EXHIBIT 10.70
Agreement for Aircraft Starting Battery Distribution
This agreement is made this 13th day of February, 1996, by
and between Electrosource, Inc., Delaware Corporation,
having its principal place of business at 0000 X Xxxxxxxx
Xx., Xxxxxx, Xxxxx, 00000-0000 (hereinafter referred to as
"Electrosource"), and Horizon Aircraft, Inc., a Texas
corporation whose address is 1710 Travelair, Xxxxxxx, Xxxxx,
00000 (hereinafter referred to as the "Distributor").
Electrosource and Distributor are hereinafter collectively
referred to as the "Parties," and from time to time may be
individually referred to as a "Party."
Recitals
Whereas, Electrosource is developing a certain proprietary
lead acid battery for use in aviation applications, which
battery is part of the Horizon family of Electrosource
batteries (hereinafter known as "Batteries" or "Products"),
and
Whereas Distributor wishes to join with Electrosource to
further develop, obtain necessary certifications and market
the Battery for an aviation applications, and
Whereas Electrosource wishes to grant a license to
Distributor for distribution of the Battery, and
Electrosource wishes to become a co-owner of Distributor,
Now therefore in consideration of the covenants and
conditions herein contained, the Parties agree as follows:
1.Distribution License. Electrosource hereby grants
to Distributor a worldwide, exclusive right to
distribute its products for aviation applications.
"Aviation Applications" includes starting applications
for all aircraft, including helicopters and military
aircraft which are the same or similar to civilian
counterparts, but excludes tactical military aircraft
(fixed wing and rotary).
2.Term. The initial term of the license shall be for
fifteen years. In addition, Distributor may elect to
extend this agreement on the same terms for an additional
fifteen year period by notifying Electrosource of such
election in writing on or before ninety (90) days from
the end of the initial term.
3.Certification, Test Marketing and Production.
Distributor shall use all reasonable efforts to obtain
United States Federal Aviation Administration ("FAA")
certification of the Battery for use in Aviation
Applications. The Distributor shall also use its best
efforts to obtain necessary certifications in such
other countries as Distributor in its discretion
believes are necessary. Distributor shall also use its
best efforts to test and test market the Battery,
perform market research and investigate the utility,
pricing, performance, size and other specifications
necessary for Aviation Applications.
4.Production. If market research and FAA
certification demonstrate an adequate and profitable
market for the Batteries for both Distributor and
Electrosource as determined from a good faith financial
analysis based upon projected sales, prices and costs,
then Electrosource will use its best reasonable efforts
to make Batteries available in commercial quantities
and in amounts requested by Distributor. Electrosource
will provide for the necessary manufacturing equipment,
facility improvements, etc. at its cost. If, however,
FAA certification is not obtained within two years from
the date hereof or if the Distributor cannot within
such time period demonstrate the reasonable likelihood
of an adequate market for Batteries in light of
projected costs for both Parties, then either Party may
terminate this Agreement upon thirty days advance
written notice to the other. If production is
initiated, a good faith financial analysis will also be
performed each year thereafter with respect to the
prior year's results and projections for the next
calendar year. If such analysis does not demonstrate a
reasonable likelihood of a reasonable profit in the
future to each of Electrosource and Distributor, then
either party may terminate this agreement upon ninety
days notice to the other. The financial analysis will
include the opportunity for each party to examine the
books, records and accounts of the other to verify
costs, revenues and other relevant matters and to
provide input into such analysis.
5.Electrosource Assistance. Electrosource will
provide a reasonable number of prototype batteries for
testing, certification and test marketing to
Distributor free of charge. Electrosource will also
provide such promotional, educational and consulting
support to Distributor as is reasonably necessary and
appropriate to assist Distributor in its certification,
market research and marketing hereunder. Electrosource
will assist Distributor in advertising the Batteries,
including without limitation, sharing camera-ready art
work without charge and paying the cost of national
advertising for its Batteries.
6.Distributor's Duties. In addition to the duties
outlined in paragraph 3 above, Distributor shall also:
a. Organize, train and maintain a competent sales force,
b. Provide central warehousing, receiving, shipping, credit extension,
billing and other facilities and services as necessary to
maximize sales of the Battery,
c. Use its best efforts to promote sales of Batteries in the United
States and on a worldwide basis, but concentrating on the
countries that Distributor in its discretion believes are most
appropriate in order to maximize sales and profits, and
d. Comply with all legal and professional requirements pertaining to
the conduct of its business and refrain from any illegal,
deceptive, misleading or unethical acts and practices.
7.Orders, Product and Product Changes. Electrosource
will use its best reasonable efforts to fill all orders
for Batteries received from Distributor, but reserves
the right to reject orders that it deems itself unable
to fill on a reasonable basis and may condition its
acceptance of orders on Distributor's adherence to such
credit and other terms and conditions as Electrosource
may establish from time to time in keeping with
industry standards. Electrosource will not make
modifications to any Batteries that have received or
are undergoing certification from the FAA if such
changes are expected to impair FAA certification
without the prior consent of Distributor, which consent
will not be unreasonably withheld or delayed.
8.Product Price and Payment. Distributor shall
purchase Batteries from Electrosource for distribution
at such price and on such terms as may be established
by Electrosource from time to time in recognition of
market conditions based upon information supplied by
Distributor. In general, it is anticipated that
Batteries will be sold to Distributor at a sixty
percent (60%) discount from retail market price as it
is set from time to time, plus insurance, freight and
other costs of shipment. The parties will discuss from
time to time possible adjustments to this discount in
response to market conditions. Payment for batteries
shall be due from Distributor within thirty days of
receipt of the invoice from Electrosource. Late fees
and interest will be added to late payments. Batteries
will be shipped in accordance with good commercial
practice, FOB Electrosource's loading dock. Risk of
loss or damage for transfer, use, handling, storage or
disposal of Batteries will pass to Distributor once the
batteries are placed in shipment by Electrosource.
9.Product Alterations. Distributor shall not mix,
repackage or otherwise alter or modify the Batteries
without the prior written consent of Electrosource.
Any improvements made to the Battery by Distributor,
including any patentable inventions or other
intellectual property enhancements, shall be the
property of Electrosource. FAA certification of the
Batteries shall not be considered to be such an
improvement, invention or enhancement.
10. Trademarks, Tradenames and Copyrights.
Electrosource grants to Distributor for the term of
this agreement a non-exclusive, non-transferable right
to use the trademarks and tradenames associated with
the Batteries for Aviation Applications and to copy,
reproduce and use copyrighted material furnished by
Electrosource to Distributor. Use of the trademarks
and tradenames is strictly conditioned upon full
compliance of this Agreement by Distributor.
Distributor may market products under a tradename
selected by it provided such tradename uses the xxxx
"Horizon" and provided further that Electrosource
consents to such name, which consent will not be
unreasonably withheld or delayed.
11. Representations and Warranties.
a. Electrosource warrants that the Batteries, to the best of its
knowledge, do not infringe upon any copyrights, patents or any
other intellectual property rights validly registered in the
United States.
b. Electrosource shall initially sell all prototype batteries on a
"AS IS" basis.
Electrosource HEREBY DISCLAIMS ANY AND ALL
WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
c. When the Battery is made available for
commercial sale for Aviation Applications
Distributor and Electrosource will agree upon
an appropriate warranty for such products.
d. ELECTROSOURCE SHALL IN NO EVENT BE LIABLE
FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES,
WHETHER OR NOT FORESEEABLE, ARISING OUT OF OR
IN CONNECTION WITH ANY BREACH OF ANY WARRANTY
HEREUNDER. Any claim for warranty breach
shall be submitted in writing within thirty
business days after such breach is
discovered, and shall be accompanied within a
reasonable time thereafter by the Battery for
which the warranty is allegedly breached.
12. Nature of Relationship. Distributor shall not
have the right or authority to obligate Electrosource
in connection with any order, contract, sales agreement
or credit agreement and shall not make any warranties
concerning the Battery except as provided by
Electrosource and shall not otherwise act or be
considered as an employee or agent of Electrosource.
13. Ownership Interest in Distributor. Electrosource,
in consideration of the grant of the license herein to
Distributor, shall be entitled to receive immediately
upon execution hereof stock representing twenty-five
percent (25%) of the outstanding shares, calculated
after such issuance to Electrosource, of any and all
classes of stock in Distributor. Electrosource shall
also be entitled to proportionate representation on the
board of directors of Distributor. Without dilution to
Electrosource's percentage ownership, Distributor shall
otherwise obtain the necessary funds to carry out its
initial operations hereunder (that is, through FAA
certification), provided that Electrosource's interest
in Distributor cannot be reduced below twenty-five
percent without good cause and without Electrosource's
prior written consent. Thereafter, all shareholders
shall have pre-emptive rights as to future sales of
stock in Distributor to the extent of such Parties`
percentage ownership in Distributor. Any shareholder
who chooses not to exercise such pre-emptive rights may
suffer dilution of its ownership percentage.
14. Reliance on Personnel. It is understood and
agreed that Electrosource is relying a large part on
the expertise of Xxxxxx X. Xxxxx and Xxxxx Xxxxxx, who
are principals in Distributor. The Distributor agrees
to assign and make available Xxxxx and Xxxxxx to the
business of this agreement for an extended and
substantial period of time.
15. Selling Shareholder Agreement. Electrosource and
the Distributor shall cause a Shareholders Agreement to
be entered into between Electrosource and Distributor's
other two shareholders such that Electrosource, Xxxxxx
X. Xxxxx and Xxxxx Xxxxxx shall each have a right of
first refusal for sale of stock in Distributor by the
others.
16. Books and Records. Distributor shall maintain and
make available for inspection by Electrosource ordinary
and necessary books and records of its accounts.
17. Exports. Electrosource and Distributor are
subject to United States laws and regulations
controlling the export of technical data, computer
software and other commodities, and any exports
hereunder are contingent upon compliance with any
applicable United States export laws and regulations.
Export of commodities to certain foreign countries may
also require a license or permission from relevant
United States agencies and no such exports will be made
by Distributor without necessary approvals.
18. Arbitration. All disputes, controversies or
differences which may arise between the parties out of
or in connection with this agreement, or the
interpretation or breach thereof, shall be settled by
arbitration in Austin, Texas pursuant to the commercial
arbitration rules of the American Arbitration
Association.
19. Assignment. Neither Party to this agreement may
assign this agreement or any of its right or
obligations hereunder without the prior written consent
of the other Party.
IN WITNESS WHEREOF the Parties have executed this agreement
as of the day first above written.
Electrosource, Inc. Distributor: Horizon Aviation, Inc.
/s/ /s/
by: Xxxxxxx X. Xxxxxxx by: Xxxxx Xxxxxx
title: President/CEO title: President
date: 2/13/1996 date: 2/14/96
