask
questions and receive answers from the Company or a person
or persons acting on its behalf, concerning the terms and
conditions of this investment and has had an opportunity to
examine all applicable documents and such applicable
information as specified in Schedule A to the Securities
Act, to the extent such documents and information are
relevant to this transaction and are possessed by the
Company or are obtainable by the Company without
unreasonable effort or expense, and all such questions have
been answered and documents and information have been
supplied to the full satisfaction of the Purchasers and
Ally.
(c) The Purchasers and Ally are aware that:
(i) there are substantial risks incident to an
investment in the Common Stock of the Company (the
"Shares"), and such investment is speculative and
involves a high degree of risk of loss of its entire
investment in the Company;
(ii) no Federal or State agency has passed upon the
sale of the Shares or made any finding or determination
concerning the fairness of this investment, and the
terms of the offering may not conform to the guidelines
of certain state securities administrators;
(iii) the Company has and may continue to have a
significant need for cash for operating expenses and
other purposes; that the aggregate proceeds from the
sale of the Shares alone may not be sufficient to
satisfy the cash requirements of the Company for any
appreciable period of time; that other sources of funds
may not be available;
(iv) the industry in which the Company is engaged is
occupied by several firms, some of which will be
substantially greater in size and have financial
resources and personnel staff larger and more
established than those of the Company, and there can be
no assurance that the Company will be able to compete
in the market effectively;
(d) The Purchasers and Ally understand that an investment
in the Company is an illiquid investment and further
recognizes and agrees that because the Shares have not been
registered under applicable securities laws or an exemption
from such registration is available, the Purchasers and Ally
must bear the economic risk of the investment for an
indefinite period of time. The Purchasers and Ally further
acknowledge that each certificate representing Shares will
bear a legend to the effect that the Shares have not been
registered under any securities law and setting forth or
referring to the restrictions on transferability and sale of
the shares. The Purchasers and Ally further acknowledge
that the Company will issue stop transfer orders to its
transfer agent restricting transfer of the Shares in the
absence of registration under the securities laws or
exemption therefrom.
(e) The Purchasers and Ally acknowledge awareness that
there are substantial restrictions on the transferability of
the Shares. Unless the Shares are registered under the
Securities Act and any applicable state securities law, the
Shares may not be, and the Purchasers and Ally agrees that
they shall not be, sold unless such sale is exempt from such
registration under the Securities Act and any other
applicable state blue sky laws or regulations. The
Purchasers and Ally further acknowledge that the Company is
under no obligation to aid it in obtaining any exemption
from the registration requirements. The Purchasers and Ally
also acknowledge responsibility for compliance with all
conditions on transfer imposed by any securities
administrator of any state.
(f) The Purchasers and Ally are acquiring the Shares for
which Purchasers hereby subscribe for their own account, as
principal, and not for the account of any other person.
(g) Ally Capital Corporation, in executing this letter
agreement on behalf of the Purchasers, represents and
warrants in its individual capacity, and not as agent for
the Purchasers, that it has all necessary power and
authority to execute this letter agreement on behalf of the
Purchasers, and that the Purchasers will be legally bound
hereby.
3. Registration Rights.
(a) The Company agrees to file a registration statement on
Form S-3 under the Securities Act of 1933, as amended (the
"Securities Act") covering the sale of the shares of Common
Stock sold to the Purchasers pursuant to the Offering. Such
registration statement will be applicable only to sales by
the Purchasers of Shares purchased in the Offering made
through registered broker-dealers at market prices
prevailing at the time of sale, although the Company may
elect to include in the registration securities to be
registered for the account of selling shareholders other
than the Purchasers. The obligation of the Company to effect
the registration of the Shares may at the election of the
Company be accomplished through the filing of a new
registration statement or through the amendment of a then-
currently filed registration statement to include the Shares
so long as such registration statement remains current for
the time period set forth in paragraph (b)(ii) below.
(b) In connection with the registration of Shares
undertaken by the Company pursuant to this paragraph 3, the
Company shall:
(i) promptly prepare and file with the Securities and
Exchange Commission (the "Commission") a registration
statement on Form S-3 with respect to such shares, and
thereafter and use its reasonable best efforts to cause
such registration statement to become effective;
(ii) prepare and file with the Commission such
amendments and supplements to such registration
statement and the prospectus used in connection
therewith as may be necessary to keep such registration
statement current at any time that sales are proposed
to be made thereunder for a period expiring one hundred
twenty (120) days after the date that such registration
statement is declared to be effective by the
Commission.
(iii) provide Purchasers a reasonable opportunity
to review prior to filing the registration statement
and any amendments or supplements to such registration
statement and any prospectus used in connection
therewith;
(iv) furnish to Purchasers such number of conformed
copies of such registration statement and of each such
amendment and supplement thereto (in each case
including all exhibits), such number of copies of the
prospectus included in such registration statement
(including each preliminary prospectus and prospectus
supplement), in conformity with the requirements of the
Securities Act, and such other documents as Purchasers
may reasonably request in order to facilitate the sale
of the Shares covered by such registration statement;
(v) notify Purchasers at any time when a prospectus
relating to the Shares covered by such registration
statement is required to be delivered under the
Securities Act, of the Company's becoming aware that
the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a
material fact or omits to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances then existing, and at the request of
Purchasers promptly prepare and furnish to Purchasers a
reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter
delivered to the Purchasers of such shares, such
prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances then existing; and
(vi) use its best efforts to cause all of the Shares by
such registration statement to be accepted for
quotation on NASDAQ.
(c) In connection with any registration pursuant to this
paragraph 3, the Company shall pay all registration and
filing fees, printing expenses, fees and disbursements of
the CompanyOs legal counsel and accountants, and transfer
agents' and registrars' fees. Purchasers shall pay all
underwriting discounts, commissions and expenses
attributable to the sale of the Shares and all fees and
disbursements of Purchasers' legal counsel and accountants.
(d) At least ten days prior to making any offer or sale of
Shares pursuant to the registration statement, the
Purchasers shall advise the Company that the Purchasers
propose to make offers or sales of Shares, the number of
Shares proposed to be offered and sold, the name and address
of each broker or dealer to or through which such offers and
sales are proposed to be made, and the approximate period of
time in which such offers and sales are proposed to be made.
If, in the reasonable judgment of the Company, it is
necessary to amend or supplement the registration statement
or the prospectus contained therein (the "prospectus") prior
to or in connection with any such offer or sale or during
the period any such offer or sale is being made, the Company
will advise the Purchasers, who shall promptly notify each
broker or dealer named by the Purchasers as participating in
the offer or sale of Shares by the Purchasers. The
Purchasers and each broker or dealer participating in the
offer or sale of Shares by the Purchasers shall not make any
offer or sale of Shares until the expiration of ten business
days after such Purchaser has advised the Company that it
proposes to make such offers and sales and, following such
ten-day period, shall offer and sell Shares only during the
period specified by such Purchaser in the notice given to
the Company. Notwithstanding the foregoing, if the Company
shall advise the Purchasers of its determination that it is
necessary to amend or supplement the registration statement
or prospectus, the Purchasers and each broker or dealer
participating in the offer and sale of Shares by the
Purchasers shall make no offers or sales of Shares until the
Company notifies the Purchasers that such supplement has
been filed with or that such amendment has been declared
effective by the Commission. Purchasers shall promptly
notify the Company of each sale of Shares and shall promptly
notify the Company when the sale or other distribution of
all Shares held by the Purchasers have been completed.
(e) The Purchasers hereby represent and warrant to the
Company that no broker, dealer, Underwriter, Prospective
Underwriter, Affiliated Purchasers or other person who has
agreed to Participate or is Participating in the
Distribution contemplated hereby on behalf of or at the
direction of such Purchasers, shall directly or indirectly,
by the use of any means or instrumentality of interstate
commerce, or of the mails, or of any facility of any
national securities exchange, either alone or with one or
more other persons, bid for or purchase for any account in
which he has a beneficial interest, any shares of Common
Stock, or any right to purchase shares of Common Stock, or
attempt to induce any person to purchase any shares of
Common Stock or rights until after he has completed his
Participation in such Distribution. Purchasers shall be
deemed to have completed his Participation in the
Distribution when he has sold all Shares owned by him. So
long as such transactions are not engaged in for the purpose
of creating actual, or apparent, active trading in or
raising the price of the Common Stock, this paragraph shall
not prohibit (i) transactions in connection with the
Distribution contemplated hereby effected otherwise than on
a securities exchange with the Company or the Purchasers on
whose behalf such distribution is being made or among
Underwriters, Prospective Underwriters or other persons who
have agreed to Participate or are Participating in such
Distribution; or (ii) unsolicited, privately negotiated
purchases, each involving at least a block of shares, that
are not effected from or through a broker or dealer; or
(iii) purchases by the Company effected more than 40 days
after the effective date of the Registration Statement
covering the Common Stock to be distributed hereunder, for
the purpose of satisfying a sinking fund or similar
obligation to which the Company is subject and which becomes
due as of a date that does not exceed twelve months from the
date of such purchases; or (iv) odd-lot transactions and
round-lot transactions that offset odd-lot transactions
previously or simultaneously executed or reasonably
anticipated in the usual course of business by a person who
acts in the capacity of an odd-lot dealer; or (v) brokerage
transactions not involving solicitation of the customer's
order; or (vi) brokerage transactions involving the
solicitation of a customerOs order made prior to the later
of nine business days before commencement of offers or sales
of the Shares to be Distributed or the time the broker-
dealer becomes a Participant in the Distribution; or (vii)
offers to sell or the solicitation of offers to buy Shares
being Distributed or securities or rights offered as
principal by the person making such offer to sell or
solicitation; or (viii) the exercise of any right or
conversion privilege set forth in the instrument governing a
security, to acquire any security directly from the Company;
or (ix) bids or purchases by an Underwriter, Prospective
Underwriter, Affiliated Purchasers or dealer, if all such
bids or purchases are made (a) prior to the later of nine
business days prior to the commencement of offers or sales
of the shares of Common Stock to be Distributed or the time
such person becomes a Participant in the Distribution or (b)
in the case of unsolicited purchases, prior to the later of
the date of commencement of offers or sales of the shares of
Common Stock to be Distributed or the time such person
becomes a Participant in the Distribution; or (x) bids or
purchases by the Company or the Purchasers or by an
Affiliated Purchasers if all such bids and purchases are
made (a) nine or more business days prior to the
commencement of offers or sales of the shares of Common
Stock to be Distributed or (b) in the case of unsolicited
purchases, prior to the date of commencement of offers or
sales of the Shares. Capitalized terms used in this
paragraph and not defined in this Agreement shall have the
meanings assigned to such terms in Rule 10b-6 of the
Commission.
(f) The Company and the Purchasers agree to comply with all
applicable federal and state laws and regulations in
connection with the registration, qualification, offering
and sale of Shares, including but not limited to the
Securities Act, the Securities Exchange Act of 1934 (the
OExchange ActO), the rules and regulations promulgated by
the Commission under the Securities Act and the Exchange Act
and, particularly, Rules 10b-2, 10b-6 and 10b-7 of the
Commission under the Exchange Act.
(g) Neither any Purchasers nor any broker or dealer or
other person acting for or on behalf of the Purchasers shall
place any bid or effect any purchase for the purpose of
pegging, fixing or stabilizing the price of the Shares to be
offered as contemplated herein.
(h) The Purchasers shall comply with all applicable
requirements with respect to the delivery of prospectuses
set forth in sections 5 and 10 of the Securities Act and all
applicable rules thereunder.
If these terms are acceptable, please sign where provided below
and return a copy to me as soon as possible. We can then issue
the stock and begin the registration process.
Very truly yours,
/s/
James M. Rosel
Vice President Finance
and General Counsel
JMR:sdl
AGREED and ACCEPTED this 20th day of December, 1996.
Environmental Allies NV, Environmental Allies International, NV
and Ally Capital Markets Group
By: Ally Capital Markets Group, authorized signatory
By: /s/
Stephen M. Pickens
Its: Vice President
EXHIBIT 4.10
January 20, 1997
Mr. Steve Pickens VIA: Fax (415-331-1212)
Ally Capital Corporation
2330 Marinship Way, Suite 300
Sausalito, California 94965
RE: Prepayment of Equipment Lease
Dear Steve:
With respect to our letter agreement of December 18, 1996
("Agreement") for prepayment of the Equipment Lease, please
sign where indicated below to evidence Ally's agreement, on
behalf of the Lessors, that it will not dispose of
Electrosource common stock in a fashion that will result in a
credit of less than $1.00 per share, and that if the stock
price drops to $1.00 or less, the Agreement shall automatically
be rescinded and the stock returned to Electrosource.
Electrosource will, under such circumstances, remain
responsible for all balances due under the lease agreement and
the letter agreement of December 18, 1996 that may remain at
such time as whatever stock remains unsold is returned. This
is necessary because Electrosource's par value per share of
stock is $1.00 and the Company must receive at least that much
in value for the shares to be fully paid and non-assessable.
The current market price is approximately $5.12 per share.
If you have any questions, please call. Thank you for your
cooperation and early consideration of this letter.
Very truly yours,
/s/
James M. Rosel
Vice President Finance
and General Counsel
JMR:sdl
cc: Bret Van Earp
AGREED TO on behalf of ALLY CAPITAL CORPORATION on this
the 21st day of January, 1997.
By: /s/
Stephen M. Pickens
Its: Vice President
EXHIBIT 4.11
April 10, 1997
Mr. Steve Pickens VIA: Fax (415-331-1212)
Ally Capital Corporation
Marina Plaza
2330 Marinship Way, Suite 300
Sausalito, California 94965-2853
Re: Prepayment of Lease
Dear Steve:
In accordance with the letter agreement dated December 18, 1996
between Ally and Electrosource, as amended by letter agreement
dated January 20, 1997, Ally and Electrosource hereby agree to
adjust the number of shares issued to Ally on behalf of the
Lessors to 127,500 shares. The adjustment is to reflect the
subsequent lease payments made to reduce the indebtedness since
December. We will continue payments per our agreement until the
obligation is satisfied.
The existing certificate for 160,000 will be canceled and
replaced with a new stock certificate for 127,500 shares. We
will deliver this to you as soon as possible, which I anticipate
during the week of April 14. There are no other changes to the
agreement.
Please indicate your agreement to this amendment where provided
below and return a copy of this letter by fax (512-753-6578) and
mail at your earliest convenience.
We appreciate your cooperation and attention to this matter.
Very truly yours,
/s/
James M. Rosel
Vice President Finance
and General Counsel
AGREED TO AND ACCEPTED this 11th day of April, 1997.
ALLY CAPITAL CORPORATION
By: /s/
Stephen M. Pickens
Its: Vice President
EXHIBIT 24.1
Consent of Ernst & Young, LLP
Independent Auditors
We consent to the reference to our firm under the
caption "Experts" in the Registration Statement (Amendment
No. 1 to Form S-3 No. 333-20103) and related Prospectus of
Electrosource, Inc. for the registration of 127,500 shares
of its common stock and to the incorporation by reference
therein of our report dated February 28, 1997, with respect
to the financial statements of Electrosource, Inc. included
in its Annual Report (Form 10-K) for the year ended December
31, 1996, filed with the Securities and Exchange Commission.
/s/
Ernst & Young LLP
Austin, Texas
April 10, 1997
