UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(_x_) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended January 31, 1997
----------------
or
(___) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From _____________ To _______________.
Commission File No. 0-25184
U.S. ELECTRICAR, INC.
---------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3056150
- ------------------------------- ------------------------------------
(State of other jurisdiction of (IRS employer identification number)
incorporation or organization)
5 Thomas Mellon Circle, Suite 305
San Francisco, CA 94134
----------------------------------
(Address of Principal Executive Offices and Zip Code)
Indicate by check mark whether he registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (_X_) No (___)
As of March 11, 1997, there were 126,231,929 shares of Common Stock, no par
value, outstanding.
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<TABLE>
INDEX
U.S. ELECTRICAR, INC.
<CAPTION>
Page No.
-------
<S> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) ............................................ 3
Consolidated Balance Sheets:
January 31, 1997 and July 31, 1996 ......................................... 3
Consolidated Statements of Operations:
Three and Six months ended January 31, 1997 and 1996 ........................ 4
Consolidated Statements of Cash Flows:
Six months ended January 31, 1997 and 1996 .................................. 5
Notes to Consolidated Financial Statements:
for the Three and Six months ended January 31, 1997 and 1996 ................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................................... 14
Item 2. Changes in Securities ....................................................... 14
Item 3. Defaults upon Senior Securities ............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders ......................... 14
Item 5. Other Information ........................................................... 15
Item 6. Exhibits and Reports on Form 8-K ............................................ 16
SIGNATURE ..................................................................................... 17
EXHIBIT INDEX.................................................................................. 18
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2
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<TABLE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
As of As of
January 31, 1997 July 31, 1996
---------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 10 $ 13
Accounts receivable, net of allowances of $434 and $596 679 856
Inventory 1,969 2,387
Prepaids and other current assets 178 184
-------- --------
Total Current Assets 2,836 3,440
PROPERTY, PLANT AND EQUIPMENT - NET 1,274 835
OTHER ASSETS 47 88
-------- --------
TOTAL ASSETS $ 4,157 $ 4,363
======== ========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITES:
Accounts payable $ 2,896 $ 2,868
Accrued payroll and related expense 594 441
Accrued warranty expense 974 1,156
Reserve for lease obligations 70 112
Accrued Interest 649 208
Other accrued expenses 1,000 721
Customer deposits and deferred revenue 451 323
Capital leases payable 369 0
Bonds and notes payable 9,257 7,283
-------- --------
Total Current Liabilities 16,260 13,112
LONG TERM DEBT 3,987 3,987
SHAREHOLDERS' (DEFICIT):
Series A preferred stock - No par value; 30,000,000 shares authorized;
3,821,000 and 4,010,000 shares issued and outstanding at 1/31/97
and 7/31/96 2,800 2,983
Series B preferred stock - No par value; 5,000,000 shares authorized;
1,587,000 shares issued and outstanding 3,175 3,175
Stock notes receivable (1,098) (1,061)
Common Stock - No par value; 300,000,000 shares authorized; 126,209,000
and 120,220,000 shares issued and outstanding at 1/31/97 and 7/31/96 60,699 59,157
Accumulated deficit (81,666) (76,990)
-------- --------
Total Shareholders' (Deficit) (16,090) (12,736)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) $ 4,157 $ 4,363
======== ========
<FN>
Note: The balance sheet at July 31, 1996 has been derived from the audited financial statements at that date.
See notes to consolidated financial statements.
</FN>
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3
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<TABLE>
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except for per share and share data)
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended January 31 Six Months Ended January 31,
--------------------------------- ----------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 371 $ 917 $ 898 $ 3,011
COST OF SALES 649 1,168 1,412 3,489
------------- ------------- ------------- -------------
GROSS MARGIN (278) (251) (514) (478)
------------- ------------- ------------- -------------
OTHER COSTS AND EXPENSES:
Research & development 467 380 633 716
Selling, general & administrative 887 1,446 1,487 2,683
Interest and financing fees 373 486 412 913
Acquisition of a research company 1,630
------------- ------------- ------------- -------------
Total other costs and expenses 1,727 2,312 4,162 4,312
------------- ------------- ------------- -------------
LOSS BEFORE GAIN ON DEBT
RESTRUCTURING (2,005) (2,563) (4,676) (4,790)
GAIN ON DEBT RESTRUCTURING 107 390
------------- ------------- ------------- -------------
NET LOSS $ (2,005) $ (2,456) $ (4,676) $ (4,400)
============= ============= ============= =============
PER COMMON SHARE:
Loss before gain on debt restructuring $ (0.016) $ (0.044) $ (0.038) $ (0.084)
Gain on debt restructuring 0.002 0.007
============= ============= ============= =============
Net loss per common share $ (0.016) $ (0.042) $ (0.038) $ (0.077)
============= ============= ============= =============
WEIGHTED AVERAGE SHARES
OUTSTANDING 126,196,062 58,220,984 123,725,462 56,873,171
</TABLE>
4
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<TABLE>
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended January 31
-----------------------------
1997 1996
------- -------
<S> <C> <C>
OPERATIONS
Net loss $(4,676) $(4,400)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and Amortization 275 694
Change in allowance for doubtful accounts 0 (21)
Provision to reduce inventory values (31) (1,724)
Debt restructuring 0 0
Purchase of a research company 1,630 0
Stock option compensation 0 0
Interest income on stock notes receivable (37) (35)
Accretion on royalties payable 0 27
Change in operating assets and liabilities:
Accounts Receivable 188 (274)
Inventory 478 2,872
Prepaids and other assets 100 (110)
Accounts payable and accrued expenses 453 542
Customer deposits and deferred revenue (7) (463)
------- -------
Net cash used by operating activities (1,627) (2,892)
------- -------
INVESTING:
Repayments on advances to Systronix Corporation 209
Purchases of property, plant and equipment, net of disposals (95) 86
------- -------
Net cash provided by investing activities 114 86
------- -------
FINANCING:
Payments on notes payable (672) (58)
Borrowings on notes payable 2,182 2,288
Proceeds from issuance of common stock 701
------- -------
Net cash provided by financing activities 1,510 2,931
------- -------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (3) 125
CASH AND EQUIVALENTS:
Beginning of period 13 319
------- -------
End of period $ 10 $ 444
======= =======
</TABLE>
5
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<TABLE>
U.S. ELECTRICAR, INC, AND SUBSIDIARIES
CONSOLIDATED STSTEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
(In thousands)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended January 31,
----------------------------
1997 1996
-------- -------
<S> <C> <C>
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of Series A preferred stock to common stock $ 140 1,134
Conversion of Series S bonds to common stock 210
Conversion of convertible notes to common stock 600
Assumption of notes payable in connection with acquisition 800
Note issued in connection with acquisition 830
Note assumed by buyer in connection with divestiture (1,013)
Conversion of accrued interest to notes payable 147
Acquisition of capital assets through capital leases 361
Decrease in accounts receivable from divestiture of IEV 365
Decrease in inventory from divestiture of IEV 470
Decrease in accounts payable and accrued expenses from
divestiture of IEV (172)
Increase in inventory from acquisition of Systronix Corporation (499)
Increase in prepaids from acquisition of Systronix (94)
Increase in accounts payable and accrued expenses from
acquisition of Systronix (361)
Increase in customer deposits from acquisition of Systronix 135
</TABLE>
6
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U. S. ELECTRICAR, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
For the Three and Six Months Ended January 31, 1997 and 1996
NOTE 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared from the
records of the Company without audit, and in the opinion of management, include
all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position at January 31, 1997 and the interim
results of operations and cash flows for the three and six month periods ended
January 31, 1997 and 1996. The balance sheet at July 31, 1996, presented herein,
has been prepared from the audited financial statements of the Company for the
fiscal year then ended.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
affecting the reported amounts of assets, liabilities, revenues and expenses,
and the disclosure of contingent assets and liabilities. The July 31, 1996 and
January 31, 1997 inventories are reported at market value. The inventory
valuation adjustments are estimates based on sales of inventory subsequent to
July 31, 1996, and the projected impact of certain economic, marketing and
business factors. Warranty reserves and certain accrual expenses are based upon
an analysis of future costs expected to be incurred in meeting contracted
obligations. The amounts estimated for the above, in addition to other estimates
not specifically addressed, could differ from actual results; and the difference
could have a significant impact on the financial statements.
Accounting policies followed by the Company are described in Note 1 to the
audited financial statements for the fiscal year ended July 31, 1996. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted for purposes of the interim financial statements. The
financial statements should be read in conjunction with the audited financial
statements, including the notes thereto, for the year ended July 31, 1996, which
are included in the Company's Form 10-K Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 as filed with the Securities and
Exchange Commission.
The results of operations for the three and six month periods presented herein
are not necessarily indicative of the results to be expected for the full year.
NOTE 2 - Going Concern
The Company has experienced recurring losses from operations and use of cash
from operations and had an accumulated deficit of $76,990,000 at July 31, 1996
and $81,666,000 at January 31, 1997. A substantial portion of the losses are
attributable to research, development and other start-up costs associated with
the Company's focus on the development and manufacture of electric vehicles,
including electric powered buses, the conversion of gas powered cars and light
trucks to electric power and off-road electric powered industrial vehicles.
During the three years ended July 31, 1996, the Company obtained approximately
$45 million (net of debt repayments) in cash from financial activities through
private placements of common stock and Series A preferred stock, the exercise of
options and warrants, and the issuance of convertible subordinated notes payable
and secured convertible bonds and notes. During the six months ended January 31,
1997, the Company raised an additional $1,510,000, net of repayments, through
the issuance of secured convertible debt.
7
<PAGE>
It is management's intention to complete its debt restructuring and to seek
additional financing through private placements as well as other means.
Subsequent to January 31, 1997, in February, 1997, the Company reached an
agreement with Hyundai Motor Company ("HMC") and Hyundai Electronics Industries
Co., Ltd. ("HEI") whereby HMC and HEI shall collectively invest $3.6 million in
the Company and secure a technology license for an additional payment of $2.0
million. The Company expects the transactions to close in March 1997 with $5.45
million to have been received by the Company by the closing and the balance to
be received over 6 years.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. Cash flows from operations for the
foreseeable future may not be sufficient to enable the Company to meet its
obligations. Market conditions and the Company's financial position may inhibit
its ability to achieve profitable operations.
These factors as well as the future availability or inadequacy of financing to
meet future needs, could force the Company to delay, modify, suspend or cease
some or all aspects of its planned operations, and/or seek protection under
applicable state and federal bankruptcy and insolvency laws.
NOTE 3 - Inventories
Inventories are comprised of the following (in thousands):
January 31, 1997 July 31, 1996
---------------- -------------
(unaudited)
Finished Goods $755 $1,000
Work-in-process 501 710
Raw materials 1,022 1,450
Valuation adjustment (309) (773)
------- -------
$1,969 $2,387
======= =======
8
<PAGE>
U.S. ELECTRICAR, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
NOTE 4 - Notes and Bonds Payable, Long-Term Debt and Other Financing
Notes and bonds payable and long-term debt are comprised of the following (in
thousands):
<CAPTION>
January 31, 1997 July 31, 1996
--------------- -------------
<S> <C> <C>
Series S secured convertible bonds, interest at 10%;
principal and interest due March 1997, secured by
the personal property of the parent company. $3,000 $3,000
Convertible secured notes under a Supplemental Loan
Agreement with ITOCHU Corporation; interest at 10%,
principal and interest due April 1997, secured by
the personal property of the parent company. 3,000 3,000
Convertible secured note (acquisition of Nordskog);
due January 1997, with interest at 9% payable
quarterly; secured by certain machinery and
equipment of the subsidiary; in September 1996, the
assets associated with the previous acquisition of
Nordskog were sold in exchange for the assumption of
this note - 1,013
Secured promissory note - Credit Managers
Association of California ("CMAC") as exclusive
agent for Non-Qualified Creditors; interest at 3%,
with principal and interest due April 1999; secured
with an interest in a sinking fund escrow consisting
of 10% of any financing received subsequent to April
1996; the Board of Directors may waive the sinking
fund set aside on a case-by-case basis 95 95
Secured subordinated promissory note - CMAC as
exclusive agent for Qualified Creditors; interest
at 3%, with principal and interest due April 1999;
secured with an interest in a sinking fund escrow
as noted above 560 560
Secured subordinated promissory note - CMAC as
exclusive agent for Non-Qualified Creditors;
interest at 3% for the first 5 years, 6% for years 6
and 7, and then at prime plus 3% through date of
maturity; interest payments are made upon payment of
principal, with principal and interest due no later
than April 2016; secured with an interest in a
sinking fund escrow as noted above; payments on this
note are subordinated to payment in full on all
principal and accrued interest owed on the above
3-year non-qualified and qualified notes 3,332 3,332
Promissory note - accrued interest on Nordskog
convertible secured note converted to a new note;
due upon receipt of additional financing by the
Company, with interest at 9%. 147 -
</TABLE>
9
<PAGE>
January 31, July 31,
1997 1996
------- -------
NOTE 4 - Long-Term Debt (Continued)
Promissory note payable to principals of Systronix
Corporation in connection with the acquisition of
Systronix; interest at 10%, due April 1, 1997 480 --
Convertible secured promissory note payable to
Itochu Corporation; interest at 10%, due December
1997; convertible into common stock at $0.30 per
share 1,050 100
Convertible secured promissory note payable to
Fontal International, Ltd.; interest at 10%, due
in April, 1997; convertible into common stock at
$0.30 per share 1,150 --
Convertible secured promissory note payable to
Fontal International, Ltd.; interest at 10% due
July, 1997; convertible into common stock at $0.30
per share 260 --
Other 170 170
------- -------
13,244 11,270
Less current maturities 9,257 7,283
------- -------
$ 3,987 $ 3,987
======= =======
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters addressed in this report, with the exception of the historical
information presented, incorporate certain forward-looking statements involving
risks and uncertainties, including the risks discussed in the report under the
heading "Certain Factors That May Affect Future Results", as reported by the
Company in the Form 10-K filed with the Commission on November 12, 1996.
GENERAL
U.S. Electricar, Inc. and Subsidiaries (the "Company") develops, converts,
assembles, manufactures and distributes battery-powered electric vehicles,
including on-road pick-up trucks, passenger cars, buses and delivery vehicles,
and a variety of off-road industrial vehicles. The Company's product lines
included converted vehicles (originally built to be powered by internal
combustion engines) and vehicles that are built specifically to be battery
powered. The Company's fiscal year ends July 31. All year references refer to
fiscal years.
During 1994 and the first half of 1995, the Company's approach to its business
was to establish manufacturing, marketing and support functions of a large scale
company so that the transition from development and prototype activities to
volume production of on-road electric vehicles could be made as quickly as
possible once component parts design, systems integration and assembly processes
were developed. The Company raised approximately $38 million to fund its
activities during this period. However, the Company was not able to achieve
volume production primarily because the development of such designs and
processes were not completed prior to the company's capital becoming severely
depleted which occurred in the second half of 1995. The Company incurred losses
totaling $62,586,000 during 1994 and 1995.
The Company was forced to severely curtail its activities in the second half of
1995 due to a lack of funds. Certain facilities were closed and operations were
consolidated, and the Company initiated programs to restructure its debt and
raise interim funding.
During 1996, the Company restructured a significant portion of its debt and
raised approximately $5 million in interim funding. However, its operations
continued to be impacted by an insufficient amount of funds to adequately
support its planned sales volumes and product development programs. The Company
curtailed the manufacture and sale of off-road industrial vehicles in the third
and fourth quarters of 1996 and reduced the carrying values of the assets
associated with this product line. In 1996, the Company incurred a loss of
$9,354,000.
In September 1996, a substantial portion of the assets of Industrial Electric
Vehicles, Inc., (formerly Nordskog Electric Vehicles, Inc. (Nordskog), prior to
its acquisition by the Company) were sold. Consideration for this sale included
the assumption of, and release of liability for, the note payable that totaled
$1,013,000 at July 31, 1996 to Nordskog.
On October 25, 1996, the Company acquired substantially all the tangible and
intangible assets, and assumed certain liabilities, of Systronix Corporation
(Systronix), for stock, note and cash.
LIQUIDITY AND CAPITAL RESOURCES
`
The Company has experienced significant recurring cash flow shortages due to
operating losses primarily attributable to research, development ,administrative
and other expenses associated with the Company's efforts to become an
international manufacturer and distributor of electric vehicles. Cash flows from
operations have been extremely negative and have not been sufficient to meet the
Company's obligations as they came due. The Company has therefore had to raise
11
<PAGE>
funds through numerous financial transactions and from various resources. At
least until the Company reaches break-even volume in sales and develops and/or
acquires the capability and technology necessary to manufacture and sell its
electric vehicles profitably, it will need to continue to rely extensively on
cash from debt and equity financing. The Company anticipates that it will
require substantial additional outside financing for at least two more years.
During the six months ended January 31, 1997, the Company spent $1,627,000 in
cash on operating activities to fund the net loss of $4,676,000 resulting from
factors explained in the following section of this discussion and analysis.
Accounts receivable, exclusive of the divestiture of the industrial electric
vehicles business, decreased by $188,000. The reduction of accounts receivable
attributable to this divestiture was $365,000, net of allowances. Inventory, net
of the divestiture of the industrial electric vehicles business, which reduced
inventory by $470,000, and the acquisition of Systronix Corporation, which
increased inventory by $499,000, decreased by $478,000.
The operations of the Company during the six months ended January 31, 1997 were
financed primarily by $472,000 received from the issuance of promissory notes,
an additional $810,000 received from Fontal International, Ltd. and $900,000
received from Itochu Corporation, for the issuance of convertible secured
promissory notes. Repayments on the promissory notes were made in the amount of
$322,000 during the period. In addition, payments of $350,000 were made during
the period against the $829,978 promissory note issued to the principals of
Systronix Corporation, the payment schedule was amended, and the maturity date
of the note was extended to April 1, 1997.
IF THE COMPANY IS UNABLE TO RESTRUCTURE ITS DEBT OR OTHERWISE REFINANCE OR
CONVERT SUCH DEBT, AND ADDITIONAL FUNDING IS NOT AVAILABLE, THE COMPANY WOULD BE
FORCED TO SEEK PROTECTION UNDER APPLICABLE STATE AND FEDERAL BANKRUPTCY AND
INSOLVENCY LAWS.
AS OF MARCH 11, THE COMPANY HAS COMMITMENTS FOR FUNDS TOTALING OVER $5.0 MILLION
(See Item 5, below), WHICH THE COMPANY EXPECTS TO RECEIVE IN MARCH 1997.
HOWEVER, SIGNIFICANT ADDITIONAL FUNDING WILL BE NEEDED IN 1997 AND 1998. THERE
CAN BE NO ASSURANCE THAT ADDITIONAL FUNDS WILL BE AVAILABLE FROM ANY SOURCE AT
THE TIME THE COMPANY WILL NEED SUCH FUNDS. THE INABILITY OF THE COMPANY TO
OBTAIN ADDITIONAL FUNDING ON TERMS ACCEPTABLE TO THE COMPANY WILL HAVE A
MATERIAL ADVERSE EFFECT ON ITS BUSINESS. THE FUTURE AVAILABILITY OR INADEQUACY
OF FINANCING TO MEET FUTURE NEEDS COULD FORCE THE COMPANY TO DELAY, MODIFY,
SUSPEND OR CEASE SOME OR ALL ASPECTS OF ITS PLANNED OPERATIONS, AND/OR SEEK
PROTECTION UNDER APPLICABLE STATE AND FEDERAL BANKRUPTCY AND INSOLVENCY LAWS.
RESULTS OF OPERATIONS
Net sales declined $546,000, or 59.5%, in the second quarter of 1997 from the
second quarter of 1996, and declined $2,113,000, or 70.2%, in the first half of
1997 from the first half of 1996. The decline in sales was primarily due to the
Company's inability to raise the funds necessary to continue its operations at
the same levels as the first quarter of 1996. Significant declines occurred in
all product lines.
12
<PAGE>
Sales of converted sedans and light trucks declined from 4 units in the second
quarter of 1996 to 3 units in the second quarter of 1997, and unit sales for the
first half of 1997 were down 60.5% to 15 units from 38 units in the first half
of 1996. Total revenue from this product line was $106,000 in the second quarter
of 1997 and $515,000 in the first half, down 10.2% and 58.2%, respectively from
the corresponding periods of 1996. There were no sales of industrial vehicles
and associated parts and service in the second quarter of 1997, since this
business was sold on September 5, 1996. Sales for this product line in 1996 were
$697,000 in the second quarter and $1,341,000 in the first half. The Company
realized revenues of $144,000 in the second quarter of 1997 from various
engineering contracts of the Components Division, acquired in October, 1996.
Cost of sales as a percent of sales increased to 174.9% in the second quarter of
1997 from 127.4% in the second quarter of 1996, and cost of sales as a percent
of sales increased to 157.2% in the first half of 1997 from 115.9% in the first
half of 1996. The increase in costs was largely due to the low levels of
production and high costs from purchasing parts in small quantities. Efforts to
reduce manufacturing overhead continue, but the costs are still high relative to
the low levels of production.
Research and development expense increased in the second quarter of 1997 by
$87,000, or 22.9%, from the second quarter of 1996. The Company has reduced its
technical staff and curtailed purchasing engineering services due to a severe
lack of funds. In October, 1996, the Company acquired Systronix Corporation,
which is primarily a research company at the present time. For the first half of
1997, research and development expense decreased $83,000, or 11.6% from the
first half of 1996.
Selling, general and administrative expense decreased $559,000, or 38.7% in the
second quarter of 1997, and decreased $1,196,000, or 44.6% in the first half of
1997, from the corresponding periods in 1996. This was primarily as a result of
a significant reduction in staff and outside services due to the aforementioned
lack of funds.
Interest and financing fees in the second quarter of 1997 declined $113,000, or
23.3%, from the second quarter of 1996. For the first half of 1997, interest and
financing fees decreased $501,000, or 54.9% from the first half of 1996. During
1996, the Company converted $15,548,000 of principal and accrued interest to
common stock, resulting in a significant decrease in interest expense.
Additional borrowing in 1997 resulted in an increase in interest expense in the
second quarter of 1997 compared to the first quarter.
As a result of the foregoing changes in net sales, cost of sales, other costs
and expenses, the acquisition of a research company and the gain on debt
restructuring, the net loss decreased $451,000, or 18.4%, from $2,456,000 in the
second quarter of 1996 to $ 2,005,000 in the second quarter of 1997. For the
first half of 1997, the net loss increased $276,000, or 6.3% to $4,676,000 from
$4,400,000 in the first half of 1996.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
On May 20, 1996, a suit was filed by a shareholder against the
company, one of its former officers, and a third party
individual in the San Francisco Superior Court. The suit
alleges that the individual made fraudulent and negligent
misrepresentations to induce the shareholder to purchase
shares of Company stock for 100,000; that the former officer
concealed material facts from the shareholder; and that
defendants (including the Company) all breached fiduciary
duties to the shareholder. The complaint seeks compensatory
damages, punitive damages, attorneys fees and and costs, and
other relief. The Company believes the allegations against it
are without merit. The Company sought dismissal of such
claims, by demurring to the Complaint and the First Amended
Complaint. The demurrer to the First Amended Complaint was
sustained without leave to amend. Judgement was entered in
favor of the Company and its former officer on February 7,
1997.
On January 16, 1997, the Company was served a Complaint for
Damages originally filed in San Francisco Superior Court on
September 30, 1996 against the Company by Anthony O. Vicari,
Plaintiff in Propria Persona. The Complaint alleges that on or
about October, 1994, plaintiff and the Company entered into an
oral agreement whereby the plaintiff agreed to seek and
arrange a joint business venture agreement for the manufacture
and sale of of the Company's electric vehicles to Grupo
Industrial CASA, S.A. de C.V., a Mexican Corporation, and that
the Company agreed to compensate the plaintiff for said
services in the amount of one million dollars and to issue to
plaintiff eighty thousand shares of Company stock. The
Complaint further alleges that the Company breached the oral
agreement on or about December 20, 1994. The Complaint seeks
compensatory damages in an unspecified amount, punitive
damages, the issuance of eighty thousand shares of stock, and
attorney fees and costs. On February 18, 1997, the Company
filed an Answer to the Complaint wherein the Company denies
the allegations and seeks dismissal of the Complaint.
Item 2. Changes in Securities:
None.
Item 3. Defaults Upon Senior Securities:
None. See Item 5 for debt maturing in the near future.
Item 4. Submission of Matters to a Vote of Securities Holders:
None.
14
<PAGE>
Item 5. Other Information:
(a) Agreement with Hyundai
On February 27, 1997, the Company executed a definitive Stock
Purchase Agreement and Technology License Agreement with
Hyundai Motor Company ("HMC") and Hyundai Electronics
Industries Co., Ltd. ("HEI"). Under the terms of the Stock
Purchase Agreement, HMC and HEI shall collectively receive
12,000,000 shares of stock in the Company for an investment of
$3.6 million, or $0.30 per share. The shares to be issued have
not been registered under the Securities Act of 1933 in
reliance upon Regulation S, promulgated thereunder. Pursuant
to the Technology License Agreement, HMC and HEI shall pay
$2.0 million for a permanent license to use certain technical
data in the manufacture and assembly of the PantherTM series
of electric drivetrains designed by the Company's Components
Division for use within motor vehicles built by Hyundai or its
subsidiaries. The Company expects the transactions to close in
March 1997 with $5.45 million to be received by the Company at
closing, and the balance to be paid over 6 years.
(b) Fontal Convertible Debt
On March 6, 1997, the Company and Fontal International, Ltd.,
Geneva, Switzerland, executed a Loan Agreement whereby Fontal
extended a loan to the Company in the amount of $200,000. The
Loan was evidenced by a Promissory Note which provides for a
due date of July 15, 1997, an interest rate of ten percent
(10%) per annum, and the right to convert principal and
accrued interest at any time, in one or more installments,
into shares of the Company's common stock at the conversion
rate described below. The note and any shares issuable upon
conversion thereof have not been registered under the
Securities Act of 1933 in reliance upon Regulation S
promulgated thereunder.
The number of shares to be issued pursuant to any election to
convert any or all of the Loan amount shall equal the quotient
obtained by dividing (x) the amount of the loan to be
converted, by (y) the conversion price of $0.30 per share. The
total number issuable pursuant to such conversion of principal
is therefore 666,667 shares.
(c) Certain Debt Maturities
Series S Bonds: The Company has outstanding Series S secured
convertible bonds in the principal amount of $3.0 million. The
maturity date on these bonds is March 25, 1997.
ITOCHU: The Company has outstanding secured notes under a
Supplemental Loan Agreement with ITOCHU Corporation in the
principal amount of $3.0 million. The maturity date on these
notes is April 17, 1997.
Systronix: In connection with the acquisition on October 25,
1996, of all of the assets and certain liabilities of
Systronix Corporation, the Company issued an $829,978.39
Promissory Note due November 25, 1996, secured by the acquired
assets pursuant to a security agreement ("the Note"). Payments
of $350,000 have been made on the note, the payment schedule
was amended, and the maturity date of the note was extended to
April 1, 1997.
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Item 6. Exhibits and Reports on Firm 8-K:
(a) Exhibits: 10.98 Stock Purchase Agreement and
Technology License Agreement dated February 27, 1997
by and between the Company and Hyundai Motor Company
and Hyundai Electronics Industries Co., Ltd.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K with the
Commission on January 10, 1997 reporting the
execution of a Supplemental Loan Agreement with
ITOCHU Corporation whereby ITOCHU extended a $900,000
convertible loan to the Company. The Company filed a
report on Form 8-K with the Commission on January 30,
1997 reporting the execution of Loan Agreements with
Fontal International, Ltd. whereby Fontal extended
two convertible loans to the Company in the aggregate
amount of $260,000. The Company filed a report on
Form 8-K with the Commission on February 26, 1997
reporting the execution of a Loan Agreement with
Fontal International, Ltd. whereby Fontal extended a
$140,000 convertible loan to the Company, and
reporting the execution of a Supplemental Loan
Agreement with ITOCHU Corporation whereby ITOCHU
extended a $400,000 convertible loan to the Company.
16
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SIGNATURE
Pursuant to the requirements of Section 13 or 15 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized on March 11, 1997.
U.S. ELECTRICAR, INC.
(Registrant)
/s/ Roy Y. Kusumoto
- --------------------------------------------------------------------------------
By: Roy Y. Kusumoto, Chief Executive Officer, President and
Acting Chief Financial Officer
(Principal executive officer and principal financial and accounting officer)
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EXHIBIT INDEX
Exhibit No. Description Page No.
- --------------------------------------------------------------------------------
10.98 Stock Purchase Agreement and Technology License
Agreement dated February 27, 1997 by and between the
Company andHyundai Motor Company and Hyundai
Electronics Industries Co., Ltd. 19
27 Financial Data Schedule 63
18
U.S. ELECTRICAR, INC.
REGULATION S
COMMON STOCK PURCHASE AGREEMENT
FEBRUARY 27, 1997
THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES LAWS ("BLUE SKY LAWS"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES OR TO U.S. PERSONS (AS DEFINED IN REGULATION S) WITHOUT REGISTRATION
UNDER THE SECURITIES ACT, AND AS REQUIRED BY BLUE SKY LAWS IN EFFECT AS TO SUCH
TRANSFER, UNLESS AN EXEMPTION FROM SUCH REGISTRATION UNDER STATE AND FEDERAL LAW
IS AVAILABLE.
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THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES LAWS ("BLUE SKY LAWS"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES OR TO U.S. PERSONS (AS DEFINED IN REGULATION S) WITHOUT REGISTRATION
UNDER THE SECURITIES ACT, AND AS REQUIRED BY BLUE SKY LAWS IN EFFECT AS TO SUCH
TRANSFER, UNLESS AN EXEMPTION FROM SUCH REGISTRATION UNDER STATE AND FEDERAL LAW
IS AVAILABLE.
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT is made effective for reference
purposes only as of February 27, 1997, by and between U.S. Electricar, Inc., a
California corporation (the "Corporation") and HYUNDAI MOTOR COMPANY whose
signature appears on the signature page to this Agreement (the "Investor").
R E C I T A L
The Investor desires to purchase from the Corporation, and the
Corporation desires to sell to the Investor, certain common stock shares of the
Corporation, on the terms and conditions hereinafter set forth.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained in this Agreement, the parties hereby
agree as follows:
1. Purchase and Sale of Shares/Execution of Technical Agreement.
a. Sale and Issuance of Shares. Subject to the terms and
conditions of this Agreement, the undersigned Investor agrees to purchase at the
Closing (as defined below) and the Corporation agrees to sell and issue to the
Investor at the Closing, that number of common stock shares (the "Shares") set
forth under Schedule 1 of the signature page attached to this Agreement at the
price set forth under Schedule 1 of the signature page attached to this
Agreement (the "Purchase Price"). All monetary references in this Agreement are
to United States of America dollars.
b. Payment and Delivery. The Investor shall purchase the
Shares by (i) the cancellation of any indebtedness owed to Investor by the
Corporation as set forth on Schedule 1 and (ii) making payment to U.S.
Electricar, Inc. in cash by check or wire transfer of the balance of funds
necessary to equal the Purchase Price delivered to the Corporation on, or
before, the date set forth on Schedule 1 attached to the signature page hereto
(the "Closing").
c. License Agreement. Contemporaneously with Investor's
purchase of the Shares, Investor and the Corporation shall enter into a License
Agreement in form and substance as shall be mutually agreed upon by the parties
as evidenced by their execution thereof in consideration of Investor's payment
to the Corporation in cash at the Closing of that sum as set forth on Schedule
1., and the payment obligations set forth in said Amendment.
2. Delivery of Shares. Upon the Investor's delivery of the Purchase
Price in full and a fully executed and completed original of this Agreement to
the Corporation, and after the Corporation determines that all applicable
securities laws have been satisfied, the Corporation will deliver to the
Investor at the address indicated on Schedule 1 within five (5) business days
after the Closing a share certificate for the Shares dated as of the Closing. As
of the Closing, the Investor shall be deemed the owner of the Shares. Investor
shall provide the Corporation with instructions for registration and delivery of
the Shares as set forth on Schedule 1. Any instructions for registration of the
Shares in a name other than that of the Investor shall require such registered
owner to affirm Investor's warranties and representations set forth herein.
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3. Corporation's Representations, Warranties and Covenants. The
Corporation hereby represents, warrants and covenants to the Investor as
follows:
a. Corporate Organization and Standing. The Corporation is a
corporation duly organized, validity existing and in good standing under the
laws of the State of California. The Corporation has the requisite corporate
power to carry on its business as presently conducted, and as proposed or
contemplated to be conducted in the future, and to enter into and carry out the
provisions of this Agreement and the transactions contemplated hereby. The
Corporation is duly qualified to do business in the jurisdictions where it is
currently doing business.
b. Authorization. All corporate action on the part of the
Corporation, its directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Corporation and the
performance of all of the Corporation's obligations hereunder has been taken.
This Agreement, when executed and delivered by the Corporation, shall constitute
a valid and binding obligation of the Corporation, enforceable in accordance
with its terms, except as may be limited by principles of public policy, and
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. The Shares, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable. The Corporation is, and at all times during the offer
and sale of the Shares, will be a "reporting issuer" as that term is defined
under Regulation S.
c. No Breach. The issue and sale of the Shares by the
Corporation does not and will not conflict with and does not and will not result
in a breach of any of the terms of the Corporation's incorporating documents or
any agreement or instrument to which the Corporation is a party. The
consummation of the transactions or performance of the obligations contemplated
by this Agreement will not result in a breach of any term of, or constitute a
default under, any statute, indenture, mortgage, or other agreement or
instrument or any order, writ, judgment or decree to which the Corporation or
any of its subsidiaries is or are a party or by which any of them is or are
bound.
d. Pending or Threatened Claims. Except as disclosed in
Exhibit A ("Risk Factors"), attached hereto and incorporated herein by this
reference, neither the Corporation nor any of its subsidiaries is a party to any
action, suit or proceeding which could materially affect its business or
financial condition, and no such actions, suits or proceedings are contemplated
or have been threatened.
e. No Preemptive Rights. There are no preemptive rights of any
shareholder of the Corporation with respect to the Shares.
f. Authorized Shares. The Corporation has sufficient
authorized and unissued shares of its common stock to provide for the issuance
and delivery of the Shares as provided under this Agreement.
g. Compliance with Regulation S. The Corporation represents
and warrants that it has complied, and covenants that until the end of the
applicable Regulation S restricted period it will comply with all of the
requirements of Rule 903(a), (b) and (c)(3) of Regulation S applicable to the
Corporation with respect to the offer and sale of the Shares, including but not
limited to the requirement not to engage in any "directed selling efforts" (as
defined in Regulation S) in the United States with respect to the Shares.
4. Investor Representations and Warranties. The Investor represents and
warrants to the Corporation that:
a. Account/Regulation S. The Investor is acquiring the Shares
for investment for its own account, and not with a view to, or for resale in
connection with, any distribution thereof, and it has no present intention of
selling or distributing any of the Shares. The Investor understands that the
Shares have not been registered under the Securities Act of 1933, as amended
(the "Securities Act") by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment as expressed herein. The Investor understands
that the Corporation is relying on the rules and regulations governing offers
and sales made outside the United States to non-"U.S. Persons" pursuant to
Regulation S under the Securities Act.
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<PAGE>
b. Access to Data. The Investor has had an opportunity to
discuss the Corporation's business, management and financial affairs with its
management and to obtain any additional information which the Investor has
deemed necessary or appropriate for deciding whether or not to purchase the
Shares, including an opportunity to receive, review and understand the
disclosures and information regarding the Corporation's financial statements,
capitalization and other business information as set forth in Corporation's
filings with the Securities and Exchange Commission through December 16, 1996,
all incorporated herein by reference, together with all exhibits referenced
therein as well as the Corporation's Private Placement Memorandum dated January
2, 1996 prepared for the Corporation's trade creditors. Attached hereto as
Exhibit B and incorporated herein by reference is the Corporation's approximate
Pro-Form Capitalization as of the date hereof. The Investor acknowledges that no
other representations or warranties, oral or written, have been made by the
Corporation or any agent thereof except as set forth in this Agreement.
c. No Fairness Determination. The Investor is aware that no
federal, state or other agency has made any finding or determination as to the
fairness of the investment, nor made any recommendation or endorsement of the
Shares.
d. Knowledge And Experience. The Investor has such knowledge
and experience in financial and business matters, including investments in other
start-up companies, that it is capable of evaluating the merits and risks of the
investment in the Shares, and it is able to bear the economic risk of such
investment. Further, the individual executing this Agreement has such knowledge
and experience in financial and business matters that he is capable of utilizing
the information made available to him in connection with the offering of the
Shares, of evaluating the merits and risks of an investment in the Shares and of
making an informed investment decision with respect to the Shares, including
assessment of the Risk Factors attached hereto as Exhibit A and incorporated
herein by reference.
e. Limited Public Market. The Investor is aware that there is
currently a very limited "over-the-counter" public market for the Corporation's
registered securities and that the Corporation became a "reporting issuer" under
the Securities Exchange Act of 1934, as amended, on January 27, 1995. There is
no guarantee that a more established public market will develop at any time in
the future. The Investor understands that the Shares are all unregistered and
may not presently be sold in even this limited public market. The Investor
understands that the Shares cannot be readily sold or liquidated in case of an
emergency or other financial need. The Investor has sufficient liquid assets
available so that the purchase and holding of the Shares will not cause it undue
financial difficulties.
f. Investment Experience. The Investor is an "accredited
investor" as that term is defined in Regulation D promulgated by the Securities
and Exchange Commission. The term "Accredited Investor" under Regulation D
refers to:
(i) A person or entity who is a director or executive
officer of the Corporation;
(ii) Any bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity; any broker or dealer registered pursuant to
Section 15 of the Exchange Act; insurance company as defined in Section 2(13) of
the Securities Act; investment company registered under the Investment Company
Act of 1940; or a business development Corporation as defined in Section
2(a)(48) of that Act; Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decision made solely
by persons that are accredited investors;
(iii) Any private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
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(iv) Any organization described in Section 501(c)(3)
of the Internal Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of acquiring the
Shares offered, with total assets in excess of $5,000,000;
(v) Any natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of his purchase exceeds
$1,000,000;
(vi) Any natural person who had an individual income
in excess of $200,000 during each of the previous two years or joint income with
that person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
(vii) Any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the Shares offered,
whose purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment; or
(viii) Any entity in which all of the equity owners
are accredited investors.
As used in this Section 4(f), the term "net worth" means the excess of total
assets over total liabilities. For the purpose of determining a person's net
worth, the principal residence owned by an individual should be valued at fair
market value, including the cost of improvements, net of current encumbrances.
As used in this Section 4(f), "income" means actual economic income, which may
differ from adjusted gross income for income tax purposes. Accordingly, the
undersigned should consider whether it should add any or all of the following
items to its adjusted gross income for income tax purposes in order to reflect
more accurately its actual economic income: Any amounts attributable to
tax-exempt income received, losses claimed as a limited partner in any limited
partnership, deductions claimed for depletion, contributions to an IRA or Keogh
retirement plan, and alimony payments.
5. Restrictions On Transfer Re Regulation S.
a. Not A "U.S. Person." The Investor hereby certifies that (i)
it is not a "U.S. Person" as defined under Rule 902, Section (o) of Regulation S
promulgated under the Securities Act (a copy of which is attached hereto as
Schedule 2) and is not acquiring the Shares for the account or benefit of any
U.S. Person, and (ii) it is acquiring the Shares in an "offshore transaction" as
defined under Section (i) of such Rule 902 (a copy of which is attached hereto
as Schedule 3).
b. Transfer Restrictions. The Investor shall not attempt to
have registered any transfer of the Shares not made in accordance with the
provisions of Regulation S. In addition to any other restrictions on transfer
set forth in this Agreement, the Investor agrees to transfer the Shares only (i)
in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act, or pursuant to an available exemption from
registration, and (ii) in accordance with any applicable state securities laws.
Unless so registered or exempt therefrom, such transfer restrictions shall
include but not be limited to and the Investor warrants and represents the
following:
(i) The Investor shall not sell the Shares publicly
or privately, or through any short sale, or other hedging transaction to any
U.S. Person, whether directly or indirectly, or for the account or benefit of
any such U.S. Person for the restricted period mandated by Regulation S after
the purchase of the Shares unless registered or exempt from registration;
(ii) Any other offer or sale of the Shares shall be
made only if (A) during the restricted period any subsequent purchaser certifies
in writing that it is not a U.S. Person and is not acquiring the Shares for the
account or benefit of any U.S. Person, or (B) after the restricted period the
Shares are purchased in a transaction that did not require registration under
the Securities Act and applicable Blue Sky laws; and
(iii) Any transferee of the Shares who acquires the
Shares during the Regulation S restricted period shall agree in writing to
resell the Shares only in accordance with the provisions of Regulation S,
pursuant to registration under the Securities Act, or pursuant to an available
exemption from registration.
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c. Restrictions On Resales In the United States. The Investor
understands and acknowledges that the Securities Act prohibits resales of
securities in the United States except pursuant to an effective registration
statement or an exemption from registration for which the Shares and the
Investor holding such Shares qualifies. The Investor understands and
acknowledges the requirements for qualifying for an exemption from registration
afforded by Section 4 of the Securities Act and that there can be no assurance
that the Investor will be able to qualify for such an exemption from
registration.
6. Public Offering Lock-Up. For one period of up to one-hundred-eighty
(180) days (the "Stand-off Period"), Investor shall not transfer or sell its
Shares to any person or entity if requested by the Corporation upon at least
thirty (30) days prior written notice given, on, or after, the termination of
the Regulation S restricted period hereunder in contemplation of a public
registration. Notwithstanding the foregoing, this right may be exercised only
one time by the Corporation.
7. Restrictive Legends. Each certificate evidencing the Shares which
the Investor may purchase hereunder and any other securities issued upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event (unless no longer required in the opinion of the counsel for the
Corporation) shall be imprinted with legends substantially in the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED OR SOLD WITHOUT REGISTRATION UNDER THE ACT UNLESS THE
CORPORATION RECEIVES AN OPINION OF COUNSEL, SATISFACTORY TO THE
CORPORATION, THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE OR
SUCH REGISTRATION IS NOT REQUIRED PURSUANT TO REGULATION S UNDER THE
ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY ALSO BE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER DURING A "STAND-OFF PERIOD" OF UP TO
180 DAYS AS PROVIDED IN THAT CERTAIN FEBRUARY ____, 1997, AGREEMENT
BETWEEN THE ORIGINAL HOLDER HEREOF AND THE CORPORATION. THE CORPORATION
WILL NOTIFY THE TRANSFER AGENT OF THE STARTING DATE OF ANY SUCH
STAND-OFF PERIOD AND WILL ISSUE STOP-TRANSFER INSTRUCTIONS APPLICABLE
TO THE STAND-OFF PERIOD. WHENEVER THE TRANSFER AGENT HAS RECEIVED NO
SUCH STOP TRANSFER INSTRUCTIONS FROM THE CORPORATION, THE TRANSFER
AGENT IS HEREBY AUTHORIZED AND DIRECTED TO CONCLUSIVELY PRESUME THAT NO
STAND-OFF PERIOD IS IN EFFECT TO PREVENT THE TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE. IMMEDIATELY AFTER THE EXPIRATION DATE
OF ANY STAND-OFF PERIOD (WHICH SHALL FALL NOT LATER THAN 180 DAYS AFTER
THE STARTING DATE), THIS RESTRICTIVE LEGEND AND ANY RELATED STOP
TRANSFER INSTRUCTIONS GIVEN BY THE CORPORATION TO THE TRANSFER AGENT
SHALL BE OF NO FURTHER FORCE OR EFFECT, AND THE TRANSFER AGENT IS
HEREBY AUTHORIZED AND DIRECTED, AT ANY TIME ON OR AFTER THE EXPIRATION
DATE OF THE STAND-OFF PERIOD, TO ISSUE A NEW CERTIFICATE WITHOUT THIS
LEGEND IN EXCHANGE FOR THIS LEGENDED CERTIFICATE UPON SURRENDER BY AND
AT THE REQUEST OF THE HOLDER WITHOUT FURTHER AUTHORIZATION FROM THE
CORPORATION.
The Corporation shall be entitled to enter stop transfer notices on its transfer
books with respect to the Shares during the Regulation S restricted period and
the Stand-off Period.
8. Reliance. The Investor is aware that the Corporation is relying on
the accuracy of the above representations to establish compliance with Federal
and State securities laws. If any such warranties or representations are not
true and accurate in any respect as of the Closing, Investor shall so notify the
Corporation in writing immediately and shall be cause for rescission by the
Corporation at its sole election. The Investor shall indemnify the Corporation
and its affiliates, legal counsel and agents against all losses, claims, costs,
expenses and damages or liabilities, including reasonable attorneys' fees, which
such parties may suffer or incur caused or in connection with or arising out of,
directly or indirectly, from their reliance on such warranties and
representations.
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9. Miscellaneous.
a. Survival. The representations, warranties, covenants and
agreements made herein shall survive the closing of the transactions
contemplated hereby.
b. Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
c. Entire Agreement. This Agreement and the Exhibits and
Schedules attached hereto constitute the entire agreement and understanding
between the parties with respect to the subject matters herein, and supersede
and replace any prior agreements and understandings, whether oral or written
between and among them with respect to such matters. The provisions of this
Agreement may be waived, altered, amended or repealed, in whole or in part, only
upon the written consent of the Corporation and the Investor.
d. Titles and Subtitles. The titles of the Sections and
subsections of this Agreement are for the convenience of reference only and are
not to be considered in construing this Agreement.
e. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
f. Applicable Law. This Agreement shall be governed by and
construed in accordance with laws of the State of California, applicable to
contracts between California residents entered into and to be performed entirely
within the State of California.
g. Venue. Any action, arbitration, or proceeding arising
directly or indirectly from this Agreement or any other instrument or security
referenced herein shall be litigated or arbitrated, as appropriate, in the
County of San Francisco, State of California.
h. Authority. If Investor is a corporation, partnership, trust
or estate: (i) the individual executing and delivering this Agreement on behalf
of the Investor has been duly authorized and is duly qualified to execute and
deliver this Agreement on behalf of Investor in connection with the purchase of
the Shares and (ii) the signature of such individual is binding upon Investor.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
INVESTOR U.S. ELECTRICAR, INC.
HYUNDAI MOTOR COMPANY
By: /s/ Y.I. Lee By: /s/ Roy Y. Kusumoto
------------------------ ----------------------------------
Y.I. Lee/Vice President Roy Y. Kusumoto/President and CEO
SCHEDULE 1
Purchase Price Per Share: US $0.30
Aggregate Purchase Price US $2,520,000
Total Number of Shares 8,400,000
Purchase Date: March 1, 1997
Name of Registered Owner(s)
of Shares Hyundai Motor Company
Address for delivery of Shares 140-2 Kye-Dong, Chongro-Ku, Seoul
110-793 Korea
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SCHEDULE 2
Definition of "U.S. Person"
"Reg. ss.230.902. As used in Regulation S, the following terms shall
have the meanings indicated: . . .
(o) U.S. Person.
(1) "U.S. person" means:
(i) any natural person resident in the United States;
(ii) any partnership or corporation organized or incorporated
under the laws of the United States;
(iii) any estate of which any executor or administrator is a
U.S. person;
(iv) any trust of which any trustee is a U.S. person;
(v) any agency or branch of a foreign entity located in the
United States;
(vi) any non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person;
(vii) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States; and
(viii) any partnership or corporation if:
(A) organized or incorporated under the laws of any foreign
jurisdiction; and
(B) formed by a U.S. person principally for the purpose of
investing in securities not registered under the Act, unless it is
organized or incorporated, and owned, by accredited investors (as
defined in Rule 501(a) under the Act (ss.230.501(a) of this chapter))
who are not natural persons, estates or trusts.
(2) Notwithstanding paragraph (o)(1) of this section, any discretionary
account or similar account (other than an estate or trust) held for the benefit
or account of a non-U.S. person by a dealer or other professional fiduciary
organized, incorporated, or (if an individual) resident in the United States
shall not be deemed a "U.S. person."
(3) Notwithstanding paragraph (o)(1) of this section, any estate of
which any professional fiduciary acting as executor or administrator is a U.S.
person shall not be deemed a U.S. person if:
(i) an executor or administrator of the estate who is not a
U.S. person has sole or shared investment discretion with respect to
the assets of the estate; and
(ii) the estate is governed by foreign law.
(4) Notwithstanding paragraph (o)(1) of this section, any trust of
which any professional fiduciary acting as trustee is a U.S. person shall not be
deemed a U.S. person if a trustee who is not a U.S. person has sole or shared
investment discretion with respect to the trust assets, and no beneficiary of
the trust (and no settlor if the trust is revocable) is a U.S. person.
(5) Notwithstanding paragraph (o)(1) of this section, an employee
benefit plan established and administered in accordance with the law of a
country other than the United States and customary practices and documentation
of such country shall not be deemed a U.S. person.
(6) Notwithstanding paragraph (o)(1) of this section, any agency or
branch of a U.S. person located outside the United States shall not be deemed a
"U.S. person" if:
(i) the agency or branch operates for valid business reasons;
and
(ii) the agency or branch is engaged in the business of
insurance or banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located.
(7) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank, the Asian
Development Bank, the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar international
organizations, their agencies, affiliates and pension plans shall not be deemed
"U.S. persons."
26
<PAGE>
SCHEDULE 3
Definition of "Offshore Transaction"
"Reg. ss.230.902. As used in Regulation S, the following terms shall
have the meanings indicated: . . .
(i) Offshore Transaction.
(1) An offer or sale of securities is made in an "offshore transaction"
if:
(i) the offer is not made to a person in the United States;
and
(ii) either:
(A) at the time the buy order is originated, the buyer is
outside the United States, or the seller and any person acting on its
behalf reasonably believe that the buyer is outside the United States;
or
(B) for purposes of:
(1) ss.230.903, the transaction is executed
in, on or through a physical trading floor of an
established foreign securities exchange that is
located outside the United States; or
(2) ss.230.904, the transaction is executed
in, on or through the facilities of a designated
offshore securities market described in paragraph (a)
of this section, and neither the seller nor any
person acting on its behalf knows that the
transaction has been pre-arranged with a buyer in the
United States.
(2) Notwithstanding paragraph (i)(1) of this section, offers
and sales of securities specifically targeted at identifiable groups of
U.S. citizens abroad, such as members of the U.S. armed forces serving
overseas, shall not be deemed to be made in "offshore transactions."
(3) Notwithstanding paragraph (i)(1) of this section, offers
and sales of securities to persons excluded from the definition of
"U.S. person" pursuant to paragraph (o)(7) of this section or persons
holding accounts excluded from the definition of "U.S. person" pursuant
to paragraph (o)(2) of this section, solely in their capacities as
holders of such accounts, shall be deemed to be made in "offshore
transactions."
27
<PAGE>
EXHIBIT A - RISK FACTORS
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, IN ADDITION TO THE MATTERS SET
FORTH ELSEWHERE IN THIS AGREEMENT, THE FOLLOWING FACTORS.
28
<PAGE>
EXHIBIT B - APPROXIMATE PRO FORMA CAPITALIZATION
EXHIBIT A
RISK FACTORS
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, IN ADDITION TO THE MATTERS SET
FORTH ELSEWHERE IN THIS SUBSCRIPTION AGREEMENT, THE FOLLOWING FACTORS.
Debt Restructuring. As a result of the Corporation's insolvency in
March 1995, the Corporation entered into agreements in March and April 1995 with
its secured creditors and largest unsecured creditor, to restructure debt in the
aggregate amount of approximately $22 million. In addition, in April 1995, an
informal committee of the Corporation's unsecured antecedent trade creditors was
established, and in August 1995, this committee recommended for approval by the
Corporation's creditors and shareholders a voluntary restructuring of the
Corporation's unsecured trade debt ("Debt Restructuring Plan"). In early 1996,
the Corporation's shareholders approved and accepted the terms of the
restructuring plan. The terms of the Debt Restructuring Plan are set forth in
the Private Placement Memorandum dated January 2, 1996, a copy of which has been
delivered to and is available for review by the Purchaser and its counsel upon
request.
Pursuant to the Debt Restructuring Plan, and as of October 31, 1996,
the Corporation believes it has received and approved approximately $11,751,000
or 84% acceptances by its antecedent trade creditors. Outstanding antecedent
debt of approximately $2,254,000 has not been settled. As of January 1997, the
Corporation issued 1,587,473 shares of Series B Convertible Preferred Stock as
payment of $3,175,000 of debt owed to qualified unsecured creditors under the
Corporation's Debt Restructuring Plan. This stock is convertible into 10,583,682
shares of common stock. In addition, the Corporation and its secured creditors
have converted approximately $15,000,000 in debt into approximately 50,000,000
shares of common stock. The Corporation and its secured creditors may elect,
however, to keep the remainder of the secured debt outstanding until
substantially all of this remaining unsecured antecedent trade debt has accepted
the Corporation's Debt Restructuring Plan.
THERE CAN BE NO ASSURANCE THAT THE CORPORATION WILL BE ABLE TO CONTINUE
TO EFFECTUATE THE DEBT RESTRUCTURING. TO THE EXTENT THAT THE CORPORATION IS
UNABLE TO CONTINUE TO EFFECTUATE THE VOLUNTARY RESTRUCTURING OR OTHERWISE
REFINANCE OR CONVERT SUCH DEBT AND ADDITIONAL FUNDING IS NOT AVAILABLE, THE
CORPORATION WOULD BE FORCED TO SEEK PROTECTION UNDER APPLICABLE BANKRUPTCY AND
INSOLVENCY LAWS.
Additional Funding. The Corporation's planned expenditures are based
primarily on its internal estimates of future sales and ability to raise
additional financing. If revenues or additional financing do not meet the
Corporation's expectations in any given period of time, the adverse impact on
the Corporation's finances will be magnified by the Corporation's inability to
adjust spending quickly enough to compensate for revenue or financing
shortfalls. Significant additional funding will be required throughout 1997 to
continue operations, and there can be no assurance that the Corporation will be
able to secure such additional financing on favorable terms, or at all. As of
October 31, 1996, the Corporation had cash of $51,000, including $2,000 held in
escrow for antecedent debt and together with its subsidiaries had receivables
which were not more than sixty days past due of approximately $357,000 which the
Corporation believes have a reasonable likelihood of being collected. There is
no guaranty that all or any of the Corporation's remaining unsecured creditors
representing in excess of $2.2 million in debt will agree to the proposed debt
restructuring/repayment plan or any other plan. In connection with the sale, the
Company issued 13 million cashless warrants with an exercise price of $0.30 per
share. These warrants can be exercised for no cash if the price of the Company's
common stock is at least double the exercise price for a period of 20 days.
Going Concern/NOL. The Corporation has experienced recurring losses
from operations, use of cash from operations and had an accumulated deficit of
$79,661,000 at October 31, 1996, which deficit as of July 31, 1996, was
approximately $76,990,000. (See "Increasing and Continued Losses" below). There
is no guaranty, however, that any net operating losses will be available to the
Corporation in the future as an offset against future profits. A substantial
portion of the losses are attributable to research, development and other
start-up costs associated with the Corporation's changing business focus from
retail and mail order operations to the production
29
<PAGE>
of electric vehicles and electric power-train systems. Cash flows from future
operations may not be sufficient to enable the Corporation to achieve profitable
operations as previously disclosed in the preceding paragraph. Market conditions
and the Corporation's financial position may inhibit its ability to achieve
profitable operations. These factors as well as others indicate the Corporation
may be unable to continue as a going concern unless it is able to obtain
significant additional financing and generate sufficient cash flows to meet its
obligations as they come due and sustain its operations. The Corporation
estimates that it will need additional outside financing for at least
approximately two more years to continue funding the development of its products
and the growth of its business before cash from operations is sufficient to fund
the Corporation's business operations. The Corporation estimates that it will
need approximately $8 million in additional outside funding through calendar
1997, without the payment of past due debts owed to creditors. The Corporation's
audited financial statements included in the Form 10-K for fiscal year 1996 also
include a "Going Concern" qualification from the Corporation's auditors.
Increasing and Continued Losses. The Corporation was founded in 1976,
but initial sales were very limited and the Corporation was unprofitable as a
manufacturer of solar powered toys. The Corporation has been profitable in only
one year, fiscal year 1986. For the fiscal years ended July 31, 1994, 1995 and
1996, the Corporation had substantial net operating losses of $25,021,000,
$37,565,000 and $9,354,000, respectively, on sales of $5,787,000, $11,625,000
and $4,209,000, respectively. Through the first three months of fiscal 1997, the
Corporation lost an additional $2,671,000 on sales of $527,000. There can be no
assurance that the Corporation will be able to achieve profitability.
Source of Revenues. In 1991, the Corporation started to generate a
significant portion of its revenues from the sale of electric vehicles. The
Corporation intends to substantially increase its revenue from the sale of
electric vehicles. However, there can be no assurance that demand for these
products will warrant the Corporation's anticipated expenditures, or that the
Corporation will be successful in engineering and marketing these products or
deriving any sort of profit from such revenues. Due to the lack of capital and
other factors, the Corporation has recently furloughed a significant portion of
its production workforce. This action will significantly impact the
Corporation's ability to generate revenue near term.
General Economic Conditions. The financial success of the Corporation
may be sensitive to adverse changes in general economic conditions, such as
inflation, unemployment, and consumer demand for the Corporation's products.
These changes could cause the cost of supplies, labor, and other expenses to
rise faster than the Corporation can raise prices. Such changing conditions also
could significantly reduce demand in the market place for the Corporation's
products. The Corporation has no control over any of these changes.
Growth Stage Company; Reevaluation of Business Plans. Although the
Corporation was originally founded in 1976, many aspects of the Corporation's
business are still in the early growth stage development, and its proposed
operations are subject to all of the risks inherent in a start-up or growing
business enterprise, including the likelihood of continued operating losses. The
likelihood of the success of the Corporation must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with the growth of an existing business, the
development of new products and channels of distribution, and current and future
development in several key technical fields, as well as the competitive and
regulatory environment in which the Corporation will operate.
In response to the severe cash shortage experienced by the Corporation,
in March 1995, the Corporation initiated steps to restructure its organization
and operations in an effort to stabilize and improve the Corporation's financial
condition. Beginning in March 1995, the Corporation focused its resources on the
production of off-road industrial vehicles and on-road buses and ceased ordering
new inventory for its on-road conversion business; however, the Corporation
intends to finish converting and selling its existing inventory of on-road
vehicles. The Corporation is currently re-evaluating all aspects of its
business, including each of its product lines, in view of its capital
constraints as well as competitive market conditions. To the extent the
Corporation determines to discontinue any of its product lines, potential
sources of revenue from those product lines would be eliminated. In Fall 1996,
the Corporation sold the assets of Industrial Electric Vehicles, Inc., and
ceased production of industrial vehicles domestically. For the first nine months
of Fiscal 1996, industrial vehicle sales were $1.7 million, or approximately 50%
of the Corporation's sales. In December 1996, the Corporation decided to
concentrate its sales activities on two product lines; the first product line is
the drive train system; and the second is the Electrolite Vehicle.
30
<PAGE>
Dependence on Key Personnel. The success of the Corporation is largely
dependent on its key management and technical personnel, including Roy Kusumoto,
the Corporation's Chief Executive Officer, and Dan Rivers, Don Kang and Abas
Goodarzi, the loss of one or more of whom could adversely affect the
Corporation's business. Additionally, in order to successfully implement its
anticipated growth, the Corporation will be dependent upon its ability to hire
additional qualified personnel. There can be no assurance that the Corporation
will be able to retain or hire other necessary personnel. The Corporation does
not maintain key man life insurance on any of its key personnel. The Corporation
believes
that its future success will depend in part upon its continued ability
to attract, retain and motivate additional highly skilled personnel, including
engineers, who are in great demand.
Insurance and Potential Liability. The Corporation maintains insurance,
including insurance relating to personal injury and product liability, in
amounts which the Corporation currently considers adequate. Nevertheless, a
partially or completely uninsured claim against the Corporation, if successful
and of sufficient magnitude, could have a material adverse effect on the
Corporation. In addition, the Corporation's severe cash shortage may adversely
affect its ability to continue to maintain its insurance coverage.
Nature of Industry. The electric vehicle industry is in its infancy.
Although the Corporation believes that it has manufactured more electric
vehicles than any other company in the United States based on its own knowledge
of the industry, there are many large and small companies, both domestic and
foreign, now in, poised to enter or entering this industry. This EV industry is
subject to rapid technological change. Most of the major domestic and foreign
automobile manufacturers (i) have produced design-concept electric vehicles,
and/or (ii) have developed improved electric storage, propulsion and control
systems, and/or (iii) are planning to enter the field. Various non-automotive
companies are also developing improved electric storage, propulsion and control
systems. Demand for and interest in electric vehicles appears to be increasing.
However, growth in the present limited demand for electric vehicles depends upon
(A) future regulation and legislation requiring more use of non-polluting
vehicles, (B) the environmental consciousness of customers and (C) the ability
of electric vehicles to successfully compete with vehicles powered with internal
combustion engines.
Uncertainty of Product Market and Acceptance; Changed Legislative
Climate. Because vehicles powered by internal combustion engines cause
pollution, there is significant public pressure in Europe and Asia, and enacted
or pending legislation in the United States at the federal level and in certain
states, to promote or mandate the use of vehicles with no tailpipe emissions
("zero emission vehicles") or reduced tailpipe emissions ("low emission
vehicles"). To date, substantially all zero emission vehicles designed and
produced have been electric vehicles, and most low emission vehicles have been
powered by natural gas or have been hybrid vehicles using two or more powering
systems. The Corporation believes that legislation requiring or promoting zero
emission vehicles or low emission vehicles is necessary to create a significant
commercial market for electric vehicles. There can be no assurance, however,
that further legislation will be enacted or that current legislation will not be
repealed or amended, or that a different form of zero emission or low emission
vehicle will not be invented, developed and produced, and achieve greater market
acceptance than electric vehicles. Following the state and federal elections in
November 1994, the Corporation believes that the changed legislative climate in
the United States may result in extensions, modifications or reductions of
current federal and state legislation, mandates and potential tax incentives
which could adversely affect the Corporation's business prospects if
implemented. In April 1996, California altered its mandate requirements by
extending the implementation date and establishing voluntary compliance.
Additional information regarding the status of legislative mandates and
initiative is available in the Corporation's Form 10K for the fiscal year ended
July 31, 1996 filed with the Securities and Exchange Commission.
Competition. There are many companies, including several major
automobile companies and electronics firms, actively engaged in the research and
development of electric vehicles. Many have far greater resources and marketing
abilities than the Corporation. Although the Corporation believes it has sold
more electric vehicles than any other company in the United States, there can be
no assurance that the Corporation will retain this advantage or be able to
compete in the future with the companies in or entering the electric vehicle
market. The major automobile manufacturers have a distinct advantage over the
Corporation if they decide to compete with the Corporation in the
retrofit/conversion EV business, should the Corporation continue in this
business. Their vast resources would pose a distinct disadvantage to the
Corporation. Direct competition from the "Big Three" could possibly inhibit the
Corporation from obtaining the vehicles it needed without additional cost. The
Corporation, believes, however, that the niche fleet market which it has
targeted is presently too small for the large automobile manufacturers to pursue
on a competitive basis with the Corporation.
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<PAGE>
Dependence On Suppliers/Outside Parties. Certain components used in the
Corporation's electric vehicles are available only from a limited number of
sources. If such sources are unable or unwilling for any reason to manufacture
and sell these unique components, the Corporation at the present time would have
no other supplier. Additionally, the Corporation intends to develop close
relationships with other suppliers of propriety components, such as batteries,
which the Corporation will integrate into its retrofitted and OEM electric
vehicles. The Corporation's reliance on these limited source suppliers could
cause shortages of certain key components, or the inability to find comparable
replacements at any cost or time could significantly impair the Corporation's
financial performance and relationships with its customers.
Rapid Technological Change. The Corporation's existing products are
designed for use with, and are dependent upon, existing electric vehicle
technology. As technologies change, and subject to the Corporation's limited
available resources, the Corporation plans to upgrade or adapt its products in
order to continue to provide products with the latest technology. However, there
can be no assurance that the Corporation will be able to avoid technological
obsolescence of its products or that the Corporation's research and development
efforts will be able to adapt to changes in or create the necessary
"leading-edge" technology to stay competitive. Further proprietary technology
development by others could prohibit the Corporation from using its own
technology.
Minimal Barriers to Entry. Other than its trademarks and its
distribution arrangements with suppliers of subcomponents, the Corporation does
not presently license or own any proprietary technology and, therefore, has
created little or no barrier to entry for competitors other than the time and
significant expense required to assemble and develop similar production and
design capabilities. Competitors of the Corporation may enter into exclusive
arrangements with current or potential suppliers for the Corporation, thereby
potentially giving such competitors a competitive edge which the Corporation
might not be able to overcome.
No Dividends.No Dividends. To date, the Corporation has not paid any
dividends on its Common Stock or Preferred Stock and does not intend to declare
any dividends in the foreseeable future on its Stock.
Preferred Stock Preferences. The Corporation's Series A and Series B
Preferred Stock has preference over the Common Stock with respect to the payment
of dividends and the distribution of assets in the event of a liquidation or
dissolution of the Corporation. In addition, the Board of Directors of the
Corporation also has the authority to issue additional preferred stock in one or
more series and to fix the voting and other powers, designations, dividends,
preferences and relative participation, optional, conversion, exchange,
redemption and other special rights and qualifications, limitations or
restrictions thereon of any such series of preferred stock. Such rights could
adversely affect the existing or future rights of the units of Common Stock with
respect to the existing Series A Preferred Stock and as to any new series of
Preferred Stock. In connection with the restructuring of the Corporation's
unsecured debt, the Corporation shall issue shares of Series B Preferred Stock
that will have certain preferences over the Common Stock and the Series A
Preferred Stock with respect to dividends and the distribution of assets in the
event of a liquidation or dissolution. See Risk Factors -- Debt Restructuring.
Units Eligible for Future Sale. No prediction can be made as to the
effect, if any, that substantial and significant sales of new units of Common
Stock or the availability of such unitsfor sale will have on the market prices
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of Common Stock may be sold in the future may adversely affect
prevailing prices for the Corporation's Common Stock and could impair the
Corporation's ability to raise capital through the sale of its equity
securities. As of January 31, 1997, the Corporation had issued and outstanding
approximately 131,000,000 shares, of which over 1,000,000 shares are free
trading with the remainder restricted pursuant to Rule 144 or Regulation S.
Leverage; Cash Flow. Any indebtedness being assumed by the Corporation
in connection with its financing activities poses significant risks to potential
investors, particularly in view of the Corporation's loss history. The ability
of the Corporation to generate sufficient cash flow to make payments with
respect to any debt of the Corporation will depend upon the future performance
of the Corporation, which will be subject to factors beyond the Corporation's
control. No assurance can be given that the Corporation will be able to fund its
working capital needs and to satisfy its principal and interest requirements
from internally generated funds.
Creditor Claims and Litigation [Shareholder] Claims. The informal
Creditors Committee of the Corporation recommended in 1995 a voluntary
moratorium on pursuing unsecured claims (a copy of which is available for review
by the Purchaser and its counsel upon request). There is no guarantee, however,
that this moratorium will continue. In addition, certain unsecured creditors
representing approximately $650,000 in principal and interest
32
<PAGE>
have nevertheless filed or threatened to file lawsuits if they are not paid.
Judgments have been awarded to unsecured creditors who filed lawsuits for claims
representing an aggregate of approximately $450,000 in principal and interest.
On September 30, 196, a suit was filed by Anthony Vicari in proper against the
Corporation in San Francisco Superior Court, alleging that plaintiff and
defendant entered into an oral agreement whereby defendant agreed to give
plaintiff $1,000,000 and 80,000 shares of defendant's stock as compensation for
seeking and arranging a joint business venture agreement with a Mexican company.
The complaint seeks compensatory damages in an unspecified amount, punitive
damages, attorneys' fees and costs, specific performance under the oral
agreement, and an aware of 80,000 shares of stock. The Corporation was served on
January 16, 1997, and has just begun to investigate this matter and has retained
counsel.
33
<PAGE>
<TABLE>
EXHIBIT B - APPROXIMATE PRO FORMA CAPITALIZATION
U.S. Electricar, Inc.
Stock Capitalization Table
January 31, 1997
(UNAUDITED)
<CAPTION>
Shares @ Shares @ Shares @
Shares 7/31/95 7/31/96 1/31/97
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common 55,672,992 120,220,248 130,969,477
Series A Preferred 6,274,335 4,010,159 3,860,931
Series B Convertible Preferred 1,587,473 1,587,473
- -------------------------------------- ---------------------------------------------
61,947,327 125,817,880 136,417,881
- -------------------------------------- ---------------------------------------------
---------------------------------------------
Warrants 4,667,428 2,180,000 2,180,000
---------------------------------------------
---------------------------------------------
Cashless Warrants 15,333,332 15,333,332
---------------------------------------------
---------------------------------------------
Options -- Employee Plan 16,399,200 16,570,778 23,770,778
---------------------------------------------
---------------------------------------------
Options -- Non-Plan 2,268,766 1,695,000 1,695,000
---------------------------------------------
- -------------------------------------- ---------------------------------------------
Total: 85,282,721 161,596,990 179,396,991
- -------------------------------------- ---------------------------------------------
---------------------------------------------
Convertible Debt and Bonds: 20,000,000 24,866,666
---------------------------------------------
- -------------------------------------- ---------------------------------------------
Total Shares -- Fully Diluted 85,282,721 181,596,990 204,263,657
- -------------------------------------- ---------------------------------------------
ProForma
------------------------------------------------------------------
Common Stock (Hyundai) 12,000,000
------------------------------------------------------------------
------------------------------------------------------------------
Convertible Debt 4,799,999
------------------------------------------------------------------
- -------------------------------------- ---------------------------------------------
Total Shares -- Fully Diluted 85,282,721 181,596,990 221,063,656
- -------------------------------------- ---------------------------------------------
</TABLE>
34
<PAGE>
ADDENDUM
Hyundai Motor Company ("HMC")
and
Hyundai Electronics Industries Co., Ltd. ("HEI")
and
U.S. Electricar, Inc. ("USE")
February 27, 1997
Regarding the 12 April 1996 Agreement bvetween HMC and USE/SC (hereinafter
"the Agreement"), it is agreed that all references to HMC may mena either HMC
exclusively or HMC and HEI.
Specially, due to the participation of HEI, each party agrees the amendment of
the Agreement as follows;
1) with respect to the purchase of 12,000,000 shares of USE, the break down
and the price shall be as follows;
HMC: 8,400,000 shares (70%) at a price of US $0.30.
HEI: 3,600,000 shares (30%) at a price of US $0.30.
2) HMC and HEI shall pay royalties as follows;
HMC: US $1,295,000 of the paid-up royalty and US $105,000 of the running
royalty*).
HEI: US $555,000 of the paid-up royalty and US $45,000 of the running
royalty*).
*) The running royalty shall be paid on or before the anniversary of the
Effective date of the License Agreement, through and including the sixth
anniversary of the License Agreement.
All other terms and conditions of the 12 April 1996 Agreement remain in full
force and effect.
Hyundai Motor Company
By: /s/ Y. I. Lee
---------------------------------
Y. I. Lee / Vice President
Hyundai Electronics & Industries Co., Ltd.
By: /s/ J. S. Lee
---------------------------------
J. S. Lee / Executive Managing Director
U.S. Electricar, Inc.
By: /s/ Roy Y. Kusumoto
---------------------------------
Roy Y. Kusumoto / President & CEO
35
<PAGE>
LICENSE AGREEMENT
This License Agreement is entered into on February 27, 1997, by and between U.S.
Electricar, Inc., a California corporation (hereinafter referred to as
"Licensor"), and Hyundai Motor Company and Hyundai Electronics Industries Co.,
Ltd. (hereinafter jointly referred to as "Licensee").
WITNESSETH:
WHEREAS, Licensor has acquired or developed considerable technical information
and expertise relating to the design, assembly, manufacture and sale of the
Panther(TM) Systems; and
WHEREAS, Licensee desires to secure from Licensor the right to use such
technical information and expertise in order to develop, manufacture, assemble,
sell and distribute the Panther(TM) Systems; and
WHEREAS, it is the mutual intent of the parties to set forth the terms and
conditions under which Licensor will permit Licensee to use said technical
information.
NOW, THEREFORE, the parties hereby agree as follows:
I. DEFINITIONS
(A) "Licensed Panther(TM) Systems" as used herein shall mean Propulsion Systems
for Electric Vehicles which are or will be developed by Licensor during the term
of this License Agreement, including upgrades to said systems developed by
Licensor, all of which may be assembled by Licensee, or Licensee's designated
manufacturer, in accordance with the Technical Data. Notwithstanding the
foregoing, Licensor may customize a propulsion system exclusively for a customer
other than Licensee using Technical Data and the Licensed Panther(TM) Systems
("Customized System").
(B) "Licensed Component(s)" as used herein shall mean such parts of the Licensed
Panther(TM) Systems as are designed and manufactured by Licensor at its plants
and identified in Exhibit A attached hereto, all of which Licensed Components
may be manufactured by Licensee in accordance with the Technical Data.
(C) "Licensed Item(s)" as used herein shall mean Licensed Panther(TM) Systems
and Licensed Component(s).
(D) "Technical Data" as used herein shall mean such technical data and any
patents relating thereto, assembly, subassembly and parts drawings, and
applicable material specifications, stamping, casting and forging drawings,
labor and tool routing sheets, process specifications, drawings of special
tools, fixtures, dies, jigs, gauges and patterns, and production and inspection
procedures as are designed or created by Licensor and used by it in the
development and assembly of Licensed Panther(TM) Systems, and the manufacture of
Licensed Components, and which are specified in Exhibits A and B attached hereto
and incorporated herein by this reference.
(E) "Korea" as used herein means the territory of Korea.
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<PAGE>
II. GRANT
Subject to the terms and conditions of this License Agreement, Licensor hereby
grants to Licensee license to use Technical Data in the manufacture and assembly
of Licensed Panther(TM) Systems, and the manufacture and assembly of Licensed
Components for use in such Licensed Items, for the following purposes:
1) Use within motor vehicles built by Licensee or built by subsidiaries
owned more than fifty percent (50%) by Licensee (hereinafter referred to as
"Licensee Motor Vehicles"), or for use as spare parts for such Licensee Motor
Vehicles;
2) The manufacturing and distributing licenses to the Licensed
Panther(TM) Systems shall also be exclusive to HMC for the territory of Korea;
and
3) Motor vehicles manufactured pursuant to this Article II may be
exported to any other country.
III. OWNERSHIP OF TECHNICAL DATA AND LICENSED ITEMS
(A) During the term of this License Agreement, the Technical Data and the
Licensed Items shall remain owned by Licensor. In addition to any other rights
it may have, Licensor expressly retains the right to customize a propulsion
system exclusively for a customer other than Licensee, provided that:
(B) Nothing in this License Agreement shall be deemed to constitute a transfer
of title, or any interest other than a license, in the Technical Data or the
Licensed Items.
(C) Any improvements, enhancements, and/or modifications made by Licensee to the
Technical Data or the Licensed Items shall be the property of Licensee. Licensor
shall have a fully-paid, worldwide, non-exclusive license to use, manufacture,
sell, distribute and sublicense such improvements, enhancements, and/or
modifications. The obligations of Licensee to provide Licensor with information
regarding any improvements, enhancements or modifications to the technology is
expressly understood to be ongoing. In furtherance of this obligation, Licensee
will meet at least quarterly with Licensor to review the status of transfer of
technical data, as well as progress on improvements, updates or upgrades
thereto.
(D) Any improvements, enhancements, and/or modifications made by Licensor to the
Technical Data shall be the property of Licensor. Licensee shall have such
license rights in the improvements, enhancements, and/or modifications made by
Licensor as have been granted to Licensee in Article II above. The obligations
of Licensor to provide Licensee with information regarding any improvements,
enhancements or modifications to the technology is expressly understood to be
ongoing. In furtherance of this obligation, Licensor will meet at least
quarterly with Licensee to review the status of transfer of technical data, as
well as progress on improvements, updates or upgrades thereto
(E) The parties agree to cooperate with and to assist each other in protecting
the intellectual property rights to the Technical Data, the Licensed Items, and
any improvements, enhancements, and/or modifications made thereto by Licensee or
Licensor, including assistance in filing for patent protection worldwide. The
parties agree that this is one of the material terms of this License Agreement,
and each recognizes the importance of protecting the intellectual property and
providing assistance in filing for patent protection worldwide. Each party
further agrees that these obligations are expressly understood to be ongoing
throughout the term of this License Agreement.
37
<PAGE>
IV. DISCLOSURE OF TECHNICAL DATA
(A) Licensor shall supply the Technical Data to Licensee as requested by
Licensee during the term of this License Agreement. Unless the parties shall
otherwise agree, the Technical Data shall be supplied in written form at the
office of Licensor located in Torrance, California. In addition, Licensor shall
also supply to Licensee identification listings of basic manufacturing and
inspection equipment for use by the latter in connection with the development,
assembly and manufacture of Licensed Items.
(B) In no event shall Licensor disclose or supply any Technical Data to Licensee
on or after the date of termination of this License Agreement. All Technical
Data to be supplied under the terms of this License Agreement shall be in the
language and the system of measures used by Licensor.
(C) The Technical Data is confidential. Licensee shall preserve and protect the
confidential nature of the Technical Data, and accordingly shall not disclose
the Technical Data to third parties without the written consent of Licensor.
Said consent will not, however, be required in order to disclose the Technical
Data to the following parties, provided that, in each case, said parties shall
agree in writing that (i) the Technical Data will only be used to develop,
assemble, and manufacture Licensed Items under this License Agreement, and (ii)
the Technical Data shall not be disclosed to third parties.
1. To those of their respective employees necessary to enable Licensee
and/or Licensee's designated manufacturer to manufacture and assemble Licensed
Panther(TM) Systems and Licensed Components.
2. To suppliers of Licensee and/or Licensee's designated manufacturer to
the extent necessary to enable such suppliers to deliver to Licensee and/or
Licensee's designated manufacturer the materials and components required to
manufacture and assemble Licensed Components and Licensed Panther(TM) Systems.
3. To subcontractors and sub-subcontractors of Licensee and/or Licensee's
designated manufacturer to the extent necessary to enable such subcontractors
and sub-subcontractors to perform work required to manufacture and assemble
Licensed Components and Licensed Panther(TM) Systems.
The disclosures permitted under (1), (2) and (3) above of this Article IV shall
not relieve Licensee, or permitted third parties under this License Agreement,
of the obligation to maintain the Technical Data in confidence.
(D) Notwithstanding the foregoing, the obligation provided for in this Article
IV shall not apply to any information: 1) which is already known to Licensee at
the time of disclosure; or 2) which becomes lawfully known to the public through
sources other than Licensee; and 3) which is received by Licensee from a third
party where the disclosure by the third party is not in violation of any law or
contract.
V. TECHNICAL ASSISTANCE
(A) Licensor shall use its reasonable efforts to furnish, upon written request
of Licensee, the services of engineers, and/or technicians ("technicians") in
Korea to assist Licensee in acquiring knowledge and training relating to the
development or assembly of Licensed Panther(TM) Systems and manufacture of
Licensed Components in accordance with the Technical Data (hereinafter referred
to as "Technical Assistance"). Such technicians shall be made available to
Licensee for reasonable periods of time
38
<PAGE>
throughout the term of this License Agreement. Subject to the agreement on the
terms of visit, Licensee agrees to pay for the out-of-pocket expenses incurred
by such technicians in providing said services, such expenses to include
airfare, room and board.
(B) Licensor shall permit a reasonable number of Licensee's employees to visit
the plants of Licensor for reasonable training periods to enable Licensee's
employees to gain knowledge with respect to the assembly of Licensed Panther(TM)
Systems and the manufacture of Licensed Components in accordance with the
Technical Data and training program. Licensor and Licensee shall consult and
agree upon the number of Licensee's employees to visit and the duration of the
visits, it being understand that the aggregate duration of all such visits
during any one (1) year shall not exceed sixty (60) man-days unless Licensor
shall otherwise agree. All salaries, costs and expenses of Licensee's
technicians for such periods of training shall be paid by Licensee.
(C) All employees or other representatives of either party hereto, while at the
premises of the other party, shall comply with all the then regularly
established and existing rules and regulations of such other party.
VI. INDEMNITIES
(A) Licensor shall not be liable to Licensee for any claim by any third party
for personal injury or property damages based on breach of warranty or products
liability allegedly due to a defect in a motor vehicle manufactured by HMC and
using the Technical Data or Technical Assistance transferred under this
Agreement. Specifically, Licensor shall not be liable for claims of personal
injury or damage to property based on the design, manufacture, or assembly of
Hyundai motor vehicles utilizing the Technical Data or Technical Assistance.
Nevertheless, with respect to a claim made where the claim is based solely on an
alleged defect in the Technical Data or Technical Assistance, Licensor shall
defend and indemnify Licensee with respect to such claim. If a claim is made
where the claim is based on both: (i) an alleged defect in the Technical Data or
Technical Assistance; and (ii) an alleged defect in the design, materials or
workmanship produced by Licensee; then each party shall bear its own costs of
suit and its allocable share of any damages.
(B) Licensor warrants and represents that (i) it is the Licensor and proprietor
of all right, title and interest in and to the Technical Data; (ii) it has the
right and authority to enter into this Agreement and to license the Technical
Data to Licensee in accordance with the terms hereof, and as of the date hereof,
has no actual knowledge of any claim that the Technical Data infringes any
copyright, patent, trade secret or other proprietary rights of any third party,
and (iii) the performance of the terms of this Agreement and of Licensor's
duties to Licensee hereunder will not breach any separate agreement or
arrangement by which Licensor is bound.
(C) Licensor hereby agrees to defend, indemnify and hold Licensee, its
directors, shareholders, agents, officers, employees, authorized assignees and
successors in interest harmless from and against any claims, suits, losses,
damages, judgments, fines, costs, expenses, obligations, recoveries and
deficiencies, including penalties, interests, and reasonable attorney fees, and
all liability that Licensee may incur or suffer resulting from any claim of
infringement of any patent, copyright, trademark, trade secret or any other
intellectual property right of any third party by the Technical Data or
resulting from its use under this Agreement.
39
<PAGE>
(D) Where indemnification is required or appears probable pursuant to paragraphs
(A) and (C) herein, the Licensee shall provide prompt written notice to the
Licensor, and cooperate reasonably and at the Licensor's expense with the
Licensor. Licensee shall not settle any claim hereunder, without the Licensor's
prior approval. The foregoing rights to indemnification are contingent upon the
Licensee: (i)promptly notifying the Licensor in writing; (ii) allowing the
Licensor, at Licensor's expense, to direct the defense or settlement of such
claim or suit; and (iii) giving to the Licensor, at the Licensor's expense,
reasonable information and assistance for such defense or settlement, including
providing such witnesses for testimony as may reasonably be required.
(E) The indemnity provisions herein shall continue throughout the term of this
Agreement and shall survive any termination or expiration of this Agreement.
VII. ROYALTIES
In consideration for the rights granted to Licensee hereunder, Licensee agrees
to pay a fee to Licensor in the total sum of $2 million. At Licensor's request,
$1.85 million of said fee shall be paid by Licensee to Licensor within ____ days
of the Effective Date of this License Agreement. The remaining $150,000 portion
of said $2 million fee shall be paid on a periodic installment basis as follows:
a $25,000 payment by Licensee to Licensor on or before the anniversary of the
Effective Date of this License Agreement, through and including the sixth
anniversary of this License Agreement, for a total of $150,000 in installment
payments (6 x $25,000).
VIII. BOARD MEMBERSHIP
Licensor hereby agrees to take such steps as may be required to appoint a person
designated by Licensee to the Board of Directors of Licensor or as an Observer
to said Board, as Licensee may elect in its sole discretion, such appointment to
be effective within ______ days of the execution of this Agreement. Licensor
also hereby agrees, during the term of the Agreement, to provide Licensee
(either through Licensee's designee serving on the Licensor's Board of Directors
or otherwise upon the Licensee's written request to the Licensor) with prompt
delivery of, or access to, the Licensor's corporate, business, accounting and
financial information and documents, including but not limited to all
information and documents made available or discussed at meetings of the
Licensor's Board of Directors, all documents and reports filed or proposed to be
filed by the Licensor with any executive, legislative, administrative or
judicial office or agency; and all corporate minutes, articles of incorporation,
bylaws, contracts, agreements, shareholder lists, correspondence, press
releases, financial statements, books and records, and other documents of the
Licensor (collectively "Information"); provided, however, that Licensee shall
hold in strict confidence all Information which has not yet been made generally
available to the public and shall not engage, directly or indirectly, in any
transaction involving securities of the Licensor while in possession of
Information which is material and has not yet been made generally available to
the public.
IX. TRADEMARKS AND PUBLICITY
(A) Nothing in this License Agreement shall be construed to authorize the use by
Licensee of any trademarks or other distinctive marks or signs owned by Licensor
unless prior approval in writing is received from Licensor. Licensee shall only
utilize its own trademarks. Licensee may, if it so elects, affix to any Licensed
Item made by Licensee under this License Agreement such marks as the parties may
agree upon in writing.
40
<PAGE>
(B) Notwithstanding anything contained in this License Agreement to the
contrary, the parties shall have the right to use the trademarks of the other
parties in connection with announcements regarding the relationship of the
parties. No such announcement shall be made, however, without the prior consent
of the other party. Consent of the other party shall be deemed to have been
given if a written copy of the notice is provided to the other party, and such
party does not object in writing to such announcement. Neither party shall
unreasonably withhold its consent to such announcements.
X. FAILURES AND DELAYS IN PERFORMANCE
Neither Licensor nor Licensee shall be liable in damages or otherwise for any
delay or default in performance under this License Agreement where such delay or
default is due to any cause beyond its control or is caused by war, strikes,
other labor trouble, shortage of labor or material, riots, fires, floods, public
calamity, transportation difficulties, or by an act or omission of any
governmental authority.
XI. TERM AND TERMINATION
(A) This License Agreement shall be effective from the date when this License
Agreement is signed by the parties hereto ("Effective Date") and continue in
effect until December 31, 2010.
(B) Without limiting any other rights either party may have, it is specifically
understand that:
1) In the event of either party's dissolution, or the liquidation of
either party's assets, or the filing of a voluntary petition in bankruptcy, or
the filing of an involuntary petition in bankruptcy that is not dismissed within
sixty (60) days after filing; or
2) In the event either party breaches any material term hereunder more
than twice in any twelve (12) month period and the defaulting party has received
written notice of each breach;
then the other party shall have the right, at its sole option and upon written
notice to the bankrupt and/or defaulting party, to terminate this License
Agreement immediately.
(C) The parties agree and acknowledge that this License Agreement constitutes,
and throughout its term shall continue to be, an executory contract under which
Licensor is a licensor of a right to intellectual property, pursuant to 11
U.S.C. ss. 365(n), and therefore that this License Agreement is, in the event of
a future bankruptcy filing against Licensor, subject to the provisions of 11
U.S.C. ss. 365(n), and accordingly, in such event, Licensee would have the
rights and privileges enumerated in 11 U.S.C. ss. 365(n).
XII. CONSEQUENCES OF TERMINATION
Upon termination of this License Agreement for any reason, except breach of its
terms by Licensee, Licensee shall have a permanent, fully-paid license to the
Technical Data, under the same terms as set forth in Article II, without any
additional payments. Licensor shall retain title and ownership to the Technical
Data. If Licensee breaches the License Agreement, all Technical Data shall be
returned to Licensor. Licensee shall have no rights to improvements,
enhancements, or modifications to the Technical Data or Licensed Items made by
Licensor subsequent to the termination of this License Agreement.
41
<PAGE>
XIII. ASSIGNMENT AND SUBLICENSE RIGHTS
Except as otherwise provided in this License Agreement, Licensee shall not
assign or sublicense its rights under this License Agreement.
Licensee may appoint subcontractors as its subcontractors to undertake the
manufacture or assembly of Licensed Components.
XIV. DISCLAIMER OF AGENCY
This License Agreement shall not constitute Licensee as the legal representative
or agent of Licensor, nor shall Licensee have the right or authority to assume,
create or incur any liability or any obligation of any kind, express or implied,
against, or in the name of, or on behalf of, Licensor.
XV. GENERAL PROVISIONS
(A) Title and Subtitles. The titles of the Articles and Paragraphs of this
License Agreement are for the convenience of reference only, and are not to be
considered in construing this License Agreement.
(B) Counterparts. This License Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
(C) Entire Agreement. This License Agreement is the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes all
documents and correspondence with respect to such subject matter prior to the
date hereof. No amendment to this License Agreement shall be effective unless in
writing and signed by all parties hereto.
(D) Waiver. The failure of a party to insist on the strict performance of any
provision of this License Agreement or to exercise any right, power, or remedy
upon a breach hereof shall not constitute a waiver of any provision of this
License Agreement or limit the party's right thereafter to enforce any provision
or exercise any right.
(E) Notice. Any notice, payment, report or other communication required or
permitted to be given by one party to any other party by this License Agreement
shall be in writing and either (i) served personally on the other party, (ii)
sent by express, registered or certified first class mail, postage prepaid,
addressed to the other party or parties at its/their address indicated next to
their signatures below, or to such other address as any addressee shall have
theretofore furnished to the other parties by like notice, (iii) delivered by
commercial courier to the other party, or (iv) sent by facsimile with the
original sent by express mail. Such notice shall be deemed received on the
second day after transmittal if sent by one day courier together with a
transmission of such notice by facsimile if the recipient has the capability to
notice a facsimile at its address, and if sent by other methods shall be deemed
received upon receipt.
(F) Governing Law. This License Agreement has been entered into in California,
and shall be governed by the laws of the State of California, United States of
America.
42
<PAGE>
(G) Arbitration. All disputes arising in connection with this License Agreement
shall be finally settled under the rules of Conciliation and Arbitration of the
International Chamber of Commerce ("ICOC") by one or more arbitrators appointed
in accordance with ICOC rules. The place of arbitration shall be the country of
the respondents.
IN WITNESS WHEREOF, the parties have executed this License Agreement as of the
date first above stated.
Hyundai Motor Company
By: / s / Y. I. Lee
--------------------------------------------
Y. I. Lee / Vice President
Hyundai Electronics & Industries Co., Ltd.
By: / s / J. S. Lee
--------------------------------------------
J. S. Lee / Executive Managing Director
U.S. Electricar, Inc.
By: / s / Roy Y. Kusumoto
--------------------------------------------
Roy Y. Kusumoto / President & CEO
* NOTE:
(1) This License Agreement includes the Addendum dated February 27, 1997.
(2) "Exhibit A" means the drawing tree of Licensed Panther(TM) Systems.
(3) "Exhibit B" means the "Technical Data List" which will be attached to
this License Agreement.
43
<PAGE>
EXHIBIT A
The following drawing tree graphic data is available from the Company upon
request.
CEU P60
V10000AA
P60NVRT DWG TREE
DRAWING NUMBER V10000TA
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 4/19/96]
44
<PAGE>
CEU P60
V20000A-
P60/6 INVRT DWG TREE
DRAWING NUMBER V20000T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 12/20/96]
45
<PAGE>
BCU ASSEMBLY
B10000A-
BCU DWG TREE
DRAWING NUMBER B10000T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 1/2/97]
46
<PAGE>
GDU
G01000A-
GDU DWG TREE
DRAWING NUMBER G10000T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 11/18/96]
47
<PAGE>
EDM P60 ASSEMBY
M01000AA
EDM DWG TREE
DRAWING NUMBER M01000TA
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 11/14/96]
48
<PAGE>
A/C SYSTEM
A01000A-
A/C SYSTEM DWG TREE
DRAWING NUMBER A0100T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 9/24/96]
49
<PAGE>
POWER STEERING UNIT (PSU)
P01000A-
PSU DWG TREE
DRAWING NUMBER P01000T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 7/26/96]
50
<PAGE>
HVDC CONTRACTOR ASSY
K10100A-
HVDC CONTRACTOR ASSY DWG TREE
DRAWING NUMBER K10100T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 9/16/96]
51
<PAGE>
CEI HARNESS KIT
K20100A-
CEU HARNESS KIT DWG TREE
DRAWING NUMBER K20100T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 9/5/96]
52
<PAGE>
BATTERY VOLT-AMP DISPLAY
D01000A-
BATTERY VOLT-AMP DISPLAY DWG TREE
DRAWING NUMBER D01000T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 1/2/97]
53
<PAGE>
BATTERY V-I SENSE BOARD
K30100A-
BATTERY V-I SENSE BOARD DWG TREE
DRAWING NUMBER K30100T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 1/2/97]
54
<PAGE>
PRELIMINARY
CEU P90
V30000A-
P90 INVRT DWG TREE
DRAWING NUMBER V30000T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 12/20/96]
55
<PAGE>
PRELIMINARY
CEU P120
V40000A-
P12 INVRT DWG TREE
DRAWING NUMBER V40000T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 12/20/96]
56
<PAGE>
ACCENT CONVERSION
SAC100A-
ACCENT CONVERSION DWG TREE
DRAWING NUMBER SAC100T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 11/18/96]
57
<PAGE>
HYUNDAI HYBRID SOC AND BIAS POWER ASSEMBLY
B01000A-
HYUNDAI HYBRID SOC AND BIAS POWER ASSY DWG TREE
DRAWING NUMBER B01000T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 11/14/96]
58
<PAGE>
HYUNDAI SERIES-TYPE HYBRID EV BCU SYSTEM
SBCU01A-
HYUNDAI SERIES-TYPE HYBRID EV BCU SYSTEM DWG TREE
DRAWING NUMBER SBCU01T-
[GRAPHIC OF DRAWING TREE
BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 11/14/96]
59
<PAGE>
EXHIBIT B
TECHNICAL DATA
1. System Engineering
1) concept and technical background
2) simulation and analysis
3) design and test specification including testing know-how
4) test procedure of system performance
5) evaluation and verification for system performance
2. Hardware Engineering (Design Concept, Technical Background and
Implementation)
1) power electronics
2) signal processing (digital and analog)
3) unit-to-unit and human-to-system interface
4) EMI/EMC solution
3. Software Engineering (Design Concept, Technical Background and
Implementation)
1) development environment (S/W and H/W tool and documentation)
2) flow chart and algorithm
2-1) flow chart: (CEU, APC and BCU)
a) main program functions
b) list of names of all main modules with the description of
the main functions performed by each module
c) communication methods for RS232 and CAN
2-1) algorithms not described in the flow charts
a) module control (CEU and APC)
b) motion control
c) general fault detection and handling
d) charging and state of charge (CEU and BCU)
3) debugging for each function in Panther system
4) additional necessary information regarding manufacturing
4. Mechanical Matching Engineering
1) design concept
2) technical background and implementation
5. Manufacturing Engineering
1) concept and technical background
2) manufacturing and / or assembly process in mass production
6. Qualification
1) qualification program (including test specification)
2) reliability program (including test specification)
3) durability program (including test specification)
60
<PAGE>
EXHIBIT B (Continued)
7. Others
1) safety, diagnostics
- test background
- tool and implementation
2) industrial standard (UL, IEEE, etc.)
61
<PAGE>
ADDENDUM
Hyundai Motor Company ("HMC")
and
Hyundai Electronics Industries Co., Ltd. ("HEI")
and
U.S. Electricar, Inc. ("USE")
February 27, 1997
Regarding the 27 February Agreement bvetween HMC and HEI and USE (hereinafter
"the License Agreement "), each party agrees to add the following paragraph to
the end of paragraph VI(A) of the License Agreement dated February 27, 1997.
"Licensor shall maintain a reasonable amount of product liability insurance to
cover its obligations hereunder. The Licensor shall also name the Licensee as an
additional named insured on its product liability insurance policies so that
Licensee will be covered by Licensor's product liability insurance in the event
that any claim is made against Licensee based on an alleged defect in the
Technical Data or Technical Assistance transferred under this Agreement."
All other terms and conditions of the 27 February 1997 License Agreement remain
in full force and effect.
Hyundai Motor Company
By: /s/ Y. I. Lee
---------------------------------
Y. I. Lee / Vice President
Hyundai Electronics & Industries Co., Ltd.
By: /s/ J. S. Lee
---------------------------------
J. S. Lee / Executive Managing Director
U.S. Electricar, Inc.
By: /s/ Roy Y. Kusumoto
---------------------------------
Roy Y. Kusumoto / President & CEO
62
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS IN THE ANNUAL REPORT ON FORM 10-Q OF U.S.
ELECTRICAR, INC. FOR THE QUARTER ENDED JANUARY 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 10
<SECURITIES> 0
<RECEIVABLES> 679
<ALLOWANCES> 0
<INVENTORY> 1,969
<CURRENT-ASSETS> 2,836
<PP&E> 1,274
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,157
<CURRENT-LIABILITIES> 16,260
<BONDS> 3,987
<COMMON> 60,699
0
5,975
<OTHER-SE> (81,666)
<TOTAL-LIABILITY-AND-EQUITY> 4,157
<SALES> 898
<TOTAL-REVENUES> 898
<CGS> 1,412
<TOTAL-COSTS> 3,532
<OTHER-EXPENSES> 1,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 412
<INCOME-PRETAX> (4,676)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,676)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,676)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
