<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission file number
March 31, 1995 000-17303
VECTOR AEROMOTIVE CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 33-025-4334
(State of Incorporation) (I.R.S. Employer Identification No.)
7601 CENTURION PARKWAY
JACKSONVILLE, FLORIDA 32256
(Address of principal executive offices)
(904) 645-0505
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Common Stock, $.01 par value per share; 42,379,699 shares
outstanding as of May 12, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I
<S> <C> <C>
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 8
PART II
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE> 3
Vector Aeromotive Corporation
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
----------- -------------
Assets
- --------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,080,966 $ 7,809
Inventories 466,347 286,347
Prepaid expenses 60,913 12,789
Accounts receivable 15,388 50,000
Other receivable 10,281 232,804
----------- -----------
Total current assets 4,633,895 589,749
Property and equipment 650,132 567,861
Other assets 137,180 137,180
----------- -----------
$ 5,421,207 $ 1,294,790
=========== ===========
Liabilities and Stockholders' Equity
- ---------------------------------------------------
Current liabilities:
Accounts payable $ 432,206 $ 528,170
Accrued expenses 99,619 114,886
Interest payable 47,207 47,207
Note payable to related party 178,200 178,200
Customer deposits 30,000 65,000
----------- -----------
Total current liabilities 787,232 933,463
----------- -----------
Contingencies (Note 6)
----------- -----------
Total liabilities 787,232 933,463
Stockholders' Equity
Common stock, par value $.01 per share, 423,796 240,463
600,000,000 shares authorized; issued and
outstanding: 42,379,699 in 1995 and 24,046,366
in 1994
Capital in excess of par value 31,630,004 26,211,740
Accumulated deficit (27,419,825) (26,090,876)
----------- -----------
Total stockholders' equity 4,633,975 361,327
----------- -----------
$ 5,421,207 $ 1,294,790
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
1
<PAGE> 4
Vector Aeromotive Corporation
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
Sales - -
Cost of sales - -
Gross profit - -
Costs and expenses
Salaries and wages $ 111,658 $ 94,676
Rental expense 36,659 83,654
Utilities 845 8,550
Research and development 785,181 83,169
Depreciation and amortization 29,590 30,762
Advertising and promotion 3,153 42,432
Professional fees 194,277 315,605
General and administrative 248,333 393,530
----------- -----------
Total costs and expenses 1,409,696 1,052,378
----------- -----------
Operating loss (1,409,696) (1,052,378)
Other income (expense)
Interest and other income 80,747 34,767
Other expense 0 (14,397)
----------- -----------
Net loss ($1,328,949) ($1,032,008)
=========== ===========
Net loss per share ($0.03) ($0.05)
=========== ===========
Weighted average common shares
outstanding 39,324,144 24,526,629
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
2
<PAGE> 5
Vector Aeromotive Corporation
Condensed Statement of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION> Common Stock
---------------------------- Capital in Excess Accumulated
Shares Amount of Par Value Deficit Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 24,046,366 $240,463 $26,211,740 ($26,090,876) $ 361,327
Issuance of shares for cash 18,333,333 183,333 5,316,667 5,500,000
Issuance of option to purchase
common stock 500,000 500,000
Stock offering costs (398,403) (398,403)
Net loss (1,328,949) (1,328,949)
------------------------------------------------------------------------------------
Balance, March 31, 1995 42,379,699 $423,796 $31,630,004 ($27,419,825) $4,633,975
====================================================================================
</TABLE>
See accompanying notes to unaudited condensed financial statements.
3
<PAGE> 6
Vector Aeromotive Corporation
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($1,328,949) ($1,032,008)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 29,590 54,611
Increase (decrease) from changes in
Inventories (180,000)
Other receivable 222,523
Prepaid expenses and other assets (13,512) (114,234)
Accounts payable (95,964) (113,315)
Accrued expenses (15,267) (360,980)
Customer deposits (35,000)
----------- -----------
Net cash from operating activities (1,416,579) (1,565,926)
Cash flows used in investing activities:
Acquisition of property and equipment (111,861) (134,672)
----------- -----------
Net cash used in investing activities (111,861) (134,672)
Cash flows from financing activities:
Proceeds from issuance of common stock
and warrants 6,000,000 2,380,500
Stock offering costs (398,403)
----------- -----------
Net cash from financing activities 5,601,597 2,380,500
Net increase (decrease) in cash and cash
equivalents 4,073,157 679,902
Cash and cash equivalents, beginning of period 7,809 2,378,012
----------- -----------
Cash and cash equivalents, end of period $ 4,080,966 $ 3,057,914
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
4
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements and should be read in
conjunction with the Notes to Financial Statements contained in the
Company's Annual Report on form 10-K for the year ended September 30, 1994.
On October 3, 1994 the Company changed its fiscal year-end from September
30 to December 31. A transition report was filed on Form 10-Q for the
period ended December 31, 1994. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three months ended March 31, 1995 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995.
2. Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31, Dec. 31,
1995 1994
--------- --------
<S> <C> <C>
Raw material $286,347 $286,347
Finished goods 180,000 -
-------- --------
Total $486,347 $286,347
======== ========
</TABLE>
During the first quarter of 1995, the Company repurchased one of its
Vector W8 automobiles from Lamborghini USA for cash.
5
<PAGE> 8
3. Stock Offering
Effective as of January 5, 1995, the Company entered into a Share Purchase
Agreement and Option Agreement with V'Power Corporation ("VPC). Pursuant
to these agreements, the Company issued VPC on January 15, 1995, 18,333,333
shares of Common Stock for $5.5 million and on April 17, 1995 sold to VPC
for $500,000 a twelve-month option to acquire an additional 50 million
shares of Common Stock for $.43 per share. Fees for legal, investment
banking, consulting and advisory services incurred for the stock offering
totaling $398,403, were charged against capital in excess of par.
4. Other Receivable
In January, 1995, a settlement was reached for $125,385 regarding the
March, 1992 complaint against the Company for breach of contract. The
balance of the $357,000 appeal bond was returned to the Company.
5. Commitments
In November 1994, the Company and automobili Lamborghini, S. p. A.
("Lamborghini") entered into an agreement whereby Lamborghini would develop
and sell to the Company, a suitable engine to power the Avtech in exchange
for certain consideration of which will be completed during 1995. In
addition, the Company shall pay to Lamborghini the cost of tooling used to
manufacture the engine. Upon successful development of the engine suitable
for installation and operation, the Company also agreed to purchase a
minimum number of engines through 1997 for a pre-determined price (subject
to increases in cost of production). The Company may, upon prior written
notice to Lamborghini, terminate the agreement at any time.
6. Contingencies
On March 22, 1993, the Company's Board of Directors (The Board) determined
that Gerald A. Wiegert's (the former President of the Company) employment
as an officer and employee of the Company should be terminated. Mr.
Wiegert disputed the Board's authority to terminate his employment and
refused to relinquish control over the Company's assets and operations.
This dispute between the Company, acting through its Board and certain
executive officers, and Mr. Wiegert is the subject of an ongoing civil
lawsuit which was commenced by the Company on March 24, 1993.
6
<PAGE> 9
On September 14, 1993, the company obtained a court order confirming the
validity of Mr. Wiegert's termination, and control of the Company's assets
and business affairs has been returned to the Board. Significant claims
made by the Company against Mr. Wiegert, and by Mr. Wiegert against the
Company, seeking monetary damages are pending. In the opinion of
management, these claims will not have a material adverse effect on the
Company's financial condition.
Mr. Wiegert also alleges that the Company has failed to pay principal and
accrued interest under two promissory notes allegedly payable by the
Company to Vector Car, a partnership controlled by Mr. Wiegert. At March
31, 1994, the Company had recorded amounts due relating to the promissory
notes mentioned above totaling $178,200 plus accrued interest of $47,207.
This claim is being disputed by the Company.
In June 1994, an individual and a company (the "Plaintiffs") filed a
complaint against the Company in the Los Angeles County Superior Court.
The complaint sets forth six claims for breach of contract, fraud,
negligent misrepresentation, breach of implied covenant of good faith and
fair dealing, restitution and quantum merit. The complaint alleges that
Plaintiffs performed services with respect to a public offering and that
under the terms of a finder's agreement, the Plaintiffs are entitled to
compensation for services allegedly rendered in connection with the public
offering. The Plaintiffs are seeking special damages of $155,000 plus
interest from August 19, 1991 and general damages in the sum of $500,000
plus interest from August 19, 1991. The Company believes that it will
prevail in its defense of this action.
In 1994, Mr. Wiegert, as general partner of Vector Car, filed an action
alleging that the Company assumed a Vector Car debt to him, in the
approximate sum of $325,000. Vector Car has also alleged that the Company
has a promissory note due in the amount of $250,000 to Vector Car. The
Company will vigorously defend this action believing that it has performed
on all agreements with Vector Car.
Mr. Wiegert has filed an application with the United States Patent and
Trademark Office to register "Avtech" as a trademark. The Company is
opposing Mr. Wiegert's application.
7
<PAGE> 10
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
General
Development of the Avtech SC Coupe has been the focus of activities during the
past quarter. Engine development to satisfy emission and other performance
requirements has been continuously undertaken through the design and
development contract with automobili Lamborghini in Italy. This work will be
concluded on a new prototype vehicle, "EPA2", which will be delivered to Italy
on schedule in late May.
Chassis and body prototypes have been built to validate the photometric
compliance of the lighting systems, the installation of the various sub-systems
in the car, and the deployment of the driver and passenger air bag systems.
Goals were set at the start of the year to increase the torsional stiffness and
simultaneously reduce the weight of the chassis. These goals have been
achieved.
Based on the plan established at the start of the year, the Company is still in
compliance with the prototype build program, leading to a start of production
in August with the first vehicles available for sale in October.
Results of Operations
The Company recorded no automobile sales during the quarter ended March 31,
1995 and 1994.
Total costs and expenses for the first quarter of 1995 increased $357,318 or
approximately 34% compared to the first quarter of 1994, due to the increased
research and development activity.
Total costs spent on research and development for the first quarter of 1995
were $785,181 as compared to $83,169 in 1994, an increase of $702,012.
Salaries and wages increased by 16,982 or 18% due to recent staffing increases
in the administrative department. Rental expense and utilities have decreased
$54,700 or 59% in total due to lower costs as a result of relocating the
Company's facilities to Florida.
8
<PAGE> 11
Professional fees have decreased $121,328 or 38% from the first quarter of 1994
due to the significant amount of legal fees incurred in connection with the
Company's litigation with its former President in 1994.
General and administrative expenses have decreased by $145,197 or 37% compared
to 1994 due to Director's fees totaling approximately $125,000 paid in the
first quarter of 1994 to the Company's former Board of Directors.
Liquidity and Capital Resources
As previously reported, the Company entered into an agreement in January 1995
from which $5.5 million, net of stock offering costs, was received. As of
March 31, 1995, the balance of the Company's cash and equivalents is
approximately $4 million. Cash used during the first quarter of 1995 was
primarily for engineering research and development and tooling.
The Company remains on target for production and sale of the Avtech SC Coupe in
the fall of this year, and believes that the remaining funds are sufficient to
support its planned operations during the remainder of this year.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the registrant was held on March 29,
1995. At the meeting, the shareholders approved by a vote of 15,329,300 for,
82,490 against and 21,310 abstaining the amendment of the registrant's Articles
of Incorporation to increase the number of authorized Common Shares of the
registrant from 60 million shares to 600 million shares.
ITEM 5. OTHER INFORMATION
Effective April 18, 1995, pursuant to the previously reported Share Purchase
Agreement with V'Power Corporation ("VPC") dated January 5, 1995, the
registrant completed the issuance to VPC of a twelve-month option to purchase
50 million of the registrant's Common Shares at a price of $.43 per share. As
a result of this transaction, VPC currently beneficially owns approximately 85%
of the registrant's outstanding Common Shares.
9
<PAGE> 12
ITEM 6, EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
3.01 Amendment effective April 13, 1995 to the registrant's Articles of
Incorporation.
10.01 Agreed contract between Vector Aeromotive Corporation and automobili
Lamborghini, S.p. A. for Engine Development Program and Engine
Purchase Agreement.
27.01 Financial Data Schedule.
10
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VECTOR AEROMOTIVE CORPORATION
By /s/ D. Peter Rose
--------------------------------
D. Peter Rose
President
/s/ Sultaman G. Lubis
---------------------------------
Sultaman G. Lubis
Chief Financial Officer, Treasurer
<PAGE> 1
EXHIBIT 3.01
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
VECTOR AEROMOTIVE CORPORATION
Pursuant to a written consent signed by all of the members of the
board of directors effective on January 30, 1995, Vector Aeromotive
Corporation, a corporation organized under the laws of the State of Nevada, by
its president and secretary does hereby certify:
1. The name of the corporation is Vector Aeromotive Corporation.
2. The Corporation has received cash or other consideration in
connection with the issuance of outstanding shares.
3. That the board of directors of said corporation passed a
resolution declaring that the change and amendment in the articles of
incorporation hereinafter set forth is advisable, and directed that the change
and amendment be submitted to shareholders of the corporation at the next
annual meeting of shareholders for approval.
4. That thereafter, on the 29th day of March, 1995, upon notice
given to each shareholder of record entitled to vote on an amendment to the
articles of incorporation as provided by law, an annual meeting of the
shareholders of the corporation was held, at which meeting, the holders of
15,433,100 Common Shares, representing at least a majority of the voting
power, were present in person or represented by proxy; that the number of
shares of the corporation outstanding and entitled to vote on the adoption of
said amendment was 24,046,366; that 15,275,500 shares, constituting at least a
majority of the shares outstanding and entitled to vote thereon, voted in favor
of such change and amendment, such change and amendment being as follows:
Section 1 of Article V of the Articles of Incorporation is
amended in its entirety to read as follows:
ARTICLE FOUR
Section 1. The total number of shares which the Corporation
shall have authority to issue is Six Hundred five Million
(605,000,000) shares, of which Six Hundred
<PAGE> 2
Million (600,000,000) shall be common shares, par value $.01 per share
(hereinafter referred to as "Common Shares"), and Five Million
(5,000,000) shares shall be preferred shares, par value $.10 per share
(hereinafter referred to as "Preferred Shares").
WE, THE UNDERSIGNED, do make and file these amendments to the articles
of incorporation, hereby declaring and certifying that the facts herein are
true, and accordingly have hereunto set our hands this 29th that of March,
1995.
VECTOR AEROMOTIVE CORPORATION
By: Robert A. Braner, President
--------------------------------
Robert A. Braner, President
By: Richard J. Aprahamian, Secretary
--------------------------------
Richard J. Aprahamian, Secretary
STATE OF FLORIDA
COUNTY OF DUVAL
On this 29th day of March, 1995, before me, a Notary Public,
personally appeared Robert A. Braner, and Richard Aprahamian, who acknowledged
that they executed the above instrument.
[Seal] Ellen P. Starr
------------------------------
Notary Public
My commission expires ELLEN P. STARR
------------------------------
2
<PAGE> 3
STATE OF NEVADA
SECRETARY OF STATE
I hereby certify that this is a
true and complete copy of
the document as filed in this
office
April 14, 1995
Dean Heller
----------------------------
DEAN HELLER
SECRETARY OF STATE
By D. Farmer
-------------------------
<PAGE> 1
EXHIBIT 10.1
ENGINE DEVELOPMENT PROGRAM
AND ENGINE PURCHASE AGREEMENT
THIS ENGINE DEVELOPMENT PROGRAM AND PURCHASE AGREEMENT ("Agreement") is made as
of the 1st day of November, 1994, by and between AUTOMOBILI LAMBORGHINI S.p.A.,
a corporation ("Lamborghini"), located at 40019 Sant'Agata Bolognese (BO), Via
Modena 12, Italy, and VECTOR AEROMOTIVE CORPORATION, a corporation ("Vector"),
located at 444 Quay Street, Wilmington, California 90744 USA.
RECITALS
A. Vector manufactures and sells high performance sports cars and it
requires an engine to power its Avtech vehicle ("Avtech").
B. Lamborghini manufactures and sells high end luxury sports cars and
high performance Diablo V-12 engines ("Diablo Engine").
C. Vector desires to enter into an engine development program
("Program") with Lamborghini wherein Lamborghini will make modifications to its
Diablo Engine and to sell Modified Engines to Vector under the terms and
provisions of this Agreement.
In consideration for the mutual promises, covenants, and conditions contained
herein the parties agree as follows:
1. ENGINE DEVELOPMENT
Vector and Lamborghini agree to develop the Modified Engine for use in the
Avtech. The Joint Program will include all modification to the Diablo Engine
and components for installation into the Avtech, including, but not limited to,
the design and development of a new oil sump, inlet manifolds, bell housing,
exhaust manifold and catalysts, cooling systems, electrical system,
installation pipings, and engine mounting.
2. ENGINE DEFINITION
The definition of the engine and its components is described in Exhibit "A"
together with the overall plan attached hereto and incorporated herein by
reference.
Page 1
<PAGE> 2
3. PHASES OF PROGRAM
Phase 1 Design and drawings plus the assembly of three
complete engines.
Phase 2 Installation of the engine in the Avtech.
Phase 3 Laboratory emission tests.
Phase 4 EPA and CARB homologation MY96 and OBDII
conformity.
The responsibility of Lamborghini and Vector shall be hereinafter designated in
this agreement.
4. DESIGN AND DEVELOPMENT TESTING
Vector and Lamborghini shall be responsible for performing design, development
and testing of the Modified Engine in accordance with the Schedule marked
Exhibit "B" attached hereto and incorporated herein by reference.
5. MODIFIED ENGINE DESIGN AND TESTING
Lamborghini and Vector shall design and test the Modified Engine. A schedule
containing the tasks to be performed, the dates of performance, an explanation
of the test, the cars being tested, and the responsibilities of Lamborghini and
Vector are set forth on Exhibit "C" attached hereto and incorporated herein by
reference.
6. POWERTRAIN TESTING
Lamborghini and Vector shall each have engineering responsibilities and test
responsibilities respecting the powertrain testing, which shall include EPA,
CARB, and OBD II conformity. A schedule of each test to be performed, an
explanation of the test, and the assignment of engineering responsibility is
set forth on Exhibit "D" attached hereto and incorporated herein by reference.
Page 2
<PAGE> 3
7. AVTECH FMVSS SCHEDULE
Vector shall be responsible for and shall perform the FMVSS tasks according to
the schedule set forth on Exhibit "E" attached hereto and incorporated herein
by reference.
8. COOPERATION AND COORDINATION/PROGRAM MANAGER
The performance by Vector and Lamborghini of their duties shall require
extensive coordination and cooperation between Lamborghini and Vector. To
facilitate that cooperation and coordination, Vector and Lamborghini shall each
appoint a program manager to represent it concerning the Program. Initially,
the program managers appointed by the parties are as follows:
Lamborghini's Program Manager: Massimo Ceccarani
Vector's Program Manager: Colin Spooner
The parties shall each have the right to change their program manager upon
written notice to the other party.
9. DELIVERY OF VEHICLES
To enable Lamborghini to perform its duties under this Agreement, Vector agrees
to deliver to Lamborghini the following vehicles on or before the dates set
forth beside each vehicle:
<TABLE>
<CAPTION>
Vehicle Date of Delivery
------- ----------------
<S> <C>
EPA1 August 20, 1994
EPA2 January 1, 1995
EPA3 February 10, 1995
</TABLE>
10. TERM OF PROGRAM
The Program shall commence upon execution of this Agreement by Lamborghini and
shall be completed on or before ten (10) months thereafter.
Page 3
<PAGE> 4
11. COST AND PAYMENT OF ENGINE DEVELOPMENT AND
CERTIFICATION
In consideration for the work to be performed by Lamborghini in connection with
the Program, including certification, and all labor and materials, directly or
indirectly related to the Program, Vector shall pay to Lamborghini the sum of
[*$_____] payable in twelve (12) monthly installments of [*$______] each, with
the first payment upon execution of this agreement by Lamborghini and Vector.
12. TOOLING
Lamborghini shall produce tooling for machinery which shall be used for the
manufacture of the Modified Engine. In consideration for the tooling, Vector
shall pay to Lamborghini the agreed cost of tooling, i.e. [*$_______] additional
cost for casting tooling will be incurred subsequent to approval after 50
units. Costs to be reviewed prior to setting down the casting tooling. Payment
shall be made thirty (30) days after the completion of the tooling.
13. PURCHASE OF MODIFIED ENGINES
Upon successful development of the Modified Engine suitable for installation
and operation in the Avtech, Vector agrees to purchase a minimum of Modified
Engines on the following schedule:
June 1, 1995 through September 30, 1995 12 Pre-production
Modified Engines.
Oct. 1, 1995 through September 30, 1996 48 Modified Engines.
Oct. 1, 1996 through September 30, 1997 144 Modified Engines.
Vector will place its order for the Modified Engines with its standard purchase
order form.
14. ADDITIONAL QUANTITY OF ENGINES
Vector shall have the right to purchase from Lamborghini additional Modified
Engines prior to September 30, 1997 according to the terms and conditions of
this Agreement.
*Confidential treatment is sought under Rule 24b-2.
Page 4
<PAGE> 5
15. PURCHASE PRICE OF MODIFIED ENGINES
15.1 The purchase price of each Modified Engine shall be *$ excluding
warranty, product liability, obsolete materials and direct transportation, and
each purchase order by Vector must be for a minimum of 50 Modified Engines per
year. In case Avtech falls below 50 units per year, Lamborghini has the right
to renegotiate the price with the view of increasing the price to offset the
lower volume.
15.2 All prices are Automobili Lamborghini ex-factory Sant'Agata and will be
set at an exchange rate of LIT 1650/$. Exchange differences will be invoiced by
Lamborghini every three months. Packing not included. The price will be
reviewed annually to reflect increases in cost. Vector will pay any agreed
excess costs for the initial twelve pre-production engines.
15.3 Prices for all Modified Engines are exclusive of all federal, state, and
local excise, sales, use and similar taxes. Consequently, in addition to the
price specified, the amount of any present or future excise, sales, use,
personal property or similar taxes applicable to the sales or use of the
Modified Engines shall be paid by the Buyer and shall be additional items on
the invoices.
15.4 Vector shall pay all required import duties, licenses, fees and taxes in
addition to the prices stated herein.
15.5 Vector and Lamborghini will examine their individual product liability
insurer costs with the objective of reducing these costs by amalgamating
product liability insurance on the Lamborghini engine with that on the Vector
car. The finalized cost of the Lamborghini engine insurance will be charged to
Vector plus a 10% admin. charge.
16. INVOICE TERMS
16.1 Payment to Lamborghini for the first 50 engines shall be by way of
telegraphic transfer when engines are ready for shipment. Thereafter payment
shall be by irrevocable letter of credit cashable upon presentation of bill of
lading. Letter of credit drawn up initially for 25% of ordered value increasing
to 75% six months prior to engine scheduled ship date, and increasing to 100%
two months prior to engine scheduled ship date.
16.2 All payments are to be made in full, on or before the due date, in U.S.
dollars to Lamborghini at its address as shown on the face of this Agreement.
*Confidential treatment is sought under Rule 24 b-2.
Page 5
<PAGE> 6
17. SHIPMENT
17.1 Purchase Orders
17.1.1 Shipment of Modified Engines shall be made only against written purchase
orders issued by Vector.
17.1.2 The delivery date for Modified Engines to be shipped under this
Agreement shall be specified by Vector in the written purchase order
transmitted to Lamborghini. Each purchase order shall specify the exact number
of Modified Engines to be delivered and shall specify a delivery date which
shall be at least ten (10) months after the date of receipt by Lamborghini of
such purchase order and which delivery date shall not be beyond the date
specified in Paragraph 14 of this Agreement.
17.2 Modification of Delivery Date
17.2.1 Vector shall have the right upon prior written notice six months in
advance to Lamborghini to reschedule a delivery date specified in any purchase
order issued pursuant to Section 17.1 of this Agreement, but such rescheduling
shall be permitted only plus or minus 20% of schedule. And two months in
advance plus or minus 5% of schedule. Any changes of schedule outside these
parameters will attract a penalty charge which will be calculated on the basis
of unrecoverable agreed costs incurred by Lamborghini.
17.2.2 Anything else in this Paragraph 17.2 to the contrary notwithstanding,
the Buyer shall not have the right to schedule or reschedule delivery to a date
beyond December 31, 1997.
17.3 Cancellation of Purchase Order
17.3.1 Prior to shipment, Vector shall have the right to cancel a purchase
order issued pursuant to Paragraph 17.1 of this Agreement in its entirety upon
written notice to Lamborghini accompanied by the payment to Lamborghini of a
cancellation charge calculated as the cost to Lamborghini of stock purchased
and value of WIP related to the purchase order canceled.
17.3.2 Vector and Lamborghini will examine ways by which Lamborghini will
receive financial assurances (e.g. bank guarantee) from Vector to cover
Lamborghini's exposure in the event of cancellation by Vector of the contract
for reasons beyond the control of Vector. The result of this examination will
be implemented at the end of the initial 15 months of the program.
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18. CONTINGENCY
Neither party will be liable if performance is delayed or prevented by reasons
beyond reasonable control including, but not limited to, acts of God, delays
caused by the other party, judicial action, accidents, acts of governmental
authority, acts of a public enemy, earthquake, fire, floods, epidemics, storm,
quarantine restrictions, strikes, or other labor difficulties including work
stoppages caused by jurisdictional and similar disputes, delays of carriers or
suppliers, insurrection or riots, acts of sabotage, governmental priorities,
freight or transportation embargoes, unusually severe weather, accidents or
explosions, war, rebellion, major equipment breakdowns, volunteer or mandatory
compliance with any governmental act, regulation or request, inability to
obtain or retain approval of federal, state, or local authority required for
the construction or shipment of the Modified Engine or for delays of
subcontractors or suppliers due to such reasons, acts of omissions or of other
causes beyond the other party's control or without the fault or negligence of
the other party.
19. TERMINATION
19.1 Termination for convenience
Vector may upon prior written notice to Lamborghini terminate this Agreement at
any time and for any reason. In the event of any such termination, Vector's
liability for such termination shall be cancellation charges calculated at the
cost to Lamborghini to stock purchased and value of WIP related to this
Agreement.
19.2 Termination for Default
Each party may terminate this Agreement for reason of default on the part of
the other party and if Vector terminates this agreement due to the default of
Lamborghini, Vector shall not be liable for cancellation charge. A party may
terminate this Agreement pursuant to this Section 19.2 only if it shall have
given the other party at least ninety (90) days prior written notice as to such
default and only if such default shall not have been remedied by the other
party within such ninety (90) day period and such additional time, if any, is
reasonably necessary to cure such default.
20. ACCEPTANCE TESTS AND TECHNICAL ASSISTANCE
20.1 If any of the Modified Engines delivered to Vector hereunder shall, upon
delivery, fail to successfully meet the specifications, if any, specified in
writing by Vector and agreed to by Lamborghini in connection with this
Agreement, then in such event, the Seller, after prompt written or telegraphic
facsimile notice of such failure from the Buyer, shall, either:
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<PAGE> 8
20.1.1 Provide field service and/or technical personnel necessary to correct
the defect within thirty (30) working days from the day following the date of
the receipt by Lamborghini of the notice of such failure, or
20.1.2 Rectify the defective Modified Engine in order to correct the defect.
20.1.3 Have defective engine returned to Lamborghini at the discretion of
Lamborghini.
20.1.4 Lamborghini shall make available training sessions for Vector's service
staff at Vector's cost.
20.2 Lamborghini shall bear the cost and expenses of all repairs made pursuant
to this Paragraph 20.1. However, if upon examination of the Modified Engine,
Lamborghini shall determine that the malfunction, defect or damage was a result
of the action or failure, in whole or in part, of Vector or its personnel or
agents, then in such event all costs and expenses incurred by Lamborghini shall
be promptly paid by Vector. If Vector disagrees with the findings of
Lamborghini, an arbitrator will be mutually appointed and will decide fault and
responsibility.
20.3 In the acceptance of Modified Engines delivered hereunder, Lamborghini
will perform the then-current versions of its acceptance tests on all Modified
Engines delivered under this Agreement. Vector may request notification by
Lamborghini one week in advance of each such test and may have a reasonable
number of representatives present, at its own expense, to observe performance.
21. PRODUCT DOCUMENTATION
Lamborghini shall provide Vector one set of reproducible maintenance
documentation excluding only proprietary manufacturing drawings or process
specifications. This documentation shall be used solely for the purposes of
preparing and updating Vector's maintenance documentation. Lamborghini shall
send Vector updated reproducible copies of documentation affected by
Lamborghini engineering changes to the equipment.
22. STANDARD PRODUCT WARRANTY
Each Modified Engine shall be covered by Lamborghini's standard warranty of one
year. And Lamborghini's current warranty rates will apply to all warranty work
carried out by Vector.
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23. ENGINEERING CHANGES
Lamborghini shall notify Vector of any engineering changes affecting the form,
fit, or function of Modified Engines to be furnished to Vector hereunder and
shall forward such changes to the Buyer. Any such changes shall be approved or
rejected by Vector in writing to Lamborghini within thirty (30) days from the
date of such notification. If such changes are not rejected in writing within
such thirty-day period, the Buyer shall be deemed to have accepted all such
changes.
23.1 Lamborghini reserves the right to make changes in design and improvements
in the Modified engine without any obligation to install these changes in any
of its Modified Engines theretofore manufactured.
24. REPLACEMENT PARTS
24.1 Lamborghini agrees to supply critical replacement parts for all Modified
Engines delivered hereunder. Prices for such replacement parts shall be those
prices in effect at the time such replacement parts are ordered. Prices will be
ex-factory Sant'Agata, Italy. In particular, Vector will hold in stock a basic
engine.
24.2 Lists
Lamborghini shall provide Vector with a list of recommended replacement parts
when requested by Vector in writing.
24.3 Delivery of replacement parts
24.3.1 Lamborghini shall deliver replacement parts within sixty (60) days from
the receipt of an order for such parts.
24.3.2 Lamborghini shall use its best efforts to ship replacement parts within
seventy-two (72) hours (exclusive of Saturdays, Sundays and holidays) of the
receipt of an emergency order for such parts for the Modified Engines, provided
that Vector has agreed to maintain and has maintained an adequate level of
replacement parts based on levels mutually agreed upon.
25. PATENT INDEMNITY AND PATENT RIGHTS
Lamborghini shall defend any suit or proceeding brought against Vector insofar
as such suit or proceeding is based on a claim that any Modified Engine or
replacement part manufactured and supplied by Lamborghini to Vector hereunder
constitutes direct infringement of any duly issued United States patent,
provided that Lamborghini is promptly informed and furnished a copy of each
communication, notice or other action relating to the alleged infringement
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<PAGE> 10
and is given authority, information and assistance (at Lamborghini's expense)
necessary to defend or settle said suit or proceeding. Lamborghini shall not
be obligated to defend or be liable for costs and/or damages if the
infringement arises out of compliance with Vector's specifications or designs,
or form a combination with, an addition to, or a modification of the Modified
Engine after delivery by Lamborghini.
25.1 The seller shall not be liable for any collateral, incidental or
consequential damages arising out of patent infringement. If infringement is
alleged prior to completion of delivery of any Modified Engine, Lamborghini
may, without being in breach of this Agreement, decline to make further
deliveries of such Modified Engine.
25.2 The foregoing states the sole and exclusive liability of Lamborghini for
patent infringement and is in lieu of all warranties, express or implied, in
regard thereto.
26. CONTINUITY OF SUPPLY
26.1 Lamborghini shall use its best efforts to maintain under conditions
providing adequate protection against fire and other hazards, a complete and
current duplicate set of "Requisite Documentation" which term as used herein
shall include all documentation, drawings, specifications, bills of material,
parts lists, manufacture and assembly routines, instructions and all other
requisite information in sufficient detail to permit an experienced
manufacturer of items similar to Modified Engine and replacement parts sold
hereunder to manufacture and assemble the Modified Engine and replacement parts
to be supplied by Lamborghini under this agreement.
26.2 It is understood and agreed, without limiting in any respect Lamborghini's
obligations to furnish Modified Engines and replacement parts in accordance
with this agreement, that in the event Vector is not in default of any
provision of this Agreement and Lamborghini shall fail to supply the required
Modified Engines and replacement parts within one hundred and twenty (120) days
of written notice of default from the Buyer, Lamborghini shall, upon Vector's
written request either (a) make such arrangements as it deems necessary to
ensure the continuity of the supply of Modified Engines and replacement parts
to Vector at a price not greater than the price set forth in this Agreement, or
(b) licenses Vector or Vector's designee to manufacture and assemble the
Modified Engines and replacement parts; provided, however, that the terms of
any such license to Vector or Vector's designee shall be that Vector or such
designee shall have the right to manufacture and assemble the Modified Engines
and replacement parts solely for Vector and only for such time as Lamborghini
or Lamborghini's designee is unable to deliver such Modified Engines and
replacement parts
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under the terms of this Agreement. Any such licenses shall provide that Vector
shall pay to Lamborghini, as compensation therefore, the sum of $1,000 for all
Modified Engines and replacement parts so manufactured and assembled. Vector or
its designee shall not manufacture or assemble any Modified Engines or
replacement parts for any person or entity other than Vector and shall so
manufacture and assemble only to the extent to supply the number of Modified
Engines and replacement parts which were to be supplied pursuant to this
Agreement.
26.3 Vector agrees not to disclose to any other persons any of the proprietary
and confidential information disclosed to it by Lamborghini, and will safeguard
any such proprietary and confidential information received to the same extent
that it safeguards its own proprietary information. Vector agrees to
disseminate any confidential and proprietary information of Lamborghini within
its own company only to the extent necessary for the contemplated purpose of
this Agreement. Vector will defend, and hold harmless Lamborghini for this
unauthorized use or disclosure of Lamborghini's confidential and proprietary
information. Notwithstanding the above provisions, Vector shall not be liable
for disclosure of the proprietary and the confidential information of
Lamborghini: (a) After the information becomes public knowledge, or (b) If
Vector receives the information from another source who is not bound to protect
the information through a confidentiality agreement. In all cases, the
Requisite Documentation delivered by Lamborghini to Vector shall remain the
sole and exclusive property of Lamborghini.
27. PACKING
The Modified Engines and replacement parts shall be packed in the manner in
which Lamborghini normally ships such engines and replacement parts for itself
and other customers. Any additional handling or preparation for shipment
specified by Vector shall be at Vector's expense and subject to acceptance to
Lamborghini.
28. LIMITATION OF LIABILITY
In no event will Lamborghini or its suppliers or subcontractors of any tier be
liable to Vector, in contract or in tort, for any special, incidental, or
consequential damages, including but not limited to loss of use, loss of
revenue, loss of use of revenue, loss of anticipated profits, costs of capital,
and claims of customers. The provisions of this Paragraph will apply,
notwithstanding any other provisions of this contract or of any other contract.
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29. MODIFICATION IN EQUIPMENT DELIVERED
If Vector reconstructs or makes changes in any Modified Engines or replacement
parts delivered to it hereunder, Lamborghini will not be liable for warranty
claims which may arise.
30. INSURANCE PROVIDED BY VECTOR
Vector will provide and maintain insurance (including Transit Insurance, with
ocean marine coverage if necessary) or the equivalent thereof, providing
protection against physical loss or damage during transit to and subsequently
upon arrival at Vector's site to all Modified Engines and replacement parts
furnished hereunder, and Lamborghini will be covered as additional insured.
Such insurance will be for the full limits of the value of the Modified Engines
and replacement parts then at risk, and any deductible amounts will be for the
account of Vector.
31. MISCELLANEOUS
31.1 There are no representations or agreements between the parties hereto,
other than contained in this Agreement. All negotiations are merged into this
Agreement and this Agreement constitutes the entire understanding of the
parties and cannot be modified, except by a writing signed by the parties.
31.2 It is expressly agreed that the validity performance and construction of
this Agreement will be governed by the internal laws of the State of Florida.
Any controversy or claim arising out of or relating to this Agreement, or any
breach thereof, shall be settled by arbitration in accordance with the rules
then obtaining of the American Arbitration Association, and judgment upon the
award rendered may be entered in any court having jurisdiction thereof.
31.3 This Agreement is not assignable by the Buyer without the prior written
consent of the Seller. Any attempt of the Buyer to affect such an assignment
without such consent shall be void.
31.4 If any provision of this Agreement is or becomes, at any time or for any
reason, unenforceable or invalid, no other provision of this Agreement shall be
affected thereby, and the remaining provisions of this Agreement shall continue
with the same effects as if such unenforceable or invalid provisions shall not
have been inserted in this Agreement.
31.5 No Waiver by a party of its rights to enforce any provisions hereof after
any default on the part of the other party shall be deemed a waiver of such
party's right to enforce each and all of the provisions hereof upon any further
or other
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<PAGE> 13
default on the party of the other party. The acceptance of payment hereunder
shall not be, or be construed to be, a waiver of any breach of any term,
covenant or condition of this Agreement.
31.6 Any notice (tender or delivery) to be given hereunder by either party to
the other may be effected by personal delivery in writing or by registered or
certified mail, postage prepaid, return receipt requested. Mailed notices shall
be addressed by written notice in accordance with this paragraph.
To Seller: Massimo Ceccarani
Gianfranco Venturelli
Automobili Lamborghini S.p.A.
40019 Sant'Agata Bolognese (BO)
Via Modena 12, Italy
To Buyer: Tim Enright, Chief Operating Officer
Colin Spooner, Project Engineer
Vector Aeromotive Corporation
7601 Centurion Parkway South
Jacksonville, FL 32256
31.7 This Agreement sets forth the entire agreement of the parties with respect
to its subject matter as of its date and supersedes all prior and
contemporaneous negotiations.
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<PAGE> 14
31.8 The headings and captions contained in this Agreement shall not be
considered to be a part hereof for purposes of interpreting or applying this
Agreement, but are for convenience only.
LAMBORGHINI:
Automobili Lamborghini S.p.A.
a corporation
By: Gianfranco Venturelli
-------------------------------------
Gianfranco Venturelli
Title:
-----------------------------------
General Manager & Director
VECTOR:
Vector Aeromotive Corporation
a Nevada Corporation
By: Sultaman G. Lubis
--------------------------------------
Sultaman G. Lubis
Title:
-----------------------------------
Chief Financial Officer & Treasurer
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VECTOR AEROMOTIVE CORP. FOR THE THREE MONTHS ENDED
MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,080,966
<SECURITIES> 0
<RECEIVABLES> 25,699
<ALLOWANCES> 0
<INVENTORY> 466,347
<CURRENT-ASSETS> 4,633,895
<PP&E> 1,299,207
<DEPRECIATION> 649,073
<TOTAL-ASSETS> 5,421,207
<CURRENT-LIABILITIES> 787,232
<BONDS> 0
<COMMON> 423,796
0
0
<OTHER-SE> 4,210,179
<TOTAL-LIABILITY-AND-EQUITY> 5,421,207
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,409,696
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,328,949)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,328,949)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,328,949)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
