ELECTROSOURCE, INC.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"),
AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR
FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS SUCH TERMS ARE
DEFINED IN REGULATION S UNDER THE 1933 ACT), FOR A PERIOD OF
FORTY (40) DAYS AFTER COMPLETION OF THE OFFERING PURSUANT TO
WHICH THESE DEBENTURES WERE ISSUED, AND THEREAFTER MAY ONLY BE
OFFERED OR SOLD PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
8% CONVERTIBLE DEBENTURE DUE November 9, 1997
$_______ November 10,1995
Number ________
FOR VALUE RECEIVED, Electrosource, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to
_________________ or registered assigns (the "Holder") on
November 9, 1997 (the "Maturity Date"), the principal amount of
_________________________ Dollars ($_______) U.S., and to pay
interest on the principal amount hereof, in such amounts, at such
times and on such terms and conditions as are specified herein.
Article 1. Interest
The Company shall pay interest on the unpaid principal
amount of this Debenture (this "Debenture") at the rate of Eight
Percent (8%) per year, payable quarterly in arrears until the
principal hereof is paid in full or has been converted. Interest
on this Debenture shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from
November 10, 1995. Interest shall be computed on the basis of a
360-day year of 12 30-day months. If the Holder shall convert
this Debenture during any quarter, the Company shall pay to the
Holder, upon conversion, the pro-rata portion of accrued interest
payable through the conversion date.
Article 2. Method of Payment
This ▇▇▇▇▇▇▇▇▇ must be surrendered to the Company in order
for the Holder to receive payment of the principal amount hereof.
The Company shall pay the principal of and interest on this
Debenture in United States dollars. However, the Company may pay
principal and interest by a check payable in such money. The
Company may draw a check for the payment of interest to the order
of the Holder of this Note and mail it to the Holder's address as
shown on the Register (as defined in Section 7.2 below).
Interest and principal payments shall be subject to withholding
under applicable United States Federal Internal Revenue Service
Regulations.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right, at
its option, to convert it into shares of common stock, par value
$0.10 per share, of the Company ("Common Stock") at any time
which is before the close of business on the Maturity Date,
except as set forth in Section 3.1(c) below. The number of
shares of Common Stock issuable upon the conversion of this
Debenture is determined by dividing the principal amount hereof
to be converted plus all accrued interest thereon minus any
required withholding by the conversion price in effect on the
conversion date (as defined in paragraph (b) of this Section 3.1
below) and rounding the result to the nearest 1/100th of a share.
On conversion, no payment of or adjustment (other than as
provided in the previous sentence) for accrued interest shall be
made whether or not such conversion occurs before, on or after an
interest payment date.
(b) The conversion price is Seventy Five Percent (75%) of
the current market price of the Common Stock on the conversion
date.
(c) Less than all of the principal amount of this Debenture
may be converted into Common Stock if the portion converted is
$10,000 or a whole multiple of $10,000 and the provisions of this
Article 3 that apply to the conversion of all of the Debenture
also apply to the conversion of a portion of it. All accrued
interest on this Debenture shall be added to the amount converted
if less than all of the principal amount of this Debenture is
converted and shall be deemed to be paid and discharged thereby.
This Debenture may not be converted until Sixty (60) days
following the closing of the purchase of this Debenture.
(d) In the event any Debentures remain outstanding on the
second anniversary of the date hereof, the unconverted portion of
such Debentures will automatically be converted into shares of
Common Stock on such date in the manner set forth in this Section
3.1.
Section 3.2. Conversion Procedure. To convert this
Debenture into Common Stock, the Holder must (a) complete and
sign the Notice of Conversion attached hereto, (b) surrender the
Debenture to the Company, (c) furnish appropriate endorsements
and transfer documents if so requested by the Company and (d)
subject to Section 3.4 pay any transfer or similar tax if
required by the Company. The date upon which all of the
foregoing requirements are satisfied is the conversion date.
Within five business days thereafter, the Company shall deliver a
certificate for the number of full shares of Common Stock
issuable upon the conversion and a check for any fraction of a
share. The person in whose name the certificate of Common Stock
is to be registered shall be treated as a shareholder of record
on and after the conversion date. No payment or adjustment shall
be made for accrued interest on a converted Debenture whether the
conversion date is on, at or after an interest payment date. If
one person converts more than one Debenture at the same time, the
number of full shares issuable upon the conversion shall be based
on the total principal amount of Debentures converted. Upon
surrender of a Debenture that is to be converted in part, the
Company shall issue to the Holder a new Debenture equal in
principal amount to the unconverted portion of the Debenture
surrendered.
Section 3.3. Fractional Shares. The Company shall not
issue a fractional share of Common Stock upon the conversion of
this Debenture. Instead, the Company shall pay in lieu of any
fractional share the cash value thereof at the then current
market price of the Common Stock as determined under Section 3.7
below.
Section 3.4. Taxes on Conversion. The Company shall pay
any documentary, stamp or similar issue or transfer tax due on
the issue of shares of Common Stock upon the conversion of this
Debenture. However, the Holder shall pay any such tax which is
due because the shares are issued in a name other than its name.
Section 3.5. Company to Reserve Stock. The Company shall
reserve out of its authorized but unissued Common Stock or Common
Stock held in treasury enough shares of Common Stock to permit
the conversion of this Debenture. All shares of Common Stock
which may be issued upon the conversion hereof shall be fully
paid and nonassesssable.
Section 3.6. Restrictions on Transfer. This Debenture and
the Common Stock issuable upon the conversion hereof have not
been registered under the Securities Act of 1933 (the "Act") and
have been sold pursuant to Regulation S under the Act
("Regulation S"). The Debentures may not be transferred or
resold in the United States, or to a U.S. Person, or to or for
the account or benefit of a U.S. Person (as defined in Regulation
S) for a period of Forty (40) days from the date hereof and
thereafter may only be offered or sold pursuant to registration
under or an exemption from the Act.
Section 3.7. Current Market Price.
(a) In Sections 3.1 and 3.3, the current market price per
share of Common Stock on any date is the average of the quoted
prices of the Common Stock for five consecutive trading days
ending on the trading day before the date in question.
(b) As used in this Section 3.7, the term quoted price
shall mean (i) the closing bid prices thereof on any such trading
date, as reported by Bloomberg, L.P. or (ii) in the event the
Common Stock is not reported on such system, the fair market
value of the Common Stock as determined by the Board of Directors
of the Company in its good faith judgment.
Section 3.8. Mergers, Etc. If the Company merges or
consolidates with another corporation or sells or transfers all
or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common
Stock, then as a condition of such merger, consolidation, sale or
transfer, the Company and any such successor, purchaser or
transferee shall amend this Debenture to provide that it may
thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of
shares of Common Stock into which this Debenture might have been
converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for
in this Article 3.
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer
all or substantially all of its assets to, any person, unless
such person assumes the obligations of the Company under this
Debenture and immediately after such transaction no Event of
Default exists. Any reference herein to the Company shall refer
to such surviving or transferee corporation and the obligations
of the Company shall terminate upon such assumption.
Article 5. Reports
The Company will mail to the Holder hereof at its address as
shown on the Register a copy of any annual, quarterly or current
report that it files with the Securities and Exchange Commission
promptly after the filing thereof and a copy of any annual,
quarterly or other report or proxy statement that it gives to its
shareholders generally at the time such report or statement is
sent to shareholders.
Article 6. Defaults and Remedies
Section 6.1. Events of Default. An "Event of Default"
occurs if (a) the Company does not make the payment of the
principal of this Debenture when the same becomes due and payable
at maturity, upon redemption or otherwise, (b) the Company does
not make a payment for a period of 5 days thereafter, (c) the
Company fails to comply with any of its other agreements in this
Debenture and such failure continues for the period and after the
notice specified below, (d) the Company pursuant to or within the
meaning of any Bankruptcy Law (as hereinafter defined): (i)
commences a voluntary case; (ii) consents to the entry of an
order for relief against it in an involuntary case; (iii)
consents to the appointment of a Custodian (as hereinafter
defined) of it or for all or substantially all of its property or
(iv) makes a general assignment for the benefit of its creditors
or (v) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (A) is for relief against
the Company in an involuntary case; (B) appoints a Custodian of
the Company or for all or substantially all of its property or
(C) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for 60 days. As used in
this Section 6.1, the term "Bankruptcy Law" means Title 11 of the
United States Code or any similar federal or state law for the
relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any
Bankruptcy Law. A default under clause (c) above is not an Event
of Default until the holders of at least 25% of the aggregate
principal amount of the Debentures notify the Company of such
default and the Company does not cure it within 5 days after the
receipt of such notice, which must specify the default, demand
that it be remedied and state that it is a "Notice of Default."
Section 6.2. Acceleration. If an Event of Default occurs
and is continuing, the Holder hereof by notice to the Company,
may declare the principal of and accrued interest on this
Debenture to be due and payable. Upon such declaration, the
principal and interest hereof shall be due and payable
immediately.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered
series of Debentures having an aggregate principal amount of not
more than $5,000,000 which are identical except as to the
principal amount and date of issuance thereof and as to any
restriction on the transfer thereof in order to comply with the
Securities Act of 1933 and the regulations of the Securities and
Exchange Commission promulgated thereunder. Such Debentures are
referred to herein collectively as the "Debentures." The
Debentures shall be issued in whole multiples of $10,000.
Section 7.2. Record Ownership. The Company shall maintain
a register of the holders of the Debentures (the "Register")
showing their names and addresses and the serial numbers and
principal amounts of Debentures issued to or transferred of
record by them from time to time. The Register may be maintained
in electronic, magnetic or other computerized form. The Company
may treat the person named as the Holder of this Debenture in the
Register as the sole owner of this Debenture. The Holder of this
Debenture is the person exclusively entitled to receive payments
of interest on this Debenture, receive notifications with respect
to this Debenture, convert it into Common Stock and otherwise
exercise all of the rights and powers as the absolute owner
hereof.
Section 7.3. Registration of Transfer. Transfers of this
Debenture may be registered on the books of the Company
maintained for such purpose pursuant to Section 7.2 above (i.e.,
the Register). Transfers shall be registered when this Debenture
is presented to the Company with a request to register the
transfer hereof and the Debenture is duly endorsed by the
appropriate person, reasonable assurances are given that the
endorsements are genuine and effective, and the Company has
received evidence satisfactory to it that such transfer is
rightful and in compliance with all applicable laws, including
tax laws and state and federal securities laws. When this
Debenture is presented for transfer and duly transferred
hereunder, it shall be canceled and a new Debenture showing the
name of the transferee as the record holder thereof shall be
issued in lieu hereof. When this Debenture is presented to the
Company with a reasonable request to exchange it for an equal
principal amount of Debentures of other denominations, the
Company shall make such exchange and shall cancel this Debenture
and issue in lieu thereof Debentures having a total principal
amount equal to this Debenture in the denominations requested by
the Holder. The Company may charge a reasonable fee for any
registration of transfer or exchange other than one occasioned by
a notice of redemption or the conversion hereof.
Section 7.4. Worn and Lost Debentures. If this Debenture
becomes worn, defaced or mutilated but is still substantially
intact and recognizable, the Company or its agent may issue a new
Debenture in lieu hereof upon its surrender. Where the Holder of
this Debenture claims that the Debenture has been lost, destroyed
or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by
written notice to the Company actually received by the Company
before it is notified that the Debenture has been acquired by a
bona fide purchaser and the Holder has delivered to the Company
an indemnity bond in such amount and issued by such surety as the
Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction
or wrongful taking and such other information in such form with
such proof or verification as the Company may request.
Article 8. Notices
Any notice which is required or convenient under the terms
of this Debenture shall be duly given if it is in writing and
delivered in person or mailed by first class mail, postage
prepaid and directed to the Holder of the Debenture at its
address as it appears on the Register or if to the Company to its
principal executive offices. The time when such notice is sent
shall be the time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment of
money or the performance of a condition or obligation on a
Saturday or Sunday or a public holiday, or authorizes or requires
the payment of money or the performance of a condition or
obligation within, before or after a period of time computed from
a certain date, and such period of time ends on a Saturday or a
Sunday or a public holiday, such payment may be made or condition
or obligation performed on the next succeeding business day, and
if the period ends at a specified hour, such payment may be made
or condition performed, at or before the same hour of such next
succeeding business day, with the same force and effect as if
made or performed in accordance with the terms of this Debenture.
Where time is extended by virtue of the provisions of this
Article 9, such extended time shall not be included in the
computation of interest.
Article 10. Waivers
The holders of a majority in principal amount of the
Debentures may waive a default or rescind the declaration of an
Event of Default and its consequences except for a default in the
payment of principal of or interest on any Debenture.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires,
words in the singular number include the plural, and in the
plural include the singular, and words of the masculine gender
include the feminine and the neuter, and when the sense so
indicates, words of the neuter gender may refer to any gender.
The numbers and titles of sections contained in this Debenture
are inserted for convenience of reference only, and they neither
form a part of this Debenture nor are they to be used in the
construction or interpretation hereof. Wherever, in this
Debenture, a determination of the Company is required or allowed,
such determination shall be made by a majority of the Board of
Directors of the Company and if it is made in good faith, it
shall be conclusive and binding upon the Company and the Holder
of this Debenture.
Article 12. Governing Law
The validity, terms, performance and enforcement of this
Debenture shall be governed and construed by the provisions
hereof and in accordance with the laws of the State of New York
applicable to agreements that are negotiated, executed, delivered
and performed solely in the State of New York.
IN WITNESS WHEREOF, the Company has duly executed this
Debenture as of the date first written above.
ELECTROSOURCE, INC.
By /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
NOTICE OF CONVERSION
[To be completed and signed only upon conversion of
Debenture]
The undersigned, the Holder of this Debenture, hereby
irrevocably elects to exercise the right to convert it into
common stock, par value $0.10 per share, of Electrosource, Inc.,
as follows:
[Complete if less than ____________________Dollars($__________)*___
all of principal amount ($10,000 or integral multiples of $10,000)
is to be converted]
[Signature must be ___________________________________________
guaranteed if registered (Name of Holder of shares if different than
holder of stock differs registered Holder of Debenture)
from registered Holder of
Debenture)
__________________________________________
(Address of Holder if different than address
of registered Holder of Debenture)
__________________________________________
(Social Security or EIN of Holder of shares
if different than Holder of Debenture)
*If the principal amount of the Debenture to be converted is
less than the entire principal amount thereof, a new
Debenture for the balance of the principal amount shall be
returned to the Holder of the Debenture.
Date:________________ Sign:_____________________________________
(Signature must conform in all respects
to name of Holder shown on face of this
Debenture)
Signature Guaranteed:
Assignment of Note
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
________________________________________________________________________
(name, address and SSN or EIN of assignee)
__________________________________________________Dollars($_________)___
(principal amount of Debenture, $10,000 or integral multiples of $10,000)
of principal amount of this Debenture together with all accrued
interest hereon.
Date:________ Sign:__________________________________________
(Signature must conform in all respects to
name of Holder shown on face of Debenture)
Signature Guaranteed:
SUBSCRIPTION REGISTER
Debenture
Number Purchaser Amount
D597-101 ▇▇▇▇▇▇▇▇▇▇▇ Trading Corporation $ 250,000
Nassau Bahamas
D597-102 Infinity Investors, Ltd 1,250,000
London, United Kingdom
D597-103 Taryak, Inc. 100,000
Zurich, Switzerland
D597-104 ▇▇▇▇▇ ▇▇▇▇▇ 900,000
-D597-121 Downsview, Ontario, Canada
D597-122 Gems of the World London England, Inc. 200,000
-D597-125 London, England
D597-126 Societe Commerciale ▇▇▇▇▇▇▇▇▇▇ ▇▇ 580,000
-D597-136 Herisau, Switzerland
TOTAL $3,280,000