SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
U.S. ELECTICAR, INC.
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(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
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U.S. ELECTRICAR, INC.
Notice of Annual Meeting of Stockholders
To Be Held July 29, 1999
To the Stockholders of U.S. ELECTRICAR, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of U.S. Electricar, Inc., a California corporation (the
"Company"), will be held at 19850 South Magellan Drive, Torrance, California
90502, on Thursday, July 29, 1999, at 10:00 a.m., local time, for the following
purposes:
1. AMENDMENT TO THE U.S. ELECTRICAR, INC. RESTATED AND
AMENDED ARTICLES OF INCORPORATION ("ARTICLES OF INCORPORATION") TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK. To approve an
amendment to the U.S. Electricar, Inc. Articles of Incorporation increasing the
authorized number of shares of Common Stock from 300,000,000 to 500,000,000;
2. AUTHORIZATION FOR THE BOARD OF DIRECTORS TO EFFECT A
REVERSE STOCK SPLIT. To authorize the Board of Directors to effect a reverse
stock split of the Company's Common Stock in a ratio of one-for-twenty, at any
time until the next Annual Meeting of Shareholders;
3. AMENDMENT TO THE ARTICLES OF INCORPORATION TO CHANGE
THE NAME OF THE COMPANY AND AUTHORIZE THE BOARD OF DIRECTORS TO SELECT A NEW
NAME FOR THE COMPANY. To approve an amendment to the Articles of Incorporation
to change the name of the Company and authorize the Board of Directors to select
a new name for the Company in their sole discretion;
4. AMENDMENT TO THE U.S. ELECTRICAR, INC. 1996 STOCK
OPTION PLAN. To ratify and approve an increase in the authorized number of
shares under the U.S. Electricar, Inc. 1996 Stock Option Plan from ____________
to ____________ shares;
5. AMENDMENT TO ARTICLE III, SECTION 2 OF U.S.
ELECTRICAR'S BYLAWS TO AMEND THE VARIABLE AUTHORIZED NUMBER OF DIRECTORS
CURRENTLY RANGING FROM SIX (6) TO ELEVEN (11) TO A VARIABLE AUTHORIZED NUMBER OF
DIRECTORS RANGING FROM FOUR (4) TO SEVEN (7). To approve an amendment to Article
III, Section 2 of the Company's Bylaws to change the variable authorized number
of directors to Four (4) to Seven (7);
6. ELECTION OF DIRECTORS. To elect six (6) Directors of
the Company to serve until the next Annual Meeting of Stockholders or until
their respective successors are elected and qualified;
7. SELECTION OF INDEPENDENT AUDITORS. To ratify the
appointment of Moss Adams LLP as the independent auditors for the Company for
the fiscal year ending July 31, 1999; and
8. To transact such other business as may properly come
before the Annual Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement which is attached and made a part hereof.
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The Board of Directors has fixed the close of business on July 8, 1999
as the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
After careful consideration, the Company's Board of Directors has
approved the proposals and recommends that you vote in favor of each such
proposal.
By Order of the Board of Directors
Carl D. Perry
Chief Executive Officer
Torrance, California
July 8, 1999
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY. IF YOU DO NOT EXPECT TO ATTEND IN
PERSON, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE ANNUAL MEETING
AND VOTE BY BALLOT, YOUR PROXY WILL BE AUTOMATICALLY REVOKED AND ONLY YOUR VOTE
AT THE ANNUAL MEETING WILL BE COUNTED.
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Mailed to Stockholders on or about July 9,1999
U.S. ELECTRICAR, INC.
19850 South Magellan Drive
Torrance, California 90502
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PROXY STATEMENT
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For the Annual Meeting of Shareholders
To Be Held on July 29, 1999
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of U.S. Electricar, Inc., a California corporation (the "Company"),
for use at the 1999 Annual Meeting of Shareholders to be held on Thursday, July
29, 1999 at 10:00 a.m., local time, at 19850 South Magellan Drive, Torrance,
California 90502, and at any adjournment thereof.
This Proxy Statement and the accompanying form of Proxy are to be first
mailed to the shareholders entitled to vote at the Annual Meeting on or about
July 9, 1999. The specific proposals to be considered and acted upon at the
Annual Meeting are summarized in the accompanying Notice and are described in
more detail in the Proxy Statement. All shareholders of record at the close of
business on July 8, 1999 are entitled to notice of, and to vote at, the Annual
Meeting.
Proxies
If any shareholder is unable to attend the Annual Meeting, such
shareholder may vote by proxy. The enclosed proxy is solicited by the Board. The
shares represented by the proxies received, properly marked, dated, executed and
not revoked will be voted at the Annual Meeting. Shareholders are urged to
specify their choices on the enclosed proxy card. If a proxy card is signed and
returned without choices specified, in the absence of contrary instructions, the
shares of Common Stock, Series A Convertible Preferred Stock ("Series A
Preferred Stock") and Series B Convertible Preferred Stock ("Series B Preferred
Stock"), as the case may be, represented by such proxy card will be voted "FOR"
Proposals 1, 2, 3, 4, 5, 6 and 7, and will be voted in the proxy holders'
discretion as to other matters that may properly come before the Annual Meeting.
Revocability of Proxy
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is exercised by: (i) delivering to the
Company at the Company's executive offices, 19850 South Magellan Drive Torrance,
California 90502 (to the attention of Carl D. Perry, the Company's President) a
written notice of revocation or a duly executed proxy bearing a later date; or
(ii) attending the Annual Meeting and voting in person.
Solicitation
The solicitation of proxies will be conducted by mail and the Company
will bear all attendant costs. These costs will include the expense of preparing
and mailing proxy materials for the Annual Meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its Officers, Directors and regular
employees, none of whom will receive additional compensation for assisting with
the solicitation.
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Record Date and Voting
The close of business on July 8, 1999 has been fixed as the record date
(the "Record Date") for determining the holders of shares of Common Stock,
Series A Preferred Stock, and Series B Preferred Stock of the Company entitled
to notice of and to vote at the Annual Meeting. As of the close of business on
the Record Date, the Company had ________ shares of Common Stock, ________shares
of Series A Preferred Stock, and _________ shares of Series B Preferred Stock,
for an aggregate of ________ shares, outstanding and entitled to vote at the
Annual Meeting.
The presence at the Annual Meeting of a majority of the shares of
Common Stock, Series A Preferred Stock, and Series B Preferred Stock of the
Company in the aggregate on an as converted basis, or approximately _______of
these shares on an as converted basis either in person or by proxy, will
constitute a quorum for the transaction of business at the Annual Meeting.
Each outstanding share of Common Stock and Series A Preferred Stock on
the Record Date is entitled to one (1) vote, and each outstanding share of
Series B Preferred Stock on the Record Date is entitled to three and one-third
(31/3) votes on all matters voted on at the Annual Meeting, except that (i) the
holders of the Series B Preferred Stock are voting as a separate class to fill
one of two vacancies allotted to the Series B Preferred Stock by voting for one
(1) director, (ii) the holders of the Common Stock and Series A Preferred Stock
are voting together as a single class for the election of five (5) directors,
and (iii) cumulative voting may be used in the election of directors to be
elected by the Common Stock and the Series A Preferred Stock. Since only one
director has been nominated that will be voted upon by the holders of the Series
B Preferred Stock, the Company does not believe cumulative voting will be
applicable for the election of this director. Under cumulative voting, each
holder of Common Stock and Series A Preferred Stock may cast for a single
candidate, or distribute among the candidates as such holder chooses, a number
of votes equal to the number of candidates (five (5) at this meeting) multiplied
by the number of shares held by such shareholder. Cumulative voting will apply
only to those candidates whose names have been placed in nomination prior to
voting. No shareholder shall be entitled to cumulate votes unless the
shareholder has given notice at the meeting, prior to the voting, of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder gives such notice, all shareholders may cumulate their votes for
candidates in nomination, except to the extent that if a shareholder withholds
votes from the nominees, the proxy holders named in the accompanying form of
proxy, in their sole discretion, will vote such proxy for, and, if necessary,
exercise cumulative voting rights to secure, the election of the nominees listed
below as directors of the Company.
The Common Stock, Series A Preferred Stock, and Series B Preferred
Stock will vote together as a single class on all matters scheduled to be voted
on at the Annual Meeting, other than: (i) Proposal 1, the approval of the
amendment of the Articles of Incorporation to increase the authorized number of
shares of Common Stock, for which the affirmative vote of a majority of the
outstanding Common Stock, voting as a separate class, will be required in
addition to the affirmative vote of a majority of the outstanding Common Stock,
Series A Preferred Stock, and Series B Preferred Stock, voting together as a
single class (ii) Proposal 2, the authorization for the Board to effect a
reverse stock split, for which the affirmative vote of a majority of the
outstanding Common Stock, voting as a separate class, will be required in
addition to the affirmative vote of a majority of the outstanding Common Stock,
Series A Preferred Stock, and Series B Preferred Stock, voting together as a
single class; and (iii) Proposal No. 5, the election of directors, for which the
Series B Preferred Stock, voting as a separate class, shall vote to elect one
(1) of the six (6) directors, and for which the outstanding Common Stock and
Series A Preferred Stock, voting together as a single class, shall vote to elect
five (5) directors.
An affirmative vote of a majority of the issued and outstanding shares
of Common Stock (not just shares present and voting at the meeting), and an
affirmative vote of a majority of the issued and outstanding shares of Common
Stock, Series A Preferred Stock, and Series B Preferred Stock in the aggregate
(not just shares present and voting at the meeting) is required for approval of
Proposals 1, 2 and 3. An affirmative vote of a majority of the shares of Common
Stock, Series A Preferred Stock, and Series B Preferred Stock, present and
voting at the meeting, either in person or by proxy, is required for approval of
Proposals 4, 5, 6 and 7.
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An automated system administered by the Company's Common Stock transfer
agent will tabulate votes of the holders of Common Stock cast by proxy, and the
Company's Series A and Series B Preferred Stock transfer agent will tabulate
votes of the holders of Series A and Series B Preferred Stock cast by proxy. An
employee of the Company will tabulate votes cast in person at the Annual
Meeting. Abstentions and broker non-votes are each included in the determination
of the number of shares present and voting, and each is tabulated separately.
However, broker non-votes are not counted for purposes of determining the number
of votes cast with respect to a particular proposal. In determining whether a
proposal has been approved, abstentions are counted as votes against the
proposal and broker non-votes are not counted as votes for or against the
proposal, except broker non-votes will have the effect of a negative vote for
Proposals 1, 2 and 3, since such proposal requires for approval an affirmative
vote of a majority of the outstanding shares of the Company's Common Stock (not
just shares present and voting at the meeting), and an affirmative vote of a
majority of the Common Stock, Series A Preferred Stock, and Series B Preferred
Stock (not just shares present and voting at the meeting).
The Annual Report of the Company for the fiscal year ended July 31,
1998 has been mailed concurrently with the mailing of the Notice of Annual
Meeting and Proxy Statement to all shareholders entitled to notice of and to
vote at the Annual Meeting. The Annual Report is not incorporated into this
Proxy Statement and is not considered proxy soliciting material.
Please mark, date, sign and return the enclosed Proxy in the
accompanying postage-prepaid, return envelope as soon as possible so that, if
you are unable to attend the Annual Meeting, your shares may be voted.
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MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL NO. 1
AMENDMENT OF THE
COMPANY'S ARTICLES OF INCORPORATION TO INCREASE
THE AUTHORIZED COMMON STOCK
The Board of Directors has adopted a resolution proposing and declaring
the advisability of amending the Company's Articles of Incorporation to increase
from 300,000,000 to 500,000,000 the number of shares of Common Stock that the
Company is authorized to issue. The Board of Directors directed that this
proposed amendment be considered at the Annual Meeting of Shareholders on July
29, 1999.The Board believes this capital structure more appropriately reflects
the present and future needs of the Company. The authorization of an additional
200,000,000 shares of Common Stock would give the Board of Directors the express
authority, without further action of the shareholders, to issue such shares of
Common Stock from time to time as the Board deems necessary. A copy of this
proposed amendment to the Articles of Incorporation of the Company is set forth
in full as Exhibit A attached to this Proxy Statement and is hereby incorporated
herein by this reference; provided, however, that the text of the amendment is
subject to change as may be required by the California Secretary of State.
Purposes and Effects of the Amendment to Increase the Authorized Number of
Shares of Common Stock
Number of Shares of Common Stock Issued and Issuable upon Exercise or Conversion
Exceeds Number of Authorized Shares
As of July 8, 1999, the Company had approximately ________ shares of
Common Stock issued and outstanding, ______ shares of Common Stock issuable upon
conversion of outstanding Series A Preferred Stock _____ shares of Common Stock
issuable upon conversion of outstanding Series B Preferred Stock, _____ shares
of Common Stock issuable upon exercise of outstanding options and warrants,
______ shares of Common Stock issuable upon conversion of outstanding
convertible debt or convertible debt that the Company has agreed to issue
(excluding shares issuable pursuant to interest accrued), and ________ shares of
Common Stock issuable under warrants which are issuable upon the conversion of
certain convertible debt either issued and outstanding or convertible debt that
the Company has agreed to issue for a total of approximately ______ shares
issued and outstanding or issuable upon exercise or conversion of convertible
securities. 300,000,000 shares of Common Stock are authorized to be issued under
the Company's Articles of Incorporation as currently in effect.
Since the total number of shares of Common Stock issued and outstanding
or issuable upon exercise or conversion of convertible securities exceeds the
authorized number of Common Stock shares, the Company must increase its
authorized number of shares of Common Stock so that it will be able to issue all
the shares required by the terms of its issued and outstanding or agreed to be
issued convertible securities. Shareholder approval of the amendment to increase
the authorized number of Common Stock shares is necessary to enable the Company
to meet its obligations to issue additional shares of Common Stock under the
terms of its outstanding options, warrants and convertible debt.
Need for Additional Financing and Flexibility
The proposed increase in the authorized number of shares of Common
Stock will also allow the Company to reserve an additional number of shares
sufficient to provide flexibility for the future. In particular, the Company may
require additional funding in 1999 and beyond for its operations and will
therefore need the increased number of authorized shares to raise additional
equity. In addition, the additional authorized shares may be used in the future
for any other proper corporate purpose approved by the Board, including
corporate mergers or acquisitions, an increase in the number of shares reserved
under the Company's stock option plans, stock dividends or splits, or
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other corporate purposes. At present, the Company has no plans, agreements or
understandings for the issuance of additional shares of capital stock as of
April 30, 1999, other than (i) pursuant to outstanding options, warrants,
convertible debt and shares of Series A Preferred Stock and Series B Preferred
Stock outstanding as of April 30, 1999 and the issuance on June 7, 1999 of
70,000,000 million shares of Common and agreements to issue an additional
80,000,000 million shares of Common Stock upon the issuance and/or conversion of
certain warrants and convertible debt. No further action or authorization by the
stockholders would be necessary prior to the issuance of additional shares
unless applicable laws or regulations require such approval.
Effects of the Amendment
Each additional share of Common Stock authorized by the amendment to
the Articles of Incorporation would have the same rights and privileges as each
share of Common Stock currently authorized or outstanding.
The Board of Directors believes the increase in the authorized shares
is necessary to provide the Company with the flexibility to act in the future
with respect to financings, acquisitions and other corporate purposes without
the delay and expense associated with obtaining special shareholder approval
each time an opportunity requiring the issuance of shares may arise.
An issuance of additional shares by the Company could have an effect on
the potential realizable value of a shareholder's investment. In the absence of
a proportionate increase in the Company's earnings and book value, an increase
in the aggregate number of outstanding shares of the Company caused by the
issuance of the additional shares would dilute the earnings per share and could
dilute the book value per share of all outstanding shares of the Company's
capital stock. If such factors were reflected in the price per share of Common
Stock, the potential realizable value of a shareholder's investment could be
adversely affected.
Vote Required
The approval of the amendment of the Articles of Incorporation
increasing the authorized number of shares of Common Stock requires the
affirmative vote of a majority of the outstanding shares of Common Stock, voting
separately as a class, and the affirmative vote of a majority of the outstanding
shares of Common Stock and Series A Preferred Stock and Series B Preferred
Stock, voting together as a single class (with both the Common Stock and the
Series A Preferred Stock having one vote per share and the Series B Preferred
Stock having 3-1/3 votes per share).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
PROPOSED AMENDMENT OF THE COMPANY'S
ARTICLES OF INCORPORATION INCREASING THE AUTHORIZED NUMBER
OF SHARES OF COMMON STOCK.
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PROPOSAL NO. 2
AUTHORIZATION FOR THE BOARD TO
EFFECT A REVERSE STOCK SPLIT
IN A RATIO OF ONE-FOR-TWENTY
General
The Company's shareholders are being asked to act upon a proposal to
authorize the Board of Directors (the "Board") to effect a reverse stock split
of one (1) new share of Common Stock for each twenty (20) existing shares of
Common Stock (the "Reverse Stock Split"), at any time prior to the next Annual
Meeting of Shareholders, depending upon a determination by the Board that the
reverse stock split is in the best interests of the Company and the
shareholders. The Board has approved the Reverse Stock Split and has directed
that the Reverse Stock Split proposal be submitted to the Company's shareholders
for consideration and action. At the last annual meeting, held on May 9, 1997, a
reverse stock split of up to one-for-twenty was approved by the shareholders.
However, the Company did not implement that reverse stock split and the
Company's shareholders are being asked to act upon a similar proposal to
authorize the Board to effect the Reverse Stock Split at this Annual Meeting.
If the Reverse Stock Split is approved by the shareholders of the
Company at the Annual Meeting, the Reverse Stock Split will be effected only
upon a determination by the Board of Directors that the Reverse Stock Split is
in the best interests of the Company and the shareholders, based on factors,
including the marketability and liquidity of the Common Stock, prevailing market
conditions, the likely effect on the market price of the Common Stock, and other
relevant factors.
If approved by the shareholders of the Company, the Reverse Stock Split
would become effective on any date (the "Effective Date") selected by the Board
of Directors on or prior to the Company's next Annual Meeting of Shareholders.
If the Reverse Stock Split is not effected by such date, the Board of Directors
will take action to abandon the Reverse Stock Split and, if necessary, again
seek shareholder approval.
The complete text of the form of an amendment to the Articles of
Incorporation (the "Amendment to the Articles") for the Reverse Stock Split is
set forth in Exhibit B to this Proxy Statement; however, such text is subject to
amendment to include such changes as may be required by the California Secretary
of State. If the Reverse Stock Split is approved by the requisite vote of the
Company's shareholders, upon filing of the Amendment to the Articles with the
California Secretary of State on the Effective Date, the Reverse Stock Split
will be effective, and each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be, automatically and
without any action on the part of the shareholders, converted into and
reconstituted as 1/20th of a share of the Company's Common Stock (the "New
Common Stock"); provided, however, that no fractional shares of New Common Stock
will be issued as a result of the Reverse Stock Split. In lieu of any such
fractional share interest, each holder of Old Common Stock who would otherwise
be entitled to receive a fractional share of New Common Stock will receive cash
in lieu of such fractional share of New Common Stock in an amount equal to the
product obtained by multiplying (a) the average of the high bid and low asked
per share prices of the Common Stock as reported on the NASDAQ electronic
"Bulletin Board" on the Effective Date (adjusted if necessary to reflect the per
share price of the Old Common Stock without giving effect to the Reverse Stock
Split) by (b) the number of shares of Old Common Stock held by such holder that
would otherwise have been exchanged for such fractional share interest.
Shortly after the Effective Date, shareholders will be asked to
surrender certificates representing shares of Old Common Stock in accordance
with the procedures set forth in a letter of transmittal to be sent by the
Company. Upon such surrender, a certificate representing shares of New Common
Stock will be issued and forwarded to the shareholders (and cash in lieu of any
fractional share interest); however, each certificate representing shares of Old
Common Stock will continue to be valid and represent the number of shares of New
Common Stock equal to 1/20th of the number of shares of Old Common Stock (and
cash in lieu of such fractional share, as described above).
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Purposes of the Reverse Stock Split
The Board of Directors believes the Reverse Stock Split is desirable
for several reasons. The Reverse Stock Split should enhance the acceptability of
the Common Stock by the financial community and the investing public. The
reduction in the number of issued and outstanding shares of Common Stock caused
by the Reverse Stock Split is anticipated initially to increase proportionally
the per share market price of the Common Stock. The Board of Directors also
believes that the proposed Reverse Stock Split may result in a broader market
for the Common Stock than that which currently exists. The expected increased
price level may encourage interest and trading in the Common Stock and possibly
promote greater liquidity for the Company's shareholders, although such
liquidity could be adversely affected by the reduced number of shares of Common
Stock outstanding after the Reverse Stock Split Effective Date. Additionally, a
variety of brokerage house policies and practices tend to discourage individual
brokers within those firms from dealing with lower priced stocks. Some of those
policies and practices pertain to the payment of broker's commissions and to
time consuming procedures that function to make the handling of lower priced
stocks economically unattractive to brokers. In addition, the structure of
trading commissions also tends to have an adverse impact upon holders of lower
priced stock because the brokerage commission on a sale of lower priced stock
generally represents a higher percentage of the sales price than the commission
on a relatively higher priced issue. The proposed Reverse Stock Split could
result in a price level for the Common Stock that will reduce, to some extent,
the effect of the above-referenced policies and practices of brokerage firms and
diminish the adverse impact of trading commissions on the market for the Common
Stock. Any reduction in brokerage commissions resulting from the Reverse Stock
Split may be offset, however, in whole or in part, by increased brokerage
commissions required to be paid by shareholders selling "odd lots" created by
such Reverse Stock Split.
However, there can be no assurance that any or all of these effects
will occur; including, without limitation, that the market price per share of
New Common Stock after the Reverse Stock Split will be equal to the applicable
multiple of the market price per share of Old Common Stock before the Reverse
Stock Split, or that such price will either exceed or remain in excess of the
current market price. Further, there is no assurance that the market for the
Common Stock will be improved. Shareholders should note that the Board of
Directors cannot predict what effect the Reverse Stock Split will have on the
market price of the Common Stock.
Effects of the Reverse Stock Split
The Reverse Stock Split will be effected by means of filing the
Amendment to the Articles with the California Secretary of State. Assuming
approval of the Reverse Stock Split by the requisite vote of the shareholders at
the meeting, the Amendment to the Articles will be filed with the California
Secretary of State as promptly as practicable after a determination by the Board
of Directors to proceed with the Reverse Stock Split, and the Reverse Stock
Split will become effective on the date of such filing. Without any further
action on the part of the Company or the shareholders, after the Reverse Stock
Split, the shares of Old Common Stock will be converted into and reconstituted
as the appropriate number of shares of New Common Stock (and, where applicable,
cash in lieu of such fractional share, as described above).
As a result of paying cash in lieu of fractional shares resulting from
a Reverse Stock Split, the Company estimates that the entire interest of
approximately ___ shareholders (those holding fewer than 20 shares of Common
Stock) will be eliminated pursuant to such Reverse Stock Split. Because such
transaction would be mandatory, such shareholders holding fewer than 20 shares
who wish to retain their existing equity interest in the Company would be
adversely affected. The Company expects that approximately ____ of the currently
outstanding shares of Common Stock would result in fractional share interests
for which cash would be paid in the Reverse Stock Split. Shares of Common Stock
no longer outstanding as a result of the fractional share settlement procedure
will be returned to authorized but unissued shares of the Company.
After giving effect to the settlement of fractional shares of Common
Stock, there will be no material differences between the rights of the shares of
Common Stock outstanding prior to the Reverse Stock Split and those outstanding
after the Reverse Stock Split is effected. The Reverse Stock Split will,
however, result in certain adjustments to the voting rights and conversion
ratios of the Series A Preferred Stock and the Series B Preferred
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Stock. Specifically, pursuant to the terms of the Company's Articles of
Incorporation, the Reverse Stock Split will result in an adjustment to the
voting rights of the Series A Preferred Stock and the Series B Preferred Stock
so that once the Reverse Stock Split is effected, the relative voting power of
such shares to the voting power of the Common Stock and to the voting power of
the other series of outstanding Preferred Stock will be in the same proportion
as existed immediately prior to the Reverse Stock Split. For example, this
adjustment would result in a reduction in the voting power of each share of the
Series A Preferred Stock from one vote per share to .05 of a vote per share and
a reduction in the voting power of the Series B Preferred Stock from 3-1/3 votes
per share to 1/6 of a vote per share. Thus, the proportionate voting power of
the holders of the stock of the Company would not be affected. The Reverse Stock
Split will also result in adjustments being made to the conversion ratios of the
Series A Preferred Stock and the Series B Preferred Stock so that such shares
will be convertible into such number of shares of Common Stock that a holder of
such Preferred Stock would have been entitled to receive if such Preferred Stock
were to have been converted into Common Stock immediately prior to the Reverse
Stock Split. For example, under such adjustments, after the Reverse Stock Split
is made effective, each share of the Series A Preferred Stock will be
convertible into .05 of a share of Common Stock, as compared to one share of
Common Stock prior to the Reverse Stock Split, and each share of the Series B
Preferred Stock will be convertible into 1/6 of a share of Common Stock, as
compared to 3-1/3 shares of Common Stock prior to the Reverse Stock Split.
Similar adjustments will also be made to the conversion ratios and exercise
provisions of the Company's various other outstanding convertible or exercisable
securities.
Shareholders have no right under California law to dissent from the
Reverse Stock Split of the Common Stock.
Consummation of the Reverse Stock Split will not alter the number of
authorized shares of Common Stock which will remain at 300,000,000 shares (or
500,000,000 shares if Proposal No. 1 is adopted). As discussed above,
proportionate voting rights and other rights of the holders of Common Stock and
Preferred Stock will not be altered by the Reverse Stock Split (other than as a
result of the payment of cash in lieu of fractional shares, as described above,
and other than the change in the number of shares of Common Stock into which the
outstanding shares of Series A Preferred Stock and Series B Preferred Stock are
convertible).
Shareholders should note that certain disadvantages may result from the
adoption of this Proposal 2. In the event this Proposal 1 is approved by the
shareholders and the Reverse Stock Split is effected by the Board, the number of
outstanding shares of Common Stock would be decreased as a result of the Reverse
Stock Split, but the number of authorized shares of Common Stock would not be so
decreased. The Company would therefore have the authority to issue a greater
number of shares of Common Stock following the Reverse Stock Split without the
need to obtain shareholder approval to authorize additional shares. Any such
additional issuance may have the effect of significantly reducing the interest
of the existing shareholders of the Company with respect to earnings per share,
voting, liquidation value and book and market value per share.
As of June 8, 1999, the number of issued and outstanding shares of Old
Common Stock was ___________. The following table illustrates the effects of the
Reverse Stock Split upon the number of shares of Old Common Stock issued and
outstanding, and the number of authorized and unissued shares of Common Stock
(assuming that no additional shares of Old Common Stock are issued by the
Company after the Record Date).
Common Stock Authorized and
Reverse Stock Split Ratio Outstanding(1) Unissued Common Stock
------------------------- -------------- ---------------------
1 for 20 _________ ___________
- --------------------
(1) The figures in this table are calculated based on ___________ issued
and outstanding shares of Old Common Stock as of ______________. These
figures do not take into account any reduction in the number of
outstanding shares of Common Stock resulting from the procedures for
cashing out fractional shares. In addition, the number of Common Stock
shares outstanding does not include shares of Common Stock issuable
upon exercise or conversion of outstanding options, warrants or
convertible debt but does include the conversion of the Series A and
Series B Preferred Stock.
10
<PAGE>
The Common Stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934 (the "Exchange Act") and, as a result, the
Company is subject to the periodic reporting and other requirements of the
Exchange Act. The Reverse Stock Split will not effect the registration of the
Common Stock under the Exchange Act. After the Effective Date, trades of the New
Common Stock will continue to be reported on the NASDAQ electronic "Bulletin
Board" under the Company's symbol "ECAR."
Federal Income Tax Consequences of the Reverse Stock Split
The Company has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service regarding the federal income tax
consequences of the Reverse Stock Split. The Company, however, believes that
because the Reverse Stock Split is not part of a plan to increase any
shareholder's proportionate interest in the assets or earnings and profits of
the Company, the Reverse Stock Split will have the following federal income tax
effects:
1. A shareholder will not recognize gain or loss on the exchange of Old
Common Stock for New Common Stock. In the aggregate, the shareholder's
basis in shares of New Common Stock will equal his basis in shares of
Old Common Stock.
2. A shareholder's holding period for tax purposes for shares of New
Common Stock will be the same as the holding period for tax purposes of
the shares of Old Common Stock exchanged therefor.
3. The Reverse Stock Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Internal Revenue Code or will
otherwise qualify for general nonrecognition treatment, and the Company
will not recognize any gain or loss as a result of the Reverse Stock
Split.
4. To the extent a shareholder receives cash from the Company in lieu of a
fractional share of New Common Stock, the shareholder will be treated
for tax purposes as though he sold the fractional share to the Company.
Such a shareholder will recognize a gain equal to the excess of (i) his
cash distribution over (ii) his tax basis in the fractional share
deemed sold. The gain will be long-term capital gain if the
shareholder's shares are capital assets in his hands and if he had held
his shares for more than one year before the Reverse Stock Split. If
the shareholder's tax basis in the fractional share deemed sold exceeds
his cash distribution, the shareholder will recognize a loss.
Vote Required
The approval of the Reverse Stock Split requires the affirmative vote
of a majority of the outstanding shares of Common Stock, voting separately as a
class, and the affirmative vote of a majority of the outstanding shares of
Common Stock, Series A Preferred Stock and Series B Preferred Stock, voting
together as a single class (with both the Common Stock and the Series A
Preferred Stock having one vote per share and the Series B Preferred Stock
having 3-1/3 votes per share).
THE BOARD RECOMMENDS A VOTE FOR THE AUTHORIZATION OF THE BOARD TO
EFFECT A 1-FOR-20 REVERSE STOCK SPLIT PURSUANT TO THE RESOLUTIONS WITH
RESPECT THERETO SET FORTH IN EXHIBIT B TO THIS PROXY STATEMENT.
11
<PAGE>
PROPOSAL NO. 3
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Company's shareholders are being asked to act upon a proposal to
amend the Company's Articles of Incorporation to change the name of the Company
if so desired by the Company's Board of Directors and to authorize the Board of
Directors to select a new name of the Company if it deems such name change to be
in the best interests of the Company and if such new name is approved by the
Board of Directors, to file and complete the necessary paperwork to effectuate
the name change with the California Secretary of State and all other pertinent
agencies. The name change, if any, will be effected by means of filing an
amendment to the Articles of Incorporation with the California Secretary of
State. Assuming approval of the name change by the requisite vote of the
shareholders at the meeting, the amendment to the Articles of Incorporation will
be filed with the California Secretary of State as promptly as practicable after
the Board of Directors has selected a new name for the Company, and the name
change will become effective on the date of such filing. If the Board of
Directors has not approved the adoption of a new name for the Company before the
next Annual Meeting of Shareholders, the Board of Directors will again seek the
approval of the shareholders of this Company before undertaking any new name
change of the Company.
THE BOARD RECOMMENDS A VOTE FOR AUTHORIZATION OF THE BOARD OF DIRECTORS
TO ADOPT A NEW NAME FOR THE COMPANY AND, IF SO ADOPTED BY THE BOARD OF
DIRECTORS, FILE AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO CHANGE THE NAME
OF THE COMPANY AS SO ADOPTED.
12
<PAGE>
PROPOSAL NO. 4
AMENDMENT TO THE COMPANY'S
1996 STOCK OPTION PLAN
General
The Company's shareholders are being asked to act upon a proposal to
ratify the action of the Board amending the Company's 1996 Stock Option Plan
(the "1996 Plan") to increase the authorized number of shares reserved
thereunder from __________ to _____________.
A general description of the principal terms of the 1996 Plan, the
amendment approved by the Board of Directors and the purpose of such amendment
are set forth below. This description is qualified in its entirety by the terms
of the 1996 Plan. A copy of the actual 1996 Plan document has been previously
filed with the SEC. A copy of this document will also be furnished without
charge to any stockholder upon written request made prior to the meeting to the
attention of the Company in Torrance.
General Description
In October 1996, the Board of Directors of the Company adopted the 1996
Plan. A total of 15,000,000 shares have been reserved for issuance under the
1996 Plan. Options granted under the 1996 Plan may be either incentive stock
options, as defined in Section 422 of the Internal Revenue Code of 1986 or
nonstatutory stock options. Currently, the total number of shares issuable under
both the 1996 Plan and the 1993 Employee and Consultant Stock Plan is 30,000,000
shares. The Board of Directors has approved an amendment to the 1996 Plan to
increase the number of shares of Common Stock reserved for issuance thereunder
by 15,000,000 shares, bringing the total number of shares issuable under the
1996 Plan to ___________. The proposed share increase to the 1996 Plan will
assure that a sufficient reserve of Common Stock will be available under the
1996 Plan to provide the Company with the continuing opportunity to utilize
equity incentives to attract and retain the services of employees essential to
the Company's long-term growth and financial success.
Description of 1996 Plan
Administration. With respect to the grant of options to directors or
employees who are also officers or directors, the 1996 Plan shall be
administered by (i) the Board of Directors of the Company; or (ii) a committee
designated by the Board and constituted in such a manner as to comply with
applicable laws and to permit such grants and related transactions to be exempt
from Section 16(b) of the Exchange Act in accordance with Rule 16b- 3. With
respect to grants to employees or consultants who are neither officers nor
directors of the Company, the 1996 Plan shall be administered by the Board or by
a committee of the Board. It is anticipated that the 1996 Plan will be
administered by the Compensation Committee of the Board with respect to grants
to employees, officers and consultants of the Company, and by the Board with
respect to grants to directors who are not employees of the Company.
The administrators of the 1996 Plan have full power to select, from
among the employees, directors and consultants of the Company eligible for
grants, the individuals to whom options will be granted, to determine the
specific terms and conditions of each grant, including the number of shares
subject to each option, to amend the terms of outstanding options granted under
the 1996 Plan (except that any amendments that would adversely affect an
optionee's rights under an outstanding option may not be made without the
optionee's written consent), and to interpret and construe the terms of the 1996
Plan and options granted thereunder, all subject to the provisions of the 1996
Plan. The interpretation and construction of any provision of the 1996 Plan by
the administrators shall be final and conclusive. Members of the Board receive
no additional compensation for their services in connection with the
administration of the 1996 Plan.
13
<PAGE>
Eligibility. The 1996 Plan provides that options may be granted to
employees (including officers and directors who are also employees), directors
and consultants to the Company or its subsidiaries. Incentive stock options may
only be granted to employees.
Stock Options. Each option granted under the 1996 Plan is to be
evidenced by a written stock option agreement between the Company and the
optionee and is subject to the following additional terms and conditions:
(a) Exercise of the Option. The Board or its committee determines
on the date of grant when options will become exercisable. An option is
exercised by giving written notice of exercise to the Company, specifying the
number of full shares of Common Stock to be purchased and tendering payment of
the purchase price to the Company. The acceptable methods of payment for shares
issued upon exercise of an option are set forth in the option agreement and may
consist of (1) cash; (2) check; or (3) promissory note; (4) the delivery of a
properly executed exercise notice together with such other documentation as the
Administrator shall require to effect an exercise and delivery to the Company of
the amount of sale or loan proceeds required to pay the exercise price; (5) any
combination of the foregoing methods; or (6) such other consideration and method
of payment as may be determined by the 1996 Plan administrators and permitted
under applicable laws.
(b) Exercise Price. The exercise price of options granted under
the 1996 Plan is determined on the date of grant. The exercise price of
incentive stock options must be at least 100% of the fair market value per share
of the Common Stock at the time of grant. In the case of incentive stock options
granted to an employee who at the time of grant owns more than 10% of the voting
power of all classes of stock of the Company or any parent or subsidiary, the
exercise price must be at least 110% of the fair market value per share of the
Common Stock at the time of grant. The exercise price of nonstatutory stock
options must be at least 85% of the fair market value per share of the Common
Stock at the time of grant. The exercise price of nonstatutory stock options
granted to an employee who at the time of grant owns more than 10% of the voting
power of all classes of stock of the Company or any parent or subsidiary, the
exercise price must be at least 110% of the fair market value per share of the
Common Stock at the time of grant. In the event of the grant of a nonstatutory
option with an exercise price below the then fair market value of the Common
Stock, the difference between fair market value on the date of grant and the
exercise price would be treated as a compensation expense for accounting
purposes and would therefore affect the Company's earnings. For purposes of the
1996 Plan, fair market value is defined as the closing sale price of the Common
Stock as reported on the National Association of Securities Dealers (NASD)
"Bulletin Board" on last market trading day prior to the time of grant.
(c) Termination. If the optionee's employment, directorship or
consulting relationship with the Company is terminated for any reason (other
than death or disability), options may be exercised within such period as is
determined by the Board or its committee (up to three months in the case of
incentive stock options) after such termination as to all or part of the shares
as to which the optionee was entitled to exercise at the date of such
termination, provided that the option is exercised no later than its expiration
date.
(d) Disability. If an optionee is unable to continue his or her
employment, directorship or consulting relationship with the Company as a result
of disability, options may be exercised at any time within 12 months from the
date of disability to the extent such options were exercisable at the date of
disability, provided that the option is exercised no later than its expiration
date. With respect to incentive stock options, if the disability is not a
"disability" as defined in Section 22(e)(3) of the Code, an optionee's incentive
stock options shall automatically convert into nonstatutory options on the day
three months and one day following the date of termination of the optionee.
(e) Death. If an optionee should die while serving as an employee,
director or consultant of the Company, options may be exercised at any time
within 12 months after the date of death by the optionee's estate or a person
who acquired the right to exercise the option by bequest or inheritance, but
only to the extent that such options would have been exercisable by the optionee
at the date of death, provided that the option is exercised no later than its
expiration date.
14
<PAGE>
(f) Term and Termination of Options. At the time an option is
granted, the Board or its committee determines the period within which the
option may be exercised. In no event may the term of an incentive stock option
be longer than ten (10) years. No option may be exercised by any person after
the expiration of its term. An incentive stock option granted to an optionee
who, at the time such option is granted, owns stock possessing more than 10% of
the voting power of all classes of stock of the Company, may not have a term of
more than five (5) years.
(g) Transferability of Options. An incentive stock option is not
transferable by the optionee, other than by will or the laws of descent and
distribution, and is exercisable during the optionee's lifetime only by the
optionee. A nonstatutory option shall be transferable to the extent determined
by the administrator and as provided in an optionee's option agreement.
(h) Other Provisions. The option agreement may contain such other
terms, provisions and conditions not inconsistent with the 1996 Plan as may be
determined by the Board or its committee.
Adjustments; Mergers and Asset Sales. In the event any change, such as
a stock split, reverse stock split, stock dividend, or combination or
reclassification of the Common Stock, is made in the Company's capitalization
without receipt of consideration by the Company, which results in an increase or
decrease in the number of outstanding shares of Common Stock, an appropriate
adjustment shall be made in the number of shares under the 1996 Plan and the
price per share covered by each outstanding option.
In the event of the merger or consolidation of the Company in which the
Company is not the surviving corporation, or a proposed sale, transfer or other
disposition of all or substantially all of the assets of the Company in
connection with the complete liquidation or dissolution of the Company, or a
reverse merger in which the Company is the surviving entity but in which
securities possessing more than 50% of the total combined voting power of the
Company's outstanding securities are transferred to a person or persons
different from those who held such securities immediately prior to such merger,
each outstanding option shall automatically become fully vested and exercisable
and released from any restrictions on transfer and repurchase or forfeiture
rights, unless such option is assumed or substituted by such successor
corporation or replaced with a comparable option with respect to shares in the
surviving corporation, or such option is replaced with a comparable cash
incentive program of the successor corporation, or unless the vesting,
exercisability and release of such option is subject to other limitations
imposed by the 1996 Plan administrators at the time of granting such options.
Amendment, Suspension and Termination of the 1996 Plan. The Board may
amend the 1996 Plan at any time or from time to time or may suspend or terminate
the 1996 Plan without approval of the stockholders; provided, however, that
stockholder approval is required for any amendment to the 1996 Plan for which
stockholder approval would be required under applicable law, as in effect at the
time. Any amendment, suspension or termination of the 1996 Plan shall not affect
options already granted, and such options shall remain in full force and effect,
unless mutually agreed otherwise in writing between the optionee and the Plan
administrators. The Board may accelerate any option or waive any condition or
restriction pertaining to such option at any time. The Board may also substitute
new stock options for previously granted stock options, including previously
granted stock options having higher option prices, and may reduce the exercise
price of any option to the then current fair market value, if the fair market
value of the Common Stock covered by such option shall have declined since the
date the option was granted. In any event, the 1996 Plan shall terminate in
October 2006. Any options outstanding under the 1996 Plan at the time of its
termination shall remain outstanding until they expire by their terms.
Amended Plan Benefits
The Company cannot now determine the number of options to be granted in
the future under the 1996 Plan to all current executive officers as a group or
all employees (excluding current executive officers) as a group. The following
table sets forth additional information with respect to options granted under
the 1996 Plan to date:
15
<PAGE>
<TABLE>
<CAPTION>
Weighted Average
Options % of Total Exercise Price
Identity of Group Granted Options Granted Per Share
----------------- ------- --------------- ----------------
<S> <C> <C> <C>
Executive officers as a group
Employees that are not
executive officers, as a
group
Directors that are not
executive officers, as a
group
</TABLE>
<TABLE>
On ___________, pursuant to Board authorization, the Company authorized
the issuance of _______ options under the 1996 Plan to certain employees
(including executive officers) of the Company, at an exercise price of
_________, in consideration of the cancellation by such employees of an equal
number of existing options held by the employees. The following table sets forth
additional information with respect to the options granted under the 1996 Plan
in _________________:
<CAPTION>
Additional
Options Options Exercise Price
Identity of Group Re-Granted Granted Per Share
----------------- ---------- ---------- --------------
<S> <C> <C> <C>
Carl D. Perry (CEO)
Executive officers as a group
Employees that are not
executive officers, as a
group
Directors that are not
executive officers, as a
group
</TABLE>
Certain Federal Income Tax Information
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time of grant or exercise, although the exercise
may subject the optionee to the alternative minimum tax. Upon the sale or
exchange of the shares more than two years after grant of the option and one
year after exercise, any gain or loss will be treated as long-term capital gain
or loss. If these holding periods are not satisfied, the optionee will recognize
ordinary income at the time of sale or exchange equal to the difference between
the exercise price and the lower of (i) the fair market value of the shares at
the date of the option exercise, or (ii) the sale price of the shares. A
different rule for measuring ordinary income upon such a premature disposition
may apply if the optionee is subject to Section 16 of the Exchange Act. Any gain
or loss recognized on such a premature disposition of the shares in excess of
the amount treated as ordinary income will be characterized as long-term or
short-term capital gain or loss, depending on the holding period.
An optionee will not recognize any taxable income at the time he or she
is granted a nonstatutory option. However, upon its exercise, the optionee will
recognize taxable income generally measured as the excess of the then fair
market value of the shares purchased over the purchase price. Any taxable income
recognized in connection with an option exercise by an optionee who is also an
employee of the Company will be subject to tax withholding by the Company. Upon
resale of such shares by the optionee, any difference between the sales price
16
<PAGE>
and the optionee's purchase price, to the extent not recognized as taxable
income as described above, will be treated as long-term or short-term capital
gain or loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by an optionee with respect to shares acquired
upon exercise of an option.
The foregoing summary of the federal income tax consequences of 1996
Plan transactions is based upon federal income tax laws in effect on the date of
this Proxy Statement. This summary does not purport to be complete, and does not
discuss foreign, state or local tax consequences.
Vote Required
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock, Series A Preferred Stock, and Series B Preferred Stock,
voting together as a single class, present or represented by proxy at the Annual
Meeting, is required to approve the amendment to the 1996 Plan which will
increase the number of shares of Common Stock reserved for issuance thereunder
by __________ shares, bringing the total number of shares issuable under the
1996 Plan to ________.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT
OF THE 1996 PLAN
17
<PAGE>
PROPOSAL NO. 5
AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION TO
DECREASE THE AUTHORIZED NUMBER OF MEMBERS OF THE BOARD OF DIRECTORS
FROM ELEVEN (11) TO SEVEN (7)
The Company's Article of Incorporation provides that the authorized
number of directors of the Corporation is not to exceed eleven (11). Article
III, Section 2 of the Bylaws of the Company provides that the authorized number
of directors of the Company shall not be less than six (6), nor more than eleven
(11). The Board of Directors is currently fixed at 6. The Board of Directors has
adopted a resolution proposing and declaring the advisability of amending the
Company's Articles of Incorporation to amend the variable number of the
authorized number of members of the Board of Directors to a variable range of
four (4) to seven (7). The Board of Directors believes this proposal will allow
the Board of Directors more flexibility and allow the Board of Directors to meet
more frequently when desired. The Company has also agreed not to increase the
size of its Board of Directors above seven (7) without the consent of certain
purchasers who recently invested in the Company. The Board of Directors directed
that this proposed amendment be considered at the Annual Meeting of Shareholders
on July 29, 1999. In the event that this Proposal 5 is approved by the
shareholders, Article III, Section 2 of the Company's Bylaws will be amended
accordingly.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT
OF ARTICLE III, SECTION 2 OF THE COMPANY'S BYLAWS TO CHANGE THE AUTHORIZED
VARIABLE NUMBER OF DIRECTORS TO FOUR (4) TO SEVEN(7)
18
<PAGE>
PROPOSAL NO. 6
ELECTION OF DIRECTORS
A board of six (6) Directors will be elected at the Annual Meeting. The
Company's Articles of Incorporation provide that the holders of the Series B
Preferred Stock are entitled, voting as a separate class, to elect two members
of the Board. The holders of the Common Stock and Series A Preferred Stock,
voting together as a single class, are entitled to elect the balance of the
authorized members of the Board. One (1) nominee has been nominated for election
by the holders of the Series B Preferred Stock and five (5) nominees will be
elected by the holders of the Common Stock and Series A Preferred Stock.
The Series B Preferred Stock proxy holders will vote, as a separate
class, the proxies received by them to elect the Series B nominee named below to
the Board of Directors. The Common Stock and Series A Preferred Stock proxy
holders will vote, as a single class, the proxies received by them to elect the
five (5) nominees named below to the Board of Directors. If a nominee is unable
or declines to serve as a Director at the time of the Annual Meeting, the
proxies will be voted for any nominee designated by the proxy holders to fill
such vacancy. However, it is not expected that any nominee will be unable or
will decline to serve as a Director. If shareholders nominate persons other than
the Company's nominees for election as Directors, the Common Stock, Series A
Preferred Stock, and Series B Preferred Stock proxy holders will vote all
proxies received by them in accordance with cumulative voting to assure the
election of as many of the Company's nominees as possible. The term of office of
each person elected as a Director will continue until the next Annual Meeting of
Shareholders or until the Director's successor has been elected.
Currently, the Company's Bylaws authorize the number of Directors to be
not less than six (6) nor more than eleven (11) with the exact number in this
range as established from time to time by the Board of Directors. The number of
Directors on the Board is currently fixed at seven (7). Following the Annual
Meeting, one Board seat allocated to the Company's Series B Preferred Stock
shareholders established pursuant to the Company's Articles of Incorporate will
be vacant.
Certain information about the nominees for the Board of Directors is
furnished below.
Common Stock and Series A Preferred Stock Nominees:
Carl D. Perry, Chairman of the Board and Chief Executive Officer. Mr.
Perry has served as a Director and as an Executive Vice President of the Company
from July 1993 until November 1997. In November 1997, Mr. Perry was elected as
Chairman of the Board and Chief Executive Officer of the Company. Prior to
joining the Company, he served as Executive Vice President of Canadiar Ltd.,
Canada's largest aerospace corporation, from 1984 to 1993, where he conducted
strategic planning, worldwide marketing, and international joint ventures. From
1979 to 1983, Mr. Perry served as Executive Vice President of the Howard Hughes
Summa Corporation's Helicopter Company, now known as McDonnell Douglas
Helicopters, where he was responsible for general management, worldwide business
development, and international operations.
Malcolm R. Currie, Ph.D., Director. Dr. Currie has served as a Director
of the Company since March 1995 through ___, 1997. Since 1994, he has served as
Chairman of Electric Bicycle Co., a developer of electric bicycles. From 1986
until July 1992, Dr. Currie served as Chairman and Chief Executive Officer of
Hughes Aircraft Co. (now Hughes Electronics), and from 1985 until 1988, he was
the Chief Executive Officer of Delco Electronics. His career in electronics and
management has included research with many patents and papers in microwave and
millimeter wave electronics, laser, space systems, and related fields. He has
led major programs in radar, commercial satellites, communication systems, and
defense electronics. He served as Undersecretary of Defense for Research and
Engineering, the Defense Science Board, and currently serves on the Boards of
Directors of UNOCAL, Investment Company of America, and LSI Logic, all of which
are publicly traded companies. He is President of the American Institute of
Aeronautics and Astronautics, and is Chairman of the Board of Trustees of the
University of Southern California.
19
<PAGE>
Edwin O. Riddell, Director. Mr. Riddell has served as a Director of the
Company since June 1995. From January 1991 to the present, Mr. Riddell has
served as Manager of the Transportation Business Unit in the Customer Systems
Group at the Electric Power Research Institute in Palo Alto, California, and
from 1985 until November 1990, he served with the Transportation Business Unit
as Vice President, Engineering, working on electric public transportation
systems. From 1979 to 1985, he was Vice President and General Manager of Lift U,
Inc., the leading manufacturer of handicapped wheelchair lifts for the transit
industry. Mr. Riddell has also worked with Ford, Chrysler, and General Motors in
the area of auto design (styling), and has worked as a member of senior
management for a number of public transit vehicle manufacturers. Mr. Riddell has
been a member of the American Public Transit Association's ("APTA") Association
Member Board of Governors for over 15 years. He has also served on APTA's Board
of Directors.
Anthony Rawlinson.
John J. Micek III. Mr. Micek was elected a Director of the Company in
_____, 1999. Mr. Micek served as the Company's Vice President, General Counsel
and Secretary from March 1994 to ____.
Series B Preferred Stock Nominee:
Donald H. Dreyer. Mr. Dreyer was elected a Director of the Company in
January 1997. Mr. Dreyer is President and CEO of Dreyer & Company, Inc., a
consultancy in credit, accounts receivable and insolvency services, which was
established in 1990. Mr. Dreyer has served as Chairman of the Board of Credit
Managers Association of California during the 1994 to 1995 term and continues to
serve as a member of the Advisory Committee of that organization. Mr. Dreyer is
currently the co-Chair of the Creditors Committees' Subcommittee of the American
Bankruptcy Institute and is a member of the Western Advisory Committee of Dun &
Bradstreet, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES NAMED ABOVE.
20
<PAGE>
Directors and Executive Officers
<TABLE>
The following table sets forth certain information with respect to the
Directors and Executive Officers of the Company:
Directors and Executive Officers
<CAPTION>
Name Age Position
- -------------------------- --- --------------------------------------
<S> <C> <C>
Carl D. Perry 66 President, Chief Executive Officer,
Chief Financial Officer, Secretary and
Chairman of the Board
Edwin O. Riddell (2) (1) 56 Director
Donald H. Dreyer (1) 62 Director
John J. Micek III Director
Anthony Rawlinson (3) Director
Malcolm R. Currie, Ph.D. (3) Director
<FN>
- -----------------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Mr. Rawlinson and Dr. Currie have been nominated to serve as Directors
after the Annual Meeting. They do not currently serve as Directors.
</FN>
</TABLE>
Relationships Among Directors or Executive Officers
There are no family relationships among any of the Directors or
Executive Officers of the Company.
Meetings and Committees of the Board of Directors
During the fiscal year ended July 31, 1998, the Board of Directors met
four times. No Director attended fewer than 75% of the aggregate of the total
number of meetings of the Board, plus the total number of all meetings of
committees of the Board on which he served. The Board currently has two
committees: the Compensation Committee and the Audit Committee.
The Compensation Committee held one meeting in 1998. The Compensation
Committee currently consists of Mr. Edwin Riddell, as Chairman. Its functions
are to establish and apply the Company's compensation policies with respect to
the Company's Executive Officers, and to administer the Company's stock option
plans.
The Audit Committee held one meeting in 1998. The Audit Committee
currently consists of Mr. John Micek III and Donald Dreyer. The Audit Committee
recommends engagement of the Company's independent auditors and is primarily
responsible for approving the services performed by the Company's independent
auditors and for reviewing and evaluating the Company's accounting principles
and its system of internal accounting controls.
21
<PAGE>
Compensation of Directors
Directors who are employees of the Company do not receive any
compensation for their services as Directors. All Directors are reimbursed for
expenses incurred in connection with attending Board and committee meetings. One
Director, Donald H. Dreyer, is paid a consulting fee for attendance at Company
Board meetings. In 1998, the total amount paid to Mr. Dreyer was approximately
$4,000 for Board meetings and other consulting activities.
Each nonemployee Director of the Company is also entitled to
participate in the Company's 1994 Director Stock Option Plan (the "Director
Option Plan"). The Board of Directors and the shareholders have authorized a
total of 150,000 shares of Common Stock for issuance under the Director Option
Plan. The Director Option Plan provides for the grant of nonstatutory options to
nonemployee Directors of the Company. The Director Option Plan is designed to
work automatically and not to require administration; however, to the extent
administration is necessary, it will be provided by the Board of Directors.
The Director Option Plan provides that each eligible Director is
granted an option to purchase 1,000 shares of Common Stock for each Board
meeting attended in person. Options granted under the Director Option Plan have
a term of five years unless terminated sooner upon termination of the optionee's
status as a Director or otherwise pursuant to the Director Option Plan. No
option granted under the Director Option Plan is transferable by the optionee
other than by will or the laws of descent and distribution, and each option is
exercisable, during the lifetime of the optionee, only by such optionee. The
Director Option Plan provides that the options become exercisable in full
immediately upon the grant of such options.
The exercise price of all stock options granted under the Director
Option Plan is equal to the fair market value of a share of the Company's Common
Stock on the date of grant of the option. Fair Market Value is defined under the
Director Option Plan as the average of the bid and asked prices of the Common
Stock in the over-the-counter market on the date of grant, as reported by the
National Association of Securities Dealers Automated Quotation System.
In the event of a merger of the Company with or into another
corporation or a sale of substantially all of the Company's assets, the Director
Option Plan requires that each outstanding option be assumed or an equivalent
option substituted by the successor corporation. The Director Option Plan will
terminate in December 2004. The Board of Directors may amend or terminate the
Director Option Plan; provided, however, that no such action may adversely
affect any outstanding options, and the provisions of the Director Option Plan
affecting the grant and terms of options granted thereunder may not be amended
more than once in any six-month period. Executive officers of the Company are
not eligible to participate in the Director Option Plan.
As of March 15, 1999, _______ options had been granted and remained
outstanding under the Director Option Plan.
Certain Relationships and Related Transactions
The following are certain transactions entered into between the Company
and its officers, directors and principal shareholders and their affiliates
since August 1, 1997.
Transactions with Secured Creditors and Others:
Itochu Corporation
As of August 1997, there was $3,000,000 of debt outstanding to Itochu,
a principal shareholder of the Company, pursuant to a Supplemental Loan
Agreement. The debt is convertible at the election of Itochu at any
22
<PAGE>
time, or automatically upon the occurrence of certain events, into shares of
Common Stock at a conversion rate of $0.30 per share. The debt is secured by all
of the assets of the Company.
Fontal International, Ltd. ("Fontal")
In January 1998, the Company borrowed $200,000 from Fontal, a creditor
and shareholder of the Company, under a short term, non-interest bearing
promissory note, and this amount was outstanding at the end of 1998.
Additionally, there is an outstanding balance of $800,000 on unsecured
convertible bonds held by Fontal at the end of 1998.
The Company believes that the transactions described above were made on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The above referenced transactions were approved by a
majority of the disinterested members of the Board of Directors. All future
transactions between the Company and its officers directors, principal
shareholders and affiliates will be approved by a majority of the Board of
Directors, including, where appropriate, a majority of the disinterested,
nonemployee directors on the Board of Directors, and, where appropriate, will be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
23
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of June
15, 1999, by (i) each stockholder known to the Company to own beneficially more
than 5% of the Company's Common Stock; (ii) each of the Company's Directors;
(iii) the Chief Executive Officer and four other Executive Officers of the
Company, and two former Executive Officers; and (iv) all Executive Officers and
Directors of the Company as a group. Except as indicated in the footnotes to
this table and subject to applicable community property laws, the persons named
in the table, based on information provided by such persons, have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
<CAPTION>
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
5% Shareholders, Directors, Officers Common Shares Percentage of Common Voting
and Directors and Officers as a Group Beneficially Owned (1) Shares Beneficially Owned (2) Percentage (3)
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
<S> <C> <C> <C>
Jagen Pty, Ltd.
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
Carl D. Perry
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
Gerlach & Co.
c/o Citibank N.A.
111 Wall Street, 8th Floor
New York, NY 10043
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
Citibank N.A.
111 Wall Street, 8th Floor
New York, NY 10043
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
Fontal International Ltd.
9 Quai des Bergues
Geneva, Switzerland
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
Hyundai Motor Company
140-2 Kye-Dong, Chongro-Ku
Seoul, 110-793 Korea
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
Hyundai Electronics Industries
San 136-1, Ami-ri, Bubal-eub, Ichon-si
Kyoungki-do, 467-701 Korea
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
Edwin O. Riddell
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
David A. Ishag
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
John Micek III
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
Anthony Rawlinson
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
Malcolm R. Currie
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
Donald H. Dreyer
- ---------------------------------------------- ----------------------------- ---------------------------------- -------------------
All Directors and executive officers as a
group (____ persons)
- ---------------------------------------------- --------------------------- ---------------------------------- -------------------
<FN>
* Indicates less than 1%
</FN>
</TABLE>
24
<PAGE>
PROPOSAL NO. 7
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Moss Adams LLP served as the Company's independent auditors in 1998, and have
been appointed by the Board to continue as the Company's independent auditors
for the Company's fiscal year ending July 31, 1999. In the event that
ratification of this selection of auditors is not approved by a majority of the
shares of Common Stock, Series A Preferred Stock, and Series B Preferred Stock
voting at the Annual Meeting in person or by proxy, management will review its
future selection of auditors.
A representative of Moss Adams LLP is expected to be present at the
Annual Meeting. The representative will have an opportunity to make a statement
and will be able to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1999
25
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
<TABLE>
The following table sets forth all compensation earned for the years
ended July 31, 1998, 1997 and 1996, by the Company's Chief Executive Officer,
each of the four other most highly compensated Executive Officers of the
Company, and two former Executive Officers of the Company (collectively, the
"Named Executive Officers").
Summary Compensation Table
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
-------------------------- ------------
Securities
Underlying All Other
Salary Bonus(1) Options Compensation
Name and Principal Position Year ($) ($) (#) ($) (2)
- --------------------------- ---- ------- ------- ----- --------
<S> <C> <C> <C> <C> <C>
Carl D. Perry (1) 1998 $50,000 $---- $---- $----
Chief Executive Officer 1997 $75,000 $---- $---- $----
1996 $75,000 $---- $---- $----
<FN>
(1) Mr. Perry was elected as Chief Executive Officer in November
1997. Amounts paid to Mr. Perry for all periods shown were
paid to Mr. Perry as an Executive Vice President of the
Company. Mr. Perry's current salary is $50,000 per year.
</FN>
</TABLE>
26
<PAGE>
Option Grants/SAR Grants
The following table sets forth certain information with respect to
stock options granted as of July 31, 1998 to each of the Named Executive
Officers. In accordance with the rules of the Securities and Exchange
Commission, also shown below is the potential realizable value over the term of
the option (the period from the grant date to the expiration date) based on
assumed rates of stock appreciation of 5% and 10%, compounded annually,
calculated based on the closing price of the Common Stock on the grant date.
These amounts are based on certain assumed rates of appreciation and do not
represent the Company's estimate of future stock price. Actual gains, if any, on
stock option exercises will be dependent on the future performance of the Common
Stock.
No grants of stock options or stock appreciation rights ("SARs") were
made during fiscal year 1998 to the named Executive Officers.
<TABLE>
Aggregated Option/SAR Exercises in 1998
and Option Values at July 31, 1998
<CAPTION>
Number of Securities
Aggregate Underlying Unexercised Value of Unexercised
Option/SAR Options/SARs at In-the-Money Options at
Exercises in 1998 July 31, 1998 July 31, 1998 (1)
----------------- ---------------------------- ----------------------------
Shares Value
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl D. Perry -- -- 1,200,000 0 $ -- $ --
<FN>
- -----------------------
(1) Calculated on the basis of the average of the high bid and low ask prices
of the Common Stock on July 31, 1998 of $0.045 per share, minus the
exercise price.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider Participation
[____]
Compensation Committee Report on Executive Compensation
Compensation Policy. The Company's Compensation Policy as established
by the Compensation Committee is that executive officers' total annual cash
compensation should vary with the performance of the Company and that long-term
incentives awarded to such officers should be aligned with the interest of the
Company's shareholders. The Company's executive compensation program is designed
to attract and retain executive officers who will contribute to the Company's
long-term success, to reward executive officers who contribute to the Company's
financial performance and to link executive officer compensation and shareholder
interests through the 1993 Plan and the 1996 Plan.
Compensation of the Company's executive officers consists of two
principal components: salary and long-term incentive compensation consisting of
stock option grants.
Salary. The base salaries for the Company's executive officers are
reviewed annually and set by the Compensation Committee. When setting base
salary levels, in a manner consistent with the Compensation Committee's policy
outlined above, the Committee considers competitive market conditions for
executive compensation, Company performance and individual performance as well
as the Company's current financial condition and available cashflow to sustain
operations.
27
<PAGE>
Long-term Incentive Compensation. The Company believes that option
grants (i) align executive interests with shareholder interests by creating a
direct link between compensation and shareholder return, (ii) give executives a
significant, long-term interest in the Company's success, and (iii) help retain
key executives in a competitive market for executive talent.
The Company's 1993 Employee and Consultant Stock Plan authorized the
Committee to grant stock options to employees and consultants, including
executives. The 1996 Plan authorizes the Committee to grant stock options to
employees and consultants, including executives. Option grants under the 1996
Plan will be made from time to time to executives whose contributions have or
will have a significant impact on the Company's long-term performance. The
Company's determination of whether option grants are appropriate each year is
based upon individual performance measures established for each individual.
Options are not necessarily granted to each executive during each year. Options
granted to executive officers typically vest in equal monthly installments over
a period of five years and expire either five or ten years from the date of
grant. No stock options to the Named Executive Officers were granted during
fiscal year ending July 31, 1998.
Compensation of Chief Executive Officer. In determining the
compensation of Carl D. Perry, the Chief Executive Officer, the Board of
Directors considered specifically the cash shortage faced by the Company, and
the need to create a strong incentive with long-term incentive awards for the
Chief Executive Officer to apply the time and effort necessary to improve the
Company's financial condition. The Board therefore established a compensation
package consisting primarily of options and stock appreciation rights, with an
annual salary of $50,000. In addition, the vesting of the majority of these
long-term incentive awards is contingent upon the occurrence of certain
performance-based milestones tied to the profitability of the Company. The
Committee believes that the salary and long-term incentive compensation paid to
Mr. Perry in fiscal year 1998 were appropriate based on these criteria.
Compensation Policy Regarding Deductibility. The Company is required to
disclose its policy regarding qualifying executive compensation for
deductibility under Section 162(m) of the Internal Revenue Code which provides
that, for purposes of the regular income tax and the alternative minimum tax,
the otherwise allowable deduction for compensation paid or accrued with respect
to a covered employee of a publicly-held corporation is limited to $1 million
per year. For the fiscal year ended July 31, 1997, no executive officer of the
Company received in excess of $1 million in compensation from the Company, and
for the fiscal year ending July 31, 1998, no executive officer will receive in
excess of $1 million in compensation from the Company. The 1996 Plan is
structured so that any compensation deemed paid to an executive officer when he
exercises an outstanding option under the Plan, with an exercise price equal to
the fair market value of the option shares on the grant date, will qualify as
performance-based compensation which will not be subject to the $1 million
limitation. The Compensation Committee currently intends to limit the dollar
amount of all other compensation payable to the Company's executive officers to
no more than $1 million.
Submitted by the Compensation Committee:
[_______]
28
<PAGE>
Stock Performance Graph
The graph below compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return on the Standard & Poor's
Small Capitalization 600 Index and an index of peer companies selected by the
Company. A group of six other electric vehicle companies comprise the peer group
index.(1)
The period shown commences on August 1, 1993, and ends on July 31,
1998, the end of the Company's last fiscal year. The graph assumes an investment
of $100 on August 1, 1993 and the reinvestment of any dividends. The comparisons
in the graph below are based upon historical data and are not indicative of, nor
intended to forecast, future performance of the Company's Common Stock.
TOTAL RETURN TO SHAREHOLDERS
AUGUST 1, 1993 TO JULY 31, 1998
(1) Companies included in the peer group index are ________________.
29
<PAGE>
Employment Agreements
Carl D. Perry, Chief Executive Officer of the Company, has no
employment agreement and is an "at will" employee with the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors,
Executive Officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file reports of ownership and
changes in ownership of the Company's Common Stock to the Securities and
Exchange Commission and the New York Stock Exchange. Copies of these reports are
also required to be delivered to the Company.
Except as set forth below, the Company believes, based solely on its
review of the copies of such reports received or written representations from
certain Reporting Persons, that during fiscal 1998, all Reporting Persons
complied with all applicable filing requirements. Mr. Perry has filed a Form 4
for a transaction effected in March, 1999.
STOCKHOLDER PROPOSALS
To be considered for presentation to the annual meeting of the
Company's stockholders to be held in 2000, a stockholder proposal must be
received by Carl D. Perry, Chief Executive Officer, U.S. Electricar, Inc., 19850
South Magellan Drive, Torrance, California, no later than _____________.
OTHER MATTERS
The Board of Directors knows of no other business which will be
presented at the Annual Meeting. If any other business is properly brought
before the Annual Meeting, it is intended that proxies in the enclosed form will
be voted in respect thereof in accordance with the judgment of the persons
voting the proxies.
It is important that the proxies be returned promptly and that your
shares be represented. Stockholders are urged to mark, date, execute and
promptly return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
----------------------------------
Carl D. Perry
Chairman of the Board
July 8, 1999
Torrance, California
30
<PAGE>
EXHIBIT A
FORM OF RESOLUTIONS REGARDING
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
INCREASING THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
"This Corporation is authorized to issue two classes of shares of
stock, to be designated Common Stock and Preferred Stock, respectively. This
Corporation is authorized to issue Five Hundred Million (500,000,000) shares of
Common Stock and Thirty-five Million (35,000,000) shares of Preferred Stock. The
Preferred Stock authorized by these Articles of Incorporation shall be issued
from time to time in one or more series.
31
<PAGE>
EXHIBIT B
FORM OF REVERSE STOCK SPLIT RESOLUTIONS
RESOLVED, that, prior to the Company's next Annual Meeting of
Shareholders, on the condition that no other amendment to the Company's Articles
of Incorporation shall have been filed subsequent to ____________, 2000
effecting a reverse stock split of the Common Stock, Article III of the Amended
and Restated Articles of Incorporation of U.S. Electricar, Inc. be amended by
the addition of the following text immediately following the first paragraph of
Article III:
"On the effective date of this amendment to the Restated and Amended
Articles of Incorporation (the "Effective Date"), the Common Stock of
the Corporation will be reverse split on a one-for-twenty (1- for-20)
basis so that each share of Common Stock issued and outstanding
immediately prior to the Effective Date shall automatically and without
any action on the part of the holder thereof be converted into and
reconstituted as one-twentieth (1/20th) of a share of Common Stock (the
"Reverse Stock Split"). No fractional shares will be issued by the
Corporation as a result of the Reverse Stock Split. In lieu thereof,
each beneficial shareholder whose shares of Common Stock are not evenly
divisible by twenty will receive a cash payment therefor in an amount
equal to the product obtained by multiplying (i) the average of the
high bid and low asked per share prices of the Common Stock as reported
on the NASDAQ electronic "Bulletin Board" on the Effective Date
(adjusted if necessary to reflect the per share price of the Common
Stock without giving effect to the conversion and reconstitution of the
Common Stock effected hereby) by (ii) the number of shares of Common
Stock held by such holder that would otherwise have been exchanged for
such fractional share of Common Stock."
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated and Amended Articles of Incorporation
effecting the Reverse Stock Split, notwithstanding authorization of the proposed
amendment by the shareholders of the Company, the Board of Directors may abandon
such proposed amendment without further action by the shareholders.
32
