<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 5, 1997
REGISTRATION NO. 333-17401
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
AMERIGON INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
CALIFORNIA 95-4318554
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
</TABLE>
404 EAST HUNTINGTON DRIVE
MONROVIA, CALIFORNIA 91016
(818) 932-1200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
LON E. BELL, PH.D.
PRESIDENT
AMERIGON INCORPORATED
404 EAST HUNTINGTON DRIVE
MONROVIA, CALIFORNIA 91016
(818) 932-1200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
--------------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
D. STEPHEN ANTION, ESQ. SHELDON E. MISHER, ESQ.
O'MELVENY & MYERS LLP BACHNER, TALLY, POLEVOY & MISHER LLP
400 SOUTH HOPE STREET, 15TH FLOOR 380 MADISON AVENUE, 18TH FLOOR
LOS ANGELES, CALIFORNIA 90071-2899 NEW YORK, NEW YORK 10017
(213) 669-6000 (212) 687-7000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If the registrant elects to deliver its latest joint annual report to
security holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ----------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ----------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Units(2)(3).............................................................. $21,505,000 $6,516.67
Class A Common Stock, no par value per share(4).......................... $29,031,750 $8,797.50
Unit Purchase Option(5).................................................. $1.70 $.00
Units(3)(6).............................................................. $2,711,500 $821.67
Class A Common Stock, no par value per share(7).......................... $2,524,500 $765.00
Total.................................................................. $55,772,751.70 $16,900.84(8)
</TABLE>
(FOOTNOTES ON NEXT PAGE)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(FOOTNOTES FROM COVER)
- --------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 2,550 Units subject to the Underwriter's over-allotment option.
(3) Each Unit will consist of 280 shares of Class A Common Stock, no par value
per share, and 280 Class A Warrants. Each Class A Warrant will entitle the
registered holder thereof to purchase one share of Class A Common Stock.
(4) Issuable upon exercise of the Class A Warrants included in the Units to be
sold to the public.
(5) To be issued to the Underwriter.
(6) Issuable upon exercise of the Underwriter's Unit Purchase Option.
(7) Issuable upon exercise of the Class A Warrants included in the Units
issuable upon exercise of the Underwriter's Unit Purchase Option.
(8) A registration fee of $13,488.64 was paid in connection with the original
filing of the Registration Statement.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 5, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
AMERIGON INCORPORATED
17,000 UNITS
EACH CONSISTING OF 280 SHARES OF CLASS A COMMON STOCK
AND 280 CLASS A WARRANTS
---------------------
Each unit ("Unit") hereby offered (the "Offering") by AMERIGON INCORPORATED,
a California corporation (the "Company"), consists of 280 shares of the
Company's Class A Common Stock, no par value per share ("Class A Common Stock"),
and 280 warrants to purchase shares of Class A Common Stock (the "Class A
Warrants"). The components of the Units will be separately transferable upon
issuance. Each Class A Warrant entitles the registered holder thereof to
purchase, at any time until the fifth anniversary of the date hereof, one share
of the Company's Class A Common Stock at an exercise price of 135% of the price
per Unit to the public divided by 280, subject to adjustment. Commencing one
year after the date hereof (the "Effective Date"), the Company may, upon 30
days' written notice, redeem each Class A Warrant in exchange for $0.05 per
Class A Warrant, provided that before any such redemption, the closing Bid Price
of the Class A Common Stock as reported by the Nasdaq SmallCap Market or the
closing Bid Price on any national stock exchange (if the Company's Class A
Common Stock is listed thereon) shall have, for 30 consecutive business days
ending within 15 days of the date of the notice of redemption, averaged in
excess of 175% of the Class A Warrant exercise price per share (subject to
adjustment in the event of any stock splits or other similar events). See
"Description of Securities."
The Company's Class A Common Stock is traded on the Nasdaq SmallCap Market
under the symbol "ARGNA". Prior to the Offering, there has been no public market
for the Class A Warrants. The Company has applied for inclusion of the Class A
Warrants on the Nasdaq SmallCap Market. The Units offered hereby will not be
listed separately on Nasdaq. It is currently expected that the public offering
price will be between $1,000 and $1,100 per Unit (between $3.57 and $3.93 per
share of Class A Common Stock, ascribing no value to the Class A Warrants
included in the Units). See "Underwriting." The last sale price of the Company's
Class A Common Stock on February 4, 1997 as reported by Nasdaq was $5.625 per
share. See "Price Range of Common Stock and Dividends." The exercise price and
other terms of the Class A Warrants were determined in part by negotiation
between the Company and D.H. Blair Investment Banking Corp. (the "Underwriter"),
and do not necessarily bear any relationship to the Company's assets, book
value, results of operations, net worth, or any other recognized criteria of
value. FOR INFORMATION CONCERNING A SECURITIES AND EXCHANGE COMMISSION
INVESTIGATION RELATING TO THE UNDERWRITER, SEE "RISK FACTORS" AND
"UNDERWRITING."
The Company has agreed to register subsequent to the Offering for resale
(the "Subsequent Offering") by certain securityholders (the "Selling
Securityholders") 1,620,000 Class A Warrants (the "Selling Securityholder
Warrants") and the Class A Common Stock underlying the Selling Securityholder
Warrants. The Selling Securityholder Warrants and the securities underlying such
warrants are sometimes collectively referred to as the "Selling Securityholder
Securities." The Selling Securityholder Warrants are issuable on the closing of
the Offering to the Selling Securityholders upon the automatic conversion of
convertible subordinated debentures acquired by them in the Company's private
placement completed in October 1996. The Selling Securityholders have agreed not
to sell any of the Selling Securityholder Warrants for at least 90 days after
the closing of the Offering and, for the period expiring 270 days after such
closing, have agreed to certain resale restrictions. See "Shares Eligible for
Future Sale." Sales of the Selling Securityholder Warrants or the underlying
securities, or the potential of such sales, may have an adverse effect on the
market price of the securities offered hereby.
------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 7 AND
"DILUTION" BEGINNING ON PAGE 24.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Unit..................................................... $ $ $
Total (3).................................................... $ $ $
</TABLE>
(1) Does not reflect additional compensation to the Underwriter in the form of
(i) a non-accountable expense allowance of $ ($ if the
Over-Allotment Option referred to below is exercised in full); and (ii) an
option (the "Unit Purchase Option") to purchase up to 1,700 Units at 145% of
the price per Unit to the public over a two-year period commencing on the
date that is the third anniversary of the Effective Date. In addition, the
Company has agreed to indemnify the Underwriter against certain civil
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting estimated expenses of $675,000 and the Underwriter's
non-accountable expense allowance, both of which are payable by the Company.
(3) The Company has granted the Underwriter a 45-day option (the "Over-Allotment
Option") to purchase up to 2,550 additional Units on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
the Over-Allotment Option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ , and $ , respectively. See "Underwriting."
The Units are offered by the Underwriter on a "firm commitment" basis when,
as and if delivered to and accepted by the Underwriter, and subject to the
Underwriter's right to reject orders in whole or in part and to certain other
conditions. It is expected that delivery of the certificates representing the
Units will be made at the offices of D.H. Blair Investment Banking Corp., 44
Wall Street, New York, New York 10005, on or about , 1997.
------------------------------
D.H. BLAIR INVESTMENT BANKING CORP.
---------------
The date of this Prospectus is , 1997.
<PAGE>
AMERIGON PICTURE DESCRIPTIONS
<TABLE>
<S> <C>
INSIDE FRONT COVER
AMERIGON'S RADAR PRODUCT
Top (one photo): [Photo of Amerigon radar sensor circuit board (held in
RADAR SENSOR CIRCUIT BOARD fingers).]
Senses through rubber, plastic and glass panels up to an inch;
User adjustable & sharply defined detection pattern;
Extremely low emission levels (typically 100 mWatts average);
and
Extremely low power (typically 300 mWatts).
Bottom (three illustrations):
Possible applications of Amerigon's radar product
Left: [Overhead view depiction of automobile using radar to detect
presence of/distance from another automobile during parallel
parking maneuver.]
BACK UP AND PARKING RADAR MAY HELP AVOID COLLISIONS AND INJURY
Center: [Overhead view depiction of automobile using radar to detect
presence of/distance from other automobiles in "blind spot."]
LANE-CHANGE RADAR WARNS THE DRIVER OF OBJECTS IN BLIND SPOT
Right: [Overhead view depiction of automobile using radar to detect
presence of/distance from another automobile ahead.]
INTELLIGENT CRUISE CONTROL MAY ALLOW FOR SAFER DRIVING AND HELP
RELIEVE TRAFFIC CONGESTION
INSIDE BACK COVER
AMERIGON'S REVA ELECTRIC VEHICLE
AN AFFORDABLE COMMUTER CAR DESIGNED FOR DEVELOPING COUNTRIES
Top (three photos):
Left: [Rear/three-quarters view photo of Amerigon's REVA electric
vehicle.]
Center: [Interior view showing seat, instrument panel, and steering
wheel of Amerigon's REVA electric vehicle.]
Right: [Front/three-quarters view photo of Amerigon's REVA electric
vehicle.]
Bottom (one photo, one illustration):
AMERIGON'S CLIMATE CONTROL SEAT
The first environmentally friendly system that both heats and cools car seats
Left: [Photo of Amerigon Climate Control Seat.]
Right: [Illustration depicting cutaway view of Amerigon Climate
Control Seat, and component parts.]
</TABLE>
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OF THE COMPANY AND/OR CLASS A WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NASDAQ SMALLCAP MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMPANY'S CLASS
A COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS
OR INCORPORATED HEREIN. INVESTORS SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION
SET FORTH UNDER THE HEADING "RISK FACTORS." UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO THE RELEASE OF THE ESCROW
SHARES (AS HEREINAFTER DEFINED) OR TO THE EXERCISE OF (I) THE OVER-ALLOTMENT
OPTION, (II) THE CLASS A WARRANTS, (III) THE UNIT PURCHASE OPTION, (IV) OPTIONS
TO PURCHASE SHARES OF CLASS A COMMON STOCK RESERVED FOR ISSUANCE UNDER THE
COMPANY'S 1993 STOCK OPTION PLAN, AS AMENDED, AND (V) OTHER OUTSTANDING WARRANTS
TO PURCHASE SHARES OF CLASS A COMMON STOCK.
THE COMPANY
GENERAL
Amerigon Incorporated (the "Company" or "Amerigon") is a development stage
company formed in 1991 to develop, manufacture and market proprietary high
technology automotive components and systems for sale to automobile and other
original equipment manufacturers. The Company's business strategy is to apply
aerospace and defense industry technology to products for the automotive market.
The Company has principally focused on developing proprietary positions in the
following technologies: (i) thermoelectric heated and cooled seats; (ii) radar
for maneuvering and safety; (iii) voice interactive navigation and
entertainment; and (iv) electric vehicle components and production systems.
The Company has substantially completed development of the first generation
of its Interactive Voice System ("IVS-TM-") audio-navigation product. The
IVS-TM- provides spoken-word navigation directions to driver and passengers
using an in-vehicle compact audio disc system. To date, the IVS-TM- product has
not been commercially successful and likely would require substantial further
development before it could be expected to achieve significant sales. The
Company is presently seeking to sell the IVS-TM- product line and the Company's
interests in related technology or to find a strategic or financial partner to
help further develop and market the IVS-TM- product. If the Company is unable to
consummate such a sale or arrange such a relationship in the near future, the
Company plans to discontinue sales and further development of the IVS-TM- and
related technology. See "--Business Strategy; Recent Developments."
The Company's other products are in various stages of development. The
Company is presently working with three of the world's largest automotive
original equipment manufacturers on pre-production development programs for
heated and cooled seats. In addition, the Company has sold multiple prototypes
of its heated and cooled seats and radar for maneuvering and safety to potential
customers for evaluation and demonstration.
BUSINESS STRATEGY; RECENT DEVELOPMENTS
The Company was founded on the premise that technology proven for use in the
defense and aerospace industries could be successfully adapted to the automotive
and transportation industries. Amerigon has focused on technologies that it
believes can be readily adapted to automotive needs for advanced vehicle
electronics and for electric vehicle systems. The Company seeks to avoid direct
competition with established automotive suppliers of commodity products by
identifying market opportunities where the need for rapid technological change
gives an edge to new market entrants with proprietary products.
The Company has recently determined to focus its resources primarily on
developing its heated and cooled seat and radar for maneuvering and safety
technologies. The Company has adopted this strategy primarily because the
Company believes that the markets for these products have greater near-term
potential than the markets for its other products, and because these
technologies afford the Company its best opportunities to exploit competitive
advantages over rival companies. The Company also would expect continued
necessary development and marketing of the Company's voice interactive
navigation technologies and electric vehicle systems to entail very high costs,
to the point that they would likely exceed the Company's financial resources.
Even if the Company were able to overcome this financial challenge, management
also believes that the Company might not be able to develop and successfully
market the next generation of
3
<PAGE>
IVS-TM-, and might not be able to successfully develop and profitably
manufacture electric vehicles or their components, without commercial or
technical assistance from one or more strategic partners. Accordingly, the
Company is presently seeking to sell the IVS-TM- product line and the Company's
interests in related technology or to find a strategic or financial partner to
help further develop and market the IVS-TM- product. If the Company is unable to
consummate such a sale or arrange such a relationship in the near future, the
Company plans to discontinue sales and further development of the IVS-TM- and
related technology. See "Risk Factors--Possible Termination of License of Voice
Recognition Software Technology." The Company is also presently seeking
strategic and financial partners to help support continued development and
marketing of the Company's electric vehicle systems. If the Company is unable to
arrange such a relationship in the near term, the Company will attempt to sell
its proprietary interests and other assets in and relating to its electric
vehicle technology or abandon their development. See "Risk Factors--Possible
Disposition or Abandonment of Electric Vehicle and IVS-TM- Product Businesses."
The Company has recently experienced serious cash shortfalls. In October
1996, the Company completed a private placement (the "Bridge Financing") of 60
bridge units (each a "Bridge Unit"), each consisting of one $47,500 10%
unsecured promissory note (each a "Bridge Note") and one $2,500 10% convertible
subordinated debenture (each a "Bridge Debenture") to enable it to continue
operations until the completion of the Offering. A portion of the proceeds of
the Offering will be applied to repayment of the Bridge Notes. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Use of Proceeds."
THE OFFERING
<TABLE>
<S> <C>
Securities Offered by the
Company........................... 17,000 Units, each consisting of 280 shares of the
Company's Class A Common Stock and 280 Class A Warrants.
See "Description of Securities."
Terms of Class A Warrants......... Each Class A Warrant entitles the registered holder
thereof to purchase, at any time until the fifth
anniversary of the Effective Date, one share of the
Company's Class A Common Stock, subject to earlier
redemption by the Company. The exercise price for the
Class A Warrants will be 135% of the amount equal to the
price per Unit to the public divided by 280. See
"Description of Securities--Class A Warrants."
Number of Shares of Capital Stock
Outstanding:
Before the Offering (1)......... 7,068,500 shares of Class A Common Stock, of which
3,000,000 shares are Escrow Shares(2).
After the Offering (3)........ . 11,828,500 shares of Class A Common Stock, of which
3,000,000 shares are Escrow Shares(2).
Use of Proceeds................... Repayment of indebtedness, payment of deferred executive
salaries, production engineering, manufacturing,
research and development, marketing and working capital
purposes. See "Use of Proceeds."
Risk Factors...................... The securities offered hereby involve a high degree of
risk. See "Risk Factors."
Nasdaq Symbols.................... Class A Common Stock--ARGNA
Class A Warrants--ARGNW
</TABLE>
(FOOTNOTES ON NEXT PAGE)
4
<PAGE>
- ------------------------
(1) Does not include 264,757 shares of Class A Common Stock issuable upon
exercise of outstanding warrants and 530,000 shares of Class A Common Stock
presently reserved for issuance under the Company's 1993 Stock Option Plan,
as amended, under which options to purchase 312,236 shares of Class A Common
Stock are outstanding.
(2) In connection with the Company's 1993 initial public offering, 3,000,000
shares (the "Escrow Shares") of the Company's Class A Common Stock were
deposited in escrow by certain shareholders of the Company, which Escrow
Shares are to be released to such shareholders for no consideration if the
Company attains certain pre-tax earnings levels during any of the fiscal
years ending December 31, 1996, 1997 and 1998. If such earnings are
achieved, the Company will record a substantial non-cash charge to earnings,
for financial reporting purposes, as compensation expense relating to the
value of the Escrow Shares released to current and former Company officers
and employees. On April 30, 1999, all Escrow Shares that have not been so
released from escrow will automatically be exchanged for shares of Class B
Common Stock which will then be released from escrow. The Class B Common
Stock is neither transferable nor convertible and its rights with respect to
dividends and liquidation distributions are inferior to those of the Class A
Common Stock. Therefore, the Class B Common Stock has limited economic
value. See "Risk Factors--Potential Charges to Income," "Principal
Shareholders--Escrow Shares" and "Description of Securities--Common Stock."
(3) Does not include (i) 1,428,000 shares of Class A Common Stock issuable upon
exercise of the Over-Allotment Option and the Class A Warrants included in
the Units issuable upon exercise of the Over-Allotment Option; (ii)
4,760,000 shares of Class A Common Stock issuable upon exercise of the Class
A Warrants included in the Units offered hereby; (iii) 952,000 shares of
Class A Common Stock issuable upon exercise of the Unit Purchase Option and
the Class A Warrants included in the Units included in the Unit Purchase
Option; (iv) outstanding warrants to purchase 288,608 shares of Class A
Common Stock and (v) 530,000 shares of Class A Common Stock presently
reserved for issuance under the Company's 1993 Stock Option Plan, as
amended, under which options to purchase 312,236 shares of Class A Common
Stock are outstanding. See "Description of Securities" and "Underwriting."
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial data presented below should be read in conjunction
with the financial statements and related notes thereto appearing elsewhere in
this Prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
APRIL 23, APRIL 23,
1991 1991
FISCAL YEARS (INCEPTION) NINE MONTHS ENDED (INCEPTION)
ENDED DECEMBER 31, TO ---------------------------- TO
------------------------------- DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1993 1994 1995 1995 1995 1996 1996
--------- --------- --------- ------------- ------------- ------------- -------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues...................... $ 2,289 $ 2,640 $ 7,809 $ 14,638 $ 4,806 $ 6,501 $ 21,139
Costs and expenses:
Direct development contract and
related grant costs............. 525 928 5,332 6,785 3,895 9,142 15,927
Direct grant costs................ 1,649 803 339 4,522 390 101 4,623
Research and development.......... 1,578 2,137 2,367 6,659 1,785 1,544 8,203
Selling, general and
administrative, including
reimbursable administrative
costs........................... 2,340 3,235 3,135 10,377 1,820 1,838 12,215
--------- --------- --------- ------------- ------------- ------------- -------------
Total costs and expenses............ 6,092 7,103 11,173 28,343 7,890 12,625 40,968
--------- --------- --------- ------------- ------------- ------------- -------------
Operating loss...................... $ (3,803) $ (4,463) $ (3,364) $ (13,705) $ (3,084) $ (6,124) $ (19,829)
--------- --------- --------- ------------- ------------- ------------- -------------
--------- --------- --------- ------------- ------------- ------------- -------------
Net loss............................ $ (3,640) $ (4,235) $ (3,237) $ (13,187) $ (2,960) $ (6,245) $ (19,432)
--------- --------- --------- ------------- ------------- ------------- -------------
--------- --------- --------- ------------- ------------- ------------- -------------
Net loss per share.................. $ (1.64) $ (1.28) $ (0.98) -- $ (0.90) $ (1.54) --
Weighted average number of shares
outstanding....................... 2,213 3,300 3,306 -- 3,300 4,060 --
Supplemental pro forma net loss per
share(1).......................... -- -- -- -- -- $ (1.45) --
Supplemental pro forma weighted
average shares outstanding(1)..... -- -- -- -- -- 4,292 --
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
---------------------------------------
AS OF DECEMBER 31, PRO FORMA AS
1995 ACTUAL PRO FORMA(2) ADJUSTED(3)
---------------------- --------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................. $ 6,481 $ 351 $ 351 $ 14,843
Total assets.................................... 8,995 5,876 8,976 18,883
Long term debt.................................. 68 50 50 50
Total liabilities............................... 1,797 4,872 7,972 3,387
Deficit accumulated during development stage.... (13,187) (19,432) (19,432) (19,932)
Total shareholders' equity...................... 7,198 1,004 1,004 15,496
</TABLE>
- --------------------------
(1) Supplemental pro forma net loss per share and supplemental pro forma
weighted average shares outstanding reflect the anticipated application of a
portion of the proceeds of the Offering to repay the bank line of credit as
described in "Use of Proceeds" as if such repayment occurred as of its
issuance date (April 18, 1996). Supplemental pro forma net loss per share
for the year ended December 31, 1995 has not been presented since there were
no borrowings outstanding on the bank line of credit at December 31, 1995.
(2) Gives pro forma effect to the October 1996 issuance of the Bridge Units, net
of approximately $500,000 of issuance costs, and the January 1997 loan of
$100,000 to the Company from Dr. Bell, as if such transactions had occurred
as of September 30, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-- Liquidity and Capital
Resources."
(3) As adjusted to give effect to the sale of the 17,000 Units offered hereby at
an assumed offering price of $1,000 per Unit and the application of the net
proceeds therefrom (including the automatic conversion of the Bridge
Debentures into Class A Warrants, the repayment of the principal on the
Bridge Notes and the corresponding charge to operations upon repayment
thereof estimated at $500,000). See "Use of Proceeds," "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
6
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE IN NATURE AND INVOLVE A
HIGH DEGREE OF RISK. PRIOR TO MAKING AN INVESTMENT DECISION, PROSPECTIVE
INVESTORS SHOULD GIVE CAREFUL CONSIDERATION TO, AMONG OTHER THINGS, THE RISK
FACTORS SET FORTH BELOW. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. REFERENCE IS MADE IN PARTICULAR TO THE
DESCRIPTION OF THE COMPANY'S PLANS AND OBJECTIVES FOR FUTURE OPERATIONS,
ASSUMPTIONS UNDERLYING SUCH PLANS AND OBJECTIVES AND OTHER FORWARD-LOOKING
STATEMENTS INCLUDED IN "PROSPECTUS SUMMARY," "RISK FACTORS," "USE OF PROCEEDS,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "BUSINESS" IN THIS PROSPECTUS. SUCH STATEMENTS MAY BE IDENTIFIED
BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT,"
"BELIEVE," "ESTIMATE," "ANTICIPATE," "CONTINUE," OR SIMILAR TERMS, VARIATIONS OF
SUCH TERMS OR THE NEGATIVE OF SUCH TERMS. SUCH STATEMENTS ARE BASED ON
MANAGEMENT'S CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF FACTORS AND
UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
DESCRIBED IN THE FORWARD-LOOKING STATEMENTS. FACTORS WHICH COULD CAUSE SUCH
RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING
STATEMENTS INCLUDE THOSE SET FORTH BELOW.
DEVELOPMENT STAGE COMPANY
The Company's proposed future operations are subject to numerous risks
associated with establishing new businesses, including, but not limited to,
unforeseeable expenses, delays and complications, as well as specific risks of
the industry in which the Company competes. There can be no assurance that the
Company will be able to market any product on a commercial scale, achieve
profitable operations or remain in business. To date, the Company's first
developed product, the IVS-TM-, has not been commercially successful. The
Company was formed in April 1991 and most of its products are still in the
development stage. In addition, several of the Company's products are aimed at
the electric vehicle market, which is still in its infancy and may never achieve
commercial prominence. The likelihood of the success of the Company must be
considered in light of the problems, expenses, difficulties, complications and
delays frequently encountered in connection with establishing a new business,
including, without limitation, uncertainty as to market acceptance of the
Company's products, marketing problems and expenses, competition and changes in
business strategy. There can be no assurance that the Company will be successful
in its proposed business activities.
Moreover, except for the IVS-TM-, the Company's other products are in
various stages of prototype development and will require the expenditure of
significant funds for further development and testing in order to commence
commercial sales. No assurance can be given that the Company will obtain such
additional funds or that it will be successful in resolving all technical
problems relating to its products or in developing the technology used in its
prototypes into commercially viable products. The Company does not expect to
generate any significant revenues from the sale of seat or radar products for at
least 12 to 24 months, and no assurance can be given that such sales will ever
materialize. Further, there can be no assurance that any of the Company's
products, if successfully developed, will be capable of being produced in
commercial quantities at reasonable costs or will be successfully marketed and
distributed. See "--Limited Marketing Capabilities; Uncertainty of Market
Acceptance."
SUBSTANTIAL OPERATING LOSSES SINCE INCEPTION
The Company has incurred substantial operating losses since its inception.
At December 31, 1995 and at September 30, 1996, the Company had accumulated
deficits since inception of $13,187,000 and $19,432,000, respectively. During
the years ended December 31, 1994 and 1995, the Company had net losses of
$4,235,000 and $3,237,000, respectively. For the nine months ended September 30,
1995 and 1996, the Company had net losses of $2,960,000 and $6,245,000,
respectively. The Company has incurred substantial additional losses and its
accumulated deficit has increased since September 30, 1996. The Company expects
to report net losses for the three months ended December 31, 1996 that will be
disproportionately large compared to its losses in each of the prior quarters in
1996. The Company's
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accumulated deficits are attributable to the costs of developmental and other
start-up activities, including the industrial design, development and marketing
of the Company's products and a significant loss incurred on a major electric
vehicle development contract. See "--Electric Vehicle Cost Overruns and
Significant Contract Losses." The Company has continued to incur losses due to
continuing expenses without significant revenues or profit margins on the sale
of products, and expects to incur significant losses for the foreseeable future.
See Note 3 of Notes to Financial Statements.
NEED FOR ADDITIONAL FINANCING; INDEPENDENT ACCOUNTANTS' EXPLANATORY PARAGRAPH
FOR FISCAL 1995; LIKELIHOOD OF EXPLANATORY PARAGRAPH CONCERNING THE COMPANY'S
ABILITY TO CONTINUE AS A GOING CONCERN FOR FISCAL 1996
The Company has experienced negative cash flow since its inception and has
expended, and expects to continue to expend, substantial funds to continue its
development efforts. The Company has not generated and does not expect to
generate in the foreseeable future sufficient revenues from the sales of its
principal products to cover its operating expenses. Even after completion of the
Offering, the Company will require additional financing through bank borrowings,
debt or equity financing or otherwise to finance its planned operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." If additional funds are not
obtained when needed, the Company will be required to significantly curtail its
activities, dispose of one or more of its technologies and/or cease operations
and liquidate. If and when the Company is able to commence commercial production
of its heated and cooled seat or radar products, the Company will incur
significant expenses for tooling product parts and to set up manufacturing
and/or assembly processes. In part as a result of the Company's anticipated
capital requirements, management is currently seeking to sell the IVS-TM-
product line or enter into collaborative or other arrangements with financial or
strategic corporate partners to develop the IVS-TM- product and its electric
vehicle technologies. See "--Possible Disposition or Abandonment of Electric
Vehicle and IVS-TM- Product Businesses." No assurance can be given that such
alternate funding sources can be obtained or will provide sufficient, or any,
financing for the Company. Moreover, the licensing agreements for the Company's
current and potential future rights to licensed technology generally require the
payment of minimum royalties. For the fiscal year ended December 31, 1996, the
Company paid a total of approximately $201,000 in royalties. In the event the
Company is unable to pay such royalties or otherwise breaches such licensing
agreements, the Company would lose its rights to the technology, which would
have a material adverse effect on the Company's business.
The report of the Company's independent accountants for the fiscal year
ended December 31, 1995 contained an explanatory paragraph regarding the
Company's need to obtain additional financing to repay its debt and finance
continued operations. Moreover, in light of the Company's significant losses in
1996, including significant losses experienced on the Company's major electric
vehicle contract (see "--Electric Vehicle Cost Overruns and Significant Contract
Losses"), it is likely that the report of the Company's independent accountants
with respect to the Company's financial statements as of and for the period
ended December 31, 1996 will contain an explanatory paragraph concerning the
Company's ability to continue as a going concern without obtaining additional
financing.
POSSIBLE DISPOSITION OR ABANDONMENT OF ELECTRIC VEHICLE AND IVS-TM- PRODUCT
BUSINESSES
To date, the Company has focused on and invested substantial capital in four
product technologies: (i) thermoelectric heated and cooled seats; (ii) radar for
maneuvering and safety; (iii) voice interactive navigation and entertainment;
and (iv) electric vehicle components and production systems. See
"Business--Products." The Company has recently determined to focus its resources
primarily on developing its heated and cooled seat and radar technologies. The
Company is presently seeking to sell the IVS-TM- product line or find a
strategic or financial partner to help further develop and market the IVS-TM-
product. The Company is also presently seeking strategic and financial partners
to help support continued development and marketing of the Company's electric
vehicle systems. No assurance can be given that the Company's
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change in business strategy will prove successful or even beneficial to the
Company. Further, no assurance can be given that the Company will be able to
complete a sale of the IVS-TM- product line, obtain additional funding or
attract strategic or financial partners or that, if such funding or partners
were to be obtained, the electric vehicle or IVS-TM- products could be
successfully developed. If the Company is unable to arrange such a relationship
in the near term, the Company will attempt to sell its proprietary interests and
other assets in and related to these technologies or abandon their development.
No assurance can be given that the Company would be able to effect such a sale
on terms favorable to the Company or at all.
ELECTRIC VEHICLE COST OVERRUNS AND SIGNIFICANT CONTRACT LOSSES
In its results for the nine months ended September 30, 1996, the Company
reported cost overruns on the approximately $9.6 million electric vehicle
contract now in process that resulted in the Company recording charges to
operations for the ultimate estimated loss at completion of the contract of
approximately $1,625,000. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The Company may continue to experience
cost overruns on this contract due to unanticipated design and development
problems and continuing delays in the completion of this contract, as well as
other factors. Furthermore, the customer under the contract is entitled to
withhold 10% of the contract price payable to the Company for a period of time
following the final shipment and to offset such amount against any claims the
customer may have against the Company, including any warranty claims. Any such
withholding and/or offset would further exacerbate the Company's liquidity
problems. The Company will also be obliged to fulfill warranty obligations on
electric vehicles delivered under the contract for a period of one year, which
may result in additional expense to the Company.
UNCERTAIN MARKET DEMAND FOR IVS-TM-; FURTHER REFINEMENT NEEDED; POSSIBLE
DISPOSITION
Development of the first generation IVS-TM- audio navigation product was
completed and commercial sales commenced in December 1995. To date, sales of the
product have been weak due to lower than anticipated consumer acceptance of the
product and overall market demand. In 1995, the Company had pre-production
orders for approximately 2,000 units. As of December 31, 1996, only
approximately 2,700 units had been produced and sold. Of such units,
approximately 270 are subject to one customer's right to return units for a
refund of approximately $77,000. No assurance can be given that such units will
not be returned. Moreover, the Company believes that the current IVS-TM- product
is not commercially viable and will require further development, at significant
cost, in order to have a reasonable prospect for commercial viability,
particularly with respect to sales to automobile manufacturers. Based upon the
results to date, the strategy of attempting to sell the IVS-TM- product in the
aftermarket is questionable. As a result of weak demand for the product in its
current form and the capital resources necessary to refine and market it, the
Company is presently seeking to sell the IVS-TM- product line and the Company's
interests in related technology or to find a strategic or financial partner to
help further develop and market the IVS-TM- product. If no such sale or
relationship is consummated in the near future, the Company intends to
discontinue sales and further development of the IVS-TM- and related technology.
See "--Possible Disposition or Abandonment of Electric Vehicle and IVS-TM-
Product Businesses."
POSSIBLE TERMINATION OF LICENSE OF VOICE-RECOGNITION SOFTWARE TECHNOLOGY USED IN
IVS-TM-
The Company has failed to make advance royalty payments required by the
terms of the governing license agreement for certain voice-recognition software
technology used in the IVS-TM-. This license may be terminated by either party
upon a material breach of the agreement by the other party that remains uncured
after a certain grace period. See "Business--Proprietary Rights and Patents." If
the licensor were to terminate such license, in order to continue to manufacture
and sell the IVS-TM-, the Company would either need to reach an accommodation
with such licensor or identify and secure a license to use a substitute software
technology, neither of which can be assured. The adaptation of substitute
software technology under such circumstances might result in additional
development costs to the Company. If the
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Company were unable to reach an accommodation with the licensor or identify and
secure a substitute license, the Company's ability to sell the IVS-TM- product
line and the Company's interests in related technology might be impaired.
LACK OF EXCLUSIVE LICENSES ON IVS-TM- AND HEATED AND COOLED SEATS; POTENTIAL
LOSS OF EXCLUSIVITY OF LICENSE ON RADAR FOR MANEUVERING AND SAFETY
The Company has entered into an agreement with the IVS-TM- licensor, Audio
Navigation Systems, LLC ("ANS"), formerly Audio Navigation Systems, Inc., which
resolved prior differences of interpretation of the license agreement covering
the IVS-TM- technology. The new agreement provides, among other things, that ANS
can produce, market and/or license others to make and sell products
incorporating certain improvements made by the Company to the IVS-TM- technology
that could compete directly with the Company's IVS-TM- product. The Company
believes that ANS may introduce a competitive product in 1997. Such competition
could have an adverse effect on the value of the Company's IVS-TM- product and
on any future versions of such product. The Company also lacks an exclusive
license for its heated and cooled seat technology. Consequently, such technology
may be licensed to other entities, which may introduce seat products competitive
with those of the Company. Such competitive products may be superior to the
Company's seat products, and such competition may have a material adverse effect
on sales of the Company's seat products and on the business and financial
condition of the Company. See "Business-- Proprietary Rights and Patents."
The Company's exclusive license from the Regents of the University of
California for the Company's radar technology requires the Company to achieve
commercial sales of products by the end of 1998. Commercial sales are defined as
sales of non-prototype products to at least one original equipment manufacturer.
Failure to achieve commercial sales for a particular application will result in
the loss of exclusivity of the license for that application, in which event the
licensor will have the right to grant other entities a non-exclusive license for
that application on terms no more favorable than those enjoyed by the Company.
See "Business--Proprietary Rights and Patents."
LIMITED PROTECTION OF PATENTS AND PROPRIETARY RIGHTS; POTENTIAL DISPUTE WITH
LICENSOR OF SEAT TECHNOLOGY
The Company believes that patents and proprietary rights have been and will
continue to be important in enabling the Company to compete. There can be no
assurance that any patents will be granted or that the Company's or its
licensors' patents and proprietary rights will not be challenged or circumvented
or will provide the Company with any meaningful competitive advantages or that
any pending patent applications will issue. Furthermore, there can be no
assurance that others will not independently develop similar products or will
not design around any patents that have been or may be issued to the Company or
its licensors. Failure to obtain patents in certain foreign countries may
materially adversely affect the Company's ability to compete effectively in
certain international markets. The Company is aware that an unrelated party
filed a patent application in Japan on March 30, 1992 with respect to certain
improvements to the CCS technology developed by the Company. See
"Business--Proprietary Rights and Patents."
The Company has a different understanding regarding technology improvements
made by the Company than that of the licensor of certain technology used in the
Company's heated and cooled seats. Such licensor has informed the Company that
he believes that he is entitled to a license to use any improvements to such
technology that the Company might develop. If such licensor were deemed to have
such rights to use such improvements, such licensor may develop and sell seat
products competitive with those of the Company, which competition may have a
material adverse effect on sales of the Company's seats and its business and
financial condition generally.
The Company also relies on trade secrets that it seeks to protect, in part,
through confidentiality and non-disclosure agreements with employees, customers
and other parties. There can be no assurance that
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these agreements will not be breached, that the Company would have adequate
remedies for any such breach or that the Company's trade secrets will not
otherwise become known to or independently developed by competitors. To the
extent that consultants, key employees or other third parties apply
technological information independently developed by them or by others to the
Company's proposed projects, disputes may arise as to the proprietary rights to
such information which may not be resolved in favor of the Company. The Company
may be involved from time to time in litigation to determine the enforceability,
scope and validity of proprietary rights. Any such litigation could result in
substantial cost to the Company and diversion of effort by the Company's
management and technical personnel. Additionally, with respect to licensed
technology, there can be no assurance that the licensor of the technology will
have the resources, financial or otherwise, or desire to defend against any
challenges to the rights of such licensor to its patents.
DEPENDENCE ON ACCEPTANCE BY AUTOMOBILE MANUFACTURERS AND CONSUMERS; MARKET
COMPETITION
The Company's ability to successfully market its seats and radar products
will in large part be dependent upon the willingness of automobile manufacturers
to incur the substantial expense involved in the purchase and installation of
the Company's products and systems, and, ultimately, upon the acceptance of the
Company's products by consumers. The Company's potential customers may be
reluctant to modify their existing automobile models, where necessary, to
incorporate the Company's products. In addition, automobile manufacturers may be
reluctant to purchase key components from a small, development-stage company
with limited financial and other resources. The Company's ability to
successfully market its seats and radar products will also be dependent in part
upon its ability to persuade automobile manufacturers that the Company's
products are sufficiently unique that they cannot be obtained elsewhere. See
"--Competition; Possible Obsolescence of Technology" and "--Lack of Exclusive
Licenses on IVS-TM- and Heated and Cooled Seats; Potential Loss of Exclusivity
of License on Radar for Maneuvering and Safety." There can be no assurance that
the Company will be successful in this effort. Furthermore, in the event the
Company is successful in obtaining favorable responses from automobile
manufacturers, the Company may need to license its technology to potential
competitors to ensure adequate additional sources of supply in light of
automobile manufacturers' reluctance to purchase products from a sole source
supplier (particularly where the continued viability of such supplier is in
doubt, as may be the case with the Company). Acceptance of the Company's
components and systems for electric vehicles is dependent upon market acceptance
of electric vehicles, as to which there can be no assurance.
LACK OF CAPITAL TO FUND PROPOSED ELECTRIC VEHICLE JOINT VENTURE; STRATEGY
UNTESTED; INCREASED LOSSES RESULTING FROM WRITE-OFF OF CAPITALIZED EXPENSES IN
1996 FOURTH QUARTER
In February 1996, the Company entered into a memorandum of understanding
(which by its original terms expired on August 29, 1996 but has since been
extended until February 28, 1997) with a strategic partner to enter into a
proposed joint venture in India to develop, market and/or manufacture electric
vehicles. The terms of the joint venture call for the Company to contribute cash
in the approximate amount of $2.2 million as well as the design and certain
tooling for production of the electric vehicles to the joint venture in exchange
for a minority equity stake. The Company presently lacks the capital to make
such a financial contribution to a joint venture entity, and currently does not
propose to apply any of the net proceeds of the Offering for such purpose. See
"Business--Electric Vehicles" and "Use of Proceeds." Accordingly, unless the
terms of the joint venture were to be revised so as to eliminate or
substantially reduce the Company's required capital contribution, or unless the
Company can find a new or additional joint venture partner, the Company would be
unable to participate in the proposed joint venture on its original terms. No
assurance can be given that the Company will be able to reduce its required
capital contribution to the proposed joint venture or obtain additional
financing for the proposed joint venture. Furthermore, there can be no assurance
that the Company and its proposed partner will ever consummate the proposed
joint venture.
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Even if the Company were able to obtain sufficient funding to participate in
the proposed joint venture in India or similar joint ventures in other
countries, there can be no assurance that the governments of such countries
would grant the necessary permits, authority and approvals for any such joint
venture or similar enterprise or for the development, manufacture and sale of
electric vehicles, that consumer interest would be sufficient or economic
factors affecting consumer demand would be favorable to make such ventures
financially feasible, or that competition will not exist or develop that would
materially adversely affect the financial feasibility of such ventures. In
addition, many of the Company's competitors in the electric vehicle market have
greater financial resources than the Company. See "--Dependence on Acceptance by
Automobile Manufacturers and Consumers; Market Competition" and "--Competition;
Possible Obsolescence of Technology."
Prior to December of 1996, the Company treated certain costs totaling
approximately $700,000 incurred in connection with prototype development in
anticipation of the formation of the Indian joint venture as capitalized
expenses. Because the joint venture may not be viable, the Company will treat
such costs as current period expenses in December of 1996. Such expenses will
increase losses during the fourth quarter of 1996 by approximately $700,000. See
"--Potential Charges to Income" and Note 15 to Notes to Financial Statements.
LIMITED MANUFACTURING EXPERIENCE
To date, the Company has been engaged in only limited manufacturing,
principally of the IVS-TM- in small quantities, and there can be no assurance
that the Company's efforts to establish its manufacturing operations for any of
its products (including electric vehicles) will not exceed estimated costs or
take longer than expected or that other unanticipated problems will not arise
which will materially adversely affect the Company's operations, financial
condition and/or business prospects. The Company has already experienced
significant delays and cost overruns in connection with its electric vehicle
contracts. See "--Electric Vehicle Cost Overruns and Significant Contract
Losses." Automobile manufacturers demand on-time delivery of quality products,
and some have required the payment of substantial financial penalties for
failure to deliver components to their plants on a timely basis. Such penalties,
as well as costs to avoid them, such as working overtime and overnight air
freighting parts that normally are shipped by other less expensive means of
transportation, could have a material adverse effect on the Company's business
and financial condition. Moreover, the inability to meet demand for the
Company's products on a timely basis would materially adversely affect the
Company's reputation and prospects. The Company currently is seeking to identify
and hire a vice president of operations with manufacturing experience. However,
no assurance can be given that the Company will be successful in identifying,
hiring or retaining such an individual on terms affordable to the Company (or on
any terms).
RESTATEMENT OF 1996 1ST QUARTER AND 2ND QUARTER FINANCIAL RESULTS
On October 24, 1996, the Company filed two Forms 10-Q/A amending the
Company's quarterly reports on Form 10-Q for the periods ended March 31, 1996
and June 30, 1996, respectively, to adjust revenues and expenses associated with
development contracts. In the six months ended June 30, 1996, these adjustments
resulted in a decrease in revenues from development contracts of $1,500,000 and
a decrease in expenses related to direct development contract costs of $570,000,
which caused an increased operating loss and net loss of $930,000. Net loss per
share for such period increased by $.23. The decrease in revenues from
development contracts for the six months ended June 30, 1996 consisted of
approximately $800,000 related to errors in the calculation of the revenue
recognized under the Company's major electrical vehicle development contract.
The correction of these errors also resulted in an increase in direct
development contract costs of approximately $130,000 for the six months ended
June 30, 1996. The remaining decrease in development contract revenue of
approximately $700,000 related to the reversal of $700,000 in revenue and an
equal amount of associated contract costs recognized prior to the finalization
of the Company's proposed joint venture in India and related contracts
therefrom. The $700,000 in costs
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were recorded as deferred contract costs. See "Lack of Capital to Fund Proposed
Electric Vehicle Joint Venture; Strategy Untested; Write-off of Capitalized
Expenses in 1996 Fourth Quarter."
DEPENDENCE ON AND STRAINED RELATIONS WITH VENDORS AND SUPPLIERS
The Company is dependent on various vendors and suppliers for the components
of its products. Although the Company believes that there are a number of
alternative sources for most of these components, certain components are only
available from a limited number of suppliers. Due to the Company's recent cash
shortfalls, the Company has been unable to pay most of its vendors and suppliers
on a timely basis. As a result, the Company believes that its relations with
many of its vendors and suppliers may be strained. Many of such vendors and
suppliers will no longer extend trade credit to the Company. There can be no
assurance that any of such vendors and suppliers will not limit or cease doing
business with the Company in the future or further alter the terms on which they
do business with the Company. The loss of any significant supplier, in the
absence of a timely and satisfactory alternative arrangement, or an inability to
obtain essential components on reasonable terms or at all, could materially
adversely affect the Company's business and operations. The Company's business
and operations could also be materially adversely affected by delays in
deliveries from suppliers.
DEFAULT UNDER BANK CREDIT LINE
The Company has a secured line of credit from a commercial bank to borrow
funds based on costs incurred and billings made under a major electric vehicle
development contract. The Company has experienced significant delays and cost
overruns under such electric vehicle contract, which may delay or impair the
Company's ability to collect the remaining payments due under this contract. See
"--Electric Vehicle Cost Overruns and Significant Contract Losses." The line of
credit is secured by a security interest in all of the Company's personal
property, including, but not limited to, all accounts receivable, equipment,
inventory and general intangibles. As of February 4, 1997, the Company had
approximately $1,185,000 outstanding under the secured line of credit. The
Company intends to use part of the proceeds of the Offering to repay all amounts
due under the line of credit. See "Use of Proceeds." The line of credit expired
by its terms but has been extended orally until February 28, 1997. The Company
has sought, and the bank has advised the Company that it will soon deliver, a
written extension to such date. However, the delivery of such a written
extension cannot be assured.
The Company has breached certain financial and other covenants under the
line of credit, which defaults entitle the bank to declare all sums outstanding
under the line of credit immediately due and payable. Any exercise by the bank
of its rights and remedies under the line of credit prior to the repayment of
all amounts due thereunder would have a material adverse effect on the Company.
However, the bank has agreed orally to forbear until February 28, 1997 from
exercising its rights and remedies with respect to such breaches. The Company
has sought, and the bank has advised the Company that it will soon deliver, a
written forbearance to such date. However, the delivery of a written forbearance
to such date cannot be assured. The Company has agreed that it will not be
entitled to make any further borrowings under the line of credit. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Liquidity and Capital Resources."
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Class A Common Stock by existing stockholders pursuant to
Rule 144 under the Securities Act, pursuant to the Subsequent Offering or
otherwise, or the potential of such sales, could have an adverse effect on the
price of the Company's securities. Pursuant to the Subsequent Offering,
1,620,000 Selling Securityholder Warrants and the underlying Class A Common
Stock will be registered for resale subsequent to this Offering, subject to a
contractual restriction that the Selling Securityholders not sell any of the
Selling Securityholder Warrants for at least 90 days after the date of this
Prospectus and, during the period from 91 to 270 days after the date of this
Prospectus, may only sell specified percentages of such
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Selling Securityholder Warrants. Approximately 7,068,500 shares of Class A
Common Stock are outstanding prior to completion of the Offering. 3,000,000 of
such shares are Escrow Shares not transferable unless released from escrow
pursuant to the Escrow Agreement. See "Principal Shareholders--Escrow Shares."
Of the 4,068,500 shares of Class A Common Stock outstanding prior to the
Offering that are not Escrow Shares, 795,197 are "restricted securities," all of
which are currently eligible for sale pursuant to Rule 144 under the Securities
Act. However, all directors and executive officers of the Company and certain
holders of the outstanding shares of Class A Common Stock have agreed not to
sell any shares of Common Stock for a period of 13 months from the date of this
Prospectus without the prior written consent of the Underwriter. In addition,
the holders of the Unit Purchase Option and the holders of 750,000 shares of
Class A Common Stock and the holders of warrants to purchase 278,608 shares of
Class A Common Stock have certain demand and "piggy-back" registration rights
with respect to their securities. Exercise of such rights could involve
substantial expense to the Company. See "Description of Securities," "Shares
Eligible for Future Sale," "Subsequent Offering" and "Underwriting."
In connection with certain threatened claims against the Company and its
directors and officers, certain of the Company's shareholders have indicated to
the Company that they may attempt to sell all or part of their holdings of Class
A Common Stock. See "--Legal Proceedings."
OUTSTANDING OPTIONS AND WARRANTS
Upon completion of this Offering, the Company will have outstanding (i)
4,760,000 Class A Warrants to purchase shares of Class A Common Stock; (ii) the
Selling Securityholder Warrants to purchase 1,620,000 shares of Class A Common
Stock; (iii) the Unit Purchase Option to purchase an aggregate of 952,000 shares
of Class A Common Stock, assuming exercise of the underlying Class A Warrants;
(iv) 530,000 shares of Class A Common Stock reserved for issuance upon exercise
of options under the Company's 1993 Stock Option Plan, under which options to
purchase 312,236 shares of Class A Common Stock are outstanding; and (v)
warrants to purchase 288,608 shares of Class A Common Stock. Holders of such
warrants and options are likely to exercise them when, in all likelihood, the
Company could obtain additional capital on terms more favorable than those
provided by such warrants and options. Further, while these warrants and options
are outstanding, the Company's ability to obtain additional financing on
favorable terms may be adversely affected.
LEGAL PROCEEDINGS
HBI Financial Inc. ("HBI"), and DDJ Capital Management LLC ("DDJ"), each
major shareholders of the Company, have threatened various claims against the
Company and its directors and officers arising out of the December 1995 private
placement by the Company of 750,000 shares of Class A Common Stock. In general,
they allege that the Company provided misleading projections and failed to
disclose certain information in connection with such private placement. The
Company believes these allegations to be without merit. While, to the Company's
knowledge, HBI and DDJ have commenced no legal action against the Company in
connection with such claims, no assurance can be given that they will not do so
in the future. If they were to commence such legal action, the Company would be
forced to defend such action and/or settle with them, the costs of which defense
and/or any resulting liability or settlement could have a material adverse
effect on the Company's financial condition. John W. Clark, a director of the
Company, is a general partner of an affiliate of HBI.
The Company is subject to other litigation in the ordinary course of its
business, none of which is expected to have a material adverse effect on the
Company. See "Business--Legal Proceedings."
LIMITED MARKETING CAPABILITIES; UNCERTAINTY OF MARKET ACCEPTANCE
Because of the sophisticated nature and early stage of development of its
products, the Company will be required to educate potential customers and
successfully demonstrate that the merits of the Company's products justify the
costs associated with such products. In certain cases, the Company will likely
encounter resistance from customers reluctant to make the modifications
necessary to incorporate the Company's
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products into their products or production processes. In some instances, the
Company may be required to rely on its distributors or other strategic partners
to market its products. The success of any such relationship will depend in part
on the other party's own competitive, marketing and strategic considerations,
including the relative advantages of alternative products being developed and/or
marketed by any such party. There can be no assurance that the Company will be
able to market its products properly so as to generate meaningful product sales.
TIME LAG FROM PROTOTYPE TO COMMERCIAL SALES
The sales cycle in the automotive components industry is lengthy and can be
as long as six years or more for products that must be designed into a vehicle,
since some companies take that long to design and develop a car. Even when
selling parts that are neither safety-critical nor highly integrated into the
vehicle, there are still many stages that an automotive supply company must go
through before achieving commercial sales. The sales cycle is lengthy because an
automobile manufacturer must develop a high degree of assurance that the
products it buys will meet customer needs, interface as easily as possible with
the other parts of a vehicle and with the automobile manufacturer's production
and assembly process, and have minimal warranty, safety and service problems. In
the case of electric vehicles, another factor affecting the pace of
commercialization is the pace of development of the electric vehicle industry
itself. Since that industry has been and probably will continue to be slow to
develop, electric vehicle products can generally be expected to require even
longer times for commercialization than products intended for use in
conventional gasoline-powered vehicles.
SPECIAL FACTORS APPLICABLE TO THE AUTOMOTIVE INDUSTRY IN GENERAL
The automobile industry is cyclical and dependent on consumer spending. The
Company's future sales may be subject to the same cyclical variations as the
automotive industry in general. There have been recent reports of declines in
sales of automobiles on a worldwide basis, and there can be no assurance that
continued or increased declines in automobile production would not have a
material adverse effect on the Company's business or prospects. Additionally,
automotive customers typically reserve the right to unilaterally cancel
contracts completely or to require unilateral price reductions. Although they
generally reimburse companies for actual out-of-pocket costs incurred with
respect to the particular contract up to the point of cancellation, these
reimbursements typically do not cover costs associated with acquiring general
purpose assets such as facilities and capital equipment, and may be subject to
negotiation and substantial delays in receipts by the Company. Any unilateral
cancellation of, or price reduction with respect to, any contract that the
Company may obtain could reduce or eliminate any financial benefits anticipated
from such contract and could have a material adverse effect on the Company's
financial condition and results of operations.
COMPETITION; POSSIBLE OBSOLESCENCE OF TECHNOLOGY
The automotive component and electric vehicle industries are subject to
intense competition. Most of the Company's competitors are substantially larger
in size, have substantially greater financial, marketing and other resources
than the Company, and have more extensive experience and records of successful
operations than the Company. Competition extends to attracting and retaining
qualified technical and marketing personnel. There can be no assurance that the
Company will successfully differentiate its products from those of its
competitors, that the marketplace will consider the Company's current or
proposed products to be superior or even comparable to those of its competitors,
or that the Company can succeed in establishing relationships with automobile
manufacturers. Furthermore, no assurance can be given that competitive pressures
faced by the Company will not adversely affect its financial performance. Due to
the rapid pace of technological change, the Company's products may even be
rendered obsolete by future developments in the industry. The Company's
competitive position would be adversely affected if it were unable to anticipate
such future developments and obtain access to the new technology. See
"Business--Competition."
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<PAGE>
DEPENDENCE ON KEY PERSONNEL; NEED TO RETAIN TECHNICAL PERSONNEL
The Company's success will depend to a large extent upon the continued
contributions of Lon E. Bell, Ph.D., Chief Executive Officer, President and
Chairman of the Board of Directors and the founder of the Company, and Joshua M.
Newman, Vice President of Corporate Development and Planning and a Director. The
Company has obtained key-person life insurance coverage in the amount of
$2,000,000 on the life of Dr. Bell and in the amount of $2,000,000 on the life
of Mr. Newman. Neither Dr. Bell nor Mr. Newman is bound by an employment
agreement with the Company. The loss of the services of Dr. Bell, Mr. Newman or
any of the Company's executive personnel could materially adversely affect the
Company. The success of the Company will also depend, in part, upon its ability
to retain qualified engineering and other technical and marketing personnel.
There is significant competition for technologically qualified personnel in the
geographical area of the Company's business and the Company may not be
successful in recruiting or retaining sufficient qualified personnel.
RELIANCE ON MAJOR CONTRACTORS; RISKS OF INTERNATIONAL OPERATIONS
The Company has in the past engaged certain outside contractors to perform
product assembly and other production functions for the Company, and the Company
anticipates that it may desire to engage contractors for such purposes in the
future. The Company believes that there are a number of outside contractors that
provide services of the kind that have been used by the Company in the past and
that the Company may desire to use in the future. However, no assurance can be
given that any such contractors would agree to work for the Company on terms
acceptable to the Company or at all. The Company's inability to engage outside
contractors on acceptable terms or at all would impair the Company's ability to
complete any development and/or manufacturing contracts for which outside
contractors' services may be needed. Moreover, the Company's reliance upon third
party contractors for certain production functions will reduce the Company's
control over the manufacture of its products and will make the Company dependent
in part upon such third parties to deliver its products in a timely manner, with
satisfactory quality controls and on a competitive basis.
Furthermore, the Company may engage contractors located in foreign
countries. Accordingly, the Company will be subject to all of the risks inherent
in international operations, including work stoppages, transportation delays and
interruptions, political instability, foreign currency fluctuations, economic
disruptions, the imposition of tariffs and import and export controls, changes
in governmental policies and other factors which could have an adverse effect on
the Company's business.
POTENTIAL CHARGES TO INCOME
In connection with the Company's initial public offering completed in 1993,
the Escrow Shares were placed (and currently remain) in an escrow account, and
are subject to release to the beneficial owners of such shares in the event the
Company attains certain pre-tax income goals. In the event any Escrow Shares are
released to persons who are current or former officers or other employees of the
Company, compensation expense will be recorded for financial reporting purposes.
Accordingly, in the event of the release of the Escrow Shares from escrow, the
Company will recognize during the periods in which the earnings thresholds are
met or are probable of being met one or more substantial non-cash charges which
would have the effect of substantially increasing the Company's loss or reducing
or eliminating earnings, if any, at such time. Although the amount of
compensation expense recognized by the Company will not affect the Company's
total shareholders' equity or reduce its working capital, it may have a
depressive effect on the market price of the Company's securities. The Company
also expects to incur a non-recurring charge to operations in each fiscal
quarter up to and including the fiscal quarter in which the closing of the
Offering occurs relating to the repayment of the Bridge Notes and associated
costs of their issuance the aggregate amount of which, together with the charge
the Company will incur upon repayment of the Bridge Notes, will be approximately
$500,000. In addition, during the fourth quarter of 1996, the Company will incur
a charge of approximately $700,000 related to costs incurred in connection with
the Company's proposed Indian joint venture. See "Principal Shareholders--Escrow
Shares," "Management's Discussion and Analysis of Financial Condition and
Results of
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<PAGE>
Operations" and "--Lack of Capital to Fund Proposed Electric Vehicle Joint
Venture; Strategy Untested; Write-off of Capitalized Expenses in 1996 Fourth
Quarter."
POTENTIAL PRODUCT LIABILITY
The Company's business will expose it to potential product liability risks
which are inherent in the manufacturing, marketing and sale of automotive
components. In particular, there may be substantial warranty and liability risks
associated with critical safety components of the Company's products. If
available, product liability insurance generally is expensive. While the Company
presently has $5,000,000 of product liability coverage with respect to the
IVS-TM- product and its electric vehicle prototypes, there can be no assurance
that it will be able to obtain or maintain such insurance on acceptable terms
with respect to other products the Company may develop, or that any insurance
obtained will provide adequate protection against any potential liabilities. In
the event of a successful claim against the Company, a lack or insufficiency of
insurance coverage could have a material adverse effect on the Company's
business and operations.
DEPENDENCE ON GRANTS; GOVERNMENT AUDITS OF GRANTS
For the year ended December 31, 1995, and for the nine months ended
September 30, 1996, the Company received a total of $1,469,000 and $1,454,000,
respectively, in federal and state government grants to fund the Company's
development of various of its products, including electric vehicles. As a result
of budgetary pressures, fewer federal and state grants of the kind obtained by
the Company in the past are available and those that are available are
increasingly difficult to obtain. No assurance can be given as to whether the
Company will be able to obtain any such grants in the future.
The Company's grants are subject to periodic audit by the granting
government authorities for the purpose of confirming, among other things,
progress in development and that grant moneys are being used and accounted for
as required by the granting authority. If, as a result of any such audit, a
granting authority were to disallow expenses submitted for reimbursement, such
authority could seek recovery of such funds from the Company. The Company is not
aware of any pending or threatened audits with respect to the Company's grants
and does not have any reason to believe that any grant moneys have been applied
in a manner inconsistent with grant requirements or that any grant audits are
otherwise warranted or likely. However, no assurance can be given that any such
audits will not be commenced in the future or that, if commenced, any such
audits would not result in an obligation of the Company to reimburse funds to
the granting authority.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Units in the Offering will experience immediate and
substantial dilution of approximately $1.81 or 51% per share in the net tangible
book value per share of Class A Common Stock. Additional dilution to public
investors may result to the extent that the Class A Warrants, Unit Purchase
Option or other outstanding options or warrants to purchase Class A Common Stock
are exercised at a time when the net tangible book value per share exceeds the
exercise price of such securities. See "Dilution."
NO DIVIDENDS
The Company has not paid any cash dividends on its Common Stock since its
inception and, by reason of its present financial status and its contemplated
financial requirements, does not anticipate paying any cash dividends in the
foreseeable future. It is anticipated that earnings, if any, which may be
generated from operations will be used to finance the operations of the Company.
FLUCTUATIONS IN QUARTERLY RESULTS; SIGNIFICANT DECLINE IN REVENUES EXPECTED;
POSSIBLE VOLATILITY OF STOCK PRICE
Factors such as announcements by the Company of quarterly variations in its
financial results, or unexpected losses, could cause the market price of the
Class A Common Stock of the Company to fluctuate significantly. The results of
operations in previous quarters have been partially dependent on
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<PAGE>
large grants, orders and development contracts, which may not recur in the
future. In addition, the Company's quarterly operating results may fluctuate
significantly in the future due to a number of other factors, including timing
of product introductions by the Company and its competitors, availability and
pricing of components from third parties, timing of orders, foreign currency
exchange rates, technological changes and economic conditions generally.
Development contract revenues are expected to decline significantly in the next
two fiscal quarters because the activity on the Company's major electric vehicle
development contract is expected to diminish during the fourth quarter of 1996
and ultimately conclude at the end of 1996 with no replacement contract
presently scheduled to follow. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." In recent years, the stock
markets in general, and the share prices of technology companies in particular,
have experienced extreme fluctuations. These broad market and industry
fluctuations may adversely affect the market price of the Class A Common Stock.
In addition, failure to meet or exceed analysts' expectations of financial
performance may result in immediate and significant price and volume
fluctuations in the Class A Common Stock.
POTENTIAL CONFLICTS OF INTEREST
Affiliates of Lon E. Bell, Ph.D., Chief Executive Officer, President,
Chairman of the Board of Directors, founder and a principal shareholder of the
Company, are parties to certain business contracts and arrangements with the
Company. These contracts and arrangements include the Company's lease of a
manufacturing and office facility located in Alameda, California from CALSTART,
a non-profit research and development consortium co-founded by Dr. Bell, several
management contracts pursuant to which the Company manages certain electric
vehicle grant programs obtained by CALSTART and an engineering design services
contract pursuant to which the Company periodically engages Adaptrans, an entity
owned by David Bell, Dr. Bell's son, to provide assistance with the Company's
development of its electric vehicle Energy Management System. In addition, Dr.
Bell has extended a $200,000 working capital loan to the Company that is payable
on demand and a $100,000 working capital loan that is due and payable on the
earlier of March 1, 1997 or the day after the completion of the Offering. See
"Certain Transactions." These relationships and transactions, coupled with Dr.
Bell's ownership of a significant percentage of the Company's Class A Common
Stock and his membership on the Board of Directors, could give rise to conflicts
of interest. The Company believes that such affiliate transactions are on terms
no less favorable to the Company than those that could have been obtained from
unaffiliated third parties.
John W. Clark, a director of the Company, is a general partner of an
affiliate of HBI. HBI and DDJ, each major shareholders of the Company, have
threatened various claims against the Company and its directors and officers
arising out of the December 1995 private placement by the Company of 750,000
shares of Class A Common Stock. See "--Legal Proceedings." While to the
Company's knowledge neither HBI nor DDJ has commenced any legal action against
the Company, no assurance can be given that any such legal action will not be
commenced in the future. The relationship of Mr. Clark with HBI, coupled with
the fact that he is a member of the Company's Board of Directors, could give
rise to conflicts of interest.
SIGNIFICANT INFLUENCE OF PRINCIPAL SHAREHOLDER
Upon completion of the Offering, the Company's principal shareholder, Dr.
Bell, will beneficially own approximately 29% of the outstanding shares of Class
A Common Stock of the Company (approximately 28% if the Underwriters'
over-allotment option is exercised in full) and, therefore, will have the power
to influence significantly the management and policies of the Company. See
"Principal Shareholders" and "Description of Securities."
ANTI-TAKEOVER EFFECTS OF UNISSUED PREFERRED STOCK
The Company's Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
shareholders. The rights of the holders of Class A Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any shares of
Preferred Stock that may be
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<PAGE>
issued in the future. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. However, the
Company has no present plans to issue shares of Preferred Stock. See
"Description of Securities-- Preferred Stock."
RISK OF FOREIGN SALES
A substantial percentage of the Company's revenues to date have been from
sales to foreign countries. Accordingly, the Company's business is subject to
many of the risks of international operations, including governmental controls,
tariff restrictions, foreign currency fluctuations and currency control
regulations. However, substantially all sales to foreign countries have been
denominated in U.S. dollars. As such, the Company's historical net exposure to
foreign currency fluctuations has not been material. No assurance can be given
that future contracts will be denominated in U.S. dollars, however.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
Commencing one year from the date of this Prospectus, the Class A Warrants
may be redeemed by the Company at a redemption price of $.05 per Warrant upon
not less than 30 days' prior written notice if the closing bid price of the
Class A Common Stock shall have averaged in excess of 175% of the Class A
Warrant exercise price per share for 30 consecutive trading days ending within
15 days of the notice. Redemption of the Class A Warrants could force the
holders (i) to exercise the Class A Warrants and pay the exercise price therefor
at a time when it may be disadvantageous for the holders to do so, (ii) to sell
the Class A Warrants at the then current market price when they might otherwise
wish to hold the Class A Warrants, or (iii) to accept the nominal redemption
price which, at the time the Class A Warrants are called for redemption, is
likely to be substantially less than the market value of the Class A Warrants.
See "Description of Securities--Class A Warrants."
CURRENT PROSPECTUS AND STATE REGISTRATION TO EXERCISE WARRANTS
Holders of Class A Warrants will be able to exercise the Class A Warrants
only if (i) a current prospectus under the Securities Act relating to the
securities underlying the Class A Warrants is then in effect and (ii) such
securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states in which the various holders of Class A
Warrants reside. Although the Company has undertaken and intends to use its best
efforts to maintain a current prospectus covering the securities underlying the
Class A Warrants following completion of the Offering to the extent required by
Federal securities laws, there can be no assurance that the Company will be able
to do so. The value of the Class A Warrants may be greatly reduced if a
prospectus covering the securities issuable upon the exercise of the Class A
Warrants is not kept current or if the securities are not qualified, or exempt
from qualification, in the states in which the holders of Class A Warrants
reside. Persons holding Class A Warrants who reside in jurisdictions in which
such securities are not qualified and in which there is no exemption will be
unable to exercise their Class A Warrants and would either have to sell their
Class A Warrants in the open market or allow them to expire unexercised. If and
when the Class A Warrants become redeemable by the terms thereof, the Company
may exercise its redemption right even if it is unable to qualify the underlying
securities for sale under all applicable state securities laws. See "Description
of Securities--Class A Warrants."
POSSIBLE ADVERSE EFFECT ON LIQUIDITY OF THE COMPANY'S SECURITIES DUE TO THE
INVESTIGATION OF D.H. BLAIR INVESTMENT BANKING CORP. AND D.H. BLAIR & CO.,
INC. BY THE SECURITIES AND EXCHANGE COMMISSION
The Commission is conducting an investigation concerning various business
activities of the Underwriter and D.H. Blair & Co., Inc. ("Blair & Co."), a
selling group member which will distribute substantially all of the Units
offered hereby. The investigation appears to be broad in scope, involving
numerous aspects of the Underwriter's and Blair & Co.'s compliance with the
Federal securities laws and
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compliance with the Federal securities laws by issuers whose securities were
underwritten by the Underwriter or Blair & Co., or in which the Underwriter or
Blair & Co. made over-the-counter markets, persons associated with the
Underwriter or Blair & Co., such issuers and other persons. The Company has been
advised by the Underwriter that the investigation has been ongoing since at
least 1989 and that it is cooperating with the investigation. The Underwriter
cannot predict whether this investigation will ever result in any type of formal
enforcement action against the Underwriter or Blair & Co., or, if so, whether
any such action might have an adverse effect on the Underwriter or the
securities offered hereby. The Company has been advised that Blair & Co. intends
to continue to make a market in the securities following the Offering. An
unfavorable resolution of the Commission's investigation could have the effect
of limiting such firm's ability to make a market in the Company's securities,
which could adversely affect the liquidity or price of such securities. See
"Underwriting."
ADVERSE EFFECT ON LIQUIDITY ASSOCIATED WITH POSSIBLE RESTRICTIONS ON
MARKET-MAKING ACTIVITIES IN THE COMPANY'S SECURITIES
The Underwriter has advised the Company that Blair & Co., among others,
intends to continue to make a market in the Company's securities. Rule 10b-6
under the Securities Act of 1934, as amended (the "Exchange Act"), may prohibit
Blair & Co. from engaging in any market-making activities with regard to the
Company's securities for the period from nine business days (or such other
applicable period as Rule 10b-6 may provide) prior to any solicitation by the
Underwriter of the exercise of Class A Warrants until the later of the
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that the Underwriter may have to receive a fee for the
exercise of Class A Warrants following such solicitation. As a result, Blair &
Co. may be unable to provide a market for the Company's securities during
certain periods while the Class A Warrants are exercisable. In addition, under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the Selling Securityholder Warrants may not simultaneously
engage in market-making activities with respect to any securities of the Company
for the applicable "cooling off" period (at least two and possibly nine business
days) prior to the commencement of such distribution. Accordingly, in the event
the Underwriter or Blair & Co. is engaged in a distribution of the Selling
Securityholder Warrants, neither of such firms will be able to make a market in
the Company's securities during the applicable restrictive period. Any temporary
cessation of such market-making activities could have an adverse effect on the
market price of the Company's securities. The Commission has recently adopted
Regulation M, which will replace Rule 10b-6 and certain other rules promulgated
under the Exchange Act. Upon its effectiveness in March 1997, Regulation M will
result in, among other things, modifications of (i) the restricted or "cooling
off" periods referenced above from two and nine business days (under current
Rule 10b-6) to one and five business days and (ii) the criteria used to
determine the applicable period. See "Underwriting."
ARBITRARY DETERMINATION OF PRICE AND TERMS OF UNITS
The public offering price of the Units and the exercise price and other
terms of the Class A Warrants have been determined in part by negotiation
between the Company and the Underwriter and are not necessarily related to the
Company's asset value, net worth, results of operations or other established
criteria of value. See "Underwriting."
POSSIBLE DELISTING OF SECURITIES FROM THE NASDAQ STOCK MARKET
While the Company's Class A Common Stock is currently listed on the Nasdaq
SmallCap Market and the Class A Warrants meet the current Nasdaq listing
requirements and are expected to be initially listed on Nasdaq, there can be no
assurance that the Company will meet the criteria for continued listing.
Continued inclusion on the Nasdaq generally requires that (i) the Company
maintain at least $2,000,000 in total assets and $1,000,000 in capital and
surplus, (ii) the minimum bid price of the Common Stock be $1.00 per share,
(iii) there be at least 100,000 shares in the public float valued at $200,000 or
more, (iv) the Common Stock have at least two active market makers and (v) the
Common Stock be held by at least 300 holders. Nasdaq
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has recently proposed certain modifications to the listing requirements that
would make them even more stringent. Pursuant to such proposed modifications,
continued inclusion on the Nasdaq would require that (i) the Company maintain
(A) net tangible assets (defined as total assets less total liabilities and
goodwill) of at least $2,000,000, (B) net income of $500,000 in two of the last
three years, or (C) market capitalization of at least $35,000,000, (ii) the
minimum bid price of the Common Stock be $1.00 per share, (iii) there be at
least 500,000 shares in the public float valued at $1,000,000 or more, (iv) the
Common Stock have at least two active market makers and (v) the Common Stock be
held by at least 300 holders.
If the Company is unable to satisfy Nasdaq's maintenance requirements, its
securities may be delisted from Nasdaq. In such event, trading, if any, in the
Class A Common Stock and Class A Warrants would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or on the NASD's
"Electronic Bulletin Board." Consequently, the liquidity of the Company's
securities could be impaired, not only in the number of securities which could
be bought and sold, but also through delays in the timing of transactions,
reduction in security analysts' and the news media's coverage of the Company and
lower prices for the Company's securities than might otherwise be attained.
RISKS OF LOW-PRICED STOCK
If the Company's securities were delisted from Nasdaq (See "--Possible
Delisting of Securities from the Nasdaq Stock Market"), they could become
subject to Rule 15g-9 under the Securities Exchange Act of 1934, which imposes
additional sales practice requirements on broker-dealers which sell such
securities to persons other than established customers and "accredited
investors" (generally, individuals with net worths in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For
transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, such rule may
adversely affect the ability of broker-dealers to sell the Company's securities
and may adversely affect the ability of purchasers in the Offering to sell in
the secondary market any of the securities acquired hereby.
Commission regulations define a "penny stock" to be any non-Nasdaq equity
security that has a market price (as therein defined) of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on Nasdaq and have certain
price and volume information provided on a current and continuing basis or meet
certain minimum net tangible assets or average revenue criteria. There can be no
assurance that the Company's securities will qualify for exemption from these
restrictions. In any event, even if the Company's securities were exempt from
such restrictions, it would remain subject to Section 15(b)(6) of the Exchange
Act, which gives the Commission the authority to prohibit any person that is
engaged in unlawful conduct while participating in a distribution of a penny
stock from associating with a broker-dealer or participating in a distribution
of a penny stock, if the Commission finds that such a restriction would be in
the public interest. If the Company's securities were subject to the rules on
penny stocks, the market liquidity for the Company's securities could be
severely adversely affected.
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USE OF PROCEEDS
The net proceeds of the Offering, at an assumed public offering price of
$1,000 per Unit, are estimated to be approximately $14,841,750 ($17,169,263 if
the Over-Allotment Option is exercised in full) after deducting underwriting
discounts and estimated expenses of the Offering. A portion of the net proceeds
will be allocated to the retirement of debt as follows: (i) the Bridge Notes
bearing interest at 10% per annum and due and payable upon the earlier to occur
of the closing of the Offering or October 31, 1997, in the amount of $2,850,000
plus an estimated $75,000 in accrued interest from October 31, 1996 (the
proceeds from which have been and are being used to finance the Company's
operations, including payments to vendors and suppliers and other general and
administrative expenses, pending completion of the Offering); (ii) all
outstanding amounts due under a secured bank line of credit bearing interest at
the bank's "prime rate" plus 1.3% per annum and due and payable January 31,
1997, but which has been extended orally until February 28, 1997 (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources"), in the amount of approximately
$1,185,000 (the proceeds from which have been and are being used to finance the
Company's performance under a contract to develop passenger electric vehicle
systems for an Asian manufacturing company, and the Company's obligations under
which have been partially guaranteed by Lon E. Bell, Ph.D., Chief Executive
Officer, President and Chairman of the Board of Directors, founder of the
Company and a principal shareholder of the Company); (iii) the September 1996
working capital loan made by Dr. Bell bearing interest at 8% per annum and due
and payable on demand, in the principal amount of $200,000 (the proceeds from
which were used to augment the Company's short-term working capital) and (iv)
the January 1997 working capital loan made by Dr. Bell, in the principal amount
of $100,000, bearing interest at 10% per annum and due and payable on the
earlier of March 1, 1997 or the day after the closing of the Offering (the
proceeds from which were used to augment the Company's short-term working
capital). In addition, the Company intends to apply approximately $100,000 of
the net proceeds of the Offering to pay deferred executive salaries. The Company
intends to apply the balance of the net proceeds of the Offering (approximately
$10,331,750) to fund near-term production engineering, manufacturing, research
and development and marketing of its products, allocated approximately as
follows: $8,831,750 to the Company's thermoelectric heated and cooled seats and
radar for maneuvering and safety technologies, and $1,500,000 to the Company's
electric vehicle components and production systems technologies and voice
interactive navigation and entertainment. To the extent that the Company has net
proceeds from the Offering that it is not able to use for the foregoing
purposes, the Company intends to use such net proceeds for general corporate
purposes. Pending the uses described above, the net proceeds of the Offering
will be invested in short-term interest-bearing securities or money market
funds.
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The following table sets forth the anticipated approximate uses of the net
proceeds from the Offering as described above:
<TABLE>
<CAPTION>
% OF NET
$ AMOUNT PROCEEDS
------------- --------------
<S> <C> <C>
Retirement of Debt:
Repayment of Bridge Notes (with interest)................................. $ 2,925,000 19.7%
Repayment of Secured Credit Line.......................................... 1,185,000 8.0
Repayment of Working Capital Loans from Dr. Bell.......................... 300,000 2.0
-------------
Total Debt Retirement................................................. 4,410,000 29.7
Payment of Deferred Executive Salaries...................................... 100,000 0.7
Working Capital(1):
Thermoelectric Heated and Cooled Seats/Radar.............................. 8,831,750 59.5
Electric Vehicle Components and Production Systems and IVS-TM-............ 1,500,000 10.1
-------------
Total Working Capital................................................. 10,331,750 69.6
------------- -----
Total All Uses.............................................................. $ 14,841,750 100.0%
------------- -----
------------- -----
</TABLE>
- ------------------------
(1) Consists of operating expenses, including production, engineering,
manufacturing, research and development, marketing costs and corporate
overhead.
The amounts and timing of such expenditures may vary significantly depending
upon numerous factors, including the progress of the Company's research and
development programs, the timing of development contracts and grant funding, if
any, technological advances, determinations as to commercial potential and the
status of competitive products. Expenditures may also be dependent upon the
establishment of strategic arrangements with other companies, the availability
of financing and other factors. Subject to the variables set forth above, the
Company anticipates that the net proceeds of this Offering, together with its
existing resources, should be sufficient to finance its working capital
requirements for approximately the next 12 months.
23
<PAGE>
DILUTION
The following discussion and tables allocate no value to the Class A
Warrants and assume no exercise of the Underwriter's Over-Allotment Option.
As of September 30, 1996, the Company had a net tangible book value of
$1,004,000 or approximately $.25 per share of Class A Common Stock. Net tangible
book value per share represents the amount of the Company's total tangible
assets, less liabilities, divided by the number of shares of Class A Common
Stock outstanding (excluding the Escrow Shares). Giving retroactive effect to
the sale of the 17,000 Units offered hereby at an assumed offering price of
$1,000 per Unit and receipt of the estimated net proceeds therefrom, and giving
pro forma effect to the $500,000 charge to operations to be incurred upon
repayment of the Bridge Notes, the pro forma net tangible book value at
September 30, 1996 would have been $1.76 per share, representing an immediate
increase in net tangible book value of $1.51 per share to the present
shareholders and an immediate dilution of $1.81 per share to new investors from
the public offering price. Dilution per share represents the difference between
the public offering price and the pro forma net tangible book per share value
after the Offering.
The following table illustrates the per share dilution to be incurred by
public investors from the public offering price:
<TABLE>
<S> <C> <C>
Assumed public offering price per share of Class A Common Stock................ $ 3.57
Net tangible book value before Offering.................................... .25
Increase attributable to new investors..................................... 1.51
---
Pro forma net tangible book value after Offering............................... 1.76
---------
Dilution of net tangible book value to new investors........................... $ 1.81
---------
---------
</TABLE>
The following table sets forth the difference between the present
shareholders and the public investors with respect to the number of shares of
Class A Common Stock purchased from the Company, the total consideration paid
and the average price per share:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF AVERAGE PRICE
NUMBER TOTAL AMOUNT TOTAL PER SHARE
-------------- ------------ ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Current Shareholders........................ 4,068,500(1) 46% $ 20,045,000 54% $ 4.93
Investors in the Offering................... 4,760,000 54% 17,000,000 46% $ 3.57
-------------- ----- ------------- -----
8,828,500(1) 100% $ 37,045,000 100%
-------------- ----- ------------- -----
-------------- ----- ------------- -----
</TABLE>
- ------------------------
(1) Excludes the Escrow Shares. See "Principal Shareholders--Escrow Shares."
24
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Class A Common Stock has traded on the Nasdaq SmallCap Market
under the symbol ARGNA since June 10, 1993. The Company has applied for
inclusion of the Class A Warrants on the Nasdaq SmallCap Market. The Units will
not be listed or traded separately on Nasdaq. The following table sets forth the
high and low bid prices for the Class A Common Stock as reported on the Nasdaq
SmallCap Market for each quarterly period (or part thereof) from the beginning
of the first quarter of 1994 through December 31, 1996.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1994
1st Quarter.............................................................. $ 10.00 $ 7.50
2nd Quarter.............................................................. 9.75 8.00
3rd Quarter.............................................................. 10.00 9.00
4th Quarter.............................................................. 12.00 9.75
1995
1st Quarter.............................................................. 13.50 9.50
2nd Quarter.............................................................. 10.50 9.50
3rd Quarter.............................................................. 12.50 9.00
4th Quarter.............................................................. 11.25 10.25
1996
1st Quarter.............................................................. 10.75 10.00
2nd Quarter.............................................................. 12.00 9.00
3rd Quarter.............................................................. 11.00 7.25
4th Quarter.............................................................. 7.00 4.75
</TABLE>
The last reported sales price of the Class A Common Stock on the Nasdaq
SmallCap Market on February 4, 1997 was $5.625 per share. As of February 4,
1997, there were approximately 49 holders of record of the Class A Common Stock
(not including beneficial owners holding shares in nominee accounts).
The Company has not paid any cash dividends since its formation and, given
its present financial status and its anticipated financial requirements, does
not expect to pay any cash dividends in the foreseeable future. In addition, the
terms of the Company's secured bank line of credit prohibit the payment of cash
dividends. The Company intends to apply a portion of the net proceeds of the
Offering to pay off such line of credit. See "Use of Proceeds." It is
anticipated that earnings, if any, which may be generated from operations will
be used to finance the operations of the Company.
25
<PAGE>
CAPITALIZATION
The following table sets forth (i) the capitalization of the Company at
September 30, 1996, (ii) the pro forma capitalization of the Company at
September 30, 1996 giving effect to the Bridge Financing and to the January 1997
working capital loan of $100,000 from Dr. Bell as if such transaction had
occurred on that date and (iii) the pro forma capitalization of the Company at
September 30, 1996 as adjusted at that date to give effect to the sale of the
Units offered hereby at an assumed offering price of $1,000 per unit (and the
application of the net proceeds therefrom). See "Use of Proceeds," "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the financial statements of the Company and related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
(IN THOUSANDS)
-------------------------------------------
PRO FORMA
PRO FORMA (AS
ACTUAL (1)(2) ADJUSTED)(1)(3)
---------- ----------- ------------------
<S> <C> <C> <C>
Short term debt
Capital lease--short term portion................................... $ 19 $ 19 $ 19
Notes payable to shareholder........................................ 200 300 --
Bank loan payable................................................... 2,532 2,532 1,347
10% Notes payable(4)................................................ -- 2,850 --
10% Convertible subordinated debentures(4).......................... -- 150 --
---------- ----------- --------
Total short term debt................................................. 2,751 5,851 1,366
---------- ----------- --------
Long term portion of capital lease.................................... 50 50 50
Shareholders' equity
Preferred stock, no par value;
5,000,000 shares authorized, none issued.......................... -- -- --
Common stock:
Class A, no par value; 17,000,000 shares authorized and 4,068,500
shares issued and outstanding actual and pro forma, excluding
3,000,000 shares issued and held in escrow; 17,000,000 shares
authorized and 8,828,500 shares issued and outstanding,
excluding 3,000,000 shares issued and held in escrow, as
adjusted........................................................ 17,321 17,321 32,163
Class B, no par value; 3,000,000 shares authorized, none issued... -- -- --
Warrants to purchase common stock................................. -- -- 150
Contributed capital............................................... 3,115 3,115 3,115
Deficit accumulated during development stage(2)................... (19,432) (19,432) (19,932)
---------- ----------- --------
Total shareholders' equity........................................ 1,004 1,004 15,496
---------- ----------- --------
Total capitalization.................................................. $ 3,805 $ 6,905 $ 16,912
---------- ----------- --------
---------- ----------- --------
</TABLE>
- ------------------------
(1) Does not include (i) 1,428,000 shares of Class A Common Stock issuable upon
exercise of the Over-Allotment Option and the Class A Warrants included in
the Units issuable upon exercise of the Over-Allotment Option; (ii)
4,760,000 shares of Class A Common Stock issuable upon exercise of the Class
A Warrants included in the Units offered hereby; (iii) 952,000 shares of
Class A Common Stock issuable upon exercise of the Unit Purchase Option and
the Class A Warrants included in the Units included in the Unit Purchase
Option; (iv) 288,608 shares of Class A Common Stock issuable upon exercise
of outstanding warrants; (v) 530,000 shares of Class A Common Stock
presently reserved for issuance under the Company's 1993 Stock Option Plan,
as amended, under which options to purchase 312,236 shares of Class A Common
Stock are outstanding. "Description of Securities" and "Underwriting."
26
<PAGE>
(2) Gives pro forma effect to the October 1996 issuance of the Bridge Units, net
of approximately $500,000 of issuance costs, and the January 1997 loan of
$100,000 to the Company by Dr. Bell, as if such transactions had occurred as
of September 30, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(3) As adjusted to give effect to the sale of the 17,000 Units offered hereby at
an assumed offering price of $1,000 per Unit and the application of the net
proceeds therefrom (including the automatic conversion of the Bridge
Debentures into Class A Warrants, the repayment of the principal on the
Bridge Notes and the corresponding charge to operations upon repayment
thereof estimated at $500,000). See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(4) The Bridge Notes and Bridge Debentures are payable on the earlier of the
closing of this Offering or October 31, 1997; provided that the Bridge
Debentures will automatically convert upon the closing of the Offering into
an aggregate of 1,620,000 Selling Securityholder Warrants.
BRIDGE FINANCING
In October 1996, the Company completed the Bridge Financing from which it
received net proceeds of approximately $2,500,000. The Bridge Notes and the
Bridge Debentures are payable, together with interest at the rate of 10% per
annum, on the earlier of October 31, 1997 or the closing of the Offering. See
"Use of Proceeds." The Bridge Debentures are convertible upon the Closing of the
Offering into the Selling Securityholder Warrants, each of which will be
identical to the Class A Warrants included in the Units offered hereby, and
which will entitle the holders thereof to purchase an aggregate of 1,620,000
shares of Class A Common Stock. The Company has agreed to register subsequent to
the Offering for resale the Selling Securityholder Securities, subject to the
contractual restriction that the Selling Securityholders have agreed not to
exercise the Selling Securityholder Warrants for a period of one year from the
closing of the Offering and not to sell the Selling Securityholder Warrants
except after specified periods commencing 90 days after the closing date of the
Offering. See "Subsequent Offering."
27
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data of the Company presented below as of and for the
four years ended December 31, 1995, as of and for the period April 23, 1991
(Inception) to December 31, 1991 and for the period April 23, 1991 (Inception)
to December 31, 1995 have been derived from the audited financial statements of
the Company. The selected financial data of the Company presented below at
September 30, 1996 and for the nine months ended September 30, 1995 and 1996 and
for the period April 23, 1991 (Inception) to September 30, 1996 have been
derived from unaudited financial statements of the Company and, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
interim periods. The results of operations for the nine months ended September
30, 1996 are not necessarily indicative of future results of operations. The
selected financial data presented below should be read in conjunction with the
financial statements and related notes thereto appearing elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS
PERIOD FROM PERIOD FROM ENDED
APRIL 23, 1991 FISCAL YEARS ENDED DECEMBER 31, APRIL 23, 1991 -------------
(INCEPTION) TO ------------------------------------------ (INCEPTION) TO SEPTEMBER 30,
DECEMBER 31, 1991 1992 1993 1994 1995 DECEMBER 31, 1995 1995
------------------- --------- --------- --------- --------- ----------------- -------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues............ $ -- $ 1,900 $ 2,289 $ 2,640 $ 7,809 $ 14,638 $ 4,806
Costs and expenses:
Direct development
contract and related
grant costs........... -- -- 525 928 5,332 6,785 3,895
Direct grant costs...... 84 1,647 1,649 803 339 4,522 390
Research and
development........... 221 356 1,578 2,137 2,367 6,659 1,785
Selling, general and
administrative,
including reimbursable
administrative
costs................. 311 1,356 2,340 3,235 3,135 10,377 1,820
------ --------- --------- --------- --------- -------- -------------
Total costs and
expenses................ 616 3,359 6,092 7,103 11,173 28,343 7,890
------ --------- --------- --------- --------- -------- -------------
Operating Loss............ (616) (1,459) (3,803) (4,463) (3,364) (13,705) (3,084)
Interest Income........... -- -- 163 228 127 518 124
Interest Expense.......... -- -- -- -- -- -- --
------ --------- --------- --------- --------- -------- -------------
Net loss.................. $ (616) $ (1,459) $ (3,640) $ (4,235) $ (3,237) $ (13,187) $ (2,960)
------ --------- --------- --------- --------- -------- -------------
------ --------- --------- --------- --------- -------- -------------
Net loss per share........ $ (.61) $ (1.46) $ (1.64) $ (1.28) $ (.98) -- $ (0.90)
Weighted average number of
shares outstanding...... 1,000 1,000 2,213 3,300 3,306 -- 3,300
Supplemental pro forma net
loss per share (1)...... -- -- -- -- -- -- --
Supplemental pro forma
weighted average shares
outstanding (1)......... -- -- -- -- -- -- --
<CAPTION>
PERIOD FROM
APRIL 23, 1991
SEPTEMBER 30, (INCEPTION) TO
1996 SEPTEMBER 30, 1996
------------- ------------------
<S> <C> <C>
OPERATING DATA:
Total revenues............ $ 6,501 $ 21,139
Costs and expenses:
Direct development
contract and related
grant costs........... 9,142 15,927
Direct grant costs...... 101 4,623
Research and
development........... 1,544 8,203
Selling, general and
administrative,
including reimbursable
administrative
costs................. 1,838 12,215
------------- --------
Total costs and
expenses................ 12,625 40,968
------------- --------
Operating Loss............ (6,124) (19,829)
Interest Income........... 42 560
Interest Expense.......... (163) (163)
------------- --------
Net loss.................. $ (6,245) $ (19,432)
------------- --------
------------- --------
Net loss per share........ $ (1.54) --
Weighted average number of
shares outstanding...... 4,060 --
Supplemental pro forma net
loss per share (1)...... $ (1.45) --
Supplemental pro forma
weighted average shares
outstanding (1)......... 4,292 --
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).......................................... $ (438) $ (1,644) $ 8,833 $ 4,149 $ 6,481
Total assets....................................................... 55 969 9,721 7,162 8,995
Long-term debt..................................................... -- -- -- 78 68
Total liabilities.................................................. 460 2,494 701 2,376 1,797
Deficit accumulated during development stage....................... (616) (2,075) (5,715) (9,950) (13,187)
Total shareholders' equity (accumulated deficit)................... (405) (1,525) 9,020 4,786 7,198
<CAPTION>
AS OF
SEPTEMBER 30, 1996
------------------
<S> <C>
BALANCE SHEET DATA:
Working capital (deficit).......................................... $ 351
Total assets....................................................... 5,876
Long-term debt..................................................... 50
Total liabilities.................................................. 4,872
Deficit accumulated during development stage....................... (19,432)
Total shareholders' equity (accumulated deficit)................... 1,004
</TABLE>
- ----------------------------------
(1) Supplemental pro forma net loss per share and supplemental pro forma
weighted average shares outstanding reflect the anticipated application of a
portion of the proceeds of the Offering to repay the bank line of credit as
described in "Use of Proceeds" as if such repayment occurred as of its
issuance date (April 18, 1996). Supplemental pro forma net loss per share
for the year ended December 31, 1995 has not been presented since there were
no borrowings outstanding on the bank line of credit at December 31, 1995.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements of the Company and related notes thereto appearing
elsewhere in this Prospectus, and is qualified in its entirety by the same and
by other more detailed financial information appearing elsewhere in this
Prospectus.
OVERVIEW OF DEVELOPMENT STAGE ACTIVITIES
The Company's operations during the development stage have focused on the
research and development of technologies to adapt them for a variety of uses in
the automotive industry. Generally, the Company licenses the rights to these
technologies from the holders of the related patents. As development proceeds,
the Company seeks to generate revenues from the sale of prototypes, then from
specific development contracts, pre-production orders and, ultimately,
production orders. The benefit of prototype sales is to gain experience and
information regarding the performance of the prototypes and to develop customer
interest in and comfort with the technology. Development contracts are from
customers interested in developing a particular use or project using the
Company's technologies and are generally longer term activities (from six months
to one year) involving, in some cases, pre-production orders of larger
quantities of the product for final testing by the customer before submitting a
production order. Revenues obtained as grant funding from government agencies
interested in promoting the technologies for specific tasks or projects, and
development funds from prototype sales to customers help offset the development
expenses overall. Throughout the development stage, development costs and
administrative expenses have and are expected to continue to exceed the revenues
from customers and from grant agencies.
The Company received no funds to offset its development expenses from any
funding source in 1991 and, in 1992, secured its first outside grant funding
totaling $1,900,000. In 1993, the Company sold $188,000 in prototypes of its
developing technology adaptations and, in addition, recorded $2,101,000 in grant
revenue. In 1994, the sale of prototypes increased and the Company recorded its
first development contract revenues, increasing revenues from these sources to
$1,336,000. Grant revenues became less important as a source of total revenues,
decreasing in 1994 to 49% of total revenues from 92% in 1993. In 1995, the
Company recorded development funding revenue from customers of $5,418,000 plus
related grant funds of $1,872,000. The Company also recorded additional grant
revenue of $519,000.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
REVENUES. Revenues for the nine months ended September 30, 1996 ("1996")
were $6,501,000 as compared with revenues of $4,806,000 in the nine months ended
September 30, 1995. Approximately $5,535,000 of 1996 revenue relates to a single
electric vehicle development contract and related grants, which is an increase
of approximately $1,871,000 over 1995. Development contract revenues are
expected to decline significantly in the next two fiscal quarters because the
activity on the major electric vehicle development contract is expected to
diminish during the fourth quarter of 1996 and ultimately conclude at the end of
1996 with no replacement contract presently scheduled to follow. Therefore, the
Company does not expect any revenues from this major electric vehicle
development contract in 1997. The percentage of completion method of accounting
is used for this contract and, accordingly, revenues and gross profit are
recognized as work is performed based on the relationship between actual costs
incurred and total estimated costs at completion. Revenues and gross profit are
recognized prospectively after taking into account revisions in estimated total
contract costs and contract values, and estimated losses are recorded when
identified. As discussed below, the Company recorded a charge to operations of
approximately $1,625,000 during the nine months ended September 30, 1996 to
provide for the ultimate estimated loss expected on the contract. Grant revenue
is recorded when reimbursable costs are incurred.
29
<PAGE>
The level of activity in the contract involved considerably more labor and
material expenses in 1996 compared to the beginning stages of the contract in
1995, when engineering design was the principal activity. In 1996, two
prototypes of the vehicle to be built under the contract were constructed and
improved with design modification changes. Kits for all vehicle frames with
motor controllers required under the contract were completed and shipped to the
customer and final tooling for body panels and interior portions of the vehicle
and remaining parts were being ordered.
During 1996, development continued on the Company's climate control seat
system and radar system, some of which was funded pursuant to development
contracts. The magnitude of the revenues recognized for the development of the
seat systems, radar systems and for the sale of IVS products in 1996 was
$847,000, compared to $727,000 in 1995. The Company began selling IVS-TM-
products in December 1995. Demand for the IVS-TM- product in 1996 was weak.
Grant revenues in 1996 of approximately $119,000 were related to new grants
for the IVS-TM- and radar products, compared to $480,000 in 1995 that were
related to two prior electric vehicle projects and a project in the seat systems
area. Certain other grant revenues that are related to the electric vehicle
development have been combined with the development contract revenue. These
grant revenues totaled $815,000 in 1996 compared to $872,000 in 1995.
DIRECT DEVELOPMENT CONTRACT AND RELATED GRANT COSTS. Direct development
contract and related grant costs increased to $9,142,000 in 1996 from $3,895,000
in 1995 due to the increased activity in the Company's electric vehicle program.
Included in these costs are costs related to the commercial sales of IVS-TM-
products totaling $490,000 in 1996. Commercial sales of the IVS-TM- products
commenced in December of 1995. See "Business--Electric Vehicles." In 1996, two
prototypes of the vehicle were constructed and improved with design modification
changes, kits for all vehicle frames with motor controllers were completed and
shipped to the customer, and final tooling for body panels and interior portions
of the vehicle and remaining parts were being ordered. In 1995, engineering
design was the principal activity. The amount for 1996 includes a provision of
$1,625,000 for the ultimate loss expected on the Company's major electric
vehicle contract that was provided for primarily in the second quarter of 1996.
The cost overruns were caused by unanticipated design and development problems
and continued delays in the completion of the contract, as well as other
factors, which resulted in higher labor costs together with higher than expected
tooling and material costs.
DIRECT GRANT COSTS. Direct Grant Costs in 1996 were $101,000 compared to
$390,000 in 1995. These costs are related to the projects for which grant
revenues are reported. The decrease in amount reflects the reduction in grant
project activities during 1996.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$1,544,000 in 1996 compared to $1,785,000 in 1995. These expenses represent
unfunded research and development expenses. Expenses of research and development
projects that are specifically funded by development contracts from customers
are classified under direct development contract and related grant costs or
direct grant costs. The Company's research and development expenses fluctuate
significantly from period to period, due to both changing levels of activity and
changes in the amount of such activities that are covered by customer contracts
or grants. Where possible, the Company seeks funding from third parties for its
research and development activities.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES. SG&A expenses were
$1,838,000 in 1996 compared to $1,820,000 in 1995. Direct and indirect overhead
expenses included in SG&A which are associated with development contracts are
allocated to such contracts.
INTEREST INCOME (EXPENSE). The interest expense in 1996 is related to the
bank line of credit obtained to finance work on the major electric vehicle
contract. There was no such loan in 1995. Interest income decreased to $42,000
in 1996 compared to $124,000 in 1995 reflecting the overall lower cash balance
during 1996.
30
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Total revenues increased by $5,169,000 to $7,809,000 in the year ended
December 31, 1995 from the year ended December 31, 1994 due to the increase in
development contract work for customers. Development contract revenues including
revenues from the sales of prototypes increased to $7,290,000, which includes
$1,872,000 of grant funding related to these development activities, compared to
$1,336,000 in 1994. The substantial increase in development revenues is
primarily attributable to revenues in 1995 from the Company's electric vehicle
development contract which were $4,040,000 compared to $48,000 in 1994. These
contracts are related to orders for prototype models and kits to make
approximately 50 electric vehicles. Grant revenue from activities not related to
development contracts decreased from $1,304,000 in 1994 to $519,000 in 1995 due
to the completion in 1994 of three grants accounting for $577,000 of the
decrease and due to the decrease in billings for two other grants.
Direct costs for development contracts and related grants increased from
$928,000 in 1994 to $5,332,000 in 1995 primarily as a result of the Company's
electric vehicle development contract together with development contract costs
in the climate control seat and radar programs. In the electric vehicle program
the costs primarily consisted of tooling costs for prototype materials, internal
and external engineering services and consulting. In 1995, the amount for direct
development contract and related grant costs includes $412,000 with respect to
the commercial sales of IVS-TM- products that commenced in December of 1995.
Direct costs for grants decreased from $803,000 in 1994 to $339,000 in 1995, due
to the decrease in the number of and activity under grants as described above.
Research and development expenses include the unfunded portion of direct
wages of Company engineers and technicians, outside consultants, prototype
tooling and prototype materials. Such expenses increased from $2,137,000 in 1994
to $2,367,000 in 1995 primarily due to costs associated with completing the
development of the Company's IVS-TM- product. Included in the research and
development expenses are fees for licenses and royalties of $248,000 in 1994 and
$345,000 in 1995. Research and development is expected to continue at high
levels as work continues toward the commercialization of the Company's electric
vehicle, radar and seat products as well as on improvements to the IVS-TM-
product.
SG&A decreased from $3,235,000 in 1994 to $3,135,000 in 1995. Increases in
rent, legal expenses, sales commissions and depreciation were offset by
decreases in the provision for doubtful accounts and recruiting expenses.
Interest income decreased from $228,000 in 1994 to $127,000 in 1995 due to the
lower amount of invested cash in 1995.
Future fiscal periods will be negatively impacted to the extent the Company
incurs charges to income resulting from the vesting of options granted at prices
below fair market value on date of grant and the vesting of performance options
on the date such performance goals are attained (See Note 8 of Notes to the
Financial Statements). Substantial charges to income will also be incurred at
such time that financial or per share targets for the release of shares held in
escrow are met (See Note 7 of Notes to the Financial Statements).
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Total revenues increased from $2,289,000 in the year ended December 31, 1993
to $2,640,000 in the year ended December 31, 1994. Revenues for 1994 included
$1,336,000 in development contracts from customers compared to $188,000 in 1993.
The increase in sales of prototypes and development contract revenue compared to
1993 is because the Company's products were further along in the development
cycle and due to increased marketing efforts which expanded in 1994. Also, the
Company was able to offer more advanced prototypes of the Company's products to
automotive manufacturers for testing and analysis. Revenue from grants decreased
from $2,101,000 in 1993 to $1,304,000 in 1994 due to an electric vehicle
"Showcase" grant program completed in 1993 with a grant-funded follow-on program
that began in 1993 and was completed in the first half of 1994.
Direct costs for development contracts and related grants increased from
$525,000 in 1993 to $928,000 in 1994. The increase is due to the increased
numbers of customer prototypes. In 1993, the costs of producing prototypes was
greater relative to the related revenues because the state of development and
31
<PAGE>
ease of production was not as advanced as in 1994, and also because the Company
was not able to charge as much to customers as in 1994.
Research and development expenses increased from $1,578,000 in 1993 to
$2,137,000 in 1994 due to accelerated development of its products, primarily the
IVS-TM- System, Climate Controlled Seat System and the Ultra Wideband Radar
products. Research and Development activities provide benefit to some of the
specific prototypes sold and development contracts since most of the technology
is common within a product line. Included in these expenses in 1994 was $248,000
in license acquisition costs and minimum royalties related to the IVS-TM-, the
Climate Controlled Seat and the radar technology.
SG&A expenses increased from $2,340,000 in 1993 to $3,235,000 in 1994
primarily due to the hiring of additional personnel, development of a marketing
department and marketing activities, and other increases in administrative
expenses in support of the increases in development activities. Many of these
increases in activities initially occurred in the second six months of 1993, but
had a full year effect in 1994. In addition, SG&A expenses increased in 1994 by
approximately $189,000 due to the start of the lease in February 1994 at the
present location. Previously, the Company occupied office space at minimal
expense. SG&A expenses in 1993 included $549,000 in compensation expense related
to the granting of stock options compared to $1,000 of such expenses in 1994.
Interest income of $163,000 was earned in 1993 on invested cash as compared
with $228,000 in 1994. The net loss increased from $3,640,000 in 1993 to
$4,235,000 in 1994 due primarily to the increase in development activity
expenses relative to the amount of grant and customer funding obtained, and, in
part, to the increases in selling expenses to increase that activity and to the
increase in costs associated with being in a new facility for the full year in
1994.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital of $351,000. The
Company's principal sources of operating capital have been the proceeds of its
initial public offering in September 1993, the private placement of common stock
in December 1995 and the October 1996 Bridge Financing discussed below, together
with revenues from grants, development contracts and the sale of prototypes to
customers. To a lesser extent, the Company received capital contributions from
the Company's principal shareholders before becoming a public company and has
received loans from the Company's Chief Executive Officer and principal
shareholder subsequent to such date.
Cash and cash equivalents decreased by $4,218,000 during the period from
December 31, 1995 to September 30, 1996. Operating activities used $6,796,000,
of which $6,245,000 was for the operating loss, $1,098,000 was for the increase
in unbilled revenues and accounts receivable (primarily related to the
development contract and grant related to the Company's electric vehicle
program), and $700,000 was related to work in anticipation of a proposed joint
venture company in India. Reductions of $501,000 in prepaid expenses and other
assets related to the electric vehicle program and increases in accounts payable
of $410,000 partially offset the other uses of cash for operating activities.
Investing activities used $187,000 related to the purchase of property and
equipment.
Financing activities provided $2,765,000, of which $2,532,000, net of
repayments, was from borrowing under a bank line of credit established to
finance the cash flows of the major electric vehicle contract. The line of
credit expired by its terms but was extended orally until February 28, 1997. The
Company has sought, and the bank has advised the Company that it will soon
deliver, a written extension to such date. As of September 30, 1996, the Company
was in violation of certain financial and other covenants contained in the loan
agreement. However, the bank has agreed to waive its rights and remedies with
respect to some of such violations and has agreed orally to forbear until
February 28, 1997 from exercising its rights and remedies with respect to all
others. The Company has sought, and the bank has advised the Company that it
will soon deliver, a written forbearance to such date. However, the delivery of
such a written forbearance cannot be assured. See "Risk Factors--Default Under
Bank Credit Line." The Company has agreed that it
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will not be entitled to make any further borrowings under the line of credit. A
portion of the proceeds of the Offering will be applied to repayment of
obligations incurred by the Company under the credit line. See "Use of
Proceeds."
The Company expects to incur losses for the foreseeable future due to the
continuing cost of its product development and marketing activities. To fund its
operations, the Company will continue to need cash from financing sources unless
and until such time as sufficient profitable production contracts are obtained.
Cash inflows during the development and early stage production period are
dependent upon achieving certain billing milestones under existing development
contracts and grants, and on obtaining new production and/or development
contracts. Cash outflows are dependent upon the level and timing of production
and/or development work and the amount of research and development and overhead
expenses. Cash inflows must be supplemented by cash from debt and/or equity
financing.
Subsequent to September 30, 1996, the Company's working capital diminished
to almost zero. In October 1996, the Company completed the Bridge Financing. The
Bridge Debentures will, upon completion of the Offering, automatically convert
into an aggregate of 1,620,000 Class A Warrants. The net proceeds to the Company
from the Bridge Financing were approximately $2,500,000, net of costs of
issuance of approximately $500,000. A portion of the proceeds of the Offering
will be applied to repayment of the Bridge Notes. See "Use of Proceeds." A
substantial portion of the costs of issuance of the Bridge Financing will be
charged to operations upon repayment of the Bridge Notes.
If and when the Company is able to commence commercial production of its
heated and cooled seat or radar products, the Company will incur significant
expenses for tooling product parts and to set up manufacturing and/or assembly
processes. The Company also expects to require significant capital to fund other
near-term production engineering and manufacturing, as well as research and
development and marketing, of these products. Moreover, the licensing agreements
for the Company's current and potential future rights to licensed technology
generally require the payment of minimum royalties. For the fiscal year ended
December 31, 1996, the Company paid a total of approximately $201,000 in
royalties. In the event the Company is unable to pay such royalties or otherwise
breaches such licensing agreements in the future, the Company would lose its
rights to the licensed technology, which would have a material adverse effect on
the Company's business. The Company anticipates that its existing capital
resources, together with the net proceeds from the Offering, will be sufficient
to meet all of these capital needs for approximately the next twelve months.
Over the long-term, the Company expects to continue to expend substantial
funds to continue its development efforts. The Company has experienced negative
cash flow since its inception and has not generated, and does not expect to
generate in the foreseeable future, sufficient revenues from the sales of its
principal products to cover its operating expenses or to finance such further
development efforts. Accordingly, the Company expects that significant
additional financing will be necessary to fund the Company's long-term
operations. See "Risk Factors--Need for Additional Financing."
Except for the historical information contained herein, the matters
discussed above include forward looking statements that involve risks and
uncertainties, including with respect to the electric vehicle project, potential
further delays in the completion of the contract, unanticipated costs associated
with the project which may cause the estimated loss to increase, unanticipated
product design problems and inability to obtain a financial or strategic
partner, and with respect to the overall operations and expected future
operating losses, the timing and amount of financing required to continue
operations, and other risks detailed from time to time in the Company's other
filings with the Commission.
CHARGES TO INCOME
During the fourth quarter of 1996, the Company will incur a charge of
approximately $700,000 related to costs incurred in connection with the
Company's proposed Indian joint venture. See "Risk Factors-- Lack of Capital to
Fund Proposed Electric Vehicle Joint Venture; Strategy Untested; Write-off of
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Capitalized Expenses in 1996 Fourth Quarter" and "--Potential Charges to
Income." In addition, the Company expects to incur a non-recurring charge to
operations in each fiscal quarter up to and including the fiscal quarter in
which the closing of the Offering occurs relating to the repayment of the Bridge
Notes and associated costs of their issuance the aggregate amount of which,
together with the charge the Company will incur upon the repayment of the Bridge
Notes, will be approximately $500,000.
In the event any Escrow Shares are released from escrow to persons who are
officers and other employees of the Company, compensation expense will be
recorded for financial reporting purposes. Therefore, in the event the Company
attains any of the earnings thresholds required for the release of Escrow Shares
from escrow, such release will be deemed additional compensation expense of the
Company and the Company will recognize during the periods in which the earnings
thresholds are met or are probable of being met or such minimum bid prices
attained what will likely be one or more substantial charges which would have
the effect of substantially increasing the Company's loss or reducing or
eliminating earnings, if any, at such time. Although the amount of compensation
expense recognized by the Company will not affect the Company's total
shareholders' equity or its working capital, it may have a depressive effect on
the market price of the Company's common stock.
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BUSINESS
GENERAL
Amerigon is a development stage company formed in 1991 to develop,
manufacture and market proprietary high technology automotive components and
systems for sale to automobile and other original equipment manufacturers. The
Company's business strategy is to apply aerospace and defense industry
technology to products for the automotive market. The Company has principally
focused on developing proprietary positions in the following technologies: (i)
thermoelectric heated and cooled seats; (ii) radar for maneuvering and safety;
(iii) voice interactive navigation and entertainment; and (iv) electric vehicle
components and production systems.
The Company has substantially completed development of the first generation
of IVS-TM-. The IVS-TM- provides spoken-word navigation directions to driver and
passengers using an in-vehicle compact audio disc system. To date, the IVS-TM-
product has not been commercially successful and likely would require
substantial further development before it could be expected to achieve
significant sales. The Company is presently seeking to sell the IVS-TM- product
line and the Company's interests in related technology or to find a strategic or
financial partner to help further develop and market the IVS-TM- product. If the
Company is unable to consummate such a sale or arrange such a relationship in
the near future, the Company plans to discontinue sales and further development
of the IVS-TM- and related technology. See "Risk Factors-- Possible Termination
of License of Voice Recognition Software Technology."
The Company's other products are in various stages of development. The
Company is presently working with three of the world's largest automotive
original equipment manufacturers on pre-production development programs for
heated and cooled seats. In addition, the Company has sold multiple prototypes
of its heated and cooled seats and radar for maneuvering and safety to potential
customers for evaluation and demonstration.
The Company was founded on the premise that technology proven for use in the
defense and aerospace industries could be successfully adapted to the automotive
and transportation industries. Amerigon has focused on technologies that it
believes can be readily adapted to automotive needs for advanced vehicle
electronics and for electric vehicle systems. The Company seeks to avoid direct
competition with established automotive suppliers of commodity products by
identifying market opportunities where the need for rapid technological change
gives an edge to new market entrants with proprietary products.
The Company has recently determined to focus its resources primarily on
developing its heated and cooled seat and radar for maneuvering and safety
technologies. The Company has adopted this strategy primarily because the
Company believes that the markets for these products have greater near-term
potential than the markets for its other products, and because these
technologies afford the Company its best opportunities to exploit competitive
advantages over rival companies. The Company also would expect continued
necessary development and marketing of the Company's voice interactive
navigation technologies and electric vehicle systems to entail very high costs,
to the point that they would likely exceed the Company's financial resources.
Even if the Company were able to overcome this financial challenge, management
also believes that the Company might not be able to develop and successfully
market the next generation of IVS-TM-, and might not be able to successfully
develop and profitably manufacture electric vehicles or their components,
without commercial or technical assistance from one or more strategic partners.
Accordingly, the Company is presently seeking to sell the IVS-TM- product line
and the Company's interests in related technology or to find a strategic or
financial partner to help further develop and market the IVS-TM- product. If the
Company is unable to consummate such a sale or arrange such a relationship in
the near future, the Company plans to discontinue sales and further development
of the IVS-TM- and related technology. The Company is also presently seeking
strategic and financial partners to help support continued development and
marketing of the Company's electric vehicle systems. If the Company is unable to
arrange such a relationship in the near term, the Company will attempt to sell
its proprietary interests
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and other assets in and relating to its electric vehicle technology or abandon
their development. See "Risk Factors--Possible Disposition or Abandonment of
Electric Vehicle and IVS-TM- Product Businesses."
The Company has recently experienced serious cash shortfalls. In October
1996, the Company completed the Bridge Financing to enable it to continue
operations until the completion of the Offering. A portion of the proceeds of
the Offering will be applied to repayment of the Bridge Notes. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Use of Proceeds."
PRODUCTS
CLIMATE CONTROL SEAT SYSTEM
The Company's Climate Control Seat ("CCS") system utilizes non-exclusive,
licensed, patented technology to improve the temperature comfort of automobile
passengers. The CCS uses one or more small (approximately two-inch square and
one-eighth inch thick) thermoelectric modules, which are solid-state devices the
surfaces of which turn hot or cold depending on the polarity of applied direct
current electricity. Heat-transfer parts attached to the modules cool or heat
air that is blown past them. The conditioned air is then circulated through
ducts and pads in the seat so that the surface of the seat grows warm or cool
for the passengers, with small quantities of conditioned air passing through the
seat to flow directly on the passengers. Each seat has individual electronic
controls to adjust the level of heating or cooling. The CCS uses substantially
less energy than conventional air conditioners by focusing the cooling directly
on the passengers through the seat, rather than cooling the entire ambient air
volume and the interior surfaces of the vehicle.
The CCS offers several benefits compared to conventional heated car seats.
First, the thermoelectric technology provides both heating and cooling. The
system also provides environmental benefits because it cools without the use of
fluorine-based refrigerants or other liquids. The CCS could be used as the sole
source of climate control in certain cars, such as low cost European cars or
electric vehicles. Only a portion of the cars sold in Europe come equipped with
factory air conditioning because of cost and effect on gas mileage, and the
range of electric vehicles is greatly reduced by the large amount of energy
required to operate traditional air conditioners. For some consumers, seat-based
cooling is expected to be sufficient, while others will prefer it to be
augmented with moderate cooling of the ambient air. In either case, there is the
potential for significant reductions in energy usage, which would result in
greater gas mileage in conventional vehicles and greater range in electric
vehicles.
Additional development is needed before the CCS can be commercialized. In
particular, a production-engineered design is being modified to make the units
less complex, more energy efficient and less expensive to manufacture and
install. The Company is also working to reduce fan noise and condensation
resulting from operation of the seat in the cooling mode. The Company's initial
marketing of the CCS has been to automobile and vehicle seat manufacturers
directly. The Company is presently working with three of the world's largest
automotive original equipment manufacturers on pre-production development
programs for the CCS. However, there can be no assurance that these development
programs will lead to commercial production orders.
Since Amerigon's CCS system provides both heating and cooling, the Company
believes that the potential market for CCS is larger than the market for heated
seats alone. The Company also believes that the CCS concept could be applied to
seats other than those used in motor vehicles, e.g. to aircraft, theater, and
stadium seating, although the Company has not devoted any resources to
development of such products.
RADAR FOR MANEUVERING AND SAFETY
In January 1994, the Company obtained a non-transferable limited exclusive
license from the Regents of the University of California (Lawrence Livermore
National Laboratory) to certain "pulse-echo," "ultra-
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wideband" radar technology for use in the following three passenger vehicle
applications: intelligent cruise control, airbag crash systems, and position
sensors. The license requires the Company to achieve commercial sales (defined
as sales of non-prototype products to at least one original equipment
manufacturer) of products by the end of 1998. Failure to achieve commercial
sales will result in the loss of exclusivity of the license with respect to any
particular application. See "--Proprietary Rights and Patents." This technology
was originally developed as part of a laser fusion program to measure the short
bursts of energy emitted during fusion experiments. This type of radar sends out
from one to two million short radio impulses every second to a distance of 5 to
10 meters, each lasting a billionth of a second. These short impulses enable the
radar to operate across a wider and lower band of radio frequency, making it
less likely to suffer from interference from other radar signals, and allowing
it to penetrate dirt, snow and ice.
The Company has applied this technology to develop demonstration prototypes
of a parking aid and a lane change aid. The parking aid detects a vehicle or
other object that reflects radar signals behind the automobile and provides an
audible or visual signal as the driver approaches it. The lane change aid
detects vehicles to the side of the automobile when the driver attempts to turn
or change lanes and emits an audible warning signal. The Company began marketing
these radar products in 1994 and has received contracts to design evaluation
prototypes from eight automotive manufacturers for both the parking and lane
change aids. These products are now under evaluation by customers. The Company's
near term objective is to obtain further development agreements from some of
these customers to customize the system design during 1997.
Several automotive original equipment manufacturers are now offering
ultrasonic or infrared laser distance sensors for parking aids. The Company
believes that the advantage of its radar technology is superior performance.
Competing products in the automotive industry have utilized ultrasonic and
infrared sensors which require line of sight from the sensor to the target and
installation with outside lenses. Dirt, ice, rain, fog or snow can obstruct the
function of such systems. Although they offer reasonable accuracy at short
distances, they are comparatively range-limited and are subject to false trigger
problems due to interference with the required line of sight. Amerigon's radar
technology, on the other hand, is less susceptible to these environmental
conditions, and can even penetrate plastic, allowing it to be mounted inside
plastic bumpers or tail light assemblies. Although there is currently
considerable interest among automobile manufacturers for various radar products,
there is substantial competition from large and well-established companies for
these potential product opportunities, including for possible industrial
applications. See "--Competition--Radar for Maneuvering and Safety." In
addition, considerable research and development will be required to develop the
Company's radar technology into finished products, including design and
development of application software and antenna systems and production
engineering to reduce costs and increase reliability.
INTERACTIVE VOICE SYSTEMS (IVS-TM-)
The IVS-TM- was initially designed to apply voice recognition technology
incorporating proprietary features and computer systems to provide an
inexpensive and easy-to-use tool for people to receive directions to their
destination while driving their vehicle. To date, the IVS-TM- product has not
been commercially successful and likely would require substantial further
development before it could be expected to achieve significant sales. In 1995,
the Company had pre-production orders for approximately 2,000 units. As of
December 31, 1996, only approximately 2,700 units have been produced and sold.
Although the Company recently received an order for additional units, the
Company did not accept such order since the costs associated with filling the
order were greater than the revenues to be received as a result of the low
volume of units ordered. The Company is presently seeking to sell the IVS-TM-
product line and the Company's interests in related technology or to find a
strategic or financial partner to help further develop and market the IVS-TM-
product. Further development efforts would focus on streamlining data-entry,
lowering costs, improving the compatibility of the product with audio compact
disc ("CD") units and exploring other applications of the technology. If the
Company is not able to sell its interests in the IVS-TM- product line and
related technology, or obtain a financial or strategic partner in the near term,
the
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Company will discontinue sales and further development of IVS-TM- and related
technology. See "Risk Factors--Possible Disposition or Abandonment of Electric
Vehicle and IVS-TM- Product Businesses."
The IVS-TM- provides navigation directions through the car's CD system using
actual spoken words stored on the CD through digital compression technology. The
car CD system or radio functions normally when the IVS-TM- is not giving or
receiving instructions, but can be temporarily interrupted to use the IVS-TM-
functions. The IVS-TM- has three components: a small microphone mounted near the
sun visor, similar to a cellular phone microphone; an electronic module
(approximately two-thirds the size of a standard video cassette tape) that is
mounted inside the dashboard, under the seat or in the trunk; and a standard
automobile CD player and radio. In most instances, the CD player is modified by
its manufacturer to provide additional ports in the back of the unit for
connecting to the IVS-TM- electronic module.
The system operates by requesting a starting point and a destination point,
each of which must be spelled out, one letter at a time, by the driver or a
passenger, and confirmed by the unit. Way-points may include specific street
names and addresses, cross-streets or "points of interest" (such as airports,
hotels, gas stations, major restaurants, ATMs and tourist attractions.). The
IVS-TM- provides step-by-step verbal instructions on how to reach the
destination. The IVS-TM- uses a proprietary routing algorithm that selects the
most favorable route to a given destination taking into account average highway
and street speeds, one way streets and distances.
The operating software and digital map data for the IVS-TM- are stored on a
CD that is inserted in the car stereo when the system is in use. The CDs, which
contain encrypted maps for various metropolitan areas, are packaged inside the
same box with the IVS-TM- hardware. Customers call a toll-free number to access
the maps they wish from the selection available on the CDs. Upon payment by
credit card for requested metropolitan areas, the customer is provided a code
number that unlocks the encrypted maps once the number is spoken into the
IVS-TM- unit.
To date the Company has completed encrypted maps for twenty metropolitan
areas including Atlanta, Boston, Chicago, Dallas/Ft. Worth, Denver, Detroit,
Houston, Indianapolis, Las Vegas, the five counties in Los Angeles, Miami, New
York and Northern New Jersey, Orlando, Philadelphia, Phoenix, Sacramento, San
Diego, San Francisco, Seattle and Washington D.C./Baltimore. Using map
technology licensed from an unrelated third party, the Company does map checking
and limited upgrading to make the maps suitable for use with the IVS-TM-.
The Company believes that the IVS-TM- has several advantages over other
navigation systems which generally utilize manual keyboards or touch screens to
input data, visual map displays for showing locations, and global positioning
satellite systems or other expensive sensors for identifying the vehicle's
location. The IVS-TM- is not only less costly but simpler and safer to use
because it relies solely on verbal instructions, and drivers are not distracted
by the need to look at a visual display or manipulate a keyboard or other
complicated controls. In addition, competitive navigation systems with visual
displays require extensive modification to the interior of a vehicle if the
display is to fit in the dashboard, thereby reducing the feasibility of offering
the product as a dealer-installed option or aftermarket product.
In December 1995 and January 1996, the Company shipped the first IVS-TM-
product to be sold initially to the consumer electronics market. Four
manufacturers of automotive CD players (Kenwood, Alpine, Clarion and Fujitsu-Ten
Eclipse) have modified certain of their CD player models for compatibility with
the IVS-TM-. To date, the IVS-TM- has only been sold to the retail aftermarket.
The Company is exploring voice remote control of certain automotive
electrical systems such as, among other things, raising and lowering windows,
changing seat positions and changing heating and air conditioning settings.
There are additional possible applications of the system using the capability
inherent in the basic IVS-TM- system.
The Company has failed to make certain advance royalty payments required by
the terms of the governing license agreement for certain voice-recognition
software technology used in the IVS-TM-. The
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license agreement affords the licensor the opportunity to terminate the
agreement under such circumstances. If the licensor were to terminate such
license, in order to continue to manufacture and sell the IVS-TM-, the Company
would either need to reach an accommodation with such licensor or identify and
secure a license to use a substitute software technology, neither of which can
be assured. The adaptation of substitute software technology under such
circumstances might result in additional development costs to the Company. If
the Company were unable to reach an accommodation with the licensor or identify
and secure a substitute license, the Company's ability to sell the IVS-TM-
product line and the Company's interests in related technology might be
impaired.
ELECTRIC VEHICLE SYSTEMS
The Company is seeking financial partners to help fund further research and
development of its electric vehicle technology and strategic partners to assist
the Company in manufacturing and distribution. If the Company is not able to
obtain such financial or strategic partners, the Company will abandon further
development of its electric vehicle technology or attempt to sell its
proprietary interests and other assets in and relating thereto. The Company is
the recipient of certain federal and state government grants relating to the
development of the Company's electric vehicle products. Any failure to complete
the development work contemplated by such grants that may be occasioned by the
Company's abandonment of its electric vehicle business may have an adverse
effect on the Company, including the loss of revenues from such grants or the
inability to collect related receivables. See "Risk Factors--Possible
Disposition or Abandonment of Electric Vehicle and IVS-TM- Product Businesses."
By developing its own products and managing programs related to electric
vehicles (such as the Showcase Electric Vehicle Program and the Running Chassis
Program), the Company has developed a base of knowledge and expertise concerning
electric vehicles. The Company's experience has included the ground-up design of
electric vehicles and testing and integration of state of the art components
being made available for electric vehicles by other companies. The Company's
electric vehicle systems program is presently focused on two main fronts. The
first comprises the development and production of electric vehicles, principally
for developing country markets. The Company hopes to implement this initiative
in the near-term through a proposed joint venture project in India (see
"--Electric Vehicles"). The Company's other main electric vehicle undertaking
would center on the marketing and distribution of its Energy Management System
(see "--Energy Management System").
ELECTRIC VEHICLES. The Company has nearly completed a contract for
approximately $9.6 million to develop approximately fifty aluminum-chassis
passenger electric vehicle systems for an Asian manufacturing company. The
electric vehicles produced under this contract include two of the Company's
other proprietary products, the CCS and the Energy Management System.
In its results for the nine months ended September 30, 1996, the Company
reported cost overruns on this contract that resulted in the Company recording
charges to operations for the ultimate estimated loss at completion of the
contract of approximately $1,625,000. During 1996, the Company experienced a
number of unanticipated design and development problems in the course of its
performance under this contract. It became necessary to significantly modify the
design of the interior of the electric vehicles to correct design deficiencies.
The delay caused by this redesign had a number of deleterious side-effects. A
number of employees had to be re-assigned to new jobs which resulted in
additional work hours. Orders already given to vendors for tooling and parts had
to be cancelled or delayed. As a result of these delays, some of the vendors
that had been selected for critical parts took on large projects for other
companies and were thereafter no longer available to supply the Company on a
timely basis. Additional costs and delays were incurred in re-negotiating
several large, complex supply contracts. Finally, due to the delays and the
short time left to complete tooling and parts, orders had to be rushed, causing
significantly higher costs for tooling, parts and freight. The Company also
experienced problems with certain products supplied by vendors. These problems
required additional attention by engineers, re-work of tooling and
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parts, and in some cases required the engagement of alternate suppliers. The
Company may continue to experience cost overruns on this contract due to these
unanticipated design and development problems.
In February 1996, the Company entered into a memorandum of understanding
(which by its original terms expired on August 29, 1996 but which has been
extended until February 28, 1997) with a strategic partner to enter into a
proposed joint venture in India to develop, market and/or manufacture electric
vehicles. The terms of the joint venture call for the Company to contribute cash
in the approximate amount of $2.2 million as well as the design and certain
tooling for production of the electric vehicles to the joint venture in exchange
for a minority equity stake. The Company presently lacks the capital to make
such a financial contribution to the joint venture entity, and currently does
not propose to apply any of the net proceeds of the Offering for such purpose.
Accordingly, unless the terms of the joint venture were to be revised so as to
eliminate or substantially reduce the Company's required capital contribution,
or unless the Company can find a new or additional joint venture partner, the
Company would be unable to participate in the proposed joint venture on its
original terms. See "Risk Factors--Lack of Capital to Fund Proposed Electric
Vehicle Joint Venture; Strategy Untested; Write-off of Capitalized Expenses in
1996 Fourth Quarter." The Company believes that a joint venture with the same
strategic partner on similar terms remains possible, although there can be no
assurance it will be consummated.
The proposed joint venture calls for the Company to produce approximately 60
electric mini-cars in ready-to-assemble kits for assembly in India. The proposed
Indian co-venturer would have been expected to build the manufacturing
capability for full-scale production. In anticipation of the formation of the
Indian joint venture, the Company has begun prototype development work on a
mini-car called the "REVA," designed principally for the Indian market. The
Company has produced five fully-functional REVA prototypes.
The Company intends to focus its electric vehicle development activity on
vehicles intended for use in developing Asian countries. The Company believes
that there may be considerable demand for low cost electric vehicles in these
markets. For example, in India, auto capacity is currently estimated at 300,000,
which is comparatively small when measured against India's 20 million household
middle class population. Less than 20% of these households own cars; more than
50% own motorcycles. As a result, in India there is a growing demand for
vehicles and a large unfilled backlog of orders. Because of this backlog, Indian
consumers typically must put down a 10% cash deposit for a car and often have to
wait for up to a year or more for delivery. In India, most cars sell for $7,500
or more and are expensive to operate due to the limited availability of gas and
high costs of maintenance. The REVA is designed to be priced at less than $6,000
and to be relatively inexpensive to operate due to the availability of
electricity for re-charging batteries in most households and the minimal number
of parts compared to gas-powered cars. If the proposed Indian joint venture were
to go forward successfully, the Company might search for similar opportunities
in other developing countries. The Company has no present plans to try to sell
its electric vehicles in the United States.
ENERGY MANAGEMENT SYSTEM. The Company's "Energy Management System" is a
proprietary computer-based system under development by the Company for electric
vehicles. The Energy Management System has two functions. First, it optimizes
battery charging and use based on the age and condition of the battery to
maximize vehicle range and extend battery life. The second function is to
automatically adjust the operation of the systems of an electric vehicle to
improve performance. For example, if the vehicle air conditioner is running, the
system can momentarily turn it down during acceleration so that additional
energy is available for propelling the vehicle. The system can also predict
available range for typical freeway, city or mountain driving, and whether
specific trips are possible (such as a commute to work or a trip to the grocery
store). These features of the Energy Management System are important in electric
vehicle applications because the range of electric vehicles initially will be
limited to approximately 60 to 120 miles between charges, and because the
frequency of battery replacement will be more important in determining the cost
of operating an electric vehicle than the cost of the electricity necessary to
recharge the battery.
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The Energy Management System consists of two components: first, a
custom-developed printed circuit board with a micro-processor computer chip and
other standard, commercially available computer components, that serves as the
"brain" of the system; and second, custom-developed sensors installed on each of
the vehicle's batteries to provide information concerning the batteries' status.
Optimal decisions are either implemented automatically by the system or
communicated to the driver through a text display in the instrument panel. The
Company has completed initial research and development of prototype Energy
Management Systems and is installing units in the electric vehicles it assembles
under development orders and in prototypes for the proposed Indian joint
venture.
The Company intends to try to market the Energy Management System by
licensing its technology to other companies making electric vehicles. See
"--Proprietary Rights and Patents." However, the system requires customization
for the particular electric vehicle it is to control, including modification of
the software, and requires extensive integration into the vehicle since it must
connect with various other systems, receive sensor inputs from throughout the
vehicle, and communicate with a visual display in the instrument panel. Because
of these integration requirements, the Company or its licensees would need to
undertake significant application engineering to adapt this product for each
electric vehicle model. Furthermore, because development of the electric vehicle
industry is subject to numerous uncertainties, the Company cannot predict
whether there would ever be commercial sales of its system. Substantial
additional investments in development of this product would be based upon
customer interest as the electric vehicle market develops.
MARKETING AND SALES
In the automotive components industry, products typically proceed through
five stages of research and development and commercialization. Initial research
on the product concept comes first, in order to assess its technical feasibility
and economic costs and benefits, and often includes the development of an
internal prototype for the supplier's own evaluation of the product. If the
product appears feasible, a functioning prototype or demonstration prototype is
manufactured by the component supplier to demonstrate and test the features of
the product. This prototype is then marketed to automotive companies to generate
sales of evaluation prototypes for internal evaluation by the automobile
manufacturer. If the automobile manufacturer remains interested in the product
after testing initial evaluation prototypes, it typically works with the
component supplier to refine the product and then purchase second and subsequent
generation engineering prototypes for further evaluation. Finally, the
automobile manufacturer determines to either purchase the component for a
production vehicle or terminate interest in the component.
The time required to progress through these five stages of commercialization
varies widely. Automotive companies will take longer to evaluate components that
are critical to the safe operation of the vehicle where a product failure can
result in a passenger death. Conversely, if the product is not safety critical,
the evaluation can proceed more quickly since the risk of product liability is
smaller. Another factor influencing the time required to complete the product
sales cycle relates to the required level of integration of the component into
other vehicle systems. Products that are installed by the factory generally
require a medium amount of time to evaluate since other vehicle systems are
affected and because a decision to introduce the product into the vehicle is not
easily reversed, as it is with dealer-installed options. Products that are
installed by an auto dealer take the least amount of time to evaluate since they
have little impact on other vehicle systems. The Company's products vary in how
they fit within these two factors affecting the time required for completing the
sales cycle. The CCS has a moderate effect on other vehicle systems and would be
a factory installed item. The Company's radar system and energy management
system would also be factory installed and would have a greater impact on other
vehicle systems.
The Company's CCS, radar products and IVS-TM-, all of which are derived from
technologies used in the aerospace or defense industries, are designed primarily
to be applied to new gasoline-powered vehicles, with possible aftermarket
application to existing gasoline-powered vehicles. The energy management system
and the electric vehicle systems are uniquely designed for application to
electric vehicles.
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PROPRIETARY RIGHTS AND PATENTS
The Company acquires developed technologies through licenses and joint
development contracts in order to optimize the Company's expenditure of capital
and time, and to adapt and commercialize such technologies in automotive
products which are suitable for mass production. The Company also develops
technologies or furthers the development of acquired technologies through
internal research and development efforts by Company engineers.
The Company has adopted a policy of seeking to obtain, where practical, the
exclusive rights to use technology related to its products through patents or
licenses for proprietary technologies or processes. The Company currently has
several license arrangements, two patents and several pending patent
applications relating to the technologies used in the Company's business, as
described below.
CCS
Pursuant to an Option and License Agreement between the Company and Feher
Design, Inc. ("Feher"), Feher has granted to the Company a non-exclusive
worldwide license to use three specific CCS technologies covered by patents held
by Feher. The license with respect to technology subject to a Feher patent
expires upon the expiration of the Feher patent covering the relevant
technology. The first of these three patents expires on November 17, 2008.
In addition to the aforementioned license rights to the CCS technology, the
Company holds two patents on a variable temperature seat climate control system.
The Company also has pending two additional patent applications with respect to
certain improvements to the CCS technology developed by the Company. The Company
is aware that an unrelated party filed a patent application in Japan on March
30, 1992 with respect to technology similar to the CCS technology. However, to
date, this application remains subject to examination and therefore no patent
has been issued to the party filing such application. If such patent were to
issue and be upheld, it could have a material adverse effect upon the Company's
ability to sell CCS products in Japan.
RADAR FOR MANEUVERING AND SAFETY
Pursuant to a License Agreement between the Company and the Regents (the
"Regents") of the University of California (Lawrence Livermore National
Laboratory), the Regents have granted to the Company a limited, exclusive
license to use certain technology covered by patents held by the Regents in the
following three passenger vehicle applications: intelligent cruise control, air
bag crash systems, and position sensors. This license requires the Company to
achieve commercial sales of products by the end of 1998. Commercial sales are
defined as sales of non-prototype products to at least one original equipment
manufacturer. Failure to achieve commercial sales for a particular application
will result in the loss of exclusivity of the license for that application, in
which event the licensor will have the right to grant other entities a
non-exclusive license for that application at terms no more favorable than those
enjoyed by the Company. The license expires on January 14, 2014 (the date of
expiration of the last-to-expire patent for the technology covered by the
license). As the patents covering the licensed technology expire, products made
by the Company using such technology (and only such technology) will cease to be
subject to any further royalty obligations under the license.
IVS-TM-
The Company has licensed rights to intellectual property comprising the
IVS-TM- technology pursuant to three different license agreements. The Company
has a worldwide non-exclusive license from Lernout & Hauspie Speech Products
N.V. to use certain interactive software and related documentation used in the
voice recognition technology incorporated in the IVS-TM- product. This license
may be terminated by either party upon a material breach of the agreement by the
other party that remains uncured after a certain grace period. The Company has
failed to make certain advance royalty payments required by the terms of this
license agreement, and the applicable grace period has expired. As of the date
hereof, the Company
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has not received any notification that the licensor is terminating this license.
However, no assurance can be given that the licensor will not terminate this
license in the future. See "Products--Interactive Voice Systems (IVS-TM-)."
The Company also has a non-exclusive license to produce, distribute and/or
sell copies of a navigation database, the rights to which are owned by
Navigation Technologies Corporation ("NavTech"). This license expires on
December 31, 2001 but may be renewed at the Company's option for subsequent
five-year periods (which renewal option is subject to termination by NavTech).
In May, 1996, the Company entered into an agreement (the "Settlement
Agreement") with ANS and certain other parties pursuant to which the Company
settled certain disputes it had with such parties relating to certain technology
used or useful in the Company's IVS-TM- product. Under the Settlement Agreement,
ANS granted the Company a worldwide non-exclusive, royalty-bearing license to
make and sell products incorporating certain voice-interface vehicle navigation
technology and technology for recognizing spoken words in which ANS has
proprietary rights. The Settlement Agreement also provides that the Company has
exclusive rights to the IVS-TM- trademark. The Company granted ANS a worldwide
non-exclusive, royalty-bearing license to make and sell products incorporating
certain improvements made by the Company to the voice-interface system and the
word recognition technology. These products could compete directly with the
Company's IVS-TM- product and could be introduced by ANS as early as 1997. See
"Risk Factors--Lack of Exclusive Licenses on IVS-TM- and Heated and Cooled
Seats; Potential Loss of Exclusivity of License on Radar for Maneuvering and
Safety."
The Company has copyrights on several materials used in connection with its
IVS-TM- product, including map discs for various geographical regions to be used
with the navigator software (which copyrights are jointly owned with NavTech and
ANS), as well as navigator installation and user guides for use with certain
in-dash compact disc components manufactured by Kenwood, Eclipse, Clarion and
Alpine (which copyrights are jointly owned with ANS).
ELECTRIC VEHICLE SYSTEMS
The Company was recently issued a patent on a key function of the Energy
Management System and has applied for additional patents relating to such
system. The Company believes that those elements of the Energy Management System
not covered by the patent are protected as trade secrets.
GENERAL
Because of rapid technological developments in the automotive industry and
the competitive nature of the market, the patent position of any component
manufacturer is subject to uncertainties and may involve complex legal and
factual issues. Consequently, although the Company either owns or has licenses
to certain patents, and is currently processing several additional patent
applications, it is possible that no patents will issue from any pending
applications or that claims allowed in any existing or future patents issued or
licensed to the Company will be challenged, invalidated, or circumvented, or
that any rights granted thereunder will not provide adequate protection to the
Company. There is an additional risk that the Company may be required to
participate in interference proceedings to determine the priority of inventions
or may be required to commence litigation to protect its rights, which could
result in substantial costs to the Company.
The Company's potential products may conflict with patents that have been or
may be granted to competitors or others. Such other persons could bring legal
actions against the Company claiming damages and seeking to enjoin manufacturing
and marketing of the affected products. Any such litigation could result in
substantial cost to the Company and diversion of effort by the Company's
management and technical personnel. If any such actions are successful, in
addition to any potential liability for damages, the Company could be required
to obtain a license in order to continue to manufacture or market the affected
products. There can be no assurance that the Company would prevail in any such
action or that any license required under any such patent would be made
available on acceptable terms, if at all. Failure to obtain
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needed patents, licenses or proprietary information held by others may have a
material adverse effect on the Company's business. In addition, if the Company
becomes involved in litigation, it could consume a substantial portion of the
Company's time and resources. However, the Company has not received any notice
that its products infringe on the proprietary rights of third parties.
The Company also relies on trade secrets that it seeks to protect, in part,
through confidentiality and non-disclosure agreements with employees, customers
and other parties. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any such breach or
that the Company's trade secrets will not otherwise become known to or
independently developed by competitors. To the extent that consultants, key
employees or other third parties apply technological information independently
developed by them or by others to the Company's proposed projects, disputes may
arise as to the proprietary rights to such information that may not be resolved
in favor of the Company. The Company may be involved from time to time in
litigation to determine the enforceability, scope and validity of proprietary
rights. Any such litigation could result in substantial cost to the Company and
diversion of effort by the Company's management and technical personnel.
Additionally, with respect to licensed technology, there can be no assurance
that the licensor of the technology will have the resources, financial or
otherwise, or desire to defend against any challenges to the rights of such
licensor to its patents.
The enactment of the legislation implementing the General Agreement on Trade
and Tariffs has resulted in certain changes to United States patent laws that
became effective on June 8, 1995. Most notably, the term of patent protection
for patent applications filed on or after June 8, 1995 is no longer a period of
17 years from the date of grant. The new term of a United States patent will
commence on the date of issuance and terminate 20 years from the earliest
effective filing date of the application. Because the time from filing to
issuance of an automotive technology patent application is often more than three
years, a 20-year term from the effective date of filing may result in a
substantially shortened term of patent protection, which may adversely impact
the Company's patent position. If this change results in a shorter period of
patent coverage, the Company's business could be adversely affected to the
extent that the duration and/or level of the royalties it may be entitled to
receive from a collaborative partner, if any, is based on the existence of a
valid patent.
COMPETITION
The automotive components and systems business is highly competitive. The
Company may experience competition directly from automobile manufacturers, most
of which have the capability to manufacture competing products. Many of the
existing and potential competitors of the Company have considerably greater
financial and other resources than the Company, including, but not limited to,
an established customer base, greater research and development capability,
established manufacturing capability and greater marketing and sales resources.
The Company also competes indirectly with related products that do not offer
equivalent features to the Company's products, but can substitute for the
Company's products. The Company believes that its products will compete on the
basis of price, performance and quality.
CCS
The Company is not aware of any competitors that are offering systems for
both heating and cooling automotive car seats, although substantial competition
exists for the supply of heated-only seats. It is possible that competitors will
be able to expand or modify their current products by adding a cooling function
to their seats based upon a technology not covered by patented technology
licensed to the Company, or by licensing rights to these patents from the
inventor. The CCS competes indirectly with alternative methods of providing
passenger climate control in a vehicle such as heating and air conditioning
systems, which are currently available for almost all vehicles. The Company
hopes to develop a market niche for this product initially as a luxury in
conventional gasoline-powered cars in Europe, where gasoline prices are
relatively high, as well as in electric vehicles which, due to their reliance on
batteries, could
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benefit from a less energy intensive source of climate control. The Company is
aware that a Japanese patent has been applied for by another entity on
technology similar to the CCS technology.
RADAR FOR MANEUVERING AND SAFETY
The potential market for automotive radar has attracted many aerospace
companies who have developed a variety of radar technologies. A few automotive
original equipment manufacturers are now offering ultrasonic or infrared laser
distance sensors for parking aids. These companies have far greater technical
and other resources than does the Company. While the Company believes that its
licensed radar technology has competitive advantages which are protected by
intellectual property rights in the applications the Company is developing, it
is possible that the market will not accept the Company's radar products or that
competitors will find ways to offer similar products without infringing on the
Company's intellectual property rights.
IVS-TM-
The Company is aware that there are 20 or more competitors developing
car-based navigation systems, and is aware of at least 13 companies that have
systems that are very advanced in the development cycle, including systems from
Blaupunkt-werk GmbH, Bosch Electronics, Clarion Corporation of America, Motorola
Incorporated, Sanyo Fisher USA Corp., Siemens Automotive LP, Sony Electronics,
Phillips Electronics, Pioneer Electronic Corp. and General Motors Corporation.
Several of these competitors have achieved significant sales of their systems in
Japan and Europe, and recently have introduced their product in the United
States or are planning to introduce their product in the United States. Many of
these competitors have established relationships with automobile manufacturers.
The Company expects that new competitors will enter the market once United
States sales are established. All the competitive systems of which the Company
is currently aware of utilize visual displays and, unlike the Company's IVS-TM-,
most of them rely on global positioning satellite systems to identify the
location of the vehicle. While these features of competitive navigation systems
may enhance consumer acceptance of the systems, they are more costly than the
Company's system.
Under the Settlement Agreement with ANS, ANS will have rights which will
allow it to make and sell products incorporating certain improvements made by
the Company to the IVS-TM- technology. These products could compete directly
with the Company's IVS-TM- product and could be introduced by ANS as early as
1997. ANS does not at this time have a product for commercial sale. The Company
is not aware of any other competitor that has offered a voice recognition system
for identifying the vehicle location or desired destination, although at least
two competitors use a voice recognition system to allow drivers to control some
of the functions of the system, such as the movement of the map or the visual
display, and several competitors use speech output, but not input, systems to
provide verbal directions to the destination.
ELECTRIC VEHICLE SYSTEMS
ELECTRIC VEHICLES. The potential market for electric vehicles and electric
vehicle systems, when and if it develops into a significant commercial market,
is expected to attract many of the domestic and international automobile
manufacturers. Currently, many automobile manufacturers are doing development
work on electric vehicles, and some have announced plans to enter the commercial
market. General Motors Corporation has recently introduced a production electric
vehicle that is now available for lease in the United States.
The Company has experience in the design and prototyping of Electric Vehicle
Systems which it believes provides certain niche market opportunities. The
Company believes such a niche now exists in developing Asian countries.
Accordingly, the Company initially intends to sell its Electric Vehicle Systems
in selected Asian markets where competition at this time is from a limited
number of higher priced gasoline-powered cars. The emergence of a significant
market, if such emergence occurs, will cause other
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competitors to enter the market, all of which may have far greater depth of
technical, manufacturing, and marketing resources than does the Company. The
Company does not intend to enter the U.S. market at this time.
ENERGY MANAGEMENT SYSTEM. The Company is aware of one competitor, Hughes
Power Control Systems, which is developing and offering a product which competes
directly with the Energy Management System. The Company is also aware of several
automobile manufacturers that plan to incorporate the function of the Energy
Management System into electronic modules currently manufactured or which may be
manufactured in the future.
EMPLOYEES
As of January 24, 1997, the Company had 55 employees. Approximately 5 of the
Company's employees, or about 9% of the Company's personnel, are covered under a
collective bargaining agreement. The Company considers its employee relations to
be satisfactory.
PROPERTIES
The Company maintains its corporate headquarters and research and
development facilities in sub-leased space in a Monrovia, California industrial
park. The Company has exercised an option to extend the sub-lease until July 31,
1997, after which the sublessor's master lease expires and the Company will have
to relocate its facilities. The current monthly rent under the sub-lease is
approximately $24,000. The Company believes that adequate alternative space is
available in the immediate area at comparable rates. The Company also leases
manufacturing and office space in Alameda, California on a month-to-month basis.
The monthly rent for this space is approximately $5,700. The Company believes
that its facilities are adequate for its present needs and projected needs for
the immediate future.
LEGAL PROCEEDINGS
HBI and DDJ have threatened various claims against the Company and its
directors and officers arising out of the December 1995 private placement by the
Company of 750,000 shares of Class A Common Stock. In general, they allege that
the Company provided misleading projections and failed to disclose certain
information in connection with such private placement. The Company believes
these allegations to be without merit. While, to the Company's knowledge, HBI
and DDJ have commenced no legal action against the Company in connection with
such claims, no assurance can be given that they will not do so in the future.
If they were to commence such legal action, the Company would be forced to
defend such action and/or settle with them, the costs of which defense and/or
any resulting liability or settlement could have a material adverse effect on
the Company's financial condition. John W. Clark, a director of the Company, is
a general partner of an affiliate of HBI.
On November 14, 1996, Gibbins Pattern & Plastic, Inc. ("Gibbins"), a
supplier to the Company, filed suit against the Company in Michigan state court
in the circuit court for the County of Wayne, Michigan for breach of contract,
open account/account stated, and unjust enrichment/quantum meruit. Gibbins
alleges that the Company has failed to pay for delivered products. The Company
has withheld certain payments because Gibbins has failed to provide the Company
with assurance of future performance. Gibbins has claimed a total of $231,548 in
damages. The Company has removed the lawsuit to the federal district court for
the Eastern District of Michigan and asserted certain counterclaims against
Gibbins. The Company intends to defend the matter vigorously and believes that
the lawsuit will not have a material adverse effect on the Company.
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MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- ---------------------------------------------------------------
<S> <C> <C>
Lon E. Bell, Ph.D................ 56 President, Chief Executive Officer, and Chairman of the Board
Daniel R. Coker.................. 44 Vice President of Sales and Marketing
R. John Hamman, Jr............... 55 Vice President of Finance and Chief Financial Officer
James L. Mertes.................. 44 Vice President of Operations and Quality
Joshua M. Newman................. 38 Vice President of Corporate Development and Planning, Secretary
and Director
Roy A. Anderson.................. 76 Director
Roger E. Batzel.................. 75 Director
John W. Clark.................... 51 Director
A. Stephens Hutchcraft, Jr....... 66 Director
Michael R. Peevey................ 58 Director
Norman R. Prouty, Jr............. 58 Director
</TABLE>
Dr. Lon E. Bell has been the President, Chief Executive Officer and Chairman
of the Board of the Company since its formation in April 1991. Dr. Bell
co-founded Technar Incorporated with Dr. Allen Gillespie and Mr. Robert Diller,
Amerigon's Chief Engineer, in 1967, which developed and manufactured automotive
components, and served as its Chairman and President until selling majority
ownership of Technar to TRW Inc. in 1986. Dr. Bell continued managing Technar as
its President until 1991, when he left to form the Company. Dr. Bell received
his undergraduate degree in mathematics from the California Institute of
Technology in 1962, where he also was granted a master's degree in rocket
propulsion in 1963 and a Ph.D. in mechanical engineering in 1968.
Daniel R. Coker joined the Company as Vice President of Sales and Marketing
in March, 1996. Previously, he worked with Arvin, Inc., a tire pressure sensor
manufacturer, from 1986 through 1995 as Vice President and General Manager of
North American Operations. Mr. Coker received his BS degree from Tennessee
Technological University in 1974.
R. John Hamman, Jr. joined the Company in August, 1995 as Vice President of
Finance and Chief Financial Officer. From 1986 to 1994, he was Vice President of
Finance for Amcare, Inc., a provider of pharmaceutical drugs and supplies to
long-term care facilities. Mr. Hamman received his BS degree from Denison
University and an MBA degree from Northwestern University, and is a CPA.
James L. Mertes joined the Company in 1993 as Vice President of Quality and
was promoted to Vice President of Operations and Quality in 1994. Immediately
prior to joining the Company, Mr. Mertes was Director of Quality at TRW Sensor
Operations, a unit of TRW Inc., for two years.
Joshua M. Newman joined the Company in March 1992 as Vice President of
Corporate Development and Planning, and became a Director in April 1993. Prior
to joining the Company, Mr. Newman worked as a management consultant, first for
the Boston Consulting Group from 1988 through December 1990, and then as an
independent electric vehicle consultant until joining the Company. Mr. Newman
received his undergraduate degree in history from the University of California
at Davis in 1981 and an MBA from Harvard University in 1988.
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Roy A. Anderson has been a Director of the Company since the closing of the
Company's initial public offering. Mr. Anderson is Chairman Emeritus of Lockheed
Corporation. He served as Chairman of the Board and Chief Executive Officer of
Lockheed from 1977 until his retirement on December 31, 1985. He remained on
Lockheed's board of directors until December 31, 1990, and also served as a
consultant to that company until December 31, 1992. Mr. Anderson is a member of
the boards of the Los Angeles Music Center, the Greater Los Angeles United Way,
and the Los Angeles World Affairs Council. He is Chairman and Chief Executive
Officer of the Weingart Foundation and Co-Chairman of the Select Panel of
Project California.
Roger E. Batzel has been a Director of the Company since the closing of the
Company's initial public offering. In April 1988, he retired after 16 years as
Director of Lawrence Livermore National Laboratory and became Director Emeritus.
From March 1, 1988 to the present, Mr. Batzel has been a scientist at Lawrence
Livermore National Laboratory, serving initially as associate director at large,
and then as a consultant, and beginning in 1991 as a laboratory associate.
John W. Clark has been a Director of the Company since July 1996. Since May
1995, Mr. Clark has been a General Partner of Westar Capital Associates, a
private equity investment company. From 1990 to May 1995, he was a private
investor. Prior to 1990, Mr. Clark was President of Valentec International
Corporation, a producer of metal and electronic components for military and
commercial products. Mr. Clark serves as a director for All Post, Inc., Dogloo,
Inc., and Scripps Clinic MSO, Inc.
A. Stephens Hutchcraft, Jr. has been a Director of the Company since the
closing of the Company's initial public offering. From December 1992 through
December 1993, Mr. Hutchcraft served as Chairman and Chief Executive Officer of
Kaiser Aluminum & Chemical Corporation, and served as its President from 1982 to
May 1993. He has been a Director of that Company since 1982.
Michael R. Peevey has been a Director of the Company since the closing of
the Company's initial public offering. From October 1990 until he retired in
March 1993, Mr. Peevey was President of Southern California Edison and SCE
Corporation. Prior thereto, he was Executive Vice President of such entities
since January 1986. Mr. Peevey has been President and Chief Executive Officer of
New Energy Partners since March 1995. Mr. Peevey serves as a Director of
ElectroRent Corporation, Dames & Moore, Inc. and Ocal, Inc.
Norman R. Prouty has been a Director of the Company since the closing of the
Company's initial public offering. Mr. Prouty was a general partner of the
investment banking firm of Lazard Freres & Co., from 1990 to 1993 and a limited
partner during 1994. The firm subsequently became a limited liability company
and Mr. Prouty was a Limited Managing Director during 1995 until his retirement
on December 31, 1995. Since January 1996, Mr. Prouty has been a private
investor. Previously, Mr. Prouty was a Vice President and Senior Credit Officer
of Citibank, N.A. where he was engaged in domestic and international banking for
approximately 20 years.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Articles of Incorporation limit the liability of its
directors. As permitted by the California General Corporation Law, directors
will not be liable to the Company for monetary damages arising from a breach of
their fiduciary duty as directors in certain circumstances. Such limitation does
not affect liability for any breach of a director's duty to the Company or its
shareholders (i) with respect to approval by the director of any transaction
from which he derives an improper personal benefit, (ii) with respect to acts or
omissions involving an absence of good faith, that he believes to be contrary to
the best interests of the Company or its shareholders, that involve intentional
misconduct or a knowing and culpable violation of law, that constitute an
unexcused pattern of inattention that amounts to an abdication of his duty to
the Company or its shareholders, or that show a reckless disregard for his duty
to the Company or its shareholders in circumstances in which he was or should
have been aware, in the ordinary course of performing his duties, of a risk of
serious injury to the Company or its shareholders, or (iii) based on
transactions between the Company and its directors or another corporation with
interrelated directors
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or on improper distributions, loans or guarantees under applicable sections of
the California General Corporation Law. Such limitation of liability also does
not affect the availability of equitable remedies such as injunctive relief or
rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the full extent permitted by California law, including
circumstances in which indemnification is otherwise discretionary under
California law, and the Company has entered into indemnity agreements with its
directors and officers providing such indemnity.
CERTAIN TRANSACTIONS
Lon E. Bell, Ph.D., Chief Executive Officer, President and Chairman of the
Board of Directors, founder of the Company and a principal shareholder of the
Company, co-founded CALSTART (a non-profit consortium of companies engaged in
the development and manufacture of products that benefit the environment) in
1992, served as its interim President, and for the last three years has served
on its Board of Directors and been a member of its Executive Committee.
The Company leased space from CALSTART from June 1992 until April 1994 at no
charge, at which time the Company moved to its current facility. On April 1,
1996, the Company signed a lease with CALSTART for a 24,000 square foot
manufacturing and office facility located in Alameda, California for a term
beginning November 15, 1995 and ending December 31, 1996 for an advance payment
of $450,000 and approximately $11,500 per month. The Company presently leases
approximately half of such space on a month to month basis for approximately
$5,700 per month. The Company believes the terms of such lease are at least as
favorable to the Company as those that could have been obtained from
unaffiliated third parties.
The Company managed the Showcase Program, co-managed the Neighborhood
Electric Vehicle Program, and currently manages three other electric vehicle
programs for CALSTART, for which the Company recognized revenues of $679,000
from CALSTART in 1992, $1,649,000 in 1993, $802,000 in 1994, and $2,198,000 in
1995. Such amounts represent reimbursement of expenses incurred by the Company
in managing the Showcase Program in 1992, for four programs in 1993, for three
programs in 1994, and for four programs in 1995.
In March 1993, Dr. Bell granted to Mr. Newman options to purchase 354,485
shares of Class A Common Stock owned by Dr. Bell, of which a portion relate to
Dr. Bell's Escrow Shares. Of the options covering such 354,485 shares, options
to purchase 27,337 shares were cancelled, and Mr. Newman has exercised options
to purchase 60,000 shares. Of Mr. Newman's remaining options from Dr. Bell,
options on 21,787 shares are fully vested and options on 245,361 shares vest
only at such time, if ever, as such Escrow Shares are released as Class A Common
Stock from escrow. The exercise price is $1.15 per share and the options expire
March 31, 2003.
In May 1993, Dr. Bell granted options to purchase 10,000 shares of his Class
A Common Stock each to Directors Messrs. Anderson, Batzel, Hutchcraft, Peevey
and Prouty. Of the 50,000 options, 12,500 (or 2,500 options per director) are
fully vested and the balance will vest at such time, if ever, as the Escrow
Shares are released as Class A Common Stock from the escrow. The exercise price
is $6.00 per share and the options expire in 1999.
In August 1995, Dr. Bell granted options to purchase 10,000 shares of his
Class A Common Stock to Mr. Hamman at $12.00 per share of which 2,500 became
vested in August 1996 and the remaining 7,500 options will vest at such time, if
ever, as the Escrow Shares are released as Class A Common Stock from escrow.
Such options expire in August 2000.
In March 1996, Dr. Bell granted options to purchase 5,000 shares of his
Class A Common Stock to Mr. Coker. Of the 5,000 options, 1,250 will vest in
March of 1997 and the balance will vest at such time, if ever, as the Escrow
Shares are released as Class A Common Stock from the escrow. The exercise price
is $10.38 per share and the options expire in March 2001.
49
<PAGE>
In September 1996, Dr. Bell extended a $200,000 working capital loan to the
Company. The loan bears interest at 8% per annum and is payable on demand. In
January 1997, Dr. Bell extended an additional $100,000 working capital loan to
the Company, which loan bears interest at 10% per annum and is payable on the
earlier of March 1, 1997 or the day after the Offering is completed. A portion
of the proceeds of the Offering will be used to pay interest and principal on
such working capital loans. See "Use of Proceeds."
In the event that the Company goes forward with its proposed joint venture
project in India, the Company and its potential joint venture partner intend to
grant Mr. Prouty options to purchase an equity interest in the joint venture
entity if Mr. Prouty is able to arrange financing for the project from third
party investors.
The Company periodically engages Adaptrans, an entity owned by David Bell,
Dr. Bell's son, for engineering design services. Such services primarily involve
assistance in the development and refinement of the Energy Management System.
Adaptrans is engaged only on an "as needed" basis and the Company pays
approximately $8,000 per month for such services. Through December 31, 1996, the
Company had paid Adaptrans a total of $159,000 for such services. The Company
believes the terms of its engagement of Adaptrans are at least as favorable to
the Company as those that could have been obtained from unaffiliated third
parties.
50
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Stock as of December 31, 1996 by (i)
each person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Class A Common Stock; (ii) each of the Company's directors
and nominees; (iii) each of the named executive officers identified in the
Company's Proxy Statement dated June 17, 1996 and (iv) all executive officers
and directors of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF CLASS
NATURE OF -----------------------
BENEFICIAL BEFORE AFTER
NAME AND ADDRESS(1) OWNERSHIP OFFERING OFFERING
- ------------------------------------------------------------------------------------------ ------------- -------- ------------
<S> <C> <C> <C>
Lon E. Bell(2)(3)(4)...................................................................... 3,451,938 48.8% 29.2%
Joshua M. Newman(4)(5).................................................................... 21,787 * *
Roy A. Anderson(4)(6)(7).................................................................. 42,500 * *
Roger E. Batzel(4)(6)(7).................................................................. 42,500 * *
John W. Clark............................................................................. 12,500 * *
A. Stephens Hutchcraft, Jr.(4)(6)(7)...................................................... 42,500 * *
Michael R. Peevey(4)(6)(7)................................................................ 42,500 * *
Norman R. Prouty(4)(6)(7)................................................................. 42,500 * *
DDJ Capital Management, LLC............................................................... 560,000 7.9% 4.7%
All executive officers and directors as a group (9 persons)(2)(3)(4)(7)................... 3,668,709 50.4% 30.5%
</TABLE>
- ------------------------
* Less than 1%.
(1) For all shareholders other than DDJ Capital Management, LLC, the address is
c/o the Company, 404 E. Huntington Drive, Monrovia, CA 91016. The address
for DDJ Capital Management, LLC is 141 Linden Street, Suite 4, Wellesley, MA
02181.
(2) 2,592,903 of the shares are held in Escrow. See "Escrow Shares" below.
(3) By virtue of the number of shares of stock owned by Dr. Lon Bell, and his
position as an officer, director and founder of the Company, he is deemed
the "parent" of the Company within the meaning of the rules and regulations
promulgated under the Securities Act of 1933 (the "Act"). Dr. Bell has
transferred by gift and sale an aggregate of 26,666 shares to each of three
trusts, for which he and his spouse are co-trustees, created for the benefit
of his children. Such shares total 79,998 and are included in Dr. Bell's
beneficial ownership in the above table.
(4) Of these shares, Dr. Bell has granted the following options to purchase
shares of his Class A Common Stock: 267,148 shares to Joshua Newman; 10,000
shares to R. John Hamman, Jr.; 411,072 shares to other employees and
consultants; and 10,000 shares each to Messrs. Anderson, Batzel, Hutchcraft,
Peevey and Prouty. Of the total options outstanding, options to purchase
349,795 shares of Class A Common Stock relate to Dr. Bell's Escrow Shares
and are exercisable only at such time, if ever, as the Escrow Shares are
released as Class A Common Stock from Escrow, and the remaining options do
not relate to Escrow Shares. All of the 738,220 shares issuable upon the
exercise of these options are included in Dr. Bell's beneficial ownership in
the above table.
(5) Includes 21,787 shares issuable upon exercise of options granted by Dr.
Bell, which have vested to date. Does not include 245,361 shares issuable
upon the exercise of options to purchase Dr. Bell's Escrow Shares, which
vest only at such time, if ever, as the Escrow Shares are released from
Escrow.
(6) Includes, as to each of Messrs. Anderson, Batzel, Hutchcraft, Peevey and
Prouty, 2,500 shares issuable upon the exercise of options granted by Dr.
Bell. Does not include, as to each person, 7,500 shares
51
<PAGE>
issuable upon the exercise of options to purchase Dr. Bell's Escrow Shares,
which vest only at such time, if ever, as the Escrow Shares are released
from Escrow.
(7) Includes, as to each of Messrs. Anderson, Batzel, Hutchcraft, Peevey and
Prouty, 40,000 shares issuable upon exercise of options granted under the
Company's 1993 Stock Option Plan.
ESCROW SHARES
In order to incent management of the Company to achieve certain stock price
and income targets, and as a condition of the Company's Initial Public Offering
("IPO") in June 1993, the Company's then existing shareholders (the "Original
Shareholders") placed 3,000,000 shares (the "Escrow Shares") of the Company's
Class A Common Stock into escrow pursuant to an agreement (the "Escrow
Agreement") by and among the Original Shareholders, the Company, and the escrow
agent. The Escrow Shares will automatically be released from escrow to the
Original Shareholders upon satisfaction of certain conditions with respect to
1,000,000 shares, referred to as "Escrow Target I," and upon satisfaction of
certain other conditions with respect to an additional 2,000,000 shares,
referred to as "Escrow Target II." The Escrow Agreement will terminate upon the
earlier of the release of all the Escrow Shares or April 30, 1999 (the "Escrow
Period"). During the Escrow Period, the Original Shareholders may vote, but may
not transfer, the Escrow Shares; however, options for Escrow Shares may be
granted. The conditions for release of the Escrow Shares are as follows:
(a) Escrow Target I: 1,000,000 of the Escrow Shares will be released in
the event that the Company's Minimum Pretax Income (as defined below) for
any of the fiscal years ending December 31, 1996, 1997 and 1998 equals or
exceeds the following amounts, after giving effect to the issuance of the
Class A Common Stock offered hereby and the exercise of warrants presently
outstanding and the Class A Warrants to be issued in connection with the
Offering:
<TABLE>
<CAPTION>
PRO FORMA AFTER
THE
PRO FORMA OFFERING AND
AFTER THE EXERCISE OF
FISCAL YEAR ENDING OFFERING WARRANTS
- --------------------------------------------------- ----------- ------------------
(IN THOUSANDS)
<S> <C> <C>
December 31, 1996.................................. $ 9,592 $ 15,752
December 31, 1997.................................. 14,388 23,628
December 31, 1998.................................. 19,183 31,503
</TABLE>
(b) Escrow Target II: The remaining 2,000,000 Shares held in Escrow will
be released in the event that the Company's Minimum Pretax Income (as
defined below) for any of the fiscal years ending December 31, 1996, 1997
and 1998 equals or exceeds the following amounts, after giving effect to the
issuance of the Class A Common Stock offered hereby and the exercise of
warrants presently outstanding and the Class A Warrants to be issued in
connection with the Offering:
<TABLE>
<CAPTION>
PRO FORMA AFTER
THE
PRO FORMA OFFERING AND
AFTER THE EXERCISE OF
FISCAL YEAR ENDING OFFERING WARRANTS
- --------------------------------------------------- ----------- ------------------
(IN THOUSANDS)
<S> <C> <C>
December 31, 1996.................................. $ 17,265 $ 28,353
December 31, 1997.................................. 23,020 37,804
December 31, 1998.................................. 28,775 47,255
</TABLE>
"Minimum Pretax Income" means for any fiscal year the Company's net income
before provision for income taxes and exclusive of (i) any extraordinary items,
(ii) charges to income resulting from the release of the Escrow Shares or (iii)
charges to income resulting from options granted by Dr. Bell or of options
granted under the Company's 1993 Stock Option Plan, as reflected in the
Company's audited financial statements. The Escrow Agreement provides that the
minimum pretax income conditions in Escrow
52
<PAGE>
Target I and Escrow Target II be adjusted for any issuance of Class A Common
Stock after the IPO other than stock issued upon the exercise of the
underwriter's over-allotment option granted in connection with the IPO,
underwriter's warrants granted in connection with the IPO or options under the
1993 Stock Option Plan.
The escrow targets set forth above were determined by negotiation between
the Company and the underwriter of the IPO and should not be construed to imply
or predict any future earnings by the Company or any increase in the market
price of its securities.
On April 30, 1999, all shares that have not been released from escrow will
automatically be exchanged for shares of Class B Common Stock, which will then
be released from escrow. The Class B Common Stock is neither transferable nor
convertible and its rights with respect to dividends and liquidation
distributions are inferior to those of the Class A Common Stock. See
"Description of Securities--Common Stock." Therefore, the Class B Common Stock
has limited economic value. Any money, securities, rights or property
distributed in respect of the Escrow Shares, including any property distributed
as dividends or pursuant to any stock split, merger, recapitalization,
dissolution, or total or partial liquidation of the Company, shall be held in
escrow until release of the Escrow Shares. Any dividends or other distributions
made with respect to Escrow Shares for which the relevant earnings levels have
not been reached within the Escrow Period will be forfeited and contributed to
the capital of the Company on April 30, 1999.
The Company expects that the release, if any, of the Escrow Shares will be
deemed compensatory and, accordingly, will result in substantial charges to
earnings equal to the fair market value of the Escrow Shares as of the date on
which they are released. Such charges could substantially increase the loss or
reduce or eliminate the Company's net income for financial reporting purposes
for the periods in which the Escrow Shares are released or are probable of being
released. Although the amount of compensation expense recognized by the Company
will not affect total stockholders' equity, it may have a negative effect on the
market price of the Company's securities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Pursuant to the terms of a shareholders agreement among the Original
Shareholders, if Class B Common Stock is issued at the end of the Escrow Period,
and if any such shareholder, or the beneficiary of the trust which is the
shareholder, is not or ceases to be an employee, director or consultant of the
Company, then all of his shares of Class B Common Stock will be forfeited and
contributed to the capital of the Company by the shareholder for no additional
consideration. Furthermore, the agreement provides that Class B Common Stock may
be forfeited by each shareholder in order to ensure that each shareholder will
hold no more than one share of Class B Common Stock for each share of Class A
Common Stock held by such shareholder, if only Escrow Target I has been met
(after giving effect to the release of one-third of the Escrow Shares to such
shareholder), or no more than three shares of Class B Common Stock for each
share of Class A Common Stock held by such shareholder, if neither target is
met.
The following table sets forth the number of Escrow Shares owned by all
original shareholders of the Company:
<TABLE>
<S> <C>
Dr. Bell......................................................... 2,592,903
Allen Gillespie.................................................. 218,100
Robert Diller.................................................... 129,000
Trusts for the benefit of Dr. Bell's children.................... 59,997
---------
3,000,000
---------
---------
</TABLE>
53
<PAGE>
SUBSEQUENT OFFERING
The Company has agreed to register, subsequent to the Offering, an
additional 1,620,000 Class A Warrants (the "Selling Securityholder Warrants")
for sale by the holders thereof (the "Selling Securityholders") and 1,620,000
shares of Class A Common Stock (the "Selling Securityholder Stock") underlying
the Selling Securityholder Warrants, all for resale from time to time by the
Selling Securityholders subject to the restrictions described below. The Selling
Securityholders will obtain the Selling Securityholder Warrants upon completion
of the Offering as a result of the automatic conversion of the Bridge
Debentures. See "Management's Discussion and Analysis--Liquidity and Capital
Resources." The Selling Securityholder Warrants and the Selling Securityholder
Stock are sometimes collectively referred to herein as the "Selling
Securityholder Securities."
The Selling Securityholder Warrants are identical to the Class A Warrants
included in the Units offered hereby. All of the Selling Securityholder Warrants
issued upon conversion of the Bridge Debentures and the Class A Common Stock
issuable upon exercise of such Selling Securityholder Warrants will be
registered under the Securities Act and will become tradeable subsequent to the
Effective Date subject to the following contractual restrictions: each Selling
Securityholder has agreed (i) not to sell, transfer, or otherwise dispose
publicly of the Selling Securityholder Warrants except after the time periods
and in the percentage amounts set forth below, on a cumulative basis, and (ii)
not to exercise the Selling Securityholder Warrants for a period of one year
from the closing of the Offering. Purchasers of the Selling Securityholder
Warrants will not be subject to such restrictions.
<TABLE>
<CAPTION>
PERCENTAGE ELIGIBLE
LOCK-UP PERIOD FOR RESALE
- --------------------------------------------------------------------------- ---------------------
<S> <C>
Before 90 days after Closing............................................... 0%
Between 91 and 150 days.................................................... 25%
Between 151 and 210 days................................................... 50%
Between 211 and 270 days................................................... 75%
After 270 days............................................................. 100%
</TABLE>
After the one year period following the effective date of the Offering, the
Selling Securityholders will be able to exercise the Selling Securityholder
Warrants and sell the Class A Common Stock issuable upon exercise thereof
without restriction. The Company will not receive any proceeds from the sale of
the Selling Securityholder Warrants. Sales of Selling Securityholder Warrants
issued upon conversion of the Bridge Debentures or the securities underlying
such Class A Warrants or even the potential of such sales could have an adverse
effect on the market prices of the Class A Common Stock and the Class A
Warrants.
There are no material relationships between any of the Selling
Securityholders and the Company, nor have any such material relationships
existed within the past three years. The Company has been informed by the
Underwriter that there are no agreements between the Underwriter and any Selling
Securityholder regarding the distribution of the Selling Securityholder Warrants
or the underlying securities.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Selling Securityholder Warrants may not
simultaneously engage in market-making activities with respect to any securities
of the Company during the applicable "cooling-off" period (at least two and
possibly nine business days) prior to the commencement of such distribution.
Accordingly, in the event the Underwriter or Blair & Co. is engaged in a
distribution of the Selling Securityholder Warrants, neither of such firms will
be able to make a market in the Company's securities during the applicable
restrictive period. However, neither the Underwriter nor Blair & Co. has agreed
to nor is either of them obligated to act as broker-dealer in the sale of the
Selling Securityholder Warrants, and the Selling Securityholders may be
required, and in the event Blair & Co. is a market-maker, will likely be
required, to sell such securities through another broker-dealer. In addition,
each Selling Securityholder desiring to sell Warrants will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-6 and 10b-7, which provisions
may limit the timing of the purchases
54
<PAGE>
and sales of shares of the Company's securities by such Selling Securityholder.
The Commission has recently adopted Regulation M, which will replace Rule 10b-6
and certain other rules promulgated under the Exchange Act. Upon its
effectiveness in March 1997, Regulation M will result in, among other things,
modifications of (i) the restricted or "cooling off" periods referenced above
from two and nine business days (under current Rule 10b-6) to one and five
business days and (ii) the criteria used to determine the applicable period. See
"Underwriting."
The Selling Securityholders and broker-dealers, if any, acting in connection
with such sales might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act and any commission received by them and any
profit on the resale of the securities might be deemed to be underwriting
discount and commissions under the Securities Act.
DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 40,000,000 shares of Class A
Common Stock, no par value, 3,000,000 shares of Class B Common Stock, no par
value, and 5,000,000 shares of preferred stock, no par value (the "Preferred
Stock").
UNITS
Each Unit consists of 280 shares of the Company's Class A Common Stock, no
par value per share, and 280 Class A Warrants. The public offering price of the
Units will be determined by negotiations between the Company and the
Underwriter, based primarily upon the market price of the outstanding Class A
Common Stock and other factors described in "Underwriting". The components of
the Units will be separately transferable upon issuance.
COMMON STOCK
The holders of each class of common stock have one vote per share on each
matter considered by shareholders. The holders of common stock may cumulate
their votes in the election of directors upon giving notice as required by law.
Shareholders have no preemptive rights. All outstanding shares are, and all
shares to be sold and issued in the Offering will be, fully paid, non-assessable
and legally issued. The Board of Directors is authorized to issue additional
shares of common stock within the limits authorized by the Company's charter and
without shareholder action. Reference is made to the Company's Articles of
Incorporation and By-Laws, as well as to the applicable provisions of the
California General Corporation Law, for a more detailed description of the
rights and liabilities of shareholders.
CLASS A COMMON STOCK
Prior to the Offering, 7,068,500 shares of Class A Common Stock have been
issued and are outstanding, held of record by 49 shareholders (not including
beneficial owners holding in nominee accounts), of which 3,000,000 shares are
Escrow Shares subject to release to the beneficial owners of such shares in the
event the Company attains certain pre-tax income goals. See "Principal
Shareholders-- Escrow Shares." Upon consummation of the sale of the Units
offered hereby, there will be 11,828,500 shares of Class A Common Stock issued
and outstanding, 3,000,000 of which will be Escrow Shares.
CLASS B COMMON STOCK
No shares of Class B Common Stock are issued and outstanding. The Class B
Common Stock is non-transferable and non-convertible. Further, the Class B
Common Stock is subject to forfeiture under certain circumstances. See
"Principal Shareholders--Escrow Shares." Holders of the Class B Common Stock
will be entitled to receive, on a per share basis, only five percent (5%) of the
dividends as may be declared by the Board of Directors on the Class A Common
Stock, and five percent (5%) of the amount receivable by holders of Class A
Common Stock upon liquidation or dissolution of the Company.
55
<PAGE>
PREFERRED STOCK
Shares of Preferred Stock may be issued from time to time in one or more
series and the Board of Directors, without further shareholder approval, is
authorized to fix the dividend rights and terms, conversion rights, voting
rights (whole, limited or none), redemption rights and terms, liquidation
preferences, sinking funds and any other rights, preferences, privileges and
restrictions applicable to each such series of Preferred Stock. The purpose of
authorizing the Board of Directors to determine such rights and preferences is
to eliminate delays associated with a shareholder vote on specific issuances.
The issuance of the Preferred Stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could, among other
things, adversely affect the voting power of the holders of Class A Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company. Such issuance also could adversely affect the
distributions on and liquidation preference of the Class A Common Stock by
creating one or more series of Preferred Stock with distribution or liquidation
preferences senior to the Class A Common Stock. The Company does not currently
intend to issue any shares of its authorized Preferred Stock.
CLASS A WARRANTS
Each Class A Warrant entitles the registered holder thereof to purchase, at
any time until the fifth anniversary of the Effective Date, one share of the
Company's Class A Common Stock at an exercise price of 135% of the amount equal
to the price per Unit to the public divided by 280, subject to adjustment.
Commencing one year from the date hereof, the Company may, upon 30 days' written
notice, redeem each Class A Warrant in exchange for $0.05 per Class A Warrant if
the closing Bid Price of the Class A Common Stock as reported by Nasdaq or the
closing Bid Price on any national stock exchange (if the Company's Class A
Common Stock is listed thereon) shall have, for 30 consecutive business days
ending within 15 days of the date of the notice of redemption, averaged in
excess of 175% of the Class A Warrant exercise price per share (subject to
adjustment in the event of any stock splits or other similar events). The notice
of redemption will be sent to the registered address of the registered holder of
the Class A Warrant. All Class A Warrants must be redeemed if any are redeemed;
provided, however, that the Class A Warrants underlying the Unit Purchase Option
may only be redeemed under limited circumstances. See "Underwriting."
The Class A Warrants will be issued pursuant to a warrant agreement (the
"Warrant Agreement") among the Company, the Underwriter and U.S. Stock Transfer
Corporation as warrant agent (the "Warrant Agent"), and will be evidenced by
warrant certificates in registered form. The exercise price of the Class A
Warrants was determined by negotiation between the Company and the Underwriter
and should not be construed to be predictive of, or to imply that, any price
increases will occur in the Company's securities. The exercise price of the
Class A Warrants and the number and kind of shares of Class A Common Stock or
other securities and property to be obtained upon exercise of the Class A
Warrants are subject to adjustment in certain circumstances, including a stock
split of, or stock dividend on, or a subdivision, combination or
recapitalization of, the Class A Common Stock or the issuance of shares of Class
A Common Stock at less than the market price of the Class A Common Stock.
Additionally, an adjustment would be made upon the sale of all or substantially
all of the assets of the Company for less than the market value thereof, a
merger or other unusual events (other than share issuances pursuant to employee
benefit and stock incentive plans for directors, officers and employees of the
Company) so as to enable holders of the Class A Warrants to purchase the kind
and number of shares or other securities or property (including cash) receivable
in such event by a holder of the kind and number of shares of Class A Common
Stock that might otherwise have been purchased upon exercise of such Class A
Warrant. No adjustment for previously paid cash dividends, if any, will be made
upon exercise of the Class A Warrants.
The Class A Warrants may be exercised upon surrender of the Class A Warrant
certificate on or prior to the expiration date (or earlier redemption date) of
such Class A Warrants at the offices of the Warrant Agent with the form of
"Election of Purchase" on the reverse side of the Class A Warrant certificate
56
<PAGE>
completed and executed as indicated, accompanied by payment of the full exercise
price (by certified or bank check payable to the order of the Company) for the
number of Class A Warrants being exercised. Shares of Class A Common Stock
issuable upon exercise of Class A Warrants and payment in accordance with the
terms of the Warrants will be fully paid and non-assessable.
The Class A Warrants do not confer upon the holders of Class A Warrants any
voting or other rights of the shareholders of the Company. Upon notice to the
holders of Class A Warrants, the Company has the right to reduce the exercise
price or extend the expiration date of the Class A Warrants. Although this right
is intended to benefit the holders of Class A Warrants, to the extent the
Company exercises this right when the Class A Warrants would otherwise be
exercisable at a price higher than the prevailing market price of the Class A
Common Stock, the likelihood of exercise, and resultant increase in the number
of shares outstanding, may result in making more costly, or impeding, a change
in control of the Company.
The description above is subject to the provisions of the Warrant Agreement,
as amended, which has been filed as an exhibit to the Registration Statement, of
which this Prospectus forms a part, and reference is made to such exhibit for a
detailed description thereof.
UNIT PURCHASE OPTION
The Company has agreed to grant to the Underwriter, upon the closing of the
Offering, the Unit Purchase Option to purchase up to 1,700 Units. These Units
will, when issued, be identical to the Units offered hereby, except that the
Class A Warrants included in the Unit Purchase Option are subject to redemption
by the Company, in accordance with the terms of the Warrant Agreement, only at
any time after the Unit Purchase Option has been exercised and the underlying
Class A Warrants are outstanding. The Unit Purchase Option cannot be
transferred, sold, assigned or hypothecated, except to any officer of the
Underwriter or members of the selling group or their officers. The Unit Purchase
Option is exercisable during the two-year period commencing three years from the
date hereof at an exercise price of 145% of the public offering price per Unit
subject to adjustment in certain events to protect against dilution. The holders
of the Unit Purchase Options have certain demand and piggyback registration
rights. See "Underwriting."
REGISTRATION RIGHTS
Commencing two and one-half years from the date of this Prospectus, the
holders of the Unit Purchase Option will have certain demand and piggyback
registration rights relating to such options and the underlying securities.
These registration rights are in addition to the similar demand and piggyback
registration rights granted to the holders of outstanding warrants issued to the
underwriter in connection with the initial public offering of the Company in
1993, which, upon completion of the Offering, will entitle the holders thereof
to purchase up to 228,608 shares of Class A Common Stock exercisable at $8.66
per share until June 4, 1998. The Company has also granted certain piggyback
registration rights to HBI, Sutro & Co., Incorporated, The Galileo Fund, L.P.
and The Copernicus Fund, L.P. with respect to an aggregate of 800,000 shares of
Class A Common Stock and warrants to purchase Class A Common Stock. The exercise
of the registration rights relating to the Unit Purchase Option or the
outstanding warrants may involve substantial expense to the Company and have a
depressive effect on the market price of the Company's securities.
The Company has also agreed to register, subsequent to the Offering, the
Selling Securityholder Securities for resale by the holders thereof. See
"Subsequent Offering."
CERTAIN RIGHTS
In connection with the Company's 1995 private placement of 750,000 shares of
Class A Common Stock with HBI and two funds currently managed by DDJ
(collectively, the "Purchasers"), the Company granted the Purchasers and their
respective assigns certain rights (the "Rights") to purchase shares of the
Company's capital stock in the event the Company proposes to issue or offer for
sale such shares in certain
57
<PAGE>
transactions. Pursuant to such Rights, if the Company issues or makes any
offering of its capital stock in any transaction not involving an "exempt
transaction" (defined to include a registered public offering and certain other
transactions), the Company must offer the Purchasers or their respective assigns
the opportunity to acquire from the Company, on the same terms such stock is
proposed to be issued or offered in such non-exempt transaction, up to the same
number of shares of such stock, allocated pro rata. The Units offered hereby are
not subject to such Rights. The Rights expire by their terms on June 30, 1997.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Class A Common Stock and
the Warrant Agent for the Class A Warrants is U.S. Stock Transfer Corporation,
1745 Gardena Avenue, Suite 200, Glendale, California 91204.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to the Offering, the Company will have outstanding an
aggregate of 7,068,500 shares of Class A Common Stock. 3,000,000 of such shares
are Escrow Shares not transferable unless released from escrow pursuant to the
Escrow Agreement. See "Principal Shareholders -- Escrow Shares." In addition, an
aggregate of 264,757 shares of Class A Common Stock are issuable pursuant to
outstanding warrants. Of the 4,068,500 shares of Class A Common Stock
outstanding prior to the Offering that are not Escrow Shares, 795,197 are
"restricted securities" as that term is defined under Rule 144. All such shares
of Class A Common Stock will be eligible for sale under Rule 144 (subject to the
restrictions on transfer agreed to between the current shareholders and the
Underwriter, as set forth below, and the restrictions on transfer with respect
to the Escrow Shares) and will be freely transferable without restriction under
the Securities Act except for any shares purchased by any person who is or
thereby becomes an "affiliate" of the Company, which shares will be subject to
the resale limitations contained in Rule 144 promulgated under the Securities
Act.
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated), with respect to restricted securities that satisfy
a two-year holding period, may sell within any three-month period a number of
restricted shares which does not exceed the greater of 1% of the then
outstanding shares of such class of securities or the average weekly trading
volume during the four calendar weeks prior to such sale. Sales under Rule 144
are also subject to certain requirements as to the manner of sale, notice and
the availability of current public information about the Company. Rule 144 also
permits, under certain circumstances, the sale of shares by a person who is not
an affiliate of the Company, with respect to restricted securities that satisfy
a three-year holding period, without regard to the volume or other resale
limitations. For shares issued in consideration of an unsecured or non-recourse
promissory note, the holding period does not commence until the note is paid in
full. The above is a brief summary of Rule 144 and is not intended to be a
complete description thereof.
The "restricted" Class A Common Stock currently is eligible for sale
pursuant to Rule 144. However, the directors and executive officers of the
Company and certain holders of 5% or more of the outstanding Class A Common
Stock have agreed not to sell, assign or transfer any of their shares of Class A
Common Stock, options or warrants for a period of 13 months after the closing
date of the Offering without the prior consent of the Underwriter. In addition,
the Company has granted certain registration rights with respect to the Unit
Purchase Option and the securities underlying it. See "Underwriting."
Pursuant to registration rights acquired in the Bridge Financing, the
Company will, subsequent to the Offering, register for resale on behalf of the
Selling Securityholders, the Selling Securityholder Securities, subject to the
contractual restriction that the Selling Securityholders have agreed (i) not to
exercise the
58
<PAGE>
Selling Securityholder Warrants for a period of one year for the closing of the
Offering and (ii) not to sell the Selling Securityholder Warrants except
pursuant to the restrictions set forth below:
<TABLE>
<CAPTION>
PERCENTAGE ELIGIBLE
LOCK-UP PERIOD FOR RESALE
- --------------------------------------------------------------------------- ---------------------
<S> <C>
Before 90 days after closing............................................... 0%
Between 91 and 150 days after closing...................................... 25%
Between 151 and 210 days after closing..................................... 50%
Between 211 and 270 days after closing..................................... 75%
After 270 days after closing............................................... 100%
</TABLE>
Following the Offering, no predictions can be made of the effect, if any, of
future public sales of restricted shares or the availability of restricted
shares for sale in the public market. Moreover, the Company cannot predict the
number of shares of Class A Common Stock that may be sold in the future pursuant
to Rule 144 because such sales will depend on, among other factors, the market
price of the Class A Common Stock and the individual circumstances of the
holders thereof. The availability for sale of substantial amounts of Class A
Common Stock acquired through the exercise of the Class A Warrants under Rule
144, other options or the Unit Purchase Option could adversely affect prevailing
market prices for the Class A Common Stock.
Beginning two and one-half years from the date of this Prospectus, the
holders of the Unit Purchase Option will have demand and piggy-back registration
rights relating to such options and the underlying securities and the holders of
warrants issued to the underwriter in connection with the Company's initial
public offering in 1993 will have certain demand and piggy-back registration
rights with respect to 228,608 shares of Class A Common Stock into which such
warrants are exercisable. See "Underwriting." The Company has also granted
certain piggyback registration rights to HBI, Sutro & Co., Incorporated, The
Galileo Fund, L.P. and The Copernicus Fund, L.P. with respect to an aggregate of
800,000 shares of Class A Common Stock and warrants to purchase Class A Common
Stock.
Except as set forth above, no stockholder of the Company, nor any holder of
warrants to purchase shares of the Class A Common Stock, has any registration
rights.
59
<PAGE>
UNDERWRITING
D.H. Blair Investment Banking Corp. (the "Underwriter") has agreed, subject
to the terms and conditions of the Underwriting Agreement, to purchase the
17,000 Units offered hereby from the Company on a "firm commitment" basis, if
any are purchased. It is expected that Blair & Co., will distribute as a selling
group member substantially all of the Units offered hereby. Blair & Co. is
substantially owned by family members of J. Morton Davis. Mr. Davis is the sole
stockholder of the Underwriter.
The Underwriter has advised the Company that it proposes to offer the Units
to the public at the public offering price set forth on the cover page of this
Prospectus, and that it may allow, to selected dealers who are members of the
National Association of Securities Dealers, Inc. (the "NASD"), concessions, not
in excess of $ per Unit, of which not in excess of $ per Unit may be
reallowed to other dealers who are members of the NASD. After the public
offering, the public offering price, concessions and reallowances may be changed
by the Underwriter.
The Company has granted an option to the Underwriter, exercisable during the
45-day period from the date of this Prospectus, to purchase up to 2,550
additional Units at the public offering price set forth on the cover page of
this Prospectus, less the underwriting discounts and commissions. The
Underwriter may exercise this option in whole, or, from time to time, in part,
solely for the purpose of covering over-allotments, if any, made in connection
with the sale of the Units offered hereby.
The Underwriter has informed the Company that it does not expect sales to
any discretionary accounts to exceed 5% of the Offering.
The Company has agreed to pay to the Underwriter a non-accountable expense
allowance representing 3% of the aggregate offering price of the Units offered
hereby (plus 3% of the aggregate offering price of any Units purchased pursuant
to the Underwriter's Over-allotment Option), $40,000 of which has been paid to
date.
The Company has agreed to sell to the Underwriter and its designees, on the
closing date of the Offering, for nominal cost, the Unit Purchase Option (the
"Unit Purchase Option") to purchase up to 1,700 Units at an exercise price of
145% of the price per Unit to the public, subject to certain anti-dilution
provisions. The Units purchasable upon exercise of the Unit Purchase Option are
identical to the Units offered hereby, except that the Warrants contained
therein are subject to redemption by the Company, in accordance with the terms
of the Warrant Agreement, only after the Unit Purchase Option has been exercised
and the underlying warrants are outstanding. The Unit Purchase Option will be
exercisable during the two-year period commencing three years from the date of
this Prospectus. The Unit Purchase Option may not be transferred, sold, assigned
or hypothecated except to any NASD member participating in the offering or any
officers of the Underwriter or any such NASD member. The Company has agreed to
register under the Securities Act at its expense on one occasion, and at the
expense of the Underwriter on another occasion, the Unit Purchase Option and/or
the underlying securities at the request of the holder thereof. The Company has
also agreed to certain "piggyback" registration rights for the holders of the
Unit Purchase Option and/or the underlying securities.
For the life of the Unit Purchase Option, the holders are given the
opportunity to profit from a rise in the market price of the Company's Common
Stock and Class A Warrants with a resulting dilution in the interest of other
shareholders. The Company may find it more difficult to raise additional equity
capital while the Unit Purchase Option is outstanding and, at any time when the
holders of the Unit Purchase Option might be expected to exercise it, the
Company would probably be able to obtain equity capital on terms more favorable
than those provided in the Unit Purchase Option.
Except for HBI, the Copernicus Fund and the Galileo Fund, all of the current
directors and executive officers of the Company, all shareholders owning 5% or
more of the issued and outstanding Class A Common Stock of the Company and
certain holders of 1% but less than 5% of all of the issued and
60
<PAGE>
outstanding Class A Common Stock of the Company have agreed not to sell,
transfer or assign any of their shares of Common Stock, options or warrants
without the prior written consent of the Underwriter for a period of 13 months
from the closing date of the Offering, other than (i) bona fide gifts and
transfers to trusts for estate planning purposes where the transferee agrees to
be bound by the transfer restrictions described herein and (ii) the sale of
shares owned by Lon E. Bell, Ph.D., pursuant to the exercise, by the holders
thereof, of options on such shares previously granted by Dr. Bell.
In connection with the Offering, the Company has extended the term of an
agreement providing for the payment of a fee to the Underwriter in the event the
Underwriter is responsible for a merger or other acquisition transaction to
which the Company is a party until five years from the date of completion of the
Offering.
The Underwriter acted as the sole underwriter for the Company's initial
public offering in June 1993. In connection therewith, the Underwriter received
warrants which, upon completion of the Offering, will entitle the holders
thereof to purchase 228,608 shares of Class A Common Stock exercisable at $8.66
per share.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities, including
liabilities under the Securities Act.
The Company has agreed not to solicit Class A Warrant exercises other than
through the Underwriter, unless the Underwriter declines to make such
solicitation. Upon any exercise of the Class A Warrants after the first
anniversary of the date of this Prospectus, the Company will pay the Underwriter
a fee of 5% of the aggregate exercise price of the Class A Warrants, if (i) the
market price of the Company's Common Stock on the date the Class A Warrants are
exercised is greater than the then exercise price of the Class A Warrants; (ii)
the exercise of the Class A Warrants was solicited by a member of the NASD, as
designated in writing on the warrant certificate subscription form; (iii) the
Class A Warrants are not held in a discretionary account; (iv) disclosure of
compensation arrangements was made both at the time of the Offering and at the
time of exercise of the Class A Warrants; and (v) the solicitation of exercise
of the Class A Warrant was not in violation of Rule 10b-6 promulgated under the
Exchange Act.
In connection with the Offering, the Underwriter may engage in passive
market making transactions in the Class A Common Stock on Nasdaq in accordance
with Rule 10b-6A under the Securities Exchange Act of 1934, as amended, during
the two business day period before commencement of offers or sales of the Units.
The passive market making transactions must comply with applicable volume and
price limits and be identified as such. In general, a passive market maker may
display its bid at a price not in excess of the highest independent bid for the
security; if all independent bids are lowered below the passive market maker's
bid, however, such bid must then be lowered when certain purchase limits are
exceeded. Unless granted an exemption by the Commission from Rule 10b-6, the
Underwriter will be prohibited from engaging in any other market marking
activities with regard to the Company's securities for the period from nine
business days (or such other applicable period as Rule 10b-6 may provide) prior
to any solicitation by the Underwriter of the exercise of the Class A Warrants
until the later of the termination of such solicitation activity or the
termination (by waiver or otherwise) of any right that the Underwriter may have
to receive a fee for the exercise of Class A Warrants following such
solicitation. As a result, the Underwriter may be unable to continue to provide
a market for the Company's securities during certain periods while the Class A
Warrants are exercisable. The Commission has recently adopted Regulation M,
which will replace Rule 10b-6 and certain other rules promulgated under the
Exchange Act. Upon its effectiveness in March 1997, Regulation M will result in,
among other things, modifications of (i) the restricted or "cooling off" periods
referenced above from two and nine business days (under current Rule 10b-6) to
one and five business days and (ii) the criteria used to determine the
applicable period.
The Company has agreed with the Underwriter that the Underwriter will have
the right to appoint one director to the Company's Board of Directors for a
period of five years following the completion of the Offering.
61
<PAGE>
The exercise prices and other terms of the Class A Warrants have been, and
the public offering price of the Units will be, determined by negotiations
between the Company and the Underwriter and are not necessarily related to the
Company's asset value, net worth or other established criteria of value. Factors
considered in determining the exercise price and other terms of the Class A
Warrants, and to be considered in determining the public offering price of the
Units, include the market price of the Class A Common Stock, the present state
of the Company's development, the future prospects of the Company, an assessment
of management, the general condition of the securities markets and other factors
deemed relevant.
The Underwriter has informed the Company that the Commission is conducting
an investigation concerning various business activities of the Underwriter and
Blair & Co., a selling group member which will distribute substantially all of
the Units offered hereby. The investigation appears to be broad in scope,
involving numerous aspects of the Underwriter's and Blair & Co.'s compliance
with Federal securities laws and compliance with the Federal securities laws by
issuers whose securities were underwritten by the Underwriter or Blair & Co., or
in which the Underwriter or Blair & Co. made over-the-counter markets, persons
associated with the Underwriter or Blair & Co., such issuers and other persons.
The Company has been advised by the Underwriter that the investigation has been
ongoing since at least 1989 and that the Underwriter is cooperating with the
investigation. The Underwriter cannot predict whether this investigation will
ever result in a formal enforcement action against the Underwriter or Blair &
Co. or, if so, whether any such action might have an adverse effect on the
Underwriter, Blair & Co. or the securities offered hereby. The Company has been
advised that the Underwriter or Blair & Co. intends to make a market in the
securities following the Offering. An unfavorable resolution of the Commission's
investigation could have the effect of limiting such firm's ability to make a
market in the Company's securities, which could adversely affect the liquidity
or price of such securities.
LEGAL MATTERS
Certain legal matters in connection with the Offering have been passed upon
for the Company by O'Melveny & Myers LLP, Los Angeles, California. Bachner,
Tally, Polevoy & Misher LLP, New York, New York, have acted as counsel to the
Underwriter in connection with the Offering.
EXPERTS
The financial statements as of December 31, 1995 and 1994 and for each of
the three years ended December 31, 1995, and for the period April 23, 1991
(Inception) to December 31, 1995 included in this Prospectus have been so
included in reliance on the report (which contains an explanatory paragraph
relating to the Company's need to obtain financing to repay its debt and finance
continued operations) of Price Waterhouse LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Pursuant to Item 12 of the Instructions to Form S-2, the following documents
are hereby incorporated herein in their entirety by reference thereto:
(1) The Company's Annual Report on Form 10-K for the Company's fiscal year
ended December 31, 1995.
(2) The Company's Quarterly Report on Form 10-Q/A for the three-month period
ended March 31, 1996.
(3) The Company's Quarterly Report on Form 10-Q/A for the three-month period
ended June 30, 1996.
62
<PAGE>
(4) The Company's Quarterly Report on Form 10-Q for the three-month period
ended September 30, 1996.
(5) The Company's Current Report on Form 8-K filed July 17, 1996.
(6) The Company's Current Report on Form 8-K filed January 30, 1997.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-2 under the
Securities Act of 1933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in
such Registration Statement and the exhibits thereto. For further information
with respect to the Company and the Units, reference is hereby made to the
Registration Statement and the exhibits thereto, which may be inspected without
charge at the public reference facilities maintained at the principal office of
the Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549 and
at the Commission's regional offices at 7 World Trade Center, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained upon written
request from the public reference section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Electronic registration
statements made through the Electronic Data Gathering, Analysis, and Retrieval
System are publicly available through the Commission's Web site
(http://www.sec.gov). Statements contained in the Prospectus as to the contents
of any contract or other document referred to herein are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports and other
information with the Commission. Such reports and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at the addresses shown above. Copies of such
material can be obtained from the Public Reference Section of the Commission at
the address shown above at prescribed rates or through the Commission's Web
site. Reports and other information concerning the Company may also be inspected
at the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
The Class A Common Stock is listed on the Nasdaq SmallCap Market (symbol
ARGNA). Certain information, reports and proxy statements of the Company are
also available for inspection at the offices of the Nasdaq National Market
Reports Section, 1735 K Street, Washington, D.C. 20006.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of such person, a copy of any or all of the documents referred to in
"Incorporation of Certain Information by Reference" which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents. Requests for such copies should be directed to Amerigon Incorporated,
404 East Huntington Drive, Monrovia, California 91016-3600, Attention: R. John
Hamman, Jr. (telephone 818-932-1200).
63
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Balance Sheet.............................................................................................. F-3
Statement of Operations.................................................................................... F-4
Statement of Shareholders' Equity.......................................................................... F-5
Statement of Cash Flows.................................................................................... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Amerigon Incorporated (a Development Stage Enterprise)
In our opinion, the accompanying balance sheet and the related statements of
operations, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Amerigon Incorporated (a
Development Stage Enterprise) at December 31, 1994 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, and for the period from April 23, 1991 (inception) to
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The Company has incurred significant losses during 1996, is in default of
its bank line of credit agreement, and has entered into a bridge financing
agreement. As more fully described in Note 14 to the financial statements, the
Company will need to obtain additional financing to repay its debt and finance
continued operations.
PRICE WATERHOUSE LLP
Costa Mesa, California
February 26, 1996, except
as to Note 14 which is as
of December 4, 1996
F-2
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------- -------- SEPTEMBER 30,
1996
---------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................................................. $ 2,405 $ 4,486 $ 268
Short term investments.................................................................... 2,910 -- --
Accounts receivable less allowance of $100 in 1994 and 1995 (Note 13)..................... 768 1,052 1,053
Unbilled revenue (Notes 10 and 11)........................................................ 275 1,468 2,565
Inventory (Note 4)........................................................................ -- 243 127
Deferred contract costs................................................................... -- -- 700
Prepaid expenses and other assets......................................................... 89 961 460
------- -------- ---------------
Total current assets.................................................................. 6,447 8,210 5,173
Property and equipment, net (Note 4)...................................................... 715 785 703
------- -------- ---------------
Total assets.......................................................................... $ 7,162 $ 8,995 $ 5,876
------- -------- ---------------
------- -------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable (Note 13)................................................................ $ 262 $ 1,123 $ 1,533
Deferred revenue (Note 10)................................................................ 1,754 94 141
Accrued liabilities (Note 4).............................................................. 282 512 416
Note payable to shareholder............................................................... 200
Bank loan payable......................................................................... 2,532
------- -------- ---------------
Total current liabilities............................................................. 2,298 1,729 4,822
------- -------- ---------------
Long-term portion of capital lease (Note 12).................................................. 78 68 50
------- -------- ---------------
Commitments (Notes 9 and 12)
Shareholders' equity: (Notes 7 and 8)
Preferred Stock, no par value; 5,000 shares authorized, none issued and outstanding
Common Stock:
Class A--No par value; 17,000 shares authorized, 3,300 and 4,050 issued and outstanding
in 1994 and 1995, respectively. (An additional 3,000 shares held in escrow)........... 11,634 17,270 17,321
Class B--No par value; 3,000 shares authorized, none issued and outstanding.............
Contributed capital....................................................................... 3,102 3,115 3,115
Deficit accumulated during development stage.............................................. (9,950) (13,187) (19,432)
------- -------- ---------------
Total shareholders' equity............................................................ 4,786 7,198 1,004
------- -------- ---------------
Total liabilities and shareholders' equity............................................ $ 7,162 $ 8,995 $ 5,876
------- -------- ---------------
------- -------- ---------------
</TABLE>
See accompanying notes to the financial statements.
F-3
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FROM FROM
APRIL 23, APRIL 23,
1991 1991
(INCEPTION) NINE MONTHS ENDED (INCEPTION)
YEAR ENDED DECEMBER 31, TO SEPTEMBER 30, TO
------------------------------- DECEMBER 31, -------------------- SEPTEMBER 30,
1993 1994 1995 1995 1995 1996 1996
--------- --------- --------- ------------- --------- --------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Development contracts and
related grants........... $ 188 $ 1,336 $ 7,290 $ 8,814 $ 4,326 $ 6,382 $ 15,196
Grants..................... 2,101 1,304 519 5,824 480 119 5,943
--------- --------- --------- ------------- --------- --------- -------------
Total revenues............... 2,289 2,640 7,809 14,638 4,806 6,501 21,139
--------- --------- --------- ------------- --------- --------- -------------
Costs and expenses:
Direct development contract
and related grant
costs.................... 525 928 5,332 6,785 3,895 9,142 15,927
Direct grant costs......... 1,649 803 339 4,522 390 101 4,623
Research and development... 1,578 2,137 2,367 6,659 1,785 1,544 8,203
Selling, general and
administrative, including
reimbursable
administrative costs..... 2,340 3,235 3,135 10,377 1,820 1,838 12,215
--------- --------- --------- ------------- --------- --------- -------------
Total costs and expenses..... 6,092 7,103 11,173 28,343 7,890 12,625 40,968
--------- --------- --------- ------------- --------- --------- -------------
Operating loss............... (3,803) (4,463) (3,364) (13,705) (3,084) (6,124) (19,829)
Interest income.............. 163 228 127 518 124 42 560
Interest expense............. (163) (163)
--------- --------- --------- ------------- --------- --------- -------------
Net loss..................... $ (3,640) $ (4,235) $ (3,237) $ (13,187) $ (2,960) $ (6,245) $ (19,432)
--------- --------- --------- ------------- --------- --------- -------------
--------- --------- --------- ------------- --------- --------- -------------
Net loss per share........... $ (1.64) $ (1.28) $ (0.98) $ (0.90) $ (1.54)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average number of
shares outstanding......... 2,213 3,300 3,306 3,300 4,060
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------- DEFICIT
ACCUMULATED
PREFERRED STOCK CLASS A CLASS B DURING THE
--------------- ---------------- --------------- CONTRIBUTED DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
------ ------ ------ ------- ------ ------ ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 23, 1991 (Inception)... -- -- 1,000 $ 100 -- -- -- -- $ 100
Contributed capital--founders'
services provided without
compensation........................ $ 111 111
Net loss.............................. $ (616) (616)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at December 31, 1991............ -- -- 1,000 100 -- -- 111 (616) (405)
Transfer of common stock to employee by
principal shareholder for services.... 150 150
Contributed capital--founders' services
provided without compensation......... 189 189
Net loss.............................. (1,459) (1,459)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at December 31, 1992............ -- -- 1,000 100 -- -- 450 (2,075) (1,525)
Issuance of common stock (public
offering)........................... 2,300 11,534 11,534
Options granted by pricipal
shareholder for services............ 549 549
Contribution of notes payable to
contributed capital................. 2,102 2,102
Net loss.............................. (3,640) (3,640)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at December 31, 1993............ -- -- 3,300 11,634 -- -- 3,101 (5,715) 9,020
Compensation recorded for variable
plan stock option (Note 8).......... 1 1
Net loss.............................. (4,235) (4,235)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at December 31, 1994............ -- -- 3,300 11,634 -- -- 3,102 (9,950) 4,786
Private placement of common stock..... 750 5,636 1 5,637
Compensation recorded for variable
plan stock option (Note 8).......... 12 12
Net loss.............................. (3,237) (3,237)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at December 31, 1995............ -- -- 4,050 17,270 -- -- 3,115 (13,187) 7,198
Unaudited Information:
Exercise of stock options............. 19 145 145
Expenses of sale of stock............. (94 ) (94)
Net loss.............................. (6,245) (6,245)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at September 30, 1996........... -- -- 4,069 $17,321 -- -- $3,115 $(19,432) $1,004
------ ------ ------ ------- ------ ------ ----------- ----------- ------
------ ------ ------ ------- ------ ------ ----------- ----------- ------
</TABLE>
See accompanying notes to the financial statements
F-5
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FROM APRIL NINE MONTHS ENDED FROM APRIL
23, 1991 23, 1991
YEAR ENDED DECEMBER 31, (INCEPTION) SEPTEMBER 30, (INCEPTION)
------------------------------- TO DECEMBER -------------------- TO SEPTEMBER
1993 1994 1995 31, 1995 1995 1996 30, 1996
--------- --------- --------- ------------- --------- --------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net Loss........................... $ (3,640) $ (4,235) $ (3,237) $ (13,187) $ (2,960) $ (6,245) $ (19,432)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization.... 65 176 283 554 221 269 823
Provision for doubtful
accounts....................... -- 100 10 110 -- -- 110
Stock option compensation........ 549 1 12 712 -- -- 712
Contributed capital--founders'
services provided without cash
compensation................... -- -- -- 300 -- -- 300
Change in operating assets and
liabilities:
Accounts receivable............ (544) (286) (294) (1,162) 457 (1) (1,163)
Unbilled revenue............... 436 (32) (1,193) (1,468) (1,036) (1,097) (2,565)
Inventory...................... -- -- (243) (243) (515) 116 (127)
Deferred contract costs........ -- -- -- -- -- (700) (700)
Prepaid expenses and other
assets....................... (55) (23) (872) (960) (204) 501 (459)
Accounts payable............... 162 (203) 861 1,123 342 410 1,533
Deferred revenue............... 46 1,708 (1,660) 94 (868) 47 141
Accrued liabilities............ 102 92 230 512 (22) (96) 416
--------- --------- --------- ------------- --------- --------- -------------
Net cash used in operating
activities....................... (2,879) (2,702) (6,103) (13,615) (4,585) (6,796) (20,411)
--------- --------- --------- ------------- --------- --------- -------------
Investing activities:
Purchase of property and
equipment........................ (134) (635) (353) (1,271) (276) (187) (1,458)
Proceeds from disposition of
property......................... -- 9 -- 9 -- -- 9
Short term investments............. -- (2,910) 2,910 -- 2,910 -- --
--------- --------- --------- ------------- --------- --------- -------------
Net cash used in investing
activities..................... (134) (3,536) 2,557 (1,262) 2,634 (187) (1,449)
--------- --------- --------- ------------- --------- --------- -------------
Financing activities:
Proceeds from sale of common stock,
net.............................. 11,534 -- 5,636 17,270 -- (94) 17,176
Proceeds from sale of warrants..... -- -- 1 1 -- -- 1
Proceeds from exercise of stock
options.......................... -- -- -- -- -- 145 145
Borrowing under line of credit..... -- -- 1,100 1,100 -- 5,180 6,280
Repayment of line of credit........ -- -- (1,100) (1,100) -- (2,648) (3,748)
Repayment of capital lease......... -- -- (10) (10) (10) (18) (28)
Proceeds from note payable to
shareholder...................... -- -- -- -- -- 200 200
Notes payable contributed to
capital.......................... -- -- -- 2,102 -- -- 2,102
--------- --------- --------- ------------- --------- --------- -------------
Net cash provided by financing
activities..................... 11,534 -- 5,627 19,363 (10) 2,765 22,128
--------- --------- --------- ------------- --------- --------- -------------
Net increase (decrease) in cash...... 8,521 (6,238) 2,081 4,486 (1,961) (4,218) 268
Cash and cash equivalents at
beginning of period................ 122 8,643 2,405 -- 2,405 4,486 --
--------- --------- --------- ------------- --------- --------- -------------
Cash and cash equivalents at end of
period............................. $ 8,643 $ 2,405 $ 4,486 $ 4,486 $ 444 $ 268 $ 268
--------- --------- --------- ------------- --------- --------- -------------
--------- --------- --------- ------------- --------- --------- -------------
</TABLE>
See accompanying notes to the financial statements
F-6
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--THE COMPANY:
Amerigon Incorporated (the "Company" or "Amerigon") is a development stage
enterprise, which was incorporated in California on April 23, 1991, primarily to
develop, manufacture and market proprietary, high technology automotive
components and systems for gasoline-powered and electric vehicles.
Amerigon's activities through December 31, 1995 include (1) obtaining the
rights to the basic technology and continuing development of the audio
navigation system, the climate control seat system, and certain ultra-wideband
radar applications; (2) obtaining financing from grants and other sources and
conducting development programs related to electric vehicles and its other
products; (3) marketing of these development stage products to automotive
companies and their suppliers; and (4) completing the development, in December
1995, of the audio navigation system and selling the first commercial units.
The Company's strategy has been to augment the expenditure of its own funds
on research and development by seeking and obtaining various grants which
support the development of electric vehicles and related technologies. Through
such grant funded activities and development contracts with customers, the
Company has opportunities to gain access to new technologies and to extend its
own product development efforts.
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The financial statements include amounts that are based on management's
judgments. Certain reclassifications have been made for consistent presentation.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of all financial instruments, comprising cash and cash
equivalents, accounts receivable and unbilled revenues, accounts payable,
accrued expenses and capital leases, approximate fair value because of the short
maturities of these instruments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
All investments with original maturities of less than 90 days are considered
cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which subject the Company to concentration of credit
risk consist primarily of cash equivalents, accounts receivable and unbilled
revenue. Cash equivalents are invested in the money market account of a major
U.S. financial services company and the risk is considered limited. The risk
associated with accounts receivable and unbilled revenue is limited by the large
size and credit worthiness
F-7
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
of the Company's commercial customers and the federal and California government
agencies providing grant funding. Three government agencies are included in the
$2,520,000 of accounts receivable and unbilled revenues at December 31, 1995,
representing 22%, 15% and 12%, respectively, of the total. No individual
commercial customer represents greater than 10% of the total. One government
agency and one commercial customer represent 16% and 52%, respectively, of
revenues for the year ending December 31, 1995. Two government agencies and one
commercial customer represent 28%, 10%, and 10%, respectively, of revenues for
the year ending December 31, 1994. For the year ending December 31, 1993, one
funding agency represented 59% of revenues. In addition, revenues from foreign
customers represented 54% of total revenues for the year ended December 31, 1995
and insignificant percentages of revenues for the two preceding years.
INVENTORY
Inventory, other than inventoried purchases relating to development
contracts, is valued at the lower of cost, on the first-in, first-out basis, or
market. Inventory related to development contracts is stated at cost, and is
removed from inventory when used in the development project.
PROPERTY AND EQUIPMENT
Property and equipment, including additions and improvements, are recorded
at cost. Expenditures for repairs and maintenance are charged to expense as
incurred. When property or equipment is retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the accounts. Gains
or losses from retirements and disposals are recorded as other income or
expense.
Property and equipment are depreciated over their estimated useful lives
ranging from three to five years. Leasehold improvements are amortized over the
shorter of their estimated useful lives or the term of the lease. Depreciation
and amortization are computed using the straight-line method.
DEVELOPMENT CONTRACT REVENUES
The Company has entered into a series of fixed-price development contracts,
which include (1) specific engineering and tooling services to prepare the
Company's products and the related manufacturing processes for commercial sales
to certain original equipment manufacturers ("OEMs"); (2) the development of
complete electric vehicle systems (Note 10); and (3) prototype products
developed during the research and development process, some of which are sold to
third parties for evaluation purposes. Revenue is recognized on development
contracts using the percentage of completion method or, in the case of short
duration contracts, when the prototype or service is delivered. Revenues earned
are recorded on the balance sheet as Unbilled Revenue until billed. All amounts
received from customers in advance of the development effort are reflected on
the balance sheet as Deferred Revenue until such time as the contracted work is
performed.
GRANT REVENUES
Revenue from government agency grants and other sources pursuant to cost
reimbursement and cost sharing arrangements (Note 11) is recognized when
reimbursable costs have been incurred. Billings on the
F-8
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
Company's grant programs are generally subject to the Company achieving certain
milestones or complying with billing schedules designated in the grant
agreements. Accordingly, delays between the time reimbursable grant costs are
incurred and then ultimately billed may occur. Grant revenues earned are
recorded on the balance sheet as Unbilled Revenue until billed.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development activities are expensed as incurred. These amounts
represent direct expenses for wages, materials and services associated with
development contracts, grant program activities and the development of the
Company's products. Research and development expenses associated with projects
that are specifically funded by development contracts or grant agreements from
customers are classified under Direct Development Contract and Related Grant
Costs or Direct Grant Costs in the Statement of Operations. All other research
and development expenses that are not associated with projects that are
specifically funded by development contracts or grants from customers are
classified as Research and Development. The Company has expensed, as Research
and Development, payments for license rights to technology and minimum royalties
which amounted to $345,000 in 1995, $248,000 in 1994 and $260,000 in 1993.
Research and development does not include any overhead or administrative costs.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), effective for years beginning after December 15, 1995. For purposes of
recording expense associated with stock-based compensation, the Company intends
to continue to apply the provisions of APB Opinion 25 and related
interpretations. The effect of adoption of SFAS 123 in the year ending December
31, 1996 is not known.
INCOME TAXES
Income taxes for periods subsequent to the Company's election to report as a
"C" Corporation for tax purposes are determined under guidelines prescribed by
Financial Accounting Standards Board Statement No. 109 (SFAS 109), "Accounting
for Income Taxes." Under the liability method specified by SFAS 109, the
deferred tax assets and liabilities are measured each year based on the
difference between the financial statement and tax bases of the assets and
liabilities at the applicable enacted Federal and state tax rates. A valuation
allowance is provided for the portion of net deferred tax assets considered
unlikely to be realized.
NET LOSS PER SHARE
The Company's net loss per share calculations are based upon the weighted
average number of shares of common stock outstanding. Excluded from this
calculation are the 3,000,000 Escrowed Contingent Shares (Note 7). Common stock
equivalents (stock options and stock warrants) are anti-dilutive in 1995, 1994
and 1993 and are excluded from the net loss per share calculation.
F-9
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
INTERIM RESULTS (UNAUDITED)
The accompanying balance sheet at September 30, 1996 and the statements of
operations and cash flows for the nine month periods ended September 30, 1995
and 1996 and for the period April 23, 1991 (inception) to September 30, 1996,
and the statement of shareholders' equity for the nine month period ended
September 30, 1996 are unaudited. In the opinion of management, these statements
have been prepared on the same basis as the audited financial statements and
include all adjustments, consisting of only normal recurring adjustments,
necessary for the fair statement of results of the interim periods. The data
disclosed in the notes to the financial statements for those periods are also
unaudited.
RECLASSIFICATIONS
Certain amounts for the year ended December 31, 1995 have been reclassified
to be consistent with the presentation for the nine months ended September 30,
1996 and 1995.
NOTE 3--HISTORICAL LOSSES:
The Company is a development stage enterprise and has incurred losses from
operations since its inception of $13,187,000 through December 31, 1995. The
Company may continue to incur losses for the foreseeable future due to the costs
anticipated to be incurred with the development, manufacture and marketing of
its products. See Note 14 regarding subsequent events including Indispensible
Financing.
NOTE 4--DETAILS OF CERTAIN FINANCIAL STATEMENT COMPONENTS (IN THOUSANDS):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
INVENTORY:
Raw materials and component parts.......................................... -- $ 243
Finished goods............................................................. -- --
--------- ---------
-- $ 243
--------- ---------
--------- ---------
PROPERTY AND EQUIPMENT:
Equipment.................................................................. $ 372 $ 611
Computer equipment......................................................... 476 578
Leasehold improvements..................................................... 139 151
--------- ---------
987 1,340
Less: accumulated depreciation and amortization............................ (272) (555)
--------- ---------
$ 715 $ 785
--------- ---------
--------- ---------
ACCRUED EXPENSES:
Accrued salaries........................................................... $ 116 $ 328
Accrued vacation........................................................... 152 165
Other accrued liabilities.................................................. 14 19
--------- ---------
$ 282 $ 512
--------- ---------
--------- ---------
</TABLE>
F-10
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--INCOME TAXES:
There are no assets or liabilities for income taxes, nor income tax expense
included in the financial statements because the Company has incurred losses
since inception for both book and tax purposes. Prior to the effective date of
the initial public offering in 1993, the Company elected to be taxed as an S
corporation for both federal and state income tax purposes. As a result, the
Company was not subject to federal taxation and was subject to state taxation at
a reduced rate (2.5%). Subsequent to the public offering, the Company has
incurred net operating losses for federal and state purposes of $9,559,000 and
$4,778,000 respectively, and has generated tax credits for certain research and
development activities of $301,000 and $167,000 for federal and state purposes,
respectively. Federal net operating losses and tax credits expire from 2008
through 2010 and state net operating losses expire from 1998 through 2000. The
use of such net operating losses would be limited in the event of a change in
control of the Company.
A valuation allowance of $3,919,000 has been provided for the entire amount
of the deferred tax assets created by these net operating loss and tax credit
carry-forwards, which represents an increase in the valuation allowance of
$1,327,000 from December 31, 1994. The remaining temporary differences are
primarily attributable to depreciation, unbilled grant revenue, deferred revenue
and accrued compensated absences.
NOTE 6--LINE OF CREDIT
On November 27, 1995, the Company entered into a line of credit agreement
with a bank under which the Company may borrow up to $4 million based on certain
costs incurred and billings made under a major electric vehicle development
contract (Note 10). The line of credit provides for interest at the prime rate
plus 1.3% and payments from the customer are applied as repayments, unless
otherwise paid by the Company. All assets of the Company have been pledged as
collateral and the loan has been guaranteed by the Company's president, a
principal shareholder. The loan agreement restricts the Company's payment of
dividends and any redemptions or retirement of stock. The agreement contains
certain required financial statement ratios and limits certain loans,
investments, acquisitions and dispositions of assets. The loan agreement expires
June 30, 1996. No amounts are outstanding under the line of credit at December
31, 1995.
NOTE 7--SHAREHOLDERS' EQUITY:
COMMON STOCK
The Class A and Class B Common Stock are substantially the same on a
share-for-share basis, except that holders of outstanding shares of Class B
Common Stock will be entitled to receive dividends and distributions upon
liquidation at a per share rate equal to five percent of the per share rate
received by holders of outstanding shares of Class A Common Stock. The Class B
Common Stock is neither transferable nor convertible and is subject to
cancellation under certain circumstances.
PUBLIC OFFERING OF CLASS A COMMON STOCK
In June 1993, the Company sold 2,300,000 shares of its Class A Common Stock
for net proceeds of $11,534,000. The Company issued Warrants to purchase 204,757
shares of Class A Common Stock, as subsequently adjusted pursuant to
anti-dilution provisions (Note 8). Immediately prior to the public
F-11
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--SHAREHOLDERS' EQUITY: (CONTINUED)
offering, $2,102,000 of the outstanding balance of notes payable to shareholders
were contributed by the shareholders to the capital of the Company.
PRIVATE PLACEMENT OF CLASS A COMMON STOCK
On December 29, 1995, the Company sold 750,000 shares of its Class A Common
Stock for $6,000,000 and received net proceeds of $5,636,000. The investors
received registration rights pursuant to which the Company must register these
shares. The stock purchase agreement also restricts the sale of additional stock
until June 30, 1996. In addition, the Company issued Warrants to purchase 60,000
shares of Class A Common Stock (Note 8).
ESCROW AGREEMENT
Prior to the effective date of the June 1993 initial public offering,
3,000,000 shares of the Company's Class A Common Stock ("Escrowed Contingent
Shares") were deposited into escrow by the then existing shareholders in
proportion to their then current holdings. These shares are not transferable
(but may be voted) and will be released from escrow in the event the Company
attains certain earnings levels (which have been adjusted for the December 29,
1995, private placement) during the period through December 31, 1998 or the
market price of the Class A Common Stock reaches specified levels during the
period through June 10, 1996.
The release of the Escrowed Contingent Shares will be deemed compensatory
and, accordingly, will result in charges to earnings equal to the fair market
value of the Escrowed Contingent Shares recorded ratably over the period
beginning on the date when management determines that any of the specified
events are probable of being attained and ending on the date when the goal is
attained causing the Escrowed Contingent Shares to be released. At the time a
goal is attained, previously unrecognized compensation expense will be adjusted
by a one-time charge based on the then fair market value of the shares released
from Escrow. Such charges could substantially reduce the Company's net income or
increase the Company's loss for financial reporting purposes in the periods such
charges are recorded. The specified events are not considered probable of
attainment at this time.
On April 30, 1999, all shares that have not been released from Escrow will
automatically be exchanged for shares of Class B Common Stock, which will then
be released from Escrow. Any dividends or other distributions made with respect
to Escrowed Contingent Shares that have not been released from Escrow as Class A
Common Stock will be forfeited and contributed to the capital of the Company on
April 30, 1999.
NOTE 8--STOCK OPTIONS AND STOCK WARRANTS:
1993 STOCK OPTION PLAN
Under the Company's 1993 Stock Option Plan (the "Plan"), as amended in June
1995, 550,000 shares of the Company's Class A Common Stock are reserved for
issuance, pursuant to which officers and employees of the Company as well as
other persons who render services to or are otherwise associated with the
Company are eligible to receive qualified ("incentive") and/or non-qualified
stock options.
F-12
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--STOCK OPTIONS AND STOCK WARRANTS: (CONTINUED)
The Plan, which expires in April 2003, is administered by the Board of
Directors or a stock option committee designated by the Board of Directors. The
selection of participants, allotment of shares, determination of price and other
conditions of purchase of options is to be determined by the Board or stock
option committee at its sole discretion, in order to attract and retain
personnel instrumental to the success of the Company. Incentive stock options
granted under the Plan are exercisable for a period of up to 10 years from the
date of grant at an exercise price which is not less than the fair market value
of the Common Stock on the date of the grant, except that the term of an
incentive stock option granted under the Plan to a shareholder owning more than
10% of the voting power of the Company on the date of grant may not exceed five
years and its exercise price may not be less than 110% of the fair market value
of the Common Stock on the date of the grant.
OPTIONS GRANTED BY PRINCIPAL SHAREHOLDER ("BELL OPTIONS")
Dr. Lon Bell, the president and principal shareholder of the Company, has
granted options to purchase shares of his Class A Common Stock, 75% of which are
Escrowed Contingent Shares. The holder of these options can exercise the
portions of his options related to Escrowed Contingent Shares only upon release
of these shares from escrow as Class A Common Stock. The option holder has no
right to purchase Class B Common Stock should such shares be released (Note 7).
Any options granted at prices below fair market value on the date of grant
result in compensation expense with respect to options to purchase the 25% of
such shares not placed in escrow. Compensation expense and a corresponding
adjustment to contributed capital on options to purchase Escrowed Contingent
Shares will be recorded when they are released or it is determined they are
probable of being released as Class A Common Stock.
In 1993, options were granted at prices below fair market value for which
compensation expense was recorded for the non-escrowed shares. Additional
compensation expense will be recorded if the related Escrowed Contingent Shares
are released from escrow. Certain of the Bell options granted during 1993 to one
individual were granted contingent on certain future performance criteria and
are accounted for as a variable plan. The Company recorded $1,000 and $12,231 of
compensation expense in 1994 and 1995, respectively related to 1,500 and 5,028
of those options, respectively.
F-13
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--STOCK OPTIONS AND STOCK WARRANTS: (CONTINUED)
The following table summarizes stock option activity:
<TABLE>
<CAPTION>
1993 STOCK OPTION PLAN BELL OPTIONS
------------------------- -------------------------
NUMBER PRICE NUMBER PRICE
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1992............................ -- --
Granted................................................... 80,000 $ 6.00-8.00 850,572 $ 1.15-8.00
Canceled.................................................. -- (27,337) 1.15
--------- ---------
Outstanding at December 31, 1993............................ 80,000 6.00-8.00 823,235 1.15-8.00
Granted................................................... 63,574 8.25-11.69 -- --
Canceled.................................................. (2,064) 9.00-9.75 -- --
Exercised................................................. -- -- -- --
--------- ---------
Outstanding at December 31, 1994............................ 141,510 $ 6.00-11.69 823,235 $ 1.15-8.00
Granted................................................... 179,775 9.81-12.75 16,614 10.75-12.00
Canceled.................................................. (5,339) 10.50-11.69 (4,640) 1.15
Exercised................................................. -- -- (1,500) 1.15
--------- ---------
Outstanding at December 31, 1995............................ 315,946 6.00-12.75 833,709 1.15-12.00
--------- ---------
--------- ---------
Exercisable at December 31, 1995............................ 279,839 $ 6.00-12.75 162,187 $ 1.15-12.00
--------- ---------
--------- ---------
Shares available for option grants.......................... 234,054
---------
---------
</TABLE>
Pursuant to employment agreements with certain key employees, the Company
may grant Company options at the prevailing market price when certain
performance goals are attained. These options are not considered granted as of
December 31, 1995 as neither the option price nor the number of shares subject
to option are determinable.
STOCK WARRANTS
In connection with the Company's June 1993 initial public offering, the
Company issued to the underwriters warrants to purchase 204,757 shares of Class
A Common Stock at $9.67 per share through June 9, 1998, as adjusted for
anti-dilution provisions in the warrant agreements. The Company issued to third
parties warrants to purchase 60,000 shares of Class A Common Stock at $10.25 per
share as a financial advisory fee in connection with the private placement on
December 29, 1995. These warrants expire on December 28, 2000.
NOTE 9--LICENSES:
AUDIO NAVIGATION SYSTEM. The Company has licensed several technologies and
map data sources in connection with its Audio Navigation System and is subject
to royalty payments under each license agreement. In 1993, the Company entered
into a worldwide license to manufacture and sell certain voice activated
navigation systems and software to automotive OEMs and automotive aftermarket
companies. The Company must pay royalties on net commercial sales of the
patented hardware. The terms of the license also include a royalty on sales of
non-patented hardware and a royalty on sales of software. The Company would
receive back from the licensor a royalty on sales by the licensor of software to
the consumer electronics markets. The total minimum royalty due under the
license agreement is $750,000,
F-14
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--LICENSES: (CONTINUED)
payable in installments through June 30, 2002. A minimum royalty of $50,000 was
paid and expensed as Research and Development in each of the years ending June
30, 1995 and 1994. The minimum royalty applicable to the year ending June 30,
1996, is also $50,000. Failure to pay the minimum royalty results in the loss of
the license.
The Company also licenses the right to use certain voice recognition
technology under which a royalty is due based on the cumulative sales of
hardware units. In addition, the Company uses certain geographic data bases for
which it pays a fee based on each map area sold. There are no minimum royalties
under these two agreements.
CLIMATE CONTROLLED SEAT SYSTEM. In 1992, the Company obtained the worldwide
license to manufacture and sell technology for a climate control seat system to
individual automotive OEMs. Under the terms of the license agreement, royalties
are payable based on cumulative net sales. The Company has paid minimum
royalties of $11,500 and $20,800 in 1994 and 1995, respectively.
ULTRA-WIDEBAND RADAR. In January 1994, the Company entered into a license
agreement for exclusive rights in certain automotive applications to certain
radar technology. A licensing fee of $100,000 was paid in January 1994.
Royalties are required to be paid based on cumulative net sales and are subject
to minimum annual royalties beginning in 1995. The minimum royalty payment for
1995 was $50,000 and was expensed as Research and Development.
NOTE 10--MAJOR CONTRACTS
On December 8, 1994, the Company announced that it had entered into
contracts with two Asian manufacturing companies to produce approximately 50
aluminum chassis passenger electric vehicle systems. These contracts, together
with 1995 additions, are valued at approximately $9,600,000, of which the
Company received $1,650,000 during 1994 and $2,230,000 during 1995. The
contracts are scheduled to be completed in 1996. For the years ended December
31, 1994 and 1995, the Company recognized $48,000 and $4,040,000 in revenue,
respectively, from these contracts. At December 31, 1995, $209,000 is included
in Unbilled Revenue representing amounts recognized as revenue for which
billings had not been presented to customers.
In 1995, the Company completed development contracts related to specific
engineering and tooling of the Company's audio navigation system.
NOTE 11--GRANTS
Grant funding received by the Company are essentially cost sharing
arrangements whereby the Company obtains reimbursement from the funding source
for a portion of direct costs and reimbursable administrative expenses incurred
in managing specific programs related to the technologies utilized in the
Company's products. The Company is obligated to provide specified services and
to undertake specified activities under its arrangement with the funding sources
for these programs.
In 1992, CALSTART, Inc. ("CALSTART"), a not-for-profit consortium of public
and private entities (Note 13), was organized to support programs designed to
promote the development of advanced transportation including the advancement of
electric vehicles. CALSTART's support is primarily through the direct or
indirect arrangement of grant funding for such programs. Since 1992, the Company
has been
F-15
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--GRANTS (CONTINUED)
selected by CALSTART to manage or co-manage several such programs. Revenues
recognized from CALSTART related programs were $1,649,000, $802,000 and
$2,198,000 during 1993, 1994 and 1995, respectively. The Company has also
received grants from the California Energy Commission, the Federal Transit
Administration and from the Southern California Air Quality Management District
related to work on its electric vehicle and its climate control seat technology.
As of December 31, 1995, the Company has recorded $1,260,000 relating to
reimbursable costs incurred for which billings had not yet been presented to the
funding agencies. The Company is entitled to obtain future reimbursement from
its funding sources for up to $1,330,000 of direct costs and reimbursable
administrative costs incurred in managing grant programs now in process, most of
which are expected to be completed during 1996.
NOTE 12--COMMITMENTS:
As of December 31, 1995, the Company had in effect compensation agreements
with certain key employees, including each of the officers, which provide for
annual compensation amounts, semi-annual increases in salary based upon the
Consumer Price Index and annual increases based on merit. Several of these
agreements also provide for bonuses based upon performance, and several include
a guaranteed minimum bonus provision. These compensation agreements do not
include an obligation of continued employment; however, bonuses based upon
individual performance objectives achieved prior to termination would be payable
to terminated employees.
In February 1994, the Company executed a sublease on a facility in Monrovia,
California and, in December 1994, the Company executed an amendment to the
sublease adding additional space. As of December 31, 1995, the monthly rent was
$24,000. The lease expires in August 1996, but contains options to renew to July
31, 1997. In December 1995, the Company executed a sublease to December 31,
1996, on a facility in Alameda, California, from CALSTART (Note 13) for a
monthly rental amount of $14,000 and an advance payment of $450,000 which the
Company is amortizing to expense over the term of the lease.
In December 1994, the Company entered into a 60-month capital lease contract
for an IBM computer system with an implicit interest rate of 11.8% and, in July
1995, entered into a 36 month capital lease contract with an implicit interest
rate of 19.7% for additional computer equipment.
The future minimum annual commitments under capital leases as of December
31, 1995 are as follows:
<TABLE>
<CAPTION>
MINIMUM ANNUAL OPERATING
CAPITAL LEASE LEASE
YEAR AMOUNT AMOUNT
- ------------------------------------------------------------------ -------------- ----------
<S> <C> <C>
1996.............................................................. $ 28,000 $ 336,000
1997.............................................................. 28,000 --
1998.............................................................. 27,000 --
1999.............................................................. 22,000 --
-------------- ----------
Total Lease Commitments........................................... 105,000 $ 336,000
----------
----------
Less amount representing interest................................. (20,000)
--------------
$ 85,000
--------------
--------------
</TABLE>
F-16
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--COMMITMENTS: (CONTINUED)
The liability for this capitalized amount is classified in the Balance Sheet
as follows:
<TABLE>
<S> <C>
Current Portion.................................................... $ 17,000
Long-term Portion.................................................. 68,000
---------
Total.............................................................. $ 85,000
---------
---------
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995 were none,
$193,000 and $291,000, respectively.
NOTE 13--RELATED PARTY TRANSACTIONS:
Dr. Bell, the President and principal shareholder of the Company, co-founded
CALSTART (Notes 11 and 12) in 1992, served as its interim President, and for the
last three years has served on CALSTART's Board of Directors and is a member of
its Executive Committee.
The Company leased space from CALSTART from June 1992 until April 1994 at no
charge, at which time the Company moved to its current facility. In December
1995, the Company signed a 13 month lease with CALSTART for a 24,000 square foot
manufacturing and office facility located in Alameda, California for an advance
payment of $450,000 and $14,000 per month (Note 12).
As of December 31, 1995, the Company owes $150,000 to CALSTART related to
the lease, and CALSTART owes to the Company $135,000 relating to amounts
withheld from payments made by CALSTART under several grant programs which will
be paid to the Company upon completion of the respective grant programs.
NOTE 14--SUBSEQUENT EVENTS:
INDISPENSIBLE FINANCING
During 1996, the Company incurred significant losses on its major electric
vehicle development contract, which were recorded in the second and third
quarters of 1996, entered into a Bridge Financing agreement in October 1996
whereby the borrowings under the agreement are due in October 1997 and is
currently in default of its bank line of credit agreement. As a result of these
events, the Company will need to obtain additional financing to repay its debt
and fund continued operations. Management's plans to obtain this additional
financing include attempting to complete a public offering of its common stock.
In the event that the public offering is not successful or sufficient, the
Company will have to obtain a significant infusion of funds, either through
additional debt or sales of equity securities and/or assets. The outcome of such
efforts cannot be assured.
BRIDGE FINANCING
In October 1996, the Company completed a private placement (the "Bridge
Financing") of 60 bridge units (each a "Bridge Unit"), each consisting of one
$47,500 10% unsecured promissory note made by the Company (each a "Bridge Note")
and one $2,500 10% convertible subordinated debenture (each a "Bridge
Debenture"). The Bridge Debentures are due October 31, 1997 and will, upon
successful completion of a public offering involving warrants to purchase Class
A Common Stock, automatically convert into 27,000 warrants to purchase Class A
Common Stock per Bridge Debenture at approximately
F-17
<PAGE>
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 14--SUBSEQUENT EVENTS: (CONTINUED)
135% of the proposed public offering price for the Class A Common Stock. The
holders of such warrants will not be able to exercise the warrants until one
year after the effective date of the proposed public offering. The Bridge Notes
are due at the earlier of the completion of the public offering or one year from
the date of issuance. The net proceeds to the Company from the Bridge Financing
were approximately $2,500,000, net of issuance costs of $500,000.
BANK LINE OF CREDIT
During the third quarter of 1996, the Company's line of credit with a bank
(Note 6) was extended to October 31, 1996. It has since been extended to
December 31, 1996. At September 30, 1996, the Company was in violation of
certain financial and other covenants contained in the loan agreement. However,
the bank has agreed to waive certain of these violations and to forbear until
December 31, 1996 from exercising its rights and remedies with respect to all
others.
NOTE 15--SUBSEQUENT EVENT (UNAUDITED):
During the nine months ended September 30, 1996, the Company experienced
significant cost overruns on the major electric vehicle development contract
(Note 10) resulting from unanticipated design and development difficulties and
delays in the completion of the contract. Accordingly, the Company recorded a
charge to operations of approximately $1,625,000 during the nine months ended
September 30, 1996 for the ultimate estimated loss at completion of the
contract.
The Company's line of credit from the bank and the related forbearance
agreement expired as of December 31, 1996 (See Note 14), were subsequently
extended until January 31, 1997, and have been extended orally until February
28, 1997. The Company has sought, and the bank has advised the Company that it
will soon deliver, a written extension to February 28, 1997. However, the
delivery of such a written extension cannot be assured.
At September 30, 1996, the Company had capitalized approximately $700,000
relating to costs incurred to develop electrical vehicle prototypes, which
management believed were realizable, in connection with a proposed joint venture
in India to develop, market and manufacture electrical vehicles. Upon initial
funding of the joint venture, the Company was to be paid for the amounts due
relating to its development of the prototype electrical vehicles. In September,
October and November of 1996, the Company along with the other participants in
the proposed joint venture were actively involved in discussions and/or
negotiations with several potential investors in the joint venture including one
potential investor which had committed to invest up to $4.5 million subject to
the confirmation of certain conditions and cost assumptions.
In late December 1996, the potential for securing financing from this
investor was jeopardized when certain cost studies performed in December 1996
identified potentially higher than originally expected per unit vehicle costs.
In addition, in November and December of 1996, the other investors either
decided not to invest in the proposed joint venture or offered to invest subject
to significant contingencies. As a result of these developments, the Company
believes that the viability of the joint venture has become questionable and
recoverability of the the deferred contract costs became less probable.
Accordingly, the Company wrote off the $700,000 in deferred contract costs in
December 1996.
F-18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES
IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
Use of Proceeds................................ 22
Dilution....................................... 24
Price Range of Common Stock and Dividends...... 25
Capitalization................................. 26
Selected Financial Data........................ 28
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 29
Business....................................... 35
Management..................................... 47
Certain Transactions........................... 49
Principal Shareholders......................... 51
Subsequent Offering............................ 54
Description of Securities...................... 55
Shares Eligible for Future Sale................ 58
Underwriting................................... 60
Legal Matters.................................. 62
Experts........................................ 62
Incorporation of Certain Information by
Reference..................................... 62
Available Information.......................... 63
Index to Financial Statements.................. F-1
</TABLE>
AMERIGON
INCORPORATED
17,000 UNITS
EACH CONSISTING OF 280 SHARES OF
CLASS A COMMON STOCK AND
280 CLASS A WARRANTS
---------------------
PROSPECTUS
---------------------
D.H. BLAIR INVESTMENT
BANKING CORP.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the Offering, other than underwriting
commissions and discounts, are as follows:
<TABLE>
<S> <C>
SEC registration fee........................................... $16,900.84
NASD filing fee................................................ 6,077.28
NASDAQ fee..................................................... 8,500.00
Printing and engraving expenses................................ 145,000.00
Accounting fees and expenses................................. . 140,000.00
Legal fees and expenses........................................ 275,000.00
Blue Sky filing fees and expenses.............................. 55,000.00
Transfer Agent's fees and expenses............................. 2,500.00
Miscellaneous expenses......................................... 26,021.88
----------
Total...................................................... $675,000.00
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation and Bylaws of the Company require the Company
to indemnify its officers and directors to the fullest extent permitted by
Section 317 of the California General Corporation Law and applicable law.
Section 317 of the California General Corporation Law makes provision for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Reference is also made to those
provisions of the Underwriting Agreement filed herewith as Exhibit 1.1 and to
the form of indemnity agreement filed herewith as Exhibit 10.8 indemnifying
officers and directors of the Company against certain liabilities.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1.1 Amended and Restated Articles of Incorporation (the "Articles") of the Company(1)
3.1.2 Certificate of Amendment of Articles filed with the California Secretary of State on December 5,
1996.*
3.2 Bylaws of the Company as amended to date(1)
4.1 Form of Warrant Agreement to be entered into among the Company, the Underwriter and U.S. Stock
Transfer Corporation as Warrant Agent
4.2 Form of Warrant Certificate for Class A Warrant*
4.3 Form of Specimen Certificate of Company's Class A Common Stock(1)
4.4 Escrow Agreement among the Company, U.S. Stock Transfer Corporation and the shareholders named
therein(1)
5.1 Opinion of O'Melveny & Myers LLP regarding legality of securities being registered.*
10.1 1993 Stock Option Plan, together with Form of Incentive Stock Option Agreement and Nonqualified Stock
Option Agreement.(1)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
<S> <C>
10.2 Promissory Note Payable from the Company to Lon E. Bell dated September 9, 1996.*
10.3 Promissory Note from the Company to Lon E. Bell dated January 29, 1997.
10.4 Form of Underwriter's Unit Purchase Option
10.5 Stock Option Agreement, effective March 31, 1993, between Lon E. Bell and Joshua Newman.(1)
10.6 Stock Option Agreement, effective August 9, 1995, between Lon E. Bell and R. John Hamman, Jr.*
10.7.1 Stock Option Agreement ("Bell Stock Option Agreement"), effective May 13, 1993, between Lon E. Bell
and Roy A. Anderson.*
10.7.2 List of omitted Bell Stock Option Agreements with Company directors.*
10.8.1 Standard Sublease (the "Monrovia Lease"), dated February 14, 1994, between the Company and
Environmental Systems Group of Joy Technologies, Inc. ("Joy") (formerly Joy Manufacturing Company)
for facilities located in Monrovia, California.(2)
10.8.2 Letter dated February 7, 1996 from the Company to Joy extending the term of the Monrovia Lease to
February 14, 1997.*
10.8.3 Letter dated December 3, 1996 from the Company to McDermott, Inc., successor to Joy, extending the
term of the Monrovia Lease to July 31, 1997.*
10.9 Form of Indemnity Agreement between the Company and each of its officers and directors.(1)
10.10 Product Adaptation and Supply Contract, dated as of November 25, 1994, by and between the Company and
Samsung Heavy Industries Co., Ltd., Kihung R&D Center.
10.11 Settlement and License Agreement, dated as of May 10, 1996, by and between the Company, Audio
Navigation Systems, LLC, Alcom Engineering Corporation and Audio Navigation Systems, Inc., together
with Addendum thereto dated June 12, 1996.*
10.12 License Agreement, dated as of January 20, 1994, by and between the Company and the Regents of the
University of California, together with a letter from the Regents to the Company dated September 19,
1996 relating thereto.* **
10.13 Option and License Agreement dated as of November 2, 1992 between the Company and Feher Design,
Inc.(1)
10.14 License Agreement, dated as of October 19, 1993, by and between the Company and Lernout & Hauspie
Speech Products, N.V., as amended.*
10.15 License Agreement, dated as of March 15, 1995, by and between the Company and Navigation Technologies
Corporation.*
10.16 Shareholders Agreement, dated May 13, 1993, by and among the Company and the shareholders named
therein.(1)
10.17 Running Chassis Program Management Agreement between the Company and CALSTART dated September 8,
1993.(2)
10.18 Thermoelectric Air Conditioning System Program Contract between the Company and the South Coast Air
Quality Management District dated May 4, 1995.(3)
10.19 Thermoelectric Heating and Cooling for Electric Vehicles Program Contract between the Company and the
State of California (Energy Resources and Development Commission) dated May 12, 1994.(3)
10.20 Agreement for the Multi-Year Electric Vehicle Running Chassis Program between the Company and CALSTART
dated May 31, 1994.(3)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
<S> <C>
10.21 Modification No. 001 of Participation Agreement between the Company and CALSTART, dated October 9,
1995.(4)
10.22 Agreement for the Development of an Agile Assembly Line For the Production of Electric Vehicles and
Components between the Company and CALSTART, Inc., dated November 9, 1995.(4)
10.23.1 Security and Loan Agreement, dated November 20, 1995, between the Company and Imperial Bank (the
"Imperial Bank Agreement").(5)
10.23.2 First Amendment to Security and Loan Agreement and Addendum, Exhibit "A" Thereto, effective as of
November 30, 1996.*
10.23.3 Credit Terms and Conditions, dated November 20, 1995, relating to the Imperial Bank Agreement.(5)
10.23.4 Modification to Security and Loan Agreement, effective as of June 26, 1996, entered into between the
Company and Imperial Bank.*
10.23.5 Letter from Imperial Bank to the Company dated December 4, 1996 extending the term of the Company's
credit line under the Imperial Bank Agreement until December 31, 1996.*
10.23.6 Letter from Imperial Bank to the Company dated February 3, 1997 extending the term of the Company's
credit line under the Imperial Bank Agreement until January 31, 1997.
10.24 Stock Purchase Agreement and Registration Rights Agreement between the Company and Fidelity Copernicus
Fund, L.P. and Fidelity Galileo Fund, L.P., dated December 29, 1995.(6)
10.25 Stock Purchase Agreement and Registration Rights Agreement between the Company and HBI Financial Inc.,
dated December 29, 1995.(6)
10.26 Amerigon Client Contract, dated April 1, 1996, between the Company and Technology Strategies &
Alliances.*
10.27 Agreement, dated as of June 1, 1996, by and between the Company and the International Association of
Machinists and Aerospace Workers, District Lodge 725.*
21.1 List of Subsidiaries*
23.1 Consent of Price Waterhouse LLP
23.2 Consent of O'Melveny & Myers LLP (contained in Exhibit 5.1)*
24.1 Power of Attorney*
</TABLE>
- ------------------------
* Previously filed.
** Confidential treatment has been requested for a portion of this Exhibit.
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form SB-2, File No. 33-61702-LA, and incorporated by reference.
(2) Previously filed as an exhibit to the Company's Annual Report on Form 10-KSB
for the fiscal year ending December 31, 1993 and incorporated by reference.
(3) Previously filed as an exhibit to the Company's Annual Report on Form 10-KSB
for the fiscal year ending December 31, 1994 and incorporated by reference.
(4) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ending December 31, 1995 and incorporated by reference.
(5) Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed December 21, 1995 and incorporated by reference.
(6) Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed January 5, 1996 and incorporated by reference.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to its Articles of Incorporation or Bylaws and the
California General Corporations Law, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Monrovia, State of California, on February 4,
1997.
<TABLE>
<S> <C> <C>
AMERIGON INCORPORATED
By: /s/ LON E. BELL
-----------------------------------------
Lon E. Bell, Ph.D.
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ LON E. BELL Officer and Chairman of
- ------------------------------ the Board (Principal February 4, 1997
Lon E. Bell Executive Officer)
Vice President of
* Corporate Development
- ------------------------------ and Planning, Secretary February 4, 1997
Joshua M. Newman and Director
Vice President of Finance
* and Chief Financial
- ------------------------------ Officer (Principal February 4, 1997
R. John Hamman, Jr. Financial and Accounting
Officer)
*
- ------------------------------ Director February 4, 1997
Roy A. Anderson
*
- ------------------------------ Director February 4, 1997
Roger E. Batzel
*
- ------------------------------ Director February 4, 1997
John W. Clark
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ Director February 4, 1997
A. Stephens Hutchcraft, Jr.
*
- ------------------------------ Director February 4, 1997
Michael R. Peevey
*
- ------------------------------ Director February 4, 1997
Norman R. Prouty, Jr.
</TABLE>
*By: /s/ LON E. BELL
-------------------------
Lon E. Bell, Ph.D.
ATTORNEY-IN-FACT
II-6
<PAGE>
17,000 Units
(each Unit consisting of (i) 280 shares of Class A Class A Common Stock, no par
value, and (ii) 280 redeemable Class A Warrants to purchase one share of Class A
Common Stock at an exercise price of $___ from the date
of issuance through __________, 2002)
AMERIGON INCORPORATED
UNDERWRITING AGREEMENT
____________, 1997
D.H. Blair Investment Banking Corp.
44 Wall Street
New York, New York 10005
AMERIGON INCORPORATED, a California corporation (the "Company"),
proposes to issue and sell to D.H. Blair Investment Banking Corp. ("you" or the
"Underwriter") pursuant to this Underwriting Agreement (the "Agreement") an
aggregate of 17,000 Units, each unit being hereinafter referred to as a "Unit"
and consisting of (i) 280 shares of Class A Common Stock, no par value per share
("Shares"), and (ii) 280 redeemable Class A Warrants ("Class A Warrants"). Each
Class A Warrant is exercisable from the date of issuance through ____________,
2002, at an exercise price of $_____ to purchase one share of Class A Common
Stock. The Class A Warrants may be referred to herein as the "Warrants." The
Warrants are subject to redemption in certain instances commencing one year from
the date of this Agreement. In addition, the Company proposes to grant to the
Underwriter the option referred to in Section 2(b) to purchase all or any part
of an aggregate of 2,550 additional Units. Unless the context otherwise
indicates, the term "Units" shall include the 2,550 additional Units referred to
above.
The aggregate of 17,000 Units to be sold by the Company, together with
all or any part of the 2,550 Units which the Underwriter has the option to
purchase, and the Shares and the Warrants comprising such Units, are herein
called the "Units." The Class A Common Stock of the Company to be outstanding
after giving effect to the sale of the Shares is herein called the "Class A
Common Stock." The Shares and Warrants included in the Units (including the
Units which the Underwriter has the option to purchase as described in Section
11 hereof) are herein collectively called the "Securities."
<PAGE>
You have advised the Company that you desire to purchase the Units.
The Company confirms the agreement made by it with respect to the purchase of
the Units by you, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) A registration statement (File No. 333-17401) on Form S-2
relating to the public offering of the Units, including a form of prospectus
subject to completion, copies of which have heretofore been delivered to you,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission under the Act,
and one or more amendments to such registration statement may have been so
filed. After the execution of this Agreement, the Company will file with the
Commission either (i) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
either (A) if the Company relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Units that shall identify the Preliminary
Prospectus (as hereinafter defined) that it supplements containing such
information as is required or permitted by Rules 434, 430A and 424(b) under the
Act or (B) if the Company does not rely on Rule 434 under the Act, a prospectus
in the form most recently included in an amendment to such registration
statement (or, if no such amendment shall have been filed, in such registration
statement), with such changes or insertions as are required by Rule 430A under
the Act or permitted by Rule 424(b) under the Act, and in the case of either
clause (i)(A) or (i)(B) of this sentence, as have been provided to and approved
by you prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the Commission
to be effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been furnished to
and approved by you prior to the execution of this Agreement.
As used in this Agreement, the term "Registration Statement" means
such registration statement, as amended at the time when it was or is declared
effective, including all exhibits thereto and including any information omitted
therefrom pursuant to Rule 430A under the Act and included in the Prospectus (as
hereinafter defined); the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or any amendment
thereto (including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment thereto at the time it was or is
declared effective); the term "Prospectus" means (A) if the Company relies on
Rule 434 under the Act, the Term Sheet relating to the Units that is first filed
pursuant to Rule 424(b)(7) under the Act, together with the Preliminary
Prospectus identified therein that such Term Sheet supplements, (B) if the
Company does not rely on Rule 434 under the Act, the prospectus first filed with
the Commission pursuant to Rule 424(b) under the Act or (C) if the Company does
not rely on Rule 434 under the Act and if no prospectus is required to be filed
pursuant to said Rule 424(b), such term means the prospectus included in the
Registration Statement; except that if such registration statement or
-2-
<PAGE>
prospectus is amended or such prospectus is supplemented, after the effective
date of such registration statement and prior to the Option Closing Date (as
hereinafter defined), the terms "Registration Statement" and "Prospectus" shall
include such registration statement and prospectus as so amended, and the term
"Prospectus" shall include the prospectus as so supplemented, or both, as the
case may be; and the term "Term Sheet" means any term sheet that satisfies the
requirements of Rule 434 under the Act. Any reference to the "date" of a
Prospectus that includes a Term Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time the
Registration Statement becomes effective and at all times subsequent thereto
up to and on the Closing Date (as hereinafter defined) or the Option Closing
Date, as the case may be, (i) the Registration Statement and Prospectus will
in all material respects conform to the requirements of the Act and the Rules
and Regulations; and (ii) neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
statements therein not misleading; provided, however, that the Company makes
no representations, warranties or agreements as to information contained in
or omitted from the Registration Statement or Prospectus in reliance upon,
and in conformity with, written information furnished to the Company by or on
behalf of the Underwriter specifically for use therein or in the preparation
thereof. It is understood that the statements set forth in the Prospectus on
page 2 with respect to stabilization, under the heading "Underwriting" (other
than the number and exercise price of warrants issued to the Underwriter in
June 1993), under the heading "Risk Factors -- Possible Adverse Effect on
Liquidity of the Company's Securities Due to the Investigation of D.H. Blair
Investment Banking Corp. and D.H. Blair & Co., Inc. by the Securities and
Exchange Commission," the first sentence under the heading "Risk Factors
- --Adverse Effect on Liquidity Associated with Possible Restrictions on
Market-Marking Activities in the Company's Securities" and the identity of
counsel to the Underwriter under the heading "Legal Matters" constitute the
only information furnished in writing by or on behalf of the Underwriter for
inclusion in the Registration Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with full power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus and is
duly qualified to do business as a foreign corporation and is in good standing
in all other jurisdictions in which the nature of its business or the character
or location of its properties requires such qualification, except where failure
to be so qualified will not materially adversely affect the Company's business,
properties or financial condition, taken as a whole.
(d) The authorized, issued and outstanding capital stock of the
Company as of September 30, 1996 is as set forth in the Prospectus under
"Capitalization;" the shares of issued and outstanding capital stock of the
Company set forth thereunder have been duly authorized, validly issued and are
fully paid and non-assessable; except as set forth in the
-3-
<PAGE>
Prospectus, no options, warrants, or other rights to purchase, agreements or
other obligations to issue, or agreements or other rights to convert any
obligation into, any shares of capital stock of the Company have been granted or
entered into by the Company; and the capital stock conforms to all statements
relating thereto contained in the Registration Statement and Prospectus.
(e) The Units and the Shares are duly authorized, and when
issued and delivered against payment therefor pursuant to this Agreement, will
be duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights of any security holder of the Company. Neither the filing of
the Registration Statement nor the offering or sale of the Units as contemplated
in this Agreement gives rise to any rights, other than those which have been
waived or satisfied, for or relating to the registration of any shares of Class
A Common Stock, except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued and delivered
against payment therefor pursuant to this Agreement, will have been duly
executed, issued and delivered and will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms, except as
may be limited by bankruptcy, insolvency, moratorium or similar laws relating to
or affecting creditors' rights generally and by general principles of equity,
and entitled to the benefits provided by the warrant agreement pursuant to which
such Warrants are to be issued (the "Warrant Agreement"), which will be
substantially in the form filed as an exhibit to the Registration Statement.
The shares of Class A Common Stock issuable upon exercise of the Warrants have
been reserved for issuance upon the exercise of the Warrants and when issued in
accordance with the terms of the Warrants and the Warrant Agreement upon payment
of the exercise price therefor, will be duly and validly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights and no
personal liability will attach to the ownership thereof. The Warrant Agreement
has been duly authorized and, when executed and delivered by the Company
pursuant to this Agreement, will have been duly executed and delivered by the
Company and will constitute the valid and legally binding obligation of the
Company enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, moratorium or similar laws relating to or affecting
creditors' rights generally and by general principles of equity. The Warrants
and the Warrant Agreement conform to the respective descriptions thereof in the
Registration Statement and Prospectus.
The Shares and the Warrants contained in the Units subject to the Unit
Purchase Option have been duly authorized and, when duly issued and delivered
upon payment of the exercise price therefor, such Warrants will constitute valid
and legally binding obligations of the Company enforceable in accordance with
their terms, except as may be limited by bankruptcy, insolvency, moratorium or
similar laws relating to or affecting creditors' rights generally and by general
principles of equity, and entitled to the benefits provided by the Warrant
Agreement. The Shares included in the Unit Purchase Option (and the shares of
Class A Common Stock issuable upon exercise of such Warrants) when issued and
sold in accordance with the terms of the Unit Purchase Option or the Warrants,
as the case may be, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights and no personal liability will
attach to the ownership thereof.
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(f) This Agreement, the Unit Purchase Option and the Extension
Agreement (the "M/A Agreement") extending the term of an existing agreement
with you regarding mergers, acquisitions, joint ventures and certain other
forms of transactions have been duly and validly authorized, executed and
delivered by the Company. The Company has corporate power and authority to
authorize, issue and sell the Units to be sold by it hereunder on the terms
and conditions set forth herein, and no consent, approval, authorization or
other order of any governmental authority is required in connection with such
authorization, execution and delivery or with the authorization, issue and
sale of the Units or the Unit Purchase Option, except such as may be required
under the Act or state securities laws.
(g) Except as described in the Prospectus, the Company is not in
violation, breach or default of or under, and consummation of the transactions
herein contemplated and the fulfillment of the terms of this Agreement will not
conflict with, or result in a material breach or violation of, any of the terms
or provisions of, or constitute a material default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets of the Company is subject, nor will
such action result in any violation of the provisions of the articles of
incorporation or the by-laws of the Company, as amended, or any material
violation of any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental body
having jurisdiction over the Company.
(h) Except as described in the Prospectus, the Company has good
and marketable title to all properties and assets described in the Prospectus as
owned by it, free and clear of all liens, charges, encumbrances or restrictions,
except such as are not materially significant or important in relation to its
business, all of the material leases and subleases under which the Company is
the lessor or sublessor of properties or assets or under which the Company holds
properties or assets as lessee or sublessee as described in the Prospectus are
in full force and effect, and, except as described in the Prospectus, the
Company is not in default in any material respect with respect to any of the
terms or provisions of any of such leases or subleases, and no claim has been
asserted by anyone adverse to rights of the Company as lessor, sublessor, lessee
or sublessee under any of the leases or subleases mentioned above, or affecting
or questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus; and the Company owns or leases all
such properties described in the Prospectus as are necessary to its operations
as now conducted and, except as otherwise stated in the Prospectus, as proposed
to be conducted as set forth in the Prospectus.
(i) Price Waterhouse L.L.P., who have given their reports on
certain financial statements filed and to be filed with the Commission as a part
of the Registration Statement, which are incorporated in the Prospectus, are
with respect to the Company, independent public accountants as required by the
Act and the Rules and Regulations.
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<PAGE>
(j) The financial statements, together with related notes, set
forth in the Prospectus (or if the Prospectus is not in existence, the most
recent Preliminary Prospectus) present fairly in all material respects the
financial position and results of operations and changes in cash flow of the
Company on the basis stated in the Registration Statement, at the respective
dates and for the respective periods to which they apply. Said statements and
related notes have been prepared in accordance with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved, except for the absence of year-end adjustments to interim statements.
The information set forth under the captions "Dilution," "Capitalization," and
"Selected Financial Data" in the Prospectus fairly present, on the basis stated
in the Prospectus, in all material respects the information included therein.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), except as
contemplated thereby or in connection with the transactions contemplated by this
Agreement, the Company has not incurred any liability or obligation, direct or
contingent, not in the ordinary course of business, or entered into any
transaction not in the ordinary course of business, which is material to the
business of the Company, and there has not been any change in the capital stock
of, or any incurrence of short-term or long-term debt by, the Company or any
issuance of options, warrants or other rights to purchase the capital stock of
the Company or any adverse change or any development involving, so far as the
Company can now reasonably foresee a prospective adverse change in the condition
(financial or other), net worth, results of operations, business, key personnel
or properties of it which would be materially adverse to the business or
financial condition of the Company, taken as a whole, and the Company has not
become a party to, and neither the business nor the property of the Company has
become the subject of, any material litigation whether or not in the ordinary
course of business.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company, taken as a whole, nor are there any such actions,
suits or proceedings related to environmental matters or related to
discrimination on the basis of age, sex, religion or race, and no labor disputes
involving the employees of the Company exist or, to the knowledge of the
Company, are threatened which might be expected to materially adversely affect
the conduct of the business, property or operations or the financial condition
or results of operations of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid or is contesting in good faith all taxes shown as due thereon; and
there is no tax deficiency which has been or to the knowledge of the Company is
reasonably likely to be asserted against the Company.
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(n) Except as described in the Prospectus, the Company has
sufficient licenses, permits and other governmental authorizations currently
required for the conduct of its business or the ownership of its properties as
described in the Prospectus and is in all material respects complying therewith
and owns or possesses adequate rights to use all material patents, patent
applications, trademarks, service marks, trade-names, trademark registrations,
service mark registrations, copyrights and licenses necessary for the conduct of
such business and has not received any notice of conflict with the asserted
rights of others in respect thereof. To the knowledge of the Company, none of
the activities or business of the Company are in violation of, or cause the
Company to violate, any law, rule, regulation or order of the United States, any
state, county or locality, or of any agency or body of the United States or of
any state, county or locality, the violation of which would have a material
adverse impact upon the condition (financial or otherwise), business, property,
prospective results of operations, or net worth of the Company, taken as a
whole.
(o) The Company has not, directly or indirectly, at any time
(i) made any contributions to any candidate for political office, or failed to
disclose fully any such contribution in violation of law or (ii) made any
payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(p) On the Closing Dates (hereinafter defined) all transfer or
other taxes (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction), if any, which are required to be paid in
connection with the sale and transfer of the Units to the Underwriter hereunder
will have been fully paid or provided for by the Company and all laws imposing
such taxes will have been fully complied with.
(q) All contracts and other documents of the Company which are,
under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Class A Common Stock to facilitate
the sale or resale of the Units hereby.
(s) Except as set forth in Schedule 1(s) hereto, the Company has
no subsidiaries and except as described or referenced in the Prospectus, the
Company does not own, directly or indirectly, any capital stock or other equity
ownership or proprietary interests in any other corporation, association, trust,
partnership, joint venture or other entity. Schedule 1(s) sets forth the
jurisdiction of incorporation of each subsidiary (the "Subsidiaries") of the
Company and the amount and percentage of capital stock of such subsidiary owned
by the Company, which
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<PAGE>
capital stock is owned by the Company, except as described in the Prospectus,
free and clear of all liens, security interests and encumbrances.
(t) The Company has not entered into any agreement pursuant to
which any person is entitled either directly or indirectly to compensation from
the Company for services as a finder in connection with the proposed public
offering.
(u) Except as previously disclosed in writing by the Company to
the Underwriter, to the Company's knowledge after due inquiry, no officer,
director, 5% shareholder or 1% shareholder of the Company has any affiliation or
association with any member of the National Association of Securities Dealers
Inc. ("NASD").
(v) The Company is not, and upon receipt of the proceeds from
the sale of the Units will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
(w) The Company has not distributed and will not distribute
prior to the First Closing Date any offering material in connection with the
offering and sale of the Units other than the Preliminary Prospectus,
Prospectus, the Registration Statement or the other materials permitted by the
Act, if any.
(x) The conditions for use of Form S-2, as set forth in the
General Instructions thereto, have been satisfied.
(y) There are no business relationships or related-party
transactions of the nature described in Item 404 of Regulation S-K involving the
Company, the Subsidiaries and any person described in such Item that are
required to be disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and that have not been so
disclosed.
(z) The Company has complied with all provisions of Section
517.075 Florida Statutes relating to doing business with the government of Cuba
or with any person or affiliate located in Cuba.
2. PURCHASE, DELIVERY AND SALE OF THE UNITS.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties, and agreements herein
contained, the Company agrees to issue and sell to the Underwriter, and the
Underwriter agrees to buy from the Company at $______ per Unit, at the place and
time hereinafter specified, 17,000 Units (the "First Units").
Delivery of the First Units against payment therefor shall take
place at the offices of D.H. Blair Investment Banking Corp., 44 Wall Street, New
York, N.Y. (or at such other place as may be designated by agreement between you
and the Company) at 10:00 a.m.,
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<PAGE>
New York time, on ___________, 1997 or at such later time and date as you and
the Company may agree, such time and date of payment and delivery for the First
Units being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter to
purchase all or any part of an aggregate of an additional 2,550 Units at the
same price per Unit as the Underwriter shall pay for the First Units being sold
pursuant to the provisions of subsection (a) of this Section 2 (such additional
Units being referred to herein as the "Option Units"). This option may be
exercised within 45 days after the effective date of the Registration Statement
upon notice by the Underwriter to the Company advising as to the amount of
Option Units as to which the option is being exercised, the names and
denominations in which the certificates for such Option Units are to be
registered and the time and date when such certificates are to be delivered.
Such time and date shall be designated by the Underwriter but shall not be
earlier than four nor later than ten full business days after the exercise of
said option, nor in any event prior to the First Closing Date, and such time and
date is referred to herein as the "Option Closing Date." Delivery of the Option
Units against payment therefor shall take place at the offices of D.H. Blair
Investment Banking Corp., 44 Wall Street, New York, N.Y. The Option granted
hereunder may be exercised only to cover overallotments in the sale by the
Underwriter of First Units referred to in subsection (a) above. In the event
the Company declares or pays a dividend or distribution on its Class A Common
Stock, whether in the form of cash, shares of Class A Common Stock or any other
consideration, prior to the Option Closing Date, such dividend or distribution
shall also be paid on the Option Units on the Option Closing Date.
(c) The Company will make the certificates for the securities
comprising the Units to be purchased by the Underwriter hereunder available to
you for checking one full business day prior to the First Closing Date or the
Option Closing Date (which are collectively referred to herein as the "Closing
Dates"). The certificates shall be in such names and denominations as you may
request, at least two full business days prior to the Closing Dates. Time shall
be of the essence and delivery at the time and place specified in this Agreement
is a further condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Securities
comprising the Units to be purchased by the Underwriter hereunder will be
delivered by the Company to you against payment of the purchase price, by
certified or bank cashier's checks in New York Clearing House funds, payable to
the order of the Company.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Units pursuant to the
provisions of subsection (b) above, payment for such Units shall be made to or
upon the order of the Company by certified or bank cashier's checks payable in
New York Clearing House funds at the offices of D.H. Blair Investment Banking
Corp., at the time and date of delivery of such Units as required by the
provisions of subsection (b) above, against receipt of the certificates for the
Securities
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<PAGE>
comprising the Option Units by the Underwriter registered in such names and in
such denominations as the Underwriter may request.
It is understood that you propose to offer the Units to be
purchased hereunder to the public upon the terms and conditions set forth in the
Registration Statement, after the Registration Statement becomes effective.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible. If
required, the Company will file the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act. Upon notification from the Commission that the
Registration Statement has become effective, the Company will so advise you and
will not at any time, whether before or after the effective date, file the
Prospectus, Term Sheet or any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been advised
and furnished with a copy or to which you or your counsel shall have objected in
writing or which is not in compliance with the Act and the Rules and
Regulations. At any time prior to the later of (A) the completion by the
Underwriter of the distribution of the Units contemplated hereby (but in no
event more than nine months after the date on which the Registration Statement
shall have become or been declared effective) and (B) 25 days after the date on
which the Registration Statement shall have become or been declared effective,
the Company will prepare and file with the Commission, promptly upon your
request, any amendments or supplements to the Registration Statement or
Prospectus which, in your reasonable opinion, may be necessary or advisable in
connection with the distribution of the Units.
As soon as the Company is advised thereof, the Company will
advise you, and confirm the advice in writing, of the receipt of any comments of
the Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or any
amended Prospectus, of any request made by the Commission for amendment of the
Registration Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any state
or regulatory body of any stop order or other order or threat thereof suspending
the effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Units for offering in any jurisdiction, or of the
institution of any proceedings for any of such purposes, and will use its best
efforts to prevent the issuance of any such order, and, if issued, to obtain as
soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company
authorizes the Underwriter and
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<PAGE>
dealers to use the Prospectus in connection with the sale of the Units for such
period as in the opinion of counsel to the Underwriter the use thereof is
required to comply with the applicable provisions of the Act and the Rules and
Regulations. In case of the happening at any time within such period as a
Prospectus is required under the Act to be delivered in connection with sales by
an underwriter or dealer of any event of which the Company has knowledge and
which materially affects the Company or the securities of the Company, or which
in the opinion of counsel for the Company or counsel for the Underwriter should
be set forth in an amendment to the Registration Statement or a supplement to
the Prospectus in order to make the statements therein not then misleading in
light of the circumstances existing at the time the Prospectus is required to be
delivered to a purchaser of the Units, or in case it shall be necessary to amend
or supplement the Prospectus to comply with law or with the Rules and
Regulations, the Company will notify you promptly and forthwith prepare and
furnish to you copies of such amended Prospectus or of such supplement to be
attached to the Prospectus, in such quantities as you may reasonably request, in
order that the Prospectus, as so amended or supplemented, will not contain any
untrue statement of a material fact or omit to state any material facts
necessary in order to make the statements in the Prospectus, in the light of the
circumstances under which they are made, not misleading. The preparation and
furnishing of any such amendment or supplement to the Registration Statement or
amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriter, except that in case the Underwriter is
required, in connection with the sale of the Units to deliver a Prospectus nine
months or more after the effective date of the Registration Statement, the
Company will upon request of and at the expense of the Underwriter, amend or
supplement the Registration Statement and Prospectus and furnish the Underwriter
with reasonable quantities of prospectuses complying with Section 10(a)(3) of
the Act.
The Company will comply with the Act, the Rules and Regulations
and the Securities Exchange Act of 1934 and the rules and regulations thereunder
in connection with the offering and issuance of the Units.
(b) The Company will use its best efforts to qualify to register
the Units for sale under the securities or "blue sky" laws of such jurisdictions
as the Underwriter may designate and will make such applications and furnish
such information as may be required for that purpose and to comply with such
laws, provided the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent of service
of process in any jurisdiction in any action other than one arising out of the
offering or sale of the Units. The Company will, from time to time, prepare and
file such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriter may reasonably
request.
(c) If the sale of the Units provided for herein is not
consummated for any reason caused by the Company, the Company shall pay all
costs and expenses incident to the performance of the Company's obligations
hereunder, as set forth in Section 8.
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<PAGE>
(d) The Company will use its best efforts, if requested by the
Underwriter, to obtain and keep current a listing in the Standard & Poors or
Moody's Industrial OTC Manual.
(e) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Securities Exchange Act of 1934, the
Company, at its expense, will furnish to its shareholders an annual report
(including financial statements audited by independent public accountants), in
reasonable detail and at its expense, will furnish to you during the period
ending five (5) years from the date hereof, (i) as soon as practicable after the
end of each fiscal year, a balance sheet of the Company and any of its
subsidiaries as at the end of such fiscal year, together with statements of
income, surplus and cash flow of the Company and any subsidiaries for such
fiscal year, all in reasonable detail and accompanied by a copy of the
certificate or report thereon of independent accountants; (ii) as soon as
practicable after the end of each of the first three fiscal quarters of each
fiscal year, consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are available, a copy of all
reports (financial or other) mailed to security holders; (iv) as soon as they
are available, a copy of all non-confidential reports and financial statements
furnished to or filed with the Commission or any securities exchange or
automated quotation system on which any class of securities of the Company is
listed; and (v) such other information as you may from time to time reasonably
request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above will
be on a consolidated basis to the extent the accounts of the Company and its
subsidiary or subsidiaries are consolidated in reports furnished to its
shareholders generally.
(g) The Company will deliver to you at or before the First
Closing Date at least one signed copy of the Registration Statement including
all financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to you such number of conformed copies of the
Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon the order of the Underwriter, from
time to time until the effective date of the Registration Statement, as many
copies of any Preliminary Prospectus filed with the Commission prior to the
effective date of the Registration Statement as the Underwriter may reasonably
request. The Company will deliver to the Underwriter on the effective date of
the Registration Statement and thereafter for so long as a Prospectus is
required to be delivered under the Act, from time to time, as many copies of the
Prospectus, in final form, or as thereafter amended or supplemented, as the
Underwriter may from time to time reasonably request. The Company, not later
than (i) 5:00 p.m., New York City time, on the date of determination of the
public offering price, if such determination occurred at or prior to 12:00 noon,
New York City time, on such date or (ii) 6:00 p.m., New York City time, on the
business day following the date of determination of the public offering price,
if such determination occurred after 12:00 noon, New York City time, on such
date, will deliver to the Underwriter, without charge, as many copies of the
Prospectus and any amendment or supplement thereto as the Underwriter may
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reasonably request for purposes of confirming orders that are expected to settle
on the First Closing Date.
(h) The Company will make generally available to its security
holders and to the registered holders of its Warrants and deliver to you as soon
as it is practicable to do so but in no event later than 90 days after the end
of twelve months after its current fiscal quarter, an earnings statement (which
need not be audited) covering a period of at least 12 consecutive months
beginning after the effective date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the
Units for the purposes set forth under "Use of Proceeds" in the Prospectus. The
Company shall not use any of the proceeds from the Offering to repay any
indebtedness of the Company, including but not limited to indebtedness to any
current executive officers, directors or principal shareholders of the Company;
provided, that a portion of the proceeds will be used to repay the Bridge Notes,
a portion of the proceeds may be used to repay bank debt and trade payables and,
upon the repayment in full and termination of the Company's Imperial Bank loan,
a portion of the proceeds may be used to repay loans from Lon E. Bell Ph.D. (not
to exceed $500,000) and to pay deferred wages to executive officers and founders
of the Company (up to a maximum of $75,000).
(j) The Company will, promptly upon your request, prepare and
file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action, which
in the reasonable opinion of Bachner, Tally, Polevoy & Misher LLP, counsel to
the Underwriter, may be reasonably necessary or advisable in connection with the
distribution of the Units, and will use its best efforts to cause the same to
become effective as promptly as possible.
(k) The Company will, prior to the Effective Date of the
Registration Statement, and at all times thereafter, have authorized and
reserved sufficient shares of Class A Common Stock issuable upon exercise of the
Warrants included in the Units, upon exercise of the Unit Purchase Option to be
issued to the Underwriter (including the Warrants included therein) and upon
exercise of the Warrants included in the Underwriter's Option Units.
(l) The Underwriter shall receive agreements from each officer
and director of the Company, each stockholder holding in excess of 5% of the
outstanding Common Stock (except for HBI Financial, The Copernicus Fund, L.P.
and The Galileo Fund, L.P.) and each other stockholder known by the Company to
hold in excess of 1% of the outstanding Common Stock to the effect that (i) such
stockholder shall not publicly sell, assign or transfer any of their securities
of the Company for a period of 13 months from the First Closing Date (other than
(A) bona fide gifts and transfers to trusts for estate planning purposes where
the transferee agrees to be bound by this provision and (B) the sale of shares
owned by Lon E. Bell, Ph.D. pursuant to the exercise, by the holders thereof, of
options on such shares previously granted by Dr. Bell); (ii) such stockholder
shall not exercise any preemptive rights which it
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might hold with respect to the Offering; and (iii) such stockholder waives any
registration rights it may have with respect to the Offering and for a period of
13 months thereafter. In order to enforce this covenant, the Company shall
impose stop-transfer instructions with respect to the shares owned by such
shareholders until the end of such period.
(m) Prior to completion of this offering, the Company will make
all filings required to obtain the listing of the Warrants on the Nasdaq
SmallCap Market or a listing on such other market or exchange as the Underwriter
consents to, and will effect and use its best efforts to maintain such listing
for at least five years from the date of this Agreement.
(n) The Company and Lon E. Bell, Ph.D. represent that it or he
has not taken and agree that it or he will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result in the stabilization or manipulation of the price of
the Units, Shares or the Warrants or to facilitate the sale or resale of the
Securities.
(o) On the Closing Date and simultaneously with the delivery of
the Units, the Company shall execute and deliver to you the Unit Purchase
Option. The Unit Purchase Option will be substantially in the form of the
Underwriter's Unit Purchase Option filed as an Exhibit to the Registration
Statement.
(p) During the 18 month period commencing on the date of this
Agreement, the Company will not, without the prior written consent of the
Underwriter, grant any options to employees to purchase shares of Class A Common
Stock at an exercise price less than the fair market value of the Class A Common
Stock on the date of grant. During the three year period from the First Closing
Date, the Company will not, without the prior written consent of the
Underwriter, offer or sell any of its securities pursuant to Regulation S under
the Act.
(q) Lon E. Bell, Ph.D. shall be the Chief Executive Officer,
President and Chairman of the Board and Joshua M. Newman shall be the Vice
President - Corporate Development and Planning of the Company on the Closing
Dates. Prior to completion of this offering, the Company will have obtained key
person life insurance on the lives of each of Dr. Bell and Mr. Newman in an
amount of not less than $2 million and will use its best efforts to maintain
such insurance for a minimum period of either three years from the Effective
Date of the Registration Statement or the respective terms of the employment
agreements between the Company and such officers, whichever period is longer.
For a period of thirteen months from the First Closing Date, the cash
compensation of the executive officers of the Company shall not be increased
from the cash compensation levels disclosed in the Prospectus.
(r) On the Closing Date, and simultaneously with the delivery of
the Units, the Company shall execute and deliver to you the M/A Agreement.
(s) So long as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement to become
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effective in compliance with the Act and without any lapse of time between the
effectiveness of any such post-effective amendments and cause a copy of each
Prospectus, as then amended, to be delivered to each holder of record of a
Warrant and to furnish to you and each dealer as many copies of each such
Prospectus as you or such dealer may reasonably request. The Company shall not
call for redemption any of the Warrants unless a registration statement covering
the securities underlying the Warrants has been declared effective by the
Commission and remains current at least until the date fixed for redemption. In
addition, for so long as any Warrant is outstanding, the Company will promptly
notify the Underwriter of any material change in the business, financial
condition or prospects of the Company; provided, that the Company shall not be
required to disclose confidential information regarding any contemplated
transactions.
(t) Upon the exercise of any Warrant or Warrants (except for
Warrants included in the Unit Purchase Option) after _________, 1998, the
Company will pay D.H. Blair Investment Banking Corp. a fee of 5% of the
aggregate exercise price of the Warrants, of which a portion may be reallowed to
the dealer who solicited the exercise (which may also be D.H. Blair Investment
Banking Corp.) if (i) the market price of the Company's Common Stock is greater
than the exercise price of the Warrants on the date of exercise; (ii) the
exercise of the Warrant was solicited by a member of the National Association of
Securities Dealers, Inc., as designated in writing on the warrant certificate
subscription form; (iii) the Warrant is not held in a discretionary account;
(iv) the disclosure of compensation arrangements has been made in documents
provided to customers, both as part of the original offering and at the time of
exercise, and (v) the solicitation of the Warrant was not in violation of
Rule 10b-6 promulgated under the Securities Exchange Act of 1934, as amended.
The Company agrees not to solicit the exercise of any Warrants other than
through D.H. Blair Investment Banking Corp. and will not authorize any other
dealer to engage in such solicitation without the prior written consent of D.H.
Blair Investment Banking Corp.
(u) For a period of five (5) years from the Effective Date of
the Registration Statement, the Company (i) at its expense, shall cause its
regularly engaged independent certified public accountants to review (but not
audit) the Company's financial statements for each of the first three (3) fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's 10-Q quarterly report and the mailing of quarterly
financial information to shareholders and (ii) shall not change its accounting
firm to other than a "Big Six" firm without the prior written consent of the
Chairman or the President of the Underwriter, which consent shall not be
unreasonably withheld or delayed.
(v) As promptly as practicable after the Closing Date, the
Company will prepare, at its own expense, hard cover "bound volumes" relating to
the offering, and will distribute at least four of such volumes to the
individuals designated by the Underwriter or counsel to the Underwriter.
(w) Prior to the First Closing Date, (i) the Company will have
at least two (2) non-affiliated members on its Board of Directors; and (ii) the
Company shall engage a public relations firm reasonably acceptable to the
Underwriter.
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(x) For a period of five years from the First Closing Date, D.H.
Blair Investment Banking Corp. shall have the right, but not the obligation, to
designate one director of the Board of Directors of the Company.
(y) The Company shall, for a period of six years after date of
this Agreement, submit such reports to the Secretary of the Treasury and to
shareholders as such Secretary may require pursuant to Section 1202 of the
Internal Revenue Code, as amended, or regulations promulgated thereunder, in
order for the Company to qualify as a "small business" so that shareholders may
realize special tax treatment with respect to their investment in the Company.
(z) With five (5) business days after the Effective Date, the
Company will file with the Commission, and use its best efforts to cause to
become effective, a registration statement on Form S-3 relating to the Selling
Securityholder Securities (as defined in the Prospectus).
4. CONDITIONS TO UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase and pay for the Units which it has agreed to purchase
hereunder, are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations and warranties of the
Company herein and to the performance by the Company of its obligations
hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M., New York time,
on the date on which the amendment to the registration statement originally
filed with respect to the Units or to the Registration Statement, as the case
may be, containing information regarding the public offering price of the Units
has been filed with the Commission, or such later time and date as shall have
been agreed to by you; if required, the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto shall have
been filed with the Commission in the manner and within the time period required
by Rule 434 and 424(b) under the Act; on or prior to the Closing Dates no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that or a similar purpose shall have been
instituted or shall be pending or, to your knowledge or to the knowledge of the
Company, shall be contemplated by the Commission; any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Bachner, Tally, Polevoy & Misher LLP, counsel to the
Underwriter;
(b) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of O'Melveny & Myers LLP, counsel
for the Company, in form and substance satisfactory to counsel for the
Underwriter.
In rendering such opinion, such counsel may rely upon the
Company's representations and warranties in this Agreement and upon certificates
of any officer of the Company or public officials as to matters of fact; and may
rely as to all matters of law other than
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<PAGE>
the law of the United States or of the State of California upon opinions of
counsel satisfactory to you, in which case the opinion shall state that they
have no reason to believe that you and they are not entitled to so rely.
(c) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of Christie, Parker & Hale, LLP,
patent counsel for the Company, in form and substance satisfactory to counsel
for the Underwriter.
(d) All corporate proceedings and other legal matters relating
to this Agreement, the Registration Statement, the Prospectus and other related
matters shall be reasonably satisfactory to or reasonably approved by Bachner,
Tally, Polevoy & Misher LLP, counsel to the Underwriter, and you shall have
received from such counsel a signed opinion, dated as of the First Closing Date,
with respect to the validity of the issuance of the Units, the form of the
Registration Statement and Prospectus (other than the financial statements and
other financial data contained therein), the execution of this Agreement and
other related matters as you may reasonably require. The Company shall have
furnished to counsel for the Underwriter such documents as they may reasonably
request for the purpose of enabling them to render such opinion.
(e) You shall have received a letter prior to the effective date
of the Registration Statement and again on and as of the First Closing Date from
Price Waterhouse LLP, independent public accountants for the Company,
substantially in the form approved by you, and including estimates of the
Company's revenues and results of operations for the period ending at the end of
the month immediately preceding the effective date and results of the comparable
period during the prior fiscal year.
(f) At the Closing Dates, (i) the representations and warranties
of the Company contained in this Agreement shall be true and correct with the
same effect as if made on and as of the Closing Dates and the Company shall have
performed all of its obligations hereunder and satisfied all the conditions on
its part to be satisfied at or prior to such Closing Date; (ii) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all material respects
conform to the requirements thereof, and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(iii) there shall have been, since the respective dates as of which information
is given, no material adverse change, or any development involving a prospective
material adverse change, in the business, properties, condition (financial or
otherwise), results of operations, capital stock, long-term or short-term debt
or general affairs of the Company from that set forth in the Registration
Statement and the Prospectus, except changes which the Registration Statement
and Prospectus indicate might occur after the effective date of the Registration
Statement, and the Company shall not have incurred any material liabilities or
entered into any material agreement not in the ordinary course of business other
than as referred to in the
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Registration Statement and Prospectus; and (iv) except as set forth in the
Prospectus, no action, suit or proceeding at law or in equity shall be pending
or, to the knowledge of the Company, threatened against the Company which would
be required to be set forth in the Registration Statement, and no proceedings
shall be pending or threatened against the Company before or by any commission,
board or administrative agency in the United States or elsewhere, wherein an
unfavorable decision, ruling or finding would materially and adversely affect
the business, property, condition (financial or otherwise), results of
operations or general affairs of the Company, and (v) you shall have received,
at the First Closing Date, a certificate signed by each of the Chairman of the
Board or the President and the principal financial or accounting officer of the
Company, dated as of the First Closing Date, evidencing compliance with the
provisions of this subsection (f).
(g) Upon exercise of the option provided for in Section 2(b)
hereof, the obligations of the Underwriter to purchase and pay for the Option
Units referred to therein will be subject (as of the date hereof and as of the
Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at
the Option Closing Date, and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been instituted or shall be pending,
or, to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any reasonable request on the
part of the Commission for additional information shall have been
complied with to the satisfaction of Bachner, Tally, Polevoy &
Misher LLP, counsel to the Underwriter.
(ii) At the Option Closing Date there shall have been
delivered to you the signed opinions of O'Melveny & Myers LLP,
counsel for the Company, and Christie, Parker & Hale, LLP, patent
counsel for the Company, each dated as of the Option Closing
Date, in form and substance satisfactory to Bachner, Tally,
Polevoy & Misher LLP, counsel to the Underwriter, which opinions
shall be substantially the same in scope and substance as the
opinions furnished to you at the First Closing Date pursuant to
Sections 4(b) and 4(c) hereof, except that such opinions, where
appropriate, shall cover the Option Units.
(iii) At the Option Closing Date there shall have been
delivered to you a certificate of the Chairman of the Board or
the President and the principal financial or accounting officer
of the Company, dated the Option Closing Date, substantially the
same in scope and substance as the certificate furnished to you
at the First Closing Date pursuant to Section 4(f) hereof.
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(iv) At the Option Closing Date there shall have been
delivered to you a letter in form and substance satisfactory to
you from Price Waterhouse LLP, dated the Option Closing Date and
addressed to the Underwriter confirming the information in their
letter referred to in Section 4(e) hereof and stating that
nothing has come to their attention during the period from the
ending date of their review referred to in said letter to a date
not more than five business days prior to the Option Closing Date
which would require any change in said letter if it were required
to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Units
shall be reasonably satisfactory in form and substance to you,
and you and Bachner, Tally, Polevoy & Misher LLP, counsel to the
Underwriter, shall have been furnished with all such documents,
certificates, and opinions as you may reasonably request in
connection with this transaction in order to evidence the
accuracy and completeness of any of the representations,
warranties or statements of the Company or its compliance with
any of the covenants or conditions contained herein.
(h) No action shall have been taken by the Commission or the
NASD the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal or
agent) in the Units, Class A Common Stock or the Warrants and no proceedings for
the taking of such action shall have been instituted or shall be pending, or, to
the knowledge of the Underwriter or the Company, shall be contemplated by the
Commission or the NASD. The Company represents that at the date hereof it has
no knowledge that any such action is in fact contemplated by the Commission or
the NASD. The Company shall have advised the Underwriter of any NASD
affiliation of any of its officers, directors, shareholders or their affiliates.
(i) If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement and all
obligations of the Underwriter under this Agreement may be cancelled at, or at
any time prior to, each Closing Date by you. Any such cancellation shall be
without liability of the Underwriter to the Company.
5. CONDITION TO THE OBLIGATIONS OF THE COMPANY. The obligations of
the Company to sell and deliver the Units is subject to the condition that at
the Closing Dates, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued under the Act or any proceedings
therefor initiated or threatened by the Commission.
If the condition to the obligations of the Company provided for in
this Section has been fulfilled on the First Closing Date but is not fulfilled
after the First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Units on exercise of the
option provided for in Section 2(b) hereof shall be affected.
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6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees), to which the Underwriter or such controlling person may become
subject, under the Act or otherwise, and will reimburse, as incurred, the
Underwriter and such controlling persons for any reasonable legal or other
expenses reasonably incurred in connection with investigating, defending against
or appearing as a third party witness in connection with any losses, claims,
damages or liabilities, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in (A) the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, (B) any blue sky application or other document
executed by the Company specifically for that purpose or based upon written
information furnished by the Company filed in any state or other jurisdiction in
order to qualify any or all of the Units under the securities laws thereof (any
such application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company will
not be liable in any such case to the extent, but only to the extent, that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Underwriter specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such Preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto; and provided,
further, that the Company will not be liable in any such case to the extent that
any such loss, claim, liability, expense or damage is asserted by any person if
such person did not receive a coy of the Prospectus (or the Prospectus as
amended or supplemented) at or prior to the confirmation of the sale of such
shares to such person in any case where such delivery is required by the Act and
the untrue statement or omission of a material fact contained in the Preliminary
Prospectus (or the Prospectus) was corrected in the Prospectus (or the
Prospectus as amended or supplemented). This indemnity will be in addition to
any liability which the Company may otherwise have.
(b) The Underwriter will indemnify and hold harmless the
Company, each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys' fees) to which the
Company or any such director, nominee, officer or controlling person may become
subject under the Act or otherwise,
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insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company by the
Underwriter specifically for use therein or in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify in writing the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is the Underwriter
or a person who controls the Underwriter within the meaning of the Act, the fees
and expenses of such counsel shall be at the expense of the indemnifying party
if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the indemnified party and the
indemnifying party and in the reasonable judgment of the indemnified party, it
is advisable for the indemnified party to be represented by separate counsel (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of the indemnified party, it being understood, however,
that the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for the
indemnified party). No settlement of any action against an indemnified party
shall be made without the
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consent of the indemnifying party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnifying party.
7. CONTRIBUTION.
In order to provide for just and equitable contribution under the Act
in any case in which (i) the Underwriter makes claim for indemnification
pursuant to Section 6 hereof but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 6 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of the Underwriter,
then the Company and the Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) in either
such case (after contribution from others) in such proportions that the
Underwriter is responsible in the aggregate for that portion of such losses,
claims, damages or liabilities represented by the percentage that the
underwriting discount per Unit appearing on the cover page of the Prospectus
bears to the public offering price appearing thereon, and the Company shall be
responsible for the remaining portion, provided, however, that if such
allocation is not permitted by applicable law then the relative fault of the
Company and the Underwriter in connection with the statements or omissions which
resulted in such damages and other relevant equitable considerations shall also
be considered. The relative fault shall be determined by reference to, among
other things, whether in the case of an untrue statement of a material fact or
the omission to state a material fact, such statement or omission relates to
information supplied by the Company or the Underwriter and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Underwriter agree that
it would not be just and equitable if the respective obligations of the Company
and the Underwriter to contribute pursuant to this Section 7 were to be
determined by pro rata or per capita allocation of the aggregate damages or by
any other method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this Section 7. No person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. If the full amount of the contribution
specified in this paragraph is not permitted by law, then the Underwriter and
each person who controls the Underwriter shall be entitled to contribution from
the Company to the full extent permitted by law. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any persons
having liability under Section 11 of the Act other than the Company and the
Underwriter. No contribution shall be requested with regard to the settlement
of any matter from any party who did not consent to the settlement; provided,
however, that such consent shall not be unreasonably withheld in light of all
factors of importance to such party.
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8. COSTS AND EXPENSES.
(a) Whether or not this Agreement becomes effective or the sale
of the Units to the Underwriter is consummated, the Company will pay all costs
and expenses incident to the performance of this Agreement by the Company
including, but not limited to, the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
supplemented, or the Term Sheet, the fee of the NASD in connection with the
filing required by the NASD relating to the offering of the Units contemplated
hereby; all expenses, including reasonable fees and disbursements of counsel to
the Underwriter, in connection with the qualification of the Units under the
state securities or blue sky laws which the Underwriter shall designate; the
cost of printing and furnishing to the Underwriter copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Selling Agreement and the Blue Sky Memorandum, any fees relating to the listing
of the Units, Class A Common Stock and Warrants on the Nasdaq SmallCap Market or
any other securities exchange, the cost of printing the certificates
representing the securities comprising the Units, the fees of the transfer agent
and warrant agent and the cost of publication of at least two "tombstones" of
the offering (at least one of which shall be in national business newspaper and
one of which shall be in a major New York newspaper) and the cost of preparing
at least four hard cover "bound volumes" relating to the offering, in accordance
with the Underwriter's request. The Company shall pay any and all taxes
(including any transfer, franchise, capital stock or other tax imposed by any
jurisdiction) on sales to the Underwriter hereunder. The Company will also pay
all costs and expenses incident to the furnishing of any amended Prospectus or
of any supplement to be attached to the Prospectus as called for in Section 3(a)
of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company shall at
the First Closing Date pay to D.H. Blair Investment Banking Corp. in its
individual rather than representative capacity, a non-accountable expense
allowance of $_______ of which $40,000 has been paid. In the event the
overallotment option is exercised, the Company shall pay to D.H. Blair
Investment Banking Corp. at the Option Closing Date an additional amount
equal to 3% of the gross proceeds received upon exercise of the overallotment
option. In the event the transactions contemplated hereby are not consummated
by reason of any action by the Underwriter (except if such prevention is
based upon a breach by the Company of any covenant, representation or
warranty contained herein or because any other condition to the Underwriter's
obligations hereunder required to be fulfilled by the Company is not
fulfilled), the Company shall not be liable for such non-accountable expense
allowance, except that the Company shall be liable for the actual,
accountable, out-of-pocket expenses of the Underwriter, including legal fees,
up to a maximum of $40,000. In the event the transactions contemplated
hereby are not consummated by reason of any action of the Company or because
of a breach by the Company of any covenant, representation or warranty
herein, the Company shall be liable for the actual, accountable,
out-of-pocket expenses of the Underwriter, including legal fees, up to a
maximum of $450,000 (in addition to the Company Expenses for which the
Company shall in all events remain liable), provided, however, that if the
proposed financing is not completed because
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the Company prevents it based solely on reasons relating to pricing, the
Company's liability for such expense allowance (excluding the Company's
expenses) shall be limited to (i) $300,000 if the number of shares included in
each Unit is more than 250, (ii) $225,000 if the number of shares included in
each Unit is more than 275 and (iii) $150,000 if the number of shares included
in each Unit is more than 310.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Underwriter or from any other person for
services as a finder in connection with the proposed offering, and the Company
agrees to indemnify and hold harmless the Underwriter against any losses,
claims, damages or liabilities, joint or several (which shall include, but not
be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees), to which the Underwriter may become subject insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a
finder's fee in connection with the proposed offering by reason of such person's
or entity's influence or prior contact with the indemnifying party.
9. EFFECTIVE DATE.
The Agreement shall become effective upon its execution except that
you may, at your option, delay its effectiveness until 11:00 A.M., New York time
on the first full business day following the effective date of the Registration
Statement, or at such earlier time after the effective date of the Registration
Statement as you in your discretion shall first commence the public offering by
the Underwriter of any of the Units. The time of the public offering shall mean
the time of release by you of the first newspaper advertisement with respect to
the Units, or the time when the Units are first generally offered by you to
dealers by letter or telegram, whichever shall first occur. This Agreement may
be terminated by you at any time before it becomes effective as provided above,
except that Sections 3(c), 6, 7, 8, 13, 14 and 15 shall remain in effect
notwithstanding such termination.
10. TERMINATION.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 13, 14
and 15 hereof, may be terminated at any time prior to the First Closing Date,
and the option referred to in Section 2(b) hereof, if exercised, may be
cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriter for the resale of the Units agreed to be purchased hereunder by
reason of (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree;
(ii) trading in securities on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq SmallCap Market or the Nasdaq National Market having been
suspended or limited; (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and effect on the date
hereof); (iv) a banking moratorium having been declared by federal or New York
state authorities; (v) an outbreak of international
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hostilities or other national or international calamity or crisis or change in
economic or political conditions having occurred; (vi) a pending or threatened
legal or governmental proceeding or action relating generally to the Company's
business, or a notification having been received by the Company of the threat of
any such proceeding or action, which could materially adversely affect the
Company; (vii) except as contemplated by the Prospectus, the Company is merged
or consolidated into or acquired by another company or group or there exists a
binding legal commitment for the foregoing or any other material change of
ownership or control occurs; (viii) the passage by the Congress of the United
States or by any state legislative body or federal or state agency or other
authority of any act, rule or regulation, measure, or the adoption of any
orders, rules or regulations by any governmental body or any authoritative
accounting institute or board, or any governmental executive, which is
reasonably believed likely by the Underwriter to have a material impact on the
business, financial condition or financial statements of the Company or the
market for the securities offered pursuant to the Prospectus; (ix) any adverse
change in the financial or securities markets beyond normal market fluctuations
having occurred since the date of this Agreement, or (x) any material adverse
change having occurred, since the respective dates of which information is given
in the Registration Statement and Prospectus, in the earnings, business
prospects or general condition of the Company, financial or otherwise, taken as
a whole whether or not arising in the ordinary course of business.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10 or in
Section 9, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
11. UNIT PURCHASE OPTION.
At or before the First Closing Date, the Company will sell to D.H.
Blair Investment Banking Corp. or its designees for a consideration of $1.50,
and upon the terms and conditions set forth in the form of Unit Purchase Option
annexed as an exhibit to the Registration Statement, a Unit Purchase Option to
purchase an aggregate of 1,500 Units. In the event of conflict in the terms of
this Agreement and the Unit Purchase Option, the language of the Unit Purchase
Option shall control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties
and other statements of the Company or Dr. Bell, where appropriate, and the
undertakings set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriter, the Company or any of its officers or directors or any controlling
person and will survive delivery of and payment of the Units and the termination
of this Agreement.
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<PAGE>
13. NOTICE.
Any communications specifically required hereunder to be in writing,
if sent to the Underwriter, will be mailed, delivered and confirmed to them at
D.H. Blair Investment Banking Corp., 44 Wall Street, New York, New York 10005,
with a copy sent to Bachner, Tally, Polevoy & Misher LLP, Attention: Sheldon E.
Misher, Esq., 380 Madison Avenue, New York, New York 10017, or if sent to the
Company, will be mailed, delivered and confirmed to it at Amerigon Incorporated,
404 East Huntington Drive, Monrovia, CA 91016, Attention: Lon E. Bell, Ph.D.,
with a copy sent to O'Melveny & Myers LLP, 400 South Hope Street, Los Angeles,
CA 90071, Attention: D. Stephen Antion, Esq.
14. PARTIES IN INTEREST.
The Agreement herein set forth is made solely for the benefit of the
Underwriter, the Company and, to the extent expressed, any person controlling
the Company or the Underwriter, and directors of the Company, nominees for
directors (if any) named in the Prospectus, its officers who have signed the
Registration Statement, and their respective executors, administrators,
successors, assigns and no other person shall acquire or have any right under or
by virtue of this Agreement. The term "successors and assigns" shall not
include any purchaser, as such purchaser, from any Underwriter of the Units.
15. APPLICABLE LAW.
This Agreement will be governed by, and construed in accordance with,
the laws of the State of New York applicable to agreements made and to be
entirely performed within New York.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
AMERIGON INCORPORATED
By: ____________________________________
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
D.H. BLAIR INVESTMENT BANKING CORP.
By: ____________________________________
Authorized Officer
I hereby agree to be bound by the provisions of Sections 3(n) and 12
hereof.
______________________________
Lon E. Bell, Ph.D.
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WARRANT AGREEMENT
AGREEMENT, dated as of this ____th day of ___________, 1997, by and
among AMERIGON INCORPORATED, a California corporation ("Company"), U.S. STOCK
TRANSFER CORPORATION, as Warrant Agent (the "Warrant Agent"), and D.H. BLAIR
INVESTMENT BANKING CORP., a New York corporation (the "Underwriter").
W I T N E S S E T H
WHEREAS, in connection with (i) a public offering of up to 19,550
units ("Units"), each unit consisting of 280 shares of Class A Common Stock, no
par value per share, of the Company ("Shares" or "Class A Common Stock") and 280
redeemable Class A Warrants pursuant to an underwriting agreement (the
"Underwriting Agreement") dated _______________, 1997 between the Company and
Blair, (ii) the issuance to the Underwriter or its designees of Unit Purchase
Options to purchase an aggregate of 1,700 additional Units, to be dated as of
__________, 1997 (the "Unit Purchase Options"), and (iii) the conversion of
certain convertible subordinated debentures issued in a private placement by the
Company in October 1996 into 1,620,000 Class A Warrants, the Company may issue
up to 7,570,000 Class A Warrants (the Class A Warrants may be referred to as
"Warrants"); and
WHEREAS, each Class A Warrant initially entitles the Registered Holder
thereof to purchase one (1) share of Class A Common Stock; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the Registered Holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall
have the following meanings, unless the context shall otherwise require:
(a) "Aggregate Per Share Price" shall mean the Purchase Price per
share multiplied by the number of shares of Class A Common Stock purchasable
upon the exercise of a Warrant.
(b) "Calculation Date" shall have the meaning set forth in Section 8
hereof.
<PAGE>
(c) "Class A Aggregate Per Share Price" shall mean $_______ [Class A
Warrant Exercise Price].
(d) "Class A Warrants" shall mean the warrants to purchase shares of
Class A Common Stock of the Company issued pursuant to this Agreement.
(e) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage, which at the date hereof consists of 40,000,000 shares of Class A
Common Stock, no par value, and 3,000,000 shares of Class B Common Stock, no par
value.
(f) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business shall be
administered, which office is located at the date hereof at 1745 Gardena Avenue,
Glendale, California 91204.
(g) "Exercise Date" shall mean, as to any Warrant, the date on which
the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and (b)
payment in cash, or by official bank or certified check made payable to the
Company, or otherwise as provided in Section 4(b), of an amount in lawful money
of the United States of America equal to the applicable Purchase Price.
(h) "Market Price" shall mean (i) the average closing bid price of
the Class A Common Stock, for thirty (30) consecutive business days ending on
the Calculation Date, as reported by Nasdaq, if the Class A Common Stock is
traded on the Nasdaq SmallCap Market, or (ii) the average last reported sale
price of the Class A Common Stock, for thirty (30) consecutive business days
ending on the Calculation Date, as reported by the primary exchange on which
the Class A Common Stock is traded, if the Class A Common Stock is traded on
a national securities exchange, or by Nasdaq, if the Class A Common Stock is
traded on the Nasdaq National Market.
(i) "Purchase Price" shall mean the purchase price to be paid upon
exercise of each Class A Warrant in accordance with the terms hereof, which
price shall be $_____, subject to adjustment from time to time pursuant to the
provisions of Section 9 hereof, and subject to the Company's right to reduce the
Purchase Price upon notice to all Registered Holders of Warrants.
(j) "Redemption Date" shall have the meaning set forth in Section 8
hereof.
(k) "Redemption Price" shall mean the price at which the Company may,
at its option in accordance with the terms hereof, redeem the Class A Warrants,
which price shall be $0.05 per Warrant.
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<PAGE>
(l) "Registered Holder" shall mean as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Warrant
Agent pursuant to Section 6.
(m) "Transfer Agent" shall mean U.S. Stock Transfer Corporation, as
the Company's transfer agent, or its authorized successor, as such.
(n) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time)
on _________, 2002 or, with respect to Warrants which are outstanding as of the
applicable Redemption Date (as defined in Section 8) and specifically excluding
Warrants issuable upon exercise of Unit Purchase Options if the Unit Purchase
Options have not been exercised, the Redemption Date, whichever is earlier;
provided that if such date shall in the State of New York be a holiday or a day
on which banks are authorized or required to close, then 5:00 P.M. (New York
time) on the next following day which in the State of New York is not a holiday
or a day on which banks are authorized or required to close. Upon notice to all
Registered Holders, the Company shall have the right to extend the Warrant
Expiration Date.
SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.
(a) A Class A Warrant initially shall entitle the Registered Holder
of the certificate representing such Warrant (the "Warrant Certificate") to
purchase one share of Class A Common Stock upon the exercise thereof, in
accordance with the terms hereof, subject to modification and adjustment as
provided in Section 9.
(b) The Class A Warrants included in the offering of Units will be
detachable and separately transferable immediately from the shares of Class A
Common Stock constituting part of such Units.
(c) Upon execution of this Agreement, Warrant Certificates
representing the number of Class A Warrants sold pursuant to the Underwriting
Agreement shall be executed by the Company and delivered to the Warrant Agent.
Upon written order of the Company signed by its President or Chairman or a Vice
President and by its Secretary or an Assistant Secretary, the Warrant
Certificates shall be countersigned, issued and delivered by the Warrant Agent
as part of the Units.
(d) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 7,570,000 shares
of Class A Common Stock, subject to adjustment as described herein, upon the
exercise of Warrants in accordance with this Agreement.
(e) From time to time, up to the Warrant Expiration Date, the Warrant
Agent shall countersign and deliver Warrant Certificates in required whole
number denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this
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<PAGE>
Agreement; provided that no Warrant Certificates shall be issued except (i)
those initially issued hereunder, (ii) those issued on or after the date hereof,
upon the exercise of fewer than all Warrants represented by any Warrant
Certificate, to evidence any unexercised Warrants held by the exercising
Registered Holder, (iii) those issued upon any transfer or exchange pursuant to
Section 6; (iv) those issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7; (v) those issued pursuant
to the Unit Purchase Options; and (vi) at the option of the Company, in such
form as may be approved by the Board of Directors, to reflect any adjustment
or change in the Purchase Price, the number of shares of Class A Common Stock
purchasable upon exercise of the Warrants or the Target Price therefor made
pursuant to Section 8 hereof.
(f) Pursuant to the terms of the Unit Purchase Options, the
Underwriter may purchase up to 1,700 Units, which include up to 476,000 Class A
Warrants. Notwithstanding anything to the contrary contained herein, the
Warrants underlying the Unit Purchase Options shall not be subject to redemption
by the Company except under the terms and conditions set forth in the Unit
Purchase Options.
SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Class A Warrants may be listed, or
to conform to usage or to the requirements of Section 2(d). The Warrant
Certificates shall be dated the date of issuance thereof (whether upon initial
issuance, transfer, exchange or in lieu of mutilated, lost, stolen, or destroyed
Warrant Certificates) and issued in registered form. Warrant Certificates shall
be numbered serially with the letters AW on Class A Warrants of all
denominations.
(b) Warrant Certificates shall be executed on behalf of the Company
by its Chairman of the Board, President or any Vice President and by its
Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be an officer of the Company or to hold the
particular office referenced in the Warrant Certificate before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issue and delivery thereof, such Warrant Certificates may nevertheless
be countersigned by the Warrant Agent, issued and delivered with the same force
and effect as though the person who signed such Warrant Certificates had not
ceased to be an officer of the Company or to hold such office. After
countersignature by the Warrant Agent,
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<PAGE>
Warrant Certificates shall be delivered by the Warrant Agent to the Registered
Holder without further action by the Company, except as otherwise provided by
Section 4(a) hereof.
SECTION 4. EXERCISE.
(a) Each Warrant may be exercised by the Registered Holder thereof at
any time on or after the date hereof, but not after the Warrant Expiration Date,
upon the terms and subject to the conditions set forth herein and in the
applicable Warrant Certificate. A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the Exercise Date and
the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder of those securities upon the
exercise of the Warrant as of the close of business on the Exercise Date. As
soon as practicable on or after the Exercise Date, the Warrant Agent shall
deposit the proceeds received from the exercise of a Warrant and shall notify
the Company in writing of the exercise of the Warrants. Promptly following, and
in any event within five business days after the date of such notice from the
Warrant Agent, the Warrant Agent, on behalf of the Company, shall cause to be
issued and delivered by the Transfer Agent, to the person or persons entitled to
receive the same, a certificate or certificates for the securities deliverable
upon such exercise (plus a Warrant Certificate for any remaining unexercised
Warrants of the Registered Holder), unless prior to the date of issuance of such
certificates the Company shall instruct the Warrant Agent to refrain from
causing such issuance of certificates pending clearance of checks received in
payment of the Purchase Price pursuant to such Warrants. Notwithstanding the
foregoing, in the case of payment made in the form of a check drawn on an
account of the Underwriter or such other investment banks and brokerage houses
as the Company shall approve in writing to the Warrant Agent, certificates shall
immediately be issued without prior notice to the Company or any delay. Upon
the exercise of any Warrant and clearance of the funds received, the Warrant
Agent shall promptly remit the payment received for the Warrant (the "Warrant
Proceeds") to the Company or as the Company may direct in writing, subject to
the provisions of Sections 4(b) and 4(c) hereof.
(b) If, at the Exercise Date in respect of the exercise of any
Warrant after ____________, 1998, (i) the market price of the Company's Class
A Common Stock is greater than the then Purchase Price of the Warrant, (ii)
the exercise of the Warrant was solicited by a member of the National
Association of Securities Dealers, Inc. ("NASD") as designated in writing on
the Warrant Certificate Subscription Form, (iii) the Warrant was not held in
a discretionary account, (iv) disclosure of compensation arrangements was
made both at the time of the original offering and at the time of exercise;
and (v) the solicitation of the exercise of the Warrant was not in violation
of Rule 10b-6 (as such rule or any successor rule may be in effect as of such
time of exercise) promulgated under the Securities Exchange Act of 1934, then
the Warrant Agent, simultaneously with the distribution of the Warrant
Proceeds to the Company shall, on behalf of the Company, pay from the Warrant
Proceeds, a fee of 5% (the "Exercise Fee") of the Purchase Price to the
Underwriter (of which a portion may be reallowed by the Underwriter to the
dealer who solicited the exercise, which may also be the Underwriter or D.H.
Blair & Co., Inc.). In the event the Exercise Fee is not received within
five days of the date on which the Company receives Warrant Proceeds, then
the Exercise Fee shall begin accruing
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<PAGE>
interest at an annual rate of prime plus four percent (4%), payable by the
Company to the Underwriter at the time the Underwriter receives the Exercise
Fee. Within five days after exercise the Warrant Agent shall send to the
Underwriter a copy of the reverse side of each Warrant exercised. The
Underwriter shall reimburse the Warrant Agent, upon request, for its reasonable
expenses relating to compliance with this section 4(b). The Company shall pay
all fees and expenses including all blue sky fees and expenses and all
out-of-pocket expenses of the Underwriter, including legal fees, in connection
with the solicitation, redemption or exchange of the Warrants. In addition, the
Underwriter and the Company may at any time during business hours, examine the
records of the Warrant Agent, including its ledger of original Warrant
Certificates returned to the Warrant Agent upon exercise of Warrants. The
provisions of this paragraph may not be modified, amended or deleted without the
prior written consent of the Underwriter.
(c) In order to enforce the provisions of Section 4(b) above, in the
event there is any dispute or question as to the amount or payment of the
Exercise Fee, the Warrant Agent is hereby expressly authorized to withhold
payment to the Company of the Warrant Proceeds unless and until the Company
establishes an escrow account for the purpose of depositing the entire amount of
the Exercise Fee, which amount will be deducted from the net Warrant Proceeds to
be paid to the Company. The funds placed in the escrow account may not be
released to the Company without a written agreement from the Underwriter that
the required Exercise Fee has been received by the Underwriter or a final,
non-appealable determination by a court of competent jurisdiction that the
Underwriter is not entitled to such funds.
SECTION 5. RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES; ETC.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Class A Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Class A Common Stock
as shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Class A Common Stock which shall be
issuable upon exercise of the Warrants shall, at the time of delivery, be duly
and validly issued, fully paid, nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, (other than those which the Company
shall promptly pay or discharge or liens imposed solely as a result of actions
or agreements of the warrantholder) and that upon issuance such shares shall be
listed on each national securities exchange on which the other shares of
outstanding Class A Common Stock of the Company are then listed or shall be
eligible for inclusion in the Nasdaq National Market or the Nasdaq SmallCap
Market if the other shares of outstanding Class A Common Stock of the Company
are so included.
(b) The Company covenants that if any securities to be reserved for
the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably possible, endeavor
to secure such registration or approval. The Company will use
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reasonable efforts to obtain appropriate approvals or registrations under state
"blue sky" securities laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent of service of process in any jurisdiction. With respect to any
such securities, however, Warrants may not be exercised by, or shares of Class A
Common Stock issued to, any Registered Holder in any state in which such
exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Class A Common Stock, as the
case may be, are to be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate representing any Warrant being exercised, then
no such delivery shall be made unless the person requesting the same has paid to
the Warrant Agent the amount of transfer taxes or charges incident thereto, if
any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition
the Company's Transfer Agent from time to time for certificates representing
shares of Class A Common Stock issuable upon exercise of the Warrants, and the
Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company for shares of
Class A Common Stock issuable upon exercise of the Warrants.
SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of the terms and provisions hereof, the Company shall execute
and the Warrant Agent shall countersign, issue and deliver in exchange therefor
the Warrant Certificate(s) which the Registered Holder making the exchange shall
be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in accordance with its regular
practice. Upon due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute and the Warrant Agent
shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
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<PAGE>
(d) A service charge may be imposed by the Warrant Agent for any
exchange or registration of transfer of Warrant Certificates. In addition, the
Company may require payment by such holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange
in case of mutilated Warrant Certificates shall be promptly cancelled by the
Warrant Agent and thereafter retained by the Warrant Agent until termination of
this Agreement or resignation as Warrant Agent, or, with the prior written
consent of the Underwriter (not to be unreasonably withheld), disposed of or
destroyed, at the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary.
SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company and
the Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall ( in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a bona
fide purchaser) countersign and deliver to the Registered Holder in lieu thereof
a new Warrant Certificate of like tenor representing an equal aggregate number
of Class A Warrants. Applicants for a substitute Warrant Certificate shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Warrant Agent may prescribe.
SECTION 8. REDEMPTION.
(a) Subject to the provisions of paragraph 2(f) hereof, on not less
than thirty (30) days notice (in the form provided in subsection 8(c) below)
given at any time after __________, 1998 (the "Redemption Notice"), to
Registered Holders of the Warrants being redeemed at any time after
_________, 1998, the Warrants may be redeemed, at the option of the Company,
at a redemption price of $0.05 per Warrant, provided the Market Price shall
exceed $______ (the "Target Price"), subject to adjustment as set forth in
Section 8(f), below. All Warrants of a class must be redeemed if any of that
class are redeemed, provided that the Warrants underlying the Unit Purchase
Option may only be redeemed in compliance with and subject to the terms and
conditions of the Unit Purchase Option. For purposes of this Section 8, the
Calculation Date shall mean a date within 15 days of the mailing of the
Redemption Notice. The date fixed for redemption of the Warrants is referred
to herein as the "Redemption Date".
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(b) If the conditions set forth in Section 8(a) are met, and the
Company desires to exercise its right to redeem the Warrants, it shall request
the Underwriter to mail a Redemption Notice to each of the Registered Holders of
the Warrants to be redeemed, first class, postage prepaid, not later than the
thirtieth day before the date fixed for redemption, at their last address as
shall appear on the records maintained pursuant to Section 6(b). Any notice
mailed in the manner provided herein shall be conclusively presumed to have been
duly given whether or not the Registered Holder receives such notice.
(c) The Redemption Notice shall specify (i) the redemption price,
(ii) the Redemption Date, (iii) the place where the Warrant Certificates shall
be delivered and the redemption price paid, (iv) that the Underwriter will
assist each Registered Holder of a Warrant in connection with the exercise
thereof and (v) that the right to exercise the Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the Redemption
Date. No failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity of the proceedings for such redemption except
as to a Registered Holder (a) to whom notice was not mailed or (b) whose notice
was defective. An affidavit of the Warrant Agent or of the Secretary or an
Assistant Secretary of the Underwriter or the Company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 P.M.
(New York time) on the business day immediately preceding the Redemption Date.
On and after the Redemption Date, Registered Holders of the Warrants shall have
no further rights except to receive, upon surrender of the Warrant, the
Redemption Price.
(e) From and after the Redemption Date, the Company shall, at the
place specified in the Redemption Notice, upon presentation and surrender to the
Company by or on behalf of the Registered Holder thereof of one or more Warrant
Certificates evidencing Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Registered Holder a sum equal to
the Redemption Price of each such Warrant, payable in cash or certified or bank
check. From and after the Redemption Date and upon the deposit or setting aside
by the Company of a sum sufficient to redeem all the Warrants called for
redemption, such Warrants shall expire and become void and all rights hereunder
and under the Warrant Certificates, except the right to receive payment of the
Redemption Price, shall cease.
(f) If the shares of the Company's Class A Common Stock are
subdivided or combined into a greater or smaller number of shares of Class A
Common Stock, the Target Price shall be proportionally adjusted by the ratio
which the total number of shares of Class A Common Stock outstanding immediately
prior to such event bears to the total number of shares of Class A Common Stock
to be outstanding immediately after such event.
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SECTION 9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF
COMMON STOCK OR WARRANTS.
(a) Subject to the exceptions referred to in Section 9(g) below, in
the event the Company shall, at any time or from time to time after the date
hereof, sell any shares of Common Stock for a consideration per share less than
the Market Price (as defined in Section 1, except that for all purposes of this
Section 9, the time periods set forth in Section 1(g)(i) and (ii) shall be ten
(10) consecutive business days) on the date of the sale or issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such sale, issuance, subdivision or combination being herein
called a "Change of Shares"), then, and thereafter upon each further Change of
Shares, the Purchase Price in effect immediately prior to such Change of Shares
shall be changed to a price (including any applicable fraction of a cent)
determined by multiplying the Purchase Price in effect immediately prior thereto
by a fraction, the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding immediately prior to the issuance of such
additional shares and (ii) the number of shares of Common Stock which the
aggregate consideration received (determined as provided in subsection 9(f)(F)
below) for the issuance of such additional shares would purchase at the Market
Price and the denominator of which shall be the sum of the number of shares of
Common Stock outstanding immediately after the issuance of such additional
shares. Such adjustment shall be made successively whenever such an issuance is
made. For purposes of this Section 9, the Transaction Date shall mean the date
of the sale, issuance, modification or other transaction referred to in this
Section 9.
Upon each adjustment of the Purchase Price pursuant to this
Section 9, the total number of shares of Class A Common Stock purchasable upon
the exercise of each Class A Warrant shall (subject to the provisions contained
in Section 9(b) hereof) be such number of shares (calculated to the nearest
one-hundredth; PROVIDED, HOWEVER, that in no event shall the Class A Aggregate
Per Share Price increase as a result of such rounding calculation) purchasable
at the Purchase Price in effect immediately prior to such adjustment multiplied
by a fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Class A Warrants outstanding, in lieu of the
adjustment in the number of shares of Class A Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Class A Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Class A Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment. Upon each
adjustment of the number of Warrants pursuant to this Section 9, the
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Company shall, as promptly as practicable, cause to be distributed to each
Registered Holder of Warrant Certificates on the date of such adjustment Warrant
Certificates evidencing, subject to Section 10 hereof, the number of additional
Warrants to which such Holder shall be entitled as a result of such adjustment
or, at the option of the Company, cause to be distributed to such Holder in
substitution and replacement for the Warrant Certificates held by him prior to
the date of adjustment (and upon surrender thereof, if required by the Company)
new Warrant Certificates evidencing the number of Warrants to which such Holder
shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback, mortgage or other
financing transaction), the Company shall cause effective provision to be made
so that each holder of a Warrant then outstanding shall have the right
thereafter, by exercising such Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Class A Common
Stock that might have been purchased upon exercise of such Warrant immediately
prior to such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance. Any such provision shall include
provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 9. The Company
shall not effect any such consolidation, merger or sale of all or substantially
all of the assets or stock of the Company unless prior to or simultaneously with
the consummation thereof the successor (if other than the Company) resulting
from such consolidation or merger or the corporation purchasing all or
substantially of the assets or stock or other appropriate corporation or entity
shall assume, by written instrument executed and delivered to the Warrant Agent,
the obligation to deliver to the holder of each Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holders may be entitled to purchase and the other obligations of the Company
under this Agreement. The foregoing provisions shall similarly apply to
successive reclassifications, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price
or the number of shares of Class A Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(e) hereof, continue to express the Purchase Price per
share, the number of shares purchasable thereunder and the Redemption Price
therefor as the Purchase Price per share, and the number of shares purchasable
and the Redemption Price therefor were expressed in the Warrant Certificates
when the same were originally issued.
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(e) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Class A Common Stock
purchasable upon exercise of each Warrant after such adjustment and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the Registered Holder of each Warrant shall then be entitled,
and the adjustment in Redemption Price resulting therefrom, and (iii) a
statement showing in detail the method of calculation and the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any securities
issued or sold or deemed to have been issued, (b) the number of shares of Common
Stock outstanding or deemed to be outstanding, and (c) the Purchase Price in
effect immediately prior to such issue or sale and as adjusted and readjusted
(if required by Section 9) on account thereof. The Company will promptly file
such certificate with the Warrant Agent and furnish a copy thereof to be sent by
ordinary first class mail to the Underwriter and to each Registered Holder of
Warrants at his last address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder whose
notice was defective. The affidavit of an officer of the Warrant Agent or the
Secretary of the Company that such notice has been mailed shall, in the absence
of fraud or negligence, be prima facie evidence of the facts stated therein.
The Company will, upon the written request at any time of the Underwriter,
furnish to the Underwriter a report by Price Waterhouse L.L.P., or other
independent public accountants of recognized national standing (which may be the
regular auditors of the Company) selected by the Company to verify such
computation and setting forth such adjustment or readjustment and showing in
detail the method of calculation and the facts upon which such adjustment or
readjustment is based. The Company will also keep copies of all such
certificates and reports at its principal office.
(f) For purposes of Section 9(a) and 9(b) hereof, the following
provisions (A) to (G) shall also be applicable:
(A) The number of shares of Common Stock outstanding at any
given time shall include shares of Common Stock owned or held by or
for the account of the Company and the sale or issuance of such
treasury shares or the distribution of any such treasury shares shall
not be considered a Change of Shares for purposes of said sections.
(B) No adjustment of the Purchase Price shall be made unless
such adjustment would require an increase or decrease of at least $.10
in the Purchase Price; provided that any adjustments which by reason
of this clause (B) are not required to be made shall be carried
forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment(s) so
carried forward, shall require an increase or decrease of at least
$.10 in the Purchase Price then in effect hereunder.
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(C) In case of (1) the sale by the Company for cash (or as a
component of a unit being sold for cash) of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common
Stock or any securities convertible into or exchangeable for Common
Stock without the payment of any further consideration other than
cash, if any (such securities convertible, exercisable or exchangeable
into Common Stock being herein called "Convertible Securities"), or
(2) the issuance by the Company, without the receipt by the Company of
any consideration therefor, of any rights or warrants to subscribe for
or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights,
warrants or options shall consist of cash, whether or not such rights,
warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum
aggregate consideration payable to the Company upon the exercise of
such rights, warrants or options, plus the consideration, if any,
received by the Company for the issuance or sale of such rights,
warrants or options, plus, in the case of such Convertible Securities,
the minimum aggregate amount of additional consideration, other than
such Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities issuable
upon the exercise of such rights, warrants or options) is less than
the Market Price on the Transaction Date, then the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (as of the date of the issuance or sale of such
rights, warrants or options) shall be deemed to be outstanding shares
of Common Stock for purposes of Sections 9(a) and 9(b) hereof and
shall be deemed to have been sold for cash in an amount equal to such
price per share.
(D) In case of the sale by the Company for cash of any
Convertible Securities, whether or not the right of conversion or
exchange thereunder is immediately exercisable, and the price per
share for which Common Stock is issuable upon the conversion or
exchange of such Convertible Securities (determined by dividing (x)
the total amount of consideration received by the Company for the sale
of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by (y)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities) is less than
the Market Price on the Transaction Date, then the total maximum
number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities (as of the date of the
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sale of such Convertible Securities) shall be deemed to be outstanding
shares of Common Stock for purposes of Sections 9(a) and 9(b) hereof
and shall be deemed to have been sold for cash in an amount equal to
such price per share.
(E) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in (C) or
(D) above or any other securities of the Company convertible,
exchangeable or exercisable for shares of Common Stock, for any reason
other than an event that would require adjustment to prevent dilution,
so that the consideration per share received by the Company after such
modification is less than the Market Price on the Transaction Date,
the Purchase Price to be in effect after such modification shall be
determined by multiplying the Purchase Price in effect immediately
prior to such event by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on the date prior to the
modification plus the number of shares of Common Stock which the
aggregate consideration receivable by the Company for the securities
affected by the modification would purchase at the Market Price and of
which the denominator shall be the number of shares of Common Stock
outstanding on such date plus the number of shares of Common Stock to
be issued upon conversion, exchange or exercise of the modified
securities at the modified rate. Such adjustment shall become
effective as of the date upon which such modification shall take
effect. On the expiration of any such right, warrant or option or the
termination of any such right to convert or exchange any such
Convertible Securities referred to in Paragraph (C) or (D) above, the
Purchase Price then in effect hereunder shall forthwith be readjusted
to such Purchase Price as would have obtained (a) had the adjustments
made upon the issuance or sale of such rights, warrants, options or
Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the
exercise of such rights, warrants or options or upon the conversion or
exchange of such Convertible Securities and (b) had adjustments been
made on the basis of the Purchase Price as adjusted under clause (a)
for all transactions (which would have affected such adjusted Purchase
Price) made after the issuance or sale of such rights, warrants,
options or Convertible Securities.
(F) In case of the sale for cash of any shares of Common Stock,
any Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or
Convertible Securities, the consideration received by the Company
therefore shall be deemed to be the gross sales price therefor without
deducting therefrom any expense paid or incurred by the Company or any
underwriting discounts or commissions or concessions paid or allowed
by the Company in connection therewith.
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(G) In case any event shall occur as to which the provisions of
Section 9 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by
the Warrants in accordance with the essential intent and principles of
Section 9, then, in each such case, the Board of Directors of the
Company shall in good faith by resolution provide for the adjustment,
if any, on a basis consistent with the essential intent and principles
established in Section 9, necessary to preserve, without dilution, the
purchase rights represented by the Warrants. The Company will promptly
make the adjustments described therein.
(g) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Class A Common Stock purchasable upon the exercise of each
Warrant will be made, however,
(i) upon the exercise of any of the options presently
outstanding under the Company's 1993 Stock Option Plan (the "Plan")
for officers, directors and certain other key personnel of the
Company; or
(ii) upon the issuance or exercise of any securities which may
hereafter be granted or exercised under the Plan or under any other
employee benefit plan of the Company approved by the Company's
stockholders; or
(iii) upon the sale or exercise of the Warrants, including
without limitation the sale or exercise of any of the Warrants
comprising the Unit Purchase Options or upon the sale or exercise of
the Unit Purchase Options; or
(iv) upon the sale of any shares of Common Stock and/or
Convertible Securities in a firm commitment underwritten public
offering, including, without limitation, shares sold upon the exercise
of any overallotment option granted to the underwriters in connection
with such offering; or
(v) upon the sale by the Company of any shares of Common Stock
and/or Convertible Securities in a private placement for which the
Underwriter is the Placement Agent; or
(vi) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, whether or not such rights, warrants or
options were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold;
(vii) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether or not
any adjustment in the Purchase Price was made or required to be made
upon the issuance or sale of such
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Convertible Securities and whether or not such Convertible Securities
were outstanding on the date of the original sale of the Warrants or
were thereafter issued or sold; or
(viii) upon the issuance of shares of Class B Common Stock of
the Company pursuant to the terms of the Escrow Agreement, [dated June
10, 1993], between the Company, U.S. Stock Transfer Corporation and
certain shareholders of the Company.
(h) As used in this Section 9, the term "Common Stock" shall mean and
include the Company's Common Stock authorized on the date of the original issue
of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company. The shares issuable upon exercise of
the Warrants shall include only shares of such class designated in the Company's
Articles of Incorporation as Class A Common Stock on the date of the original
issue of the Units or (i) in the case of any reclassification, change,
consolidation, merger, sale or conveyance of the character referred to in
Section 9(c) hereof, the stock, securities or property provided for in such
section, or (ii) in the case of any reclassification or change in the
outstanding shares of Class A Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 9, or as to the amount
of any such adjustment, if required, shall be binding upon the holders of the
Warrants and the Company if made in good faith by the Board of Directors of the
Company.
(j) If and whenever the Company shall grant to the holders of Class A
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding, the
rights, warrants or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Class A Common
Stock then issuable upon exercise of his Warrants. Such grant by the Company to
the holders of the Warrants shall be in lieu of any adjustment which otherwise
might be called for pursuant to this Section 9.
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SECTION 10. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
(a) If the number of shares of Class A Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the
Company nevertheless shall not be required to issue fractions of shares, upon
exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. With respect to any fraction of a share called for
upon the exercise of any Warrant, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the current market value of such
fractional share, determined as follows:
(1) If the Class A Common Stock is listed on a national
securities exchange or admitted to unlisted trading privileges on such
exchange or is traded on the Nasdaq National Market, the current
market value shall be the last reported sale price of the Class A
Common Stock on such exchange or market on the last business day prior
to the date of exercise of this Warrant or, if no such sale is made on
such day or no closing sale price is quoted, the average of the
closing bid and asked prices for such day on such exchange or market;
or
(2) If the Class A Common Stock is not listed or admitted to
unlisted trading privileges on a national securities exchange or is
not traded on the Nasdaq National Market, the current market value
shall be the mean of the last reported bid and asked prices reported
by the Nasdaq SmallCap Market or, if not traded thereon, by the
National Quotation Bureau, Inc. on the last business day prior to the
date of the exercise of this Warrant; or
(3) If the Class A Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the current market value shall be an amount determined in
such reasonable manner as may be prescribed by the Board of Directors
of the Company.
SECTION 11. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Class A Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Warrants, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue or reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised such Warrants and
been issued shares of Class A Common Stock in accordance with the provisions
hereof.
SECTION 12. RIGHTS OF ACTION. All rights of action with respect to
this Agreement are vested in the respective Registered Holders of the Warrants,
and any Registered
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Holder of a Warrant, without consent of the Warrant Agent or of the holder of
any other Warrant, may, in his own behalf and for his own benefit, enforce
against the Company his right to exercise his Warrants for the purchase of
shares of Class A Common Stock in the manner provided in the Warrant Certificate
and this Agreement.
SECTION 13. AGREEMENT OF WARRANT HOLDERS. Every holder of a
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 7 hereof.
SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be delivered to the
Warrant Agent and cancelled by it and retired. The Warrant Agent shall also
cancel the Warrant Certificate or Warrant Certificates following exercise of any
or all of the Warrants represented thereby or delivered to it for transfer or
exchange.
SECTION 15. CONCERNING THE WARRANT AGENT. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay the Company, as provided in Section
4, all moneys received by the Warrant Agent upon the exercise of such Warrants.
The Warrant Agent shall, upon request of the Company from time to time, deliver
to the Company such complete reports of registered ownership of the Warrants and
such complete records of transactions with respect to the Warrants and the
shares of Common Stock as the Company may request. The Warrant Agent shall also
make available to the Company and the Underwriter for inspection by their
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agents or employees, from time to time as either of them may request, such
original books of accounts and record (including original Warrant Certificates
surrendered to the Warrant Agent upon exercise of Warrants) as may be maintained
by the Warrant Agent in connection with the issuance and exercise of Warrants
hereunder, such inspections to occur at the Warrant Agent's Corporate Office,
during normal business hours.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same. It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it harmless
against any and all losses, expenses and liabilities, including judgments, costs
and reasonable counsel fees, for anything done or omitted by the Warrant Agent
in the execution of its duties and powers hereunder except losses, expenses and
liabilities arising as a result of the Warrant Agent's negligence or wilful
misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or wilful misconduct), after giving 30
days' prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability
of the Warrant
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Agent to act as such hereunder, the Company shall appoint a new warrant agent in
writing. If the Company shall fail to make such appointment within a period of
15 days after it has been notified in writing of such resignation by the
resigning Warrant Agent, then the Registered Holder of any Warrant Certificate
may apply to any court of competent jurisdiction for the appointment of a new
warrant agent. Any new warrant agent, whether appointed by the Company or by
such a court, shall be a bank or trust company having a capital and surplus, as
shown by its last published report to its stockholders, of not less than
$10,000,000 or a stock transfer company that is a registered transfer agent
under the Securities Exchange Act of 1934. After acceptance in writing of such
appointment by the new warrant agent is received by the Company, such new
warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any consolidation
to which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 16. MODIFICATION OF AGREEMENT. Subject to the provisions
of Section 4(b), the parties hereto and the Company may by supplemental
agreement make any changes or corrections in this Agreement (i) that they shall
deem appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or manifest mistake or error herein contained; (ii) to
reflect an increase in the number of Class A Warrants which are to be governed
by this Agreement resulting from (a) a subsequent public offering of Company
securities which includes Class A Warrants or (b) a subsequent private placement
of Company securities which includes Class A Warrants, in either case having the
same terms and conditions as the Class A Warrants originally covered by or
subsequently added to this Agreement under this Section 16, PROVIDED, HOWEVER,
that in the case of a private placement, the amendment to this Agreement will be
effective only at such time as the resale of such Warrants, as well as the
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<PAGE>
securities underlying such Warrants is covered by an effective registration
statement under the Act; or (iii) that they may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Warrant
Certificates; PROVIDED, HOWEVER, that this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing not less
than 50% of the Warrants then outstanding; and PROVIDED, FURTHER, that no change
in the number or nature of the securities purchasable upon the exercise of any
Warrant, or the Purchase Price therefor, or the acceleration of the Warrant
Expiration Date, shall be made without the consent in writing of the Registered
Holder of the Warrant Certificate representing such Warrant, other than such
changes as are specifically prescribed by this Agreement as originally executed
or are made in compliance with applicable law.
SECTION 17. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at
the address of such holder as shown on the registry books maintained by the
Warrant Agent; if to the Company, at Amerigon Incorporated, 404 East Huntington
Drive, Monrovia, California 91016, attention: President, or at such other
address as may have been furnished to the Warrant Agent in writing by the
Company; if to the Warrant Agent, at its Corporate Office; if to the
Underwriter, at D.H. Blair Investment Banking Corp., 44 Wall Street, New York,
New York 10005.
SECTION 18. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Company and, the Warrant Agent and their
respective successors and assigns, and the holders from time to time of Warrant
Certificates . Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 20. TERMINATION. This Agreement shall terminate at the
close of business on the earlier of the Warrant Expiration Date or the date upon
which all Warrants (including the warrants issuable upon exercise of the Unit
Purchase Options) have been exercised, except that the Warrant Agent shall
account to the Company for cash held by it and the provisions of Section 15
hereof shall survive such termination.
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<PAGE>
SECTION 21. COUNTERPARTS. This Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
AMERIGON INCORPORATED
By: ______________________________
U.S. STOCK TRANSFER CORPORATION
By: ______________________________
Authorized Officer
D.H. BLAIR INVESTMENT BANKING CORP.
By: ______________________________
Martin A. Bell
Vice Chairman and
General Counsel
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<PAGE>
EXHIBIT A
[FORM OF FACE OF CLASS A WARRANT CERTIFICATE]
No. AW _____________________________________________________Class A Warrants
VOID AFTER _______________________, 2002
CLASS A WARRANT CERTIFICATE FOR PURCHASE
OF CLASS A COMMON STOCK
AMERIGON INCORPORATED
This certifies that FOR VALUE RECEIVED __________________ or
registered assigns (the "Registered Holder") is the owner of the number of Class
A Warrants ("Class A Warrants") specified above. Each Class A Warrant
represented hereby initially entitles the Registered Holder to purchase, subject
to the terms and conditions set forth in this Warrant Certificate and the
Warrant Agreement (as hereinafter defined), one fully paid and nonassessable
share of Class A Common Stock, no par value ("Class A Common Stock"), of
Amerigon Incorporated, a California corporation (the "Company"), at any time
between ____________, 1997 and the Expiration Date (as hereinafter defined),
upon the presentation and surrender of this Warrant Certificate with the
Subscription Form on the reverse hereof duly executed, at the corporate office
of U.S. Stock Transfer Corporation as Warrant Agent, or its successor (the
"Warrant Agent"), accompanied by payment of $_____ (the "Purchase Price") in
lawful money of the United States of America in cash or by official bank or
certified check made payable to Amerigon Incorporated.
This Warrant Certificate and each Class A Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
______________, 1997 by and among the Company, the Warrant Agent and D.H. Blair
Investment Banking Corp.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Class A Common Stock
subject to purchase upon the exercise of each Class A Warrant represented hereby
are subject to modification or adjustment.
Each Class A Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Class A Common Stock will
be issued. In the case of the exercise of less than all the Class A Warrants
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new
A-1
<PAGE>
Warrant Certificate or Warrant Certificates of like tenor, which the Warrant
Agent shall countersign, for the balance of such Class A Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_________________, 2002 or such earlier date as the Class A Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Class A Warrants represented hereby unless a registration
statement under the Securities Act of 1933, as amended, with respect to such
securities is effective. The Company has covenanted and agreed that it will
file a registration statement and will use its best efforts to cause the same to
become effective and to keep such registration statement current while any of
the Class A Warrants are outstanding. The Class A Warrants represented hereby
shall not be exercisable by a Registered Holder in any state where such exercise
would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class A Warrants, each of such new Warrant Certificates to
represent such number of Class A Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Class A Warrant Certificate at such office, a new Warrant
Certificate or Warrant Certificates representing an equal aggregate number of
Class A Warrants will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Class A Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class A Warrants represented hereby may be redeemed at the option
of the Company, at a redemption price of $.05 per Class A Warrant at any time
after___________________, 1998 provided the Market Price (as defined in the
Warrant Agreement) for the Class A Common Stock shall exceed $_______ per share.
Notice of redemption shall be given not later than the thirtieth day before the
date fixed for redemption, all as provided in the Warrant Agreement. On and
after the date fixed for redemption, the Registered Holder shall have no rights
with respect to the Class A Warrants represented hereby except to receive the
$.05 per Class A Warrant upon surrender of this Warrant Certificate.
A-2
<PAGE>
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class A Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
the Class A Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
AMERIGON INCORPORATED
Dated: __________________ By: ______________________________
By: ______________________________
[seal]
Countersigned:
U.S. STOCK TRANSFER CORPORATION
____________________________________
as Warrant Agent
By:_________________________________
Authorized Officer
A-3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $_______ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise _______ Class A Warrants represented by this Warrant Certificate, and
to purchase the securities issuable upon the exercise of such Class A Warrants,
and requests that certificates for such securities shall be issued in the name
of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
and be delivered to
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
and if such number of Class A Warrants shall not be all the Class A Warrants
evidenced by this Warrant Certificate, that a new Class A Warrant Certificate
for the balance of such Class A Warrants be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
The undersigned represents that the exercise of the Class A Warrants
evidenced hereby was solicited by a member of the National Association of
Securities Dealers, Inc. If not
A-4
<PAGE>
solicited by an NASD member, please write "unsolicited" in the space below.
Unless otherwise indicated by listing the name of another NASD member firm, it
will be assumed that the exercise was solicited by D.H. Blair Investment
Banking Corp. or D.H. Blair & Co., Inc.
___________________________________
(Name of NASD Member)
Dated: __________________ X _______________________________
____________________________________
____________________________________
Address
____________________________________
Taxpayer Identification Number
____________________________________
Signature Guaranteed
____________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-5
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF TRANSFEREE
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
_________________ of the Class A Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________________________ Attorney to transfer this Warrant
Certificate on the books of the Company, with full power of substitution in the
premises.
Dated:__________________ X ______________________________
Signature Guaranteed
____________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-6
<PAGE>
EXHIBIT 10.3
PROMISSORY NOTE
$100,000.00 January 29, 1997
FOR VALUE RECEIVED, AMERIGON INCORPORATED, a California corporation (the
"Company"), hereby promises to pay to the order of Dr. Lon E. Bell, One
Hundred Thousand Dollars ($100,000) in lawful money of the United States of
America, at Monrovia, California, with interest thereon at the rate of ten
percent (10%) per annum, on the earlier of (i) March 1, 1997, or (ii) the day
after the closing of the Company's currently proposed public offering of
units. Should suit be commenced to enforce payment of this note, the Company
promises to pay such additional sum as the court may adjudge reasonable as
attorneys' fees in said suit.
AMERIGON INCORPORATED
By: /s/ R. John Hamman, Jr.
Name: R. John Hamman, Jr.
Title: Vice President - Finance
<PAGE>
Option to Purchase
1,700 Units
AMERIGON INCORPORATED
UNIT PURCHASE OPTION
Dated: _________________, 1997
THIS CERTIFIES THAT_______ (herein sometimes called the "Holder") is
entitled to purchase from Amerigon Incorporated, a California corporation
(hereinafter called the "Company"), at the prices and during the periods as
hereinafter specified, up to ONE THOUSAND SEVEN HUNDRED (1,700) Units
("Units"), each Unit consisting of 280 shares of the Company's Class A Common
Stock, no par value, as now constituted ("Class A Common Stock"), and 280
warrants to purchase Class A Common Stock ("Class A Warrants"). Each Class A
Warrant is exercisable to purchase one share of Class A Common Stock at an
exercise price of $______ from ________, 2000 to ________, 2002. The Class A
Warrants are herein referred to as the "Warrants."
The Units have been registered under a Registration Statement on
Form S-2, (File No. 333-17401) declared effective by the Securities and Exchange
Commission on _________, 1997 (the "Registration Statement"). This Option,
together with options of like tenor, constituting in the aggregate options (the
"Options") to purchase 1,700 Units, subject to adjustment in accordance with
Section 8 of this Option (the "Option Units"), was originally issued pursuant to
an underwriting agreement between the Company and D.H. Blair Investment Banking
Corp., as underwriter (the "Underwriter") in connection with a public offering
(the "Offering") of 17,000 Units (the "Public Units") through the Underwriter,
in consideration of $1.70 received for the Options.
Except as specifically otherwise provided herein, the Class A Common
Stock and the Warrants issued pursuant to the option herein granted (the
"Option") shall bear the same terms and conditions as described under the
caption "Description of Securities" in the Registration Statement, and the
Warrants shall be governed by the terms of the Warrant Agreement dated as of
__________, 1997 executed in connection with such public offering (the "Warrant
Agreement"), and except that (i) the holder shall have registration rights under
the Securities Act of 1933, as amended (the "Act"), for the Option, the Class A
Common Stock and the Warrants included in the Option Units, and the shares of
Class A Common Stock underlying the Warrants, as more fully described in
Section 6 of this Option and (ii) the Warrants issuable upon exercise of the
Option will be subject to redemption by the Company pursuant to the Warrant
Agreement only at any time after the Option has been exercised and the Warrants
underlying the Option Units are outstanding. Any such redemption shall be on
the same terms and conditions as the Warrants included in the Public Units (the
"Public Warrants"). The Company will list the Class A Common Stock underlying
this Option and, at the Holder's request
<PAGE>
the Warrants, on the Nasdaq National Market, the Nasdaq SmallCap Market or such
other exchange or market as the Class A Common Stock or Public Warrants may then
be listed or quoted. In the event of any extension of the expiration date or
reduction of the exercise price of the Public Warrants, the same changes to the
Warrants included in the Option Units shall be simultaneously effected.
1. The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with Section 8 of this Option ("the
"Exercise Price"), and during the periods as follows:
(a) During the period from _______, 1997 to _______, 2000
inclusive, the Holder shall have no right to purchase any Option
Units hereunder, except that in the event of any merger,
consolidation or sale of all or substantially all the capital
stock or assets of the Company or in the case of any statutory
exchange of securities with another corporation (including any
exchange effected in connection with a merger of another
corporation into the Company) subsequent to _______, 2000, the
Holder shall have the right to exercise this Option and the
Warrants included herein at such time and receive the kind and
amount of shares of stock and other securities and property
(including cash) which a holder of the number of shares of Class
A Common Stock underlying this Option and the Warrants included
in this Option would have owned or been entitled to receive had
this Option been exercised immediately prior thereto.
(b) Between _______, 2000 and _______, 2002 inclusive, the
Holder shall have the option to purchase Option Units hereunder
at a price of $_______ per Unit. For purposes of the adjustments
under Section 8 hereof, the Per Share Exercise Price shall be
deemed to be $_______, subject to further adjustment as provided
in such Section 8.
(c) After _________, 2002 the Holder shall have no right to
purchase any Units hereunder.
2. (a) The rights represented by this Option may be exercised at
any time within the period above specified, in whole or in part, by (i) the
surrender of this Option (with the purchase form at the end hereof properly
executed) at the principal executive office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company); and
(ii) payment to the Company of the exercise price then in effect for the number
of Option Units specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any. This Option shall be deemed to have
been exercised, in whole or in part to the extent specified, immediately prior
to the close of business on the date this Option is surrendered and payment is
made in accordance with the foregoing provisions of this Section 2, and the
person or persons in whose name or names the certificates for shares of Class A
Common Stock and
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<PAGE>
Warrants shall be issuable upon such exercise shall become the holder or holders
of record of such Class A Common Stock and Warrants at that time and date. The
certificates for the Class A Common Stock and Warrants so purchased shall be
delivered to the Holder as soon as practicable but not later than ten (10) days
after the rights represented by this Option shall have been so exercised.
(b) At any time during the period above specified, during which
this Option may be exercised, the Holder may, at its option, exchange this
Option, in whole or in part (an "Option Exchange"), into the number of Option
Units determined in accordance with this Section (b), by surrendering this
Option at the principal office of the Company or at the office of its stock
transfer agent, accompanied by a notice stating such Holder's intent to effect
such exchange, the number of Option Units into which this Option is to be
exchanged and the date on which the Holder requests that such Option Exchange
occur (the "Notice of Exchange"). The Option Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
shares of Class A Common Stock and Warrants issuable upon such Option Exchange
and, if applicable, a new Option of like tenor evidencing the balance of the
Option Units remaining subject to this Option, shall be issued as of the
Exchange Date and delivered to the Holder within seven (7) days following the
Exchange Date. In connection with any Option Exchange, this Option shall
represent the right to subscribe for and acquire the number of Option Units
(rounded to the next highest integer) equal to (x) the number of Option Units
specified by the Holder in its Notice of Exchange up to the maximum number of
Option Units subject to this option (the "Total Number") less (y) the number of
Option Units equal to the quotient obtained by dividing (A) the product of the
Total Number and the existing Exercise Price by (B) the Fair Market Value.
"Fair Market Value" shall have the meaning indicated in Subsections (i) through
(iv) below for the aggregate value of all shares of Class A Common Stock and
Warrants which comprise a Unit:
(i) If the Class A Common Stock or Warrants are listed on a
national securities exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on the Nasdaq
National Market or the Nasdaq SmallCap Market, the Fair Market Value
shall be the average of the last reported sale prices or the average
of the means of the last reported bid and asked prices, respectively,
of Class A Common Stock or Warrants, respectively, on such exchange or
market for the five (5) business days ending on the last business day
prior to the Exchange Date; or
(ii) If the Class A Common Stock or Warrants are not so listed or
admitted to unlisted trading privileges, the Fair Market Value shall
be the average of the means of the last reported bid and asked prices
of the Class A Common Stock or Warrants, respectively, for the five
(5) business days ending on the last business day prior to the
Exchange Date; or
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<PAGE>
(iii) If the Class A Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are
not so reported, the Fair Market Value shall be an amount, not less
than book value thereof as at the end of the most recent fiscal year
of the Company ending prior to the Exchange Date, determined in such
reasonable manner as may be prescribed by the Board of Directors of
the Company; or
(iv) If the Warrants are not so listed or admitted to unlisted
trading privileges, and bid and asked prices are not so reported for
Warrants, then Fair Market Value for the Warrants shall be an amount
equal to the difference between (i) the Fair Market Value of the
shares of Class A Common Stock which may be received upon the exercise
of the Warrants, as determined herein, and (ii) the Warrant Exercise
Price.
3. Neither this Option nor the underlying securities shall be
transferred, sold, assigned, or hypothecated, except that they may be
transferred to successors of the Holder, and may be assigned in whole or in part
to any person who is an officer of the Holder, any member participating in the
selling group relating to the Offering or any officer of such selling group
member. Any such assignment shall be effected by the Holder (i) executing the
form of assignment at the end hereof and (ii) surrendering this Option for
cancellation at the office or agency of the Company referred to in Section 2
hereof, accompanied by a certificate (signed by an officer of the Holder if the
Holder is a corporation), stating that each transferee is a permitted transferee
under this Section 3 hereof; whereupon the Company shall issue, in the name or
names specified by the Holder (including the Holder) a new Option or Options of
like tenor and representing in the aggregate rights to purchase the same number
of Option Units as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Class A
Common Stock which may be issued as part of the Option Units purchased hereunder
and the Class A Common Stock which may be issued upon exercise of the Warrants
will, upon issuance, be duly and validly issued, fully paid and nonassessable
and no personal liability will attach to the holder thereof. The Company
further covenants and agrees that during the periods within which this Option
may be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Class A Common Stock to provide for the
exercise of this Option and that it will have authorized and reserved a
sufficient number of shares of Class A Common Stock for issuance upon exercise
of the Warrants included in the Option Units.
5. This Option shall not entitle the Holder to any voting rights or
any other rights, or subject to the Holder to any liabilities, as a stockholder
of the Company.
6. (a) The Company shall advise the Holder or its transferee,
whether the Holder holds the Option or has exercised the Option and holds Option
Units or any of the securities underlying the Option Units, by written notice at
least two weeks prior to the filing of any post-effective amendment to the
Registration Statement or of any new registration statement
-4-
<PAGE>
or post-effective amendment thereto under the Act (other than a registration
statement on Form S-4 or S-8 or any form substituting therefor or any other
limited purpose form that would not permit the inclusion of the Registrable
Securities) covering any securities of the Company, for its own account or for
the account of others, and will for a period of seven years from the effective
date of the Registration Statement, upon the request of the Holder, include in
any such post-effective amendment or registration statement, such information as
may be required to permit a public offering of the Option, all or any of the
Option Units, the Class A Common Stock or Warrants included in the Option Units
or the Class A Common Stock issuable upon the exercise of the Warrants (the
"Registrable Securities").
(b) If the Underwriter, D.H. Blair & Co., Inc., J. Morton Davis
or any 50% holder (as defined below) (each, a "Requesting Holder") shall give
notice to the Company at any time to the effect that such holder desires to
register under the Act this Option, the Option Units or any of the underlying
securities contained in the Option Units under such circumstances that a public
distribution (within the meaning of the Act) of any such securities will be
involved then the Company will promptly, but no later than four weeks after
receipt of such notice, file a post-effective amendment to the current
Registration Statement or a new registration statement on Form S-1 or such other
form as the holder requests pursuant to the Act, to the end that the Option, the
Option Units and/or any of the securities underlying the Option Units may be
publicly sold under the Act as promptly as practicable thereafter and the
Company will use its best efforts to cause such registration to become and
remain effective (including the taking of such steps as are necessary to obtain
the removal of any stop order) for a period of up to nine months or until the
distribution contemplated in the registration statement has been completed,
whichever first occurs (provided, that such nine month limitation shall be
extended indefinitely in the event the registration statement is on Form S-3 or
any successor thereto); provided, that such holder shall furnish the Company
with appropriate information in connection therewith as the Company may
reasonably request in writing. Any Requesting Holder may, at its option,
request the filing of a post-effective amendment to the current Registration
Statement or a new registration statement under the Act on two occasions during
the thirty month period beginning thirty months from the effective date of the
Registration Statement; provided, that the aggregate number of registrations
that may be requested by all Requesting Holders shall be limited to two. Any
Requesting Holder may, at its option request the registration of the Option
and/or any of the securities underlying the Option in a registration statement
made by the Company as contemplated by Section 6(a) or in connection with a
request made pursuant to this Section 6(b) prior to acquisition of the Option
Units issuable upon exercise of the Option and even though the Holder has not
given notice of exercise of the Option. Any Requesting Holder may, at its
option, request such post-effective amendment or new registration statement
during the described period with respect to the Option, the Option Units as a
unit, or separately as to the Class A Common Stock and/or Warrants included in
the Option Units and/or the Class A Common Stock issuable upon the exercise of
the Warrants, and such registration rights may be exercised by the Requesting
Holder prior to or subsequent to the exercise of the Option.
Within ten days after receiving any such notice pursuant to this
Section 6(b), the Company shall give notice to the other holders of the Options,
advising that the Company is
-5-
<PAGE>
proceeding with such post-effective amendment or registration statement and
offering to include therein the securities underlying the Options of the other
holders, provided that they shall furnish the Company with such appropriate
information (relating to the intentions of such holders) in connection therewith
as the Company shall reasonably request in writing. In the event demand for
registration is made by a Requesting Holder and the registration statement is
not filed within the period specified herein and in the event the registration
statement is not declared effective under the Act prior to ________, 2002, then,
at the holders' request, the Company shall purchase the Options from the holder
for a per option price equal to the difference between (i) the Fair Market Value
of the Class A Common Stock on the date of notice multiplied by the number of
shares of Class A Common Stock issuable upon exercise of the Option and the
underlying Warrants and (ii) the average per share purchase price of the Option
and each share of Class A Common Stock underlying the Option. All costs and
expenses of the first such post-effective amendment or new registration
statement under this paragraph 6(b) shall be borne by the Company, except that
the holders shall bear the fees of their own counsel and any underwriting
discounts or commissions applicable to any of the securities sold by them.
(c) The term "50% holder" as used in this Section 6 shall mean
the holder of at least 50% of the Class A Common Stock and the Warrants
underlying the Options (considered in the aggregate) and shall include any owner
or combination of owners of such securities, which ownership shall be calculated
by determining the number of shares of Class A Common Stock held by such owner
or owners as well as the number of shares then issuable upon exercise of the
Warrants.
(d) Whenever pursuant to Section 6 a registration statement
relating to any Registrable Securities is filed under the Act, amended or
supplemented, the Company shall (i) supply prospectuses and such other documents
as the Holder may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities, (ii) use its best efforts to
register and qualify any of the Registrable Securities for sale in such states
as such Holder designates (provided, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act), (iii) furnish
indemnification in the manner provided in Section 7 hereof, (iv) notify each
Holder of Registrable Securities at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and, at the request of any such
Holder, prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state material fact
-6-
<PAGE>
required to be stated therein or necessary to make the statements therein not
misleading and (v) do any and all other acts and things which may be necessary
or desirable to enable such Holders to consummate the public sale or other
disposition of the Registrable Securities. The Holders shall furnish
appropriate information in connection therewith and indemnification as set forth
in Section 7.
(e) The Company shall not permit the inclusion of any securities
other than the Registrable Securities and securities of the Company held by
securityholders who have duly exercised registration rights existing on the date
hereof to be included in any registration statement filed pursuant to
Section 6(b) hereof without the prior written consent of the Requesting Holders;
provided, that if the underwriter advises the Requesting Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall exclude from such underwriting, to the
fullest extent possible, (i) first, the maximum number of securities, if any,
other than Registrable Securities as is necessary in the opinion of the managing
underwriter(s) to reduce the size of the offering and (ii) then the minimum
number of Registrable Securities as is necessary in the opinion of the managing
underwriter(s) to reduce the size of the offering.
(f) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (or, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) if such registration
includes an underwritten public offering, a "cold comfort" letter dated the
effective date of such registration statement and dated the date of the closing
under the underwriting agreement signed by the independent public accountants
who have issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(g) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to non-confidential books, records and properties and
opportunities to discuss the business of the Company with its officers and
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<PAGE>
independent auditors, all to such reasonable extent and at such reasonable times
as any such Holder shall reasonably request.
7. (a) Whenever pursuant to Section 6 a registration statement
relating to the Registrable Securities is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless each holder of the
Registrable Securities covered by such registration statement, amendment or
supplement (such holder being hereinafter called the "Distributing Holder"), and
each person, if any, who controls (within the meaning of the Act) the
Distributing Holder, and each underwriter (within the meaning of the Act) of
such securities and each person, if any, who controls (within the meaning of the
Act) any such underwriter, against any losses, claims, damages or liabilities,
joint or several, to which the Distributing Holder, any such controlling person
or any such underwriter may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement or any
preliminary prospectus or final prospectus constituting a part thereof or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and will reimburse the Distributing
Holder and each such controlling person and underwriter for any legal or other
expenses reasonably incurred by the Distributing Holder or such controlling
person or underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder specifically for use in the
preparation thereof.
(b) Each Distributing Holder shall, severally but not jointly,
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, and each person, if any,
who controls the Company within the meaning of the Act against any losses,
claims, damages or liabilities to which such indemnified person may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in said registration statement, said
preliminary prospectus, said final prospectus, or said amendment or supplement,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in said registration statement, said preliminary
prospectus, said final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished by such Distributing
Holder specifically for use in the preparation thereof; except that the maximum
amount which may be recovered from the Distributing Holder pursuant to this
Section 7
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<PAGE>
or otherwise shall be limited to the amount of net proceeds received by the
Distributing Holder from the sale of the Registrable Securities.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
(8) In addition to the provisions of Section 1(a) of this Option, the
Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Options shall be subject to adjustment from
time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Class A Common Stock in
shares of Class A Common Stock, (ii) subdivide or reclassify its
outstanding shares of Class A Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares of Class
A Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Class A Common
Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Class A Common
Stock outstanding immediately prior to such action. Such adjustment
shall be made successively whenever any event listed above shall
occur.
(b) Whenever the Exercise Price payable upon exercise of each
Option is adjusted pursuant to Section (a) above, (i) the number of
shares of Class A Common Stock included in an Option Unit shall
simultaneously be adjusted by multiplying the number of shares of
Class A Common Stock included in Option Unit immediately prior to such
adjustment by the Exercise Price in effect
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<PAGE>
immediately prior to such adjustment and dividing the product so
obtained by the Exercise Price, as adjusted and (ii) the number of
shares of Class A Common Stock or other securities issuable upon
exercise of the Warrants included in the Option Units and the exercise
price of such Warrants shall be adjusted in accordance with the
applicable terms of the Warrant Agreement.
(c) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least five
cents ($0.05) in such price; provided, however, that any adjustments
which by reason of this Subsection (c) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under this
Section 8 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this
Section 8 to the contrary notwithstanding, the Company shall be
entitled, but shall not be required, to make such changes in the
Exercise Price, in addition to those required by this Section 8, as it
shall determine, in its sole discretion, to be advisable in order that
any dividend or distribution in shares of Class A Common Stock, or any
subdivision, reclassification or combination of Class A Common Stock,
hereafter made by the Company shall not result in any Federal Income
tax liability to the holders of Class A Common Stock or securities
convertible into Class A Common Stock (including Warrants issuable
upon exercise of this Option).
(d) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly but no later than 10 days after any request
for such an adjustment by the Holder, cause a notice setting forth the
adjusted Exercise Price and adjusted number of Option Units issuable
upon exercise of each Option and, if requested, information describing
the transactions giving rise to such adjustments, to be mailed to the
Holders, at the address set forth herein, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. The Company
may retain a firm of independent certified public accountants selected
by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 8,
and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(e) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (a) above, the Holder of this Option
thereafter shall become entitled to receive any shares of the Company,
other than Class A Common Stock, thereafter the number of such other
shares so receivable upon exercise of this Option shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Class
A Common Stock contained in Subsections (a) to (c), inclusive above.
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<PAGE>
(f) In case any event shall occur as to which the other
provisions of this Section 8 or Section 1(a) hereof are not strictly
applicable but as to which the failure to make any adjustment would
not fairly protect the purchase rights represented by this Option in
accordance with the essential intent and principles hereof then, in
each such case, the Holders of Options representing the right to
purchase a majority of the Option Units may appoint a firm of
independent public accountants reasonably acceptable to the Company,
which shall give their opinion as to the adjustment, if any, on a
basis consistent with the essential intent and principles established
herein, necessary to preserve the purchase rights represented by the
Options. Upon receipt of such opinion, the Company will promptly mail
a copy thereof to the Holder of this Option and shall make the
adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
9. This Agreement shall be governed by and in accordance with the
laws of the State of New York, without giving effect to the principles of
conflicts of law thereof.
IN WITNESS WHEREOF, Amerigon Incorporated has caused this Option to be
signed by its duly authorized officers under its corporate seal, and this Option
to be dated ________, 1997.
AMERIGON INCORPORATED
By: ________________________________
Lon E. Bell, Ph.D., President
(Corporate Seal)
Attest:
__________________________
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<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
The undersigned, the holder of the foregoing Option, hereby
irrevocably elects to exercise the purchase rights represented by such Option
for, and to purchase thereunder, _____ Units of Amerigon Incorporated, each Unit
consisting of _________ shares of Class A Common Stock, no par value, and
_________ Class A Warrant(s) to purchase Class A Common Stock, and herewith
makes payment of $_________ thereof.
Dated: _________ Instructions for Registration of Stock and
Warrants
________________________________________
Print Name
________________________________________
Address
________________________________________
Signature
<PAGE>
OPTION EXCHANGE
The undersigned, pursuant to the provisions of the foregoing Option,
hereby elects to exchange its Option for _________ Units of Amerigon
Incorporated, each Unit consisting of ______ shares of Class A Common Stock, no
par value, and _________ Class A Warrant(s) to purchase Class A Common Stock,
pursuant to the Option Exchange provisions of the Option.
Dated: _____________
__________________________________________
Print Name
__________________________________________
Address
__________________________________________
Signature
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto ____________________ the right to purchase Units represented
by the foregoing Option to the extent of ___ Units, and appoints _____________
attorney to transfer such rights on the books of Amerigon Incorporated, with
full power of substitution in the premises.
Dated: _______________
D.H. BLAIR INVESTMENT BANKING CORP.
By: _____________________________________
________________________________________
Address
In the presence of:
<PAGE>
PRODUCT ADAPTATION
AND SUPPLY CONTRACT
THIS CONTRACT is made and entered into as of the 25th day of November, 1994,
by and between Samsung Heavy Industries Co., Ltd., Kihung R&D Center, Located
in Suwon, Korea (hereinafter referred to as "Buyer") and Amerigon, Inc.
headquartered at 404 E. Huntington Dr., Monrovia, California 90638
(hereinafter referred to as "Seller").
WHEREAS, Buyer is interested in having Seller (i) make recommendations
regarding and (ii) design, develop and manufacture Electric Vehicle (EV)
components and 2 EVs for Buyer's EV project;
WHEREAS, Seller is interested in performing such work and has agreed
with Buyer on the SAMSUNG AND AMERIGON MEETING MINUTES dated from 17 October
1994 to 20 October 1994 ("Meeting Minutes") in that regard, which Meeting
Minutes reflect Seller's expectation that it will sell 48 sets of EV parts
and 2 EVs;
NOW, THEREFORE, in view of the foregoing premises and in consideration
of the mutual covenants and promises contained in this Contract, Buyer and
Seller agree as follows:
ARTICLE 1. CONTRACT SCOPE
1.1. In this Contract Buyer agrees to order the design, development and
manufacture of 48 sets of EV components and 2 EVs for Buyer's EV project.
1.2. In this Contract, the Seller and the Buyer agree to the Meeting Minutes
for completing this project. The Buyer has therefore decided to award the
project to the Seller. Seller, therefore, in consideration of the payment to
be made by the Buyer to the Seller, has agreed to enter into a Contract which
will result in the development and manufacture of 50 sets of EV parts. Seller
agrees to complete the design of the vehicle and manufacture and subassemble
parts in the U.S. Final vehicle and frame assembly will be completed at the
Seller's facility by Seller for two vehicles and for 40 vehicles at Buyer's
facility by Buyer in Korea. Eight part sets will not be assembled and will
be provided to Buyer as spare part kits. The vehicle's exterior will be the
same as Buyer's prototype SEV-IV. The purposes of these vehicles are for
Buyer's evaluation and normal driving on public roads in Korea. The specific
tasks to be performed in connection with this Contract are set out and shall
be limited to those set forth in Exhibit A, which is attached to and
incorporated by reference in this Contract.
Page 1 of 8
<PAGE>
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
ARTICLE 2. SELLER'S RESPONSIBILITY
2.1. The Seller will complete the design and development, tooling, prototype
evaluation, design validation and manufacturing of 50 sets of EV parts,
meeting overall vehicle and components specifications and program schedule
set forth in Exhibit's B, C and D.
2.2. The Seller will be responsible for manufacturing and procurement of all
components as set forth in Exhibit E, which outlines procurement
responsibility for both Seller and the Buyer.
2.3. Two of the Fifty EV part sets will be assembled by Seller for final
evaluation and will be sent to Buyer to be approved by Buyer, and forty-eight
sets of the EV parts will be supplied to Buyer for final vehicle and frame
assembly in Korea.
2.4. The Seller will assist Buyer and will provide sufficient technical
support to assure successful completion of vehicle assembly in Korea. This
includes technical support to Buyer and its supplier for final frame and
vehicle assembly and body in white components manufacturing.
2.5. The Seller will prepare and deliver to the Buyer all the detail and
master drawings, analysis report and testing results, process documentation
and assembly procedures.
2.6. The Seller will be responsible for component packaging suitable for Sea
shipment to Korea. (all shipments will be F.O.B. Seller's facility).
2.7. The Seller will be responsible for all deliverables as outlined in
Exhibit A ( Program Scope ), Exhibit D ( Program Schedule ) and Exhibit E
( Procurement Responsibility ).
2.8. The Seller will provide Buyer with all the fixtures and jigs for final
frame assembly in Korea and all the program specific component tooling after
completion of the work. The fixtures and jigs for final vehicle assembly
will be designed by Seller and fabricated by Buyer.
2.9. The Seller will install Climate Control Modules in the driver and
passenger seats of each vehicle.
ARTICLE 3. BUYER'S RESPONSIBILITY
3.1. The Buyer shall provide Seller with a clay model, specifications,
requirements and will continuously assist Seller to assure successful program
completion as outlined in Exhibit D.
Page 2 of 8
<PAGE>
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
3.2. The Buyer is responsible for shipping and obtaining all relevant
documents needed for the importation of the parts and two prototype vehicles
into the Buyer's country. This includes all the import fees and taxes imposed
in Buyer's country.
3.3. The Buyer will be responsible for final frame and vehicle assembly in
Korea. The fixtures and jigs for vehicle assembly will be fabricated by Buyer.
3.4. The Buyer and Seller are responsible for procurement of components
according to Exhibit E.
ARTICLE 4. CONTRACT PRICE
4.1. The total contract price for completion of the work hereto is:
USD 8,252,000. (Eight Million, Two Hundred Fifty-two Thousand
U.S. Dollars only).
4.2. The Contract Price includes all design & development, component tooling &
prototype frame assembly fixtures, prototype build, evaluation & design
validation, production of 48 vehicle part kits, completion of 2 vehicles and
technical support.
4.3 The Contract Price includes all taxes, including income taxes, duties,
fees, levies, customs duties and other charges of any such kind, levied in
connection with this Contract or its performance imposed in the Seller's
country. A condition of this provision is that all deliverables under this
Contract will be shipped directly to a non-U.S. destination (i.e. Korea).
4.4. The Contract Price excludes incoming and/or withholding taxes as well as
any duties, customs, duties, fees, levies and other charge whatsoever levied in
connection with this Contract or its performance which may be payable in the
Buyer's country. Any of the above mentioned taxes, duties, fees, levies,
charges, and etc. shall, if they occur, be borne and paid for by the Buyer. The
Buyer shall consequently indemnify and keep the Seller harmless from any of the
above-mentioned taxes, duties, fees, levies, charges and etc.
4.5. If significant changes are made and agreed to by Buyer and Seller in the
specifications or scope of work to be performed under this Contract which will
result in increased or decreased costs incurred by Seller, Buyer and Seller
will negotiate an appropriate change in the Contract Price.
Page 3 of 8
<PAGE>
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
ARTICLE 5. TERMS OF PAYMENT
5.1. The Contract Price stated in Article 4.1, shall be paid by the Buyer
(via Bank Transfer) as follows;
a) 20% of the Contract Price shall be paid as an advance payment
within fourteen (14) days after execution of this Contract by
Seller and Buyer.
b) 20% of the Contract Price shall be paid fourteen (14) days after
completion of vehicle design and shipment of the first drawing
package to Buyer.
c) 15% of the Contract Price shall be paid fourteen (14) days after
shipment of two (2) prototype vehicles.
d) 35% of the Contract Price shall be paid fourteen (14) days after
shipment of forty-eight (48) part kits.
e) 10% of the Contract Price shall be paid fourteen (14) days after
Buyer completes the assembly of forty (40) vehicles or, in any case,
within six months of shipment to Buyer of the 48 part kits in (d)
above.
5.2. The Buyer shall not be responsible for any deduction or retention of
payments by the Buyer to the Seller as may be imposed by law or as a result
of any other circumstances beyond the Buyer's control.
ARTICLE 6. PERFORMANCE OF WORK AND REMEDIES
6.1. Performance Of Work: The Seller and Buyer will use reasonable care in
performing the work which each is required to perform pursuant to Article 1
above and Exhibit A. At the completion of each phase of the Contract, Seller
will deliver to Buyer the deliverables referenced in Article 2.
6.2. Remedies: If Seller fails to use reasonable care in performing any task
that is included in the Contract which Seller is required to perform pursuant
to Article 1 and 2 above and Exhibit A, Buyer will give notice to Seller of
such failure. If Seller fails or neglects to carry out the Remedy or fails to
perform any provision of this Contract, the Buyer may after forty-five (45)
day's written notice to the Seller, and without prejudice to any other remedy
he may have, make good such deficiencies, and the Buyer's costs thereon shall
be deducted from the sums then or thereafter due to the Seller. Buyer's costs
under this paragraph will be limited to reasonable market rate costs for the
deficient items.
Page 4 of 8
<PAGE>
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
ARTICLE 7. WORK PRODUCT
7.1 All designs, drawings, specifications, technical data, plans, instruments
and other work product produced by, through, or on behalf of, the Seller in
the performance of this Contract shall be, at all times, the property of the
Buyer, and the Buyer is vested with all rights therein.
ARTICLE 8. GUARANTEE
8.1. This guarantee is valid for a period of twelve (12) months from the date
of receipt of parts by Buyer.
8.2. The Seller guarantees that the goods are new and meet the specifications
set forth in Exhibits B, C and D, but only to the extent that Seller has
procurement responsibility for related components per Exhibit E.
8.3. Should the goods or any parts thereof be repaired, replaced or altered
at Seller's expense to fulfill the guarantee, the Seller shall provide a new
guarantee of the same conditions for such materials being required, replaced
or altered for a period of twelve (12) months from the date of completion of
such remedial work.
8.4. The Buyer shall notify the Seller in writing without delay, and no later
than 20 days after the date on which the defect appeared, of any defect that
has appeared and shall give the Seller every opportunity to inspect and
remedy them.
8.5. Should the Seller fail to take such remedial action within 30 days, the
Buyer may, at its option, take remedial action at the Seller's expense or
select to accept the goods not meeting the specifications herein with
adjustment in the purchase price. Any expenses charged to Seller by Buyer
under this provision will not exceed reasonable market prices for the items
involved.
ARTICLE 9. LIABILITY
9.1. The Seller will not knowingly incorporate in any drawing or other
document furnished to Buyer under this Contract any copyrighted material or
patented concept of a third party without first notifying the Buyer.
9.2. Recognizing that final vehicle assembly is the responsibility of the
Buyer and control over the use of the vehicles resides with Buyer, Buyer
indemnifies and holds harmless Seller against any claims for loss or injury,
involving components, assemblies, or vehicles designed or delivered under
this Contract, made against Seller by Buyer's employees or agents or by third
parties.
Page 5 of 8
<PAGE>
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
9.3. In no event the Buyer or Seller shall be liable for indirect or
consequential damages.
ARTICLE 10. FORCE MAJEURE
10.1. In this Contract, the event of Force Majeure shall mean
a) flood, storms and other natural disasters, war, civil commotion,
hostilities, rebellion, insurrection, strikes, freight embargo,
acts of ordinances of governmental or state authorities of both
countries.
b) any other circumstances like or unlike foregoing, which are beyond
the reasonable control of the party affected.
10.2. Upon learning of an event of Force Majeure which threatens its
performance hereunder, a party shall give the written notice thereof
immediately to the other parties hereto. Upon request of the other parties,
such a party shall provide further information concerning such an event.
10.3. In case of Force Majeure continues for more than 180 days, the Buyer
shall, without prejudicing the other rights under this Contract, have the
right to terminate this Contract.
ARTICLE 11. TERM AND TERMINATION
11.1. This Contract shall be effective as of the date written in the first
paragraph (unnumbered) of this Contract and expire upon the delivery of all
deliverables and completion of payments under the contract, unless earlier
terminated as provided in Section 11.2 below.
11.2. Either party may terminate this Contract immediately upon written
notice to the other party if the other party breaches any material obligation
under this Contract and fails to cure such breach within sixty (60) days
after being given written notice of such breach.
11.3. Either party may terminate this Contract immediately upon written
notice to the other party if one of the parties goes into liquidation,
bankruptcy proceedings are initiated against it, a receiver of its assets is
appointed, a general assignment for the benefit of its creditors is made or
if substantial change in the legal status, ownership or management takes
place. The same shall apply if force majeure for a period of more than 180
days.
11.4 The rights and obligations of the parties under Sections 8, 9, and 13
above shall survive termination or expiration of the Contract.
Page 6 of 8
<PAGE>
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
ARTICLE 12. MISCELLANEOUS
12.1. Any modifications or amendments to this Contract are only valid if made
in writing to this Contract and if duly signed by the parties.
12.2. The language to be applied during the performance of the Contract is
English. All documents or correspondences shall be in English.
12.3. Should one or more stipulations of this Contract be held to be invalid,
unenforceable or illegal for any reason, the other stipulations of this
Contract shall nevertheless remain effective. In such case the hiatus in the
Contract shall be filled by valid provision coming as close as possible to
what the parties had intended if they had known the invalidity of the
respective stipulations.
12.4. Each party shall not assign the Contract or any part thereof, without
the written consent of the other party.
ARTICLE 13. ARBITRATION
13.1. The Buyer and Seller shall use their best efforts to settle any claimed
breach, dispute or controversies of this Contract, making a good-faith effort
to reach a just and equitable settlement satisfactory to both parties. If the
claim is not settled by the senior executives of the parties at that meeting,
then, unless the parties otherwise agree in writing, it shall be finally
settled by arbitration in accordance with the UNCITRAL Arbitration Rules in
effect on the date of this Contract. Such arbitration shall be the sole and
exclusive remedy between the parties with respect to such claim. Such
arbitration shall be held in Los Angeles, California, U.S.A.
13.2. The dispute referred to arbitration is not a reason to stop the
fulfillment of the other contractual obligation by the parties.
ARTICLE 14. PATENTS
14.1. The Seller shall be responsible for any infringement with regard to
patent, utility model, trade-mark or design in the EV project whether in the
Buyer's country or any other country or place. In the event that any dispute
relating to such right or rights might arise, Buyer shall be entitled to
cancel this Contract at his own accord and shall remain immune from any
liability and responsibility for whatever arises from such dispute.
14.2. The Seller shall be solely responsible therefore and shall defend,
reimburse, indemnify and keep the Buyer innocent thereof at the Seller's risk
and expense.
Page 7 of 8
<PAGE>
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
ARTICLE 15. OBSERVANCE OF SECRECY
15.1 During the term of this Contract, the Seller shall hold confidential and
will note disclose in any manner to any third party or parties any information
concerning all information furnished by the Buyer under this Contract.
ARTICLE 16. SIGNATURE
IN WITNESS WHEREOF, this Contract to be executed by their duly authorized
representatives on the day and year first above written.
AMERIGON, INC. SAMSUNG HEAVY INDUSTRIES, INC.
By: /s/ ZAYA S. YOUNAN By: /s/ JU WHA JEONG
-------------------------------- -------------------------------
Zaya S. Younan Ju Wha Jeong
-------------------------------- -------------------------------
Title: Vice President Title: Vice President
-------------------------------- -------------------------------
Date: November 25, 1994 Date: November 25, 1994
-------------------------------- -------------------------------
Page 8 of 8
<PAGE>
EXHIBIT A
Work Scope & Program Cost
Breakdown
<PAGE>
EXHIBIT A
WORK SCOPE
<TABLE>
ITEM AMERIGON SAMSUNG REMARK
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 STYLING &
SKIN (POINT & CARVE) O SAMSUNG WILL PROVIDE SKIN
DATA (COMPUTER DATA & DRAWING)
- ------------------------------------------------------------------------------------------------------------------
2 SKIN FAIRING; CURVE
DATA - SURFACE DATA O MAKING SMOOTH SURFACE USING CAD
SYSTEM
- ------------------------------------------------------------------------------------------------------------------
3 ENGINEERING
- - PACKAGE LAYOUT 0 0 - SAMSUNG WILL PROVIDE BASIC
LAYOUT DRAWING
- - MASTER DRAWING 0 - AMERIGON MUST MEASURE
ACCURATE CHASSIS
MOUNTING POINT (SENTRA
93,94 MY)
- - DETAIL DRAWING 0
- - ASSY DRAWING 0 - SAMSUNG WILL PROVIDE
COLOR COMBINATION CHART
- - INSTAL DRAWING 0
- -------------------------------------------------------------------------------------------------------------------
4 PROTOTYPE VEHICLE (2) O INCLUDE ALL PARTS
- -------------------------------------------------------------------------------------------------------------------
5 TOOLS & FIXTURE O ALL COMPONENTS AND FRAME
ASSEMBLY FIXTURES
- -------------------------------------------------------------------------------------------------------------------
6 PARTS (48) O O SEE PROCUREMENTS
RESPONSIBILITY (EXHIBIT E)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- - Amerigon must control all the sub-companies which provide components to
Amerigon for this EV project, in order to well correspond between Samsung and
sub-companies under Amerigon's control.
- - Amerigon must design new SEV IV and all engineering drawings, however,
maintaining SEV III styling (exterior & interior) only.
- - Samsung can not provide parts drawing because there is no drawing about
SEV III (That is hand made product).
- - Samsung use CATIA computer system, so Amerigon must provide above mentioned
drawing by CATIA data and/or paper drawing. (Preliminary Release;
APR. 30, 1995, Final Release: OCT. 30, 1995).
- - Amerigon must make new EPL (Engineering parts List) Reference to the
Attachment Detail Parts List (15 pages).
1 of 3
<PAGE>
DEVELOPING FLOW
[Development Flowchart]
<PAGE>
ACTIVITIES
DEFINITION
- - DESIGN AND DEVELOPMENT
Amerigon will perform the necessary design and analyses required to verify
the existing Samsung body and frame design for their SEV. This includes
completing the body design (interior and exterior) with all the electrical and
component system integration. Amerigon will be responsible for developing all
the master and detailed drawings and tooling for limited volume manufacturing
purposes. This includes all the fit and function trials on prototype
components. During this period Samsung will have engineering staff available
at Amerigon for training and program coordination with Korea. In addition, we
will hold meetings as required in Korea and the U.S. to discuss the program
status. Amerigon to supply the drawings necessary to fabricate the parts that
Amerigon has designed. For the skin-related interior and exterior body and
trim pieces and complicated cast pieces, Amerigon will supply section and part
drawings. Amerigon will not supply detailed drawings for carry-over parts but
will provide the outline package.
- - COMPONENT TOOLING & PROTOTYPE ASSEMBLY FIXTURES
Amerigon (including our suppliers) will design and assemble the component
tooling suitable to manufacture 50 sets of electric vehicle parts. All the
tooling with the exception of carryover parts will be manufactured by
Amerigon. Tooling will include simple assembly fixtures for completion of the
two vehicles and fixtures for final frame assembly in Korea. The
deliverables for this activity to Buyer are all the engineering drawings and
reports
- - PROTOTYPE BUILD, EVALUATION & DESIGN VALIDATION
Amerigon will build two complete vehicles for basic performance, stability and
limited durability testing. These two completed vehicles will be shipped to
Samsung for their final approval. Amerigon will purchase all the necessary
components to complete these two vehicles including the carryover parts.
Amerigon will also provide Samsung with all the needed information including
company names, addresses, and product description, etc., for carry-over parts.
The deliverables for this activity to Buyer are two (2) completed Evs.
<PAGE>
ACTIVITIES
DEFINITION
- - PRODUCTION OF PARTS
Amerigon will manufacture two completed vehicles and 40 sets of parts as
assembly kits that will include sub-assembled components as outlined in
Procurement Responsibility. We will also manufacture 8 complete sets of parts
for use as spares. Amerigon will also provide an experienced engineer on-site
to assist Samsung with final vehicle assembly limited to the time period shown
in the program schedule. The deliverable for this activity to Buyer are 48
sets of part kits.
- - TECHNICAL SUPPORT
Amerigon will do technical support for body in white component assembly in
Korea with his expense including freight, meal, accommodation charge
irrespective of the period.
- - Technical Support
- Request information for Korea Homolgation
- Owner's Manual
- Service Manual
- Assembly Manual
- Engineering Part List
- Tool and Jigs List
<PAGE>
AMERIGON
- ------------------------------------------------------------------------------
SUMMARY OF PROPOSAL COSTS
PROGRAM ACTIVITY AMERIGON'S FINAL PROPOSAL QUOTATION
SUBMITTED 9-29-94
- ------------------------------------------------------------------------------
Design & Development $1,750,000
- ------------------------------------------------------------------------------
*Component Tooling & $2,827,500
Prototype Assembly
and Fixtures (Includes
RTM Tooling)
- ------------------------------------------------------------------------------
Prototype Build, $1,105,200
Evaluation & Design
Validation
- ------------------------------------------------------------------------------
*Production of 48 $2,230,750
Vehicle Part Kits
- ------------------------------------------------------------------------------
Installation of Climate $90,000
Control System in the seats
- ------------------------------------------------------------------------------
Tooling Cost for Final $92,850
Frame Assembly (Jigs & Assembly
Fixtures)
- ------------------------------------------------------------------------------
Technical Support for $72,000
Body in White
Component Assembly
in Korea
- ------------------------------------------------------------------------------
Packaging Cost $83,700
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL $8,252,000
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
*Note: The tooling cost includes RTM for body components. The cost for
production of 48 vehicles includes new responsibility for additional parts.
See attached revised procurement responsibility.
<PAGE>
EXHIBIT B
Preliminary Overall Vehicle
Specification
<PAGE>
EXHIBIT B
Preliminary Overall Vehicle Specification
for Samsung SEV-IV
1.0 VEHICLE TYPE
Passenger: 4
Type: 2 Door Hatch Back
Drive: Front Wheel (Motor Direct Drive)
2.0 PHYSICAL DIMENSIONS
Overall Length: 4,055 mm
Width: 1,675 mm
Height: 1,490 mm
Wheelbase: 2,485 mm
Track Front: 1,440 mm
Rear: 1,425 mm
Curb Weight: 1,400 kg (target)
Weight Distribution: 50/50 With One Occupant
3.0 CLEARANCES
Nominal Ground Clearance: 165mm
Depth of pothole that can be cleared: N.A.
Angle of ramp that can be cleared: 15 DEG. (Min.)
Approach Angle: 17 DEG. (Min.)
Departure Angle: 17 DEG. (Min.)
Height of curb that can be cleared: N.A.
Front wheel to fender: Amerigon recommends 30-40 mm
(Samsung to verify)
Rear wheel to fender: Amerigon recommends 30-40 mm
(Samsung to verify)
4.0 ACCELERATION AND POWER
Acceleration: 0 to 400 m: 21.0 sec.
0 to 100 kph: 16 sec.
Max. Speed: More than 120 km/h
Hill Climbing Ability: 20% Min. at 15 kph for up to 5 Min.
Page 1 of 4
<PAGE>
VEHICLE SPECIFICATION CONT.
5.0 RANGE (MAINTENANCE FREE LEAD ACID BATTERY)
Constant Speed (40 kph): More than 150 km
City Drive (Seoul): More than 60 km
6.0 BRAKE
Performance
60 to 0 kph: 43 m (max.)
30 to 0 kph: 18 m (max.)
Max. Speed to 0 kph: 75 m
Max. deceleration by brakes: 1g (max.)
Wet Pavement 60 to 0 kph: 52 m (max.)
Uniformity of braking deceleration
Spec to be developed by Samsung
Regeneration before brake application
Up to 0.3 g (Adjustable by controller) when acceleration pedal is fully
lifted. Maximum regen must be adjustable by Samsung
Regenerative during brake application
Up to 0.6 g (Adjustable by controller) when accelerator is fully lifted.
Maximum regen must be adjustable by Samsung
Response Time
Response Time from pedal application: 100 msec (max.)
Response Time from pedal release: 100 msec (max.)
Vehicle stability during braking
Must be able to maintain control under heavy braking.
Maximum 0.25 degree yaw.
Brake noise: Less than 50 db
Parking Brake: Meets FMVSS standards
7.0 SUSPENSION
According to Basic Vehicle (Carry Over)
8.0 TIRE AND WHEEL
Tire Size: 175/70/R13 - use Goodyear Invicta GLR
Temp.: T105/70/D14
Wheel Size: 5.5 J x 13
Page 2 of 4
<PAGE>
VEHICLE SPECIFICATION CONT.
9.0 HANDLING
Lateral Acceleration: 0.75 g (min.)
Degree of body roll: 3.5 degree max. at 0.5 g
5.0 degree max. at max. accel.
10.0 DRIVE TRAIN
Motor & Controller Type: AC Induction
Power: Satisfy Vehicle Performance
Energy Used: Satisfy Driving Range
Transmission Type: Single Speed
Final Drive: Differential
11.0 OCCUPANT INTERACTION
Display Supported:
Speedometer, Odometer, Turn Signal, Drive Engaged, Battery Level,
Motor Temp., Lights for Brake, High Beam Low Energy Remaining,
Seat Belt, Door Opening, Hood Opening, Refer to Ordering Spec.
12.0 OCCUPANT PROTECTION AND SAFETY
Crash Worthiness: Per Amerigon's Specification (Do not do vehicle
tests, Simulation only)
Seat Belts: Frame will be hard points for 3 points belts
High Voltage Isolation Incorporated in controller
High Voltage Crash Disconnect
Battery Containment Requirements
Fail-safe models for loss of power brakes and steering revert to manual
Field of Vision: According to Samsung SEV - III
Do not start*: At Charging
To prevent quick start, driver has to foot brake
pedal when start
13.0 DURABILITY
Warranty: 1 year 24,000 km (min.)
Target Life
Batteries: 1,000 Recharge cycle
Brakes: 120,000 km
Shock Absorbers: 150,000 km
Tire: 50,000 km
Battery pack replacement in field service possible
Page 3 of 4
<PAGE>
VEHICLE SPECIFICATION CONT.
14.0 MAINTENANCE
Periodic maintenance: Check transmission oil
Check coolant
15.0 ENVIRONMENT
Temp. Range: -20 DEG. C to 40 DEG. C Operating
-40 DEG. C to 85 DEG. C Storage
Humidity Range: 0 to 100% Non-condensing
Rain on Chassis: Must not damage or impair function
Must not allow any current leakage from/into electrical
system
16.0 INTERFACES
Electrical Supply to Charger: 220 V 15 Amps. 60 Cycles
Test Equipment Interface: RS 232 C
Tow hooks and towing provisions 2 in front, 1 in rear
Vehicle ID Number: Assigned by Samsung
Require warning level: SAE standard on high voltage
systems
Page 4 of 4
<PAGE>
EXHIBIT C
Component Specification
<PAGE>
EXHIBIT C
SAMSUNG SEV - IV COMPONENT SPECIFICATION
ITEMS REMARKS
- -------------------------------------------------------------------------------
transmission single speed same
- -------------------------------------------------------------------------------
brakes carry over same
vacuum assist
- -------------------------------------------------------------------------------
suspension carry over same
- -------------------------------------------------------------------------------
tires 175/70 R 13 Amerigon recommends using
T105/70 D 14 Goodyear Invicta GLR model
for low rolling resistance
- -------------------------------------------------------------------------------
wheels 5.5 J x 13 same
wheel covers
- -------------------------------------------------------------------------------
instruments digital clock same
gauges:
speedometer Amerigon will also include
trip odometer the Energy Management
motor temp System
current meter -display screen control
battery level meter panel
warning lights
turn signals
brake/parking brake
EV failure
door ajar
low battery
high beam
fog lamp
seat belt
rear glass heating
- -------------------------------------------------------------------------------
glass windscreen: laminated same
door: tempered
back: tempered with
heater (on timer)
- -------------------------------------------------------------------------------
seats front: same
bucket type
level to slide
level to recline
head rest: up/down
rear:
fixed bench
head rests
cloth covering
- -------------------------------------------------------------------------------
Page 1 of 3
<PAGE>
COMPONENT SPECIFICATION CONT.
ITEMS REMARKS
- -------------------------------------------------------------------------------
interior console: same
with storage box
power window switch
ash tray: in dash
rear mirror: day/night
dual cloth visors
formed cloth headliner
door trim:
cloth in center
door speakers
trunk trim: fiberboard
pillar trim:
carpet
assist grip: passenger
coat hanger: rear seat
glove box: w/o lock
- -------------------------------------------------------------------------------
exterior bumper: 2.5 mph same
body color
door handle and trim
standard color
mirrors: manual remote
body color
glass seal: black PVC
wheelwell liners
tow hooks: front and rear
badges: film type
- -------------------------------------------------------------------------------
Audio ETR + cassette same, with the
antenna: induction type exception of external
on glass antenna
speaker: in front doors
5" or larger
- -------------------------------------------------------------------------------
Page 2 of 3
<PAGE>
COMPONENT SPECIFICATION CONT.
ITEMS REMARKS
- -------------------------------------------------------------------------------
Electrical exterior lamp same
head lamp with turn
signal (semi-sealed
halogen type)
front fog lamp
rear combo lamp
license plate lamp
interior lamp
single horn
power windows
12V 60 AH aux btty
switches and controls:
fog lamp
hazards
power windows
door lock
emergency
direction (fwd, n, rev)
brake lights
horn
window heater
washer and wiper
variable intermittent
low and high settings
- -------------------------------------------------------------------------------
Heating four speed fan same
rotary temp switch
- -------------------------------------------------------------------------------
Climate Controlled CCS module in seat Amerigon recommends
Seat (option) control switch on console using optional unit
- -------------------------------------------------------------------------------
Page 3 of 3
<PAGE>
EXHIBIT D
Summary of Program Schedule
<PAGE>
<TABLE>
Page 1 of 4
AMERIGON
- --------------------------------------------------------------------------------------------------------
SAMSUNG SEV - IV PRELIMINARY PROGRAM SCHEDULE
- --------------------------------------------------------------------------------------------------------
9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Amerigon to provide original +
proposal
Draft and finalize agreement for
Samsung's approval ---
Technical discussion in Korea XX
- SEV III review --
- digitized SEV-IV data +
- define contact names +
- define COP, materials, +
and processes from
detailed parts list
Packaging
Preliminary skin fairing, ----
component selection,
layout
Frame Engineering XXXXXXXXXXXXXXXXXXXXXXXX
- Design --------------
- Tooling -----------
- Manufacture parts -----
Body Engineering XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- Design: Check surfaces, ---------------------
rebating, styling, exterior
parts -----------------
- Tooling
- Manufacture parts -----------
</TABLE>
<PAGE>
Page 2 of 4
<TABLE>
AMERIGON
- --------------------------------------------------------------------------------------------------------
SEV - IV PRELIMINARY PROGRAM SCHEDULE (CONT.)
- --------------------------------------------------------------------------------------------------------
9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Mechanical Systems XXXXXXXXXXXXXXXXXXXXXXXXXX
- Design and layout ------------------ . . . .
- Tooling ----------
- Manufacture parts --
Interior Engineering XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- Layout and ergonomics ----
- IP design and layout -----------------------
- IP tooling ----------------
- IP parts manufacture . . .---
- Door design and layout ---------------------
- Door tooling ------------
- Door parts manufacture . . . .--------
- Trim/seats/rebate design -------------------
- Trim/seats/rebate tooling ------------------
- Trim/seats/rebate parts . . .-----
manufacture
Electrical Engineering XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X X X X
- Design ------------------------
- Procure parts ----------------- - - - - - -
Prototype Construction XXXXXXXXXXXXXXX
- Frame ----
- Mechanical system ------
- Interior ----
- Body ----
- Electrical ------
- Testing . . --
</TABLE>
<PAGE>
Page 3 of 4
<TABLE>
AMERIGON
- --------------------------------------------------------------------------------------------------------
SEV - IV PRELIMINARY PROGRAM SCHEDULE (CONT.)
- --------------------------------------------------------------------------------------------------------
9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Ship 2 units to Samsung +
Samsung review 2 prototypes --
during testing at Amerigon
Samsung agrees to release of +
parts
Samsung agrees to release of +
tools XXXXXXXXXXXXXXXXX
----
Amerigon builds 48 kits -----
- Frame parts build ------
- Frame sub-assemblies ------
- COP procurement ------
- Kit assembly XXXX
- Ship kits to Samsung --
Ship tools to Samsung --
- Packing
- Ship
</TABLE>
<PAGE>
Page 4 of 4
<TABLE>
AMERIGON
- --------------------------------------------------------------------------------------------------------
SEV - IV PRELIMINARY PROGRAM SCHEDULE (CONT.)
- --------------------------------------------------------------------------------------------------------
9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Amerigon prepares drawings -------------------------. . .
Amerigon prepares operator ----------
manual
Amerigon prepares service ----------
manual
Amerigon provides technical ----------
advice on kit assembly
Amerigon provides preliminary +
layout
Amerigon provides final layout +
Amerigon provides +
homologation documents
Amerigon provides preliminary +
engineering parts list
Amerigon provides 2 revisions + +
of final engineering parts list
Amerigon provides preliminary +
assembly tooling list
Amerigon provides final +
assembly tooling list
</TABLE>
<PAGE>
_________________________________________________________
EXHIBIT E
Procurement Responsibility
_________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS BODY
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------------------
1000 BODY QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- --- -------------------- --- ------- -------- -------- ----------- -------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1100 SPACE FRAME & PANEL ASSY IN SAMSUNG
1101 UNDERBODY FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON
1102 UNDERBODY PANEL * NEW PLASTIC AMERIGON AMERIGON AMERIGON AMERIGON
1103 FRONTEND FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON I/FR BPP FRAME
1104 SIDE FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON
1105 ROOF STRUCTURE FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON
1106 FRONT FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON
1107 REAR FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON I/FR BPR RAIL
1108 WHEELHOUSE FRONT PANEL 1 NEW PLASTIC AMERIGON AMERIGON AMERIGON AMERIGON
1109 WHEELHOUSE REAR PANEL 1 NEW PLASTIC AMERIGON AMERIGON AMERIGON AMERIGON
1200 COVER PLATE RTM NOTE:
1201 SIDE PANEL 1/1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG AMERIGON TO
1202 FRONT FENDER, LH/RH 1/1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG INVESTIGATE TOOL
1203 ROOF 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG COST AND TIMING
1204 FRONTEND PANEL (COWL) * NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG OF THE RTM PARTS.
1205 REAREND PANEL * NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG
1300 HOOD
1301 PNL-HOOD OUTER 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG SEE RTM NOTE
1302 PNL-HOOD INNER 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG
1303 HINGE ASSY-HOOD, LH 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
1304 HINGE ASSY-HOOD, RH 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
1305 STAY ROD 1 NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
1306 BUMPER-HOOD OVER SLAM 2 COP RUBBER AMERIGON AMERIGON AMERIGON AMERIGON
1307 BUMPER-HOOD GUIDE 2 COP RUBBER AMERIGON AMERIGON AMERIGON AMERIGON
1308 WEATHER STRIP ASSY-HOOD
(REAR) 1 COP/ RUBBER AMERIGON AMERIGON AMERIGON AMERIGON
MODIFY
</TABLE>
PAGE 1 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS BODY
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------------------
1000 BODY QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- --- -------------------- --- ------- -------- -------- ----------- -------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1309 SEAL STRIP ASSY-HOOD 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
(FRONT) MODIFY
1310 STRIKER ASSY-HOOD 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
1311 LATCH ASSY-HOOD 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
1312 HANDLE ASSY-HOOD 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
LATCH RELEASE
1313 CABLE ASSY-HOOD 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
RELEASE
1400 DOOR
1401 PANEL-DR OUTER, LH 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG SEE RTM NOTE
1402 PANEL-DR OUTER, RH 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG
1403 MEMBER ASSY-DOOR 1 NEW STEEL/AL AMERIGON AMERIGON AMERIGON AMERIGON PIPE
REINFORCE, LH
1404 MEMBER ASSY-DOOR 1 NEW STEEL/AL AMERIGON AMERIGON AMERIGON AMERIGON PIPE
REINFORCE, RH
1405 PANEL-DOOR INNER, LH 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG
1406 PANEL-DOOR INNER, RH 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG
1407 FRAME ASSY-DOOR, LH 1 COP/NEW STEEL/AL AMERIGON AMERIGON AMERIGON AMERIGON
1408 FRAME ASSY-DOOR, RH 1 COP/NEW STEEL/AL AMERIGON AMERIGON AMERIGON AMERIGON
1407 HINGE ASSY-DOOR UPPER, 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
LH
1408 HINGE ASSY-DOOR UPPER, 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
RH
1409 HINGE ASSY-DOOR LOWER, 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
LH
1410 HINGE ASSY-DOOR LOWER, 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
RH
1411 REGULATOR ASSY-DOOR 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
WINDOW, LH
1412 REGULATOR ASSY-DOOR 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
WINDOW, RH
1413 LATCH ASSY-DOOR, LH 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
1414 LATCH ASSY-DOOR, RH 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
1415 STRIKER ASSY-DOOR 2 COP AMERIGON AMERIGON AMERIGON AMERIGON
1416 ROD DOOR INSIDE HANDLE, 1 NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
LH
1417 ROD DOOR INSIDE HANDLE, 1 NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
RH
1418 ROD DOOR SAFETY LOCK, 1 NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
LH
1419 ROD DOOR SAFETY LOCK, 1 NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
RH
1420 KNOB-DR SAFETY LOCK, LH 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
</TABLE>
PAGE 2 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS BODY
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------------------
1000 BODY QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- --- -------------------- --- ------- -------- -------- ----------- -------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1421 KNOB-DOOR SAFETY 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
LOCK, RH
1422 HANDLE ASSY-DOOR 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
INSIDE, LH
1423 HANDLE ASSY-DOOR 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
INSIDE, RH
1424 HANDLE ASSY-DOOR 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
OUTSIDE, LH
1425 HANDLE ASSY-DOOR 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
OUTSIDE, RH
1426 CHECKER ASSY-DOOR, 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
LH
1427 CHECKER ASSY-DOOR, RH 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
1428 GLASS-DOOR DROP, LH 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
1429 GLASS-DOOR DROP, RH 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
1430 CHANNEL-DOOR QUADRANT, 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
LH
1431 CHANNEL-DOOR QUADRANT, 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
RH
1432 RUN ASSY-DOOR GLASS, LH 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
MODIFY
1429 RUN ASSY-DOOR GLASS, RH 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
MODIFY
1430 CHANNEL-DOOR GUIDE, LH 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
MODIFY
1431 CHANNEL-DOOR GUIDE, RH 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
MODIFY
1432 WEATHER STRIP-BODY 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
SIDE, LH MODIFY
1433 WEATHER STRIP-BODY 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
SIDE, RH MODIFY
1434 WEATHER STRIP-DOOR 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
SIDE, LH MODIFY
1435 WEATHER STRIP-DOOR 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
SIDE, RH MODIFY
1436 WEATHER STRIP ASSY-BELT 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
OUTSIDE, LH MODIFY
1437 WEATHER STRIP ASSY-BELT 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
OUTSIDE, RH MODIFY
1438 WEATHER STRIP-BELT 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
INSIDE, LH MODIFY
1439 WEATHER STRIP-BELT 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
INSIDE, RH MODIFY
1440 PANEL ASSY-DOOR TRIM, 1 NEW WOOD AMERIGON AMERIGON AMERIGON AMERIGON
LH STOCK/
FRP
1441 PANEL ASSY-DOOR TRIM, 1 NEW WOOD AMERIGON AMERIGON AMERIGON AMERIGON
RH STOCK/
FRP
1442 PANEL ASSY-DOOR UPPER 1 NEW CLOTH AMERIGON AMERIGON AMERIGON AMERIGON
TRIM, RH
1143 PANEL ASSY-DOOR UPPER 1 NEW CLOTH AMERIGON AMERIGON AMERIGON AMERIGON
TRIM, LH
1444 MAP POCKET-FRONT DOOR 1 NEW ABS AMERIGON AMERIGON AMERIGON AMERIGON
TRIM, LH
</TABLE>
PAGE 3 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS BODY
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------------------------
1000 BODY QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- --------- ---- --------- ---------- --------- ------------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1445 MAP POCKET-FRONT DOOR TRIM, RH 1 NEW ABS AMERIGON AMERIGON AMERIGON AMERIGON
1446 SEAL-DOOR TRIM, LH 1 NEW VINYL AMERIGON AMERIGON AMERIGON AMERIGON
1447 SEAL-DOOR TRIM, RH 1 NEW VINYL AMERIGON AMERIGON AMERIGON AMERIGON
1448 HANDLE ASSY-DOOR GRIP, LH 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
1449 HANDLE ASSY-DOOR GRIP, RH 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
1500 TAIL GATE
1501 PANEL-TAIL GATE OUTER 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG SEE RTM NOTE
1502 PANEL-TAIL GATE INNER 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON SAMSUNG
1503 HINGE ASSY-TAIL GATE, LH 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
1504 HINGE ASSY-TAIL GATE, RH 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
1505 BUMPER-TAIL GATE OVER SLAM 2 COP AMERIGON AMERIGON AMERIGON AMERIGON
1504 LIFTER-TAIL GATE 2 COP AMERIGON AMERIGON AMERIGON AMERIGON
1505 STRIKER ASSY-TAIL GATE 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
1506 LATCH ASSY-TAIL GATE 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
1507 DOOR ASSY-BATTERY RECHARGE 1 NEW FRP AMERIGON AMERIGON AMERIGON SAMSUNG
1508 BUMPER-BATTERY RECHARGE
OVER SLAM 2 COP RUBBER AMERIGON AMERIGON AMERIGON AMERIGON
1509 BATTERY RECHARGE DOOR LOCK SYS. * COP AMERIGON AMERIGON AMERIGON AMERIGON INCLUDE CABLE
1510 WEATHER STRIP-TAIL GATE 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
1600 KEY SET
1601 KEY SET 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
</TABLE>
PAGE 4 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS INTERIOR TRIM
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------------
2000 INTERIOR TRIM QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- ----------------- --- ------ -------- ------- ----------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2100 INSTRUMENT PANEL
2101 INSTRUMENT PANEL ASSY 1 NEW ABS/PC OR PP INJECTION AMERIGON AMERIGON AMERIGON AMERIGON
2102 GLOVE BOX ASSY 1 NEW ABS OR PP INJECTION AMERIGON AMERIGON AMERIGON AMERIGON
2103 LOCK ASSY-GLOVE BOX 1 COP AMERIGON AMERIGON AMERIGON AMERIGON W/O KEY
2104 CLUSTER FACIA PANEL 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2105 CENTER FACIA PANEL 1 NEW ABS SHI WANTS INJ. AMERIGON AMERIGON AMERIGON AMERIGON
2106 TRAY-CTR FACIA 1 NEW ABS SHI WANTS INJ. AMERIGON AMERIGON AMERIGON AMERIGON PUSH & SLIDING
2107 SHROUD-STEERING COLUMN - UPR 1 COP/NEW PP OR ABS VAC CAST/FORM AMERIGON AMERIGON AMERIGON AMERIGON
2108 SHROUD-STEERING COLUMN - LWR 1 COP/NEW PP OR ABS VAC CAST/FORM AMERIGON AMERIGON AMERIGON AMERIGON
2109 CONSOLE ASSY 1 NEW ABS VAC CAST/FORM AMERIGON AMERIGON AMERIGON SAMSUNG
2200 SIDE TRIM
2201 FR & CTR PLR TRIM ASSY - LH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2202 FR & CTR PLR TRIM ASSY - RH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2203 QTR INR TRIM ASSY - LH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2204 QTR INR TRIM ASSY - RH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2205 QTR INR CTR TRIM ASSY - LH 1 NEW ABS + CLOTH VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON CLOTH COVER'G
2206 QTR INR CTR TRIM ASSY - RH 1 NEW ABS + CLOTH VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON CLOTH COVER'G
2207 COWL SIDE TRIM ASSY - LH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2208 COWL SIDE TRIM ASSY - RH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2209 DR SCUFF TRIM ASSY - LH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2210 DR SCUFF TRIM ASSY - RH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2211 REAR PLR TRIM ASSY - LH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2212 REAR PLR TRIM ASSY - RH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2300 ROOF TRIM
2301 HEAD LINING ASSY 1 NEW CLOTH HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2302 ASSIST HANDLE ASSY 1 COP RETRACT. TYPE AMERIGON AMERIGON AMERIGON AMERIGON
2303 SUN VISOR ASSY - LH 1 COP MEET TO H/LING AMERIGON AMERIGON AMERIGON SAMSUNG
2304 SUN VISOR ASSY - RH 1 COP MEET TO H/LING AMERIGON AMERIGON AMERIGON SAMSUNG
</TABLE>
PAGE 5 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS INTERIOR TRIM
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
-------------------------------------
2000 INTERIOR TRIM QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- --------------- --- ------- ----------- -------- ----------- ----- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2400 TRUNK TRIM
2401 REAR SHELF CENTER TRIM 1 NEW W/STOCK + W/PAPER HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON W/STOCK;WOODSTOCK
2402 LUGGAGE SIDE TRIM ASSY - LH 1 NEW BOARD + W/PAPER HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2403 LUGGAGE SIDE TRIM ASSY - RH 1 NEW BOARD + W/PAPER HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2404 LUGGAGE REAR TRIM ASSY 1 NEW BOARD + W/PAPER HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2405 LUGGAGE MAT 1 NEW W/PAPER TRIM'G OR CUT'G AMERIGON AMERIGON AMERIGON AMERIGON
2500 FLOOR & BRACKETS
2501 FLOOR CARPET ASSY 1 NEW NEEDLE TYPE HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2502 BRACKET-CLUSATER GAUGE MTG.LH 1 NEW SPCC PRESS AMERIGON AMERIGON AMERIGON AMERIGON SUPPORT TO I/P
2503 BRACKET-CLUSATER GAUGE MTG.RH 1 NEW SPCC PRESS AMERIGON AMERIGON AMERIGON AMERIGON SUPPORT TO I/P
2504 BRACKET-GL/BOX HINGE MTG 1 NEW SPCC PRESS AMERIGON AMERIGON AMERIGON AMERIGON SUPPORT TO GL/BOX
2505 STRIKER ASSY-GL/BOX 1 COP/NEW SM2SC PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2506 BRACKET ASSY-CTR SUPPORT 1 NEW SPCC PRESS AMERIGON AMERIGON AMERIGON AMERIGON SUPPORT TO I/P
2600 VENTILATION
2601 NOZZLE ASSY-DEFROSTER 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON SAMSUNG TO APPROVE
2602 NOZZLE ASSY-DEFROSTER SIDE, LH 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON STYLING
2603 NOZZLE ASSY-DEFROSTER SIDE, RH 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON
2604 VENT LOUVER ASSY-CTR 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON
2605 VENT LOUVER ASSY-SIDE, LH 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON
2606 VENT LOUVER ASSY-SIDE, RH 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON
2607 HOSE ASSY-SIDE DEFROSTER, LH 1 NEW PP AMERIGON AMERIGON AMERIGON AMERIGON USE BEST PROCESS
2608 HOSE ASSY-SIDE DEFROSTER, RH 1 NEW PP AMERIGON AMERIGON AMERIGON AMERIGON USE BEST PROCESS
2609 DUCT ASSY-CTR AIR VENT 1 NEW ABS AMERIGON AMERIGON AMERIGON AMERIGON USE BEST PROCESS
2610 DUCT ASSY-SIDE AIR VENT, LH 1 NEW ABS AMERIGON AMERIGON AMERIGON AMERIGON USE BEST PROCESS
2611 DUCT ASSY-SIDE AIR VENT, RH 1 NEW ABS AMERIGON AMERIGON AMERIGON AMERIGON USE BEST PROCESS
2612 HEATER CONTROL COP AMERIGON AMERIGON AMERIGON AMERIGON
2613 HEATER ASSY COP AMERIGON AMERIGON AMERIGON AMERIGON ELECTRIC
</TABLE>
PAGE 6 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS INTERIOR TRIM
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
----------------------------------------------------
2000 INTERIOR TRIM QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- ------------- --- ------- -------- ------- ----------- ----- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2700 SEAT
2701 FRONT SEAT ASSY, LH 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
2702 FRONT SEAT ASSY, RH 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
2703 HEAD REST ASSY 2 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
2704 CUSHION ASSY-REAR SEAT 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
2705 BACK ASSY-REAR SEAT 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
2800 SEAT BELT
2801 BELT ASSY-FRONT SEAT, LH 1 COP AMERIGON AMERIGON SAMSUNG SAMSUNG ELR 3PT
2802 BELT ASSY-FRONT SEAT, RH 1 COP AMERIGON AMERIGON SAMSUNG SAMSUNG ELR 3PT
2803 BELT ASSY-FRONT SEAT, LH 1 COP AMERIGON AMERIGON SAMSUNG SAMSUNG ELR 3PT
2804 BELT ASSY-FRONT SEAT, RH 1 COP AMERIGON AMERIGON SAMSUNG SAMSUNG ELR 3PT
</TABLE>
PAGE 7 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS EXTERIOR TRIM
&
PROCUREMENT RESPONSIBILITY
3000 EXTERIOR TRIM QTY COP/NEW MATERIAL PROCESS
- ---- ------------- --- ------- -------- -------
<S> <C> <C> <C> <C> <C>
3100 LAMP
3101 LAMP ASSY-HEAD, LH (WITH T/SIGNAL) 1 NEW LENS:PC LENS:INJECTION
3102 LAMP ASSY-HEAD, RH (WITH T/SIGNAL) 1 HGS:VACUUM CAST'G
3103 LAMP ASSY-FRONT FOG 2 NEW/COP
3104 LAMP ASSY REAR COMB, LH 1 NEW LENS:ACRYL LENS:INJECTION
3105 LAMP ASSY REAR COMB, RH 1 HGS:VACUUM CAST'G
3106 LAMP ASSY-LICENSE PLATE 2 COP
3200 MIRROR & GLASS
3201 MIRROR ASSY-INSIDE REAR VIEW 1 COP
3202 MIRROR ASSY-OUTSIDE REAR VIEW, LH 1 COP/MODIFY BASE PLATE:NEW OR
3203 MIRROR ASSY-OUTSIDE REAR VIEW, RH 1 MODIFY
3204 GLASS ASSY-WINDSHIELD 1 NEW GLASS
3205 GLASS ASSY-TAIL GATE 1 NEW GLASS
3206 GLASS ASSY-FIXED GLASS, LH/RH 1/1 NEW GLASS
3207 COVER ASSY-COWL TOP 1 COP/NEW ABS OR PP VACUUM CASTING
3208 MOULD'G ASSY-WINDSHIELD GLASS 1 COP/NEW PVC EXTRUSION
3209 MOULD'G ASSY-TAIL GATE 1 COP/NEW PVC EXTRUSION
3210 MOULD'G ASSY-FIXED GLASS, LH/RH 1/1 COP/NEW PVC EXTRUSION
3300 BUMPER
3301 COVER-FRONT BUMPER 1 NEW TPO INJECTION OR ?
3302 RAIL-FRONT BUMPER 1 NEW AL
3303 COVER-REAR BUMPER 1 NEW TPO INJECTION OR ?
3304 RAIL-REAR BUMPER 1 NEW AL
3400 WIPER & WASHER
3401 WIPER ASSY-WINDSHIELD (WITH LINKAGE) 1 COP/MODIFY
3402 WASHER ASSY-WINDSHIELD 1 COP
3403 RESERVOIR ASSY-WINDSHIELD WASHER 1 COP
</TABLE>
<TABLE>
<CAPTION>
LIMITED PRODUCT
- -------------------------------------------------------------
ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ----------- ----- -------- --------- -------
<S> <C> <C> <C> <C>
AMERIGON AMERIGON AMERIGON AMERIGON ECE 20.02
AMERIGON AMERIGON AMERIGON AMERIGON
AMERIGON AMERIGON AMERIGON AMERIGON NEW LENS & MAT'L
STYLING
AMERIGON AMERIGON AMERIGON AMERIGON
AMERIGON AMERIGON AMERIGON AMERIGON
AMERIGON AMERIGON AMERIGON AMERIGON
AMERIGON AMERIGON AMERIGON SAMSUNG MEET TO STYLING
AMERIGON AMERIGON AMERIGON AMERIGON
AMERIGON AMERIGON AMERIGON AMERIGON MEET TO STYLING
AMERIGON AMERIGON AMERIGON AMERIGON LAMINATED
AMERIGON AMERIGON AMERIGON AMERIGON TEMPERED
AMERIGON AMERIGON AMERIGON AMERIGON TEMPERED
AMERIGON AMERIGON AMERIGON SAMSUNG
AMERIGON AMERIGON AMERIGON AMERIGON SAMSUNG TO CONFIRM
AMERIGON AMERIGON AMERIGON AMERIGON SAMSUNG TO CONFIRM
AMERIGON AMERIGON AMERIGON AMERIGON SAMSUNG TO CONFIRM
AMERIGON AMERIGON AMERIGON AMERIGON FMVSS 215
AMERIGON AMERIGON AMERIGON AMERIGON FRONT END FRAME
AMERIGON AMERIGON AMERIGON AMERIGON FMVSS 215
AMERIGON AMERIGON AMERIGON AMERIGON REAR END FRAME
AMERIGON AMERIGON AMERIGON AMERIGON 2 SPEED INTERM'T
AMERIGON AMERIGON AMERIGON SAMSUNG
AMERIGON AMERIGON AMERIGON SAMSUNG WITH HOSE ASSY
</TABLE>
PAGE 8 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS INTERIOR TRIM
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
----------------------------------------------
3000 EXTERIOR TRIM QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- ------------- --- ------- -------- ------- ----------- ----- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3500 TRIM
3501 EMBLEM 1 NEW TAPE SAMSUNG SAMSUNG SAMSUNG SAMSUNG DESIGN BY SAMSUNG
3502 WHEEL GUARD-FRONT, LH 1 NEW PE VACUUM FORMING AMERIGON AMERIGON AMERIGON SAMSUNG
3503 WHEEL GUARD-FRONT, RH 1 NEW PE VACUUM FORMING AMERIGON AMERIGON AMERIGON SAMSUNG
3504 WHEEL GUARD-REAR, LH 1 NEW PE VACUUM FORMING AMERIGON AMERIGON AMERIGON SAMSUNG
3505 WHEEL GUARD-REAR, RH 1 NEW PE VACUUM FORMING AMERIGON AMERIGON AMERIGON SAMSUNG
3506 MUD GUARD-FRONT, LH/RH 1/1 NEW/COP VACUUM FORMING AMERIGON AMERIGON AMERIGON SAMSUNG MEET TO STYLING
3507 MUD GUARD-FRONT, LH/RH 1/1 NEW/COP VACUUM FORMING AMERIGON AMERIGON AMERIGON SAMSUNG MEET TO STYLING
</TABLE>
PAGE 9 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS POWER TRAIN
&
PROCUREMENT RESPONSIBILITY
5000 POWER TRAIN QTY COP/NEW MATERIAL PROCESS
- ---- ----------- --- ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
5001 TRANS AXLE ASSY-MANUAL 1 COP/NEW
5002 PINION-SPEEDOMETER 1 COP PLASTIC OR STEEL INJECTION
5003 RING-LOCK, SPEEDOMETER PINION 1 COP PLASTIC OR STEEL INJECTION
5004 SEAL-O RING, SPEEDOMETER PINION 1 COP RUBBER INJECTION
5005 COUPLING-INPUT SHAFT, TRANS 1 COP/NEW OVER S45C MACHINING
5006 ADAPTER PLATE-CLUTCH HOUSING 1 NEW AL CAST'G/MACHIN'G
5007 DOWEL PIN-BLOCK TO TRANSMISSION 2 COP/NEW SICC MACHINING
5008 BRACKET & INSULATOR ASSY(MOTOR & T/M) 3-4 COP/MODIFY STEEL-RUBBER
</TABLE>
<TABLE>
<CAPTION>
LIMITED PRODUCT
------------------------------------------
5000 POWER TRAIN ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- ----------- ----------- ----- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
5001 TRANS AXLE ASSY-MANUAL AMERIGON AMERIGON AMERIGON AMERIGON
5002 PINION-SPEEDOMETER AMERIGON AMERIGON AMERIGON AMERIGON ABLE TO CHANGE WITH
5003 RING-LOCK, SPEEDOMETER PINION AMERIGON AMERIGON AMERIGON AMERIGON SPEEDO METER GEAR
5004 SEAL-O RING, SPEEDOMETER PINION AMERIGON AMERIGON AMERIGON AMERIGON ASSY-COP PART ONLY
5005 COUPLING-INPUT SHAFT, TRANS AMERIGON AMERIGON AMERIGON AMERIGON
5006 ADAPTER PLATE-CLUTCH HOUSING AMERIGON AMERIGON AMERIGON AMERIGON
5007 DOWEL PIN-BLOCK TO TRANSMISSION AMERIGON AMERIGON AMERIGON AMERIGON
5008 BRACKET & INSULATOR ASSY(MOTOR & T/M) AMERIGON AMERIGON AMERIGON AMERIGON BRACKET;MODIFY
</TABLE>
PAGE 10 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS CHASSIS
&
PROCUREMENT RESPONSIBILITY
6000 CHASSIS QTY COP/NEW MATERIAL PROCESS
- ---- ------- --- ------- --------- -------
<S> <C> <C> <C> <C> <C>
6100 BRAKE
6101 FRONT WHEEL BRAKE ASSY, LH 1 COP
6102 FRONT WHEEL BRAKE ASSY, RH 1 COP
6103 REAR WHEEL BRAKE ASSY, LH 1 COP
6104 REAR WHEEL BRAKE ASSY, RH 1 COP
6105 BRAKE PEDAL ASSY 1 COP
6106 BRAKE MASTER CYLINDER & BOOSTER 1 COP
6107 BRAKE FLUID LINE 1 COP/MODIFY
6108 VACUUM HOSE 1 COP/MODIFY
6109 VACUUM PUMP 1 COP
6110 VACUUM PUMP MOUNT'G BRACKET 1 NEW AL
6111 PARKING BRAKE & CABLE 1 COP/MODIFY
6200 SUSPENSION
6201 FRONT HUB & KNUCKLE ASSY, LH 1 COP
6202 FRONT HUB & KNUCKLE ASSY, RH 1 COP
6203 FRONT STRUT ASSY, LH 1 COP
6204 FRONT STRUT ASSY, RH 1 COP
6205 LOWER ARM 1 COP
6206 STABILIZER BAR 1 COP/NEW
6207 CROSS MEMBER 1 COP
6208 REAR AXLE ASSY, LH 1 COP
6209 REAR AXLE ASSY, RH 1 COP
6210 REAR STRUT ASSY, LH 1 COP
6211 REAR STRUT ASSY, RH 1 COP
6212 REAR SUSPENSION CONTROL ARM * COP
</TABLE>
<TABLE>
<CAPTION>
LIMITED PRODUCT
------------------------------------------
6000 CHASIS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- ------ ----------- ----- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
6100 BRAKE
6101 FRONT WHEEL BRAKE ASSY, LH AMERIGON AMERIGON AMERIGON SAMSUNG
6102 FRONT WHEEL BRAKE ASSY, RH AMERIGON AMERIGON AMERIGON SAMSUNG
6103 REAR WHEEL BRAKE ASSY, LH AMERIGON AMERIGON AMERIGON SAMSUNG
6104 REAR WHEEL BRAKE ASSY, RH AMERIGON AMERIGON AMERIGON SAMSUNG
6105 BRAKE PEDAL ASSY AMERIGON AMERIGON AMERIGON SAMSUNG
6106 BRAKE MASTER CYLINDER & BOOSTER AMERIGON AMERIGON AMERIGON SAMSUNG
6107 BRAKE FLUID LINE AMERIGON AMERIGON AMERIGON SAMSUNG
6108 VACUUM HOSE AMERIGON AMERIGON AMERIGON AMERIGON SAME AS EV ITEM
6109 VACUUM PUMP AMERIGON AMERIGON AMERIGON AMERIGON SAME AS EV ITEM
6110 VACUUM PUMP MOUNT'G BRACKET AMERIGON AMERIGON AMERIGON AMERIGON
6111 PARKING BRAKE & CABLE AMERIGON AMERIGON AMERIGON SAMSUNG
6200 SUSPENSION
6201 FRONT HUB & KNUCKLE ASSY, LH AMERIGON AMERIGON AMERIGON SAMSUNG
6202 FRONT HUB & KNUCKLE ASSY, RH AMERIGON AMERIGON AMERIGON SAMSUNG
6203 FRONT STRUT ASSY, LH AMERIGON AMERIGON AMERIGON SAMSUNG AMERIGON SUPPLY ALL SPRINGS
6204 FRONT STRUT ASSY, RH AMERIGON AMERIGON AMERIGON SAMSUNG AMERIGON SUPPLY ALL SPRINGS
6205 LOWER ARM AMERIGON AMERIGON AMERIGON SAMSUNG
6206 STABILIZER BAR AMERIGON AMERIGON AMERIGON AMERIGON
6207 CROSS MEMBER AMERIGON AMERIGON AMERIGON SAMSUNG
6208 REAR AXLE ASSY, LH AMERIGON AMERIGON AMERIGON SAMSUNG
6209 REAR AXLE ASSY, RH AMERIGON AMERIGON AMERIGON SAMSUNG
6210 REAR STRUT ASSY, LH AMERIGON AMERIGON AMERIGON SAMSUNG AMERIGON SUPPLY ALL SPRINGS
6211 REAR STRUT ASSY, RH AMERIGON AMERIGON AMERIGON SAMSUNG AMERIGON SUPPLY ALL SPRINGS
6212 REAR SUSPENSION CONTROL ARM AMERIGON AMERIGON AMERIGON SAMSUNG
</TABLE>
PAGE 11 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS CHASSIS
&
PROCUREMENT RESPONSIBILITY
6000 CHASSIS QTY COP/NEW MATERIAL PROCESS
- ---- ------- --- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
6300 STEERING
6301 STEERING WHEEL 1 COP/MODIFY
6302 STEERING COLUMN & SHAFT 1 COP/MODIFY
6303 POWER STEERING GEAR BOX 1 COP
6304 POWER STEERING PUMP 1 COP
6305 POWER STEERING PUMP MOUNT'G BRACKET * NEW
6306 POWER STEERING HOSE * COP/MODIFY
6307 POWER STEERING MOTOR 1 COP
6308 POWER STEERING MOTOR MOUNT'G BRACKET 1 NEW
6309 ACCEL. PEDAL & CABLE ASSY * COP/MODIFY
6400 DRIVE SHAFT
6401 DRIVE SHAFT, LH COP/NEW
6402 DRIVE SHAFT, RH COP/NEW
6500 WHEEL & TIRE
6501 WHEEL 4 COP
6502 WHEEL COVER 4 COP
6503 TIRE 4 COP
6504 TEMPORARY TIRE 1 COP
</TABLE>
<TABLE>
<CAPTION>
LIMITED PRODUCT
------------------------------------------
6000 CHASIS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- ------ ----------- ----- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
6300 STEERING
6301 STEERING WHEEL AMERIGON AMERIGON AMERIGON SAMSUNG
6302 STEERING COLUMN & SHAFT AMERIGON AMERIGON AMERIGON SAMSUNG
6303 POWER STEERING GEAR BOX AMERIGON AMERIGON AMERIGON SAMSUNG
6304 POWER STEERING PUMP AMERIGON AMERIGON AMERIGON AMERIGON
6305 POWER STEERING PUMP MOUNT'G BRACKET AMERIGON AMERIGON AMERIGON AMERIGON
6306 POWER STEERING HOSE AMERIGON AMERIGON AMERIGON SAMSUNG
6307 POWER STEERING MOTOR AMERIGON AMERIGON AMERIGON AMERIGON SAME AS EV ITEM
6308 POWER STEERING MOTOR MOUNT'G BRACKET AMERIGON AMERIGON AMERIGON AMERIGON
6309 ACCEL. PEDAL & CABLE ASSY AMERIGON AMERIGON AMERIGON SAMSUNG
6400 DRIVE SHAFT
6401 DRIVE SHAFT, LH AMERIGON AMERIGON AMERIGON SAMSUNG AMERIGON SUPPLY IF NEW
6402 DRIVE SHAFT, RH AMERIGON AMERIGON AMERIGON SAMSUNG AMERIGON SUPPLY IF NEW
6500 WHEEL & TIRE
6501 WHEEL AMERIGON AMERIGON AMERIGON SAMSUNG
6502 WHEEL COVER AMERIGON AMERIGON AMERIGON SAMSUNG REVIEW FOR STYLING
6503 TIRE AMERIGON AMERIGON AMERIGON SAMSUNG
6504 TEMPORARY TIRE AMERIGON AMERIGON AMERIGON SAMSUNG
</TABLE>
PAGE 12 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS ELECTRIC
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------------------
7000 ELECTRIC QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48)
- ---- -------- --- ------- -------- ------- ----------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7001 HARNESS ASSY - MAIN 1 NEW
7002 HARNESS ASSY - ENGINE ROOM 1 NEW AMERIGON AMERIGON AMERIGON SAMSUNG
7003 HARNESS ASSY - INSTRUMENT 1 NEW AMERIGON AMERIGON AMERIGON SAMSUNG
7004 HARNESS ASSY - TRUNK ROOM 1 NEW AMERIGON AMERIGON AMERIGON SAMSUNG
7005 HARNESS ASSY - ROOM LAMP 1 NEW AMERIGON AMERIGON AMERIGON SAMSUNG
7006 HARNESS ASSY - DOOR (DRIVE) 1 NEW AMERIGON AMERIGON AMERIGON SAMSUNG
7007 HARNESS ASSY - DOOR (ASSIST) 1 NEW AMERIGON AMERIGON AMERIGON SAMSUNG
7008 HARNESS ASSY - CONTROL 1 NEW AMERIGON AMERIGON AMERIGON SAMSUNG
7009 BATTERY 1 COP AMERIGON AMERIGON AMERIGON SAMSUNG
7010 BATTERY MOUNTING 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7011 SWITCH ASSY - COMBINATION 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7012 SWITCH ASSY - FOG LAMP 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7013 SWITCH ASSY - STOP LAMP 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7014 SWITCH ASSY - POWER WINDOW (O) 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7015 SWITCH ASSY - POWER WINDOW (A) 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7016 SWITCH ASSY - HAZARD 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7017 SWITCH ASSY - DOOR (D) 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7018 SWITCH ASSY - DOOR (A) 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7019 SWITCH ASSY - REAR HEATED 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7020 SWITCH ASSY - DIRECTION 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7021 SWITCH ASSY - EMERGENCY 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7022 COVER - DOOR SWITCH 2 COP AMERIGON AMERIGON AMERIGON AMERIGON
7023 LIGHTER COMPL. - CIGARETTE 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7024 RELAY 5 COP AMERIGON AMERIGON AMERIGON SAMSUNG
7025 LAMP ASSY - ROOM 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7026 MOTOR ASSY - WINDSHIELD WIPER 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7027 MOTOR ASSY - WINDSHIELD WASHER 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7028 MOTOR ASSY - POWER WINDOW (LH) 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7029 MOTOR ASSY - POWER WINDOW (RH) 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7030 AUDIO ASSY - ETR 1 COP AMERIGON AMERIGON SAMSUNG SAMSUNG
7031 ANTENNA ASSY - ROD 1 COP AMERIGON AMERIGON SAMSUNG SAMSUNG
7032 SPEAKER ASSY - DOOR 2 COP AMERIGON AMERIGON SAMSUNG SAMSUNG
7000 ELECTRIC REMARKS
- ---- -------- -------
<S> <C> <C>
7001 HARNESS ASSY - MAIN
7002 HARNESS ASSY - ENGINE ROOM AMERIGON TO SUPPLY
7003 HARNESS ASSY - INSTRUMENT CONNECTORS & F. BOX
7004 HARNESS ASSY - TRUNK ROOM DETAIL DRWGS, PLUS
7005 HARNESS ASSY - ROOM LAMP MASTER HARNESS
7006 HARNESS ASSY - DOOR (DRIVE) PLUS WIRE LENGTHS
7007 HARNESS ASSY - DOOR (ASSIST)
7008 HARNESS ASSY - CONTROL
7009 BATTERY
7010 BATTERY MOUNTING
7011 SWITCH ASSY - COMBINATION MULTI-FUNCTION SW
7012 SWITCH ASSY - FOG LAMP SAMSUNG TO APPROVE
7013 SWITCH ASSY - STOP LAMP ALL SWITCH ASSYS.
7014 SWITCH ASSY - POWER WINDOW (D) DRIVE
7015 SWITCH ASSY - POWER WINDOW (A) ASSIST
7016 SWITCH ASSY - HAZARD
7017 SWITCH ASSY - DOOR (D)
7018 SWITCH ASSY - DOOR (A)
7019 SWITCH ASSY - REAR HEATED
7020 SWITCH ASSY - DIRECTION PRND SWITCH
7021 SWITCH ASSY - EMERGENCY
7022 COVER - DOOR SWITCH RUBBER
7023 LIGHTER COMPL. - CIGARETTE
7024 RELAY
7025 LAMP ASSY - ROOM
7026 MOTOR ASSY - WINDSHIELD WIPER
7027 MOTOR ASSY - WINDSHIELD WASHER
7028 MOTOR ASSY - POWER WINDOW (LH) SWITCH ON CONSOLE
7029 MOTOR ASSY - POWER WINDOW (RH)
7030 AUDIO ASSY - ETR SUPPLIER: SAMSUNG
7031 ANTENNA ASSY - ROD SUPPLIER: SAMSUNG
7032 SPEAKER ASSY - DOOR SUPPLIER: SAMSUNG
</TABLE>
PAGE 13 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS ELECTRIC
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
------------------------------------------------
7000 ELECTRIC QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48)
- ---- -------- --- ------- -------- ------- ----------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7033 SPEAKER GRILLE - DOOR 2 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7034 CLUSTER ASSY - INSTRUMENT 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7035 SPEED SENSOR 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7036 INTERMITTENT WIPER RELAY 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7037 FLASHER ASSY - COMBINATION 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7038 SEAT BELT TIMER 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7039 FLASHER ASSY - COMBINATION 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7040 HORN ASSY - HIGH 1 COP AMERIGON AMERIGON AMERIGON SAMSUNG
7041 DIGITAL CLOCK 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7000 ELECTRIC REMARKS
- ---- -------- -----------------------
<S> <C> <C>
7033 SPEAKER GRILLE - DOOR
7034 CLUSTER ASSY - INSTRUMENT SAMSUNG TO APPROVE
7035 SPEED SENSOR CABLELESS TYPE
7036 INTERMITTENT WIPER DELAY WITH TIMMER
7037 FLASHER ASSY - COMBINATION
7038 SEAT BELT TIMER LIGHT PLUS CHIME
7039 FLASHER ASSY - COMBINATION
7040 HORN ASSY - HIGH SINGLE HORN TYPE
7041 DIGITAL CLOCK
</TABLE>
PAGE 14 OF 15
<PAGE>
<TABLE>
<CAPTION>
DETAIL PARTS ELECTRIC VEHICLE
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------
8000 ELECTRIC QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- -------- --- ------- -------- ------- ----------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8001 MOTOR 1 COP AMERIGON AMERIGON AMERIGON SAMSUNG
8002 CONTROLLER 1 COP AMERIGON AMERIGON AMERIGON SAMSUNG
8003 CHARGING UNIT 1 COP AMERIGON AMERIGON AMERIGON SAMSUNG MAIN & 12V
8004 BATTERY 28 COP LEAD ACID AMERIGON AMERIGON AMERIGON SAMSUNG QTY HAVE TO
ACCORD TO MOTOR
& CONTROLLER
8005 POWER BRAKE SYSTEM 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
8006 POWER STEERING UNIT 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
8007 SAFETY UNIT 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
</TABLE>
* REGULATION
FOOT BRAKE STOPPING DISTANCE; 29 m OR LESS (AT SPEED OF 50Em/h
PARKING BRAKE; VEHICLE SHALL BE CAPABLE OF HOLDING MECHANICALLY THE MOTOR
VEHICLE STATIONARY ON A DRIVE PAVED ROAD WITH 20% (11.6) GRADIENT (AT THE
STATE OF G.V.B.) OTHER PARTS NOT SHOWN ON LIST WILL BE DESIGNED & SUPPLIED
BY AMERIGON. ALL PARTS RELATED TO STYLING WILL BE CONFIRMED WITH SAMSUNG.
PAGE 15 OF 15
<PAGE>
EXHIBIT 10.23.6
[IMPERIAL BANK LETTERHEAD]
February 3, 1997
Mr. John Hamman, Jr.
Amerigon, Inc.
404 E. Huntington Drive
Monrovia, CA 91106
Re: Loan #00709056728-3
Dear Mr. Hamman:
Imperial Bank has approved an extension of your credit facility shown above
as evidenced by that Security and Loan Agreement dated November 20, 1995 as
amended on June 26, 1996, from its current maturity of December 31, 1996 to
January 31, 1997. Also, Imperial Bank will forbear in exercising any rights
under the Credit Agreement or any related documents or instruments in respect
of the company's current and anticipated non-compliance with the Financial
Covenants until 01/31/97.
Except as modified and extended hereby, the existing documentation as amended
concerning your obligation remains in full force and effect.
Sincerely,
/s/ Valerie C. Brosset
- -----------------------
Valerie C. Brosset
Commercial Loan Officer
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-2 of our report dated February 26, 1996, except
as to Note 14 which is as of December 4, 1996, relating to the financial
statements of Amerigon Incorporated, which appears in such Prospectus. We also
consent to the application of such report to the Financial Statement Schedule
for the three years ended December 31, 1995 listed under Item 14(a) of Amerigon
Incorporated's Annual Report on Form 10-K for the year ended December 31, 1995
when such schedule is read in connection with the financial statements referred
to in our report. The audits referred to in such report also included this
Financial Statement Schedule. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Costa Mesa, California
February 3, 1997
