EXHIBIT 10.36
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 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 (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.
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 ▇▇▇ ▇▇▇ 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 invoice from
Electrosource or 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 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
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 and
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 (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 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.
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.
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/ By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President and Chairman of the Board Managing Director
