SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1999
Commission File Number 0-25184
U. S. ELECTRICAR, INC.
(Exact name of registrant as specified in its charter)
California 95-3056150
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
19850 South Magellan Drive, Torrance,
California 90502 (Address of principal
executive offices, including zip code)
(310) 527-2800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of October 25, 1999 was $13,515,672. For
purposes of this calculation only, (i) shares of Common Stock and Series A
Preferred Stock are deemed to have a market value of $0.19 per share, and the
Series B Preferred Stock is deemed to have a market value of $0.633 per share,
based on the average of the high bid and low ask prices of the Common Stock on
October 25, 1999, and (ii) each of the executive officers, directors and persons
holding 5% or more of the outstanding Common Stock (including Series A and B
Preferred Stock on an as-converted basis) is deemed to be an affiliate.
The number of shares of Common Stock outstanding as of October 25, 1999 was
251,992,218.
<PAGE>
<TABLE>
U.S. ELECTRICAR, INC.
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<CAPTION>
<S> <C>
PART I
Item 1. Business .............................................................................................................. 3
Item 2. Properties ............................................................................................................ 7
Item 3. Legal Proceedings ..................................................................................................... 7
Item 4. Submission of Matters to a Vote of Security Holder .................................................................... 8
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ................................................. 10
Item 6. Selected Financial Data ............................................................................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ................................. 12
Item 7a. Quantitative and Qualitative Disclosures about Market Risk ........................................................... 16
Item 8. Financial Statements and Supplementary Data ........................................................................... 16
Item 9 Changes in Disagreements with Accountants on Accounting and Financial Disclosure ....................................... 16
PART III
Item 10. Directors and Executive Officers of the Registrant ................................................................... 17
Item 11. Executive Compensation ............................................................................................... 19
Item 12. Security Ownership of Certain Beneficial Owners and Management ....................................................... 22
Item 13. Certain Relationships and Related Transactions ....................................................................... 24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ..................................................... 25
SIGNATURE ..................................................................................................................... 26
</TABLE>
2
<PAGE>
PART I
The matters addressed in this report on Form 10-K, with the
exception of the historical information presented, may contain certain
forward-looking statements involving risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth under the heading "Certain Factors That May Affect Future Results" in the
Management's Discussion and Analysis section and elsewhere in this report.
Item 1. Business
General
U. S. Electricar, Inc., a California Corporation (the "Company"), was
incorporated on July 30, 1976, under its original name, "Clover Solar
Corporation, Inc." The name of the Company was changed in June 1979, to "Solar
Electric Engineering, Inc.", and was subsequently changed to "U.S. Electricar,
Inc." in January 1994.
The Company originally was established to develop, convert, assemble,
manufacture and distribute battery-powered electric vehicles, including on-road
pick up trucks, passenger cars, buses and delivery vehicles, and off-road
industrial vehicles. Today, the Company has completely re-defined its
product-line and the Company is directing its efforts toward the development of
electric drive-trains and related components, vehicle systems integration and
the performance of various engineering contracts. The Company's efforts relating
to the converted vehicle program have been discontinued, and any efforts toward
that program consist primarily of supporting customers with vehicle integration
and maintenance.
The Company's fiscal year ends July 31. All year references refer to
fiscal years.
In 1997, the Company made two significant moves to adjust and
strengthen its overall product base and realign its operations. In September
1996, the Company sold substantially all the assets and properties of the
Company's wholly owned subsidiary, Industrial Electric Vehicles, Inc. In October
1996, the Company acquired substantially all the tangible and intangible assets,
and assumed certain liabilities of Systronix Corporation ("Systronix"), a
developer of fully integrated propulsion systems and related components for
electric vehicles, located in Torrance, California.
In March 1997, the Company completed an agreement with Hyundai Motor
Company ("HMC") and Hyundai Electronics Industries Co., Ltd. ("HEI") whereby HMC
and HEI collectively purchased $3.6 million of the Company's common stock and
secured a technology license for an additional payment of $2.0 million. For the
technology license, the Company received $1,850,000 in cash, and the remaining
$150,000 is to be received over six years.
In 1998, the Company restructured its top management, realigned its
product base and concentrated on the reduction of overall company operating
costs. Facilities were closed, operations streamlined and personnel reduced.
Headcount decreased from 51 employees at July 31, 1997 to 26 employees at July
31, 1998, yet the Company has maintained its core engineering capabilities. The
Company has since begun to hire additional personnel as is warranted by new
contracts and orders.
During 1999, the Company continued to concentrate on the reduction of
operating costs and outstanding debt. The Company's business activities are now
focused primarily on the development of electric and hybrid electric
drive-trains and related components, fuel cell systems, vehicle systems
integration and the performance of various engineering contracts. The Company
has several key contracts with the U. S. government's Defense Advanced Research
Project Agency ("DARPA") and the Department of Transportation ("DOT"), including
the analysis of a new plastic lithium ion vehicle battery concept, testing of
advanced vehicle batteries and development of an airport electric passenger tram
system. The Company also has several major engineering contracts with HMC to
design, develop and test electric drive-trains and related products. Hyundai
Motor Company is contracting with the Company for the development of an advanced
charging unit and a hybrid vehicle development, as well as preparing to produce
the family of Panthertm drive system for their electric vehicles. The Company is
extending the PantherTM drive system to hybrid vehicle applications in projects
sponsored by Hyundai. These hybrid systems will be applied to light, medium and
heavy duty transportation vehicles. The Company is also offering the modular
drive
3
<PAGE>
systems to Original Equipment Manufacturers ("OEM") and other customers. These
drive systems have been installed in various vehicles. The Company offers other
components such as air conditioning, heat pump units, electro-hydraulic power
steering units and battery management units to OEMs, both domestic and
international. The Company is also developing a high power charger for use with
its drive systems. HMC has adapted a customized version of the PantherTM 60 for
their production electric vehicle.
The Company has completed the sale of a license to certain proprietary
PantherTM Drive System software and hardware, for the Republic of Korea, to
Hyundai Heavy Industries ("HHI") for further design and development of electric
drive systems. The Company anticipates deriving further development contracts
from this new relationship with HHI as well as utilizing HHI to manufacture the
Company's drive systems for international sales.
The Company is aggressively pursuing various avenues of revenue
generation to increase its cash flow. These include further developing its
relationship with the Hyundai Group, joint venturing with global vehicle and bus
manufacturers to utilize its electric drive train system, and developing a
comprehensive marketing plan to penetrate various alternate niche markets for
its drive system and its components. The Company is also looking at
non-automotive applications for its products.
The Company received capital investments from Jagen, Pty, Ltd. in the
amount of $2,500,000 on June 4, 1999 and from Anthony Rawlinson in the amount of
$500,000 on July 30, 1999, which have enabled the Company to further develop its
hybrid drive systems as well as embark on other in-house funded research and
development. The Company intends to explore new markets and develop an agressive
sales and marketing plan to sell the current product line of drive-trains and
components.
Debt Restructuring
The Company's debt restructuring plan has progressed positively during
1999. With the addition of capital as discussed below, the Company will retire
the $307,000, three-year debt due to the Credit Managers Association of
California ("CMAC") which has been extended to August, 1999. CMAC's $3.3
million, 20-year promissory note becomes due and payable in 2016. In March 1999,
the Company's Chief Executive Office and President purchased all of the
Company's outstanding debt due to Itochu Corporation, which was $4,300,000 plus
accrued interest. As of July 30, 1999, this individual has forgiven $1,300,000
in principal and $1,393,506 in accrued interest. This effectively reduced the
Company's total outstanding obligation including interest to $3,000,000 from
$5,693,506. The Company has also been aggressively reducing its outstanding past
due accounts payable. The Company shall continue to pursue a strategy of
negotiating settlements on these outstanding payables where prudent.
Environmental Initiatives and Legislation
Federal legislation was enacted to promote the use of alternative
fuel vehicles, including electric vehicles. Several states have also adopted
legislation that sets deadlines for the introduction of zero emission vehicles
("ZEV"). The State of California delayed the mandated introduction of ZEV from
1998 to 2003, but still retained the original required percentage of ZEV and now
hybrid-electric vehicles for 2003 at 10%. The State of California estimates that
a combination of 100,000 electric and hybrid electric vehicles will be required
to meet the State's 2003 mandate. The U.S. Department of Energy also modified
their rules governing how state fleets and utility fleets must comply with the
Energy Policy Act of 1992 on alternative fuel transportation programs.
4
<PAGE>
Products
The Company continued to enhance and expand its product line during
1999. The Company is concentrating its product base to focus primarily on
electric propulsion systems and components for electric and hybrid vehicles. The
Company maintains a family of electric propulsion systems consisting of a 60kW
drive system for light vehicles, a 90kW drive system for medium size vehicles
and a 120kW drive system for larger trucks and buses. Additionally the Company
has completed the development and prototyping of both a Series and Parallel
Hybrid drive system in conjunction with Hyundai Motor Company of Korea. The
Company has developed various components for integration into the drive systems
or as stand-alone systems such as the Battery Care Unit, the Safety Disconnect
Unit and the Electric Power Steering unit. The Company is currently analyzing
the non-automotive applications for many of its products in other industries
such as telecommunications.
The Company is no longer involved in product sales of conversion
vehicles, industrial electric vehicles or light electric delivery trucks. The
Company is in negotiations to sell an international manufacturing license for a
1.5 ton electric delivery truck previously built for international markets.
Strategic Partnering And Technology Developments
The Company has made efforts to establish third-party licensing and/or
distribution arrangements and align itself with various technology development
companies and electric vehicle component manufacturers to complement its own
expertise in the electric vehicle market. The Company has continued its efforts
to implement a strategy to be a "systems integrator" by seeking to establish
relationships to utilize other independently developed technology. The Company
believes that its competitive advantage may be its ability to identify, attract
and integrate the latest technology available to produce state of the art
products at competitive prices. The Company believes this strategy will reduce
capital and research and development costs to the extent other companies or
organizations will fund these expenses.
The Company believes that two of the principal component technologies
relevant to a cost effective electric vehicle are the electric drive system and
the battery/charging system. The Hyundai Group of Korea and the Company are
cooperating in the development of advanced drive-train technology and related
systems. It is the Company's strategy to continuously review emerging
technological developments and seek alliances with or, if sufficient additional
capital funding can be obtained, complete acquisitions with companies that it
perceives own the best proven technologies for incorporation into its electric
vehicles. The Company's progress and current plans for each system are described
below.
Electric Drive System
The electric drive system consists of an electric motor and electronic
controls that regulate the flow of electricity to and from the batteries (at
various voltages and amperages) to propel the vehicle. Auxiliary vehicle
functions (e.g., radio, lights, windshield wipers, etc.) are also powered by
stored electrical energy similar to that of an internal combustion drive system.
The Hyundai Group of Korea has recognized this advanced technology and
has invested in the Company and licensed the drive system technology for
production in Korea. The Company has fully validated its first propulsion system
product, the PantherTM 60 alternating current (AC) drive train for light duty
vehicles. The Company has continued to develop a family of electric drive
systems with the PantherTM 90 and PantherTM 120 systems for buses and heavy-duty
vehicles, and the 40kW off-board charging system, the second generation in a
family of rapid chargers for all sizes of electric vehicles.
The Company continues to be awarded a significant number of engineering
contracts from HMC and HHI for the development of various types of drive trains
and related systems.
Hybrid Vehicles
The Company completed its development for HMC of a Series Hybrid System
and Parallel Hydrid System for vehicles introduced by HMC. The hybrid systems
performed without complication and served as a validation of the capabilities of
the Company. The Company is extending the Panther drive system to the hybrid
vehicle application by adapting the PantherTM 120 as the drive system and the
PantherTM 60 as the induction generator for a series hybrid bus
5
<PAGE>
project sponsored by HMC. The Company has also developed a parallel hybrid drive
system and a dual-mode hybrid drive system utilizing the Panther controller and
the brushless DC motor.
Battery Management and Charging System
Pursuant to a DARPA program, the Company has completed a "beta test" of
new battery technologies from various battery manufacturers. The Company
believes that these new battery systems will allow design advantages in battery
placement, weight distribution, and vehicle crashworthiness. Additionally, the
Company is monitoring other battery innovations that may extend an electric
vehicle driving range by up to 50% and permit a shorter recharging time. The
Company is developing and testing Plastic Lithium Ion ("PLI") batteries in
collaboration with a major battery OEM. The PLI battery project sponsored by
DARPA is in two phases. The project is currently in its second phase and
continues to show promising results.
The Company is also developing a 40 kW high power charger for HMC. The
high power charger is based on our modular Panther system technology, and it is
sufficiently precise that it could also be used for battery conditioning.
Components
The Company is offering the modular drive system and components to OEMs
and other customers. The PantherTM 60, PantherTM 90 and PantherTM 120 drive
systems have been installed in various vehicles and are under evaluation by
customers and potential customers. HMC has adapted a customized version of the
PantherTM 60 for their production electric vehicle. The Company also offers an
air conditioning/heat pump, an electro-hydraulic power steering unit and a
safety disconnect unit for utilization by OEMs. The Company is also offering
BatteryCareTM, a battery management system, to OEMs. This battery management
system is utilized in the U.S. Postal Service electric vehicle, and it is
capable of providing communication to both inductive and conductive chargers
simultaneously and managing the on-board and off-board charging systems with
multiple technologies. This battery care unit is also being utilized to upgrade
the electric vehicles in the DARPA battery testing program in Hawaii. It makes
these vehicles compatible with the high power charging stations utilizing the
Society of Automotive Engineering standards.
Competitive Conditions
The competition to develop and market electric vehicles has increased
during the last year and the Company expects this trend to continue. The
competition consists of development stage companies as well as major U.S. and
international companies. The Company's future prospects will be highly dependent
upon the successful development and introduction of new products that are
responsive to market needs and can be manufactured and sold at a profit. There
can be no assurance that the Company will be able to successfully develop or
market any such products.
The development of hybrid-electric and alternative fuel vehicles, such
as compressed natural gas, fuel cells and hybrid cars poses a competitive threat
to the Company in markets for low emission vehicles (LEVs) but not in markets
where government mandates call for zero emission vehicles (ZEVs). The Company is
directly involved in the development of hybrid vehicles and fuel cell systems in
order to meet future requirements and applications.
Various providers of electric vehicles have proposed products or offer
products for sale in this emerging market. These products encompass a wide
variety of technologies aimed at both consumer and commercial markets. The
critical role of technology in this market is demonstrated through several
product offerings. Applied technologies range from direct current (DC) motor
drives to alternate current (AC) induction motor drives, from conversion
vehicles to purpose-built (OEM) vehicles, from lead-acid batteries to more
advanced power storage technologies and from traditional materials to more
advanced "composite" materials. As the industry matures, key technologies and
capabilities are expected to play critical competitive roles. The Company's goal
is to position itself as a long term competitor in this industry by focusing on
vehicle electric drive systems and related sub systems, component integration,
technology application and strategic partnerships. The Company believes that
this strategy will enhance the Company's position as an electric drive train
system supplier because, whether the OEMs build electric, hybrid-electric of a
fuel-cell powered vehicles, the electric drive system will be an essential
component.
6
<PAGE>
Research and Development
The Company believes that timely development and introduction of new
products are essential to establishing and maintaining a competitive advantage.
The Company is currently focusing its development efforts primarily in the
following areas:
*Technical proposals and program development under DARPA/DOT and
Hyundai Group Contracts;
*Power Control and Drive Systems and related technologies;
*Shuttle and Transit Bus integration and development; and
*Subsystem development (i.e., climate control, power management).
In 1999, 1998 and 1997, the Company spent $499,000, $445,000 and
$1,218,000, respectively, on internal research and development activities. The
Company is continually evaluating and updating the technology and equipment used
in developing each of its products. The electric vehicle industry is still in
its infancy and the technology involved in the industry is rapidly changing.
There is limited experience in the operation and testing of electric vehicles
and components, and the development of electric vehicle technology therefore
involves inherent risks.
Intellectual Property
The Company currently holds one patent has submitted applications for
another patent and several trademarks or service marks in the United States. As
the Company further develops its own technology, particularly relating to its
proprietary drive train and component technology, the Company may apply for
patents or for other appropriate statutory protection. The status of patents
involves complex legal and factual questions, and the breadth of claims allowed
is uncertain. Accordingly, there can be no assurance that any patent application
filed by the Company will result in patents being issued. Moreover, there can be
no assurance that third parties will not assert claims against the Comapny with
respect to existing and future products. Although the Company intends to protect
its rights vigorously, there can be no assurance that these measures will be
successful. In the event of litigation to determine the validity of any third
party claims such litigation could result in siginificant expense to the
Company. Additionally, the laws of certain countries in which the Company's
products are or may be developed, manufactured or sold may not protect the
Company's prodcuts and intellectual property rights to the same extent as the
laws of the United States.
Employees
As of July 31, 1999, the Company had 35 employees, of which 20 are
full-time and 11 are part-time. Three employees are contract employees, employed
on an hourly basis, and one is domiciled in South Korea. The departmental
breakdown of these individuals include 3 in administration, 1 in sales, 23 in
engineering and research and development, and 8 in production.
Item 2. Properties
The Company's corporate offices are located in Torrance, California, in
leased office space of approximately 20,000 square feet. This facility houses
the Company's administrative departments and senior level operations, including
executive, legal, finance, planning, purchasing, personnel, engineers and
operations personnel. This lease terminates in February, 2000. The Company is
currently reviewing its options to remain at its current location or move to an
alternate location.
Item 3. Legal Proceedings
As previously disclosed in the Company's periodic reports filed with
the Securities and Exchange Commission in 1995, the Company restructured
approximately $22 million in debt to vendors and lenders. A creditor's committee
was formed of substantially all the vendors and lenders at that time. Nineteen
creditors, at that time, chose not to join the creditor's committee, instead
opting to pursue their legal remedies individually. The total outstanding dollar
value of these lawsuits is approximately $650,000.00. At this time, the Company
anticipates minimal impact from the resolution of any of these lawsuits or
judgments as all assets of the Company are collateralized against a priority
security interest
In February 1999, the Company became a defendant in a lawsuit filed by
an individual alleging personal injury by a vehicle manufactured by a prior
subsidiary of the Company, Nordskog Electric Vehicles, Inc., a.k.a.
7
<PAGE>
Industrial Electric Vehicles, Inc. The matter has been referred to the insurance
company which has assumed legal liability and is proceeding to defend the
matter. As of October 27, 1999, the potential liability to the Company is
unknown, however due to the insurance coverage, it is believed to be minimal.
In April 1999, the City of Napa filed a lawsuit against the Company in
the Superior Court of California, County of Napa, regarding certain electric
vehicles sold by the Company to the City of Napa. The suit alleges that the
vehicles did not meet certain performance specifications and an unspecified
amount in damages is sought. The Company does not concur with the suit's claims
and intends to vigorously defend the suit.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on July 29, 1999,
at which the following matters were voted upon.
1. The Company's stockholders voted upon and approved a proposal to
approve an amendment to the Company's Certificate of Incorporation to
increase the authorized number of shares of Common Stock from
300,000,000 to 500,000,000. The results of the voting were as follows:
Number of Shares voted FOR: 206,493,826
Number of Shares voted AGAINST: 1,399,245
Number of Shares ABSTAINING: 102,917
Number of Broker NON-VOTES: N/A
2. The Company's stockholders voted upon and approved a proposal to
approve an amendment to the Company's Certificate of Incorporation 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. The results of the voting were as follows:
Number of Shares voted FOR: 204,967,360
Number of Shares voted AGAINST: 2,896,031
Number of Shares ABSTAINING: 132,597
Number of Broker NON-VOTES: N/A
3. The Company's stockholders voted upon and approved a proposal to
approve an amendment to the Company's Certificate 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. The results
of the voting were as follows:
Number of Shares voted FOR: 205,351,202
Number of Shares voted AGAINST: 1,070,449
Number of Shares ABSTAINING: 1,574,217
Number of Broker NON-VOTES: N/A
4. The Company's stockholders voted upon and approved a proposal to ratify
the action of the Board of Directors increasing the authorized number
of shares of common stock under the U.S. Electricar, Inc. 1996 Stock
Option Plan from 15,000,000 to 45,000,000 shares. The results of the
voting were as follows:
Number of Shares voted FOR: 183,408,560
Number of Shares voted AGAINST: 2,814,775
Number of Shares ABSTAINING: 121,282
Number of Broker NON-VOTES: N/A
8
<PAGE>
5. The Company's stockholders voted upon and approved a proposal 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). The results of the voting were as follows:
Number of Shares voted FOR: 207,068,636
Number of Shares voted AGAINST: 777,752
Number of Shares ABSTAINING: 148,908
Number of Broker NON-VOTES: N/A
6. The Company's stockholders voted upon and approved to elect six (6)
individuals to the Board of Directors. The following Directors will
serve until the next Annual Meeting of Shareholders or until their
respective successors are elected and qualified.
Re-elected Directors: FOR WITHHELD
Donald Dreyer 861,108 --
Carl D. Perry 205,151,652 217,038
Edwin Riddell 205,171,624 197,066
New Directors FOR WITHHELD
Dr. Malcolm Currie 205,166,624 202,066
John J. Micek, III 205,229,894 138.796
Anthony Rawlinson 205,124,128 244,562
7. The Company's stockholders voted upon and approved a proposal to ratify
the action of the Board of Directors appointing Moss Adams LLP as the
independent auditors for the Company for the fiscal years ending July
31, 1999 and 2000. The results of the voting were as follows:
Number of Shares voted FOR: 206,365,882
Number of Shares voted AGAINST: 47,497
Number of Shares ABSTAINING: 1,575,931
Number of Broker NON-VOTES: N/A
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
9
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
The Company's Common Stock is presently traded in the over-the-counter
market and quoted on the National Association of Securities Dealers (NASD)
"Bulletin Board" under the symbol "ECAR." The following table sets forth the
high and low prices of the Common Stock as reported on the NASD Bulletin Board
by the National Quote Bureau for the fiscal quarters indicated. The following
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
Common Stock Average Daily
High Price Low Price Volume
---------- --------- ------
Fiscal 1998
-----------
First Quarter . . . . . . . $0.120 $0.045 104,692
Second Quarter . . . . . . $0.085 $0.039 71,019
Third Quarter. . . . . . . . $0.047 $0.031 16,094
Fourth Quarter. . . . . . . $0.048 $0.040 22,739
Common Stock Average Daily
High Price Low Price Volume
---------- --------- ------
Fiscal 1999
-----------
First Quarter . . . . . . . $0.048 $0.020 72,223
Second Quarter . . . . . . $0.031 $0.029 134,535
Third Quarter. . . . . . . . $0.031 $0.029 58,224
Fourth Quarter. . . . . . . $0.190 $0.031 427,624
On October 25, 1999, the last reported high bid price of the Common
Stock was $0.19 and the last reported low asking price was $0.19. As of October
25, 1999, there were approximately 1,656 holders of record of the common stock.
As of October 25, 1999, the Company's Series A Preferred Stock was held by
approximately 124 shareholders, many of whom are also Common Stock shareholders.
The Company's Series B Preferred Stock was held by approximately 37 shareholders
as of October 25, 1999. The number of holders of record excludes beneficial
holders whose shares are held in the name of nominees or trustees.
Dividend Policy
To date, the Company has neither declared nor paid any cash dividends
on shares of its Common Stock or Series A or B Preferred Stock. The Company
presently intends to retain all future earnings for its business and does not
anticipate paying cash dividends on its Common Stock or Series A or B Preferred
Stock in the foreseeable future. The Company is required to pay dividends on its
Series A and B Preferred Stock before dividends may be paid on any shares of
Common Stock. At July 31, 1999, the Company had an accumulated deficit of
approximately $85,445,000 and, until this deficit is eliminated, will be
prohibited from paying dividends on any class of stock except out of net
profits, unless it meets certain asset and other tests under Section 500 et.
seq. of the California Corporations Code.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
10
<PAGE>
<TABLE>
Item 6. Selected Financial Data
As of and for the fiscal year ended July 31, (in thousands,
except per share data)
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET SALES $ 2,774 $ 1,938 $ 4,484 $ 4,209 $ 11,625
COST OF SALES 1,460 2,765 2,042 5,370 20,210
--------- --------- --------- --------- ---------
GROSS MARGIN 1,314 (827) 2,442 (1,161) (8,585)
--------- --------- --------- --------- ---------
OTHER COSTS AND EXPENSES
Research and Development 499 445 1,218 1,401 6,697
Selling, general and administrative 1,141 1,697 3,116 5,608 13,952
Interest and financing fees 724 665 792 1,890 5,732
Other expense (income) (41) (67) 274 740 449
Acquisition of research and development 1,630
Market development expense 77
Gain on Warranty Reevaluations (474)
Facility closures and consolidations of
operations 701 2,378
--------- --------- --------- --------- ---------
Total other costs and expenses 1,849 2,740 7,030 10,340 29,285
--------- --------- --------- --------- ---------
LOSS FROM CONTINUING OPERATIONS (535) (3,567) (4,588) (11,501) (37,870)
LOSS FROM DISCONTINUED OPERATIONS
GAIN ON DEBT RESTRUCTURING 140 42 53 2,147 305
--------- --------- --------- --------- ---------
NET LOSS $ (395) $ (3,525) $ (4,535) $ (9,354) $ (37,565)
========= ========= ========= ========= =========
PER COMMON SHARE:
Loss from continuing operations $ (0.01) $ (0.02) $ (0.03) $ (0.17) $ (1.88)
Loss from discontinued operations
Gain on debt restructuring $ 0.00 0.03 0.02
--------- --------- --------- --------- ---------
Net loss per common share $ (0.01) $ (0.02) $ (0.03) $ (0.14) $ (1.86)
========= ========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 152,077 151,265 133,806 67,906 20,156
========= ========= ========= ========= =========
Total Assets $ 3,940 $ 1,658 $ 4,513 $ 4,363 $ 10,230
========= ========= ========= ========= =========
Long-term debt $ 3,332 $ 3,332 $ 3,639 $ 3,987
========= ========= ========= ========= =========
Shareholders' equity (deficit) $ (7,316) $ (12,615) $ (9,095) $ (12,736) $ (24,760)
========= ========= ========= ========= =========
</TABLE>
11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
You should read this Management's Discussion and Analysis of Financial Condition
and Results of Operations in conjunction with our 1999 Financial Statements and
Notes thereto. The matters addressed in this Management's Discussion and
Analysis of Financial Condition and Results of Operations, with the exception of
the historical information presented contains certain forward-looking statements
involving risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under the heading "Certain Factors
That May Affect Future Results" and elsewhere in this report.
OVERVIEW
The financial statements present the financial condition of U.S.
Electricar, Inc. (the "Company") as of July 31, 1999 and the results of
operations and cash flows of the Company for the three years then ended.
The Company acquired substantially all the tangible and intangible
assets, and assumed certain liabilities, of Systronix on October 25, 1996, for
stock, a note and cash.
In March 1997, the Company completed an agreement with HMC and HEI
whereby HMC and HEI collectively purchased $3.6 million of the Company's common
stock for cash and secured a technology license for an additional payment of
$2.0 million. For the technology license, the Company received $1,850,000 in
cash and the remaining $150,000 is to be received over six years.
In 1998, the Company restructured its top management, realigned its
product base and concentrated on the reduction of overall company operating
costs. Facilities were closed, operations streamlined and personnel reduced.
Headcount decreased from 51 employees at July 31, 1997 to 26 employees at July
31, 1998, yet the Company has maintained its core engineering capabilities. The
Company has since begun to hire additional personnel as is warranted by new
contracts and orders.
During 1999, the Company continued to concentrate on the reduction of
operating costs and outstanding debt. The Company's business activities are now
focused primarily on the development of electric and hybrid electric
drive-trains and related components, fuel cell systems, vehicle systems
integration and the performance of various engineering contracts. The Company
has several key contracts with the U.S. government's Defense Advanced Research
Project Agency ("DARPA") and the Department of Transportation ("DOT"), including
the analysis of a new plastic lithium ion vehicle battery concept, testing of
advanced vehicle batteries and development of an airport electric passenger tram
system. The Company also has several major engineering contracts with HMC to
design, develop and test electric drive-trains and related products. Hyundai
Motor Company is contracting with the Company for the development of an advanced
charging unit and a hybrid vehicle development, as well as preparing to produce
the family of Panthertm drive system for their electric vehicles. The Company is
extending the PantherTM drive system to hybrid vehicle applications in projects
sponsored by Hyundai. These hybrid systems will be applied to light, medium and
heavy duty transportation vehicles. The Company is also offering the modular
drive systems to Original Equipment Manufacturers ("OEMs") and other customers.
These drive systems have been installed in various vehicles. The Company offers
other components such as air conditioning, heat pump units, electro-hydraulic
power steering units and battery management units to OEMs, both domestic and
international. The Company is also developing a high power charger for use with
its drive systems. Hyundai Motor Company has adapted a customized version of the
PantherTM 60 for their production electric vehicle.
The Company has completed the sale of a license to certain proprietary
PantherTM Drive System software and hardware, for the Republic of Korea, to
Hyundai Heavy Industries ("HHI") for further design and development of electric
drive systems. The Company anticipates deriving further development contracts
from this new relationship with Hyundai Heavy Industries as well as utilizing
HHI to manufacture the Company's drive systems for international sales.
The Company is aggressively pursuing various avenues of revenue
generation to increase its cash flow. These include further developing its
relationship with the Hyundai Group, joint venturing with global vehicle and bus
manufacturers to utilize its electric drive train system, and developing a
comprehensive marketing plan to
12
<PAGE>
penetrate various alternate niche markets for its drive system and its
components. The Company is further looking at non-automotive applications for
its products.
The Company received capital investments from Jagen, Pty, Ltd. in the
amount of $2,500,000 on June 4, 1999 and from Anthony Rawlinson in the amount of
$500,000 on July 30, 1999, which have enabled the Company to further develop its
hybrid drive systems as well as embark on other in-house funded research and
development. The Company intends to explore new markets and develop an agressive
sales and marketing plan to sell the current product line of drive-trains and
components.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced recurring cash flow shortages due to
operating losses primarily attributable to research, development, administrative
and other costs associated with the Company's efforts to become an international
manufacturer and distributor of electric vehicles. Cash flows from operations
have been negative and have not been sufficient to meet the Company's
obligations as they came due. The Company has therefore had to raise funds
through numerous financial transactions. At least until the Company reaches
breakeven volume in sales and develops and/or acquires the capability and
technology necessary to manufacture and sell its products profitably, it will
need to continue to rely extensively on cash from external financing. The
Company anticipates that it will require additional outside financing for at
least one more year.
During 1999, the Company spent $798,000 in cash on operating activities
to fund the net loss of $395,000, resulting from the factors explained in the
following section of this discussion and analysis. Accounts receivable increased
by $560,000 as the Company increased the number of engineering contracts from
Hyundai Motor Company and Hyundai Heavy Industries. Customer Deposits decreased
by $387,000 as the Company completed various contracts started in 1998 and moved
toward a milestone based billing procedure. Inventory decreased by $329,000, net
of write-downs of $36,000. The decrease was primarily caused by the Company's
reclassification of certain finished goods inventory to fixed assets to reflect
the assets current usage. These items will now be depreciated over their useful
lives.
The operations of the Company during 1999 were financed primarily by
the funds received on engineering contracts and partly on funds received in from
the sale of a technology license to Hyundai Heavy Industries. In June and July
1999 the Company received $3,000,000 from two investors, Jagen. Pty., Ltd. Of
Australia and Anthony Rawlinson
It is management's intention to continue its debt restructuring,
support current operations through sales of products and technology consulting,
as well as seek additional financing through private placements and other means
to increase research and development into leading edge technologies. As of
October 25, 1999, the Company has no firm commitments for significant additional
financing.
THE FUTURE UNAVAILABILITY OR INADEQUACY OF FINANCING TO MEET FUTURE NEEDS COULD
FORCE THE COMPANY TO DELAY, MODIFY, SUSPEND OR CEASE SOME OR ALL ASPECTS OF ITS
PLANNED OPERATIONS, AND/OR SEEK PROTECTION UNDER APPLICABLE STATE AND FEDERAL
BANKRUPTCY AND INSOLVENCY LAWS.
RESULTS OF OPERATIONS
Net sales of $2,774,000 for 1999 increased $836,000 or 43% from
$1,938,000 in 1998. Two primary factors caused the increase. In 1999, the
Company sold a technology license to HHI for $600,000. Secondly, the Company
increased engineering, development and testing of electric and hybrid drive
trains and related components in conjunction with Hyundai Motor Company of Korea
and the U.S. Government through United States Postal Service, DARPA and DOT
programs. Of the Company's total sales for 1999, $1,954,000, or 70% were
revenues realized on engineering contracts with DARPA, the Hyundai Group of
Korea and other customers.
Net sales of $1,938,000 for 1998 decreased $2,546,000 or 57% from
$4,484,000 in 1997. Two primary factors caused the decrease. In 1997, the
Company sold a technology license to HMC and HEI for $2,000,000, and there were
no such corresponding sales of a technology license in 1998. Secondly, the
Company discontinued the
13
<PAGE>
sales of electric vehicles in 1998 and focused on the engineering, development
and testing of electric drive trains and related components.
Cost of sales as a percentage of sales decreased to 53% in 1999 from
143% in 1998. Sales revenue for 1999 included a sale of a technology license of
$600,000. Excluding the sale of the technology license, cost of sales for 1999
was 67% of sales.
Research and development expense increased in 1999 to $499,000 from
$445,000, an increase of $54,000, or 12%. While the Company's has reduced staff
and cut costs in all areas, the focus of the Company continues to be centered on
research and development. The product development cost incurred in the
performance of engineering development contracts is charged to cost of sales for
this contract revenue. Non-funded development costs are reported as research and
development expense. Research and development expense of $445,000 in 1998
declined $773,000, or 63% from 1997. The decline was the result of a
continuation of the reduction of technical resources by the Company as the
Company changed from a manufacturer and retrofitter of electric vehicles to a
components developer and producer.
Selling, general and administrative expense of $1,141,000 in 1999
continued to decline from $1,697,000, or 33% from 1998, as the Company reduced
continued to reduce spending and consolidated operations. Selling, general and
administrative expense of $1,697,000 decreased significantly in 1998, by
$1,419,000, or 46%, from $3,116,000 in 1997. Continued and significant
reductions in headcount, facility costs and spending were responsible for the
decline.
In 1999, interest and financing fees increased slightly to $724,000
from $665,000 in 1998, an increase of 9% due mainly to default interest rate on
certain notes payable becoming effective. Interest and financing fees in 1998
decreased $127,000 or 16% to $665,000 from $792,000 in 1997. The forgiveness of
$1,300,000 of debt, formerly the Itochu debt, and the scheduled payment of the
$307,000 note to CMAC shall continue to reduce interest expense in the future.
During 1999, several unsecured creditors agreed to settle their trade
debt claims for amounts less than the original debt owed to them. The reductions
from the original amounts owed and the settlement amounts resulted in a gain on
debt restructuring of $140,000 in 1999. Additional settlements resulted in a
gain on debt restructuring of $42,000 in 1998 and $53,000 in 1997.
As a result of the foregoing changes in net sales, cost of sales, other
costs and expenses and gain on debt restructuring, the net loss of $395,000
decreased $3,130,000 or 89% from the $3,525,000 loss in 1998, while the net loss
for 1998 decreased $1,010,000, or 22% from the $4,535,000 loss in 1997. These
results reflect a significant change in the operating condition of the Company.
The cost structure and operating conditions of the Company are now more in line
with the sales volume and the scope of business. While the Company is not yet
operating at a profit, the fixed costs have been reduced significantly, and the
Company is now approaching a position where it will be able to sustain its
current level of operations through self-funding.
Impact of Year 2000
The Company is aware of the issues associated with the programming
code in existing computer systems as the Year 2000 approaches. The "Year 2000"
problem is concerned with whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Company, like most owners of computer software, will be
required to modify significant portions of its software so that it will function
properly in the Year 2000. The Company has replaced its accounting system
software with software that is compliant with Year 2000 requirements. The
Company mainly uses third party "off the shelf" software, and it does not
anticipate a problem in resolving the Year 2000 problem in a timely manner. The
Company is currently taking steps to ensure that its computer systems and
services will continue to operate on and after January 1, 2000. However, there
can be no assurance that Year 2000 problems will not occur with respect to the
Company's computer systems.
The Year 2000 problem may impact other entities with which the Company
transacts business, and the Company cannot predict the effect of the Year 2000
problem on such entities or the economy in general, or the
14
<PAGE>
resulting effect on the Company. As a result, if preventative and/or corrective
actions by the Company and those companies with whom the Company does business
are not made in a timely manner, the Year 2000 issue could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company has not yet developed a contingency plan to operate in
the event that any noncompliant critical systems are not remedied by January 1,
2000, but it intends to develop such a plan in the near future.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Future trends for the Company's revenue and profitability remain
difficult to predict. The Company operates in a rapidly changing and developing
market that involves a number of risks, some of which are beyond the Company's
control. In addition, as previously disclosed in this Form 10-K, the Company's
financial condition remains precarious. The following discussion highlights
certain of these risks.
Going Concern / Net Operating Losses.
The Company has experienced recurring losses from operations and had
an accumulated deficit of $85,445,000 at July 31, 1999. There is no assurance,
however, that any net operating losses will be available to the Company in the
future as an offset against future profits for income tax purposes. A
substantial portion of the losses are attributable to product development and
other start-up costs associated with the Company's business focus on the
development, production and sale of battery powered electric vehicles. In June
and July 1999, the Company received $3,000,000 in additional capital to fund
operations, invest in new technologies and provide for the commercialization of
the current product line. Cash flows from future operations may not be
sufficient to enable the Company to achieve profitable operations. Market
conditions and the Company's financial position may inhibit its ability to
achieve profitable operations. These factors, as well as others, indicate the
Company may be unable to continue as a going concern unless it is able to obtain
significant additional financing and generate sufficient cash flows to meet its
obligations as they come due and sustain its operations. As of October 27, 1999,
the Company had no firm commitments from any person or entity to provide
capital, and there can be no assurance that additional funds will be available
from any source at the time the Company will need such funds.
Continued Losses. For the fiscal years ended July 31, 1999, 1998 and 1997, the
Company had substantial net losses of $395,000, $3,525,000 and $4,535,000,
respectively on sales of $2,774,000, $1,938,000 and $4,484,000, respectively.
Nature of Industry. The electric vehicle ("EV") industry is still in its
infancy. Although the Company believes that it has manufactured a significant
percentage of the electric vehicles sold in the United States based upon its own
knowledge of the industry, there are many large and small companies, both
domestic and foreign, now in, poised to enter, or entering this industry. This
EV industry is subject to rapid technological change. Most of the major domestic
and foreign automobile manufacturers (1) have produced design-concept electric
vehicles, and/or (2) have developed improved electric storage, propulsion and
control systems, and/or (3) are now entering or planning to enter into
production. Various non-automotive companies are also developing improved
electric storage, propulsion and control systems. Growth of the present limited
demand for electric vehicles depends upon (a) future regulation and legislation
requiring more use of non-polluting or low-emission vehicles, (b) the
environmental consciousness of customers and (c) the ability of electric and
hybrid-electric vehicles to successfully compete with vehicles powered with
internal combustion engines on price and performance.
Changed Legislative Climate. Because vehicles powered by internal combustion
engines cause pollution, there has been significant public pressure in Europe
and Asia, and enacted or pending legislation in the United States at the federal
level and in certain states, to promote or mandate the use of vehicles with no
tailpipe emissions ("zero emission vehicles") or reduced tailpipe emissions
("low emission vehicles"). Legislation requiring or promoting zero or low
emission vehicles is necessary to create a significant market for electric
vehicles. There can be no assurance, however, that further legislation will be
enacted or that current legislation or state mandates will not be repealed or
amended (as recently occurred in California), or that a different form of zero
emission or low emission vehicle will not be invented, developed and produced,
and achieve greater market acceptance than electric vehicles. Extensions,
modifications or reductions of current federal and state legislation, mandates
and potential tax incentives could adversely affect the Company's business
prospects if implemented.
15
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
None.
Item 8. Financial Statements and Supplementary Data
The response to this Item is submitted as a separate section of this Form 10-K.
See Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
16
<PAGE>
PART III
<TABLE>
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information with respect to the
Directors and executive officers of the Company:
<CAPTION>
- ------------------------------------------------------ ----------------- -------------------------------------------
Name Age Position
- ------------------------------------------------------ ----------------- -------------------------------------------
<S> <C> <C>
Anthony Rawlinson 44 Chairman of the Board
- ------------------------------------------------------ ----------------- -------------------------------------------
Carl D. Perry 67 Chief Executive Officer, President and
Director
- ------------------------------------------------------ ----------------- -------------------------------------------
Edwin O. Riddell (1) 56 Director
- ------------------------------------------------------ ----------------- -------------------------------------------
Dr. Malcolm Currie (1) 70 Director
- ------------------------------------------------------ ----------------- -------------------------------------------
John J. Micek, III (2) 47 Director
- ------------------------------------------------------ ----------------- -------------------------------------------
Donald H. Dreyer (2) 63 Director
- ------------------------------------------------------ ----------------- -------------------------------------------
<FN>
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
</FN>
</TABLE>
Anthony Rawlinson, Chairman of the Board. Mr. Rawlinson was appointed
Chairman of the Board in July 1999. Mr. Rawlinson has been 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.
Carl D. Perry, Chief Executive Officer, President and Director. Mr.
Perry 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. In July, 1999, Mr. Perry resigned his position
as Chairman of the Board to allow Mr. Anthony Rawlinson to become Chairman. Mr.
Perry continues as Chief Executive Officer and President and as a Director.
Prior to joining the Company, he was an international aerospace and financial
consultant from 1989 to 1993. Mr. Perry 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 Helicopter Company, now known as Boeing Helicopter Company, where
he was responsible for general management, worldwide business development, and
international operations.
Malcolm R. Currie, Ph.D, Director. Dr. Currie was re-elected to the
Board of Directors in July 1999. Dr. Currie had served as a Director of the
Company from 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.
17
<PAGE>
John J. Micek III, Director. 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. 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.
Edwin O. Riddell, Director. Mr. Riddell has served as a Director of the
Company since June 1995. From January 1991 to the present, Mr. Riddell has
served as Manager of the Transportation Business Unit in the Customer Systems
Group at the Electric Power Research Institute in Palo Alto, California, and
from 1985 until November 1990, he served with the Transportation Business Unit
as Vice President, Engineering, working on electric public transportation
systems. From 1979 to 1985, he was Vice President and General Manager of Lift U,
Inc., the leading manufacturer of handicapped wheelchair lifts for the transit
industry. Mr. Riddell has also worked with Ford, Chrysler, and General Motors in
the area of auto design (styling), and has worked as a member of senior
management for a number of public transit vehicle manufacturers. Mr. Riddell has
been a member of the American Public Transit Association's ("APTA") Association
Member Board of Governors for over 15 years. He has also served on APTA's Board
of Directors.
Donald H. Dreyer, Director. 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.
Relationships Among Directors or Executive Officers
There are no family relationships among any of the Directors or
executive officers of 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 ("SEC"). 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 1999, all Reporting Persons complied with all applicable filing
requirements: EXCEPTIONS: (i) Anthony Rawlinson, Chairman of the Board,
inadvertently missed a filing deadline for Form 5 for one transaction effected
in July 1999; the required Form 5 will be filed shortly; (ii) Malcom Currie, a
Director, unintentionally missed a filing deadline for Form 3 that was due
within ten days of his appointment as a Director in July 1999; the required Form
3 will be filed shortly; (iii) John J. Micek, a Director, unintentionally missed
a filing deadline for Form 3 that was due within ten days of his appointment as
a Director in April 1999; the required Form 3 will be filed shortly.
18
<PAGE>
Item 11. Executive Compensation
<TABLE>
Summary Compensation Table
The following table sets forth all compensation earned by the Company's
Chief Executive Officer and each of the other most highly compensated executive
officers of the Company whose annual salary and bonus exceeded $100,000 for the
years ended July 31, 1999, 1998, and 1997 (collectively, the "Named Executive
Officers"). Mr. Carl D. Perry is the sole executive officer of the Company whose
salary currently exceeds $100,000.
<CAPTION>
Summary Compensation Table
------------------------------------------------------------------------
Name and Principal Position Annual Compensation
- --------------------------------------------------- ------------------------------------------------------------------------
Long-Term Compensation Awards
--------------------------------
Securities
Underlying
Salary Bonus Options/SARs
Year ($) ($) (#)
- --------------------------------------------------- --------- --------------- ------------- --------------------------------
<S> <C> <C> <C> <C>
Carl D. Perry (1) 1999 50,000 -- --
Chief Executive Officer 1998 55,770 -- --
And President 1997 75,000 -- --
- --------------------------------------------------- --------- --------------- ------------- --------------------------------
<FN>
(1) Mr. Perry was elected as Chief Executive Officer in November 1997. Amounts paid to Mr. Perry for all periods shown were paid to
Mr. Perry as an Executive Vice President of the Company. Mr. Perry's current salary is $110,000 per year.
</FN>
</TABLE>
Option/SAR Grants
No grants of stock options or stock appreciation rights ("SARs")
were made during fiscal 1999 to the Named Executive Officers. However, the
option exercise price, for Mr. Perry's and other employees under the 1996 Stock
Option Plan, was reset to $0.10 per share from $0.30 per share on August 19,
1998 at the direction of the Board of Directors.
19
<PAGE>
<TABLE>
Option Exercises and Option Values
The following table sets forth information concerning option
exercises during 1999, and the aggregate value of unexercised options as of July
31, 1999, held by each of the Named Executive Officers:
<CAPTION>
Aggregated Option/SAR Exercises in 1999
and Option Values at July 31, 1999
Number of Securities
Aggregate Underlying Unexercised Value of Unexercised
Option Options at In-the-Money Options at
Exercises in 1999 July 31, 1999 July 31, 1999 (1)
----------------- ------------------ --------------------------
Shares Value
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- -------------- --------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Carl D. Perry -- -- 1,200,000 -- $ 30,000 $ --
<FN>
(1) Calculated on the basis of the average of the high bid and low ask prices of the Common Stock on July 31, 1999 of $0.125 per
share, minus the exercise price.
</FN>
</TABLE>
Compensation of Directors
Directors 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
1999, the total amount paid to Mr. Dreyer was approximately $10,559 for Board
meetings and other consulting activities.
Each nonemployee Director of the Company is 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 October 27, 1999, 25,000 options had been granted and remained
outstanding under the Director Option Plan.
20
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Mr. Edwin Riddell, as
Chairman, and Dr. Malcolm Currie. Mr. Riddell was elected Chairman in August
1998. Dr. Currie was elected to the Compensation Committee in July, 1999. Mr.
Ishag served as a member of the Compensation Committee during all of Fiscal
1999. Dr. Malcolm Currie also served on the Compensation Committee during his
prior term as a Director until his resignation in 1998.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
21
<PAGE>
<TABLE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Company's stock as of September 30, 1999, (i) by each person
(or group of affiliated persons) who is known by the Company to own beneficially
more than 5% of each class of the Company's stock, (ii) by each of the Company's
Directors, (iii) by each of the Company's Named Executive Officers listed in the
Summary Compensation Table below, and (v) by the Company's Directors and
executive officers 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 stock beneficially owned by them.
<CAPTION>
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
5% Shareholders, Directors, Officers and Common Shares Percentage of Common Shares Voting
Directors and Officers as a Group Beneficially Owned (1) Beneficially Owned (2) Percentage (3)
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
<S> <C> <C> <C>
Jagen, Pty., Ltd. 125,000,000 (4) 36.60% 32.13%
9 Oxford Street, South Yorra 3141
Melbourne, Victoria Australia
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
Carl D. Perry 48,548,789 (5) 14.21% 14.40%
c/o U.S. Electricar, Inc.
19850 South Magellan Drive
Torrance, CA 90502
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
Citibank N.A. 43,508,314 12.74% 16.77%
111 Wall Street, 8th Floor
New York, NY 10043
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
Anthony Rawlinson 25,000,000 (6) 7.32% 6.43%
c/o U.S. Electricar, Inc.
19850 South Magellan Drive
Torrance, CA 90502
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
John J. Micek, III 568,000 (7) * *
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
Edwin O. Riddell 20,000 (8) * *
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
Dr. Malcolm Currie 1,000 (9) * *
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
Donald H. Dreyer 0 * *
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
All Directors and executive officers as 74,137,789 (10) * *
a group (6 persons)
- ------------------------------------------ ----------------------------- ------------------------------ -----------------
<FN>
* Indicates less than 1%
22
<PAGE>
(1) Number of Common Stock shares includes Series A Preferred Stock, Series
B Preferred Stock and Common Stock shares issuable pursuant to stock
options, warrants and other securities convertible into Common Stock
beneficially held by the person or class in question which may be
exercised or converted within 60 days after September 30, 1999.
(2) The percentages are based on the number of shares of Common Stock,
Series A Preferred Stock and Series B Preferred Stock owned by the
shareholder divided by the sum of: (i) the total Common Stock
outstanding, (ii) the Series A Preferred Stock owned by such
shareholder; (iii) the Series B Preferred Stock owned by such
shareholder; and (iv) Common Stock issuable pursuant to warrants,
options and other convertible securities exercisable or convertible by
such shareholder within sixty (60) days after September 30, 1999.
(3) The percentages are based on the number of shares of Common Stock,
Series A Preferred Stock and Series B Preferred Stock owned by the
shareholder divided by the sum of: (i) the total Common Stock
outstanding, (ii) the total Series A Preferred Stock outstanding; (iii)
the total Series B Preferred Stock outstanding; and (iv) Common Stock
issuable pursuant to warrants, options and other convertible securities
exercisable or convertible by such shareholder within sixty (60) days
after September 30, 1999. This percentage calculation has been included
to show more accurately the actual voting power of each of the
shareholders, since the calculation takes into account the fact that
the outstanding Series A Preferred Stock and Series B Preferred Stock
are entitled to vote together with the Common Stock as a single class
on certain matters to be voted upon by the shareholders.
(4) Includes 41,666,667 shares issuable pursuant to warrants redeemable at
$0.06 per share. Said warrants expire in July, 2001.
(5) Includes 10,000,000 shares of Common Stock issuable upon conversion of
convertible debt in the amount of $3,000,000 plus accrued interest, at
a conversion price of $0.30 per share and 1,200,000 shares of Common
Stock issuable pursuant to stock options issued under a employee stock
option plan exercisable at a price of $0.10 per share. The option
exercise price, for Mr. Perry's and other employess under the 1996
Stock Option Plan, was reset to $0.10 per share from $0.30 per share on
August 19, 1998 at the direction of the Board of Directors.
(6) Includes 8,333,333 shares issuable pursuant to warrants redeemable at
$0.06 per share. Said warrants expire in July, 2001.
(7) Includes 565,000 shares of Common Stock issuable pursuant to stock
options exercisable at a price of $0.10 per share. The option exercise
price was reset to $0.10 per share from $0.30 per share on June 10,
1999 at the direction of the Board of Directors.
(8) Includes 20,000 shares of Common Stock issuable pursuant to stock
options.
(9) Includes 1,000 shares of Common Stock issuable pursuant to stock
options.
(10) Includes 1,790,000 shares of Common Stock issuable pursuant to stock
options exercisable at prices ranging from $0.10 to $0.60 per share,
Includes 10,000,000 shares of Common Stock issuable upon conversion of
convertible debt in the amount of $3,000,000 plus accrued interest, at
a conversion price of $0.30 per share and 8,333,333 shares issuable
pursuant to warrants redeemable at $0.06 per share. Said warrants
expire in July, 2001.
</FN>
</TABLE>
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
23
<PAGE>
Item 13. Certain Relationships and Related Transactions
The following are certain transactions entered into between the Company
and its officers, directors and principal shareholders and their affiliates
since August 1, 1997.
Transactions with Secured Creditors and Others:
Carl D. Perry/Itochu Corporation
As of March 1999, there was $3,000,000 of debt outstanding to
Itochu, a former principle shareholder of the Company, pursuant to a
Supplemental Loan Agreement. The debt was convertible at the election of Itochu
at any time, or automatically upon the occurrence of certain events, into shares
of Common Stock at a conversion rate of $0.30 per share. The debt was secured by
all of the assets of the Company. To date, no agreement has been reached on
extending the maturity date of this debt. Additionally, Itochu issued $1,300,000
of convertible secured notes to the Company under a Supplemental loan Agreement
with a maturity date of December 1997. To date, no agreement has been reached on
extending the maturity date of this debt.
In March 1999, Itochu Corporation sold all of the aforementioned
debt plus accrued interest outstanding ($5,693,400) to Carl D. Perry, the
Company's Chief Executive Officer and President, for $50,000. Itochu also sold
all of the shares of common stock it held to Mr. Perry for $1.00. Mr. Perry
forgave $2,693,400 of accrued interest and principal on July 30, 1999. As of
July 31, 1999, there is $3,000,000 in principal owed by the Company to Mr. Perry
under this loan.
Fontal International, Ltd. ("Fontal")
In January 1998, the Company borrowed $200,000 from Fontal, a creditor
and principal shareholder of the Company, under a short term, non-interest
bearing promissory note, and this amount was outstanding at the end of fiscal
1999. Additionally, there is an outstanding balance of $800,000 on unsecured
convertible bonds held by Fontal at the end of fiscal 1999.
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.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
24
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)1. Financial Statements
The financial statements filed as a part of this report
are identified in the Index to Consolidated Financial
Statements on page F-1
(a)2. Financial Statement Schedules
No financial statement schedules are filed as a part of
this report.
(a)3. Exhibits
The exhibits filed herewith or incorporated by reference
to exhibits previously filed with the Commission are
identified in the Exhibit Index attached hereto on page
E-1. The Company shall furnish copies of exhibits for a
reasonable fee (covering the expense of furnishing copies)
upon request.
(b) Reports on Form 8-K
None
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf of the undersigned, thereunto duly authorized, on
October 29, 1999.
U.S. ELECTRICAR, INC.
By:/s/ Carl D. Perry
- --------------------------------------------------------------------------------
Carl D. Perry, Chief Executive Officer and Acting Chief Financial Officer
Dated: October 29, 1999
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Carl D. Perry, with full power
to act alone, his true and lawful attorney-in-fact and agent, with full power of
substitution for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to the annual report on Form 10-K,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact full power and authority to do and perform each and every
act and thing requisite and necessary to be done in connection as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
<TABLE>
IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of the date indicated. Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the date
indicated.
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Carl D. Perry Chief Executive October 29, 1999
- ----------------------- Officer and Director
Carl D. Perry (Principal Executive Officer)
/s/ Anthony Rawlinson Chairman October 29, 1999
- -----------------------
Anthony Rawlinson
/s/ Malcolm Currie Director October 29, 1999
- -----------------------
Malcom Currie
/s/ Edwin O. Riddell Director October 29, 1999
- -----------------------
Edwin O. Riddell
/s/ John J. Micek, III Director October 29, 1999
- -----------------------
John J. Micek, III
/s/ Donald H. Dreyer Director October 29, 1999
- -----------------------
Donald H. Dreyer
</TABLE>
26
<PAGE>
================================================================================
U. S. ELECTRICAR, INC.
INDEPENDENT AUDITOR'S REPORT
AND
FINANCIAL STATEMENTS
JULY 31, 1999 and 1998
================================================================================
<PAGE>
================================================================================
U. S. ELECTRICAR, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITOR'S REPORT ............................................. F-1
BALANCE SHEETS - JULY 31, 1999 and 1998 .................................. F-2
STATEMENTS OF OPERATIONS -
YEARS ENDED JULY 31, 1999, 1998 AND 1997 ............................ F-4
STATEMENTS OF STOCKHOLDERS' DEFICIT -
YEARS ENDED JULY 31, 1999, 1998 AND 1997 ............................ F-5
STATEMENTS OF CASH FLOWS -
YEARS ENDED JULY 31, 1999, 1998 AND 1997 ............................ F-6
NOTES TO FINANCIAL STATEMENTS ............................................ F-8
================================================================================
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
U. S. Electricar, Inc.
We have audited the accompanying balance sheets of U. S. Electricar, Inc. as of
July 31, 1999 and 1998, and the related statements of operations, stockholders'
deficit, and cash flows for each of the three years ended July 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of U. S. Electricar, Inc. as of
July 31, 1999 and 1998, and the results of its operations and cash flows for
each of the three years ended July 31, 1999, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2, the Company's
recurring losses from operations and its inability to generate sufficient cash
flows to sustain operations and meet its obligations raises substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
/s/ MOSS ADAMS LLP
Santa Rosa, California
September 17, 1999
Page F-1
<PAGE>
<TABLE>
U. S. ELECTRICAR, INC.
BALANCE SHEETS
July 31, 1999 and 1998
(In thousands, except for share and per share data)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ASSETS
1999 1998
-------------------- --------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,467 $ 266
Accounts receivable, net of allowance for doubtful accounts
of $0 and $108 751 108
Inventories and supplies 223 492
Stockholder receivable, current maturities 50 250
Prepaids and other current assets 92 124
-------------------- --------------------
Total current assets 3,583 1,240
PROPERTY, PLANT AND EQUIPMENT 282 318
STOCKHOLDER RECEIVABLE, less current maturities 75 100
-------------------- --------------------
Total assets $ 3,940 $ 1,658
==================== ====================
<FN>
The accompanying notes are an integral part of these financial statements.
- ---------------------------------------------------------------------------------------------------------------------------
Page F-2
</FN>
</TABLE>
<PAGE>
<TABLE>
U. S. ELECTRICAR, INC.
BALANCE SHEETS (Continued)
July 31, 1999 and 1998
(In thousands, except for share and per share data)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
1999 1998
-------------------- --------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 507 $ 540
Accrued payroll and related expenses 290 358
Other accrued expenses 232 285
Current maturities of long-term debt 4,427 5,727
Accrued warranty reserve - 474
Customer deposits - 387
-------------------- --------------------
Total current liabilities 5,456 7,771
ACCRUED INTEREST PAYABLE 593 1,262
LONG-TERM PAYABLES 1,875 1,908
LONG-TERM DEBT, less current maturities 3,332 3,332
-------------------- --------------------
Total liabilities 11,256 14,273
-------------------- --------------------
STOCKHOLDERS' DEFICIT
Series A preferred stock - no par value; 30,000,000 shares
authorized; 3,259,000 and 3,321,000 shares issued and
outstanding at 1999 and 1998; liquidating preference
at $0.60 per share aggregating $1,955 and $1,993 2,191 2,258
Series B preferred stock - no par value; 5,000,000 shares
authorized; 1,242,000 and 1,291,000 shares issued and
outstanding at 1999 and 1998 2,486 2,584
Stock notes receivable (1,149) (1,149)
Common stock - no par value; 500,000,000 and 300,000,000
shares authorized at 1999 and 1998; 251,992,000 and
151,767,000 shares issued and outstanding at 1999 and 1998 71,501 68,742
Additional paid-in capital 3,100 -
Accumulated deficit (85,445) (85,050)
-------------------- --------------------
Total stockholders' deficit (7,316) (12,615)
-------------------- --------------------
Total liabilities and stockholders' deficit $ 3,940 $ 1,658
==================== ====================
<FN>
The accompanying notes are an integral part of these financial statements.
- ---------------------------------------------------------------------------------------------------------------------------
Page F-3
</FN>
</TABLE>
<PAGE>
<TABLE>
U. S. ELECTRICAR, INC.
STATEMENTS OF OPERATIONS
Years Ended July 31, 1999, 1998 and 1997
(In thousands, except for share and per share data)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
------------------- ------------------ -------------------
<S> <C> <C> <C>
NET REVENUES $ 2,774 $ 1,938 $ 4,484
COST OF REVENUES 1,460 2,765 2,042
------------------- ------------------ -------------------
GROSS PROFIT 1,314 (827) 2,442
------------------- ------------------ -------------------
OTHER COSTS AND EXPENSES
Research and development 499 445 1,218
Selling, general and administrative 1,141 1,697 3,116
Interest and financing fees 724 665 792
Gain on warranty accrual reevaluation (474) - -
Other (income)/expense (41) (67) 274
Acquisition of research and development - - 1,630
------------------- ------------------ -------------------
Total other costs and expenses 1,849 2,740 7,030
------------------- ------------------ -------------------
LOSS FROM CONTINUING OPERATIONS (535) (3,567) (4,588)
GAIN ON DEBT RESTRUCTURING 140 42 53
------------------- ------------------ -------------------
NET LOSS $ (395) $ (3,525) $ (4,535)
=================== ================== ===================
PER COMMON SHARE
Loss from continuing operations $ (0.01) $ (0.02) $ (0.03)
Gain on debt restructuring - - -
------------------- ------------------ -------------------
Net loss per common share $ (0.01) $ (0.02) $ (0.03)
=================== ================== ===================
WEIGHTED AVERAGE SHARES
OUTSTANDING 152,076,615 151,265,026 133,805,603
=================== ================== ===================
<FN>
The accompanying notes are an integral part of these financial statements.
- ---------------------------------------------------------------------------------------------------------------------------
Page F-4
</FN>
</TABLE>
<PAGE>
<TABLE>
U. S. ELECTRICAR, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
Years Ended July 31, 1999, 1998 and 1997
(In thousands)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PREFERRED STOCK
-------------------------------------------------
SERIES A SERIES B COMMON STOCK ADDITIONAL
----------------------- ----------------------- ------------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ----------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1996 4,010 $ 2,983 1,587 $ 3,175 120,220 $ 59,157 $ -
PREFERRED STOCK TRANSACTION
Conversion of unsecured debt - - 42 85 - - -
COMMON STOCK TRANSACTIONS
Sales under Regulation S subscription
agreement - - - - 12,000 3,600 -
Systronix acquisition - - - - 3,800 760 -
Conversion of Series S Bonds and
accrued interest - - - - 10,732 3,219 -
Conversion of Series A preferred stock (389) (353) - - 389 353 -
Conversion of Series B preferred stock - - (289) (578) 1,927 578 -
Conversion of debt - - - - 2,000 600 -
INTEREST ON STOCK NOTES - - - - - - -
NET LOSS - - - - - - -
---------- ----------- ---------- ----------- ---------- ----------- ------------
BALANCE, July 31, 1997 3,621 2,630 1,340 2,682 151,068 68,267 -
COMMON STOCK TRANSACTIONS
Conversion of Series A preferred stock (300) (372) - - 300 372 -
Conversion of Series B preferred stock - - (49) (98) 324 98 -
Stock for services - - - - 75 5 -
NET LOSS - - - - - - -
---------- ----------- ---------- ----------- ---------- ----------- ------------
BALANCE, July 31, 1998 3,321 2,258 1,291 2,584 151,767 68,742 -
COMMON STOCK TRANSACTIONS
Conversion of Series A preferred stock (62) (67) - - 62 67 -
Conversion of Series B preferred stock (49) (98) 163 98 -
Sale of stock - - - - 83,333 2,375 -
Conversion of debt - - - - 16,667 219 -
Issuance of common stock warrants - - - - - - 406
Debt forgiveness by stockholder - - - - - - 2,694
NET LOSS - - - - - - -
---------- ----------- ---------- ----------- ---------- ----------- ------------
3,259 $ 2,191 1,242 $ 2,486 251,992 $ 71,501 $ 3,100
========== =========== ========== =========== ========== =========== ============
</TABLE>
<TABLE>
U. S. ELECTRICAR, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
Years Ended July 31, 1999, 1998 and 1997
(In thousands)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
STOCK NOTES ACCUMULATED
RECEIVABLE DEFICIT TOTAL
------------- -------------- -----------
<S> <C> <C> <C>
BALANCE, JULY 31, 1996 $ (1,061) $ (76,990) $ (12,736)
PREFERRED STOCK TRANSACTION
Conversion of unsecured debt - - 85
COMMON STOCK TRANSACTIONS
Sales under Regulation S subscription
agreement - - 3,600
Systronix acquisition - - 760
Conversion of Series S Bonds and
accrued interest - - 3,219
Conversion of Series A preferred stock - - -
Conversion of Series B preferred stock - - -
Conversion of debt - - 600
INTEREST ON STOCK NOTES (88) - (88)
NET LOSS - (4,535) (4,535)
------------- -------------- -----------
BALANCE, July 31, 1997 (1,149) (81,525) (9,095)
COMMON STOCK TRANSACTIONS
Conversion of Series A preferred stock - - -
Conversion of Series B preferred stock - - -
Stock for services - - 5
NET LOSS - (3,525) (3,525)
------------- -------------- -----------
BALANCE, July 31, 1998 (1,149) (85,050) (12,615)
COMMON STOCK TRANSACTIONS
Conversion of Series A preferred stock - - -
Conversion of Series B preferred stock - - -
Sale of stock - - 2,375
Conversion of debt - - 219
Issuance of common stock warrants - - 406
Debt forgiveness by stockholder - - 2,694
NET LOSS - (395) (395)
------------- -------------- -----------
$ (1,149) $ (85,445) $ (7,316)
============= ============== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
- ---------------------------------------------------------------------------------------------------------------------------
Page F-5
</FN>
</TABLE>
<PAGE>
<TABLE>
U. S. ELECTRICAR, INC.
STATEMENTS OF CASH FLOWS
Years Ended July 31, 1999, 1998 and 1997
(In thousands)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
------------- ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (395) $ (3,525) $ (4,535)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 179 212 578
Change in allowance for doubtful accounts (108) (7) (319)
Provision to reduce inventory values (36) 949 308
Gain on debt restructuring (140) (42) (53)
Changes in valuation allowances and reserves (640) (368) (1,011)
Purchase of research and development - - 1,630
Stock issued in settlement of legal claim - 5 -
Loss of disposal of equipment - 353 -
Gain on sale of Industrial Electric Vehicles - - (158)
Interest income on stock notes receivable - - (88)
Interest converted to common stock - 194
Change in operating assets and liabilities:
Accounts receivable (560) 753 (54)
Inventories 329 371 589
Note receivable 250 - -
Prepaids and other current assets 32 191 (53)
Accounts payable and accrued expenses 678 491 (39)
Customer deposits (387) 343 (164)
------------- ------------ -------------
Net cash used by operating activities (798) (274) (3,175)
------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (1) (8) (13)
Proceeds from sale of equipment - 35 -
Repayments on advances to Systronix Corporation - - 209
------------- ------------ -------------
Net cash provided (used) by investing activities (1) 27 196
------------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable - - (3,021)
Payments on capital leases - (20) (152)
Borrowings on notes payable 400 200 3,122
Proceeds from issuance of common stock 2,600 - 3,350
------------- ------------- ------------
Net cash provided by financing activities 3,000 180 3,299
------------- ------------- ------------
NET INCREASE (DECREASE) IN CASH 2,201 (67) 320
CASH
Beginning of year 266 333 13
------------- ------------- ------------
End of year $ 2,467 $ 266 $ 333
============= ============= ============
<FN>
The accompanying notes are an integral part of these financial statements.
- ---------------------------------------------------------------------------------------------------------------------------
Page F-6
</FN>
</TABLE>
<PAGE>
<TABLE>
U. S. ELECTRICAR, INC.
STATEMENTS OF CASH FLOWS (Continued)
Years Ended July 31, 1999, 1998 and 1997
(in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
--------- ------- --------
<S> <C> <C> <C>
SUPPLEMENTAL CASH-FLOW INFORMATION
Cash paid during the year for interest $ -- $ 3 $ 162
NON-CASH INVESTING AND FINANCING ACTIVITIES
Conversion of Series A preferred stock to common stock $ 68 $ 372 $ 353
Conversion of Series B preferred stock to common stock $ 98 $ 98 $ 578
Issuance of warrants $ 406 $ -- $ --
Decrease in capital lease payable due to cancellation $ -- $ 190 $ --
Conversion of investment to note receivable $ -- $ 250 $ --
Conversion of debt to common stock $ 400 $ -- $ 4,069
Conversion of debt to Series B preferred stock $ -- $ -- $ 85
Notes issued in connection with debt restructuring $ -- $ -- $ 15
Assumption of notes payable in connection with acquisition $ -- $ -- $ 800
Note issued in connection with acquisition $ -- $ -- $ 830
Note assumed by buyer in connection with sale of Industrial
Electric Vehicles $ -- $ -- $(1,013)
Conversion of accrued interest to notes payable $ -- $ -- $ 139
Acquisition of assets through capital lease $ -- $ -- $ 361
Sale of net assets of Industrial Electric Vehicles $ -- $ -- $ 858
Acquistion of certain assets, related debt and research and
development from Systronix Corporation for debt and
stock options, net $ -- $ -- $ (819)
<FN>
The accompanying notes are an integral part of these financial statements.
- ------------------------------------------------------------------------------------------------------------------------------------
Page F-7
</FN>
</TABLE>
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - U. S. Electricar, Inc. was incorporated in 1976 in California as
Solar Electric Engineering, Inc., and in 1994 changed its name to U. S.
Electricar, Inc. Prior to fiscal year 1998, the Company produced and sold
electric vehicles. In 1998, the Company began to focus its efforts on the
development of electric drive trains and related components for electric
vehicles and hybrid systems, vehicle systems integration and the performance of
various engineering contracts. The Company retains development and manufacturing
rights to many of the technologies created, whether such research and
development is internally or externally funded. The Company currently has
several engineering contracts to design, develop and test electric drive train
products and related products for Hyundai Motor Corporation (HMC) and the U.S.
Government. The Company anticipates deriving further development contracts from
a new relationship with Hyundai Heavy Industries, as well as utilizing Hyundai
to manufacture the Company's drive systems for international sales. The
statements of operations, stockholders' deficit, and cash flows for the year
ending July 31, 1997, include the activities of Industrial Electric Vehicles,
Inc. (IEV). Substantially all assets and liabilities of IEV were sold during the
year ended July 31, 1997 (see Note 3). All material intercompany transactions
affecting the 1997 statements were eliminated in consolidation. IEV is a dormant
company and had no transactions in 1999 and 1998.
Inventory and supplies - Inventory and supplies at July 1999 is comprised of
materials used in the design and development of electric drive systems under
ongoing development contracts. Inventory at July 1998 was comprised of electric
vehicles, raw materials, and work-in-process, and were stated at market, which
was lower than cost.
Property, plant and equipment - Property, plant and equipment are stated at cost
and depreciated using the straight-line method over the estimated useful lives
of the related assets, which range from three to seven years. Long-lived assets
are reviewed for impairment whenever events or changes in circumstances
indicates the sum of expected cash flows from use of the asset is less than its
carrying value. Long-lived assets that management has committed to sell or
abandon are reported at the lower of carrying amount or fair value less cost to
sell.
Warranties - Electric vehicle warranties were provided by the Company and
generally extended for one year from the time of sale. Warranties for
substantially all vehicles sold by the Company have elapsed. As a result, the
Company recognized a $474,000 gain in 1999 concurrent with the reevaluation of
the warranty accrual.
Income taxes - Deferred income taxes are recognized using enacted tax rates and
are composed of taxes on financial accounting income that is adjusted for
requirements of current tax law and deferred taxes. Deferred taxes are the
expected future tax consequences of temporary differences between the financial
statement carrying amounts and tax bases of existing assets and liabilities.
Revenue recognition - Revenue from the sale of electric vehicles was recognized
when the vehicle was delivered to the customer. Revenue on engineering and
research and development contracts is recognized at the completion of specified
engineering or billing milestones.
Loss per common share - Loss per common share is computed using the weighted
average number of common shares outstanding. Since a loss from operations
exists, a diluted earnings per share number is not presented because the
inclusion of common stock equivalents in the computation would be antidilutive.
Common stock equivalents associated with Series A and B preferred stock, stock
options, warrants and convertible notes and bonds, which are exercisable into
shares of common stock, could potentially dilute earnings per share in future
years.
- --------------------------------------------------------------------------------
Page F-8
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentrations of risk - Financial instruments potentially subjecting the
Company to concentrations of credit risk consist primarily of bank demand
deposits that may, from time to time, be in excess of FDIC insurance thresholds,
and trade receivables. Demand deposits are placed with known creditable
financial institutions. The Company's largest customer, Hyundai, is also a
stockholder that holds less than 5% of the outstanding common stock. Hyundai
accounted for approximately 90% of total revenues for the year ended July 31,
1999. Amounts due from Hyundai at July 31, 1999, which are included in accounts
receivable, were $736,000.
Significant estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires the Company to make
estimates and assumptions affecting the reported amounts of assets, liabilities,
revenues and expenses, and the disclosure of contingent assets and liabilities.
The amounts estimated could differ from actual results, and the difference could
have a significant impact on the financial statements.
Fair value of financial instruments - The Company measures its financial assets
and liabilities in accordance with generally accepted accounting principles. The
fair value of a financial instrument is the amount at which the instrument could
be exchanged in a current transaction between willing parties. For certain of
the Company's financial instruments, including cash, accounts receivable and
accounts payable, the carrying amount approximates fair value because of the
short maturities. The fair value of the Company's short-term and long-term debt
may be substantially less than the carrying value since there is no readily
ascertainable market for the debt, given the financial position of the Company.
Stock-based compensation - The Company accounts for stock-based employee
compensation arrangements in accordance with the provisions of Accounting
Principles Board Opinion No. 25 (APB No. 25), "Accounting for Stock Issued to
Employees," and complies with the disclosure provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for
Stock-Based Compensation." Under APB No. 25, compensation expense is the excess,
if any, of the fair value of the Company's stock at a measurement date over the
amount that must be paid to acquire the stock. SFAS No. 123 requires a fair
value method to be used when determining compensation expense for stock options
and similar equity instruments. SFAS No. 123 permits a company to continue to
use APB No. 25 to account for stock-based compensation to employees, but
proforma disclosures of net income and earnings or loss per share must be made
as if SFAS No. 123 had been adopted in its entirety. Stock options issue to
non-employees are valued under the provisions of SFAS No. 123.
Recent accounting pronouncements - The Financial Accounting Standards Board has
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 requires companies to record derivatives on the
balance sheet as assets or liabilities, measured at fair market value. Gains or
losses resulting from changes in the values of those derivatives are accounted
for depending on the use of the derivative and whether it qualifies for hedge
accounting. The key criterion for hedge accounting is that the hedging
relationship must be highly effective in achieving offsetting changes in fair
value or cash flows. The Company does not expect the adoption of SFAS No. 133,
which is effective for all fiscal quarters of fiscal years beginning after June
15, 1999, to have a material effect on the Company's financial statements.
Reclassifications - Certain reclassification have been made to the prior years'
financial statements to conform to the current year's presentation.
- --------------------------------------------------------------------------------
Page F-9
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 2 - GOING CONCERN
The Company has experienced recurring losses from operations and use of cash
from operations. Prior to the year ended July 31, 1998, a substantial portion of
the losses were attributable to research, development and other costs associated
with the Company's development and production of electric vehicles, including
the conversion of gas-powered cars and light trucks to electric power, as well
as restructuring the Company's operations.
During the three years ended July 31, 1999, the Company obtained approximately
$12 million (net of debt repayments) in cash from financing activities through
private placements of common stock and Series A preferred stock, the exercise of
options and warrants, and the issuance of convertible subordinated notes payable
and secured convertible bonds and notes. During 1999 the Company was successful
in selling $3,000,000 of its common stock. Also during 1999, the Company's
President acquired approximately $5,694,000 of debt and accrued interest, plus
37 million shares of stock, from ITOCHU Corporation. Under the agreement among
ITOCHU, the Company, and the Company's President, the acquired debt is
convertible into common stock, under the terms of the original notes.
It is management's intention to complete its debt restructuring and to seek
additional financing through private placements as well as other means. As of
September 17, 1999, the Company had no commitments from any person or entity to
provide additional financing to the Company.
The financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. Cash flows from future operations may not be
sufficient to enable the Company to meet its obligations, and market conditions
and the Company's financial position may inhibit its ability to achieve
profitable operations.
These factors, as well as the future availability or inadequacy of financing to
meet future needs, could force the Company to delay, modify, suspend or cease
some or all aspects of its planned operations, and/or seek protection under
applicable bankruptcy and insolvency laws.
NOTE 3 - ACQUISITIONS AND SALES
The Company acquired substantially all the tangible and intangible assets and
assumed certain liabilities of Systronix Corporation (Systronix) in October
1996. Systronix was a developer of technologically advanced electric propulsion
systems for electric-powered vehicles. The purchase was reported using the
purchase method of accounting and, accordingly, the purchase price was allocated
to the assets acquired and liabilities assumed based upon the fair values at the
date of acquisition. Assets associated with research and development, and for
which there was no alternative use, were expensed.
In 1997, substantially all assets of the Company's subsidiary, Industrial
Electrical Vehicles, Inc. were sold to a group headed by former employees of the
Company in exchange for the buyers assuming certain defined debt. The
liabilities assumed by the buyers exceeded the reported values of the assets
sold, which resulted in a gain of approximately $155,000.
- --------------------------------------------------------------------------------
Page F-10
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 4 - INVENTORIES (in thousands)
1999 1998
---- ----
Raw materials and supplies $223 $437
Finished goods -- 120
Work-in-process -- 101
---- ----
223 658
Less valuation adjustment -- 166
---- ----
$223 $492
==== ====
As of July 31, 1999, all inventory is classified as raw materials and supplies
since the Company no longer manufactures electric vehicles.
In 1994 the Company entered into a manufacturing agreement with a vendor,
whereby the Company agreed to sell to the vendor sufficient inventory to
complete the conversion of 84 sedans and pick-up trucks to electric power and
then to repurchase the completed vehicles upon completion of the manufacturing
process. The terms of the agreement gave the vendor a purchase money interest in
inventory. Due to the repurchase agreement, the Company did not account for this
transaction as a sale. The Company initially accrued the difference between the
selling price and repurchase price as interest expense. However, the interest
expense accrual was later reversed by the Company as a result of an amendment to
the agreement in July 1995, which eliminated the price difference and required
only the refund to the vendor of the net amount of money paid to the Company
under the agreement. During 1995, the vendor paid the Company $867,000, and the
Company paid the vendor $64,000, for a difference of $803,000, which was
recorded as an account payable. Under the July 1995 amendment, and separate from
the debt restructuring process, a portion of anticipated proceeds from future
sales of unsold vehicles in which the vendor had a purchase money interest was
to be paid to the vendor; and the vendor was to ratably release its interest in
such vehicles as they were sold until the $803,000 was fully repaid. At July 31,
1999 and 1998, approximately $98,000 remained unpaid and was included in accrued
expenses. Subsequent to July 31, 1999, the vendor agreed to accept $27,000 in
complete satisfaction of the outstanding liability.
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT (in thousands)
1999 1998
------ ------
Computers $ 846 $ 872
Machinery and equipment 267 267
Furniture and office equipment 196 196
Leasehold improvements 54 47
Automobiles and demonstration vehicles 142 --
Construction in progress -- 7
------ ------
1,505 1,389
Less accumulated depreciation and amortization 1,223 1,071
------ ------
$ 282 $ 318
====== ======
- --------------------------------------------------------------------------------
Page F-11
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 6 - LONG-TERM DEBT (in thousands, except for share data)
1999 1998
------ ------
Convertible secured note under a Supplemental Loan
Agreement with ITOCHU Corporation, with interest at
12%; principal and interest were due in April 1998; the
debt was secured by the Company's personal property
and was acquired by the Company's President during 1999 $1,700 $3,000
Secured subordinated promissory note - Credit
Management Association of California (CMAC) as
exclusive agent for Non-Qualified Creditors, with
interest at 3% for the first five years, 6% for years
six and seven, and then at prime plus 3% through
date of maturity; interest payments are made upon
payment of principal, with principal and interest due
no later than April 2016; with an interest in a sinking
fund escrow with a balance of four thousand dollars
as of July 31, 1999 and 1998, the sinking fund escrow
requires the Company fund the account with 10% of
future equity financing, including convertible debt
converted to equity; payments on this note are
subordinated to payment in full on all principal and
accrued interest owed on the Qualified Creditors
promissory note 3,332 3,332
Convertible secured notes under a Supplemental Loan
Agreement with ITOCHU Corporation, with interest at
12%; principal and interest were due in December 1997;
the debt was secured by the Company's personal property,
and was acquired by the Company's President during 1999 1,300 1,300
Convertible bonds with interest at 10%; principal and
interest were due in July 1997 800 800
Secured subordinated promissory note - CMAC, as
exclusive agent for Qualified Creditors, with interest
at 3%; principal and interest are due in August 1999;
secured with an interest in a sinking fund escrow 307 307
Other 320 320
------ ------
7,759 9,059
Less current maturities 4,427 5,727
------ ------
$3,332 $3,332
====== ======
- --------------------------------------------------------------------------------
Page F-12
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 6 - LONG-TERM DEBT (Continued)
In September 1994, the Company issued 120 units of Series S secured convertible
bonds totaling $12,000,000. Each of the units consisted of $100,000 in principal
and a warrant to purchase 10,000 common shares. Beginning July 1995 through
March 1997, the Company converted the $12,000,000 in principal and $2,002,000 of
accrued interest into 46,674,000 shares of common stock at $0.30 per share. Of
these amounts, $3,217,000 of principal and accrued interest was converted into
10,732,000 shares of common stock during the year ended July 31, 1997.
The Company and ITOCHU Corporation entered into a Supplemental Loan Agreement in
April 1995, whereby ITOCHU agreed to lend $3,000,000 to the Company. The notes
were secured by the personal property of the parent company and were convertible
at $0.30 per share into the Company's common stock. The principal and accrued
interest due under the notes have not been paid, causing an event of default.
In March 1999, this and all other notes and accrued interest payable to ITOCHU,
totaling $5,694,000, were acquired by the Company's President in a transaction
outside the Company for $50,000. During 1999, the Company's President forgave
debt totaling $2,694,000. Due to the related party nature of the transaction,
this forgiveness was recorded as additional paid-in capital. The remaining
$3,000,000 in notes continues to be in default and accrues interest at 12% per
year. The remaining principal and accrued interest is convertible into the
Company's common stock at $0.30 per share at a date mutually agreed to by the
Company and the President.
In April 1996, and as amended in July 1996, the Company issued two promissory
notes, due April 1999, for $256,000 and $560,000, and one promissory note due
April 2016 for $3,332,000, to CMAC, as the exclusive agent for certain unsecured
creditors who settled with the Company in connection with its Debt Restructuring
Plan. In May 1997 the Company issued an additional promissory note, due April
1999 for $15,000 to CMAC, under the Debt Restructuring Plan. The April notes are
in default.
NOTE 7 - CAPITAL LEASE
Included in the acquisition of certain assets and liabilities of Systronix was
the assumption of a purchase contract for a high performance dynamometer. This
acquisition was financed through a capital lease. The lease required monthly
payments of $22,000 and was scheduled to mature in May 1998. The Company was
unable to continue making the monthly lease payments and the dynamometer was
returned to the manufacturer, who was the holder of the lease. The excess of the
undepreciated capital asset's cost over the remaining liability, which totaled
$249,000, was charged to expense in 1998.
NOTE 8 - LEASE COMMITMENTS
The Company assumed the lease of its Torrance facility when Systronix was
purchased. The lease expires in February 2000. Future minimum lease payments
under this lease agreement are $56,000 for the year ended July 31, 2000. Rent
expense was $144,400, $164,500, and $225,000 for the years ended July 31, 1999,
1998, and 1997.
- --------------------------------------------------------------------------------
Page F-13
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES (in thousands)
The Tax Reform Act of 1986 and the California Conformity Act of 1987 impose
restrictions on the utilization of net operating losses in the event of an
ownership change, as defined by Section 382 of the Internal Revenue Code of
1986. An ownership change occurred at the time of the private placement
memorandums in 1991 and 1992, at the time of the common and preferred stock
issuances in 1993, and upon conversion of certain debt to equity in subsequent
years. This change will limit future availability of net operating loss
carryforwards. The extent of the limitation has not been determined.
A valuation allowance is required for those deferred tax assets that are not
likely to be realized. Realization is dependent upon future earnings during the
period that temporary differences and carryforwards are expected to be
available. Because of the uncertain nature of their ultimate utilization, based
upon the Company's past performance, a full valuation allowance is recorded
against these deferred tax assets.
1999 1998
------- -------
Deferred tax assets
Federal tax loss carryforward $23,574 $23,558
State tax loss carryforward 2,325 2,705
Basis difference 1,610 1,610
Reserves and allowances 118 107
Other, net 215 498
------- -------
27,842 28,478
Less valuation allowance 27,842 28,478
------- -------
Net deferred tax asset $ -- $ --
======= =======
Net operating losses expire as follows:
Net Operating Loss
-------------------------------------------
Date of expiration Federal California
------------------ -------------------- -------------------
2000 $ 51 $ 16,730
2001 44 4,541
2002 11 2,778
2003 64 1,541
2004 322 709
2005 443 -
2006 680 -
2007 2,552 -
2008 24,221 -
2009 33,460 -
2010 9,083 -
2011 5,557 -
2012 2,998 -
2013 1,418 -
-------------------- -------------------
$ 80,904 $ 26,299
==================== ===================
- --------------------------------------------------------------------------------
Page F-14
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 10 - STOCKHOLDERS' DEFICIT
Series A preferred stock - Series A preferred stock is currently unregistered
and convertible into common stock on a one-to-one basis at the election of the
holder or automatically upon the occurrence of certain events, including: sale
of stock in an underwritten public offering; registration of the underlying
conversion stock; or the merger, consolidation or sale of more than 50% of the
Company. Holders of Series A preferred stock have the same voting rights as
common stockholders. The stock has a liquidation preference of $0.60 per share
plus any accrued and unpaid dividends in the event of voluntary or involuntary
liquidation of the Company. Dividends are non-cumulative and payable at the
annual rate of $0.036 per share if, when, and as declared by, the Board of
Directors. No dividends have been declared on the Series A preferred stock.
In July 1993, the Board of Directors approved a plan for the sale of shares of
Series A preferred stock to certain officers and directors (Participants) at
$0.60 per share. In general, the Participants could purchase these shares for a
combination of cash, promissory notes payable to the Company, and conversion of
debt and deferred compensation due to the Participants. All shares issued under
this plan were pledged to the Company as security for the notes. The notes
provided for interest at 8% per annum payable annually, with the full principal
amount and any unpaid interest due on January 31, 1997. The notes remain
outstanding at July 31, 1999. The likelihood of collecting the interest on these
notes is remote; therefore, beginning with the year ended July 31, 1998, accrued
interest has not been recorded.
Series B preferred stock - Series B preferred stock is currently unregistered
and each share is convertible into shares of common stock at the election of the
holder. The Series B preferred stock has certain liquidation and dividend rights
prior and in preference to the rights of the common stock and Series A preferred
stock.
In 1999 and 1998, 49,000 shares of Series B preferred stock were converted each
year into common stock on a 3.33 and 6.66-to-one basis, respectively.
Other significant stock activity - In March 1997, the Company sold 12,000,000
unregistered shares of its common stock at $0.30 per share pursuant to a
Regulation S Subscription Agreement resulting in net proceeds of $3,600,000.
Also in 1997, the Company converted $600,000 of convertible secured notes to
2,000,000 shares of common stock at $0.30 per share.
In conjunction with the acquisition of ITOCHU's debt (see Note 6), the Company's
President purchased all of the outstanding common stock of ITOCHU Corporation,
which totaled approximately 37,400,000 shares, for a purchase price of $1.
In July 1999, the Company sold 86,666,666 unregistered shares of its common
stock at $0.03 per share pursuant to a Regulation D Subscription Agreement,
resulting in net proceeds of $2,600,000. Also in July 1999, the Company
converted $400,000 of convertible secured notes to 13,333,000 shares of common
stock at $0.03 per share.
In July 1999, the Company's shareholders authorized an additional 200,000,000
shares of no par common stock.
- --------------------------------------------------------------------------------
Page F-15
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 11 - STOCK OPTIONS AND WARRANTS
In 1993, stockholders approved the 1993 Employee and Consultant Stock Plan,
which expires in 2003. Under the 1993 Employee and Consultant Stock Plan, the
Company reserved 10,000,000 shares of common stock for incentive and
nonstatutory stock options. The Company increased the number of shares of common
stock reserved under the 1993 Plan to 15,000,000 in November 1993 and to
30,000,000 in September 1995. Options under the 1993 Plan expire over periods
not to exceed ten years from date of grant. Options that expire or are canceled
may become available for future grants under the 1993 Plan.
In addition, the Company grants other nonstatutory stock options.
Under the 1994 Director Stock Option Plan, the Company reserved 150,000 shares
of common stock for nonstatutory stock options for nonemployee directors.
Options under this plan are fully vested upon the granting of the options and
expire ten years from the date of grant unless terminated sooner upon
termination of the optionee's status as a director. Options that expire or are
canceled may become available for future grants under the Director Option Plan.
In 1997, in connection with the purchase of Systronix, stockholders approved the
1996 Stock Option Plan, which expires in 2006. The Company, during the term of
the 1996 Plan, will at all times reserve and keep available such number of
shares of common stock for incentive and non-qualified stock options as shall be
sufficient to satisfy the requirements of the plan. Options under the 1996 Plan
expire over a period not to exceed ten years. In July 1999, the Company's
shareholders authorized an increase in the number of shares available under the
Plan from 15,000,000 to 45,000,000.
<TABLE>
The following summarizes common stock option activity (shares in thousands):
<CAPTION>
Director
1996 Plan 1993 Plan Option Plan Other
------------------------ ------------------------- ----------------------- ---------------------------
Shares Price Shares Price Shares Price Shares Price
---------- ----------- ---------- ------------ --------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 31, 1996 - $ - 17,269 $0.30-.060 20 $0.20-6.88 1,495 $0.60-2.80
Granted 10,367 0.30 - - - - - -
Canceled (445) 0.30 (1,135) 0.30 - - - -
Exercised - - - - - - - -
Expired - - (38) 0.30 - - - -
---------- ---------- --------- ----------
Balance, July 31, 1997 9,922 0.30 16,096 0.30-0.60 20 0.20-6.88 1,495 0.60-2.80
Canceled (1,403) 0.30 (4,650) 0.30 (16) 0.20-6.88 - -
Expired (80) 0.30 (63) 0.30 - - - -
---------- ---------- --------- ----------
Balance, July 31, 1998 8,439 0.30 11,383 0.30-0.60 4 0.20 1,495 0.60-2.80
---------- ---------- --------- ----------
Granted 1,765 0.10 - - 21 0.20 - -
Canceled (1,765) 0.30 (113) 0.30 - - - -
Expired (49) 0.30 (159) 0.30 - - - -
---------- ---------- --------- ----------
Balance, July 31, 1999 8,390 $0.10 - 0.30 11,111 $0.30-0.60 25 $ 0.20 1,495 $0.60-2.80
========== ========== ========= ==========
<FN>
- ------------------------------------------------------------------------------------------------------------------------------------
Page F-16
</FN>
</TABLE>
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 11 - STOCK OPTIONS AND WARRANTS (Continued)
The Company measures its employee stock-based compensation arrangements under
the provisions of APB No. 25. Had compensation costs for the Company's stock
option plans been determined based upon the fair value at the grant date for
awards under these plans consistent with the methodology prescribed under SFAS
No. 123, the Company's net loss would have been increased by approximately
$640,700, $549,900, and $307,000 for the years ended July 31, 1999, 1998, and
1997. The fair value of options granted were estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions: (1)
dividend yield of 0%, (2) expected volatility of 164%, (3) risk free interest
rate of 5.88% to 6.59%, and (4) an expected life of the options of 5 years.
In May 1996, the Company issued 13,333,000 warrants in exchange for services
performed. The warrants were exercisable at $0.30 per share for an equal number
of shares of common stock, and expired on May 1, 1997. At September 24, 1998,
negotiations were underway to extend the period of time in which the warrants
could be exercised. If the market value of the common stock of the Company is
equal to or greater than $0.60 per share on the date of exercise, and if the
average trading volume was in excess of 100,000 shares per day for the preceding
20 trading days, the warrants may be exercised without payment of cash. The
warrants may not be exercised in the United States, and the stock purchased may
not be delivered to the United States unless first registered under the
Securities Act or receive an available exemption from registration.
In July 1999, the Company issued 50,000,000 warrants in conjunction with the
sale of common stock. The warrants are exercisable at $0.06 per share for an
equal number of shares of common stock, and expire in June 2004.
The Company determined the fair value of the warrant to be $406,000. Factors
used in determining the fair value included: (1) the effect on the stock price
if the warrants were exercised, (2) the thinly traded nature of the stock, (3)
the market for the warrants, (4) and the rate of return expected by the warrant
holders.
The following summarizes warrant activity (in thousands):
Debt
Conversion Other
------- -------
Balance, July 31, 1997 -- 15,333
Granted -- --
Expired -- --
------- -------
Balance, July 31, 1998 -- 15,333
Granted 50,000 --
Expired -- (15,333)
------- -------
Balance, July 31, 1999 50,000 --
======= =======
- --------------------------------------------------------------------------------
Page F-17
<PAGE>
U. S. ELECTRICAR, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 12 - RESEARCH AND DEVELOPMENT CONTRACTS
The Company was obligated to perform research and development activities under
development and licensing agreements. The agreements require the Company to
design, develop, and test drive systems and deliver working prototypes. The
Company retains all rights to the products developed and will license their use
to the counter-party. Compensation for the research and development services is
based on specified milestones set forth in each agreement. As of July 31, 1999,
the Company had not performed all research and development activities required
by the agreements.
Revenue received under the development agreements recognized for the period
ended July 31, 1999, was approximately $1,954,000. Related expenses are recorded
in cost revenues.
NOTE 13 - CONTINGENCIES
The Company is in the process of reviewing its software and hardware components
to identify means to ensure its computers and other systems are Year 2000
compliant. Management believes it will be able to resolve any Year 2000 issues
prior to the time compliance will affect the Company's financial or other
processes. Cost of compliance, if any, is not expected to be material.
In connection with the Company's default on its debt obligations to unsecured
creditors, 19 of these creditors have obtained judgments against the Company in
the aggregate amount of approximately $650,000.
The Company is also subject to other legal proceedings and claims that have
arisen during the period of restructuring both its debt and operations. The
ultimate resolution of these proceedings is not known, but the final outcomes
are not expected to significantly influence the Company's current financial
position.
In February 1999, the Company became a defendant in a lawsuit filed by an
individual alleging personal injury by a vehicle manufactured by a prior
subsidiary of the Company, Industrial Electric Vehicles, Inc. The Company's
insurance carrier has assumed all potential liability associated with this
matter.
In April 1999, the Company became a defendant in a lawsuit filed by the City of
Napa regarding certain electric vehicles sold by U.S. Electricar to the City of
Napa. The suit alleges that the vehicles did not meet certain performance
specifications and seeks damages. The Company does not concur with the suit's
claims and believes it will ultimately be able to settle this matter.
- --------------------------------------------------------------------------------
Page F-18
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- --------------------------------------------------------------------------------
3.1* Amended and Restated Articles of Incorporation of the Registrant,
filed July 30, 1999.
3.2 Bylaws of Registrant (Filed as Exhibit 3.12 to the Registration
Statement on Form 10 filed on November 29, 1994, and incorporated
herein by reference).
4.1 Cashless Exercise Warrants dated October 25, 1996 issued to Fontal
International, Ltd. (Filed as Exhibit 4.1) to the Registrant's
Annual Report on Form 10-K for the year ended July 31, 1996, as
filed on November 12, 1996, and incorporated herein by reference).
10.1** Form of Stock Option Agreement under 1993 Employee and Consultant
Stock Plan (Filed as Exhibit 10.15 to the Registration Statement on
Form 10 filed on November 29, 1994, and incorporated herein by
reference).
10.2** Form of Solar Electric Engineering, Inc. 1993 Employee and
Consultant Stock Plan (Filed as Exhibit 10.16 to the Registration
Statement on Form 10 filed on November 29, 1994, and incorporated
herein by reference).
10.3 Form of Confidential Private Placement Memorandum and Debt
Restructuring Disclosure Statement of U.S. Electricar, Inc., dated
January 2, 1996, delivered by the Company to certain of its
unsecured trade creditors, including exhibits (Filed as Exhibit
10.91 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended January 31, 1996, as filed on March 18, 1996, and
incorporated herein by reference).
10.4 Form of Stock Purchase, Note and Debt Exchange Agreement dated
January 2, 1996 between the Company and certain unsecured trade
creditors (Filed as Exhibit 10.92 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1996, as
filed on March 18, 1996, and incorporated herein by reference).
10.5 Form of Indemnification Agreement (Filed as Exhibit 10.63 to the
Registration Statement on Form 10 filed on November 29, 1994, and
incorporated herein by reference).
10.6 Form of Security Agreement made as of May 31, 1995, between the
Company and Credit Managers Association of California, Trustee
(Filed as Exhibit 10.85 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended April 30, 1996, as filed on June
14, 1996, and incorporated herein by reference).
10.7* Amended 1996 Employee and Consultant Stock Option Plan.
10.8 Stock Purchase Agreement and Technology License Agreement dated
February 27, 1997, by and between the Company and Hyundai Motor
Company and Hyundai Electronics Industries Co., Ltd. (Filed as
Exhibit 10.98 to the Registrant's Quarterly Report on Form 10- Q
for fiscal quarter ended January 31, 1997, as filed on March 14,
1997, and incorporated herein by reference).
E-1
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- --------------------------------------------------------------------------------
10.9 Loan Agreement for $400,000 convertible promissory note with Fontal
International, Ltd., dated April 30, 1997(Filed as Exhibit 10.99 to
the Registrant's Quarterly Report on Form 10-Q for fiscal quarter
ended April 30, 10997, as filed on June 13, 1997, and incorporated
herein by reference).
10.10* Agreement of Debt Forgiveness by and between Carl D. Perry and the
Registrant dated July 30, 1999.
10.11* Agreement of Terms by and between the Registrant and Carl D. Perry.
10.12* Securities Purchase Agreement dated as of June 1, 1999, by and
between the Company and Jagen Pty, Ltd. and Anthony Rawlinson.
10.13* Shareholders' Agreement dated as of June 1, 1999, by and among
Jagen Pty, Ltd. and Anthony Rawlinson, Carl D. Perry and the
Registrant.
10.14* Loan and Security Agreement dated as of June 1, 1999, by and among
the Registrant, Jagen Pty, Ltd. and Anthony Rawlinson.
10.15* Convertible Secured Promissory Note dated June 1, 1999 by the
Registrant in favor of Jagen Pty, Ltd. in the principal amount of
$400,000.
21* Subsidiaries of the Registrant.
24* Power of Attorney (included on signature page)
27* Financial Data Schedule.
- ---------------------
* Filed herewith.
** Indicates management contract or compensatory plan or arrangement.
E-2
Exhibit 3.1
CERTIFICATE OF AMENDMENT OF
THE RESTATED AND AMENDED ARTICLES OF INCORPORATION OF
U.S. ELECTRICAR, INC.
Carl D. Perry certifies that:
1. He is the President and Secretary of U.S. Electricar, Inc., a California
Corporation (the "Corporation").
2. The second sentence of Article III of the Restated and Amended Articles of
Incorporation of this Corporation is amended to read in its entirety as
follows:
"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.
3. The foregoing amendment of the Restated and Amended Articles of
Incorporation has been duly approved by the Board of Directors of this
Corporation.
4. The foregoing amendment of the Restated and Amended Articles of
Incorporation has been duly approved by the required vote of shareholders
in accordance with Sections 902 and 903 of the California Corporations
code. The total number of outstanding shares of this Corporation is
222,962,367 shares of Common Stock, 3,259,101 shares of Series A Preferred
Stock and 1,291,726 shares of Series B Preferred Stock. The number of
shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was more than fifty percent (50%)
of the outstanding shares of Commontogether as a single class.
I further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of my knowledge.
Dated as of July 29, 1999
/s/ Carl D. Perry
----------------------------------------------
President and Secretary
EXHIBIT 10.7
U.S. ELECTRICAR, INC.
1996 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be Incentive Stock
Options or Non-Qualified Stock Options, as determined by the Administrator at
the time of grant.
2. Definitions. As used herein, the following definitions shall apply:
a. "Administrator" means the Board or any of the Committees
appointed to administer the Plan.
b. "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act.
c. "Applicable Laws" means the legal requirements relating to
the administration of stock option plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Options granted to residents therein.
d. "Board" means the Board of Directors of the Company
e. "Code" means the Internal Revenue Code of 1986, as amended.
f. "Committee" means any committee appointed by the Board to
administer the Plan.
g. "Common Stock" means the common stock of the Company.
h. "Company" means U.S. Electricar, Inc., a California
corporation.
i. "Consultant" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services as an
independent contractor and is compensated for such services.
j. "Continuing Directors" means members of the Board who
either (i) have been Board members continuously for a period of at least
thirty-six (36) months or (ii) have been Board members for less than thirty-six
(36) months and were elected or nominated for election as Board members by at
least a majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
k. "Continuous Status as an Employee, Director or Consultant"
means that the employment, director or consulting relationship with the Company,
any Parent, or Subsidiary, is not interrupted or terminated. Continuous Status
as an Employee, Director or Consultant shall not
1.
<PAGE>
be considered interrupted in the case of (i) any leave of absence approved by
the Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. A leave of absence
approved by the Company shall include sick leave, military leave, or any other
personal leave approved by an authorized representative of the Company. For
purposes of Incentive Stock Options, no such leave may exceed ninety (90) days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract.
l. "Corporate Transaction" means any of the following
stockholder-approved transactions to which the Company is a party:
i. a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;
ii. the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company; or
iii. any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(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.
m. "Covered Employee" means an Employee who is a "covered
employee" under Section 162(m)(3) of the Code.
n. "Director" means a member of the Board.
o. "Employee" means any person, including an Officer or
Director, who is an employee of the Company or any Parent or Subsidiary of the
Company for purposes of Section 422 of the Code. The payment of a director's fee
by the Company shall not be sufficient to constitute "employment" by the
Company.
p. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
q. "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
i. Where there exists a public market for the Common
Stock, the Fair Market Value shall be (A) the closing sales price for a Share
for the last market trading day prior to the time of the determination (or, if
no sales were reported on that date, on the last trading date on which sales
were reported) on the stock exchange determined by the Administrator to be the
primary market for the Common Stock or the Nasdaq National Market, whichever is
applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on the last
date on which such prices were reported), in each case, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
2.
<PAGE>
ii. In the absence of an established market of the
type described in (i), above, for the Common Stock, the Fair Market Value
thereof shall be determined by the Administrator in good faith.
r. "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code
s. "Non-Qualified Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
t. "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
u. "Option" means a stock option granted pursuant to the Plan.
v. "Option Agreement" means the written agreement evidencing
the grant of an Option executed by the Company and the Optionee, including any
amendments thereto.
w. "Optioned Stock" means the Common Stock subject to an
Option.
x. "Optionee" means an Employee, Director or Consultant who
receives an Option under the Plan.
y. "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
z. "Performance - Based Compensation" means compensation
qualifying as "performance-based compensation" under Section 162(m) of the Code.
aa. "Plan" means this 1996 Stock Option Plan.
bb. "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor thereto.
cc. "Share" means a share of the Common Stock.
dd. "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3.
<PAGE>
3. Stock Subject to the Plan.
a. Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be optioned and sold under the Plan is
45,000,000 Shares. The Shares may be authorized, but unissued, or reacquired
Common Stock.
b. If an Option expires or becomes unexercisable without
having been exercised in full, or is surrendered pursuant to an Option exchange
program, such unissued or retained Shares shall become available for future
grant under the Plan (unless the Plan has terminated). Shares that actually have
been issued under the Plan shall not be returned to the Plan and shall not
become available for future distribution under the Plan, except that if unvested
Shares are forfeited, or repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under the Plan.
4. Administration of the Plan.
a. Plan Administrator.
i. Administration with Respect to Directors and
Officers. With respect to grants of Options to Directors or Employees who are
also Officers or Directors of the Company, the Plan shall be administered by (A)
the Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws and to permit
such grants and related transactions under the Plan to be exempt from Section
16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board.
ii. Administration With Respect to Consultants and
Other Employees. With respect to grants of Options to Employees or Consultants
who are neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. The Board may authorize one or
more Officers to grant such Options and may limit such authority by requiring
that such Options must be reported to and ratified by the Board or a Committee
within six (6) months of the grant date, and if so ratified, shall be effective
as of the grant date.
iii. Administration With Respect to Covered
Employees. Notwithstanding the foregoing, grants of Options to any Covered
Employee intended to qualify as Performance-Based Compensation shall be made
only by a Committee (or subcommittee of a Committee) which is comprised solely
of two or more Directors eligible to serve on a committee making Options
qualifying as Performance-Based Compensation. In the case of such Options
granted to Covered Employees, references to the "Administrator" or to a
"Committee" shall be deemed to be references to such Committee or subcommittee.
iv. Administration Errors. In the event an Option is
granted in a manner inconsistent with the provisions of this subsection (a),
such Option shall be presumptively valid as of its grant date to the extent
permitted by the Applicable Laws.
4.
<PAGE>
b. Powers of the Administrator. Subject to Applicable Laws and
the provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the Board, the
Administrator shall have the authority, in its discretion:
i. to select the Employees, Directors and Consultants
to whom Options may be granted from time to time hereunder;
ii. to determine whether and to what extent Options
are granted hereunder;
iii. to determine the number of Shares to be covered
by each Option granted hereunder;
iv. to approve forms of Option Agreement for use
under the Plan;
v. to determine the terms and conditions of any
Option granted hereunder;
vi. to establish additional terms, conditions, rules
or procedures to accommodate the rules or laws of applicable foreign
jurisdictions and to afford Optionees favorable treatment under such laws;
provided, however, that no Option shall be granted under any such additional
terms, conditions, rules or procedures with terms or conditions which are
inconsistent with the provisions of the Plan;
vii. to amend the terms of any outstanding Option
granted under the Plan, including a reduction in the exercise price of any
Option to reflect a reduction in the Fair Market Value of the Common Stock since
the grant date of the Option, provided that any amendment that would adversely
affect the Optionee's rights under an outstanding Option shall not be made
without the Optionee's written consent;
viii. to construe and interpret the terms of the Plan
and Options granted pursuant to the Plan; and
ix. to take such other action, not inconsistent with
the terms of the Plan, as the Administrator deems appropriate.
c. Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.
5. Eligibility. Non-Qualified Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee, Director or Consultant who has been granted an
Option may, if otherwise eligible, be granted additional Options. Options may be
granted to such Employees of the Company and its subsidiaries who are residing
in foreign jurisdictions as the Administrator may determine from time to time.
6. Terms and Conditions of Options.
a. Designation of Options. Each Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such
5.
<PAGE>
designation, to the extent that the aggregate Fair Market Value of Shares
subject to Options designated as Incentive Stock Options which become
exercisable for the first time by an Optionee during any calendar year (under
all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such
excess Options, to the extent of the Shares covered thereby in excess of the
foregoing limitation, shall be treated as Non-Qualified Stock Options. For this
purpose, Incentive Stock Options shall be taken into account in the order in
which they were granted, and the Fair Market Value of the Shares shall be
determined as of the date the Option with respect to such Shares is granted.
b. Conditions of Option. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Option including, but not limited to, the Option vesting schedule (which in no
case shall be less than 20% per year over five years from the date of grant),
repurchase provisions, rights of first refusal, forfeiture provisions, and
satisfaction of any performance criteria. The performance criteria established
by the Administrator may be based on any one of, or combination of, increase in
share price, earnings per share, total stockholder return, return on equity,
return on assets, return on investment, net operating income, cash flow,
revenue, economic value added, personal management objectives, or other measure
of performance selected by the Administrator. Partial achievement of the
specified criteria may result in vesting corresponding to the degree of
achievement as specified in the Option Agreement.
c. Term of Option. The term of each Option shall be the term
stated in the Option Agreement, provided, however, that the term of an Incentive
Stock Option shall be no more than ten (10) years from the date of grant
thereof. However, in the case of an Incentive Stock Option granted to an
Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
d. Transferability of Options. Incentive Stock Options may not
be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
Non-Qualified Stock Options shall be transferable to the extent provided in the
Option Agreement.
e. Time of Granting Options. The date of grant of an Option
shall for all purposes, be the date on which the Administrator makes the
determination to grant such Option, or such other date as is determined by the
Administrator. Notice of the grant determination shall be given to each
Employee, Director or Consultant to whom an Option is so granted within a
reasonable time after the date of such grant.
6.
<PAGE>
7. Option Exercise Price, Consideration and Taxes.
a. Exercise Price. The exercise price for an Option shall be
as follows:
i. In the case of an Incentive Stock Option:
(1) granted to an Employee who, at the time
of the grant of such Incentive Stock Option owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be not less than
one hundred ten percent (110%) of the Fair Market Value per Share on the date of
grant.
(2) granted to any Employee other than an
Employee described in the preceding paragraph, the per Share exercise price
shall be not less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.
ii. In the case of Options intended to qualify as
Performance-Based Compensation, the per Share exercise price shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the date
of grant.
iii. In the case of a Non-Qualified Stock Option:
(1) granted to a person who, at the time of
the grant of such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(2) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
b. Consideration. Subject to Applicable Laws, the
consideration to be paid for the Shares to be issued upon exercise of an Option
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
issued under the Plan the following:
i. cash;
ii. check;
iii. delivery of Optionee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate;
iv. surrender of Shares (including withholding of
Shares otherwise deliverable upon exercise of the Option) which have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised (but
7.
<PAGE>
only to the extent that such exercise of the Option would not result in an
accounting compensation charge with respect to the Shares used to pay the
exercise price unless otherwise determined by the Administrator);
v. delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price; or
vi. any combination of the foregoing methods of
payment.
c. Taxes. No Shares shall be delivered under the Plan to any
Optionee or other person until such Optionee or other person has made
arrangements acceptable to the Administrator for the satisfaction of any
foreign, federal, state, or local income and employment tax withholding
obligations, including, without limitation, obligations incident to the receipt
of Shares or the disqualifying disposition of Shares received on exercise of an
Incentive Stock Option. Upon exercise of an Option, the Company shall withhold
or collect from Optionee an amount sufficient to satisfy such tax obligations.
8. Exercise of Option.
a. Procedure for Exercise: Rights as a Stockholder.
i. Any Option granted hereunder shall be exercisable
at such times and under such conditions as determined by the Administrator under
the terms of the Plan and specified in the Option Agreement.
ii. An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect
to Optioned Stock, notwithstanding the exercise of an Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in the Option Agreement or Section 10, below.
b. Exercise of Option Following Termination of Employment,
Director or Consulting Relationship.
i. Upon termination of an Optionee's Continuous
Status as an Employee, Director or Consultant, other than upon the Optionee's
death or disability, the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). In
the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the Optionee's termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option,
8.
<PAGE>
the Shares covered by the unvested portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not exercise his or her Option
within the time specified by the Administrator, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
ii. Disability of Optionee. If an Optionee's
Continuous Status as an Employee, Director or Consultant terminates as a result
of the Optionee's disability, the Optionee may exercise the Option to the extent
the Option is vested on the date of termination, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement). If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically convert to a Non-Qualified Stock
Option on the day three months and one day following such termination. If, on
the date of termination, the Optionee is not vested as to the entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Option is not exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
iii. Death of Optionee. In the event of the death of
an Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) to the extent vested
on the date of death. If, at the time of death, the Optionee is not vested as to
the entire Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan. The Option may be exercised by the executor or
administrator of the Optionee's estate or, if none, by the person(s) entitled to
exercise the Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
c. Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
9. Conditions Upon Issuance of Shares.
a. Shares shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all Applicable Laws, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
b. As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options
9.
<PAGE>
have yet been granted or which have been returned to the Plan, as well as the
price per share of Common Stock covered by each such outstanding Option, shall
be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
similar event resulting in an increase or decrease in the number of issued
shares of Common Stock. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason hereof shall be
made with respect to, the number or price of Shares subject to an Option.
11. Corporate Transactions.
a. In the event of any Corporate Transaction, each Option
which is at the time outstanding under the Plan automatically shall become fully
vested and exercisable and be released from any restrictions on transfer and
repurchase or forfeiture rights, immediately prior to the specified effective
date of such Corporate Transaction, for all of the Shares at the time
represented by such Option. However, an outstanding Option under the Plan shall
not so fully vest and be exercisable and released from such limitations if and
to the extent: (i) such Option is, in connection with the Corporate Transaction,
either to be assumed by the successor corporation or Parent thereof or to be
replaced with a comparable Option with respect to shares of the capital stock of
the successor corporation or Parent thereof, or (ii) such Option is to be
replaced with a cash incentive program of the successor corporation which
preserves the compensation element of such Option existing at the time of the
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to such Option. The determination of Option
comparability under clause (i) above shall be made by the Administrator, and its
determination shall be final, binding and conclusive.
b. Effective upon the consummation of the Corporate
Transaction, all outstanding Options under the Plan shall terminate and cease to
remain outstanding, except to the extent assumed by the successor company or its
Parent.
c. The portion of any Incentive Stock Option accelerated under
this Section 11 in connection with a Corporate Transaction shall remain
exercisable as an Incentive Stock Option under the Code only to the extent the
$100,000 dollar limitation of Section 422(d) of the Code is not exceeded. To the
extent such dollar limitation is exceeded, the accelerated excess portion of
such Option shall be exercisable as a Non-Qualified Stock Option.
12. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue in effect for a term of ten (10) years unless sooner
terminated.
13. Amendment, Suspension or Termination of the Plan.
a. The Board may at any time amend, suspend or terminate the
Plan. To the extent necessary to comply with Applicable Laws, the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
b. No Option may be granted during any suspension of the Plan
or after termination of the Plan.
10.
<PAGE>
c. Any amendment, suspension or termination of the Plan shall
not affect Options already granted, and such Options shall remain in full force
and effect as if the Plan had not been amended, suspended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
14. Reservation of Shares.
a. The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
b. The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. No Effect on Terms of Employment. The Plan shall not confer upon
any Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
16. Stockholder Approval. The grant of Incentive Stock Options under
the Plan shall be subject to approval by the stockholders of the Company within
twelve (12) months before or after the date the Plan is adopted. Such
stockholder approval shall be obtained in the degree and manner required under
Applicable Laws. The Administrator may grant Incentive Stock Options under the
Plan prior to approval by the stockholders, but until such approval is obtained,
no such Incentive Stock Option shall be exercisable. In the event that
stockholder approval is not obtained within the twelve (12) month period
provided above, all Incentive Stock Options previously granted under the Plan
shall terminate.
17. Information to Optionees and Purchasers. The Company shall provide
to each Optionee, not less frequently than annually, copies of annual financial
statements. The Company shall also provide such statements to each individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company shall not be required to provide such statements to Employees,
Directors or Consultants whose duties in connection with the Company assure
their access to equivalent information.
11.
Exhibit 10.10
Agreement of Debt Forgiveness
I, Carl D. Perry, an individual am the holder of three
Promissiory Notes, dated December 26, 1996, February 21, 1997 and June 30, 1996
respectively in the amounts of $900,000, $400,000, and $3,000,000. As of the
date of this Agreement, said Notes are in default. Without any consideration, I
do hereby resolve to forgive the sum total of $2,693,506 in accrued interest and
principal with respect to the aforementioned Notes payable from U.S. Electricar,
Inc.
Said amount shall be forgiven as follows:
Note dated December 26, 1996 -- Accrued Interest of $ 266,150
Note dated February 21, 1997 -- Accrued Interest of $ 110,689
Note dated June 30, 1996 -- Accrued Interest of $ 1,016,667
Note dated June 30, 1996 -- Principal of $ 1,300,000
------------
Total $ 2,693,506
All other terms of said Notes shall remain in full force without any
modifications to maturity, default status, collaterization, rate or any other
terms and conditions as stated in the original loan agreements. Said rate shall
remain at the default rate of twelve percent per annum.
Signed this 30th day of July 1999 at Torrance, California.
/s/Carl D. Perry
- -----------------------
Carl D. Perry
Exhibit 10.11
Agreement of Terms
This agreement is entered into by and between U.S. Electricar, Inc. a
California Corporation (the "Company"), and Carl D. Perry, an individual, for
the purpose of restating the original terms of certain Note Agreements between
Itochu and U.S. Electricar, Inc.
In March, 1999 Carl D. Perry purchased from Itochu, three Promissiory
Notes, dated December 26, 1996, February 21, 1997 and June 30, 1996
respectively in the amounts of $900,000, $400,000 and $3,000,000 plus
accrued interest wherein U.S. Electricar, Inc. was the debtor.
The parties to this Agreement do hereby conform that these Notes may be
satisfied by either payment of assets of the Company or conversion into
equity in the Company.
All other terms of said Notes shall remain in full force without any
modifications to maturity, default status, collaterization, rate or any
other terms and conditions as stated in the original loan agreements.
Said rate shall remain at the default rate of twelve percent per annum.
Signed this 30th day of July 1999 at Torrance, California.
/s/ Carl D. Perry
--------------------------------------------
Carl D. Perry, Chief Executive Officer
U.S. Electricar, Inc.
/s/ Carl D. Perry
--------------------------------------------
Carl D. Perry, an individual
EXHIBIT 10.12
THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS ("BLUE
SKY LAWS"), AND MAY NOT BE OFFERED OR SOLD WITHOUT
REGISTRATION UNDER THE SECURITIES ACT, AND AS REQUIRED BY
BLUE SKY LAWS IN EFFECT AS TO SUCH TRANSFER, UNLESS AN
EXEMPTION FROM SUCH REGISTRATION UNDER STATE AND FEDERAL LAW
IS AVAILABLE.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is dated for reference purposes only
as of June 1, 1999, by and between U.S. Electricar, Inc., a California
corporation (the "Corporation"), Jagen Pty Ltd., an Australian company and
Anthony N. Rawlinson, an individual ("Rawlinson" and together with Jagen Pty
Ltd., the "Investors").
R E C I T A L S
A. The Investors desires to purchase from the Corporation, and the
Corporation desires to sell to each Investor, Common Stock on the terms and
conditions hereinafter set forth.
B. The Investors are willing to loan to the Corporation, and the
Corporation wishes to borrow from the Investors, certain sums to be converted
into rights to acquire Common Stock on the terms and conditions hereinafter set
forth.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained in this Agreement, the parties hereby
agree as follows:
1. Issuance of Securities, Payment and Delivery.
a. Sale of Securities. Subject to the terms and conditions of
this Agreement, Jagen Pty Ltd. agrees to purchase on June 1, 1999, or on such
later date as is agreed upon among the Investors and the Corporation (the
"Closing") and the Company agrees to sell and issue to Jagen Pty Ltd., Seventy
Million (70,000,000) shares of the Corporation's Common Stock (the "Shares") at
Three Cents per share for an aggregate purchase price of Two Million One Hundred
Thousand Dollars ($2,100,000).
b. Extension of Loans. Subject to the terms and conditions of
this Agreement, the Investors agree to loan to the Corporation:
(i) in the case of Jagen Pty Ltd., Four Hundred
Thousand Dollars ($400,000) on the Closing, in exchange for a secured
convertible promissory note to acquire 13,333,334 Shares and a Warrant to
purchase 41,666,666 Shares; and
<PAGE>
(ii) in the case of Rawlinson, Five Hundred Thousand
Dollars ($500,000) on July 31, 1999, or on such later date as is agreed upon
among the Investors and the Corporation (the "Subsequent Closing"), in exchange
for a secured convertible promissory note to acquire 16,666,666 Shares and a
Warrant to purchase 8,333,334 Shares.
The convertible promissory notes shall be issued in the form attached hereto as
Exhibit A and incorporated herein by reference (each, a "Note"). The warrants to
purchase shares of Common Stock into which a portion of the Notes shall convert
shall be issued in the form attached hereto as Exhibit B and incorporated herein
by reference (each, a "Warrant" and collectively with the Shares and the Notes,
the "Securities").
c. Payment and Delivery. Each Investor shall purchase
Securities or make loans, as applicable, by making payment to U.S. Electricar,
Inc. in cash, by cashiers check or wire transfer of funds, in U.S. Dollars.
2. Deliveries at Closing. At the Closing:
a. The Corporation and the Investors will deliver an executed
counterpart of:
(i) this Securities Purchase Agreement;
(ii) the Loan and Security Agreement of even date
herewith; and
(iii) the Shareholders' Agreement of even date
herewith, also executed by Carl D. Perry;
b. Jagen Pty Ltd. will provide the Corporation with a payment
in the aggregate amount of Two Million Five Hundred Thousand Dollars
($2,500,000);
c. The Corporation will deliver a share certificate evidencing
70,000,000 Shares in the name of Jagen Pty Ltd.;
d. The Corporation will deliver a Note to Jagen Pty Ltd.,
which will provide that the Four Hundred Thousand Dollars ($400,000) principal
amount of debt evidenced thereby may be converted into 13,333,334 Shares and a
Warrant to purchase 41,666,666 Shares;
e. The Corporation will deliver one or more certificates of
good standing to the Investors evidencing that the Corporation is in good
standing in each jurisdiction in which it does business, owns property or has
employees;
f. The Corporation will deliver an officer's certificate
providing that the representations and warranties contained in this Agreement
and the Notes are true and correct as of Closing and including a copy of the
Amended and Restated Articles of Incorporation of the Corporation certified by
an officer of the Corporation (the "Articles");
g. Jagen Pty Ltd. will deliver an officer's certificate
providing that the representations and warranties contained in this Agreement
are true and correct as of Closing;
2
<PAGE>
h. Rawlinson will deliver a certificate providing that the
representations and warranties contained in this Agreement are true and correct
as of the Closing; and
i. The Corporation will deliver a copy of its most recently
prepared unaudited financial statements (the "Financial Statements").
3. Deliveries at the Subsequent Closing. At the Subsequent Closing:
a. Rawlinson will provide the Corporation with a payment in
the aggregate amount of Five Hundred Thousand Dollars ($500,000);
b. The Corporation will deliver a Note to Rawlinson, which
will provide that the Five Hundred Thousand Dollars ($500,000) principal amount
of debt evidenced thereby may be converted into 16,666,666 Shares and a Warrant
to purchase 8,333,334 Shares;
c. The Corporation will deliver an officer's certificate
providing that the representations and warranties contained in this Agreement
and the Notes are true and correct as of the Subsequent Closing; and
d. Rawlinson will deliver a certificate providing that the
representations and warranties contained in this Agreement are true and correct
as of the Subsequent Closing.
4. Corporation's Representations and Warranties. Except as set forth on
Disclosure Schedule 4 attached hereto and incorporated herein by reference, the
Corporation hereby represents and warrants to each Investor that as of the
Closing and the Subsequent Closing:
a. Corporate Organization and Standing. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Corporation has the requisite corporate power to
carry on its business as presently conducted, and as proposed or contemplated to
be conducted in the future, and to enter into and carry out the provisions of
this Agreement, the Notes and the transactions contemplated under this Agreement
and the Notes.
b. Authorization. All corporate action on the part of the
Corporation, its directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Corporation and the
performance of all of the Corporation's obligations hereunder has been taken.
This Agreement, when executed and delivered by the Corporation, shall constitute
a valid and binding obligation of the Corporation, enforceable in accordance
with its terms, except as may be limited by principles of public policy, and
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. The Securities, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable.
3
<PAGE>
c. No Breach. The issue and sale of the Securities by the
Corporation does not and will not conflict with and does not and will not result
in a breach of any of the terms of the Corporation's incorporating documents or
any agreement or instrument to which the Corporation is a party. The
consummation of the transactions or performance of the obligations contemplated
by this Agreement will not result in a breach of any term of, or constitute a
default under, any statute, indenture, mortgage, or other agreement or
instrument to which the Corporation or any of its subsidiaries is or are a party
or by which any of them is or are bound.
d. Pending or Threatened Claims. Neither the Corporation nor
any of its subsidiaries is a party to any action, suit or proceeding which could
materially affect its business or financial condition, and no such actions,
suits or proceedings are contemplated or have been threatened.
e. No Preemptive Rights. There are no preemptive rights of any
shareholder of the Corporation with respect to the Securities.
f. Reservation of Shares. At all times during which the
Warrant may be exercised, the Corporation shall have authorized and reserved,
for the exclusive purpose of issuance and delivery upon exercise of the Warrant,
a sufficient number of shares of its Common Stock to provide for the exercise of
the Warrant in accordance with its terms.
5. Post-Closing Covenants of the Corporation. The Corporation hereby
covenants that:
a. The Corporation shall use reasonable business efforts to
file the proxy statement for its 1999 annual shareholders' meeting on or before
June 15, 1999, which proxy will nominate the following individuals to the board
of directors: Carl D. Perry, Malcolm R. Currie, Ph.D., Edwin O. Riddell, Donald
H. Dreyer, John Micek and Anthony N. Rawlinson.
b. The Corporation shall use reasonable business efforts to
hold its annual shareholders' meeting on or before July 31, 1999, at which
meeting it shall seek to (A) increase the number of authorized shares of the
Corporation to provide for sufficient shares of Common Stock to issue the Common
Stock and Warrants to purchase Common Stock described herein and (B) increase
the size of the option pool available for grant to employees and contractors of
the Corporation to twenty percent (20%) of the outstanding capital of the
Corporation.
c. The Corporation shall file amended and restated articles of
incorporation (or an amendment to its amended and restated articles of
incorporation at its discretion) increasing the number of shares of Common Stock
of the Corporation to such amount as is necessary to allow the conversion of the
Notes into Securities as soon as is practicable after shareholder approval for
such an increase.
d. The Corporation shall use the proceeds of the sale of
Securities and loans described herein (i) to pay the aggregate principal amount
of a secured promissory note payable to the Credit Managers Association of
California due April 1999; (ii) to settle outstanding debt aggregating
approximately Seven Hundred Eighty Thousand Dollars ($780,000) for up to Fifteen
4
<PAGE>
Cents on each dollar of debt; (iii) to pay expenses of the Corporation incurred
in the ordinary course of business; (iv) for general working capital; and (v) in
such other manner as is determined by the Board of Directors of the Corporation
in consultation with Rawlinson.
6. Investor Representations and Warranties. Each Investor represents
and warrants to the Corporation that:
a. Account. Such Investor is acquiring the Securities for
investment for its own account, and not with a view to, or for resale in
connection with, any distribution thereof, and it has no present intention of
selling or distributing any of the Securities. The Investor understands that the
Securities have not been registered under the Securities Act of 1933, as amended
(the "Securities Act") by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment as expressed herein.
b. Access to Data. The Investor has had an opportunity to
discuss the Corporation's business, management and financial affairs with its
management and to obtain any additional information which the Investor has
deemed necessary or appropriate for deciding whether or not to purchase the
Securities, including the Articles, and has had an opportunity to receive,
review and understand the disclosures and information regarding the
Corporation's financial statements, capitalization and other business
information as set forth in Corporation's filings with the Securities and
Exchange Commission which are all incorporated herein by reference, together
with all exhibits referenced therein. Investor understands that the Financial
Statements are confidential and may not be disclosed to any third party or used
by the Investor for purposes of trading in the Corporation's publicly traded
stock until such information is publicly released by the Corporation. The
Investor acknowledges that no other representations or warranties, oral or
written, have been made by the Corporation or any agent thereof except as set
forth in this Agreement.
c. No Fairness Determination. The Investor is aware that no
federal, state or other agency has made any finding or determination as to the
fairness of the investment, nor made any recommendation or endorsement of the
Securities.
d. Knowledge And Experience. The Investor has such knowledge
and experience in financial and business matters, including investments in other
start-up companies, that it is capable of evaluating the merits and risks of the
investment in the Securities, and it is able to bear the economic risk of such
investment. Further, the individual executing this Agreement has such knowledge
and experience in financial and business matters that he is capable of utilizing
the information made available to him in connection with the offering of the
Securities, of evaluating the merits and risks of an investment in the
Securities and of making an informed investment decision with respect to the
Securities, including assessment of the Risk Factors set forth in the
Corporation's EDGAR filings with the SEC and incorporated herein by reference.
e. Limited Public Market. The Investor is aware that there is
currently a very limited "over-the-counter" public market for the Corporation's
registered securities and that
5
<PAGE>
the Corporation became a "reporting issuer" under the Securities Exchange Act of
1934, as amended, on January 27, 1995. There is no guarantee that a more
established public market will develop at any time in the future. The Investor
understands that the Securities are all unregistered and may not presently be
sold in even this limited public market. The Investor understands that the
Securities cannot be readily sold or liquidated in case of an emergency or other
financial need. The Investor has sufficient liquid assets available so that the
purchase and holding of the Securities will not cause it undue financial
difficulties.
f. Commissions/Finders Fees. The Investor acknowledges that
commissions/finders fees may be payable by the Corporation for the sale of the
Securities as set forth on Disclosure Schedule 6.
g. Authority. If Investor is a corporation, partnership, trust
or estate: (i) the individual executing and delivering this Agreement on behalf
of the Investor has been duly authorized and is duly qualified to execute and
deliver this Agreement on behalf of Investor in connection with the purchase of
the Securities and (ii) the signature of such individual is binding upon
Investor.
h. Investment Experience. The Investor is an "accredited
investor" as that term is defined in Regulation D promulgated by the Securities
and Exchange Commission. The term "Accredited Investor" under Regulation D
refers to:
(i) A person or entity who is a director or executive
officer of the Corporation;
(ii) Any bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity; any broker or dealer registered pursuant to
Section 15 of the Exchange Act; insurance Corporation as defined in Section
2(13) of the Securities Act; investment Corporation registered under the
Investment Corporation Act of 1940; or a business development Corporation as
defined in Section 2(a)(48) of that Act; Small Business Investment Corporation
licensed by the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; employee
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974, if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan association,
insurance Corporation, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a self-directed
plan, with investment decision made solely by persons that are accredited
investors;
(iii) Any private business development Corporation as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
6
<PAGE>
(iv) Any organization described in Section 501(c)(3)
of the Internal Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of acquiring the
Securities offered, with total assets in excess of $5,000,000;
(v) Any natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of his purchase exceeds
$1,000,000;
(vi) Any natural person who had an individual income
in excess of $200,000 during each of the previous two years or joint income with
that person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
(vii) Any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the Securities
offered, whose purchase is directed by a person who has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the prospective investment; or
(viii) Any entity in which all of the equity owners
are accredited investors.
(ix) As used in this Section 4(g), the term "net
worth" means the excess of total assets over total liabilities. For the purpose
of determining a person's net worth, the principal residence owned by an
individual should be valued at fair market value, including the cost of
improvements, net of current encumbrances. As used in this Section 4(f),
"income" means actual economic income, which may differ from adjusted gross
income for income tax purposes. Accordingly, the undersigned should consider
whether it should add any or all of the following items to its adjusted gross
income for income tax purposes in order to reflect more accurately its actual
economic income: Any amounts attributable to tax-exempt income received, losses
claimed as a limited partner in any limited partnership, deductions claimed for
depletion, contributions to an IRA or Keogh retirement plan, and alimony
payments.
7. Restrictions On Transfer/Voting Agreement. The Investor acknowledges
and agrees that the Securities shall be subject to certain restrictions on
transfer for a period of two years and subject to certain voting obligations as
more fully set forth in that Shareholders' Agreement dated on the Closing and
attached hereto as Exhibit C and incorporated herein by reference.
8. Restrictive Legends. Each certificate evidencing the Securities
which the Investor may acquire hereunder or under the Note and any other
securities issued upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event (unless no longer required in the opinion
of the counsel for the Corporation) shall be imprinted with one or more legends
substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
7
<PAGE>
UNDER ANY STATE SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO
REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. OTHER THAN
IN CONNECTION WITH TRANSFERS TO AFFILIATES (AS DEFINED IN THE
SHAREHOLDERS' AGREEMENT DATED AS OF JUNE 1, 1999 AMONG PARTIES
INCLUDING THE ORIGINAL HOLDER HEREOF AND THE COMPANY (THE
"SHAREHOLDERS' AGREEMENT")), THE HOLDER OF THESE SHARES MAY BE REQUIRED
TO DELIVER TO THE COMPANY, IF THE COMPANY SO REQUESTS, AN OPINION OF
COUNSEL (REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY)
TO THE EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT (OR QUALIFICATION UNDER STATE SECURITIES LAWS) IS AVAILABLE WITH
RESPECT TO ANY TRANSFER OF THESE SHARES THAT HAS NOT BEEN SO REGISTERED
(OR QUALIFIED).
THE COMPANY IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. A COPY
OF THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF EACH CLASS AND
SERIES WILL BE PROVIDED TO EACH STOCKHOLDER WITHOUT CHARGE, UPON
WRITTEN REQUEST.
THE SHARES REPRESENTED BY THIS CERTIFICATE ALSO ARE SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND ON VOTING RIGHTS AND
OBLIGATIONS, TO WHICH ANY TRANSFEREE AGREES BY HIS ACCEPTANCE HEREOF,
AS SET FORTH IN THE SHAREHOLDERS' AGREEMENT, DATED AS OF JUNE 1, 1999.
NO TRANSFER OF SUCH SHARES WILL BE MADE ON THE BOOKS OF THE COMPANY
UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH
AGREEMENT AND BY AN AGREEMENT OF THE TRANSFEREE TO BE BOUND BY THE
RESTRICTIONS SET FORTH IN SUCH AGREEMENT. THE COMPANY WILL MAIL A COPY
OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE UPON THE
COMPANY'S RECEIPT OF A WRITTEN REQUEST THEREFOR.
The Corporation shall be entitled to enter stop transfer notices on its transfer
books with respect to the Securities.
9. Miscellaneous.
a. Notices. Any notice, request or other communication
required or permitted hereunder will be in writing and shall be deemed to have
been duly given if personally delivered or if telecopied or mailed by registered
or certified mail, postage prepaid, at the respective addresses of the parties
as set forth below. Any party hereto may by notice so given change its address
for future notice hereunder. Notice will be deemed to have been given when
personally delivered or when deposited in the mail or telecopied in the manner
set forth above and will be deemed to have been received when delivered.
8
<PAGE>
(a) If to Jagen Pty Ltd.
9 Oxford Street
South Yarra 3141
Melbourne, Victoria
Australia
Telecopier 011 - 613 - 9826 - 5499
with a copy to:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121
Telecopier (619) 677-1477
Attention: Robert W. Ayling, Esq.
(b) if to Anthony N. Rawlinson
5 Shenton Way, #1301
UIC Building
Singapore 068808, Singapore
Telecopier (65) 220-5338
with a copy to:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121
Telecopier (619) 677-1477
Attention: Robert W. Ayling, Esq.
(c) if to the Company
U.S. Electricar, Inc.
19850 South Magellan Drive
Torrance, California 90502
Attention: President
with a copy to:
Bay Venture Counsel, LLP
1999 Harrison Street, Suite 1300
Oakland, CA 94612
Attention: Donald C. Reinke, Esq.
Telecopier (510) 834-7440
9
<PAGE>
b. Survival. The representations, warranties, covenants and
agreements made herein shall survive the closing of the transactions
contemplated hereby.
c. Successors and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties.
d. Applicable Law. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law.
e. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. This Agreement may be executed by facsimile.
f. Title and Subtitles. The titles of the Sections and
subsections of this Agreement are for the convenience of reference only and are
not to be considered in construing this Agreement.
g. Attorney's Fees. If any action at law or in equity
(including arbitration) is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorney's fees,
costs and necessary disbursements in addition to any other relief to which it
may be entitled.
h. Waiver. The provisions of this Agreement may be waived,
altered, amended or repealed, in whole or in part, only upon the written consent
of the Corporation and the Investor. No waiver by any party hereto of any breach
of this Agreement by any other party shall operate or be construed as a waiver
of any other or subsequent breach. No waiver by any party hereto of any breach
of this Agreement by any other party hereto shall be effective unless it is in
writing and signed by the party claimed to have waived such breach.
i. Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or threatened
breach by the Corporation to this Agreement of any covenant, obligation or other
provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) to (A) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (B) an injunction restraining such breach or threatened
breach.
j. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith to achieve the closest comparable terms
as is possible. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (a) such provision shall
10
<PAGE>
be excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of the
Agreement shall be enforceable in accordance with its terms.
k. Venue. Any action, arbitration, or proceeding arising
directly or indirectly from this Agreement or any other instrument or security
referenced herein shall be litigated or arbitrated, as appropriate, in the State
of California.
l. Entire Agreement. This Agreement and the Exhibits,
Schedules and other documents referred to herein constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof, and any and
all other written or oral agreements regarding the subject matter hereof
existing between the parties hereto are expressly canceled.
11
<PAGE>
SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
INVESTOR
JAGEN PTY, LTD. U.S. ELECTRICAR, INC.
By: /s/ Boris Liberman By: /s/ Carl Perry
---------------------------- ---------------------------
(Signature) (Signature)
INVESTOR
/s/ Anthony N. Rawlinson
- --------------------------------
Anthony N. Rawlinson
EXHIBIT 10.13
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (the "Agreement") is dated as of
June 1, 1999, by and among Jagen Pty, Ltd. ("Jagen") and Anthony Rawlinson
("Rawlinson" and together with Jagen, the "Purchasers"), Carl D. Perry ("Perry")
and U.S. Electricar, Inc., a California corporation (the "Company"). Capitalized
terms not otherwise defined herein shall have the meanings specified in the
Securities Purchase Agreement, dated of even date herewith by and between the
Company and the Purchasers (the "Purchase Agreement").
R E C I T A L S:
A. This Agreement shall become effective on the date of, and
simultaneously with, the Closing (the "Effective Date");
B. On the Effective Date Jagen acquired 70,000,000 shares of
the Company's Common Stock (the "Shares") and a Convertible Note the principal
amount of which is convertible into 13,333,334 Shares and a Warrant to purchase
41,666,666 Shares (the "Warrant Shares") and Rawlinson agreed to extend a loan
for $500,000 upon the Subsequent Closing, to be evidenced by a Convertible Note
the principal amount of which is convertible into 16,666,666 Shares and a
Warrant to purchase 8,333,334 Warrant Shares;
C. The parties hereto desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of the Shares (as defined below), to
provide for certain rights and obligations in respect to the Shares and by the
Company and Perry, all as hereinafter provided;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms have the
following meanings:
"Agreement" shall have the meaning set forth in the preamble.
"Affiliate" shall mean, with respect to any specified Person,
any other Person directly or indirectly controlling, controlled by or under
direct or indirect common control with such specified Person. For the purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.
Without limiting the foregoing, (i) all directors and officers of a Person that
is a corporation, and all managing members of a Person that is a limited
liability company, shall be deemed Affiliates of such Person for all purposes
hereunder, and (ii) in the case
<PAGE>
of an individual, Affiliate shall include (a) members of such specified Person's
immediate family (as defined in Instruction 2 of Item 404(a) of Regulation S-K
under the Securities Act) and (b) trusts, the trustee and all beneficiaries of
which are such specified Person or members of such Person's immediate family as
determined in accordance with the foregoing clause (a).
"Appropriately Adjusted" shall mean appropriately adjusted for
stock splits, stock dividends, combinations, recapitalizations, and the like.
"Approved Plan" shall mean a stock option or other equity
participation plan for the Company's employees which has been approved by a
majority of the Board of Directors and the shareholders of the Company. The
Company's existing Stock Option Plans as identified in the Company's filings
with the Securities and Exchange Commission ("SEC Filings") shall constitute an
Approved Plan hereunder.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Business Day" shall mean a day other than a Saturday or
Sunday or any federal holiday.
"Charter Documents" shall mean the Amended and Restated
Articles of Incorporation and By-Laws of the Company, each as filed as Exhibits
to SEC Filings available on EDGAR or otherwise provided to the Purchasers.
"Company" shall have the meaning set forth in the preamble.
"Convertible Notes" shall mean the Secured Convertible
Promissory Notes issued by the Company to Jagen and Rawlinson.
"Effective Date" shall have the meaning set forth in the
recitals.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.
"Exempt Transfer" shall mean(i) Transfers by a Purchaser
directly or indirectly to, or for the benefit of, himself, his spouse, parents,
siblings, children, grandchildren, other close relatives, or any of the
foregoing of an Affiliate, to another Purchaser or to a legally organized
charitable organization; (ii) Transfers by a Purchaser to his heirs, executors,
personal representatives or other assigns as a result of his death, if
applicable; (iii)Transfers after the second anniversary of the Effective Date so
long as Purchaser is not in default under the provisions of this Agreement; (iv)
Transfers after the Company has become listed on a Permitted Exchange (as
defined below); (v) Transfers approved by a disinterested majority of the Board
of Directors, including but not limited to Transfers in connection with a sale
or merger of the Company approved by a disinterested majority of the Board of
Directors; or (vi) with respect to Perry, any Transfer of Shares other than the
Shares acquired from the Itochu Corporation (the "Itochu Shares"), provided,
however that the Itochu Shares may be transferred under paragraph (v) above.
<PAGE>
"Itochu Debt" shall mean all debt covered by and perfected
pursuant to those two certain UCC-Financing Statements identified by file
numbers 99082C0625 and 99082C0635 as filed with the California Secretary of
State on March 22, 1999.
"Permitted Exchange" shall mean the New York Stock Exchange,
the American Stock, the Nasdaq National Market or the Nasdaq Small Cap Market.
"Person" shall mean an individual or a corporation,
partnership, limited liability company, trust, or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Preemptive Rights Notice" shall have the meaning set forth in
Article III(b).
"Pro Rata Share" shall mean the percentage X/Y where "X"
equals the number of Shares that are owned immediately prior to the proposed
Transfer by Purchaser and "Y" equals the number of issued and outstanding Shares
in the Company on a fully diluted basis immediately prior to the triggering
event.
"Public Offering" shall mean a public offering of common stock
by the Company (other than (i) pursuant to a registration statement on Form S-8
or otherwise relating to equity securities issuable exclusively under an
Approved Plan, or (ii) pursuant to a merger, consolidation or reorganization).
"Purchase Agreement" shall have the meaning set forth in the
recitals.
"Purchasers" shall have the meaning set forth in the preamble.
"Registrable Securities" shall mean (i) the Shares purchased
under the Purchase Agreement or loan balances converted into Shares pursuant to
promissory notes contemplated thereby or (ii) any other shares of Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of (including
but not limited to shares of Common Stock issued upon a stock split), such
Shares; provided, however, that the foregoing definition shall exclude in all
cases Registrable Securities held by a person other than a Transferee.
Notwithstanding the foregoing, Shares shall only be treated as Registrable
Securities if and so long as they have not been (A) sold to or though a broker
or dealer or underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions, and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale.
"SEC" shall mean the Securities and Exchange Commission.
"Qualified Public Offering" shall mean a Public Offering in
which (i) the gross proceeds to the Company from the shares of Common Stock sold
are at least $10 million, (ii) the minimum public offering price is at least
Twenty Cents( $0.20) per share (Appropriately
<PAGE>
Adjusted), and (iii) immediately after such offering the Common Stock of the
Company is listed for trading on a Permitted Exchange.
"Qualified Reorganization" shall mean a merger or
consolidation with or into another corporation or a sale of the shares of this
Company's Common Stock or a sale of all or substantially all of this Company's
properties and assets in which the shareholders of this Company receive cash or
marketable securities equal to a per share valuation of at least Twenty cents
($0.20) per share (Appropriately Adjusted).
"Remaining Shares" shall have the meaning set forth in Section
2.5.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Shares" shall mean, collectively, (a) all of the shares of
any class of capital stock of the Company including, without limitation, the
Common Stock, the Preferred Stock and any shares which may be issued by reason
of stock splits, reverse stock splits, stock dividends or other
recapitalizations of the Company, (b) all shares issuable under options,
warrants, convertible promissory notes and other rights of any kind to purchase
any class of such capital stock, and (c) all shares issuable under securities
convertible into or exchangeable for any of the securities described in clause
(a) or clause (b). Shares with respect to a Purchaser shall also include the
Common Shares and Warrant Shares and any Shares now owned or hereafter acquired
by a Purchaser, including any interest of a spouse or Affiliate of a Purchaser
in any of the Shares, whether that interest is asserted pursuant to marital
property laws, contract or otherwise. Notwithstanding the foregoing, Shares
shall not include the Warrant Shares for purposes of determining a Purchaser's
Pro Rata Share under the preemptive rights established in Article III, and shall
not include the Itochu Shares after they are Transferred in an Exempt Transfer.
"Term" shall mean a period of not less than five years from
the date of this Agreement, which period shall terminate when the Investors or
Transferees own Shares representing less than five percent (5%) of the
outstanding Shares of the Corporation or when seventy-five percent (75%) of the
Shares of the Investors or Transferees have been registered pursuant to Article
V.
"Transfer" shall mean (i) when used as a noun: any direct or
indirect transfer, sale, assignment, pledge, hypothecation, encumbrance, gift,
bequest, devise, descent or other disposition and (ii) when used as a verb: to
directly or indirectly, whether voluntary or by operation of law, transfer,
sell, assign, pledge, hypothecate, encumber, gift, bequest, devise, descent or
otherwise dispose of.
"Transferee" shall mean any Person to whom Shares have been
Transferred in compliance with the terms of this Agreement.
<PAGE>
ARTICLE II.
RESTRICTIONS ON TRANSFERS /SHARE ACQUISITIONS
Section 2.1 Transfers in Contravention of this Agreement. Any
attempt to Transfer, or purported Transfer of, any Shares in violation of the
terms of this Agreement shall be null and void and neither the Company nor any
transfer agent shall register upon its books any such Transfer. A copy of this
Agreement shall be filed with the Secretary of the Company and kept with the
records of the Company.
Section 2.2 Permitted Transfers. The Purchasers shall not, and
Perry in the case of the Itochu Shares, shall not Transfer any Shares (other
than Transfers to the Company) except for Exempt Transfers and with respect to
Exempt Transfers under clauses (i) through (iv) of such definition only if (a)
the certificates representing such Shares issued to the Transferee bear the
legend provided in Section 2.3, if required by such Section, and (b) the
Transferee (if not already a party hereto) has executed and delivered to each
other party hereto, as a condition precedent to such Transfer, an instrument or
instruments, reasonably satisfactory to such parties, confirming that the
Transferee agrees to be bound by the terms of this Agreement in the same manner
as such Transferee's transferor, except as otherwise specifically provided in
this Agreement.
Section 2.3 Legend. Each Purchaser hereby agrees that each
outstanding certificate or instrument representing Shares issued or issuable to
it or any certificate issued in exchange for or upon conversion of any similarly
legended certificate, shall bear a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE. OTHER THAN IN CONNECTION
WITH TRANSFERS TO AFFILIATES, THE HOLDER OF THESE SHARES MAY BE
REQUIRED TO DELIVER TO THE COMPANY, IF THE COMPANY SO REQUESTS, AN
OPINION OF COUNSEL (REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO
THE COMPANY) TO THE EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT (OR QUALIFICATION UNDER STATE SECURITIES LAWS) IS
AVAILABLE WITH RESPECT TO ANY TRANSFER OF THESE SHARES THAT HAS NOT
BEEN SO REGISTERED (OR QUALIFIED).
THE COMPANY IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. A COPY
OF THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF EACH CLASS AND
SERIES WILL BE PROVIDED TO EACH STOCKHOLDER WITHOUT CHARGE, UPON
WRITTEN REQUEST.
THE SHARES REPRESENTED BY THIS CERTIFICATE ALSO ARE SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND ON VOTING RIGHTS AND
OBLIGATIONS, TO WHICH ANY TRANSFEREE AGREES BY HIS ACCEPTANCE
<PAGE>
HEREOF, AS SET FORTH IN THE SHAREHOLDERS' AGREEMENT, DATED AS OF JUNE
1, 1999. NO TRANSFER OF SUCH SHARES WILL BE MADE ON THE BOOKS OF THE
COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF
SUCH AGREEMENT AND BY AN AGREEMENT OF THE TRANSFEREE TO BE BOUND BY THE
RESTRICTIONS SET FORTH IN SUCH AGREEMENT. THE COMPANY WILL MAIL A COPY
OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE UPON THE
COMPANY'S RECEIPT OF A WRITTEN REQUEST THEREFOR.
Section 2.4 Acquisitions. Except pursuant to the Purchase
Agreement, the Convertible Notes, the exercise of Warrants issued under the
Convertible Notes or a Purchaser's preemptive rights set forth in Article III
below, a Purchaser shall not acquire any Shares before the second anniversary of
the date of this Agreement without the consent of this Company's Board of
Directors.
ARTICLE III.
PREEMPTIVE RIGHTS
(a) Until the Company is listed on a Permitted Exchange, if
the Company shall issue any (i) shares of capital stock, (ii) rights, options or
warrants directly or indirectly to purchase shares of its capital stock or (iii)
securities convertible directly or indirectly into such capital stock (other
than (A) any such equity or any such rights to acquire equity which are issued
or issuable and outstanding as of the date of this Agreement, (B) any stock
options or equity issued or issuable in connection with any stock option plan or
other compensatory plan approved by the Board of Directors for the benefit of
employees, officers, directors or consultants of the Company, or (C) pursuant to
a merger, consolidation or acquisition of assets or technology or in connection
with any strategic relationship approved by the Board of Directors), then each
Purchaser shall be entitled to participate in such issuance on the same terms
and conditions, on a Pro Rata Share basis in respect of such Purchaser's Shares,
so that following such issuance, each Purchaser, if it has elected to acquire
the new securities to be issued, will have (or in the case of the issuance of
options, warrants, rights or convertible securities, have the right to acquire)
the same percentage of beneficial ownership of the Common Stock of the Company
as such Purchaser had by reason of its ownership of Shares (excluding the
Warrant Shares) immediately prior to such issuance.
(b) The Company shall provide a written notice (the
"Preemptive Rights Notice") of any such issuance to each Purchaser, and each
Purchaser may elect to purchase such securities in any such issuance by giving
written notice to the Company together with payment in full within fifteen (15)
Business Days following the date of the Preemptive Rights Notice. If, subsequent
to the date of the Preemptive Rights Notice, the Company alters the price or
other significant terms and conditions of the offering that a reasonable
investor would consider material to the decision to purchase such securities, or
the Company has not sold such securities within 90 days after the date of the
Preemptive Rights Notice, the Company shall provide another Preemptive Rights
Notice to each Purchaser with respect to any subsequent issuance and will
otherwise comply with the provisions of this Article III to the extent
applicable to such issuance.
<PAGE>
(c) The rights set forth in this Article III shall also
terminate upon the consummation of a Qualified Public Offering or Qualified
Reorganization. Notwithstanding the foregoing, the Company shall not be required
to offer or issue any shares to the Purchaser under paragraph III(a) above if
counsel for the Company reasonably concludes that there is not an available
securities law exemption for an offer or issuance to the Purchaser.
ARTICLE IV.
CORPORATE GOVERNANCE AND VOTING
(a) Until a Qualified Public Offering or Qualified
Reorganization, the Purchasers and their Transferees shall have the right to
submit one designee and a majority of the board of directors shall submit the
remaining designees to be (i) elected to the Corporation's Board of Directors
until the Corporation's next shareholder's meeting in the case of a vacancy on
the board of directors, (ii) nominated, recommended for election by the Board of
Directors of the Corporation in the case of board seats to be filled in a
shareholders' meeting and (iii) included for election in the Corporation's
future proxy statements. Perry, the Purchasers and their Transferees shall vote
their Shares in favor of such designees.
(b) Until a Qualified Public Offering or Qualified
Reorganization, so long as the Purchasers or their Transferees shall own
beneficially and of record at least 75,000,000 Shares (Appropriately Adjusted),
and so long as he is willing to serve, Perry shall vote their Shares in favor of
Anthony Rawlinson as the Chairman of the Corporation's Board of Directors.
(c) Each Purchaser, its Transferees and Perry shall vote all
of the Shares they own beneficially or of record in favor of the removal (with
or without cause) of any director designated by the Board of Directors if a
majority of the Board of Directors then in office request such director's
removal in writing for any reason. None of Purchasers, their Transferees and
Perry shall vote the Shares they own beneficially or of record in favor of the
removal (with or without cause) of any director unless such removal shall be at
the request of the Board of Directors or the Purchasers, as the case may be, who
nominated such director. Any vacancy created or existing on the Company's Board
of Directors shall be filled by a successor Director who shall be designated and
elected in the manner by which his or her predecessor was designated and elected
as provided above.
(c) Until a Qualified Reorganization, during the Term of this
Agreement, the Corporation shall not increase the size of the board of directors
of the Corporation above seven (7) members without the consent of a majority in
interest of the Purchasers and their Transferees.
(d) Each Purchaser and its Transferees shall refrain from
voting the Shares held beneficially or of record by it in favor of, and shall
vote such Shares against any (i) sale, transfer or other assignment or
hypothecation of this Company's assets or merger, reorganization or similar sale
of this Company or (ii) amendment, modification, change or termination to any
provision of this Company's Charter Documents unless such action is recommended
or approved by a majority of the Board of Directors then in office or pursuant
to a unanimous written consent of the Board of Directors.
<PAGE>
(e) Perry shall refrain from (i) demanding payment for or (ii)
foreclosing on the Company's assets pursuant to the Itochu Debt without the
consent of a majority in interest of the Purchasers and their Transferees so
long as the Purchasers and their Transferees own 25,000,000 or more Shares
(Appropriately Adjusted) during the Term of this Purchase Agreement.
ARTICLE V.
REGISTRATION RIGHTS
Section 5.1 Request for Registration.
(a) If the Company shall receive at any time after the second
anniversary of the date of this Agreement and during the Term of this Agreement,
at a time when the Shares are listed on a Permitted Exchange, a written request
from the Purchasers or their Transferees that the Company file a registration
statement under the Securities Act covering the registration of at least fifty
percent (50%) of the Registrable Securities then outstanding (or a lesser
percent if the anticipated aggregate offering price, net of underwriting
discounts and commissions, would exceed $10,000,000), then the Company shall,
within twenty (20) days of the receipt thereof, give written notice of such
request to all Purchasers or their Transferees and shall, subject to the
limitations of subsection 5.1(b), use its best efforts to effect as soon as
practicable, the registration under the Securities Act of all Registrable
Securities which the Purchasers or their Transferees request to be registered
within thirty (30) days of the mailing of such notice by the Company.
(b) If the Purchasers or their Transferees initiating the
registration request hereunder ("Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 5.1 and the Company shall include such information in the written
notice referred to in subsection 5.1(a). In such event, the right of any
Purchaser or Transferee to include Registrable Securities in such registration
shall be conditioned upon such Purchaser's or Transferee's participation in such
underwriting and the inclusion of such Purchaser's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Purchaser or Transferee) to the extent provided
herein. All Initiating Holders, Purchasers and Transferees proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in subsection 5.1(e)) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 5.1, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Purchasers or Transferees holding
Registrable Securities which would otherwise be underwritten pursuant thereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated in proportion (as nearly as practicable) to the
amount of Registrable Securities of the Company held by each Purchaser or
Transferee; provided, however, that the number of shares of Registrable
Securities to be included in such underwriting shall not be reduced unless all
other securities are first entirely excluded from the underwriting.
<PAGE>
(c) Notwithstanding the foregoing, if the Company shall furnish to
Initiating Holders requesting a registration statement pursuant to this Section
5.1 a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders; provided, however, that the Company may not
utilize this right more than once in any twelve (12) month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 5.1:
(i) after the Company has effected in the aggregate two (2)
registrations pursuant to this Section 5.1 and Section 5.3 and such
registrations have been declared or ordered effective;
(ii) during the period starting with the date ninety (90) days
prior to the Company's good faith estimate of the date of filing of, and ending
on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 5.2 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 5.3 below.
Section 5.2 Company Registration.
If (but without any obligation to do so) the Company proposes to
register (including for this purpose a registration effected by the Company for
shareholders other than the Purchasers) any of its stock under the Securities
Act in connection with the public offering of such securities (other than a
registration on Form S-4, Form S-8 or any successors forms, or any registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each
Purchaser or its Transferees written notice of such registration. Upon the
written request of each Purchaser or its Transferees given within fifteen (15)
days after mailing of such notice by the Company, the Company shall, subject to
the provisions of Section 5.7, cause to be registered under the Securities Act
all of the Registrable Securities that such Purchaser or its Transferees has
requested to be registered.
Section 5.3 Form S-3 Registration.
In case the Company shall receive from any Purchasers or their
Transferees a written request that the Company effect a registration on Form S
3, and any related qualification or
<PAGE>
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Purchasers and their
Transferees; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of the Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Purchaser or Transferee joining in
such request given within fifteen (15) days after receipt of such written notice
from the Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 5.3:
(i) if Form S-3 is not available for such offering;
(ii) if the Purchasers or their Transferees propose to sell
Registrable Securities at an aggregate price to the public of less than
$1,000,000;
(iii) if the Company shall furnish a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than one hundred twenty (120)
days after receipt of the request under this Section 5.3; provided, however,
that the Company shall not utilize this right more than once in any twelve (12)
month period;
(iv) if the Company has already effected two registrations on
either Form S-3 or Form S-1 (or any combination thereof) for the Purchasers or
their Transferees pursuant to Section 5.1 or this Section 5.3;
(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance;
(vi) during the period ending one hundred eighty (180) days
after the effective date of a registration statement subject to Section 5.1 or
5.2;
(vii) prior to the second anniversary of the date of this
Agreement and thereafter, if the Shares are not listed on a Permitted Exchange,
provided, however that this exception does not apply to rights of the Purchasers
or their Transferees under Section 5.2 hereof; or
(viii) after all of the Registrable Securities shall have been
lawfully sold by the holder thereof to the public.
<PAGE>
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Purchasers or their Transferees. Registration effected pursuant to this
Section 5.3 shall not be counted as demands for registration registrations
effected pursuant to Section 5.2.
Section 5.4 Obligations of the Company.
Whenever required under this Section 5 to effect the registration of
any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use all reasonable efforts to cause such
registration statement to become effective, and keep such registration statement
effective for up to one hundred twenty (120) days. The Company shall not be
required to file, cause to become effective or maintain the effectiveness of any
registration statement (other than a registration statement on Form S-3 pursuant
to Section 5.3) that contemplates a distribution of securities on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for up to one hundred twenty (120) days.
(c) Furnish to the Purchaser or its Transferees such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonable requested by the Purchaser or its
Transferees, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Purchaser or its
Transferee participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notify each Purchaser or its Transferee of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make
<PAGE>
the statements therein not misleading in the light of the circumstances then
existing, such obligation to continue for one hundred twenty (120) days and file
any supplements or amendments as required under Section 5.4(b) to update the
prospectus for such event.
(g) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange or market on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Use its best efforts to furnish, at the request of any Purchaser or
its Transferee requesting registration of Registrable Securities pursuant to
this Section 5, on the date that such Registrable Securities are delivered to
the underwriters for sale in connection with a registration pursuant to this
Section 5, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective:
(i) an opinion, dated such date, of the counsel representing
the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Purchaser or its Transferees requesting
registration of Registrable Securities and
(ii) a letter dated such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Purchaser or
its Transferees requesting registration of Registrable Securities.
(j) To the extent reasonably necessary to effect the registration of
any Registrable Securities, make available for inspection by each seller of
Registrable Securities, any underwriter participating in any distribution
pursuant to such registration statement, and any attorney, accountant or other
agent retained by such seller or underwriter, all pertinent financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
Section 5.5 Furnish Information.
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 5 with respect to the Registrable
Securities of any selling Purchaser or its Transferee that such Purchaser or its
Transferee shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Purchaser or its Transferee's Registrable Securities. The Company shall have no
obligation with respect to any registration requested pursuant to Section 5.1 or
Section 5.3 of this Agreement if, as a result of the
<PAGE>
application of the preceding sentence, the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 5.1(a) or subsection
5.3(b)(2), whichever is applicable.
Section 5.6 Expenses of Registration.
(a) All expenses (other than underwriting discounts and commissions)
incurred in connection with registrations, filings or qualifications pursuant to
Section 5.1, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel for the selling Purchaser or its Transferees selected by them with the
approval of the Company not to exceed $15,000 for such counsel, which approval
shall not be unreasonably withheld, shall be borne by the Company; provided,
however, that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 5.1 if the registration
request is subsequently withdrawn at the request of the Purchaser or its
Transferees of a majority of the Registrable Securities to be registered (in
which case all participating Purchaser or its Transferees shall bear such
expenses), unless the Purchaser or its Transferees of a majority of the
Registrable Securities agree to forfeit their right to one demand registration
pursuant to Section 5.1 or Section 5.3 as the case may be, or unless the
registration request is withdrawn due to a material adverse change in the
Company's financial condition or business which was not known by the selling
Purchaser or its Transferees at the time the registration was requested.
(b) All expenses (other than underwriting discounts and commissions)
incurred in connection with two registrations, filings or qualifications of
Registrable Securities pursuant to Section 5.2 for each Purchaser or its
Transferee, including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel for the selling Purchaser or its Transferees selected by them with the
approval of the Company, not to exceed $5,000 for such counsel, which approval
shall not be unreasonably withheld, shall be borne by the Company.
(c) All expenses (other than underwriting discounts and commissions)
incurred in connection with a registration requested pursuant to Section 5.3,
including (without limitation) all registration, filing, qualification,
printers' and accounting fees and the reasonable fees and disbursements of one
counsel for the selling Purchaser or its Transferee or Purchaser or its
Transferees selected by them with the approval of the Company, not to exceed
$10,000 for such counsel, which approval shall not be unreasonably withheld, and
counsel for the Company shall be borne by the Company.
(d) All underwriting discounts and commissions incurred in connection
with registrations in connection with each registration statement under Section
5 shall be borne by the participating sellers (and the Company, if the Company
is a seller) in proportion to the number of shares sold by each, or as they
otherwise may agree.
<PAGE>
Section 5.7 Underwriting Requirements.
In connection with any offering involving an underwriting of shares of
the Company's capital stock, the Company shall not be required under Section 5.2
to include any of the Purchaser or its Transferees' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by Purchaser or its Transferees to be included
in such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders)
but in no event shall (i) any shares being sold by a Purchaser or its Transferee
exercising a demand registration right set forth in Section 5.1 be excluded from
such offering and (ii) the amount of securities of the selling Purchaser or its
Transferees included in the offering be reduced below ten percent (10%) of the
total amount of securities included in such offering, unless such offering is
the first public offering of the Company's securities made after the date of
this Agreement, in which case, except as provided in (i) the selling
shareholders may be excluded if the underwriters make the determination
described above and no other shareholder's securities are included. For purposes
of the preceding parenthetical concerning apportionment, for any selling
shareholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling shareholder," and any pro rata reduction with
respect to such "selling shareholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling shareholder," as defined in this sentence.
Section 5.8 Delay of Registration.
No Purchaser or its Transferee shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 5.
Section 5.9 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 5:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Purchaser or its Transferee, any underwriter (as defined in the
Securities Act) for such Purchaser or its Transferee and each person, if any,
who controls such Purchaser or its Transferee or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
<PAGE>
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto,
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law;
and the Company will pay to each such Purchaser or its Transferee, underwriter
or controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 5.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable to any Purchaser
or its Transferee, underwriter or controlling person for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Purchaser or its Transferee, underwriter or controlling person.
(b) To the extent permitted by law, each selling Purchaser or
Transferee will indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter, any other Purchaser or Transferee selling securities in such
registration statement and any controlling person of any such underwriter or
other Purchaser or Transferee, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Purchaser or
Transferee expressly for use in connection with such registration; and each such
Purchaser or Transferee will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 5.9(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 5.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Purchaser or Transferee, which
consent shall not be unreasonably withheld; provided, that in no event shall any
indemnity under
<PAGE>
this subsection 5.9(b) exceed the net proceeds from the offering received by
such Purchaser or Transferee, except in the case of willful fraud by such
Purchaser or Transferee.
(c) Promptly after receipt by an indemnified party under this Section
5.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 5.9, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
5.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 5.9.
(d) If the indemnification provided for in this Section 5.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations;
provided, that in no event shall any contribution by a Purchaser or Transferee
under this Subsection 5.9(d) exceed the net proceeds from the offering received
by such Purchaser or Transferee, except in the case of willful fraud by such
Purchaser or Transferee. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control; provided, however, that except as expressly provided in the
underwriting agreement, the obligations of the persons selling shares pursuant
to such underwriting agreement to indemnify the underwriters shall not be
considered to conflict with the
<PAGE>
indemnification obligations between the Company and the Purchasers or
Transferees under this Section 5.9.
(f) The obligations of the Company and Purchasers or Transferees under
this Section 5.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 5, and otherwise.
Section 5.10 Reports Under Securities Exchange Act of 1934.
With a view to making available to the Purchasers or Transferees the
benefits of Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Purchaser or its Transferees
to sell securities of the Company to the public without registration or pursuant
to a registration on Form S 3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Purchasers or Transferees to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of the
fiscal year in which the first registration statement filed by the Company for
the offering of its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and Exchange Act; and
(d) furnish to any Purchaser or Transferee, so long as the Purchaser
owns any Registrable Securities or the Transferee owns at least 50,000,000
shares of Registrable Securities (Appropriately Adjusted), forthwith upon
request (i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144 (at any time after ninety (90) days after
the effective date of the first registration statement filed by the Company),
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S 3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Purchaser
or its Transferees of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
Section 5.11 Termination of Registration Rights. Notwithstanding the
foregoing provisions of this Article V, the rights to registration and the
designation of Shares as Registrable Securities shall terminate as to any
particular securities and any particular Purchaser or Transferee when (i) all
such securities shall have been lawfully sold by the holder thereof to the
public, (ii) on
<PAGE>
the fifth anniversary of the date the Shares are listed on a Permitted Exchange
or (iii) on such date as such securities may both be sold pursuant to Rule 144
without registration during any three (3) month period and are listed on a
Permitted Exchange.
Section 5.12 Assignability of Registration Rights. Notwithstanding
anything to the contrary in this Article V, the registration rights set forth in
this Article V are only assignable to the original Transferee of a Purchaser,
and only provided that such assignee Transferee promptly agrees in writing to be
bound by the terms and conditions of this Agreement.
ARTICLE VI.
ADDITIONAL OBLIGATIONS OF THE CORPORATION
Section 6.1 Increase in Authorized Shares. Until the second anniversary
of this Agreement, the Corporation shall not increase the authorized number of
shares of Common Stock of the Corporation above 500,000,000 (Appropriately
Adjusted) without the consent of a majority in interest of the Purchasers or
their Transferees.
Section 6.2 Financial Statements. The Corporation shall provide current
financial statements to the Purchasers within thirty (30) Business Days of a
reasonable request for such financial statements.
Section 6.3 Filings. The Corporation shall provide reasonable
assistance to the Purchasers or their Transferees, at the expense of the
Corporation, in filing such reports and filings as are required under Sections
13(d), 13(g) and 16 of the Securities Act of 1934, as amended, and the rules
promulgated thereunder.
Section 6.4 Inspection. Until a Qualified Reorganization and only
during the Term of this Agreement, Company shall permit a Purchaser or a
Transferee holding all of a Purchaser's Shares acquired under the Purchase
Agreement and the promissory notes contemplated thereby, so long as such
Transferee continues to hold at least 50% of the Shares acquired from Purchaser,
at such person's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Purchaser or Transferee; provided, however, that the Company
shall not be obligated pursuant to this Section 6.4 to provide access to any
information which it reasonably considers to be a trade secret or similar
confidential information.
ARTICLE VII.
MISCELLANEOUS
Section 7.1 No Inconsistent Agreements. Each party hereto
hereby consents to the termination of any other prior written or oral agreement
or understanding restricting, conditioning or limiting the ability of any party
to transfer or vote Shares other than the Carl Perry Equity Side Letter executed
in May 1999. Each Purchaser represents and agrees that, as of the
<PAGE>
Effective Date, there is no (and from and after the Effective Date it will not,
and will cause its Affiliates not to, enter into any) agreement with respect to
any securities of the Company or any of its Affiliates (and from and after the
Effective Date Purchaser shall not take, or permit any of its Affiliates to
take, any action) that is inconsistent in any material respect with the
provisions in this Agreement.
Section 7.2 Recapitalization, Exchanges, etc. If any capital
stock or other securities are issued in respect of, in exchange for, or in
substitution of, any Shares by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the Shares or any other change in capital
structure of the Company, then appropriate adjustments shall be made with
respect to the relevant provisions of this Agreement so as to fairly and
equitably preserve, as far as practicable, the original rights and obligations
of the parties hereto under this Agreement and the terms "Common Stock, and
"Shares," each as used herein, shall be deemed to include shares of such capital
stock or other securities, as appropriate. Without limiting the foregoing,
whenever a particular number of Shares is specified herein, such number shall be
adjusted to reflect stock dividends, stock-splits, combinations or other
reclassifications of stock or any similar transactions.
Section 7.3 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, and their
respective successors and permitted assigns; provided that (i) neither this
Agreement nor any rights or obligations hereunder may be transferred or assigned
by the Company (except by operation of law in any merger or Qualified
Reorganization); (ii) neither this Agreement nor any rights or obligations
hereunder may be transferred or assigned by a Purchaser or Perry except to any
Person to whom it has Transferred Shares in compliance with this Agreement and
who has become bound by this Agreement pursuant to Section 2.2 hereof; and (iii)
the rights of the parties under Articles III and Articles V hereof may not be
assigned to any Person except as explicitly provided therein. If any party
hereto shall acquire additional Shares, such Shares shall, except as otherwise
expressly provided herein, be held subject to (and entitled to all the benefits
of) all of the terms of this Agreement, it being expressly understood that such
additional Shares are not subject to (i) Article III for determining a
Purchaser's Pro Rata Share or (ii) Article V for purposes of registration
rights.
Section 7.4 No Waivers; Amendments.
(a) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
(b) This Agreement may not be amended or modified, nor may any
provision hereof be waived, other than by a written instrument signed by (i) the
Company, (ii) the holders of 66% of the Shares held by Purchasers and their
direct or indirect Transferees and (iii) Perry or his Transferees.
<PAGE>
The parties hereto shall use their best efforts not to effect
any amendments to the Charter Documents that would circumvent the provisions of
this Section 7.4(b).
Section 7.6 Notices. Any notice, request or other
communication required or permitted hereunder will be in writing and shall be
deemed to have been duly given if personally delivered or if telecopied or
mailed by registered or certified mail, postage prepaid, at the respective
addresses of the parties as set forth below. Any party hereto may by notice so
given change its address for future notice hereunder. Notice will be deemed to
have been given when personally delivered or when deposited in the mail or
telecopied in the manner set forth above and will be deemed to have been
received when delivered.
(a) If to Jagen
9 Oxford Street
South Yarra 3141
Melbourne, Victoria
Australia
Telecopier 011-613-9826-5499
with a copy to:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121
Telecopier (619) 677-1477
Attention: Robert W. Ayling, Esq.
(b) if to Rawlinson
5 Shenton Way, #1301
UIC Building
Singapore 068808, Singapore
Telecopier (65) 220-5338
with a copy to:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121
Telecopier (619) 677-1477
Attention: Robert W. Ayling, Esq.
<PAGE>
(c) if to the Company
U.S. Electricar, Inc.
19850 South Magellan Drive
Torrance, California 90502
Attention: President
with a copy to:
Bay Venture Counsel, LLP
1999 Harrison Street, Suite 1300
Oakland, CA 94612
Attention: Donald C. Reinke, Esq.
Telecopier (510) 834-7440
Section 6.10 Consistency. In the event of a conflict between
this Agreement on the one hand and the Charter Documents or any agreement
relating to the securities of the Company on the other hand, the terms and
provisions of this Agreement shall be deemed to set forth the true intentions of
the parties (to the extent permitted by applicable law) and shall supersede the
terms of any other agreement.
Section 6.11 Confidentiality The Purchasers shall not at any
time (a) disclose the Company's business plans and objectives, financial
projections, marketing plans, technical data, patentable and unpatentable
designs, concepts, ideas, inventions, know-how and other trade secrets of the
Company (the Confidential Information") to any Person whatsoever, (b) examine or
make copies of any reports or other documents, papers, memoranda, or extracts
containing Confidential Information, nor (c) utilize for their own benefit or
for the benefit of any other party other than the Company any such Confidential
Information except:
(i) Information which such party can show was
rightfully in its possession at the time of disclosure by the Company.
(ii) Information which such party can show was
received from a third party who
lawfully developed the information independently of the Company or obtained such
information from the Company under conditions which did not require that it be
held in confidence.
(iii) Information which, at the time of disclosure,
is in the public domain.
Section 6.12 Applicable Law. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law.
Section 6.13 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. This Agreement may be executed by
facsimile.
<PAGE>
Section 6.14 Title and Subtitles. The titles of the Sections
and subsections of this Agreement are for the convenience of reference only and
are not to be considered in construing this Agreement.
Section 6.15 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the parties agree
to renegotiate such provision in good faith to achieve the closest comparable
terms as is possible. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
<PAGE>
SIGNATURE PAGE TO
SHAREHOLDERS' AGREEMENT
PURCHASER U.S. ELECTRICAR, INC.
JAGEN PTY, LTD.
By:/s/ Boris Liberman By:/s/ Carl Perry
-------------------------- ---------------------
(Signature) (Signature)
PURCHASER
ANTHONY N. RAWLINSON
/s/ Anthony N. Rawlinson
- ----------------------------
(Signature)
/s/ Carl Perry
- -----------------
CARL PERRY
EXHIBIT 10.14
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (the "Agreement") is entered into as
of June 1, 1999 by and among U.S. Electricar, Inc., a California corporation
(the "Company"), Jagen Pty Ltd., an Australian company, and Anthony Rawlinson
(each, a "Secured Party" and together, the "Secured Parties").
RECITAL
A. The Company wishes to borrow funds from the Secured Parties and is
willing to return such amounts to the Secured Parties in cash or in securities
as contemplated in Secured Convertible Promissory Notes in the form attached
hereto as Exhibit A and incorporated herein by this reference (the "Note").
B. The Secured Parties are willing to accept the Notes provided that
the Company and each Secured Parties enter into a Note, this Agreement, the
Purchase Agreement and such other documents as are contemplated thereby, and
that the Company grant each Secured Parties a security interest in the
collateral contemplated hereunder.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Grant of Security Interest. Subject to the terms and conditions of
this Agreement, the Company hereby grants to the Secured Parties a security
interest in all property which is in the Company's possession or control in any
matter or for any purpose, including, without limitation, the Company's right,
title and interest in the now owned and hereafter acquired assets described on
Exhibit A, and the proceeds, increase and products of such property, and all
property which the Company may receive on account of such property
(collectively, the "Collateral").
2. Obligation Secured. This Agreement shall secure the performance of
the Notes on the conditions set forth below.
3. Covenants of the Company. The Company hereby covenants and agrees
with the Secured Parties as follows:
3.1 Defense. The Company shall defend the Collateral against
any adverse claims or demands. The Company shall not sell, contract for sale,
discount, factor, pledge, grant or permit to arise or exist a security interest
in, license, or otherwise dispose of, encumber or impair the rights of the
Secured Parties to any of the Collateral out of the ordinary course of business
(it being understood that a portion of the Company's business includes licensing
and selling its technology to other parties) until each Note has been satisfied
without the prior written approval of the Secured Parties.
<PAGE>
3.2 Cooperation. The Company shall cooperate with the Secured
Parties to ensure that the Secured Parties obtain and maintain a fully perfected
security interest in the Collateral. Such cooperation shall include, without
limitation, assisting the Secured Parties with the giving of such notices as the
Secured Parties deem necessary or appropriate to inform third parties of the
Secured Parties' security interest in the Collateral, and executing from time to
time such additional documents and instruments, including any financing
statements under the UCC, if any, as may be requested by the Secured Parties to
perfect, continue or protect the security interest created by this Agreement, or
otherwise to achieve the purposes of this Agreement.
3.3 Notice of Claims. The Company shall promptly advise the
Secured Parties in writing of the initiation of any legal proceedings against
the Company or the threat thereof. The Company shall promptly notify Secured
Parties in writing of any event that affects the rights and remedies of Secured
Parties in relation to the Collateral, including, but not limited to, the levy
of any legal process against the Collateral and the adoption of any marketing
order, arrangement or procedure affecting the Collateral, whether governmental
or otherwise.
3.4 Discharge. The Company will pay and discharge promptly as
they become due and payable all taxes, assessments and other governmental
charges or levies imposed upon their income or upon any of their properties or
assets, or upon any part thereof, as well as all lawful claims of any kind
which, if unpaid, might by law become a lien or a charge upon the Collateral;
provided that the Company shall not be required to pay any such tax, assessment,
charge, levy or claim if the amount, applicability or validity thereof shall
currently be contested in good faith by appropriate proceedings promptly
initiated and diligently conducted.
3.5 Preserve Collateral. The Company shall keep the Collateral
separate and identifiable. The Company shall maintain the Collateral in good and
saleable condition, repair it as necessary and otherwise deal with the
Collateral in all such ways as are considered good practice by owners of like
property, use it lawfully and only as permitted by insurance policies, and
permit Secured Parties to inspect the Collateral at any reasonable time.
3.6 Deposit Proceeds. As to Collateral which is inventory or
accounts, the Company will, after an Event of Default under the Note, deposit
all cash proceeds as received in a demand deposit account designated by Secured
Parties, containing only such proceeds and deliver statements identifying units
of inventory disposed of, accounts which give rise to proceeds, all acquisitions
and returns of inventory, and all non-cash proceeds other than inventory
received in trade, as required by Secured Parties.
3.7 Collect Proceeds. As to Collateral which is accounts,
chattel paper, general intangibles and proceeds, the Company warrants,
represents and agrees that if an account debtor shall also be indebted to the
Company on another obligation, any payment made by such account debtor not
specifically designated to be applied on any particular obligation shall be
considered to be a payment on the account in which Secured Parties have a
security interest.
3.8 Insure Collateral. The Company will insure the Collateral
with the Secured Parties as loss payee in form and amounts, and against risks
and liability, satisfactory to the Secured Parties (to the extent customarily
maintained by businesses similar to the Company) and
-2-
<PAGE>
hereby assigns such policies to the Secured Parties and authorizes the Secured
Parties to make any claim thereunder and to receive payment of and endorse any
instrument in payment of any loss or return premium.
3.9 Pay Costs. The Company shall pay all reasonable costs and
expenses, including reasonable attorneys' fees, paid or incurred by the Secured
Parties to enforce this Agreement, to protect the security interest of the
Secured Parties in the Collateral, or to preserve, process, develop, maintain,
care for or insure the Collateral, or any part thereof.
3.10 Maintain Company. The Company shall not enter into an
agreement to merge with and into or consolidate with another entity or convey,
sell, lease or otherwise transfer substantially all of its assets at a time any
amounts are owed to Secured Parties under the Note. The Company will notify
Secured Parties immediately of any proposed change in the Debtor's name,
identity or corporate structure.
3.11 Fulfill Obligations. The Company shall use all
commercially reasonable efforts to fulfill its contractual obligations under the
Purchase Agreement and the documents contemplated thereby.
4. Representations and Warranties.
4.1 Representations and Warranties of the Company. The Company
represents and warrants to the Secured Parties as follows:
(a) The Company is duly organized, validly existing
and in good standing under the laws of California and has the power and
authority to own and operate its properties, to carry on its business as
currently conducted and as proposed to be conducted and to enter into and
perform this Agreement.
(b) This Agreement constitutes a legal, valid and
binding obligation of the Company enforceable in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.
(c) The execution and performance of this Agreement
has been duly authorized and will not constitute a breach of or a default under
the terms of the organizational documents of the Company or any material
agreement to which the Company is party or by which it is bound or restrictions
on transfer under applicable federal and state securities laws.
(d) Any officers, agents or representatives acting
for or on behalf of the Company in connection with this Agreement have been duly
authorized and are fully empowered to act in connection with this Agreement and
all matters related thereto.
(e) The Company has good and marketable title, free
and clear of any and all adverse claims, liens and encumbrances, to the
Collateral, free and clear of all covenants, conditions, restrictions, voting
trust arrangements, liens, charges, encumbrances, options and adverse claims or
rights whatsoever, except as specified in Schedule 5.1(e).
-3-
<PAGE>
(f) The Company recognizes that in an Event of
Default under the Note the Secured Parties may be unable to effect a public sale
of all or a part of the Collateral. The Company understands that private sales
so made may be at prices and on other terms less favorable to the Company than
if the Collateral were sold at public sales, and agrees that the Secured Parties
have no obligation to delay the sale of any of the Collateral. The Company
agrees that private sales made under the foregoing circumstances shall be deemed
to have been made in a commercially reasonable manner, if made at arms' length.
4.2 Representations and Warranties of the Secured Parties.
Each Secured Parties represents and warrants that:
(a) the Secured Party has had an opportunity to
discuss the Company's business, management and financial affairs with its
management and to obtain any additional information which the Secured Party has
deemed necessary or appropriate for deciding whether or not to accept the
Collateral as collateral for the Note, and has had an opportunity to receive,
review and understand the disclosures and information regarding the Company's
financial statements, capitalization and other business information as set forth
in Company's filings with the Securities and Exchange Commission which are all
incorporated herein by reference, together with all exhibits referenced therein.
(b) The Secured Party has such knowledge and
experience in financial and business matters, including investments in other
start-up companies, that it is capable of evaluating the merits and risks of the
Note, and it is able to bear the economic risk of such loan. Further, the
Secured Party has such knowledge and experience in financial and business
matters that he is capable of utilizing the information made available to him in
connection with the loan.
(c) If Secured Party is a corporation, partnership,
trust or estate: (i) the individual executing and delivering this Agreement on
behalf of the Secured Party has been duly authorized and is duly qualified to
execute and deliver this Agreement on behalf of Secured Party and (ii) the
signature of such individual is binding upon Secured Party.
4.3 Survival of Representations and Warranties. All of the
representations and warranties contained in this Agreement shall survive for so
long as any amounts are owed under the Note.
5. Additional Rights of Secured Parties.
5.1 Choice of Remedies. After an Event of Default under the
Note and any waiting or notice periods required by California law, the Secured
Parties shall have the right to do any one or more of the following:
(a) declare any indebtedness under the Notes
immediately due and payable.
(b) Enter the premises of the Company and enforce and
exercise all of the rights and remedies of secured parties under the Uniform
Commercial Code of the State of California.
-4-
<PAGE>
(c) Require the Company to assemble the Collateral
and sell the Collateral, in one or more sales, for cash or on credit or to a
wholesaler, retailer or user of the Collateral, at a private or public auction,
all of which shall be deemed to be commercially reasonable.
(d) Take such measures as the Secured Parties may
consider necessary or desirable to preserve, process, develop, maintain or
protect the Collateral or any portion thereof.
(e) Effect the transfer of any securities included in
the Collateral into the name of the Secured Parties.
(f) Require the Company to place the interest of the
Secured Parties as a lienholder on the certificate of title (or other evidence
of ownership) of any vehicle owned by the Company or with respect to which the
Company holds a beneficial interest.
(g) File or demand the Company file any forms or
other documents required to be filed with the United States Patent and Trademark
Office, United States Copyright Office, or any filings in any foreign
jurisdiction required to secure or protect the Secured Parties' interest in the
Collateral.
(h) Notify an account debtor or the obligor on an
instrument, if any, to make payment to the Secured Parties, whether or not the
Secured Parties were theretofore making collections on the account or
instrument.
(i) Take control of any and all proceeds to which the
Secured Parties are entitled.
5.2 No Notice. The Secured Parties shall have no duty or
obligation whatsoever to make or give any presentment, demand for performance,
notice of non-performance, notice of protest or notice of dishonor in connection
with the Collateral or to take any other action to preserve, protect or defend
any right, title or interest of the Company with respect to any of the
Collateral. The Company waives: (a) any right to require the Secured Parties to
proceed against any person before any other, or to pursue any other remedy; (b)
any right to the benefit of or to direct the application of the Collateral until
the obligations secured hereunder have been satisfied in full; (c) any right of
subrogation to any lender until the Notes have been satisfied; or (d) any right
to require the Secured Parties to (i) exhaust the Collateral, (ii) apply the
Collateral in any particular order, (iii) obtain any bond under claim and
deliver proceedings or retain possession of and not dispose of the Collateral
taken under claim and delivery proceedings until after trial or final judgment.
The Company further waives, to the fullest extent permitted by law, all rights
to notice for a judicial hearing prior to the time the Secured Parties takes
possession or dispose of the Collateral upon default as provided herein. The
Secured Parties shall not be obligated to make any sale of the Collateral or any
part of it if they determine not to do so, regardless of the fact that notice of
sale of the Collateral may have been given. After an Event of Default under the
Note the Secured Parties may, without notice or publication, adjourn a public or
private sale of the Collateral, or cause the same to be adjourned from time to
-5-
<PAGE>
time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned.
5.3 Discharge. In addition to all other rights given the
Secured Parties herein, the Secured Parties may, but shall not be obligated to,
discharge any or all taxes, liens, security interests or other encumbrances at
any time levied or placed upon the Collateral.
5.4 Insure Collateral. If the Company should fail after
reasonable request to deliver evidence of appropriate insurance to the Secured
Parties, the Secured Parties may, but shall have no duty to, obtain at the
Company's cost and expense, insurance naming the Secured Parties and/or the
Company as a payee, and the cost of such policy shall be secured by this
Agreement and repaid by the Company.
5.5 License. For purposes of enabling the Secured Parties to
exercise their rights and remedies hereunder, the Company hereby grants to the
Secured Parties an irrevocable, non-exclusive and assignable license
(exercisable without payment or royalty or other compensation to the Secured
Parties) to use, license or sublicense any Collateral that constitutes
intellectual property, to be exercisable by the Secured Parties solely after an
Event of Default under a Note.
6. Application of Proceeds.
6.1 Order. All proceeds of any sale of the Collateral by the
Secured Parties shall be applied as follows:
(a) first, to the payment of all reasonable fees and
expenses incurred by the Secured Parties, pro rata, in connection with any such
sale, including, but not limited to, the expenses of advertising the Collateral
to be sold, all court costs and reasonable fees of counsel for the Secured
Parties in connection therewith, and the payment of all reasonable costs and
expenses paid or incurred by the Secured Parties in connection with the exercise
of any right or remedy hereunder, to the extent that such advances, costs and
expenses shall not theretofore have been reimbursed to the Secured Parties;
(b) second, to the payment of accrued interest, if
any, on the Notes, pro rata; and
(c) third, to the payment of the outstanding
principal balance of the Notes, pro rata.
6.2 Surplus or Deficiency. Any surplus shall be delivered to
the Company. If there is any deficiency, the Company shall promptly pay it to
the Secured Parties on demand.
7. Duration of Security Interest. The grant of the security interest,
and all other terms and conditions of this Agreement as set forth herein, shall
terminate upon the Company's payment in full or conversion of all indebtedness
due under the Notes. On the date that such payment in full or conversion occurs,
the Secured Parties shall, within five (5) business days, execute and file
-6-
<PAGE>
such documents and instruments, including a termination statement under the UCC,
as may be required to terminate the Secured Parties' security interest in the
Collateral.
8. Notices. Any notice, request or other communication required or
permitted hereunder will be in writing and shall be deemed to have been duly
given if personally delivered or if telecopied or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth below. Any party hereto may by notice so given change its address for
future notice hereunder. Notice will be deemed to have been given when
personally delivered or when deposited in the mail or telecopied in the manner
set forth above and will be deemed to have been received when delivered.
(a) If to Jagen
9 Oxford Street
South Yarra 3141
Melbourne, Victoria
Australia
Telecopier 011 - 613 - 9826 - 5499
with a copy to:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121
Telecopier (619) 677-1477
Attention: Robert W. Ayling, Esq.
(b) if to Rawlinson
5 Shenton Way, #1301
UIC Building
Singapore 068808, Singapore
Telecopier 011 -65 - 220-5338
with a copy to:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121
Telecopier (619) 677-1477
Attention: Robert W. Ayling, Esq.
(c) if to the Company
U.S. Electricar, Inc.
19850 South Magellan Drive
-7-
<PAGE>
Torrance, California 90502
Telecopier (310) 527-7888
Attention: President
with a copy to:
Bay Venture Counsel, LLP
1999 Harrison Street, Suite 1300
Oakland, CA 94612
Attention: Donald C. Reinke, Esq.
Telecopier (510) 834-7440
9. Miscellaneous.
9.1 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
9.2 Governing Law. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law.
9.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument. This Agreement may be executed by
facsimile.
9.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.5 Attorney's Fees. If any action at law or in equity
(including arbitration) is necessary to enforce or interpret the terms of this
Agreement, the Secured Parties shall be entitled to reasonable attorney's fees,
costs and necessary disbursements in addition to any other relief to which they
may be entitled.
9.6 Amendments and Waivers. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. The waiver
of any default or event of default hereunder shall not be a waiver of any
subsequent default or event of default. The Secured Parties' acceptance of
partial or delinquent payments or the Secured Parties' failure to exercise any
rights they may have shall not waive any obligation of the Company or any rights
of the Secured Parties or otherwise modify this Agreement, or waive any other
similar matter. All remedies, either under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
-8-
<PAGE>
9.7 Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or threatened
breach by the Company to this Agreement of any covenant, obligation or other
provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (b) an injunction restraining such breach or threatened
breach.
9.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith to achieve the closest comparable terms
as is possible. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (a) such provision shall be
excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of the
Agreement shall be enforceable in accordance with its terms.
9.9 Venue. Any action, arbitration, or proceeding arising
directly or indirectly from this Agreement or any other instrument or security
referenced herein shall be litigated or arbitrated, as appropriate, in the State
of California.
9.10 Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement between the parties hereto
pertaining to the subject matter hereof, and any and all other written or oral
agreements regarding the subject matter hereof existing between the parties
hereto are expressly canceled.
9.11 Exculpation Among Secured Parties. Each Secured Party
acknowledges that it is not relying upon any person, firm or corporation, other
than the Company, in making its investment or decision to accept the Collateral
as security for the Notes.
IN WITNESS WHEREOF, the Company and the Secured Parties have caused
this Agreement to be executed as of the date first above written.
COMPANY: SECURED PARTY:
U.S. ELECTRICAR, INC. JAGEN PTY LTD.
By: By: /s/ Boris Liberman
----------------------------- --------------------------------
Name: Name: Boris Liberman
Title: Title: Director
-------------------------- -------------------------
SECURED PARTY:
-9-
<PAGE>
/s/Anthony Rawlinson
-----------------------------------
Anthony D. Rawlinson
<PAGE>
EXHIBIT A
This Exhibit A covers all right and title of the Company in, to and under all of
the following, wherever located and whether now owned or hereafter owned or
acquired:
1. all "accounts" of the Company, as defined in Section 9-106
of the Uniform Commercial Code ("UCC"), including, without limitation, all
accounts receivable, obligations and contract rights owned or owing the Company;
2. all "chattel paper" of the Company, as defined in Section
9-105(1)(b) of the UCC;
3. all contracts, undertakings, franchise agreements or other
agreements in or under which the Company may now or hereafter have any right,
title or interest;
4. all "deposit accounts" of the Company, as defined in
Section 9-105(e) of the UCC, including, without limitation, any agreement
relating to the terms of payment or the terms of performance thereof;
5. all "documents" of the Company, as defined in Section
9-105(1)(f) of the UCC;
6. all "equipment" of the Company, as defined in Section
9-109(2) of the UCC;
7. all "fixtures" of the Company, as defined in Section
9-313(1)(a) of the UCC;
8. all "general intangibles" of the Company, as defined in
Section 9-106 of the UCC;
9. all "instruments" of the Company, as defined in Section
9-105(1)(i) of the UCC;
10. all "inventory" of the Company, as defined in Section
9-109(4) of the UCC;
11. all "investment property" of the Company, as defined in
Section 9-115(1)(f) of the UCC;
12. any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held (collectively, the "Copyrights");
<PAGE>
13. any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
14. any and all design rights which may be available to the
Company now or hereafter existing, created, acquired or held;
15. all patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations in part of the same (collectively, the
"Patents");
16. any trademark and servicemark rights, whether registered
or not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of the Company connected
with and symbolized by such trademarks (collectively, the "Trademarks");
17. any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or infringement
of the intellectual property rights identified above;
18. all licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights; and
19. all amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents;
20. all property of the Company held by Secured Parties or any
other party for whom the Secured Parties is acting as agent hereunder,
including, without limitation, all property of every description now or
hereafter in the possession or custody of or in transit to the Company for any
purpose, including, without limitation, safekeeping, collection or pledge;
21. all other goods and personal property of the Company
whether tangible or intangible and whether now or hereafter owned or existing,
leased, consigned by or to, or acquired by the Company and wherever located; and
22. to the extent not otherwise included, all "proceeds" as
defined in Section 9-306(1) of the UCC of each of the foregoing and all
accessions to, substitutions and replacements for, and rents, profits and
products of each of the foregoing.
<PAGE>
Schedule 5.1(e)
None.
EXHIBIT 10.15
THE SECURITIES REPRESENTED BY OR UNDERLYING THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH
ANY DISTRIBUTION THEREOF. THE SECURITIES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE CORPORATION
THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
CONVERTIBLE SECURED PROMISSORY NOTE
$400,000 Torrance, California
Principal Amount June 1, 1999
For value received, U.S. Electricar, Inc., a California corporation,
with its principal place of business at 19850 South Magellan Drive, Torrance,
California, facsimile number (310) ___-____, together with its successors and
assigns (the "Maker") promises to pay to the order of Jagen Pty Ltd, 9 Oxford
Street, South Yarra 3141, Melbourne, Victoria, Australia, facsimile number
011-613-9826-5499 (the "Holder"), the principal amount of Four Hundred Thousand
Dollars ($400,000) and interest thereon, in lawful money of the United States of
America, subject to the conversion provisions set forth below.
1. Time of Repayment. The principal amount and all unpaid accrued
interest hereon shall be due and payable on or before August 31, 1999 (the
"Maturity Date"); provided, however that upon the occurrence of an Event of
Default specified in Section 6(a), the Note shall immediately become due and
payable without any action by Holder and that upon the occurrence of an Event of
Default specified in Section 6(b) through 6(c) the entire unpaid principal and
interest of this Note shall become due and payable on the third (3rd) business
day after the date provided in such section. Any applicable late charges shall
continue to accrue until this Note is paid in full.
2. Interest Rate. The outstanding principal balance shall bear interest
from the date hereof until the earlier of the Maturity Date or an Event of
Default at the rate of six percent (6%) per annum calculated on the basis of a
360 day year. In addition, if this Note is not paid in full when due, then the
entire unpaid principal and interest shall bear interest thereafter at a rate of
five percent (5%) per annum higher than the rate then applicable herein, or the
maximum legal interest rate, if lower, due on or before the fifth (5th) day of
each applicable month in arrears. Notwithstanding the provisions of this Note,
if the rate of interest payable hereunder is limited by law, the rate payable
hereunder shall be the lesser of (a) the rate set forth in this Note or (b) the
<PAGE>
maximum rate permitted by law. If, however, interest is paid hereunder in excess
of the maximum rate of interest permitted by law, any interest so paid which
exceeds such maximum rate shall automatically be considered a payment of
principal and shall automatically be applied in reduction of principal due on
this Note to the extent of such excess.
3. Prepayment. The full amount due under this Note may be prepaid
pursuant to the provisions of Section 5 below without penalty at any time. Any
prepayment will be credited first against accrued interest, then against
principal. This Note may not be prepaid in cash.
4. Payments. All payments of principal, interest and other amounts
payable on or in respect of this Note or the indebtedness evidenced hereby shall
be made to the Holder by wire transfer of immediately available Federal funds to
the Holder's designated account or by such other means as shall be acceptable to
Holder in its sole discretion. All payments on or in respect of this Note or the
indebtedness evidenced hereby shall be made to the Holder without set-off or
counterclaim and free and clear of and without deductions of any kind. All
principal and interest hereunder shall be secured as provided under the Loan and
Security Agreement between Maker and Holder dated as of the date hereof (the
"Security Agreement"). Maker shall pay all costs and expenses, including,
without limitation, reasonable attorneys' fees and expenses Holder expends or
incurs in connection with the enforcement of this Note, the collection of any
sums due hereunder, any actions for declaratory relief in any way related to
this Note, or the protection or preservation of any of Holder's rights
hereunder.
5. Conversion. Prior to the earlier of the Maturity Date or an Event of
Default, at such time as Maker has a sufficient number of authorized but
unissued and unreserved shares to convert the entire principal amount of this
Note into Common Stock of Maker (the "Conversion Date"), the outstanding
principal balance shall be automatically converted into shares of Common Stock
at the conversion price of $.03 per share and a warrant to purchase Common Stock
in such form as is agreed upon between Maker and Holder at the conversion price
of $.06 per share (the "Conversion Price"). The principal balance of this Note
shall convert into 13,333,334 shares of Common Stock and a warrant to purchase
41,666,666 Shares. Prior to the earlier of the Maturity Date or an Event of
Default Maker may, at its election, pay accrued interest in cash or for each
$.06 of accrued interest hereunder convert such interest into two shares of
Common Stock and a warrant to purchase one share of Common Stock. The Conversion
Price and the number of shares of Common Stock issuable upon conversion of this
Note shall be appropriately adjusted in the event of any stock splits, stock
dividends, recapitalizations and the like occurring prior to August 31, 1999. On
the Conversion Date, upon (a) the delivery of this Note to Maker or its transfer
agent, or (b) notification by Holder that this Note has been lost, stolen or
destroyed, and execution of documentation reasonably satisfactory to Maker
indemnifying it from any loss due to the recovery of the original Note, Maker
shall issue certificates evidencing the securities into which this Note has
converted and a check payable to Holder in the amount of any cash amount
representing fractional securities or interest not converted into securities.
6. Default and Remedies. Upon the occurrence and during the continuance
of an Event of Default (as defined below), Holder may, at Holder's option and
without demand first made and without notice to Maker, do any one or more of the
following: (i) give notice of a demand for payment due at the time specified in
Section 1 above; (ii) exercise any remedies
-2-
<PAGE>
available under this Note or the Security Agreement; or (iii) exercise any
remedies of a secured party under the Uniform Commercial Code. If any Event of
Default occurs hereunder, Maker shall pay all reasonable out-of-pocket costs,
fees and expenses incurred by Holder in enforcing and collecting this Note.
Holder shall have the right to enforce one or more remedies successively or
concurrently, and any such action shall not estop or prevent Holder from
pursuing any further remedy which Holder may have hereunder or by law. If a
sufficient sum is not realized from any such disposition of any collateral to
pay all obligations secured by this Note, Maker hereby promises and agrees to
pay Holder any deficiency.
The occurrence of any one or more of the following shall
constitute an "Event of Default":
(a) Maker making an assignment for the benefit of creditors,
or commencing any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt or moratorium law or statute, or the commencement of any
such proceeding against Maker or any guarantor of this Note that is not
dismissed or stayed by the date ten (10) business days before the automatic
conversion of this Note;
(b) Any breach by the Maker of any material warranty,
statement, promise, term or condition contained herein, in the Security
Agreement or in the Securities Purchase Agreement among Maker, Holder and
Anthony Rawlinson, dated as of the date hereof (the "Purchase Agreement"), which
shall not have been cured to the satisfaction of Holder within ten (10) business
days after Maker shall have become aware of such breach, whether through written
notice from Holder, or otherwise; or
(c) Failure by the Maker to obtain a shareholders' vote to
approve a sufficient number of authorized but unissued and unreserved shares to
convert the entire principal amount of this Note into Common Stock of Maker
before August 31, 1999.
7. Remedies. The failure of Holder to exercise all or any of its
rights, remedies, powers or privileges hereunder or under the Security Agreement
in any instance shall not constitute a waiver thereof in that or in any other
instance. If all or any part of the indebtedness represented by this Note is
collected by action at law, or in bankruptcy, insolvency, receivership or other
court proceedings, or if this Note is placed in the hands of attorneys for
collection, the Maker hereby promises to pay to the Holder, upon written demand
by the Holder, in addition to principal, interest and all (if any) other amounts
payable on or in respect of this Note or the indebtedness evidenced hereby, all
court costs and all reasonable attorneys' fees and other reasonable collection
charges and expenses incurred or sustained by or on behalf of the Holder. Time
is of the essence in respect to all provisions of this Note that specify a time
for performance.
-3-
<PAGE>
8. Waiver. The Maker hereby absolutely and irrevocably waives notice of
acceptance, presentment, notice of demand, notice of non-payment, protest,
notice of protest, suit and all other conditions precedent in connection with
the delivery, acceptance, collection and/or enforcement of this Note or any
collateral or security therefor. Any term or provision of this Note may be
amended, and the observance of any term of this Note may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a writing signed by the party to be bound thereby.
9. Notices. Any notice, request or other communication required or
permitted hereunder will be in writing and shall be deemed to have been duly
given if personally delivered or if telecopied or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth at the beginning of this Note. Any party hereto may by notice so given
change its address for future notice hereunder. Notice will be deemed to have
been given when personally delivered or when deposited in the mail or telecopied
in the manner set forth above and will be deemed to have been received when
delivered.
10. Successors and Assigns. Each and all of the covenants, terms,
provisions, and agreements contained herein shall be binding upon, and inure to
the benefit of, the permitted successors, executors, heirs, representatives,
administrators and assigns of the parties hereto, provided that Maker shall not
assign this Note to any entity without the prior written consent of Holder.
Holder and any successor thereto shall have all of the rights of a holder in due
course as provided in the Uniform Commercial Code.
11. Governing Law. This Note shall be governed by and construed and
enforced in accordance with the laws of the State of California without regard
to choice of law principles. Maker and Holder agree that all actions or
proceedings arising in connection with this Note shall be tried and litigated
only in the state and federal courts located in the State of California.
Borrower waives any right it may have to assert the doctrine of forum non
conveniens or to object to such venue, and consents to any court ordered relief.
12. Construction of Note. All headings used herein are used for
convenience only and will not be used to construe or interpret this Note. This
Note has been negotiated by the respective parties hereto and their attorneys
and the language hereof shall not be construed for or against any party.
IN WITNESS WHEREOF, the Maker has caused this Note to be issued.
U.S. ELECTRICAR, INC.
(the "Maker")
By: /s/ Carl Perry
---------------------------------------------
Its: Chief Executive Officer
---------------------------------------------
-4-
Exhibit 21
Subsidiaries of Registrant
Name Jurisdiction of Incorporation
- ---- -----------------------------
Industrial Electric Vehicles, Inc. California
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 2,467
<SECURITIES> 0
<RECEIVABLES> 751
<ALLOWANCES> 0
<INVENTORY> 223
<CURRENT-ASSETS> 142
<PP&E> 1,505
<DEPRECIATION> (1,223)
<TOTAL-ASSETS> 3,940
<CURRENT-LIABILITIES> 5,456
<BONDS> 0
0
4,677
<COMMON> 70,352
<OTHER-SE> 3,100
<TOTAL-LIABILITY-AND-EQUITY> 3,940
<SALES> 2,774
<TOTAL-REVENUES> 2,774
<CGS> 1,460
<TOTAL-COSTS> 1,460
<OTHER-EXPENSES> 1,125
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 724
<INCOME-PRETAX> (535)
<INCOME-TAX> 0
<INCOME-CONTINUING> (535)
<DISCONTINUED> 0
<EXTRAORDINARY> 140
<CHANGES> 0
<NET-INCOME> (395)
<EPS-BASIC> (0.010)
<EPS-DILUTED> (0.010)
</TABLE>