As filed with the Securities and Exchange Commission on April 22, 1997
Registration No. _______________
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 No.)
of incorporation or Classification Code
organization) Number)
Michael G. Semmens,
President
2809 Interstate 35 South Electrosource, Inc.
San Marcos, Texas 78666 2809 Interstate 35 South
(512) 753-6500 San Marcos, Texas 78666
(Address, including zip code, and (512) 753-6500
telephone number, including (Name, address, including
area code, of registrant's zip code, and telephone
principal executive office) number,
including area code, of
agent 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.
Calculation of Registration Fee
Proposed Proposed
Title of each Amount maximum maximum Amount
class of to be offering aggregate of
securities to be register price per offering registra
registered ed unit* price tion fee
Common Stock, 437,674 $5.75 per $2,516,625.50 $762.61
$1.00 par value shares share
* Estimated solely for the purpose of determining the
registration fee and based upon the closing price quoted in the
NASDAQ system for a share of Electrosource, Inc. Common Stock on
April 18, 1997.
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.
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 Shareholders Selling Shareholders
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 22, 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.
437,674 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 18, 1997, the closing price for a share of Common Stock
as reported on NASDAQ was $5.75 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 22, 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 filed an amended S-3 Registration Statement for
the sale of 127,500 shares by Ally Capital Corporation. 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 71,300 outstanding shares of
the Company's Common Stock, $1.00 par value per share ("Common
Stock"), and 366,374 shares issuable upon the exercise of
associated warrants. The shares and warrants were sold by the
Company in the private placement referenced above in "Recent
Developments" and are now being made available for sale by
certain individuals and institutions who participated in the
private placement (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.
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.
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.
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 "penny stocks." 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 customer's position
in penny stocks. The rules also impose heightened "know your
customer" 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 $5.75 per share of Common
Stock as of April 18, 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 $5.49 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
shareholder's 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.
The Company agreed to file this registration statement to
register on Form S-3 the shares purchased in the private
placement for those purchasers who were not executive officers.
The executive officers' share and warrant purchase is subject to
shareholder approval at the next Annual Meeting of Shareholders.
If the purchase by the executive officers is not approved, their
purchase price will be refunded, with interest at the prime rate,
and the shares and warrants returned.
The Company filed an amended S-3 Registration Statement on
April 18, 1997 for the sale of 127,500 shares held by Ally
Capital Corporation as agent for two entities who received the
shares for prepayment of equipment lease obligations.
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 PDR 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 acquired by
persons other than executive officers of the Company (the
"Selling Shareholders") in the private placement described above
under "Recent Developments" (see "Selling Shareholders," below).
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 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 the Selling Shareholders identified below in the
amounts shown:
Shares
Shares Shares Owned Percen
PARTICIPANT Owned Shares Underl Follow tage
Prior Offere ying ing of
to d Warran Offeri Outsta
Offeri ts ng nding
ng Shares
Joseph U. Barton 3,812 3,812 25,019 0 *
Thomas U. Barton 3,813 3,813 25,019 0 *
Collins Capital 22,875 22,875 150,117 0 *
Diversified Fund LP
Compton Family 4,000 4,000 12,000 0 *
Partners Ltd
Audrey T. Dearing 2,750 2,300 15,094 2,750 *
Fred B. Dulock 16,200 6,000 18,000 10,200 *
Bill N. Goss 5,000 5,000 15,000 0 *
Bill Kemp 10,500 5,000 15,000 5,500 *
James R. Phillips,Jr. 25,500 8,500 25,500 17,000 *
Langhorne Reid, III 11,000 10,000 65,625 1,000 *
*Less than 1%
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.
The Company agreed to file a registration statement on Form
S-3 to register for sale the shares of Common Stock purchased by
the Selling Shareholders and the shares of Common Stock issuable
under the associated warrants. The shares offered hereby are
being registered pursuant to such agreement.
Langhorne Reid, III is a consultant to the Company on
financial matters, and has been since February 1996, under a
written consulting agreement which provided for a fee of $3,000
per month and the grant of 200 stock options per month. The
agreement was amended effective August 15, 1996 to extend the
term to August 15, 1997 and modify the cash fee to $2,000 per
month and stock options to 450 options per month. The exercise
price of the options is the market price on date of issue. Under
the agreement, Mr. Reid is also entitled to an advisory success
fee for fundraising activity of 7%-10% of the amounts raised in
various financing activities. The fee is paid half in cash and
half in stock options. The options are granted at the rate of
one option for each $10.00 represented by that one-half of the
fee. The exercise price is equal to market price on the date of
the fundraising activity; the term is for two years, and there
are no registration rights. As part of his regular consulting
duties, during the past three years the Company has paid Mr. Reid
approximately $41,800 and granted 4,800 stock options.
Additionally, Mr. Reid will receive a fee of 10% or approximately
$20,015 (half in cash and half in options) as a result of the
equity participation in this offering directly resulting from his
efforts.
Under a letter agreement dated April 1, 1997, James R.
Phillips, Jr. is entitled to an advisory fee of $15,000 for his
work on this placement and will be entitled to participate up to
the amount of $35,000 in any similar offering by the Company
within one year. The Company and Mr. Phillips negotiated the fee
compensation due to a disagreement as to whether Mr. Phillips was
entitled to purchase additional shares and options in the private
placement in lieu of a fee.
The following participants in this offering have
participated in previous Electrosource offerings as follows (see
description of prior offerings below):
WARRANT
PRIOR AMOUNT SHARES PURCHASED WARRANTS EXERCISE
PARTICIP OFFERING LOANED NUMBER AMOUNT OBTAINED PRICE
ANT
Compton PP#1 -- 500 $15,000 250 $25.00
Family -- -- -- 250 $35.00
Partners PP#2 -- 2,500 27,500 -- --
Fred B. 1993 $7,500 -- -- 600 $22.50
Dulock Loan
Warrant
Program
PP#1 -- 1,000 $30,000 500 $25.00
-- -- -- 500 $35.00
PP#2 -- 3,000 $33,000 -- --
Bill PP#1 -- 1,000 $30,000 500 $25.00
Kemp -- -- -- 500 $35.00
PP#2 -- 3,000 $33,000 -- --
James R. 1993 $92,500 -- $166,500 7,400 $22.50
Phillips Loan
, Jr. Warrant
Program
1993 -- -- -- 4,000 $22.50
Loan
Warrant
Program*
PP#1 -- 7,500 $226,875 3,750 $25.00
-- -- -- 3,750 $35.00
PP#2 -- 10,000 $110,000 -- --
*Mr. Phillips purchased warrants from another participant in the program.
In October 1994, the Company completed Private Placement #1
for 48,550 shares of Common Stock which resulted in net proceeds
to the Company of $1,386,474. Warrants attached to the offering
allowed the purchase of an equal number of shares; one-half of
which were exercisable at $45 per share until September 1995 and
the remaining one-half were exercisable at $55 per share until
September 1996. The exercise prices were subsequently changed to
$25 per share and $35 per share, respectively, and the expiration
dates were extended to September 1997 for all participants in
Private Placement #2. The Company, pursuant to the terms of the
private placement, agreed to register the shares and subsequently
filed a registration statement covering the shares. The warrants
have registration rights, but have not been registered and remain
unexercised.
In September 1995, the Company completed Private Placement
#2 for 80,633 shares of Common Stock which resulted in net
proceeds to the Company of $886,966. The Company, pursuant to
the terms of the private placement, agreed to register the shares
and subsequently filed a registration statement covering the
shares.
In early 1993, the Company entered into several ten percent
notes payable aggregating $550,000 with warrants to purchase
44,000 shares of Common Stock for a purchase price of $22.50 per
share. Shares issued upon exercise were registered and all
warrants were exercised or have expired.
Audrey Dearing, Electrosource Corporate Secretary, has
received cash compensation of $59,788, $65,416 and $57,996 in the
years ended December 31, 1994, 1995 and 1996, respectively. Ms.
Dearing changed her status from a full-time to part-time employee
in July 1996. Stock options with the following terms have been
granted to Ms. Dearing in 1994 through 1996: 300 options at an
exercise price of $33.75 on 5/31/95, 867 options at an exercise
price of $12.50 on 2/1/96, 3,000 options at an exercise price of
$12.50 on 4/1/96 and 5,000 options at an exercise price of $5.28
on 10/30/96. All exercise prices were equal to market value at
the date of grant.
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 $5.75 per share (based on the
market price of a share of Common Stock as quoted by NASDAQ on
April 18, 1997) will therefore incur an immediate dilution of
$5.49 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 437,674 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 22, 1997
INFORMATION BY REFERENCE 4
SUMMARY OF PROSPECTUS 5
RISK FACTORS 5
THE COMPANY 7
RECENT DEVELOPMENTS 8
THE OFFERING 9
SELLING SHAREHOLDERS 9
USE OF PROCEEDS 11
DILUTION 11
INDEMNIFICATION OF OFFICERS
AND DIRECTORS 11
LEGAL MATTERS 12
EXPERTS 12
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 Subscription Agreements between participants and
Electrosource, Inc. dated January 23, 1997.
4.10 Letter agreement between Electrosource, Inc. and James R.
Phillips, Jr. dated April 1, 1997.
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 21, 1997.
ELECTROSOURCE, INC.
By:_____________/s/___________________
Michael G. Semmens, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints MICHAEL G.
SEMMENS and JAMES M. ROSEL, and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution, and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign this Registration Statement of
Electrosource, Inc. and any and all amendments (including post-
effective amendments) to this Registration Statement, and to file
the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each of them, or any
substitute may lawfully do or cause to be done by virtue thereof.
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.
Signatures Title Date
/s/ President, Chief Executive April 17, 1997
Michael G. Semmens Officer and Chairman of the Board
/s/ Director April 17, 1997
Richard Balzhiser
/s/ Director April 17, 1997
William R. Graham
/s/ Director April 17, 1997
Norman Hackerman
/s/ Director April 17, 1997
John D. Malone
/s/ Director April 17, 1997
Charles L. Mathews
Director April __, 1997
Nathan Morton
/s/ Director April 17, 1997
Richard S. Williamson
/s/ Director April 17, 1997
Thomas S. Wilson
/s/ Vice President Finance April 17, 1997
James M. Rosel and General Counsel
(Chief Financial Officer)
/s/ Treasurer and Controller April 17, 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 Subscription Agreements between participants
and Electrosource, Inc. dated January 23, 1997. 23
4.10 Letter agreement between Electrosource, Inc.
and James R. Phillips, Jr. dated April 1, 1997. 20
5.1 Opinion of Bret Van Earp 21
24.1 Consent of Ernst & Young LLP. 22
24.2 Consent of Bret Van Earp (included in opinion
filed as Exhibit 5.1) --
25. Power of Attorney (filed as page 17 of this
Registration Statement) --
PART 1 - PRIVATE PLACEMENT - Subscription Agreement
The following individuals participated in the larger part of the
Private Placement in the amounts as shown. The Securities
Subscription Agreement as follows was appropriately
completed for each of the participants in the amounts shown.
NAME SHARES PRICE
Barton, Joseph U. 3,812 $6.5625
Barton, Thomas U. 3,813 6.5625
Collins Capital Diversified
Fund LP 22,875 6.5625
Dearing, A. T. 2,300 6.5625
Griffin, W.F. 7,619 6.5625
Koenig, M.B. 3,810 6.5625
Morris, C. 3,810 6.5625
Reid, Langhorne III 10,000 6.5625
Rosel, J.M. 3,810 6.5625
Semmens, M.G. 19,048 6.5625
SECURITIES SUBSCRIPTION AGREEMENT
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.
THIS SECURITIES SUBSCRIPTION AGREEMENT dated as of December
28, 1996 (the "Agreement"), is executed by the undersigned
"Purchaser" in connection with the private placement of common
stock and warrants of Electrosource, Inc., a corporation
organized under the laws of Delaware, with its principal
executive offices located at 2809 IH 35 South, San Marcos, Texas
78666 (hereinafter referred to as "Company"). When accepted by
the Company, this Agreement shall constitute a subscription to
purchase common stock and warrants.
1. Agreement to Subscribe; Purchase Price.
(a) Subscription. The undersigned Purchaser hereby subscribes
for and agrees to purchase ___________________________ (______)
shares of the Company's Common Stock ("Shares") for Six and
56.25/100 Dollars ($6.5625) per share (6 9/16 closing price on
December 19, 1996) for ____________________ and __/100 Dollars
($______) in total ("Purchase Price").
(b) Warrants. For purchase of the Common Stock, the Purchaser
shall also receive warrants ("Warrants") for purchase of
____________________________ (_______) shares of common stock
at the exercise price of Seven and 56/100 Dollars ($7.56)
per share. The warrants shall have a two (2) year term. The
form of the warrant is attached hereto as Exhibit "A."
(c) Payment. The Purchase Price shall be paid by delivering
immediately available funds by check or wire transfer as directed
by Company for delivery of the Shares and Warrants versus payment.
(d) Closing. The closing of the transactions contemplated by this
Agreement shall occur on or before _____________1997, or such earlier
or later date as is mutually agreed to by Purchaser and Company.
2. 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 Shares
and Warrants 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 Warrants and the performance of the company's
obligations hereunder has been taken or will be taken prior to closing.
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 and Warrants
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 and Warrants are
subject to restrictions on transfer under state and/or federal securities
laws as set forth herein. The Shares and Warrants are not subject to
any preemptive rights or rights of first refusal.
3. Purchaser Representation.
The Purchaser hereby represents and warrants 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 Purchaser is 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, or natural person that either alone or together
with his spouse has a net worth of at least $1,000,000 or
has individual income for each of the past two (2) years of
not less than $200,000 ($300,000 joint) and reasonably
expects income of at least such amount in the current year.
(b) No representations or warranties have been made to the
Purchaser by the Company, or any agent, employee or
affiliate of the Company, and in entering into this
transaction the Purchaser is 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
its own independent investigation. The Purchaser, before
the date hereof, had 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 Purchaser.
(c) The Purchaser is aware that:
(i) there are substantial risks incident to an
investment in 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 Purchaser understands 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 Purchaser must bear the
economic risk of the investment for an indefinite period of
time. The Purchaser further acknowledges 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
Purchaser further acknowledges 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 Purchaser acknowledges 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 Purchaser 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 Purchaser further acknowledges that the
Company is under no obligation to aid it in obtaining any
exemption from the registration requirements. The Purchaser
also acknowledges responsibility for compliance with all
conditions on transfer imposed by any securities
administrator of any state.
(f) The Purchaser is acquiring the Shares for its own
account, as principal, and not for the account of any other
person.
4. 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 by Purchaser of the
Shares and the Shares issuable upon exercise of the
Warrants. Such registration statement will be applicable
only to sales by the Purchaser 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 Purchaser. 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, the
Company shall:
(i) use its best reasonable efforts within thirty (30)
days of closing to prepare and file with the Securities
and Exchange Commission (the OCommissionO) a
registration statement on Form S-3 with respect to the
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 Purchaser 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 Purchaser 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 Purchaser
may reasonably request in order to facilitate the sale
of the Shares covered by such registration statement;
(v) notify Purchaser 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 CompanyOs 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
Purchaser promptly prepare and furnish to Purchaser a
reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter
delivered to the Purchaser 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
agentsO and registrarsO fees. Purchaser shall pay all
underwriting discounts, commissions and expenses
attributable to the sale of the Shares and all fees and
disbursements of Purchaser's legal counsel and accountants.
(d) At least ten days prior to making any offer or sale of
Shares pursuant to the registration statement, the Purchaser
shall advise the Company that the Purchaser proposes 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 OprospectusO) 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 Purchaser, who shall promptly notify each
broker or dealer named by the Purchaser as participating in
the offer or sale of Shares by the Purchaser. The Purchaser
and each broker or dealer participating in the offer or sale
of Shares by the Purchaser 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 Purchaser of its determination that it is
necessary to amend or supplement the registration statement
or prospectus, the Purchaser and each broker or dealer
participating in the offer and sale of Shares by the
Purchaser shall make no offers or sales of Shares until the
Company notifies the Purchaser that such supplement has been
filed with or that such amendment has been declared
effective by the Commission. Purchaser 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 Purchaser have been completed.
(e) The Purchaser hereby represents and warrants to the
Company that no broker, dealer, Underwriter, Prospective
Underwriter, Affiliated Purchaser 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 Purchaser, 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. Purchaser 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 Purchaser 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 Purchaser 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 Purchaser or by an
Affiliated Purchaser 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 Purchaser 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 Purchaser nor any broker or dealer or other
person acting for or on behalf of the Purchaser 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 Purchaser 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.
(PURCHASER)
By:
Printed Name:
Its:
ACCEPTED BY:
ELECTROSOURCE, INC.
This ______ day of _________________, 1996.
By:
Printed Name:
Its:
EXHIBIT A
STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock of
ELECTROSOURCE, INC.
Expiring ________________
No. W_______
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
ITS EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS
OF ANY STATE. THIS WARRANT MAY NOT BE EXERCISED, AND
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
ITS EXERCISE MAY BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED, IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS OR
AN OPINION OF COUNSEL FOR THE HOLDER OF THIS WARRANT
REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT
THAT AN EXEMPTION FROM REGISTRATION THEREUNDER IS
AVAILABLE. NEITHER THE OFFERING OF THIS WARRANT NOR
ANY OFFERING MATERIALS HAVE BEEN REVIEWED BY AN
ADMINISTRATOR UNDER SUCH ACT OR ANY APPLICABLE STATE
LAW.
Warrant to Purchase
Date___________ _______ Shares
of Common Stock
The undersigned, Electrosource, Inc. (the "Company"), a
Delaware corporation, for good and valuable consideration desires
to grant to __________________________________ ("Purchaser") a
warrant or option to acquire shares of Common Stock in the
Company. The option covered hereby is granted pursuant to the
terms of a Subscription Agreement ("Subscription Agreement")
dated as of ______________, 199___ between the Company and
Purchaser, and all provisions of that Agreement are incorporated
herein by reference. Defined terms shall have the same meaning
as in the Subscription Agreement.
1. Warrant. The Company does hereby grant to Purchaser
the exclusive option to purchase from the Company all or any part
of an aggregate of ________________________ _________________
(_______) shares ("Shares") of Common Stock of the Company at the
price of Seven and 56/100 Dollars ($7.56) per share.
2. Term. The Option shall be exercisable as provided in
the Subscription Agreement and otherwise at any time until the
option expires or terminates in accordance with the provisions
hereof. This option shall in any event terminate at 5:00 o'clock
P.M., San Marcos, Texas time two years after its date of grant.
3. Exercise. To exercise this option, Purchaser shall
give written notice of such election to the Company at its
Corporate Headquarters, Attention Corporate Secretary, so as to
be received by the Company within the period this option is
exercisable, which notice shall specify the number of shares to
be purchased and be accompanied by payment in full. Payment for
such shares may be by check or wire transfer, as directed by the
Company.
4. Share Issue. Upon receipt by the Company of proper
notice of exercise of this Warrant, the Company as promptly as
practicable and subject to the other provisions in this Warrant,
shall deliver a certificate or certificates representing Shares
so purchased, and shall pay all original issuance or transfer
taxes on the exercise of this Warrant, and all other fees and
expenses necessarily incurred by the Company in connection
therewith. Certificates evidencing such Shares may have endorsed
thereon such language as may be deemed necessary or advisable by
counsel for the Company in order to ensure compliance with the
applicable securities laws or regulations. Registration rights
shall be as set forth in the Subscription Agreement.
5. Change in Capitalization; Merger; Liquidation. The
number of Shares of Common Stock covered by this Warrant, and the
price per share shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common
Stock resulting from a subdivision or combination of shares or
the payment of a stock dividend in shares of Common Stock to
holders of outstanding shares of Common Stock. If the Company
shall be the surviving corporation in any merger or
consolidation, recapitalization, reclassification of shares or
similar reorganization, Purchaser shall be entitled to purchase,
at the same times and upon the same terms and conditions as are
provided in this Warrant, the number and class of shares of stock
or other securities to which it would have been entitled to
receive as a result of such transaction as if the Purchaser had
exercised the Warrant in full on the record date for the
transaction in question. In the event of a dissolution or
liquidation of the company or a merger or consolidation in which
the Company is not the surviving corporation, this Warrant shall
terminate upon the effective date thereof, except to the extent
that another corporation assumes such Warrant or substitutes
another option therefore. In the event of a change of the
Company's shares of Common Stock with par value into the same
number of shares with a different par value or without par value,
the shares resulting from any such change shall be deemed to be
Common Stock.
IN WITNESS WHEREOF, the Parties have executed this
Agreement on the date first written above.
ELECTROSOURCE, INC. (PURCHASER)
By: By:
Printed Name: Printed Name:
Its: Its:
ANNEX TO SUBSCRIPTION AGREEMENT
ALL INFORMATION WILL BE TREATED CONFIDENTIALLY
PURCHASER QUESTIONNAIRE
Electrosource, Inc.
2809 Interstate 35 South
San Marcos TX 78666
Gentlemen:
The information contained herein is being furnished to you
in order to determine whether _____________ (insert name of
proposed purchaser) may purchase Shares of the Common Stock of
ELECTROSOURCE, INC. (the "Company"), pursuant to the private
offering exemption from registration provided by the Securities
Act of 1933, as amended (the "Securities Act"). The undersigned
understands that (i) the Company will rely upon the information
contained herein for purposes of such determination, (ii) the
Shares will not be registered under the Securities Act in
reliance upon the private offering exemption from registration
provided by the Securities Act, and (iii) this questionnaire is
not an offer of the Shares or any other securities to the
undersigned or to the above-named proposed purchaser.
I herewith furnish you with the following representations
and information:
1. Name: _____________________
2. Address:
3 Corporate, Trust or Partnership assets
$______________________.
4. Individual Financial Data - see Subscription Agreement,
Section 3(a).
(a) Individual income* during 1995: $___________
(b) Individual income* during 1996: $___________
(c) Estimated individual income* during 1997: $____________
(d) Joint income* with spouse during 1995: $___________
(e) Joint income* with spouse during 1996: $___________
(f) Estimated joint income* with spouse during 1997: $________
(g) Current net worth of undersigned (including homes,
furnishings and automobiles): $_____________
(h) Current net worth of undersigned (excluding homes,
furnishings and automobiles): $_____________
(i) Current net worth of spouse, if any (including homes,
furnishings and automobiles): $_____________
(j) Current net worth of spouse, if any (excluding homes,
furnishings and automobiles): $_____________
* The term "Income" shall be deemed to mean adjusted gross
income of the undersigned (as shown on the undersigned's
Federal Income Tax returns).
5. I have such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and
risks of the proposed investment. I can bear the economic risks
in and can afford a complete loss of any investment I may make by
virtue of purchasing Securities and can afford to hold any such
investment for an indefinite period. If I acquire any
Securities, such acquisition shall be for my own account, for
investment and not with a view to the resale or distribution
thereof.
6. I represent to you that (a) the information contained herein
is complete and accurate and may be relied upon by you, and (b) I
will notify you immediately of any material change in any of such
information occurring prior to the closing of my purchase of
Securities. I agree that, notwithstanding the confidential
treatment to be accorded the information contained here, you may
divulge such information in whole or in part or present all or
any part of this document to such parties as you may deem
appropriate in connection with establishing the availability of
an exemption under any Federal or state securities laws, rules
and regulations.
IN WITNESS WHEREOF, I have executed this Purchaser
Questionnaire this ____ day of _____________, 199____, and
declare that it is truthful and correct.
PURCHASER:
________________________
Sworn to before me this ____ day of _________________,
199___.
Notary Public in and for
The State of Texas
Printed Name:
My Commission Expires:
PART 2 - PRIVATE PLACEMENT - Subscription Agreements
The following individuals participated in the smaller part of the
Private Placement in the amounts as shown. The Securities
Subscription Agreement as follows was appropriately completed for
each of the participants in the amounts shown.
NAME SHARES PRICE
Compton Family Partners 4,000 $5.25
Dulock, Fred B.. 6,000 5.25
Goss, Bill N. 3,000 5.25
Goss, Bill N. 2,000 5.25
Kemp, Bill 5,000 5.25
Phillips, James R., Jr. 8,500 5.25
SECURITIES SUBSCRIPTION AGREEMENT
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.
THIS SECURITIES SUBSCRIPTION AGREEMENT dated as of January
_____, 1997 (the "Agreement"), is executed by the undersigned
"Purchaser" in connection with the private placement of common
stock and warrants of Electrosource, Inc., a corporation
organized under the laws of Delaware, with its principal
executive offices located at 2809 IH 35 South, San Marcos, Texas
78666 (hereinafter referred to as "Company"). When accepted by
the Company, this Agreement shall constitute a subscription to
purchase common stock and warrants.
1. Agreement to Subscribe; Purchase Price.
(a) Subscription. The undersigned Purchaser hereby
subscribes for and agrees to purchase shares
of the Company's Common Stock ("Shares") for Five and 25/100
Dollars ($5.25) per share or $_________________ in total
("Purchase Price").
(b) Warrants. For each share purchased, the Purchaser
shall also receive warrants ("Warrants") for purchase of
three (3) additional shares of common stock with an exercise
price of Five and 25/100 Dollars ($5.25) per share for one-
half (1/2) of such warrants and Six and 25/100 Dollars
($6.25) for the remaining one-half (1/2). The warrants
shall have a two (2) year term. The form of the warrant is
attached hereto as Exhibit "A."
(c) Payment. The Purchase Price shall be paid by
delivering immediately available funds by check or wire
transfer as directed by Company for delivery of the Shares
and Warrants versus payment.
(d) Closing. The closing of the transactions contemplated
by this Agreement shall occur on or before January 17, 1997,
or such earlier or later date as is mutually agreed to by
Purchaser and Company.
2. 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 Shares and Warrants 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 Warrants and the
performance of the company's obligations hereunder has been
taken or will be taken prior to closing. 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 and Warrants
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 and Warrants are subject to restrictions on
transfer under state and/or federal securities laws as set
forth herein. The Shares and Warrants are not subject to
any preemptive rights or rights of first refusal.
3. Purchaser Representation.
The Purchaser hereby represents and warrants 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 Purchaser is 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, or natural person that either alone or together
with his spouse has a net worth of at least $1,000,000 or
has individual income for each of the past two (2) years of
not less than $200,000 ($300,000 joint) and reasonably
expects income of at least such amount in the current year.
(b) No representations or warranties have been made to the
Purchaser by the Company, or any agent, employee or
affiliate of the Company, and in entering into this
transaction the Purchaser is 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
its own independent investigation. The Purchaser, before
the date hereof, had 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 Purchaser.
(c) The Purchaser is aware that:
(i) there are substantial risks incident to an
investment in 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 Purchaser understands 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 Purchaser must bear the
economic risk of the investment for an indefinite period of
time. The Purchaser further acknowledges 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
Purchaser further acknowledges 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 Purchaser acknowledges 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 Purchaser 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 Purchaser further acknowledges that the
Company is under no obligation to aid it in obtaining any
exemption from the registration requirements. The Purchaser
also acknowledges responsibility for compliance with all
conditions on transfer imposed by any securities
administrator of any state.
(f) The Purchaser is acquiring the Shares for its own
account, as principal, and not for the account of any other
person.
4. Registration Rights.
(a) The Company agrees to file a registration statement on
Form S-3 under the Securities Act of 1933, as amended (the
OSecurities ActO) covering the sale by Purchaser of the
Shares and the Shares issuable upon exercise of the
Warrants. Such registration statement will be applicable
only to sales by the Purchaser 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 Purchaser. 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, the
Company shall:
(i) use its best reasonable efforts within thirty (30)
days of closing to prepare and file with the Securities
and Exchange Commission (the OCommissionO) a
registration statement on Form S-3 with respect to the
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 Purchaser 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 Purchaser 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 Purchaser
may reasonably request in order to facilitate the sale
of the Shares covered by such registration statement;
(v) notify Purchaser 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 CompanyOs 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
Purchaser promptly prepare and furnish to Purchaser a
reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter
delivered to the Purchaser 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
agentsO and registrarsO fees. Purchaser shall pay all
underwriting discounts, commissions and expenses
attributable to the sale of the Shares and all fees and
disbursements of Purchaser's legal counsel and accountants.
(d) At least ten days prior to making any offer or sale of
Shares pursuant to the registration statement, the Purchaser
shall advise the Company that the Purchaser proposes 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 Purchaser, who shall promptly notify each
broker or dealer named by the Purchaser as participating in
the offer or sale of Shares by the Purchaser. The Purchaser
and each broker or dealer participating in the offer or sale
of Shares by the Purchaser 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 Purchaser of its determination that it is
necessary to amend or supplement the registration statement
or prospectus, the Purchaser and each broker or dealer
participating in the offer and sale of Shares by the
Purchaser shall make no offers or sales of Shares until the
Company notifies the Purchaser that such supplement has been
filed with or that such amendment has been declared
effective by the Commission. Purchaser 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 Purchaser have been completed.
(e) The Purchaser hereby represents and warrants to the
Company that no broker, dealer, Underwriter, Prospective
Underwriter, Affiliated Purchaser 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 Purchaser, 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. Purchaser 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 Purchaser 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 Purchaser 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 Purchaser or by an
Affiliated Purchaser 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 Purchaser 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 Purchaser nor any broker or dealer or other
person acting for or on behalf of the Purchaser 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 Purchaser 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.
(PURCHASER)
By:
Printed Name:
Its:
ACCEPTED BY:
ELECTROSOURCE, INC.
This ______ day of _________________, 1997.
By:
Printed Name:
Its:
EXHIBIT A
STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock of
ELECTROSOURCE, INC.
Expiring ________________
No. W_______
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
ITS EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS
OF ANY STATE. THIS WARRANT MAY NOT BE EXERCISED, AND
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
ITS EXERCISE MAY BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED, IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS OR
AN OPINION OF COUNSEL FOR THE HOLDER OF THIS WARRANT
REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT
THAT AN EXEMPTION FROM REGISTRATION THEREUNDER IS
AVAILABLE. NEITHER THE OFFERING OF THIS WARRANT NOR
ANY OFFERING MATERIALS HAVE BEEN REVIEWED BY AN
ADMINISTRATOR UNDER SUCH ACT OR ANY APPLICABLE STATE
LAW.
Warrant to Purchase
Date___________ _______ Shares
of Common Stock
The undersigned, Electrosource, Inc. (the "Company"), a
Delaware corporation, for good and valuable consideration desires
to grant to __________________________________ ("Purchaser") a
warrant or option to acquire shares of Common Stock in the
Company. The option covered hereby is granted pursuant to the
terms of a Subscription Agreement ("Subscription Agreement")
dated as of ______________, 199___ between the Company and
Purchaser, and all provisions of that Agreement are incorporated
herein by reference. Defined terms shall have the same meaning
as in the Subscription Agreement.
1. Warrant. The Company does hereby grant to Purchaser
the exclusive option to purchase from the Company all or any part
of an aggregate of ________________________ _________________
(_______) shares ("Shares") of Common Stock of the Company at the
price of Seven and 56/100 Dollars ($7.56) per share.
2. Term. The Option shall be exercisable as provided in
the Subscription Agreement and otherwise at any time until the
option expires or terminates in accordance with the provisions
hereof. This option shall in any event terminate at 5:00 o'clock
P.M., San Marcos, Texas time two years after its date of grant.
3. Exercise. To exercise this option, Purchaser shall
give written notice of such election to the Company at its
Corporate Headquarters, Attention Corporate Secretary, so as to
be received by the Company within the period this option is
exercisable, which notice shall specify the number of shares to
be purchased and be accompanied by payment in full. Payment for
such shares may be by check or wire transfer, as directed by the
Company.
4. Share Issue. Upon receipt by the Company of proper
notice of exercise of this Warrant, the Company as promptly as
practicable and subject to the other provisions in this Warrant,
shall deliver a certificate or certificates representing Shares
so purchased, and shall pay all original issuance or transfer
taxes on the exercise of this Warrant, and all other fees and
expenses necessarily incurred by the Company in connection
therewith. Certificates evidencing such Shares may have endorsed
thereon such language as may be deemed necessary or advisable by
counsel for the Company in order to ensure compliance with the
applicable securities laws or regulations. Registration rights
shall be as set forth in the Subscription Agreement.
5. Change in Capitalization; Merger; Liquidation. The
number of Shares of Common Stock covered by this Warrant, and the
price per share shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common
Stock resulting from a subdivision or combination of shares or
the payment of a stock dividend in shares of Common Stock to
holders of outstanding shares of Common Stock. If the Company
shall be the surviving corporation in any merger or
consolidation, recapitalization, reclassification of shares or
similar reorganization, Purchaser shall be entitled to purchase,
at the same times and upon the same terms and conditions as are
provided in this Warrant, the number and class of shares of stock
or other securities to which it would have been entitled to
receive as a result of such transaction as if the Purchaser had
exercised the Warrant in full on the record date for the
transaction in question. In the event of a dissolution or
liquidation of the company or a merger or consolidation in which
the Company is not the surviving corporation, this Warrant shall
terminate upon the effective date thereof, except to the extent
that another corporation assumes such Warrant or substitutes
another option therefore. In the event of a change of the
Company's shares of Common Stock with par value into the same
number of shares with a different par value or without par value,
the shares resulting from any such change shall be deemed to be
Common Stock.
IN WITNESS WHEREOF, the Parties have executed this
Agreement on the date first written above.
ELECTROSOURCE, INC. (PURCHASER)
By: By:
Printed Name: Printed Name:
Its: Its:
ANNEX TO SUBSCRIPTION AGREEMENT
ALL INFORMATION WILL BE TREATED CONFIDENTIALLY
PURCHASER QUESTIONNAIRE
Electrosource, Inc.
2809 Interstate 35 South
San Marcos TX 78666
Gentlemen:
The information contained herein is being furnished to you
in order to determine whether _____________ (insert name of
proposed purchaser) may purchase Shares of the Common Stock of
ELECTROSOURCE, INC. (the "Company"), pursuant to the private
offering exemption from registration provided by the Securities
Act of 1933, as amended (the "Securities Act"). The undersigned
understands that (i) the Company will rely upon the information
contained herein for purposes of such determination, (ii) the
Shares will not be registered under the Securities Act in
reliance upon the private offering exemption from registration
provided by the Securities Act, and (iii) this questionnaire is
not an offer of the Shares or any other securities to the
undersigned or to the above-named proposed purchaser.
I herewith furnish you with the following representations
and information:
1. Name: _____________________
2. Address:
3 Corporate, Trust or Partnership assets
$______________________.
4. Individual Financial Data - see Subscription Agreement,
Section 3(a).
(a) Individual income* during 1995: $___________
(b) Individual income* during 1996: $___________
(c) Estimated individual income* during 1997: $____________
(d) Joint income* with spouse during 1995: $___________
(e) Joint income* with spouse during 1996: $___________
(f) Estimated joint income* with spouse during 1997: $________
(g) Current net worth of undersigned (including homes,
furnishings and automobiles): $_____________
(h) Current net worth of undersigned (excluding homes,
furnishings and automobiles): $_____________
(i) Current net worth of spouse, if any (including homes,
furnishings and automobiles): $_____________
(j) Current net worth of spouse, if any (excluding homes,
furnishings and automobiles): $_____________
* The term "Income" shall be deemed to mean adjusted gross
income of the undersigned (as shown on the undersigned's
Federal Income Tax returns).
5. I have such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and
risks of the proposed investment. I can bear the economic risks
in and can afford a complete loss of any investment I may make by
virtue of purchasing Securities and can afford to hold any such
investment for an indefinite period. If I acquire any
Securities, such acquisition shall be for my own account, for
investment and not with a view to the resale or distribution
thereof.
6. I represent to you that (a) the information contained herein
is complete and accurate and may be relied upon by you, and (b) I
will notify you immediately of any material change in any of such
information occurring prior to the closing of my purchase of
Securities. I agree that, notwithstanding the confidential
treatment to be accorded the information contained here, you may
divulge such information in whole or in part or present all or
any part of this document to such parties as you may deem
appropriate in connection with establishing the availability of
an exemption under any Federal or state securities laws, rules
and regulations.
IN WITNESS WHEREOF, I have executed this Purchaser
Questionnaire this ____ day of _____________, 199____, and
declare that it is truthful and correct.
PURCHASER:
________________________
Sworn to before me this ____ day of _________________,
199___.
Notary Public in and for
The State of Texas
Printed Name:
My Commission Expires:
EXHIBIT 4.10
April 1, 1997
Mr. James R. Phillips, Jr.
8202 Woodcreek
Woodway, Texas 76712
Dear Jim:
This letter confirms our telephone conversation of March 24,
1997. You suggested that we agree upon a $15,000 advisory fee
for your efforts and ideas in the recent private placement.
You also suggested that in the event the Company does another
offering similar to the recent one with the Dallas investors,
that you be permitted to participate up to the amount of
$35,000.
This is an acceptable arrangement to Electrosource, and it is
agreed to. However, we should have a time limit on your
participation in future offerings on the "Dallas terms" and
would suggest that it be a period of one year from January 23,
1997, when the offering was completed. That is, if the Company
does an offer similar to the $6.56 per share and one warrant
per dollar invested before January 23, 1998, you will be
offered the opportunity to participate up to the amount of
$35,000.
The $15,000 fee will be paid, I propose, in two equal
installments; the first by April 20, 1997 and the second by May
15, 1997.
If you agree with all the above terms as full payment and
satisfaction of any amounts due you with regard to the
aforementioned offering, please sign where indicated below and
return a copy to me at your earliest convenience. We will then
get payment to you.
I appreciate your cooperation in working this out.
Very truly yours,
/s/
James M. Rosel
Vice President Finance
and General Counsel
cc: M.G. Semmens
M.B. Koenig
AGREED TO AND ACCEPTED by James R. Phillips, Jr. this 1st
day of April, 1997.
/s/
James R. Phillips, Jr.
EXHIBIT 5.1
April 17, 1997
Electrosource, Inc.
2809 Interstate 35 South
San Marcos, Texas 78666
Re: Registration Statement on
Form S-3
Gentlemen:
Reference is made to the registration statement on Form S-3
(the ORegistration StatementO) filed with the Securities and
Exchange Commission by Electrosource, Inc. (the OCompanyO) under
the Securities Act of 1933 relating to the distribution of 71,300
outstanding shares of the Common Stock, $1.00 par value (OCommon
StockO), of the Company (the OOutstanding SharesO) and 366,374
shares of Common Stock underlying certain stock purchase warrants
(the OWarrant SharesO) by certain selling shareholders.
The opinions expressed herein are limited in all respects to
the substantive law of the State of Texas, the federal law of the
United States, and, to the extent applicable, the Delaware
General Corporation Law. We assume no responsibility as to the
application to or effect on the opinions expressed herein of the
laws of any other jurisdiction.
We have been furnished with and examined originals or
copies, certified or otherwise identified to our satisfaction, of
all such records of the Company, agreements and other
instruments, certificates of officers or representatives of the
Company, certificates of public officials, and other documents as
we have deemed necessary or desirable as a basis for the opinions
hereinafter expressed. As to questions of fact material to such
opinions, we have relied upon certificates of officers of the
Company where relevant facts were not independently verified or
established.
We have made such examination of law and have examined such
certificates, documents, and records as We have deemed necessary
for purposes of this opinion. Based upon such examination and
review, We am of the opinion that (i) the Outstanding Shares to
be distributed pursuant to the Registration Statement are validly
issued, fully paid, and non-assessable and (ii) the Warrant
Shares will be, when issued against payment of the exercise price
thereof pursuant to the terms of those certain Stock Purchase
Warrants executed by the Company in connection with the sale of
the Outstanding Shares, validly issued, fully paid, and
non-assessable.
The opinions expressed herein are rendered as of the date of
this opinion letter, and we expressly disclaim any obligation to
advise you of any changes or new developments occurring after the
date hereof that would or might affect any matters or opinions
set forth herein. This opinion letter is limited to the matters
stated herein, and no opinion is implied or may be inferred
beyond the matters expressly stated.
We consent to the filing of this opinion as an exhibit to
the Registration Statement and to the use of my name in the
OLegal MattersO section of the prospectus included therein.
Very Truly Yours,
/s/
Bret Van Earp
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 and related
Prospectus of Electrosource, Inc. for the registration of
437,674 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 21, 1997
