SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
U.S. ELECTRICAR, INC.
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(Name of Registrant as Specified in Its Charter)
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(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)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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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 15,000,000 to 45,000,000 shares;
5. AMENDMENT TO ARTICLE III, SECTION 2 OF U.S. ELECTRICAR, INC.'S
BYLAWS TO AMEND THE VARIABLE AUTHORIZED NUMBER OF DIRECTORS. To approve an
amendment to Article III, Section 2 of the Company's Bylaws to change the
variable authorized number of directors to a range of from 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 Shareholders 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 years
ending July 31, 1999 and 2000; and
8. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
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The foregoing items of business are more fully described in the Proxy
Statement which is attached and made a part hereof.
The Board of Directors has fixed the close of business on July 8, 1999
as the record date for determining the shareholders 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 12, 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 12,1999
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 the Company's executive offices located
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 12, 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 its 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 222,962,367 shares of Common Stock,
3,259,101shares of Series A Preferred Stock, and 4,138,461 shares of Series B
Preferred Stock, for an aggregate of 227,464,249 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 115,179,965
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 No. 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 No. 2, the authorization for the Board to effect a
one-for-twenty 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
the number of shares of Common Stock that the Company is authorized to issue
from 300,000,000 to 500,000,000. 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 the text
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 June 15, 1999, the Company had approximately 222,962,367 shares
of Common Stock issued and outstanding, 3,259,101 shares of Common Stock
issuable upon conversion of outstanding Series A Preferred Stock, 4,138,461
shares of Common Stock issuable upon conversion of outstanding Series B
Preferred Stock, 83,904,786 shares of Common Stock issuable upon exercise of
outstanding options and warrants, and 46,999,999 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), for a total of approximately 361,264,714 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 other
corporate purposes. At present, the Company has no plans, agreements or
understandings for the issuance of additional shares of capital stock as of June
15, 1999, other than pursuant to (i) options, warrants, convertible
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debt and shares of Series A Preferred Stock and Series B Preferred Stock
outstanding as of June 15, 1999, and (ii) agreements to issue up to an
additional 80,000,000 million shares of Common Stock upon the issuance and
exercise of certain warrants or conversion of certain 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.
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.
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.
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 31 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 1,275 shares of
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 Stock.
Specifically, pursuant to the terms of the Company's Articles of Incorporation,
the Reverse Stock Split will
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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
1/20 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 1/20 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 No. 2. In the event this Proposal No. 2 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 15, 1999, the number of issued and outstanding shares of Old
Common Stock was 222,962,367. 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(2)
- ------------------------- -------------- ------------------------
1 for 20 11,139,484 3,860,515
- -------------------
(1) The figures in this table are calculated based on June 15, 1999 issued and
outstanding shares of Old Common Stock as reported in the Company's quarterly
report on Form 10-Q for the fiscal quarter ended April 30, 1999, as filed with
the Securities and Exchange Commission on June 18, 1999. 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.
(2) These figures are based on a pre-Reverse Stock Split number of 300,000,000
authorized shares, and does not reflect the proposed increase in the authorized
shares to 500,000,000 under Proposal No. 1.
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
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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, excluding any basis attributable to shares of Old
Common Stock which the shareholder surrenders for cash in lieu of a
fractional share of New 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
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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 Annual 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
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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 15,000,000 to 45,000,000.
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 at its executive offices in Torrance, California.
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 30,000,000 shares, bringing the total number of shares issuable under the
1996 Plan to 45,000,000. 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 is 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 is administered by the Board or by a committee of the Board.
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.
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:
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(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.
(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
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<PAGE>
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, as proposed to be amended, to its executive
officers, directors or employees. There were no grants of stock options to the
Named Executive Officer or any other person under the 1993 Plan or 1996 Plan
during fiscal 1998.
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 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
recognized on such a premature disposition of the shares in excess of the amount
treated as ordinary income will be characterized as capital gain.
15
<PAGE>
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 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
and the fair market value of shares on the date the optionee purchased the
shares will be treated as capital gain or loss.
An optionee's gain or loss on the sale or exchange of his shares, to
the extent any gain is not treated as ordinary income under the foregoing rules,
will generally represent capital gain or loss. As of 1999, the rules governing
the holding period computations for capital gain or loss have changed. Under
current law, the following holding periods and maximum federal tax rates will
generally apply:
Classification of Maximum Federal
Holding Period Gain or Loss Tax Rate
-------------- ------------ --------
One Year or Less Short-Term 39.6%
More Than One Year Long-Term 20.0%
These maximum rates are subject to several special computational rules, and
optionees are instructed to consult their personal tax advisors concerning their
own tax situations.
The Company will generally 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.
Shares Reserved for Issuance
The Company has reserved 15,000,000 shares of Common Stock for issuance
under the 1996 Plan. In order to continue to attract new talented employees,
directors and consultants, it is proposed that the 1996 Plan be amended, and
that the Company increase the number of shares of Common Stock reserved for
issuance thereunder to 45,000,000 shares of Common Stock.
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 30,000,000 shares, bringing the total number of shares issuable under the
1996 Plan to 45,000,000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT
OF THE 1996 PLAN
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PROPOSAL NO. 5
AMENDMENT TO ARTICLE III, SECTION 2 OF THE COMPANY'S BYLAWS
TO AMEND THE VARIABLE AUTHORIZED NUMBER OF DIRECTORS
TO A RANGE OF FROM FOUR (4) TO SEVEN (7)
The Company's Articles of Incorporation provide that the authorized
number of directors of the Company 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 authorized number of members of 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 from four (4) to seven (7). The Board of
Directors believes this proposal will allow the Board of Directors more
flexibility and 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 No. 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 TO ARTICLE III, SECTION 2 OF THE COMPANY'S BYLAWS
TO AMEND THE VARIABLE AUTHORIZED NUMBER OF DIRECTORS
TO A RANGE OF FROM FOUR (4) TO SEVEN (7)
17
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PROPOSAL NO. 6
ELECTION OF DIRECTORS
A board of six (6) Directors will be elected at the Annual Meeting,
each of whom will serve until the next annual meeting of shareholders or until a
successor is elected or appointed and qualified or until the Director's earlier
resignation or removal. 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 or appointed or
until the Director's earlier resignation or removal.
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 Incorporation
will be vacant.
Certain information about the nominees for the Board of Directors is
furnished below.
Common Stock and Series A Preferred Stock Nominees:
Malcolm R. Currie, Ph.D. Dr. Currie has served as a Director of the
Company since March 1995 through May 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.
John J. Micek III. Mr. Micek was elected a Director of the Company in
April 1999. Mr. Micek served as the Company's Vice President, General Counsel
and Secretary from March 1994 to March 1997. From 1997 to 1999, Mr. Micek served
as Chief Financial Officer of Protozoa, Inc., a private animation and software
production company. From 1997 to the present, Mr. Micek has served as President
of Universal Assurors, Inc.
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Prior to joining the Company, Mr. Micek practiced law since January 1989. From
1987 to March 1994, Mr. Micek held several positions with Armanino Foods of
Distinction, Inc., a publicly traded specialty foods company, including serving
as its General Counsel and Chief Financial Officer from February 1987 to
December 1988 and Vice President from January 1989 to March 1994, and a Director
of Armanino Foods from 1988 to 1989. Mr. Micek served as the President and
Director of Catalina Capitol, Inc., a publicly traded company, from 1990 until
its merger into Instant Video Technologies, Inc. ("IVT"), an interactive
multi-media network technology company, in 1992. Mr. Micek continues to serve as
a Director of IVT.
Carl D. Perry. 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, and was elected President in June 1999. 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.
Anthony Rawlinson. Mr. Rawlinson is Managing Director of the Global
Value Investment Portfolio Management Pte. Ltd., a Singapore based International
Fund Management Company managing discretionary equity portfolios for
institutions, pension funds and clients globally. Mr. Rawlinson is also Chairman
of IXLA Ltd., an Australian public company which is a leader in the field of PC
photography software. He is also Chairman of the Board of its wholly-owned
subsidiary, photohighway.com, an internet portal for PC photography.
Edwin O. Riddell. 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.
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
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Directors, Nominees and Executive Officers
The following table sets forth certain information with respect to the
Directors, Nominees and Executive Officers of the Company:
Directors, Nominees and Executive Officers
Name Age Position
---- --- --------
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 (2) 47 Director
Anthony Rawlinson (3) 44 Director
Malcolm R. Currie, Ph.D. (3) 70 Director
- -----------------------------------
(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.
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 fiscal 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 two meetings in fiscal 1998. The
Compensation Committee currently consists of Mr. Edwin Riddell and John Micek
III. 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 two meeting in 1998. The Audit Committee
currently consists of Messrs. Edwin Riddell 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.
20
<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 June 15, 1999, 28,000 options had been granted and were
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.
On June 14, 1999, the Company, Jagen Pty, Ltd. ("Jagen"), and Anthony
Rawlinson entered into a Securities Purchase Agreement dated as of June 1, 1999,
pursuant to which Jagen purchased 70,000,000 shares of the Company's Common
Stock at a purchase price of $0.03 per share, for an aggregate purchase price of
$2.1 million in cash. In addition, pursuant to the terms of the Securities
Purchase Agreement, Jagen loaned the Company the principal amount of $400,000 in
exchange for a secured promissory note convertible into 13,333,334 shares of
Common Stock, at a conversion price of $0.03 per share, and a warrant to
purchase 41,666,666 shares of Common Stock, at an exercise price of $0.06 per
share. The Jagen promissory note bears interest at the rate
21
<PAGE>
of six percent (6%) per annum and is due and payable on August 31, 1999. In
addition, pursuant to the Securities Purchase Agreement, Mr. Rawlinson committed
to loan to the Company, on July 31, 1999, the principal amount of $500,000 in
exchange for a secured promissory note convertible into 16,666,666 shares of
Common Stock, at a conversion price of $0.03 per share, and a warrant to
purchase 8,333,334 shares of Common Stock, at an exercise price of $0.06 per
share. Mr. Rawlinson's promissory note will bear interest at the rate of six
percent (6%) per annum and will be due and payable on August 31, 1999. In
connection with the Securities Purchase Agreement, the Company, Jagen, Mr.
Rawlinson and Carl Perry, the Company's Chief Executive Officer and President
and the holder of more than 10% of its Common Stock, entered into a
Shareholders' Agreement dated as of June 1, 1999, pursuant to which Jagen and
Mr. Perry agreed to vote all shares of the Company's Common Stock held by them
in favor of one director to be designated by Jagen and Mr. Rawlinson, and such
other directors as are designated by a majority of the Board of Directors of the
Company, as it is constituted from time to time. Mr. Perry also agreed to vote
his shares in favor of Mr. Rawlinson as Chairman of the Board of Directors.
Prior to consummation of the transaction, neither Jagen nor Mr. Rawlinson
beneficially owned any of the Company's capital stock or was affiliated with the
Company. As a result of the transaction, Jagen beneficially owns more than 10%
of the Company's Common Stock and Mr. Rawlinson, who is a nominee for Director,
is the holder of rights to acquire more than 10% of the Company's Common Stock.
On March 19, 1999, the Company, Itochu Corporation ("Itochu"), and Carl
D. Perry, the Company's Chief Executive Officer and President, entered into a
Share and Note Purchase Agreement ("SNP Agreement") pursuant to which Mr. Perry
acquired all of Itochu's convertible notes and Common Stock of the Company.
Under the terms of the SNP Agreement, the Company agreed to indemnify, defend
and hold harmless Itochu from and against any claims arising out of the
convertible notes and Common Stock shares it sold to Mr. Perry, the Company or
its business.
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.
22
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 all other Executive Officers of the
Company; 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.
Amount & Nature of
Name and Address of Beneficial Percent of
Beneficial Owner Ownership (1) Class(1)
- ---------------- ------------- --------
Jagen Pty, Ltd.(2) ............................... 125,000,000 44.99%
9 Oxford Street
South Yarra 3141
Melbourne, Victoria Australia
Citibank N.A ..................................... 43,508,314 19.53%
11 Wall Street, 8th Floor
New York, NY 10043
Carl Perry (3) ................................... 52,989,622 22.23%
Anthony Rawlinson (4) ............................ 25,000,000 10.08%
Edwin O. Riddell (5) ............................. 15,000 *
David Ishag (6) .................................. 12,000 *
John Micek III (7) ............................... 566,000 *
Malcolm R. Currie ................................ -- *
Donald H. Dreyer ................................. -- *
All Directors and Executive Officers as
a group (5 persons) (8) ........................ 53,582,622 22.43 %
- ----------------------------
* Less than 1%
(1) Number of shares and percentage ownership include shares issuable pursuant
to stock options, warrants and convertible debt held by the person in
question exercisable or convertible within 60 days after June 15, 1999.
Percentages are based on 222,789,681 shares of Common Stock outstanding as
of June 15, 1999, as reported in the Issuer's quarterly report on Form 10-Q
for the fiscal quarter ended April 30, 1999 as filed with the Securities
and Exchange Commission ("Commission") on June 18, 1999
(2) With respect to information relating to Jagen Pty, Ltd. ("Jagen"), the
Company has relied on information supplied by such entity on its Schedule
13D filing with the Commission dated June 24, 1999. Pursuant to the
Schedule 13D filing, Jagen has shared voting power and investment power
with respect to all of these shares. Includes 13,333,334 shares issuable
upon conversion of an outstanding convertible note in the principal amount
of $400,000 and 41,666,666 shares issuable upon exercise of outstanding
warrants.
(3) Includes (i) 1,200,000 shares issuable pursuant to stock options, and (ii)
14,333,333 shares of Common Stock issuable upon conversion of outstanding
notes in the principal amount of $3,000,000.
(4) With respect to information relating to Anthony Rawlinson, the Company has
relied on information supplied by Mr. Rawlinson on his Schedule 13D filing
with the Commission dated June 24, 1999. Pursuant to the Schedule 13D
filing, Mr. Rawlinson has shared voting power and investment power with
respect to all of these shares. Includes 16,666,666 shares issuable upon
conversion of a convertible note in the principal amount of $500,000 and
8,333,334 shares issuable upon exercise of warrants, each of which the
Company is obligated to issue to Mr. Rawlinson within 60 days of June 15,
1999.
(5) Includes 15,000 shares issuable pursuant to stock options.
(6) Includes 12,000 shares issuable pursuant to stock options. Following the
Annual Meeting, Mr. Ishag will cease to be a Director of the Company.
(7) Includes 566,000 shares issuable pursuant to stock options.
(8) See Footnotes (4), (5), (6) and (7). Includes Carl D. Perry, David Ishag,
Edwin O. Riddell, John Micek III, and Donald H. Dreyer.
23
<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 years ending July 31, 1999 and 2000. 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 MOSS ADAMS LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEARS ENDING JULY 31, 1999 AND 2000
24
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth all compensation earned for the years
ended July 31, 1998, 1997 and 1996, by Carl Perry, the Company's only Executive
Officer (the "Named Executive Officer").
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
--------------------------- -------------------------
Securities
Underlying All Other
Salary Bonus(1) Options Compensation
Name and Principal Position Year ($) ($) (#) ($)
- --------------------------- ---- --- --- --- ---
<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 and
amounts paid to Mr. Perry prior to that date were paid to Mr. Perry as an
Executive Vice President of the Company. Mr. Perry's current salary as Chief
Executive Officer is $50,000 per year.
</FN>
</TABLE>
25
<PAGE>
Option Grants/SAR Grants
The following table sets forth certain information with respect to
stock options granted during fiscal 1998 to the Named Executive Officer. In
accordance with the rules of the Securities and Exchange Commission, also shown
below is the potential realizable value over the term of the option (the period
from the grant date to the expiration date) based on assumed rates of stock
appreciation of 5% and 10%, compounded annually, calculated based on the average
of the high-bid and low-ask prices of the Common Stock on July 31, 1998. These
amounts are based on certain assumed rates of appreciation and do not represent
the Company's estimate of future stock price. Actual gains, if any, on stock
option exercises will be dependent on the future performance of the Common
Stock.
No grants of stock options or stock appreciation rights ("SARs") were
made during fiscal year 1998 to the Named Executive Officer or any other
Executive Officer.
<TABLE>
Aggregated Option/SAR Exercises in 1998
and Option Values at July 31, 1998
<CAPTION>
Number of Securities
Aggregate Underlying Unexercised Value of Unexercised
Option/SAR Options/SARs at In-the-Money Options at
Exercises in 1998 July 31, 1998 July 31, 1998 (1)
----------------- ---------------------------- --------------------------
Shares Value
Acquired on Realized
Name Exercise (#) ($) 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
The Compensation Committee currently consists of Edwin Riddell and John
Micek III.
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.
26
<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 Plan and 1996 Plan authorize the Committee to grant
stock options to employees and consultants, including executives. Currently,
option grants will only be made under the 1996 Plan and 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 were granted to the
Named Executive Officer during fiscal 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. The
Board therefore established a compensation package for fiscal 1998 consisting
solely of an annual salary of $50,000. The Committee believes that the salary
paid to Mr. Perry in fiscal year 1998 was appropriate based on the financial
condition of the Company.
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:
Edwin Riddell
John J. Micek III
27
<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
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
Cumulative Total Return
-------------------------------------------
7/93 7/94 7/95 7/96 7/97 7/98
U.S. ELECTRICAR, INC 100 365 11 18 6 4
PEER GROUP 100 61 72 62 67 44
S & P SMALLCAP 600 100 102 131 142 198 214
(1) Companies included in the peer group index are Amerigon, Inc. (ARGNA),
Electric Fuel Corp. (EFCX), Electrosource, Inc. (ELSI), Energy Conversion
Devices, Inc. (ENER), Unique Mobility (UQM), and Valence Technology, Inc.
(VLNC).
28
<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. Copies of these reports are also required to be delivered
to the Company.
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.
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 March 10, 2000.
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 12, 1999
Torrance, California
29
<PAGE>
EXHIBIT A
FORM OF RESOLUTIONS REGARDING
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
INCREASING THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
RESOLVED, that the first paragraph of ARTICLE III of the Restated and
Amended Articles of Incorporation of U.S. Electricar, Inc. is hereby amended to
read in its entirety as follows so as to increase the authorized number of
shares of Common Stock from 300,000,000 to 500,000,000 shares"
"III
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. The Preferred Stock shall be comprised of two
series comprising an aggregate of Thirty-five Million (35,000,000)
shares, of which Thirty Million (30,000,000) shares shall be designated
"Series A Convertible Preferred Stock" (also referred to as "Series A
Stock" or "Series A Preferred Stock") and Five Million (5,000,000)
shares shall be designated "Series B Convertible Preferred Stock" (also
referred to as "Series B Stock" or "Series B Preferred Stock")."
30
<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 Restated
and Amended 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.
31
<PAGE>
Appendix A
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
U.S ELECTRICAR, INC.
FOR THE 1998 ANNUAL MEETING OF THE STOCKHOLDERS
July 29, 1999
The undersigned stockholder of U.S. ELECTRICAR, INC., a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated July 8, 1999, and the Annual Report
on Form 10-K for the fiscal year ended July 31, 1998 and hereby appoints Carl D.
Perry and John J. Micek III, or any of them, proxies, with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the 1998 Annual Meeting of Shareholders of U.S. ELECTRICAR, INC.
to be held on Thursday, July 29, 1999 at 10:00 a.m., local time, at U.S.
ELECTRICAR, INC.'s principal executive office located at 19850 South Magellan
Drive, Torrance, California 90502, and at any adjournment or adjournments
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
below.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR ALL OF THE PROPOSALS SET FORTH BELOW AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
PROPOSAL 1. TO APPROVE AN 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 FROM 300,000,000 TO 500,000,000
SHARES.
__ FOR __ AGAINST __ ABSTAIN
PROPOSAL 2. TO AUTHORIZE THE BOARD OF DIRECTORS TO AMEND THE
ARTICLES OF INCORPORATION TO EFFECT A ONE-FOR-TWENTY REVERSE
STOCK SPLIT OF THE OUTSTANDING COMMON STOCK.
__ FOR __ AGAINST __ ABSTAIN
PROPOSAL 3. 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.
__ FOR __ AGAINST __ ABSTAIN
PROPOSAL 4. TO APPROVE AN AMENDMENT TO THE U.S. ELECTRICAR, INC.
1996 STOCK OPTION PLAN TO INCREASE THE AUTHORIZED NUMBER OF
SHARES AVAILABLE FOR ISSUANCE FROM 15,000,000 TO [___________]
SHARES.
__ FOR __ AGAINST __ ABSTAIN
PROPOSAL 5. TO APPROVE AN AMENDMENT TO ARTICLE III, SECTION 2 OF
U.S. ELECTRICAR, INC.'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).
__ FOR __ AGAINST __ ABSTAIN
PROPOSAL 6. TO ELECT CARL D. PERRY, MALCOLM R. CURRIE, EDWIN O.
RIDDELL, ANTHONY RAWLINSON, JOHN J. MICEK III, AND DONALD H.
DREYER AS DIRECTORS OF U.S. ELECTRICAR, INC.
__ FOR all nominees listed below __ WITHHOLD AUTHORITY to vote
(except as indicated) for all nominees listed below
<PAGE>
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below.
CARL D. PERRY
MALCOLM R. CURRIE
EDWIN O. RIDDELL
ANTHONY RAWLINSON
JOHN J. MICEK III
DONALD H. DREYER
PROPOSAL 7. PROPOSAL TO RATIFY THE APPOINTMENT OF MOSS ADAMS LLP AS
INDEPENDENT AUDITORS OF U.S. ELECTRICAR, INC. FOR FISCAL YEAR
ENDING JULY 31, 1999.
__ FOR __ AGAINST __ ABSTAIN
Dated: __________________________, 1999
_______________________________________
Signature
_______________________________________
Signature
This Proxy should be marked, dated and
signed by the stockholder(s) exactly as
his or her name appears hereon, and
returned promptly in the enclosed
envelope. Persons signing in a
fiduciary capacity should so indicate.
If shares are held by joint tenants or
as community property, both should
sign.
