Mitsui Engineering & Shipbuilding Co Ltd – ‘SC 13D/A’ on 3/18/96 re: Electrosource Inc – EX-99

As of:  Monday, 3/18/96   ·   Accession #:  891836-96-60   ·   File #:  5-39045

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Amendment to General Statement of Beneficial Ownership   —   Schedule 13D
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SC 13D/A    13D Amendment No. 1                                   11     28K 
 2: EX-99       Termination Agreement                                 11     23K 

EX-99   —   Termination Agreement
Exhibit Table of Contents

EX-99
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TERMINATION AGREEMENT     

  This termination agreement (hereinafter referred to as the

"Termination Agreement") is entered into as of this 6th day of March, 1996,     

by and between ELECTROSOURCE, INC., a Delaware corporation, having a            

principal place of business in Austin, Texas (hereinafter referred to as        

"Electrosource"), and MITSUI ENGINEERING & SHIPBUILDING CO., LTD., a            

Japanese corporation, having a principal place of business in Tokyo, Japan      

(hereinafter referred to as "Mitsui").  Electrosource and Mitsui may            

hereinafter be collectively referred to as the "Parties" and from time to       

time may be individually referred to as the "Party."                            

RECITALS    

    WHEREAS, Electrosource and Mitsui, on or about July 7, 1994,

entered into that certain Distributorship Agreement, as amended August 25,      

1994 and March 23, 1995 (hereinafter referred to as the "Distributorship        

Agreement"), and Electrosource and Mitsui, on or about October 26, 1994,        

entered into that certain Note Purchase Agreement (hereinafter referred to      

as the "Note Purchase Agreement"), and Electrosource issued to Mitsui its       

Three Million Eight Hundred thousand (US $3,800,000) 5% Convertible             

Promissory Note (the "Note"), and                                               

   WHEREAS, Mitsui gave notice to Electrosource on December 5,

1995 of termination of the Distributorship                                      

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Agreement pursuant to Article 22.2 thereof, effective January 4, 1996, and      

WHEREAS, Electrosource and Mitsui wish to agree upon the

details of such termination, settle all outstanding financial matters under     

the Distributorship Agreement and further wish to make certain                  

modifications to the Note Purchase Agreement,                                   

NOW, THEREFORE, in consideration of the premises and the

covenants and conditions contained herein the Parties agree as follows:         

I     

TERMINATION     

      1.1  Mitsui terminated the Distributorship Agreement, pursuant

to Article 22.2 thereof, effective January 4, 1996.                             

II    

PAYMENT OF FEES     

  2.1  Mitsui shall make the payments required under Section

2.1(b) and (c) of the Distributorship Agreement in the amounts of Two           

Hundred Thousand US Dollars (US $200,000.00) and Eight Hundred Thousand US      

Dollars (US $800,000.00), respectively, which totals One Million US Dollars     

(US $1,000,000.00) to Electrosource.  The payment shall be made by applying     

One Million US Dollars                                                          

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(US $1,000,000.00) of the principal amount of the Note against such license     

fee as provided for in Section 5D of the Note Purchase Agreement.               

      2.2  The resulting balance of the principal amount of the Note

shall then be Two Million Eight Hundred Thousand US Dollars (US                 

$2,800,000.00), and Electrosource shall immediately issue a replacement         

note (the "Replacement Note") in that amount to Mitsui.  Mitsui shall in        

exchange surrender the Note to Electrosource.  The Replacement Note in the      

principal amount of Two Million Eight Hundred Thousand US Dollars (US           

$2,800,000.00) shall otherwise be on the same terms and conditions as the       

Note.  The terms "Note" and "Notes" in the Note Purchase Agreement shall        

include the "Replacement Note" and such terms shall have the same meaning       

herein as in the Note Purchase Agreement.                                       

       2.3  In addition, on the date of issue of the Replacement Note,

Electrosource will pay interest on the Note and on the outstanding interest     

Note issued in October 1995 accrued to the date of issue of the Replacement     

Note by issuing an additional Note pursuant to Section 1A of the Note           

having terms identical to the Note in a principal amount equal to the           

amount of interest accrued and unpaid on the Note and on the outstanding        

interest Note issued in October 1995 as of the date of issue of the             

Replacement Note.                                                               

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     2.4  Electrosource shall remit to Mitsui One Hundred Thousand

US Dollars (US $100,000.00) for Japanese withholding tax to be paid by          

Mitsui on the One Million US Dollars (US $1,000,000.00) license fee payment     

referred to in Section 2.1 hereof.  This remittance will be made by wiring      

funds to Mitsui's bank account on or before the date of the payment in          

Section 2.1 hereof.                                                             

III     

OUTSTANDING INVOICES    

 3.1  Mitsui has provided reasonable documentation for all

batteries invoiced that it asserts have failed under proper use or were not     

received in good condition, the disposal or reclamation records, and the        

letter regarding the prototype batteries set forth in Don Orr Memorandum,       

attached as Exhibit A hereto for Electrosource's review.  As a result, the      

Parties have agreed upon the amount of payment for outstanding invoices         

submitted by Electrosource to Mitsui, and for which payment has not yet         

been received by Electrosource, to be US $19,203.36 and US $62,160 for          

prototypes ordered and canceled.  Mitsui shall make such payments in the        

total amount of US $81,363.36 within ten (10) business days after Mitsui's      

receipt of US $100,000 set forth in Section 2.4, whichever is the later by      

wiring funds to Electrosource's bank account.  Electrosource shall credit       

or return to Mitsui amounts paid for prototypes ordered but                     

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not delivered to the extent Electrosource covers the cost of same by sales      

to others, less reasonable additional costs incurred as a direct result of      

such resale.  Electrosource shall report to Mitsui on a monthly basis on        

the record of sales of such prototypes.                                         

IV    

REGISTRATION OF SHARES    

    4.1  Upon Mitsui's written request which must be made, if at

all, and received by Electrosource within 10 days of the date hereof,           

Electrosource will use its best reasonable efforts to file a registration       

statement on Form S-3 or amend its existing registration statement on Form      

S-3 within thirty (30) days after receipt of such request for registration      

for the purpose of selling the shares of Common Stock (as defined in the        

Note Purchase Agreement) issued or issuable upon conversion of the Notes.       

Electrosource shall use its best reasonable efforts to make effective and       

keep effective for a period of nine months such registration statement.         

Electrosource believes it is currently eligible to use Form S-3 and it has      

a currently effective S-3 registration.  If Electrosource is not able after     

reasonable effort and the cooperation of Mitsui to have a registration on       

Form S-3 (as amended or otherwise) declared effective, Mitsui may rescind       

its notice of conversion.  This immediate registration right will apply         

only if Mitsui in the                                                           

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aforesaid notice converts, or commits to convert upon the effectiveness of      

the registration statement, the Notes in full into shares of Common Stock       

at the rate provided for therein which is Three and 80/100 US Dollars (US       

$3.80) per share.                                                               

       4.2  The plan of distribution by Mitsui under such registration

statement, when effective, may include an underwritten offering, sales from     

time to time on NASDAQ and any other permitted manner of sale.  Mitsui          

agrees that it shall not pursuant to such immediate registration statement      

sell on NASDAQ in excess of twenty thousand (20,000) shares in any one day,     

except in block transactions or as may be otherwise mutually agreed.  This      

immediate registration right is in addition to the existing registration        

rights set forth in Section 7A(i) and (ii) of the Note Purchase Agreement.      

Upon Mitsui's request, Electrosource will assist Mitsui in attempting to        

find a buyer or buyers to purchase the shares of Common Stock issued or         

issuable upon conversion of the Notes.                                          

V     

OPTION TO PURCHASE NOTE     

      5.1  Until October 1, 1996, Mitsui grants to Electrosource the

option to re-purchase the Notes for a price equal to the number of shares       

issuable upon conversion of the Notes times the greater of (x) $1.50 per        

share or                                                                        

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(y) the market price per share.  "Market price" means the average closing       

price per share reported by NASDAQ for the last five (5) trading days prior     

to notice of exercise of this option.  The $1.50 per share amount is            

subject to review and change after mutual discussion.  This option can be       

exercised by Electrosource by written notice and together with tender of        

the cash purchase price.  Such option cannot be exercised if Mitsui has         

already agreed to sell the Notes or Common Stock issuable on conversion         

thereof in a signed binding agreement or has engaged an underwriter or          

placement agent for an underwriting or placement of such Common Stock.          

Mitsui cannot convert the Notes to shares of Common Stock after receiving       

valid notice by Electrosource of exercise of its option together with           

tender of the purchase price.  If Mitsui requests by written notice to          

Electrosource to exercise this option, Electrosource will duly consider         

such request, given its financial condition at the time.                        

VI    

FUTURE LICENSE FEES     

   6.1  For a period of two (2) years from the date hereof, if

Mitsui wishes to re-purchase an exclusive or non-exclusive distribution or      

manufacturing license for Electrosource Products for Japan, and subject to      

agreement on all other terms, if Electrosource has not previously committed     

such territory to another party on an exclusive                                 

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basis, then Mitsui and Electrosource will re-enter into such licensing          

relationship, subject to any other pre-existing rights in other parties and     

Electrosource will credit against any license fees that may then be agreed      

upon the Two Million US Dollars (US $2,000,000.00) that Mitsui has paid for     

distribution rights under the Distributorship Agreement.                        

VII     

CONTINUING COOPERATION    

7.1  It is the Parties' intention to dialogue, exchange 

information and discuss marketing and other matters from time to time to        

promote commercialization and improvement of Electrosource products.  The       

Parties will not speak negatively of each other or their relationship.          

Electrosource and Mitsui may well entertain future relationships as the         

business develops.                                                              

VIII    

RELEASE     

 8.1  Each of the Parties herein hereby fully releases and

discharges the other from any and all other claims, damages or amounts          

owing, except as is specifically set forth herein, and except as set forth      

in the termination provisions of Article 23 of the Distributorship              

Agreement.                                                                      

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IX    

SURVIVAL OF NOTE PURCHASE AGREEMENT     

   9.1  Except as expressly provided herein, all the terms and

conditions of the Note Purchase Agreement shall be unaffected and remain in     

full force and effect.                                                          

X     

BINDING EFFECT    

   10.1  This Agreement shall be binding upon and inure to the

benefit of the Parties hereto.                                                  

XI    

GOVERNING LAW AND ARBITRATION     

11.1  This Termination Agreement shall be subject to the

governing law provisions and arbitration provisions in the Distributorship      

Agreement.                                                                      

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      IN WITNESS WHEREOF, the Parties have executed this Termination

Agreement on the date first above written.                                      

ELECTROSOURCE, INC.                       MITSUI ENGINEERING &                  
                          SHIPBUILDING CO., LTD.

By: /s/ Michael G. Semmens                By: /s/ Hitoshi Narita                
Michael G. Semmens                        Hitoshi Narita                
President and Chairman                    Managing Director             
of the Board                                                        

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1

                                                             EXHIBIT A

ELECTROSOURCE MEMO                                                              

To:         Jim Rosel                                                           
From:       F. Donald Orr                                                       
Date:       12/05/95                                                            
Subject:    MES Prototype Status (Revised)                                      

Here is a compilation of where I think we now stand with MES as far as          
prototype shipments and WIP goes.                                               

                      Date
                                        Shipped or           Invoice
Customer         #        Type    P.O.          WIP      Comment   Value      

Equos Res.       8       12U20    H40072-R2     WIP     Invoiced    8,640     
Tokyo R&D       12       12U40    H50015      11/22/95             12,960     
Imasen           3       12U40    H50301      11/22/95              6,000     
Equos Res.      42       12U20    H40072-R2     WIP                45,360     
Honda            2       12U60    H50007        WIP                 2,160     

Based on agreements with Y. Kojima on 5 December, 1995, the Termination         
Agreement will stipulate that MES will pay for the above prototype              
batteries (except H50015 Tokyo R&D) with the following conditions:              

MES will assume ownership of these prototypes and Electrosource will
 issue an invoice to cover these prototypes that have not already been
invoiced (except Tokyo R&D).                                        

Electrosource will remain in possession of the prototypes, not      
already in Japan, and ship to MES any of these Austin resident      
prototypes at MES' request.                                         

If MES receives payment for the batteries delivered to their        
customers, they would retain the payments.                          

H50015 (Tokyo R&D) will be invoiced by Electrosource if MES receives
payment from Tokyo R&D.                                             

 If MES does not receive payments, for any of the invoiced prototypes,
Electrosource will make their best effort to sell them to other     
customers MES will receive credit for these payments.               

All other prototype orders or planning information is canceled as of
this date.                                                          

Originator: F. Donald Orr                      Privileged, Proprietary, and     
Distribution: Unlimited            Page 1       Confidential Information of     
Date: 12/6/95     IR951205.DOC                          Electrosource, Inc.     

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