Exhibit 5.1
PRESS RELEASE: AutoCorp Equities in Re-capitalization Pact
Auto Corp Equities, Inc. Announces Re-capitalization and New Business Model
Plano, Texas, Oct 6 -- AutoCorp Equities, Inc. (OTC Bulletin Board : ACOR)
announced today that it has reached an agreement in principle with AutoPrime,
Inc., its principal creditor, and AutoPrime's U. S. parent company, to
re-capitalize AutoCorp effective October 1, 2000.
The re-capitalization will enable AutoCorp to implement the new business model
it has recently developed. After the re-capitalization, AutoCorp will have
minimal debt and expects to have significant assets on an unaudited basis.
As part of the new business model, AutoCorp plans to acquire interests in new
and used car dealerships. AutoCorp believes without assurance it can also raise
new capital from investors , obtain a new line of credit from a lender and
acquire additional assets, in the implementation of the new business model.
In the re-capitalization, AutoPrime or its U.S. parent company, Pacific USA
Holdings Corp, Inc., will exchange debt owed by AutoCorp for shares of a new
AutoCorp convertible preferred stock to be held by either AutoPrime or Pacific
USA. The preferred stock will be convertible into 25% of AutoCorp's common stock
at a future date.
Completion of the re-capitalization is subject to a due diligence review by
Pacific USA/AutoPrime, as well as preparation of definitive documents that are
subject to the review, approval and authorization of each of the parties' boards
of directors.
AutoCorp's fiscal year ended September 30, and the parties have made the
transaction effective October 1. The closing is expected to take place when all
formalities have been completed.
The re-capitalization includes a return to AutoCorp of the preferred and common
stock tendered to AutoPrime and other parties on December 30, 1998. The tender
has never been accepted. In addition, the three trusts established on that same
date will also be terminated, and the remaining common shares held by Charles
Norman, as trustee of those trusts will be returned to AutoCorp.
Charles Norman will continue as President and Chief Executive Officer of
AutoCorp. In addition, Mr. Norman, William O. Merritt and David Brown, will
continue as the Directors until the next annual meeting of shareholders.
As previously reported in its last two Forms 10-QSB, AutoCorp's operations have
recently declined to such a low level that the expenses of its operation have
exceeded its revenues for a number of months. AutoPrime has been advancing funds
to cover the shortfall. The advances have accumulated to a level where AutoCorp
has no prospects for repaying them from that level of operations.
Pacific USA/AutoPrime elected to participate in the re-capitalization because
Mr. Norman had developed a new business model, with the assistance of Mr.
Merritt, and also because Mr. Norman will continue as the President and Chief
Executive Officer, and a Director, of AutoCorp in implementing the new business
model. If the re-capitalization plan is finalized, the advances will no longer
be necessary.
This release contains forward-looking statements reflecting AutoCorp's current
expectations as contemplated under the Safe Harbor provisions of the Private
Securities Litigation Reform Law of 1995. Words like "believe," "expect,"
"should" and other expressions which indicate future events and trends identify
forward-looking statements. Investors should not place reliance on any
forward-looking statements.
