REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of June __, 1998, by and between Electrosource, Inc., a
Delaware corporation (the "Seller"), and Kamkorp Limited, a private limited
company registered in England (together with any permitted assigns, the
"Buyer").
RECITALS
A. Seller and Buyer have executed that certain Stock
Purchase Agreement, dated as of June 2, 1998, between the Seller
and the Buyer (the "Stock Purchase Agreement"), pursuant to which
the Seller has agreed to sell, and Buyer has agreed to buy, the
Shares, all subject to the terms and conditions set forth therein
(all terms not otherwise defined herein have the meanings set
forth in the Stock Purchase Agreement).
B. It is a condition to Closing that the Seller and the
Buyer enter into this Agreement to govern the terms and
conditions governing the Shares.
C. The Buyer and the Seller desire to enter into this
Agreement upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and for
other consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:
1. Registration Rights.
1.1 With respect to the Shares, the Buyer shall have the
registration rights set forth in Section 1.1(a) and 1.1(b).
(a) The Buyer shall have the right, no more than twice in any
calendar year, by written notice to the Seller, to require the
Seller to register the sale under the Securities Act of 1933, as
amended (the "Securities Act") of all or any of the Shares
("Demand Covered Shares") representing at least five percent (5%)
of the shares of Common Stock outstanding. The Seller shall have
no obligation with respect to the selection by the Buyer of any
underwriter to be used in connection with such sale, but shall
have the right to approve such selection, which approval shall
not be unreasonably withheld or delayed. The Seller shall be
entitled to sell shares of Common Stock (to be newly issued or
from shares held in treasury) on the same terms and conditions as
apply to the Buyer's Demand Covered Shares and/or to have other
shareholders sell shares of Common Stock pursuant to such demand
registration pursuant to the same such terms and conditions
unless the Buyer's underwriters believe, or if the offering is
not underwritten, upon a good faith determination by the Buyer's
Board of Directors or a committee thereof that such inclusion
would adversely affect the success of the proposed offering by
the Buyer. The Seller shall be entitled to defer filing any
registration statement with respect to such demand registration
(A) for a reasonable period in order to insure that such filing
would not result in an effective registration statement within
six (6) months of an underwritten offering by the Seller of its
securities for its own account or (B) for a period of up to
ninety (90) days upon a good faith determination by the Seller's
management that the filing of a registration statement at such
time would be detrimental to the Seller due to a material
acquisition or financing or for other cause. Buyer may request
that the Seller withdraw any such registration statement at any
time prior to its effectiveness; provided that, any such
withdrawn registration statement shall be treated as a completed
registration fulfilling the obligations of the Seller pursuant to
this section 1.1(a) unless the Buyer shall reimburse the Seller
for all of the Seller's costs and expenses incurred in connection
with such registration within thirty days following the request
to withdraw. The Seller covenants and agrees that it will not
grant any registration rights to any other person that would
conflict or be inconsistent with the provisions of this Section
1.1(a).
(b) If the Seller proposes to sell shares of Common Stock for
its own account and to register the sale of such shares under the
Securities Act, or if the Seller proposes to register the sale of
shares of Common Stock to be sold for the account of any
shareholder, it shall give written notice of such proposed
registration to Buyer as promptly as possible and shall, subject
in all cases to Section 1.2, use its commercially reasonable
efforts to include in the offering such number of shares of
Common Stock then owned by Buyer as Buyer shall request to be
included ("Piggyback Covered Shares" and together with Demand
Covered Shares, "Covered Shares") within twenty-five (25) days
after the giving of such notice, such offering to be upon the
same terms (including method of distribution) as the securities
being sold by the Seller or any selling shareholder pursuant to
any such offering.
1.2 The Seller's obligation to include Piggyback Covered Shares
owned by Buyer in any offering pursuant to Section 1.1(b) shall
in all cases be subject to the following limitations and
qualifications:
(a) The Seller shall not be required to give notice to Buyer or
include such shares in any such registration if the proposed
registration is (A) a registration of a stock option or
compensation plan or of Common Stock issued or issuable pursuant
to any such plan, (B) a registration of Common Stock proposed to
be issued in exchange for securities or assets of, or in
connection with a merger or consolidation with, another
corporation, or (C) to be on a form of registration statement for
which the Piggyback Covered Shares are not eligible;
(b) The Seller may require that the number of Piggyback Covered
Shares requested to be included in such registration be reduced,
or that all such shares be excluded from any such registration,
if it is advised in writing by its managing underwriter (or, if
the offering is not underwritten, upon a good faith determination
by the Seller's board of directors) that such reduction or
exclusion, as the case may be, is necessary to avoid materially
adversely affecting the public offering of the securities being
offered by the Seller or other shareholder. If the Seller shall
require such a reduction, Buyer shall have the right to withdraw
from the offering;
(c) In the event that the number of shares of Common Stock
included in any registration is to be reduced pursuant to Section
1.2(b):
(i) If the registration in question is one initiated
exercising such person's demand registration rights by any person or
persons other than the Seller, in order to allow the sale of Common Stock
for the account of such person or persons, then any reduction in
the number of shares to be included in such registration shall
first affect only shares other than the shares of Common Stock
requested to be included by the person or persons initiating the
registration;
(ii) If the registration in question is one initiated by
the Seller in order to allow the sale of Common Stock for the account
of the Seller, then any reduction in the number of shares to be
included in such registration shall be applied pro rata among all
parties having piggyback registration rights in proportion to the
number of shares requested to be registered by each; and
(iii)Subject to Sections 1.2(c)(i) and 1.2(c)(ii), in the
event that the Seller requires that the number of shares to be
included in such registration be reduced, such reduction shall be
applied pro rata among all parties having piggyback registration
rights in proportion to the number of shares requested to be
registered by each.
(d) The Seller shall not be required to include any Piggyback
Covered Shares in any registration to the extent that the
inclusion thereof would result in a reduction in the number of
shares included in the registration by the person or persons
(including the Seller) initiating the registration in question or
would reduce the per share price of the offering.
(e) The Seller may, in its sole discretion and without the
consent of Buyer, withdraw such registration statement and
abandon the proposed offering in which Buyer had requested to
participate.
1.3 In connection with any registration of Covered Shares
undertaken by the Seller pursuant to this Section 1, the Seller
shall:
(a) prepare and file promptly with the Securities and Exchange
Commission (the "Commission") a registration statement with
respect to such shares and use its best efforts to cause such
registration statement to become effective;
(b) 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 for such period not to exceed 180
days as Buyer shall request and to comply with the provisions of
the Securities Act with respect to the sale of all Covered Shares
covered by such registration statement during such period;
(c) notify the Buyer of any stop order threatened or issued by
the Commission and take all action required to prevent the entry
of such stop order or to remove it if entered;
(d) provide Buyer a reasonable opportunity to review prior to
filing (A) any registration statement filed by the Seller in
connection with a registration in which Buyer is participating
pursuant to this Section 1, and (B) any amendments or supplements
to such registration statement and any prospectus used in
connection therewith;
(e) use its best efforts to register or qualify the Covered
Shares covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as Buyer shall
reasonably request, and do any and all other acts and things
which may be reasonably necessary or advisable to enable Buyer to
consummate the sale in such jurisdictions of such shares;
provided that the Seller shall not for any such purpose be
required to register or qualify the covered shares covered by
such registration statement in any jurisdiction in which the
Common Stock is not then qualified for public trading, to qualify
generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of
this Section 1.3(e) be obligated to be so qualified, to subject
itself to taxation in any such jurisdiction or to consent to
general service of process in any such jurisdiction, and provided
further that, in the case of a registration pursuant to section
1.1(b), in the event that the Buyer proposes to sell such shares
in any jurisdiction in which neither the Seller nor any selling
shareholder other than Buyer proposes to sell shares being
registered, the expense of registration or qualification in any
such additional jurisdictions other than those in which the
Seller or any selling shareholder other than Buyer proposes to
sell, including all legal fees incurred in connection with such
additional registrations or qualifications, shall be borne by
Buyer;
(f) notify Buyer at any time when a prospectus relating to the
Covered Shares covered by such registration statement is required
to be delivered under the Securities Act, of the Seller's
becoming aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and at
the request of Buyer promptly prepare and furnish to Buyer a
reasonable number of copies of a prospectus supplemented or
amended so that, as thereafter delivered to the purchasers of
such shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then
existing;
(g) use its best efforts to cause all of the Covered Shares
included in such registration statement to be listed on each
securities exchange on which securities of the same class issued
by the Seller are then listed or, if there shall then be no such
listing, to be accepted for quotation on NASDAQ in the same
manner as other securities of the same class by Seller are then
quoted; and
(h) provide a transfer agent and registrar for the Covered
Shares covered by such registration statement not later than the
effective date of such registration statement;
1.4 In the course of, and in connection with, any offering or
sale by the Buyer of Common Stock in connection with the
registration of Covered Shares pursuant to this Section 1:
(a) The Seller shall furnish to Buyer 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 Buyer may
reasonably request;
(b) If the Seller has delivered to the Buyer preliminary or
final prospectuses and, after having done so, the prospectus or
preliminary prospectus must be amended or supplemented in order
to comply with the requirements of the Securities Act, the Seller
shall promptly notify the Buyer and, if reasonably requested by
the Seller, the Buyer shall immediately cease making offers of
Common Stock and return all prospectuses and preliminary
prospectuses then in this possession to the Seller in exchange
for a reasonable number of copies of the revised or supplemented
prospectus or preliminary prospectus, and, following receipt such
revised or supplemented documents, the Buyer shall be free to
resume its offer.
(c) If the Buyer's offering is underwritten and the underwriters
require that the Seller deliver to them in connection with such
offering (i) an opinion of counsel for the Seller or (ii) a
"comfort letter" signed by the Seller's independent public
accountants, the Seller shall use its best efforts to cause the
Buyer and Buyer's underwriters to be named as addressees on any
such letters.
(d) The Seller shall, consistent with conducting its ordinary
business and upon reasonable notice, make its executive officers
generally available to assist in any underwritten offering by the
Buyer, including without limitation for the purposes of
conducting a reasonable number of "road show" presentations in
connection with an underwritten offering, and shall generally
cooperate in all reasonable ways with the Buyer in the conduct of
any offering.
1.5 For as long as Buyer shall continue to hold any Covered
Shares, the Seller shall use reasonable efforts to file, on a
timely basis, all annual, quarterly and other reports required to
be filed by it under Sections 13 and 15(d) of the Exchange Act,
and the rules and regulations of the Commission thereunder, as
amended from time to time. In the event of any proposed sale of
Covered Shares by Buyer pursuant to Rule 144 (or any successor
rule) under the Securities Act, the Seller shall cooperate with
Buyer so as to enable such sales to be made in accordance with
applicable laws, rules and regulations, the requirements of the
Seller's transfer agents, and the reasonable requirements of the
broker through which the sales are proposed to be executed.
1.6 The costs and expenses of any registration effected pursuant
to this Section 1 shall be allocated as provided in this Section
1.6:
(a) "Registration Expenses" shall mean all expenses incurred
by the Seller in complying with this Section 1, including, without
limitation, all registration, qualification and filing fees,
printing expenses, messenger, telephone, postage and delivery
expenses, escrow fees, transfer agents' and registrars' fees,
fees and disbursements of counsel for the Seller, blue sky fees
and expenses, underwriters (excluding discounts and conversion
but including liability insurance if the Seller so desires or the
underwriters so require) and the expense of the Seller's
accountants, including the cost of any special audits incident to
or required by any such registration (but excluding the
compensation of regular employees of the Seller which shall be
paid in any event by the Seller).
(b) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale and all fees and
disbursements of counsel for any holder.
(c) In connection with any registration pursuant to section
1.1(a), the Seller shall pay all Registration Expenses, and Buyer
shall pay all Selling Expenses; provided that, in the event that
the Seller or any other person shall include shares of Common
Stock in such registration, Selling Expenses (other than fees and
disbursements of counsel to any such person) shall be shared
among all such persons including shares pro rata based upon the
number of Common Shares included in the registration by each such
person.
(d) In connection with any registration initiated by the
Seller in which Buyer participates pursuant to section 1.1(b), the
Seller shall pay all Registration Expenses, and Buyer shall pay
all Selling Expenses attributable to the inclusion in the
offering of the Covered Shares being sold by Buyer.
(e) In connection with any registration initiated by any
person other than the Seller or the Buyer in which Buyer participates
pursuant to section 1.1(b), the Seller or such person shall pay
all Registration Expenses, as may be provided by the agreement
granting registration rights to such person, and Buyer shall pay
all Selling Expenses attributable to the inclusion in the
offering of the Covered Shares being sold by Buyer.
1.7 In the case of each registration effected by the Seller
pursuant to this Section 1, the Seller agrees to indemnify and
hold harmless Buyer, each person who controls the Buyer, the
directors and employees of Buyer, each underwriter of the Covered
Shares so registered and each person who controls any such
underwriter within the meaning of Section 15 of the Securities
Act, against any and all losses, claims, damages or liabilities
to which they or any of them may become subject under the
Securities Act or any other statute or common law, including any
amount paid in settlement of any litigation, commenced or
threatened, if such settlement is effected with the written
consent of the Seller, and to reimburse them for any legal or
other expenses incurred by them in connection with investigating
any claims and defending any actions (including the costs of
enforcing the indemnification obligations hereunder), insofar as
any such losses, claims, damages, liabilities or actions arise
out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the registration
statement relating to the sale of the Covered Shares, or any post-
effective amendment thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii)
any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus, if used prior to
the effective date of such registration statement, or contained
in the final prospectus (as amended or supplemented if the Seller
shall have filed with the Commission any amendment thereof or
supplement thereto) if used within the period during which the
Seller is required to keep the registration statement to which
prospectus relates current, or the omission or alleged omission
to state therein (if so used) a material fact necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however,
that the indemnification agreement contained in this Section 1.7
shall not (x) apply to such losses, claims, damages, liabilities
or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission was made in
reliance upon and in conformity with information furnished in
writing to the Seller by Buyer or such underwriter for use in
connection with the preparation of the registration statement,
any preliminary prospectus or final prospectus contained in the
registration statement, or any amendment or supplement thereto,
or (y) inure to the benefit of any underwriter or any person
controlling such underwriter, if such underwriter failed to send
or give a copy of the final prospectus to the person asserting
the claim at or prior to the delivery of certificates
representing Covered Shares or of written confirmation of the
sale of Covered Shares to such person and if the untrue statement
or omission concerned had been corrected in such final
prospectus.
1.8 In the case of a registration effected by the Seller
pursuant to this Section 1, Buyer and each underwriter of the
Covered Shares to be registered shall severally agree in the same
manner and to the same extent as set forth in Section 1.7 to
indemnify and hold harmless the Seller, each person who controls
the Seller, the directors of the Seller and those of its officers
who shall have signed any such registration statement, with
respect to any untrue statement or alleged untrue statement in,
or omission or alleged omission from, such registration statement
or any post-effective amendment thereto or any preliminary
prospectus or final prospectus (as amended or as supplemented, if
amended or supplemented as aforesaid) contained in such
registration statement, if and to the extent such statement or
omission was made in reliance upon and in conformity with
information furnished in writing to the Seller by Buyer or any
such underwriter, respectively, expressly for use in connection
with the preparation of such registration statement or any
preliminary prospectus or final prospectus contained in such
registration statement or any such amendment or supplement
thereto.
1.9 Each party entitled to indemnification under Sections 1.7 or
1.8 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim
or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party (jointly with any other
Indemnifying Party similarly notified) may participate in such
defense at such party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its
obligations hereunder, to the extent such failure is not
prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to
such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim
and litigation resulting therefrom. The indemnity agreements in
this Section 1 shall be in addition to any liabilities that the
indemnifying parties may have pursuant to law.
1.10 If the indemnification provided for in this Section 1 shall
be unavailable to or insufficient to hold harmless an Indemnified
Party under Sections 1.7 or 1.8 above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof)
referred to therein, then the Indemnifying Parties shall
contribute to the amount paid or payable by such Indemnified
Party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportions as are
appropriate to reflect the relative benefits received by the
respective parties from the offering of the Covered Shares. If,
however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, or if the
Indemnified Party failed to give the notice required under
Section 1.9, then each Indemnifying Party shall contribute to
such amount paid by or payable by such Indemnified Party in such
proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the parties in connection
with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as
well as any other relevant equitable considerations. The
relative benefits received by the parties shall be deemed to be
in the same proportion as the net proceeds to any such party bear
to the total net proceeds from the offering before deducting
expenses. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the
respective party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission.
The Buyer agrees not to effect any public sale or distribution of
Covered Shares, including a sale pursuant to Rule 144 (or any
successor rule) during the thirty (30) days prior to and during
the ninety (90) days beginning on the effective date of any
registration statement pursuant to Section 1 (except as part of
such registration).
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will bind
and inure to the benefit of the respective successors and assigns
of the parties hereto whether so expressed or not.
2.2 Severability. Each of the provisions of this Agreement (and
each part of each such provision) is severable from every other
provision hereof (and every other part thereof). In the event
that any provision (or part thereof) contained in this Agreement
shall be declared invalid, illegal or unenforceable, in whole or
in part, in any jurisdiction and to any extent:
(a) The validity, legality and enforceability of such
provision (or such part thereof) in any other jurisdiction and of the
remaining provisions contained in this Agreement (or the
remaining parts of such provision, as the case may be) shall not
in any way be affected or impaired thereby;
(b) The application of such provision (or such part thereof)
to circumstances other than those as to which it is held invalid,
illegal or unenforceable shall not in any way be affected or
impaired thereby;
(c) If possible, such provision (or part thereof) shall be
construed as closely as possible to conform to the intent of the
parties;
(d) If not susceptible to such construction, such provision
(or such part thereof) shall be severed from this Agreement and
ineffective to the extent of such invalidity, illegality or
unenforceability in such jurisdiction and in such circumstances; and
(e) The remaining provisions of this Agreement (or the
remaining parts of such provision, as the case may be) shall nevertheless
remain in full force and effect.
2.3 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same
instrument. It shall not be necessary to produce more than one
fully-executed counterpart hereof in any proceeding in order to
prove the existence of this Agreement.
2.4 Governing Law; Venue. The corporate law of Delaware will
govern all issues concerning the relative rights of the Seller
and its stockholders. All other questions concerning the
construction, validity and interpretation of this Agreement and
the exhibits and schedules hereto will be governed by the
internal law, and not the law of conflicts, of Delaware. It is
the intention of the parties that proper venue for any action,
suit or proceeding arising pursuant to this Agreement or in
connection with the transactions contemplated herein shall be in
Wilmington, Delaware. Each party waives the right to demand a
jury in any action, suit or proceeding arising pursuant to this
Agreement.
2.5 Notices. All notices provided for under this Agreement
shall be in writing and shall be deemed duly given on the date
delivered if personally delivered, three days after mailing if
mailed by registered or certified mail, on the day after dispatch
if dispatched by prepaid courier, or on the date of transmission
if delivered by facsimile transmission, in each case:
If to Seller:
Xx. Xxxxxxx Xxxxxxx
Electrosource, Inc.
0000 Xxxxxxxxxx 00 Xxxxx
Xxx Xxxxxx, XX 00000-0000
Phone: 000-000-0000
Fax: 000-000-0000
If to Buyer:
(a) Xx. Xxxxx Xxxxxxx
Mytchett Place
Mytchett, Surrey XX 00 0XX
XXXXXXX
Phone: 000-000-000000
Fax: 000-000-000000
With a copy (not constituting notice) to:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxxx & Xxxxxxxx
000 Xxxxxxx Xxxxxx X.X.
Xxxxxxxxxx, X.X. 00000
Phone: 000-000-0000
2.6 Interpretation. No provision of this Agreement shall be
interpreted or construed against any party hereto because that
party or its legal representative drafted that provision. Unless
the context of this Agreement clearly requires otherwise: (i)
references to the plural include the singular, the singular the
plural, and the part the whole, (ii) references to one gender
include all genders, (iii) "or" has the inclusive meaning
frequently identified with the phrase "and/or," (iv) "including"
has the inclusive meaning frequently identified with the phrase
"but not limited to," and (v) references to "hereunder" or
"herein" relate to this Agreement as a whole. The section and
other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction of
this Agreement or the interpretation thereof in any respect. Any
reference herein to any agreement, including this Agreement,
shall be deemed to include such agreement as it may be modified,
varied, amended or supplemented from time to time. Any reference
herein to any person or entity shall be deemed to include the
heirs, personal representatives, successors and permitted assigns
of such person or entity.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered as of the date first set forth
above.
ELECTROSOURCE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
President, CEO and Chairman of
the Board
KAMKORP LIMITED
By: /s/ Xxxxx Xxxxxxx
Xxxxx Xxxxxxx
Chairman
