Rankin Employment Agreement

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VSSnjMYJvi90L1xwPjAna1gWyl9XO21l8Vk69BLH6vWNeC8of1czdOIHsLVukNat qfc2N3U8HrU5buRqzxWegA== 0000899733-02-000027.txt : 20020414 0000899733-02-000027.hdr.sgml : 20020414 ACCESSION NUMBER: 0000899733-02-000027 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20020215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UQM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000315449 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 840579156 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10869 FILM NUMBER: 02551819 BUSINESS ADDRESS: STREET 1: 425 CORPORATE CIRCLE CITY: GOLDEN STATE: CO ZIP: 80401 BUSINESS PHONE: 3032782002 MAIL ADDRESS: STREET 1: 425 CORPORATE CIRCLE CITY: GOLDEN STATE: CO ZIP: 80401 10-K/A 1 ka33101.txt 10-K/A, 3/31/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Year Ended March 31, 2001 Commission file number 1-10869 UQM TECHNOLOGIES, INC. (Formerly Unique Mobility, Inc.) -------------------------------------------------------- (Exact name of registrant as specified in its charter) Colorado 84-0579156 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 425 Corporate Circle, Golden, Colorado 80401 ----------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 278-2002 Securities registered pursuant to Section 12(b) of the Act: Common stock, $.01 par value Name of each exchange on which registered: American Stock Exchange Pacific Stock Exchange Chicago Stock Exchange Frankfurt Stock Exchange Berlin Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Common stock, $.01 par value 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 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 stock held by nonaffiliates of the registrant (17,077,166 shares) computed by reference to the closing price of such stock on the American Stock Exchange, as of June 13, 2001: $112,709,296 The number of shares outstanding (including shares held by affiliates) of each of the registrant's classes of common stock, as of June 13, 2001: 17,451,518 shares of the registrant's common stock, $.01 par value. DOCUMENTS INCORPORATED BY REFERENCE In Part III certain information is incorporated by reference from the Company's definitive Proxy Statement for the August 22, 2001 Annual Meeting of Shareholders. ITEM 1. BUSINESS This Report may contain forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the Risk Factors section of the Registration Statement on Form S-3 (File No. 333-78525) filed by the Company with the SEC, which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including the Company's ability to obtain additional financing, the Company's reliance on major customers and suppliers and the possibility that product liability insurance may become unavailable. These forward-looking statements represent the Company's judgment as of the date of this Report. The Company disclaims, however, any intent or obligation to update these forward-looking statements. General UQM Technologies, Inc., formerly Unique Mobility, Inc. ("UQM" or the "Company") is recognized worldwide as a technology leader in the development and manufacture of energy efficient, power dense, electric motors, generators and power electronic inverters. The primary focus of the Company is incorporating its advanced technology into products aimed at high growth and emerging markets including power systems for clean electric, hybrid electric and fuel cell electric on-road and off-road vehicles, under-the-hood power accessories including 42 volt systems and environmentally friendly, distributed power generators. The Company operates its business in three segments; 1) technology - which encompasses the further advancement and application of the Company's proprietary motors, generator, power electronics and software; 2) mechanical products - which encompasses the manufacture of motors, gears and gear assemblies; and 3) electronic products which encompasses the manufacture of electronic printed circuit assemblies, wire harnesses and complete electronic boxes. The Company's $0.01 par value common stock trades on the American, Chicago, Pacific, Frankfurt and Berlin stock exchanges under the symbol "UQM". The Company's revenue is derived from two principle sources; 1) funded contract research and development services performed for strategic partners, customers and the U.S. government directed toward either the advancement of the Company's proprietary technology portfolio or the application of proprietary technology to customer's products; and 2) the manufacture and sale of products engineered by the Company and the contract manufacture of products designed by others. The Company's objective is to leverage its technology base and name recognition to develop and manufacture products for its customers that are superior in performance at competitive prices. To this end, the Company has initially focused its attention on four market areas that have significant growth potential; 1) electric propulsion systems, generators and power electronic inverters for electric, hybrid electric and fuel cell electric vehicles. Virtually every automobile and truck manufacturer worldwide are developing such vehicles. In the case of hybrid electric powerplants, additional customers include Tier I and Tier II automotive suppliers who hope to provide complete hybrid electric systems to their automotive customers; 2) electric propulsion systems and electronic inverters for small vehicles, such as electric wheelchairs, golf carts, small industrial vehicles, lawn and grounds care equipment and the like; 3) under-the-hood power accessories, such as electric air conditioning compressors and electric power steering which are expected to replace existing belt-driven parasitic components now in use as part of the automotive industry's adoption of a new 42 volt standard and fuel cell components such as air compressor drive motors and electronic inverters to manage the operation of the fuel cell, its power generation and the conversion of DC power output of the fuel cell to AC for home use; and 4) distributed power generation products such as wind generators, engine generators and electronic power inverters for both residential and commercial customers that need standby or backup power, remote stand-alone power, as well as, grid-connected power. Fundamental to this strategy is the continual advancement of the Company's proprietary motor, generator, power electronic inverter and software technology portfolio and the maintenance of a high quality and competitive manufacturing capability for products developed by the Company. Substantially all of the Company's research and development activities are funded by its customers, and in most cases, the Company maintains all or substantially all of the intellectual property rights in technology enhancements. The Company has three principal operating units; 1) UQM Technologies, Inc., located in Golden, Colorado, which includes the Corporate Headquarters and Engineering and Product Development Center; 2) wholly owned subsidiary UQM Power Products, Inc., ("UQM Power") located in Frederick, Colorado, which manufactures permanent magnet electric motors, generators, precision gears and gear assemblies; and 3) wholly owned subsidiary UQM Electronics, Inc. ("UQM Electronics"), located in St. Charles, Missouri which manufactures electronic printed circuit board assemblies, cable harness assemblies and complete electronic boxes. The Company also holds minority ownership positions in Taiwan UQM Electric Co., Ltd. ("Taiwan UQM"), EV Global Motors Company ("EV Global"), and Windemere Eco Development Limited ("WED") and Aeromax Corporation ("Aero"). The carrying value of all of these investments on the Company's balance sheet has been reduced to zero due to the development stage status of these companies in potentially emerging markets. Taiwan UQM is a joint venture with Kwang Yang Motor Company, Ltd. ("KYMCO") and Turn-Luckily Technology Co., Ltd. Taiwan UQM, located in Taipei, Taiwan, is a licensee of the Company and manufacturer of starter motors and alternators for gasoline scooters and electric propulsion systems for an all electric scooter. The Company holds a 38.25 percent ownership interest in Taiwan UQM. EV Global, based in Los Angeles, is a developer and distributor of electric bicycles. WED is an environmentally sensitive development of Windemere Island in the Bahamas. Aeromax Corporation is a developer and manufacturer of wind turbine generators and associated products for residential use. Technology Segment The technology segment of the Company encompasses the operations of the Engineering and Product Development Center and the administrative and management functions performed by the Corporate Headquarters staff and senior executives. The Company's Engineering and Product Development Center occupies a 25,000 square foot facility located in Golden, Colorado equipped with research and development laboratories, prototype build and test facilities for electric motors, generators, power electronic inverters, software, and vehicle integration activities. The technology segment conducts sponsored and internally-funded engineering activities directed toward the development of new products and the engineering of motors, generators, and power electronic inverters to meet the requirements of our customers' specific product applications and is the source of engineering services for both the mechanical and electronic product segments. During fiscal 2001, the technology segment generated revenue of $3,378,396 consisting of $2,283,292 of contract services revenue and $1,095,104 from the sale of low volume motor and control products. Net losses from operations for the technology segment amounted to $604,623, compared to net losses from operations of $5,285,807 last year. EBITDA for the fiscal year ended March 31, 2001 was $(160,484) compared to $(4,871,428) last year. Mechanical Products Segment The mechanical products segment of the Company encompasses the operations of the Company's wholly-owned subsidiary, UQM Power Products, Inc. UQM Power occupies a 25,000 square foot manufacturing plant located in Frederick, Colorado which houses the Company's gear and motor manufacturing operations. Gear manufacturing operations consist of the precision grinding of both commercial and aerospace grade gears and the manufacture of complete gear assemblies. Motor manufacturing operations consist of the high volume manufacture of the Company's proprietary permanent magnet motors. During fiscal 2001, the mechanical products segment generated revenue of $4,407,721 a 7.1 percent increase over the prior year's revenue of $4,115,557. Net losses from operations for the segment amounted to $1,195,219 compared to net losses from operations of $1,190,423 last year. EBITDA for the fiscal year ended March 31, 2001 was $(700) compared to $(586) last year. Electronic Products Segment The electronic products segment of the Company encompasses the operations of the Company's wholly-owned subsidiary UQM Electronics, Inc. and includes the manufacture of thru-hole and surface mount electronic printed circuit board assemblies, wire harness assemblies, value-added component assemblies incorporating either printed circuit board assemblies, wire harness assemblies or both, and complete turn-key electronic product builds. In addition, UQM Electronics is a wholesale distributor of over 20 lines of passive electronic components. UQM Electronics conducts its operations from a 31,000 square foot manufacturing plant located in St. Charles, Missouri. During fiscal 2001, the electronic products segment generated revenue of $19,110,954, a 36.0 percent increase over the prior year's revenue of $14,056,151. Net loss from operations for the segment amounted to $1,340,280 compared to a net profit from operations of $4,423 last year. EBITDA for the fiscal year ended March 31, 2001 was $(164,655) compared to $1,003,998 last year. Technology The Company's technology base includes a number of proprietary technologies and patents relating to brushless permanent magnet motors, generators and power electronic inverters, together with software code to intelligently manage the operation of the system. See also "Patents" below. The typical architecture (Figure 1)[digram of motor omitted] of a UQM(R) motor consists of a stator winding employing a high pole count configuration, which allows for high copper utilization (minimizing energy loss and cost) and a hollow rotor upon which powerful rare earth magnets are mounted on the outer circumference. The stator is affixed to an aluminum housing containing a mounting ring and bearing which allows the rotor to be suspended within the stator. Commutation of the machine is accomplished electronically by sensing the position of the rotor in relation to the stator and intelligently pulsing electrical energy into the stator such that the electric field generated by the stator of the rotor interacts with the magnetic field of the rotor producing rotational motion ("motor operation"). Conversely, the application of rotational motion to the rotor by an external force results in the generation of electrical power ("generator operation"). UQM(R) machines can be operated in either a forward or reverse direction of rotation and either in motor or generator mode and can dynamically change from one mode of operation to another in millisecond response time. The hollow design of the rotor permits the packaging of other components such as gears and electromechanical brakes in the interior of the machine. These design features contribute to lower usage of copper and iron and other materials generally (due to smaller package dimensions), reducing manufacturing cost over those for conventional machines of similar power. In addition, the utilization of (neodymium iron boron "NdFeB") magnet material in a wide range of consumer devices, such as cell phones, disk drives and medical devices, has dramatically improved the availability, performance and price of this material, allowing the Company to price its advanced motors and controls competitively with lesser performing conventional motors which management believes will accelerate the rate of commercialization of the Company's technology. Attributes of the Company's permanent magnet motor technology include brushless electronic commutation; a relatively large air-gap dimension; the use of powerful rare earth NdFeB magnet material; good heat rejection; low iron content; and low mechanical losses. As a result, UQM(R) motors have high operating efficiencies (>90%), high power density (high power output to weight ratio) and generally have smaller external dimensions and weight for a given power output, improving packageability. Attributes of the Company's microprocessor-based digital power electronic inverters include high power operation (600 amps at 400 volts), four quadrant control (forward/reverse and motoring/generation), reduced switching losses (minimizing energy loss), intelligent control and controller area network capability. In addition, the Company has developed and patented a method of control embodied in electronic component architecture and software code (Phase Advance Control) which allows UQM(R) motors to deliver high output torque at low operating speeds and low torque at high operating speeds from the same machine. Conventional permanent magnet motor designs are limited to operating at either high torque and low speeds or low torque at high speeds; but not both. In most vehicle propulsion applications, high torque is required to launch the vehicle from a standing stop transitioning to high power as the vehicle is accelerated to highway speeds. In conventional internal combustion powered vehicles, the transition from high torque to high power is typically accomplished through the multiple gear changes performed by a mechanical transmission. UQM(R) motors, incorporating phase advance technology, are ideally suited as propulsion drives in electric, hybrid electric and fuel cell electric vehicles due to the ability to power a vehicle from a standing stop to highway speeds without mechanical gear changes, thereby eliminating the size, weight and cost of mechanical transmissions. The Company is currently developing the next generation of its motor technology for vehicle propulsion applications which maximizes the advantages of the UQM(R) motor architecture by packaging a single speed gear reduction and differential inside the hollow rotor and integrating the power electronic inverter with the machine. The resulting system is expected to achieve greater power density, be manufacturable at lower costs due to the commonality of component parts, and have improved packageability over existing UQM(R) systems. Similarly, the Company is simultaneously developing a line of modular motors, that are expected to improve the continuous power output of the Company's existing motors and generators by about 25 percent without increasing size or weight. Substantially all of the Company's research and development activities are funded by customers, with the Company typically retaining intellectual property rights in the resulting technology developed. Customer funded development activities are recorded as contract services revenue and the associated development costs are shown as cost of contract services in the Company's financial statements. For the year ended March 31, 2001, revenues from customer funded research and development activities amounted to $2,283,292 an increase of 34.1 percent over the prior year level of $1,702,937. Internally-funded research and development expenditures were $103,231 for the fiscal year versus $378,954 for the prior year. In recent years, the Company has focused its research and development activities on the development of commercial products and production engineering activities to lower the cost of manufacture, as well as enhance the performance and capability of its technology portfolio, as opposed to basic research in the field. Management believes that the Company's future growth is dependent, in part, on the continued advancement of its technology portfolio and its ability to commercialize its technology in additional product applications and markets. Accordingly, the Company expects to continue to pursue additional customer funded programs to accomplish this objective. Competition All of the markets in which the Company operates are highly competitive. The markets served by the technology segment are additionally characterized by rapid changes due to technological advances that can render existing technologies and products obsolete. The technology segment has developed advanced electric propulsion systems and components which it hopes to market to vehicle OEM's throughout the world for use in electric, hybrid electric and fuel cell electric vehicles. At present, the market for such systems is not significant, although various legislative mandates and incentives are expected to accelerate the development of a market for vehicles propelled by such systems. There are numerous companies developing products that do or soon will compete with the Company's drive systems. Some of these companies possess significantly greater financial, personnel and other resources than the Company, including established supply arrangements and volume manufacturing operations. The Company believes its principal competitors include Hitachi, Matsushita, Siemens, Delphi, EcoStar and Visteon. The mechanical products segment competes primarily in the automotive, heavy equipment, aerospace and medical products industries. Each of these industries is extremely competitive. The Company will face substantial competition on a continuing basis from numerous competitors, many of whom possess longer operating histories, significantly greater financial resources, marketing, distribution and manufacturing capability. The Company believes its principal competitors include Advanced DC, Owosso Corporation, Emerson Electric, General Electric, Rockwell International, Baldor, ABB, Fairfield Manufacturing, Precision Gear and Fairlane Gear. The electronic products segment competes primarily in the automotive, telecommunications, medical, computer and industrial markets. Each of these markets is extremely competitive. The Company will face substantial competition on a continuing basis from numerous competitors, many of whom possess longer operating histories, significantly greater financial resources, marketing, distribution and manufacturing capability. The Company believes its principal competitors include Jabil Circuit, Plexus, EFTC Corporation, Flextronics International, Solestica Corporation and Baldwin. Patents The Company holds U.S. Patent No. 5,004,944, issued on April 2, 1991,entitled "Lightweight high power electromagnetic transducer". Corresponding applications were filed in foreign countries, and many of these foreign applications have issued as patents. U.S. Patent 5,311,092, issued on May 10, 1994, is directed to additional subject matter regarding lightweight, high power electromagnetic transducers. In April 1992, the Company was issued U.S. Patent No. 5,107,151 entitled "Switching circuit employing electronic devices in series with an inductor to avoid commutation breakdown and extending the current range of switching circuits by using IGBT devices in place of MOSFETs". This patent is directed to certain proprietary aspects of electronic control circuitry. Corresponding applications were filed in foreign countries, and many of these foreign applications have issued as patents. The Company was granted U.S. Patent No. 5,319,844, issued June 14, 1994, entitled "Method of making an electromagnetic transducer". This patent is directed to a method of constructing the motor disclosed in U.S. Patent No. 5,004,944. Corresponding applications were filed in foreign countries, and many of these foreign applications have issued as patents. The Company was granted U.S. Patent No. 5,382,859, issued January 17, 1995, entitled "Stator and method of constructing same for high power density electric motors and generators". The Company also holds U.S. Patent No. 5,592,731, issued on January 14, 1997 and entitled "Method of constructing a stator". These patents relate to the Company's enhancement to its motor technology. Corresponding applications were filed in foreign countries, and many of these foreign applications have issued as patents. The Company was granted U.S. Patent No. 5,677,605, issued October 14, 1997 entitled "Brushless DC motor using phase timing advancement". This patent describes a low cost method of controlling the drive current to a motor to achieve operating characteristics ideal for vehicle traction drives. Corresponding applications were filed in foreign countries, and some of these foreign applications have issued as patents. The Company was granted U.S. Patent No. 5,982,063, issued November 9, 1999, entitled "Electric motor with internal brake". This patent relates to current developments in electric wheelchair drives. Corresponding applications are pending in foreign countries. In July 1998 the Company filed a new U.S. patent application titled "Accurate Rotor Position Sensor and Method Using Magnet Ring and Linear Output Hall Effect Sensors" which is pending. Corresponding applications are pending in foreign countries. Trademarks The Company owns three U.S. Trademark Registrations for "UNIQ" (International Class 7 for power transducers, and Class 12 for utility land vehicles and Class 16 for Publications). The Class 12 trademark is subject to renewal in June 2006; the Class 7 trademark is subject to renewal in August 2006; and the Class 16 trademark is subject to renewal in February 2007. The Company registered the letters "UQM" and a stylized version thereof in the U.S. Counterpart applications have been filed in 26 countries throughout the world and 25 of those countries have granted registrations or indicated them to be allowable. These trademarks are directed to the same trademark classes as for the mark "UNIQ". The foreign trademark registrations and applications include major markets where the company is doing business or establishing business contacts. The Company has registered "POWERPHASE" as a trademark in the same trademark classes as for the mark "UNIQ". Corresponding applications for trademark registration were filed in 11 countries. The trademark was registered in the European community on March 21, 1997. Trademark registrations have been granted in Mexico, Canada, China, Israel, Japan, Singapore, South Korea, Taiwan and Thailand. The Company's future success depends, in part, on the diligent prosecution of its issued and pending motor and electronic patents, as well as the filing and prosecution of patents on future technological advances, if any. There can be no assurance that the Company will possess the financial resources necessary to prosecute and maintain existing applications or to pursue additional patents. If the Company is not able to prosecute and maintain its existing patent applications, they will lapse. There can be no assurance that the Company's patents will not be circumvented, invalidated or infringed, or that the Company will possess the financial resources to enforce its existing patents and patent applications in the event of an infringement. Further, new technology may be developed by third parties or may already exist unknown to the Company causing the Company's proprietary technology to be obsolete. The Company also intends to rely on the un-patented proprietary know-how it has developed and now utilizes in its products. There can be no assurance that others will not independently develop, acquire or obtain access to the Company's technology. Although the Company protects its proprietary rights by executing confidentiality agreements with its management, employees and others with access to the Company's technology, these measures may not be adequate to protect the Company from disclosure or misappropriation of its proprietary information. Backlog The Company's technology segment had unperformed service contracts from customers which will provide payments to the Company upon completion aggregating approximately $1.3 million and an order backlog for prototype motors and controls of approximately $.2 million at May 31, 2001. All such service contracts are subject to amendment, modification or cancellation. The Company expects to perform all unperformed service contracts and ship motor and controller backlog products over the next twelve months. The Company's mechanical products segment had an order backlog of approximately $1.9 million at May 31, 2001. The Company expects to ship all backlog products within the next twelve months. The Company's electronic products segment had an order backlog of approximately $8.7 million at May 31, 2001. The Company expects to ship all backlog products within the next twelve months. Customers and Suppliers The Company has two significant customers in its electronic products segment, Tyco International, Ltd., and HandEra, Inc. which accounted for revenue of $4,706,810 and $6,427,983, respectively representing 17.5 percent and 23.9 percent of consolidated revenue, respectively. Principal raw materials and components purchased by the Company include iron, steel, electronic components, magnet material and copper wire. Most of the above items are available from several suppliers and the Company generally relies on more than one supplier for each item. Certain components used by the Company are custom designs and if the Company's current supplier no longer made them available to the Company, the Company could experience production delays. U.S. Government Contracts For the year ended March 31, 2001, $853,341, or approximately 3.2 percent of the Company's consolidated revenue was derived from contracts with agencies of the U.S. Government and from subcontracts with U.S. Government prime contractors. For the year ended March 31, 2000, $910,770, or approximately 4.4 percent of consolidated revenue was derived from contracts with agencies of the U.S. Government and from subcontracts with U.S. Government prime contractors. Some of the Company's contracts with the U.S. Government provide for the reimbursement of costs on a 50 percent cost sharing basis based on not-to-exceed billing rates negotiated between the Company and the U.S. Government. Other U.S. Government business is performed under firm fixed price contracts. On "cost-share" and "firm fixed price" contracts, the Company can incur an actual loss in the performance thereof if incurred costs exceed the contract amount. All U.S. Government contracts with the Company are subject to modification or cancellation at the convenience of the Government. Employee and Labor Relations As of May 31, 2001, the Company had 165 full-time employees. The Company has entered into employment contracts with two of its executive officers which expire December 31, 2002. None of the Company's employees are covered by a collective bargaining agreement. The Company's management believes that its relationship with its employees has been generally satisfactory. In addition to its full-time staff, the Company from time to time engages the services of outside consultants and contract labor to meet peak workload or specialized program requirements. The Company does not anticipate any difficulty in locating additional qualified professional engineers, technicians and production workers, if so required, to meet expanded research and development or manufacturing operations. ITEM 2. PROPERTIES The Company owns or leases its offices and manufacturing facilities and believes these facilities to be well maintained, adequately insured and suitable for their present and intended uses. Information concerning facilities of the Company as of May 31, 2001, is set forth in the table below: Ownership or Square Expiration Date Location Feet of Lease Use Golden, Colorado (1) 40,000 (2) September 2002 manufacturing, laboratories and offices Frederick, Colorado 25,000 Own manufacturing and offices St. Charles, Missouri 31,000 March 2007 manufacturing, warehouse and offices (1) The Company sold its fifty percent member interest in a limited liability company which owns this facility in January 2001. (2) The Company occupies 25,000 square feet and sub-leases the remaining 15,000 square feet. ITEM 3. LEGAL PROCEEDINGS There is no material litigation with respect to which the Company is a party. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------ A special meeting of the shareholders of the Company was held on January 24, 2001. The following is a summary of the matters submitted to a vote of security holders and the results of the voting thereon: Proposal to amend our Certificate of Incorporation to change our name to UQM Technologies, Inc. For Against Abstain 15,014,651 36,017 37,606 Outstanding votable shares: 17,363,517 Total voted shares represented in person and by proxy: 15,088,274 Percentage of the outstanding votable shares: 86.9% ITEM 5. MARKET PRICE OF COMMON STOCK The Company's common stock trades on the American, Chicago, Pacific, Frankfurt and Berlin Stock Exchanges. The high and low closing prices, by fiscal quarter, as reported by the American Stock Exchange for the last two years are as follows: 2001 High Low Fourth Quarter $ 7.75 $6.13 Third Quarter $ 8.38 $6.50 Second Quarter $ 8.38 $7.19 First Quarter $ 9.00 $6.25 2000 High Low Fourth Quarter $10.88 $3.69 Third Quarter $ 4.38 $3.50 Second Quarter $ 4.63 $4.06 First Quarter $ 6.44 $4.31 On June 13, 2001 the closing price of the Company's common stock, as reported on the American Stock Exchange, was $6.60 per share and there were 896 holders of record of the Company's common stock. The Company has not paid any cash dividends on its common stock since inception and intends for the foreseeable future to retain any earnings to finance the growth of its business. Future dividend policy will be determined by the Board of Directors of the Company based upon consideration of the Company's earnings, capital needs and other factors then relevant. ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition Cash and cash equivalents at March 31, 2001 was $2,399,006 and working capital (the excess of current assets over current liabilities) was $4,737,780 compared with $2,085,115 and $5,672,559,respectively, at March 31, 2000. Accounts receivable rose $1,077,147 to $3,899,041 at March 31, 2001 from $2,821,894 at March 31, 2000. The increase is primarily attributable to record revenue levels during the fiscal year ended March 31, 2001 and extended payment terms offered to selected customers of the Company's mechanical products and electronic products segments. Costs and estimated earnings in excess of billings on uncompleted contracts increased $242,898 to $572,009 at March 31, 2001 from $329,111 at March 31, 2000. The increase is attributable to higher levels of unbilled work in process on engineering contracts. Estimated earnings on contracts in process rose to $720,333 at March 31, 2001 on costs incurred on contracts in process of $1,974,471 compared to estimated earnings on contracts in process of $180,293 on costs incurred on contracts in process of $645,425 at March 31, 2000. The increase in estimated earnings on contracts in process is attributable to higher levels of contracts in process at March 31, 2001. Inventories rose $3,535,957 to $6,656,236 at March 31, 2001 from $3,120,279 at March 31, 2000. Of this amount, raw material inventories rose $2,712,853 reflecting higher revenue levels, periodic electronic component shortages which necessitated higher stocking levels for all related parts used in the manufacture of affected products, and delays in customer production release authorizations. Finished products inventories rose $1,097,603 reflecting the stocking of certain completed electronic products in anticipation of future shipment release orders. Other current assets declined $348,003 to $52,065 at March 31, 2001 reflecting the collection of amounts due from the disposition of the Company's remaining equity interest in its German joint venture. The Company invested $2,381,564 for the acquisition of property and equipment during fiscal 2001 compared to $483,716 for the prior fiscal year. $1,862,851 of the increase represents expenditures for manufacturing equipment at the Company's electronic products segment to improve manufacturing throughput and component placement density. Land and Buildings declined $335,500 and $1,438,090, respectively, reflecting the sale of real estate held by Unique Building Partners Limited Liability Co. (UBPL). Goodwill, net of accumulated amortization, declined $332,666 to $5,662,797 at March 31, 2001 from $5,995,463 at March 31, 2000 due to the amortization of this asset over its 20 year useful life. Accounts payable increased $1,087,943 to $2,467,259 at March 31, 2001 from $1,379,316 at March 31, 2000. The increase is primarily attributable to higher levels of inventory purchases from suppliers. Other current liabilities rose $496,044 to $1,341,506 at March 31, 2001 from $845,462 at March 31, 2000. The increase is primarily attributable to higher payroll associated with higher staffing levels at the Company's electronics products segment and prepayments on engineering contracts not yet in process at year-end in the Company's technology segment. In January, 2001, UBPL a limited partnership in which the Company was a 50 percent owner sold its principal asset, the Company's headquarters building in Golden, Colorado, and was subsequently liquidated. As a result of this transaction, the Company received cash proceeds of $1.2 million and recorded a deferred gain that will be recognized over the remaining term of the Company's lease, including extensions. At March 31, 2001 the current portion of the deferred gain was $115,713 and the long-term portion of the deferred gain was $636,423. Current portion of long-term debt decreased $106,438 to lease including $865,685 at March 31, 2001 from $972,123 at March 31, 2000 primarily due to the retirement of the mortgage upon sale of the Company's headquarters building in Golden, Colorado by UBPL. Revolving line-of-credit rose to $4,037,000 at March 31, 2001 due to expanded working capital requirements during the fiscal year associated with higher levels of trade accounts receivable and inventory. Billings in excess of costs and estimated earnings on uncompleted contracts rose $118,320 to $197,819 at March 31, 2001 from $79,499 at March 31, 2000 reflecting payments by customers for certain sponsored development contracts in advance of the performance of the associated project work. Long-term debt declined $816,384 to $2,606,075 at March 31, 2001 primarily due to scheduled principal repayments on the Company's term bank debt during the fiscal year, and the retirement of the mortgage upon sale of the Company's headquarters in Golden, Colorado, by UBPL. Minority interest in consolidated subsidiary decreased to zero at March 31, 2001 from $413,066 at March 31, 2000 reflecting the liquidation of UBPL. Common stock and additional paid-in capital increased to $174,233 and $50,626,120 at March 31, 2001, respectively, compared to $171,942 and $49,382,877 at March 31, 2000. The increases in these accounts totaling $1,245,534 is attributable to the cash received upon the exercise of stock options by employees of $994,721; cash from the sale of common stock under the Company's Employee Stock Purchase Plan of $29,270 and cash received upon the exercise of warrants of $96,000. Results of Operations Operations for the year ended March 31, 2001, resulted in a net loss of $3,140,122, or $0.18 per share on total revenue of $26,897,071, compared to a net loss of $6,471,807, or $0.39 per share on total revenue of $20,597,860 for the year ended March 31, 2000 and a net loss of $3,754,070 or $0.24 per share on total revenue of $15,798,418 for the year ended March 31, 1999. Operations for the fiscal year ended March 31, 2001, excluding asset write-down charges of $712,599 or $0.04 per common share, resulted in a net loss of $2,427,523 or $0.14 per common share compared to a net loss of $2,367,179 or $0.14 per common share and $3,754,070 or $0.24 per common share for the fiscal years ended March 31, 2000 and 1999, respectively. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the fiscal year before the foregoing charges improved by $150,148 to $386,760 versus EBITDA of $236,612 last fiscal year and $(1,590,351) for the fiscal year ended March 31, 1999. EBITDA for the fiscal year ended March 31, 2001 including charges was $(325,839) compared to $ (3,868,016) and $(1,590,351) for the comparable fiscal years ended March 31, 2000 and 1999, respectively. EBITDA is a broadly used financial term which many investment professionals use as an approximation of the operating cash flow generated by a business. Management believes that this information may be useful to investors in the Company due to the amount of noncash depreciation and amortization charges reported by the Company. Investors are cautioned, however, that EBITDA is not a replacement or substitute for net earnings or loss determined by the application of generally accepted accounting principles and our calculation of EBITDA may not be comparable to similarly titled disclosures made by other companies. Revenue from contract services increased 34 percent to $2,283,292 during fiscal 2001 from $1,702,937 for the year ended March 31, 2000 and 50 percent over revenue for the year ended March 31, 1999. The increase in contract services revenue is attributable to continued strong demand for development programs. Product sales for the year increased 30 percent to $24,613,779 compared to $18,894,923 for the year ended March 31, 2000 and 72 percent compared to $14,280,458 for the year ended March 31, 1999. Product sales for the fiscal year ended March 31, 2001 by the mechanical products segment increased $292,164 or 7 percent to $4,407,721 compared to $4,115,557 for the comparable fiscal year ended March 31, 2000. Mechanical product sales for the fiscal year ended March 31,2000 increased $582,686 or 16 percent compared to $3,532,871 in the prior fiscal year. The growth in revenue in the mechanical products segment for each fiscal year is primarily attributable to increased shipments of wheelchair motors. Product sales during fiscal 2001 for the electronic products segment increased 36 percent to $19,110,954 compared to $14,056,151 for the year ended March 31, 2000. The growth in revenue in the electronic products segment is primarily attributable to the launch of a value added product for an existing customer, higher production volumes for certain customers and new business launches during the fiscal year. Electronic product sales for the fiscal year ended March 31, 2000 increased 39 percent to $14,056,151 compared to $10,129,729 for the year ended March 31, 1999. The increase is primarily attributable to the addition of new customer accounts. Product sales for the year by the technology segment increased 51 percent to $1,095,104 compared to $723,215 for the year ended March 31, 2000. . Technology product sales for the fiscal year ended March 31, 2000 increased 17 percent compared to $617,858 for the fiscal year ended March 31, 1999. The growth in revenue in the technology segment for each fiscal year is primarily attributable to increased shipment of Powerphase 100(R) systems during the year. Consolidated gross profit margin for fiscal 2001 was 7.4 percent compared to 15.4 and 8.2 percent for the comparable fiscal years ended March 31, 2000 and March 31, 1999, respectively. Gross profit on contract services was 15.4 percent this year compared to 23.7 and 3.0 percent for fiscal 2000 and fiscal 1999, respectively. The decline in contract services margins for the current year versus last year is attributable to cost overruns on development programs. The improvement in contract services margins for the current year versus fiscal 1999 is attributable to reduced levels of cost overruns on development programs and improved pricing. Gross profit margins on product sales this year were 6.6 percent compared to 14.6 and 8.7 percent in fiscal 2000 and fiscal 1999, respectively. The decrease in margins on product sales for this year versus fiscal 2000 and fiscal 1999 is primarily attributable to product launch costs and pricing pressure on selected accounts, the writedown of slow moving electronic raw material inventory and lower than expected overhead absorption on gear manufacturing operations in the Company's mechanical products segment. Research and development expenditures for the fiscal year ended March 31, 2001 declined to $ 103,231 compared to $378,954 and $667,989 for the fiscal years ended March 31, 2000 and 1999, respectively. The decrease in this year versus fiscal 2000 and 1999 is generally attributable to lower levels of internally-funded development activities and cost-share type contracts Generally, research and development expenditures have declined over the last several years due to the completion of development activities associated with the launch of production wheelchair motors for Invacare Corporation in fiscal 1999, an are expected to remain at approximately current levels through the first half of fiscal 2002. General and administrative expense for the year was $3,990,301 compared to $4,036,732 and $3,461,161 for fiscal years ended March 31, 2000 and 1999, respectively. The decrease in general and administrative expenses this year versus last year is primarily due to compensation payable to the Company's former CEO under the terms of his employment agreement last year. The increase in general and administrative expenses for this year versus the fiscal year ended March 31, 1999 is primarily attributable to increased marketing expenditures, investment banking fees associated with acquisition activities, and increased reserves for bad debts. Write-down of investments and other assets this year of $320,401 are attributable to the retirement of obsolete electronic equipment and the impairment write-down of the Company's investment in Aeromax Corporation, which did not meet the Company's expectation of near term profitable operations. Write-down of investments and other assets for the year ended March 31, 2000 represents write-downs of the Company's investments in EV Global, Unique Mobility Europa, Taiwan UQM Electric Company and a note receivable from Windemere Eco Development, all of which did not meet the Company's expectation of near term profitable operations. Interest income for fiscal 2001 rose to $66,833 compared to $59,369 in fiscal 2000. The increase is generally attributable to higher yields on invested cash balances. Interest income this year declined $44,532 compared to $111,365 in fiscal 1999. The decrease is attributable to lower levels of cash and cash equivalents throughout this fiscal year. Interest expense declined to $450,322 for the year ended March 31, 2001 compared to $483,298 last year. The decrease is attributable to lower levels of term-debt throughout the fiscal year. Interest expense rose $111,926 this year from $338,396 for fiscal 1999. The increase is attributable to higher levels of borrowings throughout this fiscal year on the Company's lines-of-credit. Equity in loss of joint ventures was zero this year versus $280,170 and $417,801 for the years ended March 31, 2000 and 1999, respectively. The decrease for this year versus last year and fiscal 1999 is due to the Company's write-down of its investment in Taiwan UQM, EV Global, Europa, and WED last year at which time it ceased recording its pro-rata shares of the operating losses of these entities. Liquidity and Capital Resources The Company's cash balances and liquidity throughout the fiscal year ended March 31, 2001 were adequate to meet operating needs. For the year ended March 31, 2001 net cash used by operations was $3,522,690 compared to $1,744,746 for the comparable prior year. The increase in cash used by operating activities is primarily attributable to higher levels of accounts receivables resulting from increased revenues and the granting of extended terms to selected customers and higher inventory levels somewhat offset by higher levels of trade accounts payable. Cash used by investing activities for the year ended March 31, 2001 was $342,750 compared to $1,015,393 for the prior fiscal year. The change is primarily attributable to the proceeds of $1,752,365 from the sale of the Unique Building Partners Limited Liability Co's principal asset, the Company's headquarters building located in Golden, Colorado and the subsequent liquidation of the Limited Liability Company offset by increased capital expenditures for property and equipment of $1,897,848. The Company's cash requirements throughout the period were funded primarily from existing cash balances, cash proceeds from the exercise of warrants and employee stock options, proceeds for the sale of the Company's Headquarters Building by UBPL and from borrowings on the Company's revolving lines-of-credit. UQM Power Products has a line-of-credit facility with a commercial bank in the amount of $750,000 which is scheduled for renewal in December 2001. At March 31, 2001 no amount was drawn against this facility. All financing of UQM Power has been unconditionally guaranteed by UQM Technologies as the parent entity. UQM Electronics has a line-of-credit with a commercial bank in the amount of $5.0 million expiring in August 2001 which the Company either expects to renew or replace with a similar facility. At March 31, 2001, approximately $4.0 million was drawn against this facility. All financing of UQM Electronics has been unconditionally guaranteed by UQM Technologies as the parent entity. The Company believes that its existing cash balances and bank lines-of-credit will be sufficient to meet its operating capital requirements for at least the next twelve months, exclusive of acquisition financing requirements. For the longer-term, the Company expects to continue its strategy of growing its business through expanding its product line of permanent magnet motors and controllers, securing production orders from new and existing customers for gear and component assemblies, design and introduce new products for manufacture, seek strategic alliances to accelerate the commercialization of its technology and pursue synergistic and accretive acquisitions. The Company expects to finance its future growth from existing cash resources, cash flow from operations, and through the issuance of equity or debt securities or a combination thereof. There can, however, be no assurance that such financing or capital will be available on terms acceptable to the Company. In the event financing or capital for future growth as envisioned under the Company's strategy is not available, the Company will modify its strategy to align its operations with its then available financial resources. Quantitative and Qualitative Disclosures about Market Risk Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. The Company does not use financial instruments to any degree to manage these risks and does not hold or issue financial instruments for trading purposes. Subsequently, all of the Company's product sales, and related receivables are payable in U.S. dollars. The Company is subject to interest rate risk on its debt obligations. Long-term debt obligations have fixed interest rates and the Company's lines-of-credit have variable rates of interest indexed to the prime rate. Interest rates on these instruments approximate current market rates as of March 31, 2001. ITEM 8. Financial Statements and supplementary data The Company's unaudited quarterly financial data set forth in the Company's annual report to shareholders for the fiscal year ended March 31, 2001 is hereby incorporated by reference. Independent Auditors' Report The Board of Directors UQM Technologies, Inc.: We have audited the accompanying consolidated balance sheets of UQM Technologies, Inc. (formerly Unique Mobility, Inc.) and subsidiaries (Company) as of March 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended March 31, 2001. These consolidated 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 did not audit the financial statements of Taiwan UQM Electric Co., Ltd., (a 38.25 percent owned investee company). For the year ended March 31, 1999 the Company recognized equity in the losses of Taiwan UQM Electric Co., Ltd. of $417,801. The financial statements of Taiwan UQM Electric Co., Ltd. were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Taiwan UQM Electric Co., Ltd. for the year ended March 31, 1999 is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of UQM Technologies, Inc. and subsidiaries as of March 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2001, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Denver, Colorado May 18, 2001 UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets

(Continued) UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets, Continued

See accompanying notes to consolidated financial statements. UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Operations

See accompanying notes to consolidated financial statements. UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)

(Continued) UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss), Continued

See accompanying notes to consolidated financial statements. UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Non-cash investing and financing transactions: Translation adjustments of $(67,339) and $31,159, were recorded for the years ended March 31, 2000 and 1999, respectively. In February 2000, the Company accepted 10,675 shares of its $0.01 par value common stock with a fair market value of $90,742 in satisfaction of purchase price adjustments arising subsequent to the acquisition of UQM Electronics in accordance with the provisions of the Purchase Agreement. In March 2000, the Company accepted 7,762 shares of its $0.01 per share common stock with a fair market value of $76,653 in satisfaction of purchase price adjustments arising subsequent to the acquisition of UQM Power Products in accordance with the provisions of the Purchase Agreement. In May 1999, the Company acquired a 33.6 percent ownership interest in a Germany Joint Venture. Pursuant to this transaction the Company issued 208,333 shares of common stock with an aggregate value of $1,149,894 in exchange for its ownership interest. In April 1998, the Company purchased all of the outstanding stock of UQM Electronics for $4 million cash and 286,282 shares of the Company's common stock. In accordance with the provisions of the Company's stock option plans, the Company accepts as payment of the exercise price or as repayment of promissory notes from officers issued under the option plans, mature shares of the Company's common stock held by the option holder for a period of six months prior to the date of the option exercise or promissory note repayment. For the years ended March 31, 2001 and 2000, the Company issued 20,045 and 5,000 shares of common stock for an aggregate exercise price of $63,864 and $3,750, respectively, for which the Company received 7,983 and 355 shares of common stock as payment for the exercise price. In accordance with the provisions of the Company's stock option plans, the Company accepts promissory notes from officers of the Company in satisfaction of the exercise price of options exercised. These notes receivable are recorded as a reduction of shareholders' equity in the consolidated financial statements. For the years ended March 31, 2001 and 1999, the Company issued 11,000 and 267,362 shares of common stock for an aggregate exercise price of $38,500 and $794,341, respectively, for which the Company received promissory notes for the same amount. For the year ended March 31, 2000 the Company received 14,310 shares of common stock with a fair market value of $121,635 in repayment of promissory notes issued under the option plans. The shares received were recorded at cost as treasury stock and subsequently retired. See accompanying notes to consolidated financial statements. UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Summary of Significant Accounting Policies (a) Description of Business UQM Technologies, Inc., formerly Unique Mobility, Inc. and subsidiaries (the "Company") is engaged in the research, development and commercialization of permanent magnet electric motors and the electronic controls for such motors, the grinding and manufacturing of high precision gears and the manufacture and sale of electronic printed circuit board assemblies, wire harness assemblies and other electronic products. The Company's revenue is derived primarily from product sales to customers in the automotive, agriculture, telecommunications, industrial, medical and aerospace markets, and from contract research and development services. The Company is impacted by other factors such as the continued receipt of contracts from industrial and governmental parties, its ability to protect and maintain the proprietary nature of its technology, its continued product and technological advances and the ability of the Company and its partners to commercialize its products and technology. (b) Principles of Consolidation The consolidated financial statements include the accounts of UQM Technologies, Inc. and those of all majority-owned or controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in affiliated entities in which the Company has less than a 50 percent ownership interest and the ability to exercise significant influence are accounted for by the equity method. Under the equity method, the investment is originally recorded at cost and subsequently adjusted to recognize the Company's share of the net income or losses of the affiliates. Recognition of any such losses is generally limited to the extent of the Company's investment in, advances to, commitments and guarantees for the investee. Other investments, in which the Company has a minimal ownership interest and does not exercise significant influence, are carried at cost. The minority interests as of March 31, 2000, consisted of the other stockholders' ownership interests in a subsidiary of the Company. See Note 4. (c) Cash and Cash Equivalents The Company considers cash on hand and investments with original maturities of three months or less to be cash equivalents. UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (d) Inventories Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. (e) Property and Equipment Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which range from three to five years, except for buildings, which are depreciated over 31 years. Maintenance and repairs are charged to expense as incurred. (f) Patent and Trademark Costs Patent and trademark costs consist primarily of legal expenses, and represent those costs incurred by the Company for the filing of patent and trademark applications and the costs to maintain the patents in good standing. Amortization of patent and trademark costs is computed using the straight-line method over the estimated useful life of the asset, typically 17 years for patents, and 40 years for trademarks. (g) Goodwill The excess of the consideration exchanged over the fair value of the net assets obtained in acquisitions is recorded as goodwill. Amortization of goodwill is calculated using the straight-line method over a period of 20 years. (h) Long-Lived Assets The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ("SFAS 121"). SFAS 121 requires that long-lived assets, investments and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. (i) Contract Services Revenue and Cost Recognition Revenue relating to long-term fixed price contracts is recognized using the percentage of completion method. Under the percentage of completion method, contract revenues and related costs are recognized based on the percentage that costs incurred to date bear to total estimated costs. Changes in job performance, estimated profitability and final contract settlements may result in revisions to cost and revenue, and are recognized in the period in which the revisions are determined. UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Contract costs include all direct materials, subcontract and labor costs and other indirect costs. General and administrative costs are charged to expense as incurred. At the time a loss on a contract becomes known, the entire amount of the estimated loss is accrued. The aggregate of costs incurred and estimated earnings recognized on uncompleted contracts in excess of related billings is shown as a current asset, and billings on uncompleted contracts in excess of costs incurred and estimated earnings is shown as a current liability. The Company manufactures proprietary products and other products based on design specifications provided by its customers. Revenue from sales of products are generally recognized at the time title to the goods and the benefits and risks of ownership passes to the customer which is typically when products are shipped based on the terms of the customer purchase agreement. (j) Income Taxes Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (k) Research and Development Costs of researching and developing new technology or significantly altering existing technology are charged to operations as incurred. (l) Equity Instruments Issued for Non-Employee Services The Company periodically issues common stock or stock options to non-employees for services rendered. The cost of these services is recorded based upon the fair market value of the Company's common stock on the date of issuance or the fair market value of the stock option determined using an appropriate option pricing model. (m) Foreign Currency Translation The net assets of foreign investments of the Company are translated at the appropriate period-end exchange rates. Income and expense accounts are translated at average monthly exchange rates. Net exchange gains or losses resulting from such translation are excluded from results of operations and accumulated as a separate component of stockholders' UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued equity until realized or investments are disposed of. Gains and losses from foreign currency transactions are included in other income (expense). (n) Comprehensive Income (Loss) Comprehensive income (loss) consists of net loss and other comprehensive income (loss) items which under generally accepted accounting principles are excluded from net loss but included as a component of stockholders' equity. At March 31, 2001 and 2000, accumulated other comprehensive loss consisted entirely of unrealized foreign currency losses. (o) Loss Per Common Share Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"), requires presentation of both basic earnings per share and diluted earnings per share. Basic earnings per share is computed by dividing income or loss available to common shareholders by the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is computed by dividing income or loss available to common shareholders by all outstanding and dilutive potential shares during the periods presented, unless the effect is antidilutive. (p) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (q) Reclassifications Certain prior year amounts have been reclassified to conform to the current period presentation. (2) Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts and Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts At March 31, 2001, the estimated period to complete contracts in process ranged from 1 to 15 months, and the Company expects to collect substantially all related accounts receivable arising therefrom within sixteen months. UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The following summarizes contracts in process at March 31, 2001, and 2000:

(3) Inventories Inventories at March 31, 2001, and 2000 consist of: March 31, March 31, 2001 2000 --------- --------- Raw materials $ 5,159,632 2,446,779 Work in process 352,632 627,131 Finished products 1,143,972 46,369 --------- --------- $ 6,656,236 3,120,279 ========= ========= (4) Limited Liability Company In September 1992, the Company and a private investor formed a Colorado limited liability company to acquire, own and maintain a 40,000 square-foot facility in Golden, Colorado, and the surrounding land. This facility serves as the Company's corporate headquarters. Ownership in this limited liability company is divided equally between the Company and the private investor. However, the Company is deemed to have a controlling interest in the limited liability company by virtue of the operating agreement which authorizes the Company to make all decisions with respect to the business of the limited liability company, subject only to certain protective rights of the private investor, and by virtue of the lease agreement with the limited liability company covering the entire facility. UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The limited liability company is, therefore, accounted for as a consolidated subsidiary. Minority interest in consolidated subsidiary represents the private investor's allocable portion of the equity of the consolidated subsidiary. In January 2001, the Limited Liability Company sold the Golden, Colorado real estate held by it for $3.0 million in cash. Subsequent to the sale the Limited Liability Company was liquidated. Cash proceeds to the Company from the transaction and the subsequent liquidation were $1.2 million. The Company's lease on the facility expires in September 2002, and the Company has an option to extend the lease for an additional term of five years at the then prevailing market lease rate. Recognition of the Company's gain on the transaction of $752,136 is being deferred over the remaining term of the Company's lease of the facility, including available extensions. (5) Investment in Taiwan Joint Venture The Company has a 38-1/4 percent interest in a joint venture, Taiwan UQM Electric Co., Ltd. ("Taiwan UQM"), with Kwang Yang Motor Co., Ltd., and Turn-Luckily Technology Co., Ltd. Since its inception, Taiwan UQM has incurred substantial operating losses and the Company has reported its proportionate share of such losses and foreign exchange rate fluctuations as a reduction in the recorded value of its investment in Taiwan UQM under the equity method of accounting. Because of continued operating losses at September 30, 1999 the Company evaluated this investment relative to its potential to achieve profitable operations over the near-term and the Company's potential to recover the recorded value of its investment. Based on its assessment of these factors and the uncertainty of recovering its investment, on September 30, 1999 the Company wrote down the carrying value of this investment from $1,476,233 to zero. Consequently, the Company discontinued recording its share of the net losses of the joint venture subsequent to the date of the write-down. Prior to the write down the Company reported its proportionate share of the losses of Taiwan UQM under the equity method of accounting. The cumulative foreign currency translation adjustments with respect to the Taiwan joint venture is included in accumulated other comprehensive income until the investment is sold or liquidated. UNIQUE MOBILITY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (6) Investment in EV Global The Company owns 400,000 shares of EV Global Motors Company (EVG) common stock. EVG sells electric bicycles. In June 1999, the Company acquired an approximately 9.5 percent participation in a $5.225 million convertible note receivable from Windermere Eco Development Limited, a Bahamian company ("WED") held by EVG, for $500,000 in cash. WED is an environmentally sensitive development of Windermere Island in the Bahamas. The entire loan is convertible into approximately 50.4 percent of the total outstanding equity of WED. Therefore, if EVG converts the loan, Unique will have the right to receive approximately 4.82 percent of the equity of WED. Because of continuing operating losses reported by these investees at September 30, 1999 the Company evaluated its investment in EVG and WED relative to their potential to achieve profitable operations over the near-term and the Company's potential to recover the carrying value of its investment in each Company. Based on its assessment of these factors, on September 30, 1999 the Company wrote down the carrying value of EVG from $1,000,000 to zero and the carrying value of its interest in the WED note receivable from $515,708 to zero. (7) Investment in Germany Joint Venture In May, 1999, the Company and three other entities formed a German private company, Unique Mobility Europa GmbH (Europa), to develop and manufacture a battery-electric cargo and passenger vehicle. Europa was initially capitalized with DM50,000 cash (US $9,573) and a contribution to surplus of 625,000 shares of Unique Mobility, Inc. common stock, of which 208,333 were newly issued shares contributed by the Company in exchange for 33.6 percent ownership interest in Europa. On October 8, 1999 the Company entered into an agreement with the Shareholder's of Europa providing for the reduction of its ownership percentage to 5.9 percent. As a result of this agreement and the Company's assessment of the potential for Europa to achieve profitable operations over the near-term and the Company's potential to recover the carrying value of its investment, the Company wrote down the carrying value of its investment from $1,112,687 to zero at September 30, 1999. During the year ended March 31, 2001 the Company sold its remaining ownership interest in Europa. No gain or loss was recognized on this transaction. UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (8)Impairment of Long-Lived Assets During the fiscal year ended March 31, 2001 the Company recorded an impairment charge associated with the retirement of certain electronic manufacturing equipment at its Electronic Products Segment in the amount of $216,818. Also during the year the Company evaluated its investment in Aeromax Corporation relative to their potential to complete product development activities and launch commercial products, achieve profitable operations over the near-term and the potential for the Company to recover the carrying value of its investment. Based on its assessment of these factors, the Company wrote down the carrying value of its investment in Aeromax and associated trade amounts receivable from Aeromax totaling $103,583. (9)Other Current Liabilities Other current liabilities at March 31, 2001 and 2000, consist of: March 31, March 31, 2001 2000 Accrued interest $ 41,917 21,360 Accrued legal and accounting fees 85,110 71,275 Accrued payroll, consulting, personal property taxes and real estate taxes 684,296 339,263 Customer deposits 44,575 - Accrued material purchases 310,478 327,828 Accrued warranty costs 34,275 6,473 Other 140,855 79,263 --------- ------- $ 1,341,506 845,462 ========= ======= (10) Long-term debt

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued

Certain of the above loan agreements require the Company to maintain certain financial ratios as defined in the agreements. At March 31, 2001, the Company was not in compliance with certain covenants of the above notes payable. Effective March 31, 2001 the agreement was amended to waive the covenant breaches and modify the then existing covenants. The annual aggregate maturities of long-term debt for each of the next five fiscal years and thereafter are as follows: 2002 $ 865,685 2003 721,405 2004 780,037 2005 349,157 2006 137,110 Thereafter 618,366 -------- $ 3,471,760 Lines of credit At March 31, 2001, the Company has lines of credit of $.75 million and $5.0 million. The $.75 million line-of-credit expires in December 2001 and had no amount outstanding at March 31, 2001. The $5.0 million line-of-credit is due on demand, but if no demand is made, it is due August 15, 2001. The Company expects that its lines-of-credit will be renewed or replaced with similar facilities. At March 31, 2001, $4,037,000 was outstanding on this facility. Interest on the lines-of-credit is payable monthly at prime plus .75% (8.75% at March 31, 2001) and prime (8.0% at March 31, 2001), respectively. Outstanding borrowings under both lines of credit are secured by accounts receivable, inventory and general intangibles, and are limited to certain percentages of eligible accounts receivable and inventory. Both lines have various covenants which limit the Company's ability to dispose of assets, merge with another entity, and pledge trade receivables and inventories as collateral. The Company is also required to maintain certain financial ratios as defined in the UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued agreements. At March 31, 2001, the Company was not in compliance with certain covenants of the loan agreement governing its $5 million line of credit. Effective March 31, 2001 the loan agreement was amended to waive the covenant breaches and modify the then existing covenants. (11) Income Taxes Income tax benefit attributable to loss from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 34% as a result of the following: Year Ended Year Ended Year Ended March 31, March 31, March 31, 2001 2000 1999 ---------- ---------- ----------- Computed "expected" tax benefit $ (1,067,641) (2,200,414) (1,276,384) Increase (decrease) in taxes resulting from: Amortization of goodwill not deductible for tax 91,820 107,286 97,915 Expiration of net operating loss (NOL) carry-forwards 126,992 76,822 89,369 Increase in valuation allowance for net deferred tax assets 884,072 2,160,758 906,668 Other, net (35,243) (144,452) 182,432 --------- --------- --------- Income tax benefit $ - - - ========= ========= ========= UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The tax effects of temporary differences that give rise to significant portions of the net deferred tax asset are presented below:

As of March 31, 2001, the Company had net operating loss carryforwards (NOL) of approximately $32 million for U.S. income tax purposes which expire in varying amounts through 2021. Approximately $2.8 million of the net operating loss carryforwards are attributable to stock options, the benefit of which will be credited to additional paid-in capital if realized. However, due to the provisions of Section 382 of the Internal Revenue Code, the utilization of a portion of these NOLs is limited. Future ownership changes under Section 382 could occur that would result in a Section 382 limitation which would restrict the use of NOLs. In addition, any Section 382 limitation could be further reduced to zero if the Company fails to satisfy the continuity of business enterprise requirement for the two-year period following an ownership change. (12) Stockholders' Equity During the year ended March 31, 2000, the Company completed a private placement of 88,900 shares of common stock with an institutional investor. Cash proceeds to the Company, net of offering costs was $488,828. (13) Common Stock Options and Warrants Incentive and Non-Qualified Option Plans The Company has reserved 6,104,000 shares of common stock for key UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued employees, consultants and key suppliers under its Incentive and Non-Qualified Option Plans of 1992 and 1982. Under these option plans the exercise price of each option is set at the fair market value of the common stock on the date of grant and the maximum term of the options is 10 years from the date of grant. Options granted to employees vest ratably over a three-year period. The maximum number of options that may be granted to any eligible employee during the term of the 1982 and 1992 plans is 1,000,000 options. Options granted under the Company's plans to employees require the option holder to abide by certain Company policies which restrict their ability to sell the underlying common stock. The following table summarizes activity under the plans: Shares Under Weighted-Average Option Exercise Price ------------ ---------------- Outstanding at March 31, 1998 2,828,352 5.34 Granted 650,000 5.20 Exercised (331,647) 2.90 Forfeited (109,151) 7.68 --------- Outstanding at March 31, 1999 3,037,554 5.49 Granted 495,000 8.31 Exercised (204,970) 3.79 Forfeited (96,190) 6.12 --------- Outstanding at March 31, 2000 3,231,394 6.01 Granted 472,633 7.18 Exercised (212,408) 5.16 Forfeited (676,799) 7.31 --------- Outstanding at March 31, 2001 2,814,820 $5.96 ========= Exercisable at March 31, 2001 1,995,630 $5.47 ========= UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The following table presents summarized information about stock options outstanding at March 31, 2001:

Non-Employee Director Stock Option Plan In February 1994, the Company's Board of Directors ratified a Stock Option Plan for Non-Employee Directors pursuant to which Directors may elect to receive stock options in lieu of cash compensation for their services as directors. The Company has reserved 500,000 shares of common stock for issuance pursuant to the exercise of options under the Plan. The options are exercisable from 3 to 10 years from the date of grant. Option prices are equal to the fair market value of common shares at the date of grant. The following table presents summarized activity under the plan: Weighted Shares Under Average Option Exercise Price Outstanding at March 31, 1998 189,333 5.86 Granted 64,000 5.06 ------- Outstanding at March 31, 1999 253,333 5.66 Granted 9,275 4.25 Forfeited (221,333) 5.59 ------- Outstanding at March 31, 2000 41,275 5.68 Granted 5,785 7.94 ----- Outstanding at March 31, 2001 47,060 $5.96 ======= Exercisable at March 31, 2001 29,758 $6.09 ======= UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The following table presents summarized information about stock options outstanding for non-employee directors:

Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123") defines a fair value method of accounting for employee stock options and similar equity instruments. SFAS 123 permits an entity to choose to recognize compensation expense by adopting the new fair value method of accounting or continue to measure compensation costs using the intrinsic value methods prescribed by APB25. The Company accounts for stock options granted to employees and directors of the Company under the intrinsic value method. Stock options granted to non-employees under the Company's 1992 Stock Option Plan are accounted for under the fair value method. Had the Company reported compensation costs as determined by the fair value method of accounting for option grants to employees and directors, net loss and net loss per common share would have been the pro forma amounts indicated in the following table:

The fair value of stock options granted was calculated using the Black Scholes option pricing model based on the following weighted average assumptions:

UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Future pro forma compensation cost by fiscal year, assuming no additional grants by the Company to employees and directors, is as follows: Fiscal Year Pro Forma Ended Compensation March 31, Expense ----------- ---------- 2002 $1,480,006 2003 $1,129,214 2004 $ 507,524 Warrants The Company completed a private placement in fiscal 1998 of 750,000 units consisting of one common share and one warrant. Of the 750,000 units privately placed, 626,875 were issued in March 1998 and the remaining 123,125 were issued in April 1998. Also in connection with the 1998 private placement, the placement agents were issued warrants in March 1998, to acquire 176,588 shares of the Company's common stock at an exercise price of $8.00 per share. The warrants expire two years from the date of issuance. During the years ended March 31, 2001 and 2000 warrants to acquire 12,000 and 436,212 shares of the Company's common stock at $8.00 per share were exercised resulting in cash proceeds to the Company of $96,000 and $3,489,696, respectively. In March 2000, warrants to acquire 179,000 shares expired unexercised. Warrants to purchase 299,375 shares of common stock were extended in fiscal 2000 for a period of eighteen months at the fair value of such extension resulting in cash proceeds to the Company of $78,151 and all remain outstanding at March 31, 2001. (14) Alcan Royalty Agreement During 1994, the Company and Alcan Aluminum Limited ("Alcan") executed an agreement in which Alcan assigned to the Company all of its rights, title and interests in certain motor technology developed under a program funded by Alcan. This agreement further provides that the Company shall pay to Alcan royalties of one-half of one percent on revenue derived from the manufacture and sale of products or processes embodying the related technology. For the years ended March 31, 2001, 2000 and 1999 the Company recorded royalty expense of $30,162, $23,612 and $14,240, respectively, under this agreement. (15) Significant Customers The Company has historically derived significant revenue from a few key customers. The customers from which more than 10% of total revenue has been derived and the percentage of revenue is summarized as follows: UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Year Ended Year Ended Year Ended March 31, March 31, March 31, 2001 2000 1999 ---------- ---------- ---------- Customer A $ 4,706,810 4,434,454 3,108,929 B 6,427,983 647,584 - ---------- -------- --------- $ 11,134,793 5,082,038 3,108,929 ========== ========= ========= Percentage of revenue 41% 25% 20% === === === The significant customers for the years ended March 31, 2001, 2000 and 1999, were customers in the Company's Electronic Products Segment. These customers, in total, also represented 66%, 29% and 19% of total accounts receivable at March 31, 2001, 2000 and 1999, respectively. Contract services revenue derived from contracts with agencies of the U.S. Government and from sub-contracts with U.S. Government prime contractors totaled $853,341, $910,770, and $758,853 and for the years ended March 31, 2001, 2000 and 1999, respectively. (16) Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash and cash equivalents, certificates of deposit, accounts receivable and accounts payable: The carrying amounts approximate fair value because of the short maturity of these instruments. Long-term debt and revolving line-of-credit: The carrying amount of the Company's long-term debt and revolving line-of-credit approximates fair value since the interest rate on this debt represents the current market rate for similar financing available to the Company providing comparable security to the lender. (17) Employee Benefit Plans 401(k) Plan The Company has established a 401(k) Savings Plan (the Plan) under which eligible employees may contribute up to 15% of their compensation. At the direction of the participants, contributions are invested in several investment options offered by the Plan. The Company currently matches 33% of participants contributions, subject to certain limitations. These UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued contributions vest ratably over a three-year period. Matching contributions to the Plan by the Company were $99,179, $97,715 and $107,455 for the years ended March 31, 2001, 2000 and 1999, respectively. Stock Purchase Plan The Company has established a Stock Purchase Plan which allows eligible employees to purchase, through payroll deductions, shares of the Company's common stock at 85% of the fair market value at specified dates. The Company has reserved 200,000 shares of common stock for issuance under the Stock Purchase Plan. During the years ended March 31, 2001, 2000 and 1999, the Company issued 6,774, 9,072 and 3,120 shares of common stock, respectively, under the Stock Purchase Plan. (18) Segments The Company has three reportable segments: technology, mechanical products and electronic products. The technology segment encompasses the Company's technology-based operations including core research to advance its technology, application engineering and product development and job shop production of prototype components. Salaries of the executive officers and corporate general and administrative expense is allocated equally to each segment. The mechanical products segment encompasses the manufacture and sale of permanent magnet motors, precision gears, gear assemblies and related mechanical products. The electronic products segment encompasses the manufacture and sale of wire harness assemblies, electronic printed circuit board assemblies and electronic products. For the year ended March 31, 2000, intersegment sales or transfers were $96,894. During the years ended March 31, 2001 and 1999 intersegment sales or transfers were immaterial. The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different business strategies. The following table summarizes significant financial statement information for each of the reportable segments for the year ended March 31, 2001: UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued

Segment information has been reclassified to reflect corporate overhead allocation consistent with the current year presentation. The following table summarizes significant financial statement information for each of the reportable segments for the year ended March 31, 1999: UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued

(19) Commitments and Contingencies Employment Agreements The Company has entered into employment agreement with two of its officers which expire December 31, 2002. The aggregate future compensation under the employment agreements is $726,250. Lease Commitments The Company has entered into operating lease agreements for office space and equipment which expire at various times through 2007. As of March 31, 2001, the future minimum lease payments under operating leases with initial noncancelable terms in excess of one year are as follows: Year ending March 31: 2002 $ 522,883 2003 531,729 2004 534,246 2005 530,212 2006 521,872 Thereafter 360,475 -------- $ 3,031,417 Rental expense under these leases totaled approximately $349,837, $377,000, and $327,000 for the years ended March 31, 2001, 2000 and 1999, respectively. UQM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Litigation The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, and based on current information available, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position, results of operations or cash flow, although there are no assurances that adverse developments in these matters could have a material impact on a reporting period. (20) Schedule of Valuation and Qualifying Accounts

Note (A) Uncollectible accounts written off, net of recoveries. Note (B) Amounts written off or payments incurred. Note (C) Includes write down of inventory in 2001 of approximately $392,000. ITEM 9. CHANGE IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III Item 10 Directors and Executive Officers Richard L. Hugen, Age 64, Vice President, Marketing and Sales, joined the Company in April of 2000 as Director of Marketing and Sales and was appointed Vice President, Marketing and Sales in April 2001. From 1990_to 2000 Mr. Hugen was employed by Arnautical, Inc., a airline pilot training company, as Chief Instructor. From 1984 to 1990, Mr. Hugen served as National Sales Manager for XEL Corporation, a manufacturer of telecommunications equipment. Additional information required by Item 10 is incorporated by reference from and contained under the headings "Election of Directors" and "Management" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders' held August 22, 2001. Item 11 Executive Compensation The information required by Item 11 is incorporated by reference from and contained under the headings "Executive Compensation", "Option Grants during Fiscal 2001" and "Aggregate Option Exercises During Fiscal Year 2001 and Option Values at the End of Fiscal Year 2001" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders' held August 22, 2001. Item 12 Security Ownership of Certain Beneficial Owners and Management The information required by Item 12 is incorporated by reference from and contained under the heading "Security Ownership of Certain Owners and Management" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders' held August 22, 2001. Item 13 Certain Relationships and Related Transactions The information required by Item 13 is incorporated by reference from and contained under the headings "Compensation Committee Interlocks and Insider Participation" and "Certain Relationships and Related Transactions" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders' held August 22, 2001. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. Financial Statements: -------------------- UQM Technologies, Inc. (included in Part II): Independent Auditors' Report. Consolidated Balance Sheets, March 31, 2001 and March 31, 2000. Consolidated Statements of Operations for the years ended March 31, 2001, 2000 and 1999. Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) for the years ended March 31, 2001, 2000 and 1999. Consolidated Statements of Cash Flows for the years ended March 31, 2001, 2000 and 1999. Notes to Consolidated Financial Statements.

INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Taiwan UQM Electric Co., Ltd. We have examined the balance sheets of Taiwan UQM Electric Co., Ltd. as of December 31, 1998 and 1997, and the related statements of income, changes in shareholders' equity and cash flows for the years then ended. Our examinations were made in accordance with auditing standards generally accepted in the Republic of China and the regulations governing such examinations and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. Such auditing standards are substantially equivalent to auditing standards generally accepted in the United States. In our opinion, the financial statements referred to above present fairly the financial position of Taiwan UQM Electric Co., Ltd. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the Republic of China applied on a consistent basis. - --------------------------- Horwath & Company Taipei, Republic of China January 19, 1999

See accompanying notes to financial statements.

See accompanying notes to financial statements.

See accompanying notes to financial statements.

See accompanying notes to financial statements. TAIWAN UQM ELECTRIC CO., LTD. NOTES TO FINANCIAL STATEMENTS December 31, 1998 and 1997 (Amounts Expressed in New Taiwan Dollars) 1 ORGANIZATION AND NATURE OF BUSINESS Taiwan UQM Electric Co., Ltd. (the Company) was incorporated on January 17, 1995 as a company limited by shares under the Company Law of the Republic of China. The Company is mainly engaged in the manufacture and sale of motors, motor controllers and related components. The Company was still in development stage as of April 30, 1998 and was mainly engaged in financial planning, recruitment and training, factory construction, etc. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company's accounting policies conform with accounting principles generally accepted in the Republic of China. a. Cash and cash equivalents The statements of cash flows are prepared on the basis of cash and cash equivalents. Cash equivalents are short-term and highly liquid investments with original maturities of three months or less. b. Short-term investments Short-term investments are stated at the lower of weighted average cost or market. c. Allowance for doubtful accounts Allowance for doubtful accounts is provided on the basis of the collectibility of receivables. d. Inventories Inventories are stated at the lower of weighted average cost or market. e. Property and equipment Property and equipment are stated at cost. Major additions, replacements and betterments are capitalized, while maintenance and repairs are expensed currently. Depreciation is provided by the straight-line method over the estimated useful lives of the respective assets. When property are depreciated to residual value and are still in use, they are depreciated over their remaining useful lives. When property are retired or disposed of , their cost and related accumulated depreciation are removed from the respective accounts. Any resulting gain or loss is credited or charged to income, and the gain, after deducting the applicable income tax, is transferred to capital surplus in the following year. f. Deferred charges Deferred charges are amortized by the straight-line method over five years. g. Income tax Income tax is provided in accordance with Statement of Financial Accounting Standards No. 22 "Accounting for Income Tax". Tax effects of taxable temporary differences are recognized as deferred income tax liabilities, while those of deductible temporary differences, loss carryovers and tax credits are recognized as deferred income tax assets. Valuation allowance is provided on the basis of the estimated realizability of deferred income tax assets.

13 RETAINED EARNINGS The Company's Articles of Incorporation provide that 10% of the annual net income (less deficit, if any) shall be appropriated as legal reserve, 5% of the remainder shall be appropriated as employees' bonus, and the remainder shall be appropriated at the shareholders' meeting in the following year. As of December 31, 1998, the information relating to shareholders' imputed tax credits is summarized as follows (in NT$'000): Shareholders' imputed tax credits $ 18 Unappropriated earnings through 1997 - Unappropriated earnings since 1998 - The estimated tax credit ratio on 1998 earnings distribution is about 0%. However, such ratio should be recomputed when dividends are actually distributed to shareholders.

18 ASSETS MORTGAGED OR PLEDGED The following assets were mortgaged of pledged as collaterals: December 31, 1998 ------------------------ Land $ 88,711,199 Buildings, net 97,198,415 Machinery and equipment, net 12,874,422 Other equipment, net 307,170 ------------------------ Total $ 199,091,206 ========================

a. Accounting for pensions: Under the ROC Generally Accepted Accounting Principles (GAAP), only public companies are currently required to adopt ROC SFAS No. 18"Accounting for Pensions"which is similar to US SFAS No. 87. Since the Company is not a public company, it has not adopted ROC SFAS No.18.The Company has not yet established an employees' retirement plan in accordance with the Labor Standards Law and has not obtained an actuarial valuation report to accrue the pension liability. b.Accounting for income tax: ROC SFAS No.22"Accounting for Income Tax"is similar to US SFAS No.109. However, the local accounting practices do not require that an 100% valuation allowance for deferred tax assets should be provided in an operating loss situation. The aforementioned difference represented the additional valuation allowance for deferred tax assets to be provided for 1997 under US GAAP. 2. Financial Statement Schedules: None. (b) Reports on Form 8-K: None (c) Exhibits 3.1 Bylaws. Reference is made to Exhibit 3.1 of the Company's Registration Statement on Form S-1 (No. 33-42342) filed August 20, 1991 which is incorporated herein by reference. 3.2 Restated Articles of Incorporation. Reference is made to Exhibit 3.2 of the Company's Quarter Report on Form 10-K for the year ended October 31, 1993 (No. 0-9146) which is incorporated herein by reference. 4.1 Specimen Stock Certificate. Reference is made to Exhibit 3.1 of the Company Registration Statement on Form 10, dated February 27, 1980 (No. 0-9146) which is incorporated herein by reference. 10.2 UQM Technologies, Inc. Incentive and Non-qualified Stock Option Plan (amended and restated effective January 1, 1988). Reference is made to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1988 (No. 0-9146). 10.3 UQM Technologies, Inc. 1992 Stock Option Plan. Reference is made to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No. 33-47454), which is incorporated herein by reference. 10.4 UQM Technologies, Inc. Employee Stock Purchase Plan. Reference is made to Exhibit 4.3 to the Company's Registration Statement on Form S-8 (No. 33-34612), which is incorporated herein by reference. 10.5 401(k) Savings Plan of UQM Technologies, Inc. Reference is made to Exhibit 4.3 to the Company's Registration Statement on Form S-8 (No. 33-34613), which is incorporated herein by reference. 10.8 Lease between the Company and Unique Building Partners, Ltd. Liability Co. dated September 22, 1992. Reference is made to Exhibit 10.34 of the Company's Registration Statement on Form S-2 (No. 33-53376), which is incorporated herein by reference. 10.9 UQM Technologies, Inc. Stock Option Plan for Non-Employee Directors. Reference is made to Exhibit 10.39 of the Company's Quarter Report on Form 10-K (No. 0-9146) for the year ended October 31, 1993 which is incorporated herein by reference. 10.10 Warrant Agreement with Arnhold and S. Bleichroeder, Inc. Reference is made to Exhibit 10.41 of the Company's Quarter Report on Form 10-K (No. 0-9146) for the year ended October 31, 1993 which is incorporated herein by reference. 10.11 Assignment Agreement with Alcan International Limited. Reference is made to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1994 (No. 0-9146) which is incorporated herein by reference. 10.12 Amendment to the 1992 Stock Option Plan of UQM Technologies, Inc. Reference is made to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1994 (No. 0-9146) which is incorporated herein by reference. 10.13 Amendment to the 401(k) Savings Plan of UQM Technologies, Inc. dated January 18, 1995. Reference is made to Exhibit 10.1 in the Company's Quarterly Report on Form 10-Q for the Quarter ended January 31, 1995 (No. 0-9146) which is incorporated herein by reference. 10.14 Amendment to the 1992 Stock Option Plan of UQM Technologies, Inc. dated December 7, 1994. Reference is made to Exhibit 10.2 in the Company's Quarterly Report on Form 10-Q for the Quarter ended January 31, 1995 (No. 0-9146) which is incorporated herein by reference. 10.15 Stock Purchase Agreement by and among UQM Technologies, Inc. and Invacare Corporation dated December 7, 1995. Reference is made to Exhibit 10.36 in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995, (No. 1-10869) which is incorporated herein for reference. 10.16 Amendment to the Stock Purchase Agreement by and among UQM Technologies, Inc. and Invacare Corporation. Reference is made to Exhibit 10.3 in the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1996, (No. 0-9146) which is incorporated herein by reference. 10.17 Employment Agreement between the Company and William G. Rankin. 10.18 Employment Agreement between the Company and Donald A. French. 10.19 Supply Agreement between the Company and Invacare Corporation dated April 1, 1999. Portions have been omitted pursuant to a request for confidential treatment. 10.20 License Agreement between the Company and Invacare Corporation July 23, 1997. Portions have been omitted pursuant to a request for confidential treatment. 13.1 Annual Report to Shareholders for the fiscal year ended March 31, 2001. Only the information incorporated by reference into this Form 10-K/A is included in the exhibit. 21 Subsidiaries of the Company. Reference is made to Exhibit 21 of the Company's Annual Report Form 10-K for the year ended March 31, 2000 (No. 1-10869) which is incorporated herein by reference. 23.1 Consent of KPMG LLP. 23.2 Consent of Horwath Chien Hsing SIGNATURES Pursuant to the requirements of Section 13 of the Securities and Exchange Act of 1934, UQM Technologies, Inc. has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized, in Golden, Colorado on the 14th day of February, 2002. UQM TECHNOLOGIES, INC., a Colorado Corporation By: /s/ Donald A. French Treasurer and Secretary EX-10.17 3 rankinemplagrmnt.htm RANKIN EMPLOYMENT AGREEMENT Rankin Employment Agreement UNIQUE MOBILITY, INC.

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made and entered into as of January 1, 2000, by and between UNIQUE MOBILITY, INC., a corporation organized under the laws of Colorado ("Employer"), and William G. Rankin, an adult resident of Golden, Colorado ("Executive").

WHEREAS, Executive is currently a party to an Employment Agreement with Employer dated January 1, 1997 (the "Old Agreement"); and

WHEREAS, Executive and Employer wish to replace the Old Agreement with this Agreement:

NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set forth, Employer and Executive agree as follows:

1. Termination of Old Agreement. Upon execution of this Agreement, the Old Agreement is hereby retroactively terminated, effective as of the date hereof.

2. Employment. Employer hereby agrees to employ Executive as its president and chief executive officer and Chairman of the Board of Directors for the term of employment set forth herein, and Executive hereby accepts such employment, all upon the terms and conditions hereinafter set forth.

3. Duties. Executive shall perform the duties assigned to him by the Board of Directors, subject to the control, supervision and direction of the Board of Directors.

4. Performance. During the term of Executive's employment under this Agreement and any renewal thereof, Executive shall devote Executive's best efforts and full working time and attention exclusively to the performance of the duties hereunder and to promoting and furthering the business of Employer, and shall not, during the term of employment, be engaged in any other business activity for personal pecuniary advantage. This paragraph shall not be construed as preventing Executive from investing Executive's assets in such form or manner as will not require any services on the part of Executive in the operation of the affairs of the companies in which such investments are made, subject to the provisions of Paragraph 17 hereof. Notwithstanding the foregoing, Executive may perform and assume other activities and obligations as the Board of Directors shall from time to time approve.

5. Term of Employment, Expiration and Termination.

(a) Subject to the provisions of Paragraphs 15 and 16, the term of employment of Executive pursuant to this Agreement shall commence on January 1, 2000, and shall continue through December 31, 2002 (the "Original Term of Employment").

(b) Upon expiration of this Agreement, if Employer elects to not continue Executive's employment, Employer shall provide Executive notice of such fact and shall pay Executive: a lump sum equal to one (1) month's salary for each year of full-time employment with Employer, except that such sum shall be not less than twelve (12) month's salary and shall not exceed twenty-four (24) month's salary.

(c) Upon expiration of this Agreement, if Employer elects to continue Executive's employment without a written employment agreement, Executive's employment shall be at will, except that Executive's employment may be terminated without cause by Employer after notice to Executive. Upon such termination Employer shall pay Executive: a lump sum equal to one (1) month's salary for each year of full-time employment with Employer, except that such sum shall be not less than twelve (12) month's salary and shall not exceed twenty-four (24) month's salary.

(d) On termination of Executive's employment for cause during the Original Term of Employment pursuant to Paragraph 15(a), Executive shall receive no further salary.

(e) On termination of Executive's employment without cause during the Original Term of Employment pursuant to Paragraph 15(c), Employer shall pay Executive a lump sum equal to the greater of the annual salary and benefits payable under this Agreement until the expriation date of the Original Term of Employment, or any renewals thereof, one (1) month's salary for each year of full-time employment with Employer, except that such sum shall be not less than twelve (12) month's salary and shall not exceed twenty-four (24) months' salary. In the event of a material breach of this Agreement by Employer that is not cured after notice from Executive, Executive may elect to treat such breach as a constructive termination under this subparagraph entitling Executive to the benefits hereunder.

(f) On termination of Executive's employment by Executive without cause either (i) during the Original Term of Employment pursuant to Paragraph 16(b), or (ii) after expiration of the Original Term of Employment if Executive's employment continues without written agreement, Employer shall pay Executive a lump sum equal to three (3) month's salary, and Executive shall be entitled to no other severance benefits.

(g) If Executive's employment is terminated as a result of a hostile Change in Control (as defined below) of Employer, such termination shall be deemed a termination without cause under the provisions of Paragraph 5(e), except that Executive shall receive a severance amount equal to twice any amount due under Paragraph 5(e). Any termination of Executive in contemplation of or within twelve (12) months after such Change in Control, except a termination for cause under Paragraph 15(a), shall be deemed a termination under this Subparagraph (g). Further, if Executive's position is materially changed by Employer in contemplation of or within twelve (12) months after any such Change in Control, Executive may elect to treat such change as a constructive termination under this subparagraph entitling Executive to the benefits hereunder. "Change of Control" means the election of new board

members constituting a majority of the directors then in office, which new board members were not nominated by a majority of the directors in office on the date hereof.

(h) Upon Executive's voluntary retirement after age sixty-five during or upon expiration of the Original Term of Employment, or any extension thereof, Executive shall receive the severance benefits described under Paragraph 5(e), i.e., as if the severance was a termination without cause by the Employer.

(i) Upon any termination of Executive, at Executive's election, Employer shall assign to Executive or Executive's designee any life and disability insurance policies or other fringe benefits which may so be assigned. Any continued cost of such policies or benefits shall be Executive's responsibility.

(j) Upon the expiration or termination of Executive's employment, Executive or Executive's legal representative upon request shall promptly deliver to Employer all originals and all duplicates or copies of all documents, records, notebooks and similar repositories of or containing Confidential Information as defined in Paragraph 18 then in his possession, whether prepared by Executive or not.

6. Compensation. For the services to be rendered by Executive hereunder, Employer agrees to pay Executive during the term of employment, and Executive agrees to accept:

(a) An annual base salary of $239,407. Executive's annual base salary shall not be decreased during the Original Term of Employment.

(b) Executive's salary shall be paid in equal semi-monthly installments on the 15th and final day of each month during the term of his employment.

(c) Executive shall receive fringe benefits in accordance with Employer's policies and practices for employees generally (including, without limitation, participation in any stock option plans, life and disability insurance plans, health care and hospitalization plans, medical and dental reimbursement plans, profit sharing plans, retirement plans and other employee benefit plans) for which Executive is qualified. At Employer's expense Executive shall have a medical exam every year. In addition to the foregoing, Executive shall be provided the use of an automobile for combined business and personal use. The automobile shall be provided on similar or equivalent tenns and conditions as exist for other executives who also may receive this benefit.

(d) During the last quarter of each fiscal year of Employment, Employer shall review Executive's performance under this Agreement and establish goals and objectives for Executive's performance for the next fiscal year. In such review, Employer, in its reasonable discretion, shall consider increasing Executive's salary and compensation based on relevant factors such as Executive's performance, Employer's accomplishments, increase or decrease in

Executive's responsibilities, and cost of living increases. Any salary increases normally are to be effective on January 1 of each year.

(e) Employer has adopted a bonus plan to be administered by its Compensation Committee and in the Compensation Committee's discretion may award bonuses and stock options to Executive on terms to be determined by the Compensation Committee. As soon as practicable after the effective date of this Agreement, January 1, 2000, Executive shall receive an additional grant of options to purchase 90,000 shares at an exercise price determined based on the "Fair Market Value" of the stock, as defined under Employer's Stock Option Plan, on the date of the grant of the option.

7. Working Facilities. Executive shall be furnished with appropriate office space, secretarial assistance, and such other facilities and services as are suitable to Executive's position and adequate for the performance of Executive's duties.

8. Expenses. Employer shall reimburse Executive for all reasonable expenses that Executive incurs in connection with the business of Employer or any of its subsidiaries and in the performance of Executive's duties under this Agreement. Employer shall also reimburse Executive for membership fees and expenses related to Executive's membership in professional organizations, clubs, societies and groups as may be approved by the Board of Directors from time to time, subject to such rules, regulations and record-keeping requirements as may be established from time to time by the Board.

9. Vacations. Executive shall be entitled each year to a vacation of four (4) weeks, during which time his compensation shall be paid in full. Vacation time accrued during each calendar year must be used by the end of each calendar year, or will be lost, and will not accrue from one calendar year to the next. Exceptions to the foregoing non-accrual policy may be provided under terms' and conditions approved in writing by resolution of the Board of Directors or its compensation committee in such body's sole discretion based on prolonged extra-ordinary work demands preventing Executive's timely taking vacation.

10. Disability. If Executive is unable to perform Executive's services by reason of illness or incapacity for a period of more than six (6) consecutive months, and subject to the provisions of Paragraph 11, Employer may terminate Executive's employment. Employer shall receive a credit against Executive's salary for any disability compensation benefit for the same calendar period received by Executive from Worker's Compensation or any commercial insurance carrier under Paragraph 11.

11. Insurance for the Benefit of Executive.

(a) Subject to the provisions of Paragraph 6(c), Executive shall be covered by Employer's medical and disability insurance in effect from time to time, the premiums for which shall be paid for by Employer.

(b) Employer shall at its expense continuously maintain without interruption in the name of Executive or Executive's designee or for the benefit of Executive or Executive's designee, life insurance coverage in an amount equal to Executive's then current salary for three (3) years.

12. Insurance for the Benefit of Employer. Employer shall have the right from time to time to apply for and take out in its name and at its own expense, life, health or other insurance upon Executive in any sum or sums which may be deemed necessary by Employer to protect its interest under this Agreement and Executive shall do all such things as may be necessary to assist in the procuring of such insurance by making a proper application therefor as may be required by the insurance company and submitting to the usual and customary medical examinations. Executive, in Executive's capacity as Executive, shall have no right, title or interest in or to such insurance, but the same shall be solely for the benefit of Employer and any amounts payable thereunder shall be solely payable to such Employer.

13. Death During Employment. If Executive dies during the term of his employment under this Agreement, Employer shall pay to the estate of Executive the compensation which would otherwise be payable to Executive up to the end of the third month after the month in which his death occurs. If, by that time, Executive's estate has not received any proceeds of the insurance provided for in Paragraph 11, Employer shall continue Executive's salary hereunder for up to an additional three months, or until such insurance proceeds are received, whichever is earlier ("Reimbursable Payments"), provided that Executive's estate shall reimburse Employer for any such Reimbursable Payments made from the proceeds of such insurance.

14. Representation and Warranty. Executive represents and warrants that he is not now, and will not be on the date of commencement of this Agreement, a party to any agreement, contract or understanding, whether of employment, agency or otherwise, which would in any way restrict or prohibit Executive from undertaking and performing Executive's duties in accordance with the terms and provisions of this Agreement.

15. Termination by Employe .

(a) Employer may terminate Executive's employment for cause, which is defined as follows:

i) Fraud, malfeasance, or embezzlement against Employer's assets or conviction of any felony;

ii) Except under circumstances of disability contemplated by the provisions of Paragraph 10, cessation of Executive's performance of Executive's duties hereunder or deliberate and substantial failure to perform them in a capable and conscientious manner;

iii) Violation of the provisions of Paragraph 14; or

iv) Deliberate and substantial breach of Executive's material obligations under any other provision hereof that is not cured within 30 days after notice to Executive of the breach.

(b) Should the Board of Directors of Employer determine cause exists, as defined in Subparagraph (a), to terminate Executive's employment, prior to termination for such cause, Employer shall provide Executive written notice reasonably describing the basis for the contemplated termination and a two-week period of time in which to respond in writing and in person prior to Employer's final determination of cause. During the period between such notice and final determination, the Board may suspend the performance of Executive's duties under this Agreement and direct Executive's non-attendance at work. However, Executive's right to compensation under this Agreement shall continue through and to any final termination of employment for cause.

(c) Employer may terminate Executive's employment upon three (3) months notice without cause, subject to the applicable provisions of Paragraph 5. During the period between such notice and final determination, the Board may suspend the performance of Executive's duties under this Agreement and direct Executive's non-attendance at work.

16. Termination by Executive.

(a) Executive shall have the right to terminate his employment on forty-five (45) days' written notice to Employer of any default by Employer in performing its duties under this Agreement, subject to the provisions of Paragraph 5(e) and provided that Executive may not terminate his employment if Employer cures the default within fifteen (15) days after receiving such notice.

(b) Executive may terminate Executive's employment upon three (3) months notice without cause, subject to the applicable provisions of Paragraph 5(f).

17. Restrictive Covenant.

(a) Executive agrees and covenants that, without the Board's prior written consent and except on behalf of Employer, he will not in any manner, directly or indirectly, own, manage, operate, control, be employed by, participate in, assist or be associated in any manner with any person, firm or corporation anywhere in the world whose business competes with Unique or any subsidiary of Unique. This covenant shall remain in effect until a date one (1) year after the date Executive's employment is terminated or, if his employment is terminated pursuant to Paragraph 16(a), until the termination date. Notwithstanding any other provision of this Agreement, Executive may own up to three percent (3 %) of the outstanding stock of a competing publicly traded corporation so long as he takes no other action furthering the business of such corporation.

(b) Until a date one (1) year after the termination date, Executive shall not (i) solicit any other employee of Employer to leave the employ of Employer, or in any way interfere with the relationship between Employer and any other employee of Employer, or (ii) induce any customer, supplier, licensee, or other business relation of Employer to cease doing business with Employer, or in any way interfere with the relationship between any customer or business relation and Employer.

18. Confidentiality.

(a) Definitions. For purposes of this Agreement, the following definitions shall apply:

i) "Inventions" shall mean all inventions, improvements, modifications, and enhancements, whether or not patentable, made by Executive within the scope of Executive's duties during Executive's employment by Employer.

ii) "Confidential Information" shall mean Employers proprietary know-how and information disclosed by Employer to Executive or acquired by Executive from Employer during Executive's employment with Employer about Employer's plans, products, processes and services, which Employer protects against disclosure to third parties. Confidential Information shall not include the Executive's general knowledge and experience possessed prior to or obtained during his employment with Employer.

(b) Restrictions on Disclosure.

i) During the period of employment with Employer and thereafter, Executive shall not disclose Confidential Information to any third parties other than Employer, its employees, agents, consultants, contractors and designees without the prior written permission of Employer, or use Confidential Information for any purpose other than the conduct of Employer's business.

ii) The restrictions on disclosure and use set forth herein shall not apply to any Confidential Information which:

A. At the time of disclosure to Executive by Employer is generally available to the public or thereafter becomes generally known to the public, through no fault of Executive;

B. Was known by Executive prior to his employment with Employer;

C. Executive at any time receives from a third party not under any obligation of secrecy or confidentiality to Employer;

D. Employer discloses to a third party not under any obligation of secrecy or confidentiality to it; and

E. Executive is requested or required to disclose pursuant to a subpoena or order of a court or other governmental agency, in which case Executive shall notify Employer as far in advance of disclosure as is practicable.

(c) Obligations Regarding Inventions. Without any royalty or any other additional consideration to Executive: (i) Executive shall promptly inform Employer of any Inventions by a written report, setting forth the conception and reduction to practice of all inventions; (ii) Executive hereby agrees to assign and assigns to Employer all of his right, title and interest: (1) to any Inventions made during the term of his employment by Employer (including without limitation the right to license or sell such Invention to others), (2) to applications for United States and foreign letters patent, and (3) to United States and foreign letters patent granted upon such Inventions; and (iii) Executive agrees upon request and at the sole cost and expense of Employer to, at all times, do such acts (such as giving testimony in support of his inventorship) and execute and deliver promptly to Employer such papers, instruments, and documents as from time to time may be necessary or useful to apply for, secure, maint aining, reissue, extend or defend Employer's interest in any Inventions or any or all United States and foreign letters patent, so as to secure Employer the full benefits of any Inventions or discoveries or otherwise to carry into full force and effect the intent of the assignment set out in subparagraph 18(c)(ii).

(d) Remedies. Executive acknowledges and agrees that Executive's disclosure of any Confidential Information would result in irreparable injury to Employer. Executive acknowledges and agrees that the Confidential Information is non-public information which Employee has expanded substantial time, money and effort to develop and is property considered "Trade Secrets" of Employer within the meaning of Colorado law. Therefore, upon the breach or threatened breach of the covenants in this paragraph by Executive, Employer shall be entitled to obtain from any court of competent jurisdiction a preliminary and permanent injunction prohibiting such disclosure and any other equitable relief that the court deems appropriate. In addition, Employer shall be entitled to seek damages.

(e) Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Executive during the term of his employment by Employer shall be and remain the sole property of Employer.

relating to the interpretation, alleged breach or enforcement of this Agreement shall be settled by arbitration before a single arbitrator in Denver, Colorado, in accordance with the commercial rules then in effect of the American Arbitration Association, Colorado Revised Statutes pertaining to the arbitration of civil disputes. The arbitrator, who shall be a person experienced in negotiating and making employment agreements and resolving employment disputes and in any other pertinent areas of law, shall make reasonably detailed findings to support any decision and award. The award of the arbitrator shall be final and binding and may be entered as a judgment in any court of competent jurisdiction. As part of the award in any arbitration or judicial proceedings, the prevailing party may be awarded its reasonable attorneys' fees, witness fees, expert witness fees and related costs and expenses in the discretion of the arbitrator.

20. Notices. All notices under this Agreement shall be delivered by hand or by registered or certified mail. Notices intended for Executive shall be addressed to Executive at 21820 Cabrini Blvd., Golden, Colorado 80401. Notices intended for Employer shall be addressed to it at 425 Corporate Circle, Golden, Colorado 80401. All notices shall be effective upon actual delivery if by hand, or, if by mail, five (5) days after being deposited in the United States mail, postage prepaid and addressed as required by this section. Either party may by notice accomplished in accordance with this Paragraph 20 change the address to which future notices may be sent.

21. Miscellaneous Provisions.

(a) This Agreement contains the entire agreement between the parties and supersedes all prior agreements and it shall not be amended or otherwise modified in any manner except by an instrument in writing executed by both parties.

(b) Neither this Agreement nor any rights or duties under this Agreement may be assigned or delegated by either party unless the other party consents in writing.

(c) Except as otherwise provided herein, this Agreement shall be binding upon the inure to the benefit of the parties and their respective heirs, personal representatives, successors and assigns.

(d) This Agreement has been entered into in Colorado and shall be governed by the laws of that state.

(e) In fulfilling their respective obligations under this Agreement and conducting themselves pursuant to it, each party shall act reasonably and in good faith.

(f) If any provisions of this Agreement shall be held to be invalid or

unenforceable for any reason, the invalid or unenforceable provision shall be deemed severed

from this Agreement and the balance of this Agreement shall remain in full force and effect

and be enforceable in accordance with its terms.

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.

EXECUTIVE:

/s/
William G. Rankin

EMPLOYER:

UNIQUE MOBILITY, INC.

By: /s/
Donald A. French
its Treasurer

EX-10.18 4 frenchemplagrmnt.htm FRENCH EMPLOYMENT AGREEMENT French Employment Agreement

UNIQUE MOBILITY, INC.

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made and entered into as of January 1, 2000, by and between UNIQUE MOBILITY, INC., a corporation organized under the laws of Colorado ("Employer"), and Donald A. French, an adult resident of Aurora, Colorado ("Executive").

WHEREAS, Executive is currently a party to an Employment Agreement with Employer dated January 1, 1997 (the "Old Agreement"); and

WHEREAS, Executive and Employer wish to replace the Old Agreement with this Agreement:

NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set forth, Employer and Executive agree as follows:

1. Termination of Old Agreement. Upon execution of this Agreement, the Old Agreement is hereby retroactively terminated, effective as of the date hereof.

2. Employment. Employer hereby agrees to employ Executive as its treasurer and chief financial officer for the term of employment set forth herein, and Executive hereby accepts such employment, all upon the terms and conditions hereinafter set forth.

3. Duties. Executive shall perform the duties assigned to him by the Board of Directors, subject to the control, supervision and direction of the Board of Directors and the Chairman of the Board.

5. Term of Employment, Expiration and Termination.

(a) Subject to the provisions of Paragraphs' 15 and 16, the term of employment of Executive pursuant to this Agreement shall commence on January 1, 2000, and shall continue through December 31, 2002 (the "Original Term of Employment").

(d) On termination of Executive's employment for cause during the Original Term of Employment pursuant to Paragraph 15(a), Executive shall receive no further salary.

(e) On termination of Executive's employment without cause during the Original Term of Employment pursuant to Paragraph 15(c), Employer shall pay Executive a lump sum equal to the greater of the annual salary and benefits payable under this Agreement until the expiration date of the Original Term of Employment, or any renewals thereof, one (1) month's salary for each year of full-time employment with Employer, except that such sum shall be not less than twelve (12) month's salary and shall not exceed twenty-four (24) months' salary. In the event of a material breach of this Agreement by Employer that is not cured after notice from Executive, Executive may elect to treat such breach as a constructive termination under this subparagraph entitling Executive to the benefits hereunder.

(f) On termination of Executive's employment by Executive without cause either (i) during the Original Tenn of Employment pursuant to Paragraph 16(b), or (ii) after expiration of the Original Tenn of Employment if Executive's employment continues without written agreement, Employer shall pay Executive a lump sum equal to three (3) month's salary, and Executive shall be entitled to no other severance benefits.

(g) If Executive's employment is terminated as a result of a hostile Change in Control (as defined below) of Employer, such termination shall be deemed a termination without cause under the provisions of Paragraph 5(e), except that Executive shall receive, a severance amount equal to twice any amount due under Paragraph 5(e). Any termination of Executive in contemplation of or within twelve (12) months after such Change in Control, except a termination for cause under Paragraph 15(a), shall be deemed a termination under this Subparagraph (g). Further, if Executive's position is materially changed by Employer in contemplation of or within twelve (12) months after any such Change in Control, Executive may elect to treat such change as a constructive termination under this subparagraph entitling Executive to the benefits hereunder. "Change of Control" means the election of new board members constituting a majority of the directors then in office, which new board members were not nominated by a majo rity of the directors in office on the date hereof.

6. Compensation. For the services to be rendered by Executive hereunder, Employer agrees to pay Executive during the term of employment, and Executive agrees to accept:

(a) An annual base salary of $158,916. Executive's annual base salary shall not be decreased during the Original Term of Employment.

(b) Executive's salary shall be paid in equal semi-monthly installments on the 15th and final day of each month during the term of his employment.

(c) Executive shall receive fringe benefits in accordance with Employer's policies and practices for employees generally (including, without limitation, participation in any stock option plans, life and disability insurance plans, health care and hospitalization plans, medical and dental reimbursement plans, profit sharing plans, retirement plans and other employee benefit plans) for which Executive is qualified. At Employer's expense Executive shall have a medical exam every two years until age fifty, and thereafter every year.

(e) Employer has adopted a bonus plan to be administered by its Compensation Committee and in the Compensation Committee's discretion may award bonuses and stock options to Executive on terms to be determined by the Compensation Committee. As soon as practicable after the effective date of this Agreement, January 1, 2000, Executive shall receive an additional grant of options to purchase 60,000 shares at an exercise price determined based on the "Fair Market Value" of the stock, as defined under Employer's Stock Option Plan, on the date of the grant of the option.

8. Expenses. Employer shall reimburse Executive for all reasonable expenses that Executive incurs in connection with the business of Employer or any of its subsidiaries and in the performance of Executive's duties under this Agreement. Employer shall also reimburse Executive for membership fees and expenses related to Executive's membership in professional organizations, clubs, societies and groups as may be approved by the Chief Executive Officer from time to time, subject to such rules, regulations and record-keeping requirements as may be established from time to time by the Chief Executive Officer.

9. Vacations. Executive shall be entitled each year to a vacation of four (4) weeks, during which time his compensation shall be paid in full. Vacation time accrued during each calendar year must be used by the end of each calendar year, or will be lost, and will not accrue from one calendar year to the next. Exceptions to the foregoing non-accrual policy may be provided under terms and conditions approved in writing by resolution of the Board of Directors or its compensation committee in such body's sole discretion based on prolonged extra-ordinary work demands preventing Executive's timely taking vacation.

10. Disabilily. If Executive is unable to perform Executive's services by reason of illness or incapacity for a period of more than six (6) consecutive months, and subject to the provisions of Paragraph 11, Employer may terminate Executive's employment. Employer shall receive a credit against Executive's salary for any disability compensation benefit for the same calendar period received by Executive from Worker's Compensation or any commercial insurance carrier under Paragraph 11.

11. Insurance for the Benefit of Executive.

15. Termination by Employer.

(a) Employer may terminate Executive's employment for cause, which is defined as follows:

i) Fraud, malfeasance, or embezzlement against Employer's assets or conviction of any felony;

iii) Violation of the provisions of Paragraph 14; or

iv) Deliberate and substantial breach of Executive's material obligations under any other provision hereof that is not cured within 30 days after notice to Executive of the breach.

16. Termination by Executive.

(b) Executive may terminate Executive's employment upon three (3) months notice without cause, subject to the applicable provisions of Paragraph 5(f).

17. Restrictive Covenant.

18. Confidentiality.

(a) Definitions. For purposes of this Agreement, the following definitions shall apply:

(b) Restrictions on Disclosure.

ii) The restrictions on disclosure and use set forth herein shall not apply to any Confidential Information which:

A. At the time of disclosure to Executive by Employer is generally available to the public or thereafter becomes generally known to the public, through no fault of Executive;

B. Was known by Executive prior to his employment with Employer;

C. Executive at any time receives from a third party not under any obligation of secrecy or confidentiality to Employer;

D. Employer discloses to a third party not under any obligation of secrecy or confidentiality to it; and

19. Resolution of Disputes. In addition to any other remedies available to Employer, Employer shall be entitled to specific performance of the covenants contained in Paragraphs 17 and 18. If either party is successful in enforcing its rights under this Paragraph 19, the unsuccessful party shall reimburse the successful party for all of the costs of such enforcement, including but not limited to costs, litigation expenses and reasonable attorneys' fees. Except for an action to interpret or enforce Paragraphs 17 or 18, any controversy or claim arising out of or relating to the interpretation, alleged breach or enforcement of this Agreement shall be settled by arbitration before a single arbitrator in Denver, Colorado, in accordance with the commercial rules then in effect of the American Arbitration Association, Colorado Revised Statutes pertaining to the arbitration of civil disputes. The arbitrator, who shall be a person experienced in negotiating and making employment agreements and resolving e mployment disputes and in any other pertinent areas of law, shall make reasonably detailed findings to support any decision and award. The award of the arbitrator shall be final and binding and may be entered as a judgment in any court of competent jurisdiction. As part of the award in any arbitration or judicial proceedings, the prevailing party may be awarded its reasonable attorneys' fees, witness fees, expert witness fees and related costs and expenses in the discretion of the arbitrator.

20. Notices. All notices under this Agreement shall be delivered by hand or by registered or certified mail. Notices intended for Executive shall be addressed to Executive at 1194 Kalispell Street, Aurora, Colorado 80017. Notices intended for Employer shall be addressed to it at 425 Corporate Circle, Golden, Colorado 80401. All notices shall be effective upon actual delivery if by hand, or, if by mail, five (5) days after being deposited in the United States mail, postage prepaid and addressed as required by this section. Either party may by notice accomplished in accordance with this Paragraph 20 change the address to which future notices may be sent.

21. Miscellaneous Provisions.

(b) Neither this Agreement nor any rights or duties under this Agreement may be assigned or delegated by either party unless the other party consents in writing.

(c) Except as otherwise provided herein, this Agreement shall be binding upon the inure to the benefit of the parties and their respective heirs, personal representatives, successors and assigns.

(d) This Agreement has been entered into in Colorado and shall be governed by the laws of that state.

(e) In fulfilling their respective obligations under this Agreement and conducting themselves pursuant to it, each party shall act reasonably and in good faith.

(f) If any provisions of this Agreement shall be held to be invalid or unenforceable for any reason, the invalid or unenforceable provision shall be deemed severed from this Agreement and the balance of this Agreement shall remain in full force and effect and be enforceable in accordance with its terms.

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.

EXECUTIVE:

/s/
Donald A. French

EMPLOYER:

UNIQUE MOBILITY, INC.

By: /s/
William G. Rankin
its President

EX-10.19 5 supplyredacted.htm LICENSE AGREEMENT SUPPLY AGREEMENT

SUPPLY AGREEMENT

This Supply Agreement ("this "Agreement"), entered into as of this 1^st day of April, 1999, between UNIQUE POWER PRODUCTS, INC., a Colorado corporation ("UPP") with its principal place of business at Frederick, Colorado, UNIQUE MOBILITY, INC., a Colorado corporation, ("Unique") with its principal place of business at Golden, Colorado, and INVACARE CORPORATION, an Ohio corporation ("Invacare") with its principal place of business at Elyria, Ohio.

WITNESSETH:

WHEREAS, Unique Mobility, Inc., parent of UPP, and Invacare have entered into a business relationship for the development and manufacture of gearless motors including a License Agreement dated July 23, 1997 (the "License Agreement") for the exclusive use of certain gearless motor technology in Medical Products (as defined in the License Agreement);

WHEREAS, UPP desires to manufacture and sell and Invacare desires to purchase and take delivery of certain gearless motors for use on motorized wheelchairs;

WHEREAS, motors are an essential component in the manufacturing processes utilized by Invacare and an assured source of supply of gearless motors, manufactured to exacting specifications, is of critical importance to Invacare; and

WHEREAS, UPP and Invacare desire to define the terms and conditions by which UPP shall serve as Invacare's primary, assured source of supply for gearless motors and Invacare shall make purchase commitments upon which UPP may justifiably rely;

NOW, THEREFORE, in consideration of the representation, warranties, covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and with intent to be legally bound hereby, the parties agree as follows:

I. Certain Definitions

The following terms shall have the meanings set forth herein:

1.1 "Contract Year" shall mean each consecutive twelve (12) month periods commencing with the first date of the month following (1) the acceptance of motors by Invacare and (2) UPP having fully operational manufacturing facilities for the production of Motors.

1.2 "License Agreement" shall mean the agreement between Invacare and Unique Mobility, Inc. dated July 23, 1997.

1.3 "Motor" shall mean the gearless motor for use on motorized wheelchairs to be produced by UPP in accordance with the Specifications and any improvements thereto developed during this agreement and sold to Invacare under this Agreement.

1.4 "Specifications" shall mean the specifications relating to Motors required and specified by Invacare as set forth in Exhibit 1.4 attached hereto (which may be supplemented or modified from time to time by mutual agreement of the parties) and with which the Motors sold under this Agreement shall comply.

1.5. "Term" shall mean the period of time consisting of the Original Term (as defined in Section 3.1) plus any Renewal Terms or, Additional Term (as defined in Section 3.2).

1.6 "Tooling" means the tools and equipment and the drawings, patterns and specifications of such tools and equipment described in Exhibit 1.6 attached hereto, as well as any additional tools as may be agreed upon between the parties from time to time.

II. Sale and Purchase Obligations

In accordance with the terms of this Agreement, Invacare and UPP hereby agree as follows:

2.1 Purchase Obligations. During the Term of this Agreement, UPP shall manufacture, sell and deliver to Invacare, and Invacare shall purchase and accept from UPP, quantities of Motors as follows:

(a) during each Contract Year, Invacare shall purchase from UPP a minimum number of [* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST*] Motors and such greater numbers of Motors as are specified in Release Orders issued by Invacare and approved by UPP pursuant to Section 4.1 hereof; and

(b) during each of the Contract Years of the Renewal Term, Invacare shall purchase minimum quantities of [* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST*] Motors at a price of less than [* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST*] per motor. The annual quantities and prices for each Contract Year of the Renewal Term shall reflect cost reductions achieved by UPP and will be negotiated in good faith and agreed upon during the 120 day notice period pursuant to Section 3.2 of this agreement.

2.2 Contract Year Forecast. At least fifteen (15) days prior to the commencement of each calendar quarter (other than the first calendar quarter) during each Contract Year, Invacare shall provide UPP with a good faith revision and update of the annual estimate for the remainder of the Contract Year. The parties specifically agree that Invacare's estimate is furnished only to assist UPP in scheduling production and shall not create any obligation on Invacare to purchase or UPP to supply quantities approximating the estimate if such quantities are not actually agreed to pursuant to Section 4.1 hereof

III. Term of Agreement

3.1 Original Term. The original term of this Agreement shall commence as of the date hereof (the "Effective Date") and shall continue up to and including two Contract Years (the "Original Term").

3.2 Renewal Term: Additional Terms. By written notice delivered to UPP at least 120 days prior to the expiration of the Original Term, Invacare may elect, in its sole discretion, to extend the term of this Agreement for an additional period of three (3) years (the "Renewal Term"). Thereafter, this Agreement may be extended for such additional periods and under such terms (collectively, the "Additional Term") as UPP and Invacare shall, by mutual written agreement, determine.

3.3 Permitted Purchases. With respect to any Contract Year, UPP and Invacare shall be entitled to purchase Motors from any third party without liability to UPP under this Agreement because of any such purchases, so long as Invacare purchases by the end of any such Contract Year the Minimum Quantity of Motors set forth in 2.1(b) of this Agreement from UPP but subject to any royalty payments required under the License Agreement. The parties agree that nothing in this Agreement affects in any way Invacare's rights with respect to the purchase of other motors. This Agreement relates solely to Motors as defined herein.

IV. Terms and Conditions of Sale

4.1 Release Order. Invacare shall order all amounts of Motors being purchased under this Agreement by delivering to UPP a blanket release order (the "Release Order"), in the form set forth in Exhibit 4.1 attached to this Agreement, to be delivered to UPP on or before the last day of each calendar quarter during the term hereof. Each Release Order shall specify at least (i) the aggregate amount ordered, (ii) the date of required delivery (which shall not be less than ninety (90) days after the date of delivery of the Release Order) and the quantity to be delivered on such date and (iii) any other terms not inconsistent with the terms of this Agreement that are approved by UPP. Each Release Order must be approved by UPP. Notwithstanding the provisions of any other acknowledgment, invoice or other document or instrument of UPP or Invacare, or any statement by any agent or employee of UPP or Invacare, now or hereafter executed, all sales of Motors by UPP to Invacare will be subject to and in accordance with the terms of (i) this Agreement and (ii) to the extent not inconsistent with this Agreement, the terms of the applicable Invacare Release Order, executed under this Agreement. Any motors ordered by Invacare from UPP but not supplied by UPP shall be included in the minimum quantity as set forth in Section 2.1 (a) and (b) of this Agreement.

4.2 Delivery Terms: Time of the Essence. UPP acknowledges and agrees that with respect to the delivery dates specified in any Release Order TIME IS OF THE ESSENCE. UPP agrees to deliver Motors no more than two days before, and zero days after the date specified in the applicable Invacare Release Order for such Motors. Unless otherwise expressly provided in the applicable Release Order, delivery will be. F.O.B., UPP's plant, Frederick, Colorado.

4.3 Title and Risk of Loss. Title to and risk of loss on all of the Motors shipped by UPP to Invacare shall not pass to Invacare until inspection and acceptance of such Motors by Invacare in accordance with the terms of this Agreement. During the Term of this Agreement, UPP will maintain in accordance with the terms of this Agreement sufficient insurance to cover its risk of loss with respect to Motors ordered under this Agreement and naming Invacare as an additional insured and loss payee as its interest may appear in ordered Motors. Upon written request from Invacare, UPP shall furnish Invacare with appropriate certificates of such insurance which certify the existence of such insurance and stipulate that no less than thirty (30) days notice shall be given to Invacare prior to any termination or reduction of the limits of coverage.

4.4 Acceptance and Inspection of Motors. Any Motors delivered to Invacare on or before the delivery date set forth in the Release Order shall be deemed to have accepted by Invacare on the tenth day after such delivery unless prior to that date Invacare shall have notified UPP that such Motors are defective or do not conform to the Specifications. Inspection and tests of Motors by Invacare may, at Invacare's option, be made either at UPP's plant or the point of destination. In no event shall payment be deemed to constitute acceptance. Acceptance by Invacare of all or any commercial unit of Motors delivered pursuant to any particular Release Order or accepted by Invacare after the delivery date specified therein shall not (i) relieve UPP from any of its obligations and warranties hereunder, (ii) bind Invacare to accept future shipments of Motors or (iii) deprive Invacare of, or constitute a waiver of, any right or remedy which it may otherwise have under this Agreement or under law including the right to return Motors already accepted.

4.5 Nonconforming Motors. If inspection discloses that any Motors delivered to Invacare are not in accordance with Specifications or fail to meet the warranties contained in Section 6.1 of this Agreement, UPP, upon notice from Invacare of such nonconformity or failure given timely pursuant to Section 4.4 hereof, shall correct or replace such Motors at UPP's expense. Such correction and replacement shall include all Invacare's costs and expenses incurred in the replacement of said motors including product recall at the sole discretion of Invacare. After timely receipt by UPP of Invacare's notice of noncompliance or failure, all Motors which are the subject of the notice shall be the responsibility of UPP, and UPP shall bear the risk of loss with respect to such Motors. Invacare may, and at UPP's direction shall, return such Motors to UPP at UPP's risk, and all transportation and handling charges, both to and from the original destination, shall be paid by UPP. Any payment for such Motors shall be refunded by UPP unless UPP promptly corrects or replaces the same at its expense and within the time period set forth herein. Return of any defective Motors by Invacare shall not be deemed a waiver of any right or remedy which Invacare may have as a result or in connection with the existence of such defect or defects.

4.6 Motor Purchase Price.

(a) Pricing. Except as otherwise provided in this Section 4.6, the purchase price to be paid by Invacare for each Motor hereunder (the "Purchase Price") will be the sum of [* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST*] per unit (F.O.B. UPP's Plant, Frederick, Colorado) during the first and second Contract Year of this Agreement.

(b) Offer from Other Manufacturer. If during any Contract Year of the Renewal Term, Invacare receives a bona fide competitive offer for motors from a third party manufacturer (whether solicited by Invacare or offered without solicitation ) for substantially equivalent quantities of product with specifications substantially equivalent to the Specifications applicable to Motors and at a price less than that agreed upon under the terms of this Section 4.6(b); then:

(i) UPP shall be entitled to a right of first refusal to match any such competitive pricing quoted to Invacare regarding the remaining Minimum Quantity for that Contract Year; and

(ii) in the event UPP does not elect to match such competitive price quote, the Renewal Term shall, at the election of Invacare:

(x) terminate this Agreement thirty (30) days after Invacare's notice to UPP of such competitive bid with Invacare thereafter being entitled to purchase Motors from such third party without any liability to UPP under this Agreement by reason of such purchase but subject to any royalty payments required under the License Agreement, or

(y) continue for the remainder of its term.

(c) Most Favored Customer Status. The purchase price for Motors purchased by Invacare during this agreement shall not be less favorable than the price currently or hereafter extended to any other customer of UPP for Motors sold by UPP with specifications substantially equivalent to the Specifications. In the event that, during the Term of this Agreement, UPP establishes or offers a lower price for the sale of such product, UPP agrees to offer such lower price to Invacare during the period such lower price is in effect and subject to such other terms and conditions applicable to the lower price. From time to time, Invacare may request that UPP certify that it is not selling such product to any of UPP's other customers at a price that is lower than the price Invacare is then paying for Motors.

(d) Disputes. In the event of any dispute between the parties as to any computation relating to a reduction in the Purchase Price, the parties agree to abide by the determination of an accounting firm, agreed upon by the parties.

(e) Exclusivity For so long as Invacare purchases the Minimum Quantity of Motors set forth in Section 2.1(a) and (b) of this Agreement, UPP and its affiliates agrees that, during the Term, Renewal Term, and any Additional Term as defined in Section Three of this Agreement, it will not (i) disclose the design or Specifications of the Motors to any third party in the health care field other than Invacare or (ii) sell, lease or otherwise dispose of any Motors to any party in the health care field other than Invacare. This Section 4.6(f) shall be of no force or effect if UPP terminates this Agreement as a result of a material breach by Invacare.

4.7 Invoicing. Invoices, bills of lading and other shipping notices shall be in accordance with Invacare's special instructions, if any, as specified in the applicable Release Order and shall, in any event, contain the Release Order number.

4.8 Payment. Payment of the purchase price for Motors to UPP shall be due thirty (30) days after receipt by Invacare of UPP's invoice or receipt by Invacare of the ordered Motors, whichever occurs later.

4.9 Extra Charges. The purchase price for Motors to be paid by Invacare pursuant to Section 4.6 is intended to be all inclusive (F.O.B. UPP's plant, Frederick, Colorado) and no additional charges of any kind whatsoever shall be levied upon or paid by Invacare with respect to Motors including, without limitation, charges with respect to packaging, insurance, use, excise or other tax or assessment (other than federal, state or local use or excise taxes or assessments to the extent permitted and invoiced in accordance with Section 4.10 of this Agreement). UPP shall have sole responsibility for payment of all such charges unless specifically agreed to in writing in advance by Invacare.

4.10 Taxes. The purchase price for Motors under this Agreement shall exclude any federal, state or local use or excise taxes levied upon or measured by the sale, sales price or use of goods. All such taxes lawfully applicable shall be listed separately on UPP's invoice. If such applicable tax is not separately listed, UPP assumes responsibility for the payment of such taxes and shall indemnify and hold Invacare harmless from any and all liability in connection with such taxes. Tax exemption certificates or other evidence of exemption furnished by Invacare shall be accepted by UPP in lieu of such taxes.

4.11 Technical Cooperation. During the Term of this Agreement, UPP shall use its commercially reasonable efforts to support Invacare's use of Motors and otherwise cooperate with Invacare in maximizing its use of the Motors. Invacare shall have reasonable access to UPP's personnel and facilities during the term of this Agreement and will be permitted to observe and assist with the manufacturing setup in a commercially-reasonable manner.

4.12 Mutual Savings. During the Term of this Agreement, the parties will undertake commercially reasonable efforts to develop mutual savings programs including, without limitation programs relating to raw material supply arrangements, returnable packaging, inventory management and order entry.

4.13 Audit. During the Term of this Agreement, either party may request, no more frequently than is commercially reasonable, an independent audit to confirm the other party's compliance with the terms of this Agreement. The cost of such audit shall be paid by the party requesting the same, unless the audit shall reveal that one party is not in compliance with the terms hereof; in which case such party shall pay the cost of the audit.

V. Tooling

5.1 Ownership and Exclusive Use. UPP agrees that the Tooling, is owned by Invacare and shall have been paid for by Invacare. The foregoing is and shall remain, while in the possession of UPP, the property of Invacare and shall only be used by UPP for the manufacture of Motors to be delivered to Invacare unless otherwise permitted by Invacare in writing. Such property, and whenever practical, each individual item thereof; shall be plainly marked by UPP as the "Property of INVACARE CORPORATION".;

5.2 Warranty. If the Tooling is in the possession of UPP on the date this Agreement is executed, then UPP warrants to Invacare that the Tooling is in its possession as of the date of execution of this Agreement and is not encumbered in any way as a result of any act or omission of UPP.

5.3 Covenants. During the Term and until such time as the Tooling is returned to Invacare in accordance with the terms hereof, UPP covenants that it will (i.) not allow the Tooling to become encumbered in any way as a result of any act or omission of UPP, (ii.) not move the Tooling to a location different from the address of UPP as stated herein without prior written consent of Invacare; (iii.) maintain and keep the Tooling in good repair at its own expense; (iv.) insure the Tooling in a manner consistent with normal industry practices; and (v.) at the expiration or termination of this Agreement, allow removal of the Tooling at Invacare's written request and, upon receipt of such request, it shall prepare the Tooling for shipment and shall have it delivered to Invacare, at Invacare's expense, in the same condition as originally received by UPP, ordinary wear and tear excepted.

5.4 Taxes, Assessments and Warehouseman Status. All taxes and assessments as may be charged, assessed or imposed upon such Tooling not related to the ownership thereof while in the possession or control of UPP shall be borne and discharged by UPP. In holding and maintaining the Tooling, UPP shall not be considered a warehouseman under the law of any state.

5.5 UCC Filing. UPP grants Invacare a security interest, and agrees to execute and deliver to Invacare an appropriate UCC form which with respect to the Tooling, identifies UPP as a bailee and Invacare as an owner/bailor and UPP further agrees that Invacare may cause such UCC form to be filed in the government recording offices as determined by Invacare.

VI. Motor Warranties

6.1 Warranty of Motor. UPP hereby expressly warrants, for a period of 18 months after retail purchase of the wheelchair into which each Motor is installed, that such Motor shall be of merchantable quality, free from defects in materials and workmanship and fit for their intended use in Invacare's manufacturing process and shall conform strictly to, and without variance from the Specifications as set forth in Exhibit 1.4 to this Agreement, as such Specifications and Exhibit may be amended and/or supplemented from time to time by mutual agreement of the parties.

6.2 Warranty of Title. UPP hereby expressly warrants that title to Motors conveyed to Invacare shall be good and that all such Motors shall be delivered free and clear of any security interest or other lien or encumbrance.

6.3 Warranty against Infringement: Indemnification.

(a) UPP. UPP expressly warrants that, except with respect to any components or technology of Invacare that are incorporated into the Motors with Invacare's consent ("Invacare Components"), the Motors do not infringe on any United States or foreign patent or on any other right of any other person. Except with respect to any Invacare Components, UPP shall hold and save Invacare, its successors, assigns, customers and users harmless from loss and/or liability or loss of any nature or kind arising out of or existing because of the infringement or alleged infringement of any patent by reason of the manufacture, sale or use of any goods furnished hereunder. Invacare shall notify UPP in writing of any suit filed against it or its customers on account of any such infringement or alleged infringement, and at UPP's request shall give UPP control of the defense of such suit, insofar as Invacare has the authority to do so, and information and assistance for the same, all at UPP's expense. In the event that Invacare should be enjoined in such suit or proceeding from using any part of a Motor delivered hereunder, UPP, at its option, shall promptly either (i) secure termination of the injunction or liability at UPP's expense, (ii) replace said Motor with non-infringing goods or modify the Motor to become non-infringing all at UPP's expense or (iii) terminate this Agreement.

(b) Invacare. Invacare expressly warrants that the wheelchairs into which Motors are installed do not infringe on any United States or foreign patent or on any other right of any other person. Invacare shall hold and save UPP, its successors, assigns, customers and users harmless from loss and/or liability or loss of any nature or kind arising out of or existing because of the infringement or alleged infringement of any patent by reason of the manufacture, sale or use of any goods furnished hereunder. UPP shall notify Invacare in writing of any suit filed against it or its customers on account of any such infringement or alleged infringement, and at Invacare's request shall give Invacare control of the defense of such suit, insofar as Invacare has the authority to do so, and information and assistance for the same, all at Invacare's expense.

6.4 Performance Complying With Law. In performance of work under this Agreement or under any Release Order, UPP shall comply in all material respects with all applicable federal, state and local laws and regulations and shall indemnify and hold Invacare harmless from any cost, loss or liabilities resulting from UPP's failure to so comply. Invacare shall comply in all material respects with all applicable federal, state and local laws and regulations and shall indemnify and hold UPP harmless from any cost, loss or liabilities resulting from Invacare's failure to so comply.

6.5 Survival of Warranties. The warranties set forth in this Section VI shall survive any inspection, delivery, acceptance of, or payment by Invacare for Motors.

6.6 Notice. Invacare shall give UPP written notice of any breach of warranty with respect to Motors as soon as reasonably possible after Invacare's discovery of any such breach.

6.7 Disclaimer: Damages. UPP MAKES NO INDEMNITY, REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AND NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE MOTORS EXCEPT FOR THE WARRANTIES AND INDEMNITIES EXPRESSLY SET FORTH IN THIS AGREEMENT. Each party expressly agrees that it shall be responsible for all damages caused by its breach or other noncompliance with the terms of this Agreement, including consequential and incidental damages.

VII. Representations and Covenants of UPP

7.1 Existence. UPP is a corporation duly organized and validly existing under the laws of the State of Colorado. UPP is qualified to do business in all jurisdictions wherein its ownership of property or the nature of its business requires it to be so qualified. UPP has the legal right and all necessary power and authority to own or hold under lease its properties and to carry on its business as now being conducted.

7.2 Power. Authorization and Consent. The execution, delivery and performance of this Agreement and all of the documents to be delivered by UPP hereunder (i) are within UPP's legal power and authority, (ii) have been duly authorized by all necessary action of the Board of Directors of UPP, (iii) are not in contravention of any provision of law, any provision of the Articles of Incorporation or other charter documents of UPP, any material agreement or indenture by which UPP is bound, or of any other material document to which UPP is bound, and (iv) the same do not require the consent or approval of any governmental body, agency, authority or any other person which has not been obtained. This Agreement constitutes a legal, valid and binding obligation of UPP enforceable (except as the same may be affected by general principles of equity and any bankruptcy, fraudulent conveyance, preferential transfer, avoidance, insolvency or other law relating to the enforcement of creditors' rights), against UPP in accordance with its terms.

7.3 Compliance with Laws. UPP is not in violation of any applicable statute, act, rule, regulation or order of any legislative, administrative or judicial body or official which would materially adversely affect its business, assets, operations, condition or prospects (financial or otherwise) or adversely affect its ability to perform under this Agreement.

7.4 Manufacturing Capacity. As of the date required under the terms of this agreement, UPP has the capability and the capacity to meet Invacare's requirements for Motors as contemplated by this Agreement. UPP acknowledges (i) Invacare's clear reliance upon this representation and covenant in entering into this Agreement and in conducting its supply arrangements accordingly and (ii) the immediate and direct harm and damage to Invacare that will result from UPP's inability to produce Motors required by this Agreement.

7.5 Remedy of Force Majeure. UPP shall notify Invacare immediately upon becoming aware of any event or condition that could establish a claim of force majeure. UPP shall take all commercially reasonably actions and steps to avoid or remedy the condition as to continue performance of this Agreement.

7.6. Full Disclosure. There is no fact known to UPP which has not been disclosed to Invacare which may reasonably be expected to have an adverse effect on UPP's performance under this Agreement. No representation or warranty of UPP contained in this Agreement or in any schedule, exhibit or document furnished or to be furnished in connection with this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to keep any statements made herein or therein from being misleading.

VIII. Representations and Covenants of Invacare

8.1 Existence. Invacare is a corporation duly organized and validly existing under the laws of the State of Ohio. Invacare is qualified to do business in all jurisdictions wherein its ownership of property or nature of its business requires it to be so qualified. Invacare has the legal right and all necessary power and authority to own or hold under lease its properties and to carry on its business as now being conducted.

8.2 Power, Authorization and Consent. The execution, delivery and performance of this Agreement and of all the documents to be delivered by Invacare hereunder (i) are within Invacare's legal power and authority, (ii) have been duly authorized by all necessary action of the Board of Directors of Invacare, (iii) are not in contravention of any provision of law, any provision of the Articles of Incorporation or other charter documents of Invacare, any material agreement or indenture by which Invacare is or shall in the future be bound, of any other material document to which Invacare is or shall in the future be bound, and (iv) the same do not require the consent or approval of any governmental body, agency, authority or any other person which has not be obtained. This Agreement constitutes a legal, valid and biding obligation of Invacare enforceable (except as the same may be affected by general principles of equity and any bankruptcy, fraudulent conveyance, preferential transfer, avoidance, insolvency or other law relating to the enforcement of creditors' rights), against Invacare in accordance with its terms.

8.3 Compliance with Laws. Invacare is not in violation of any applicable statute, act, rule regulation or order of any legislative, administrative or judicial body or official which would materially adversely affect is business, assets, operations, condition or prospects (financial or otherwise) or adversely affect its ability to perform under this Agreement.

8.4. Full Disclosure. There is no fact known to Invacare which has not been disclosed to UPP which may reasonably be expected to have an adverse effect on Invacare's performance under this Agreement. No representation or warranty of Invacare contained in this Agreement or in any schedule, exhibit or document furnished or to be furnished in connection with this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to keep any statements made herein or therein from being misleading.

IX. Termination: Default: Remedies

9.1 Breaches. Any breach of the agreements and provisions of this contract shall permit the parties hereto to exercise any rights or remedies they may have under this Agreement or under law.

9.2 Termination upon Substantial Impairment. Notwithstanding the provisions of Section 3 or Section 9.1 of this Agreement, if either party commits a breach which substantially impairs the value of this Agreement to the other party and has not cured such breach within thirty (30) days after receipt of written notice thereof, the aggrieved party shall have the right to terminate this Agreement upon written notice to the breaching party.

9.3 Automatic Termination. Notwithstanding the provisions of Sections 3, 9.1, or 9.2, this Agreement shall terminate immediately in the event that any party hereto shall have (i) ceased to do business as a going concern, (ii) made a general assignment for the benefit of creditors, (iii) filed a petition seeking the reorganization, arrangement, composition, adjustment, liquidation or dissolution of such party or seeking similar relief under any other statute, law or regulation, or seeking the appointment of a trustee, receiver, assignee, liquidator or similar office of the court for a substantial part of its properties or (iii) had filed against it any such petition and such petition has not been dismissed for a period of 90 days.

9.4. Consequences of Termination. Termination of this Agreement in accordance with the foregoing provisions will not affect the rights and obligations of the parties with respect to Release Orders given by Invacare prior to the effective date of the termination or terminate liabilities arising out of conduct prior to the actual date of termination. Otherwise, all rights and obligations of the parties under this agreement shall cease to exist upon termination of this Agreement; provided, however, that (i) all warranties and indemnities of the parties and the obligations under 4.6(c) shall survive termination and (ii) the party terminating this Agreement because of breach by the other party shall have the right to seek damages and equitable relief on account of such breach.

9.5 Specific Performance. UPP acknowledges that Invacare is relying on UPP to be an assured source of supply for Invacare and that a breach by JJPP of its obligation to sell Motors will disrupt the production of Invacare in a manner that can not be reflected by money damages. Accordingly, UPP hereby agrees that Invacare shall be entitled to specific performance of UPP's obligations hereunder.

9.6 Reservation of Remedies. The rights, powers and remedies which may be given or reserved to the parties by this Agreement shall be cumulative in addition to all other and further remedies provided by law. This Agreement shall not be construed to deprive the parties of any other rights, powers and remedies otherwise given by law or at equity. No waiver by either party of any breach, default or violation of any term warranty, representation, agreement, covenant, condition or provision hereof shall constitute a waiver of any subsequent breach, default or violation of the same or other term warranty, representation, agreement, covenant, condition or provision.

X. Force Majeure

10.1 General. Neither party shall be liable to the other for delay in any performance or failure to render any performance under this Agreement when such delay or failure is beyond the reasonable control of and without intentional wrongdoing or bad faith of the party asserting the claim of force majeure. A "force majeure" shall include, but not be limited to, any acts of God, strikes, lockouts, or other labor disputes or industrial disturbances, civil disturbances, shortages of raw materials or energy, acts, directives or binding orders of any court or governmental authority or person purporting to act therefor and such orders or regulations (regardless of the validity of such order or regulation) of governmental bodies or agencies asserting jurisdiction as would inhibit or prohibit performance required by this Agreement.

10.2 Suspension: Cancellation upon Force Majeure. With respect to a party to this Agreement, the other party will be correspondingly relieved of its obligations to perform pursuant to this Agreement as long as such force majeure shall be continuing. In the event that the condition of force majeure shall continue for the lesser of (i) thirty (30) days or (ii) in a period of time such that this Agreement shall become commercially impracticable, the parties shall each have the right to cancel this Agreement. During a period of suspension pursuant to this Section, UPP and Invacare agree that Invacare shall be entitled to purchase Motors from any third party without liability to UPP under this Agreement because of any such purchases.

10.3 Obligations. Section 10 shall in no way affect the obligation of either party with respect to obligations incurred hereunder prior to the event of force majeure.

XI. Miscellaneous

11.1 Indemnification. UPP and Unique shall indemnify and hold Invacare harmless against all claims, actions, costs, losses, liabilities and damages including, without limitation, reasonable attorney's fees, on account of or related to, in whole or in part, any claims of injuries to persons or damage to property based in whole or in part upon any defect in design or manufacture or nonconformity in any Motor. Invacare shall indemnify and hold UPP harmless against all claims, actions, costs, losses, liabilities and damages including, without limitation, reasonable attorney's fees, on account of or related to, in whole or in part, any claims of injuries to persons or damage to property based in whole or in part upon any defect or nonconformity in any wheelchair, except to the extent that any such claim, action, cost, loss, liability or damage results from a defective or nonconforming Motor. Each party shall indemnify and hold the other party to this Agreement harmless against all claims, actions, costs, losses, liabilities and damages including, without limitation, reasonable attorney's fees, on account of or related to, in whole or in part, any (i) act or omission of such party or its agents, employees or subcontractors or (ii) any other breach or alleged breach by such party of any of its obligations under this Agreement or any Release Order.

11.2 Agency. This Agreement does not constitute UPP or Invacare as agent of the other and neither party shall hold the other out to be its legal representative, agent or employee for any purpose whatsoever.

11.3 Notices. All notices, requests, consents and other communications required or permitted hereunder shall be in writing and shall be personally delivered, electronically delivered by facsimile or telex, mailed by overnight mail service or mailed by certified mail, return receipt requested, postage prepaid to the following addresses or to such other addresses as the parties hereto may designate in writing:

If to UPP:

                    Unique Power Products, Inc.
                    7501 Miller Drive
                    Frederick, CO 80530
                    Attention: Donald A. French
                    Telecopy No.: 303/684-0579

If to Unique:

Unique Mobility, Inc
425 Corporate Circle
Golden, CO 80401
Attention: Donald A. French
Telecopy No.: 303/278-7007

If to Invacare:

Invacare Corporation
One Invacare Way
Elyria, OH 44035
Attention: Thomas R. Miklich
Telecopy No.: 440/366-9008

All such notices, requests, consents and other communications shall be deemed to be properly given when delivered personally, or, if sent by U.S. mail, as of the date on the return receipt, or if sent by overnight mail service, the next business day after delivery to the overnight mail service, or if sent electronically, upon verification of receipt.

11.4. Counterparts. This Agreement may be executed in any number of counterparts, each of which when executed by the parties hereto and delivered shall be deemed to be an original, and all such counterparts taken together shall be deemed to be but on and the same instrument.

11.5 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the State of Colorado.

11.6 Integration: Construction. This Agreement, together with the Confidentiality Agreement and License Agreement, shall comprise the complete agreements of the parties hereto and shall supersede all prior agreements, written or oral, pertaining to the subject matter hereof This Agreement has been drafted with the joint participation of the parties hereto and shall be construed to be neither against nor in favor of UPP or Invacare.

11.7 Waivers and Amendments. No amendment, modification, supplement, termination or waiver of any provision of this Agreement, and no consent to any departure therefrom, may in any event be effective unless in writing and signed by the party or parties affected thereby, and then only in the specific instance and for the specific purpose given.

11.8 Attorneys' Fees. Each party to this Agreement shall bear its own legal fees and any and all other expenses relating to the transactions contemplated in this Agreement. If any party institutes any action or proceeding to enforce this Agreement or any provision here or for damages by reason of any alleged breach of this Agreement or of any provisions thereof or for a declaration of rights hereunder, then the prevailing party in any such action or proceeding shall be entitled to receive from the other party all costs and expenses, including reasonable attorneys fees, incurred by the prevailing party in connection with such action or proceeding.

11.9 Headings. The table of contents and headings of this Agreement are for convenience of reference only and shall not affect the construction of any provision of this Agreement.

11.10 Exhibits. Each Exhibit referred to herein and attached hereto is an integral part of this Agreement and is incorporated hereby by this reference.

11.11 Successors and Assigns. This Agreement and the provisions hereof shall be binding upon and inure to the benefit of each of the parties and their successors and assigns.

11.12. Survival of Representations and Warranties. All agreements, representations and warranties contained herein shall survive the execution and delivery of this Agreement and the closing of the transactions contemplated hereby.

11.13 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision.

11.14 Assignment. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party.

1N WITNESS WHEREOF the parties have executed this Supply Agreement as of the day and year first written above.

INVACARE CORPORATION

By: /s/
Name:
Title:

UNIQUE POWER PRODUCTS, INC.

By: /s/
Name:
Title:

UNIQUE MOBILITY, INC.

By: /s/
Name:
Title:

EX-10.20 6 licenseredacted.htm LICENSE AGREEMENT LICENSE AGREEMENT

LICENSE AGREEMENT

This AGREEMENT is made as of this ______ day of _____________, 1997, between Unique Mobility, Inc., a corporation organized and existing under the laws of the State of Colorado, with its principal offices at 425 Corporate Circle, Golden, Colorado 80401 ("Unique"), and Invacare Corporation, an Ohio corporation, with its principal office at 899 Cleveland Street, Elyria, Ohio 44036-2 125 ("Invacare").

RECITALS

Unique owns or possesses and has the right to disclose and license certain Licensed Technology relating to Licensed Motors that may prove useful in medical products.

Invacare desires to enter into a Supply Agreement with Unique Power Products, Inc. ("UPP") pursuant to which Invacare intends to purchase and UPP intends to sell Licensed Motors incorporating Licensed Technology for use in wheelchairs produced by Invacare.

Subject to the terms of this Agreement, Invacare and Unique desire to provide for Invacare to be granted a license so that Invacare may manufacture and sell Medical Products incorporating such Licensed Motors.

NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, Unique and Invacare hereby agree as follows:

SECTION ONE

DEFINITIONS

As used herein the following terms shall have the meanings set forth below:

1.1 "Affiliate" shall mean a Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a party to this Agreement.

1.2 "Confidentiality Agreement" shall mean the Confidentiality Agreement between Invacare and Unique and UPP of even date herewith.

1.3 "Medical Products" shall mean all medical and health care products including but not limited to motorized wheelchairs and other mobility products and equipment for use by persons with disabilities and/or for home health care.

1.4 "Licensed Patents" shall mean any and all patents and patent applications with respect to the Licensed Technology.

1.5 "Licensed Technology" shall mean all of Unique's trade secrets, confidential know-how and technical information in whatever form, whether or not patentable including all of the same embodied in the Licensed Patents, now known or that becomes known to Unique from whatever source during the term of this Agreement (provided that Unique has the right to use and disclose such information) and related to the development, design, manufacture, use or sale of Licensed Motors for use in Medical Products.

1.6 "Licensed Motors" shall mean electric motors made pursuant to Licensed Technology for use in Medical Products.

1.7 "Person" shall mean an individual, firm, trust, partnership, joint venture, association, company, an unincorporated association or a government or any department or agency thereof

1.8 "Supply Agreement" shall mean the Supply Agreement between Invacare and UPP of even date herewith.

SECTION TWO

GRANT OF LICENSE

2.1 Effective Date. The license rights granted to Invacare by Unique pursuant to this Agreement shall become effective on the date the Supply Agreement and the Confidentiality Agreement are effective.

2.2 License to Invacare.

(a) Unique grants to Invacare, and Invacare accepts, a royalty bearing license to undertake any and all of the following activities worldwide during the term and in accordance with the provisions of this Agreement: (i) to use and practice Licensed Technology in the manufacture of Licensed Motors as part of Medical Products, (ii) to sell, offer to sell, ship, distribute, advertise and promote the Licensed Motors manufactured or incorporated pursuant to clause (i), and (iii) to subcontract any of the activities described in clause (i) of this Section 2.2(a) to UPP. Invacare may subcontract the activities described in clause (I) of this Section 2.2(a) to another supplier or perform them itself provided that: (1) Invacare shall have complied with its obligation to purchase the "Minimum Quantity" from UPP as provided in Section 2.1 of the Supply Agreement, if it is in effect, and (2) Invacare shall pay to Unique royalties (the "Royalties") as provided in Section 2.3 below. In addition, such other supplier shall be required to enter into a confidentiality agreement containing terms substantially the same as the terms of the Confidentiality Agreement prior to disclosure to such supplier of any confidential information of Unique. A copy of any such confidentiality agreement shall be delivered to Unique immediately after it is signed.

(b) The license rights granted to Invacare pursuant to Sections 2.2(a) shall be (i) exclusive (except as to UPP's right to use the Licensed Technology to manufacture Licensed Motors for Invacare) and (ii) non-transferable but with the right of sub-license in the area of Medical Products to any Invacare Affiliate provided such Invacare Affiliate delivers to Unique such written assurances as Unique may reasonably request to evidence the agreement of such Invacare Affiliate to be bound by the terms of this Agreement and to relinquish all of its rights as sublicensee in the event it ceases to be an Invacare Affiliate.

(c) Notwithstanding the exclusivity provision contained in Section 2.2(b)(i), Unique reserves the right (i) to use and practice Licensed Technology in the manufacture of Licensed Motors as part of Medical Products and (ii) to sell, offer to sell, ship, distribute, advertise and promote the Licensed Motors manufactured or incorporated pursuant to clause (i), contingent upon Invacare's written consent, which shall not be unreasonably withheld. Prior to granting such consent, Invacare shall have the sole right to determine that such license, use or sale (A) will not directly or indirectly benefit a competitor of Invacare, (B) will not be a competitive disadvantage to Invacare or (C) is not materially adverse to Invacare's best interest. Unique reserves the unrestricted right to sell, practice or license the Licensed Technology in applications other than the Medical Products area.

2.3 Royalties.

(a) Invacare shall pay Unique Royalties equal to (i) [* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST*]% of the Net Sales Price (as defined below) of Medical Products incorporating Licensed Motors obtained from any source other than UPP or any Unique Affiliate or (ii) in the case of Licensed Motors sold by Invacare without incorporation into Medical Products, [* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST*]% of the Net Sales Price of the Licensed Motors acquired from any source other than UPP or any Unique Affiliate. Notwithstanding anything contained in this Section 2.3 that may be interpreted to the contrary, Royalties under this Agreement shall not apply to Licensed Motors purchased from UPP or any Unique Affiliate. References to Licensed Motors in this Section 2.3 shall mean Licensed Motors acquired from any source other than UPP or any Unique Affiliate.

(b) The Net Sales Price in the case of Licensed Motors resold by Invacare shall mean Invacare's entire gross receipts for Licensed Motors less only such of the following as may be included in such gross receipts (collectively, "Allowances"): (i) all normal trade discounts actually allowed; (ii) all sales, use and value added taxes, all import or export duties and freight, insurance, shipping or transportation charges paid or payable by Invacare in connection with the particular transaction involved and not reimbursed or reimbursable by the purchaser or customer; and (iii) amounts actually credited or refunded to the purchaser or customer for returned or defective goods. The Net Sales Price shall not be further reduced by any discount, allowance, deduction, rebate or franchise, income or other tax of any kind.

(c) The Net Sales Price in the case of Medical Products into which Licensed Motors are incorporated shall mean the entire gross receipts for such Medical Products, less only Allowances, multiplied by a fraction, the numerator of which is the total cost to Invacare for the Licensed Motors, and the denominator of which is the total cost to Invacare for manufacturing the Medical Products into which the Licensed Motors are incorporated. In calculating Invacare's costs for the foregoing, Invacare may use any reasonable method it normally uses to determine costs for other purposes, provided that any such method shall be consistently applied to the numerator and denominator. For the purposes of this paragraph, rebates shall be deemed to be an Allowance.

(d) Invacare may sell or transfer a Licensed Motor or Medical Product incorporating a Licensed Motor to an Affiliate for sale to a third party, and such sale or transfer to an Affiliate shall not be subject to the Royalties (provided that any subsequent sale or transfer by such Affiliate to a third party shall be subject to Royalties hereunder).

(e) During each Contract Year of the Renewal Term of the Supply Agreement, Invacare shall either pay a minimum royalty on [* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST*] Motors (as defined in the Supply Agreement) less the number of Motors manufactured by UPP or any of its affiliates multiplied by [* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST*]% of the Net Sales Price as defined in 2.3(b.) of this Agreement or revert to a non-exclusive license on the Motors. Royalties on other Licensed Motors manufactured or sold during the term of this Agreement shall be mutually agreed upon by the parties to this Agreement.

2.4 Examination of Records.

(a) Invacare shall keep full, complete and accurate business records, files and books of accounting containing all the data reasonably necessary for the accurate computation and verification of the Royalties to be paid and the information to be provided by Invacare in this Section 2. Invacare shall maintain such records, files and books for a period of five (5) years from the making thereof

(b) Should Unique's examination of the reports disclose a discrepancy in an amount greater than 5% of any Royalty payments, Unique shall have the right to retain an independent auditor to conduct an audit of Invacare's books and records, but only to the extent related to the Licensed Motors and/or Medical Products into which Licensed Motors are incorporated. If such audit discloses an underpayment, Invacare shall pay (i) all overdue amounts (plus late charges and interest as provided herein) and if such underpayment is in excess of 5% of the amount due (ii) all costs and expenses of such audit.

2.5 Quarterly Reports. Within forty-five (45) days after the close of each calendar quarter ending after the quarter in which Invacare makes its first sale of a Licensed Motor or Medical Product containing a Licensed Motor, Invacare shall deliver to Unique a written statement in form reasonably acceptable to Unique and certified as correct by Invacare showing the quantity and description of the Licensed Motors sold or incorporated into Medical Products during the calendar quarter immediately preceding and shall calculate the Net Sales Price of all such products sold during such calendar quarter and the amount of the Royalties payable to Unique with respect to such sales. For the purpose of such reports the Licensed Motors or Medical Products containing such Licensed Motors shall be considered to be sold as of the date of shipment.

2.6 Payment. Invacare shall, within 45 days following the end of each calendar quarter, submit the report and remit the full amount of Royalties that are due for the preceding quarter. All late Royalty Payments shall (i) be subject to a late charge equal to 5% of the overdue amount

2.7 Patent Markings. Invacare shall mark the Licensed Motors in accordance with such reasonable instruction as may be given by Unique from time to time during the term hereof in order to indicate that they incorporate Licensed Motors which are protected by pending patents or the Licensed Patents.

SECTION THREE

DISCLOSURE OF IMPROVEMENTS BY INVACARE

Invacare shall promptly disclose to Unique any improvements to the Licensed Technology which are developed by Invacare or which come to Invacare's knowledge and which Invacare has the right to disclose. All said improvements shall be owned by Unique.

SECTION FOUR

PATENT INFRINGEMENT

4.1 Representation and Warranty. Unique represents and warrants to Invacare that, to Unique's best knowledge, the Licensed Technology does not infringe on the patent or other intellectual property rights of any third party.

4 2 Invacare Notification: If at any time during the term of this Agreement, Invacare becomes aware that any Person is infringing any of the rights of Unique which have been licensed to Invacare hereunder, Invacare shall promptly notify Unique as to such infringement and shall provide to Unique the name and address, if known, of the alleged infringer and a description of the alleged acts of infringement. Unique shall, at its own discretion and expense, have the right to commence or prosecute any claim or suit against such infringer in its own name or in the name of Invacare as deemed necessary by Unique under the circumstances. Unique shall have the exclusive right to employ counsel of its own selection and to direct and control the litigation or settlement of any such claim or suit and shall be entitled to retain all amounts awarded as damages in connection therewith. Should Unique choose not to pursue the alleged infringer, or abandon any action, claim or suit it has commenced against any such infringer, Invacare shall, at its option, have the right under this Agreement to pursue the claim in its or Unique's name as deemed necessary or elect to pay royalties at 50%. Invacare shall, under these circumstances, have the exclusive right to employ counsel of its own selection and to direct and control the litigation or settlement of any such claim or suit and shall be entitled to retain all amounts awarded as damages in connection therewith Each party shall cooperate with and give full assistance to the other in connection with any action taken pursuant to this Section 4.2.

4.3 Prevention of Infringement. If Unique determines, in the absence of any notice, that the Licensed Technology infringes the claims of the patent or other proprietary rights of third parties, then Unique has the right and will use its best efforts to avoid such possible infringement by attempting to alter the Licensed Motors or Licensed Technology to render them non-infringing. Should Invacare or Unique receive any notice of an alleged infringement on the claims or proprietary rights of third parties, then Invacare and Unique shall meet to discuss the response to such notice. Invacare shall cooperate with and assist Unique with respect to any such response but shall have no obligation to participate in the defense against any claim or suit brought by such third parties. Should any Licensed Patent be declared in whole or in part invalid, unless specifically declared exempt as a Licensed Patent in writing and signed by both parties, then Invacare's royalty under Section 2.3 shall be reduced by 50%.

4.4 Disclaimers; Indemnifications. Except as provided in Section 4.1, UNIQUE ASSUMES NO RESPONSIBILITY FOR ANY PRODUCT MANUFACTURED OR SOLD BY OR FOR INVACARE AND MAKES NO REPRESENTATION OR WARRANTIES CONCERNING THE LICENSED TECHNOLOGY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Invacare shall indemnify Unique or UPP from and against any and all claims, losses, damages, liabilities and expenses ("Losses") arising out of or in connection with Invacare's sale of Medical Products except to the extent any such Losses are caused by design or manufacturing defects in the Licensed Motors, which are, in whole or in part, caused by the negligence or intentional acts of Unique or UPP.

SECTION FIVE

TERM; TERMINATION

5.1 Term. This Agreement shall become effective as of the date and year first above set forth and, Subject to the provisions of Section 5.2, shall continue in effect for five (5) years or until the Supply Agreement terminates, whichever is longer.

5.2 Termination.

(a) Each of the following shall constitute an "Event of Default" under this Agreement:

(i) Invacare shall have materially defaulted in the performance or observance of any of the terms or provisions of this Agreement and such default

remains uncured for a period of thirty (30) days after delivery of written notice of default by Unique;

(ii) Unique shall have materially defaulted in the performance or observance of any of the terms or provisions of this Agreement and such default remains uncured for a period of thirty (30) days after delivery of written notice of default by Invacare;

(iii) Unique shall commence bankruptcy, insolvency or similar proceedings; or their creditors commence such proceedings against them and such proceedings are not dismissed within ninety (90) days;

(iv) Invacare shall commence bankruptcy, insolvency or similar proceedings; or their creditors commence such proceedings against them and such proceedings are not dismissed within (90) ninety days;

(v) Invacare contests or otherwise challenges or attacks in any court of competent jurisdiction, the rights of Unique in or to the Licensed Technology except in connection with a breach of this Agreement by Unique; or

(vi) The Supply Agreement is terminated by Unique as a result of a material breach of the Supply Agreement by Invacare.

(b) If any Event of Default shall occur, the non-defaulting party may, in

addition to all other rights and remedies available to it, terminate this Agreement by giving the defaulting party written notice of termination.

(c) Any termination of this Agreement pursuant to Section 5.2 shall be effective immediately upon delivery of written notice of termination pursuant to Section 6.1.

5.3 Effect of Expiration. Upon the expiration of this Agreement as provided in Section 5.1, Invacare shall cease to have the right to exercise the license granted in Section 2.2, except for those Motors already sold to Invacare but, not yet resold by Invacare, and shall discontinue use of the license technology provided that, at Invacare's request, Unique shall negotiate in good faith and an extension of the said License on mutually agreed terms.

5.4 Effect of Termination.

(a) If this Agreement is terminated by Invacare as a result of an Event of Default pursuant to Sections 5.2(a)(ii) or 5.2(a) (iii), then Invacare shall, subject to the continued performance of its obligations hereunder, (including, without limitation, payment of Royalties), be permitted to continue to exercise its rights under Section Two hereof, except that the royalties shall be reduced by 50%.

(b) Except as provided in Section 5.4(a), if this Agreement is terminated by either party pursuant to Section 5.2(a), then Invacare shall immediately upon such termination cease and desist from using any of the Licensed Technology and the Trademark and from making, promoting or selling any products containing same.

SECTION SIX

MISCELLANEOUS

6.1 Notices. All notices, requests, consents and other communications required or permitted hereunder shall be in writing and shall be personally delivered, electronically delivered by facsimile or telex, mailed by overnight mail service or mailed by certified mail, return receipt requested, postage prepaid to the following addresses or to such other addresses as the parties hereto may designate in writing:

If to Unique:

Unique Mobility, Inc.
425 Corporate Circle
Golden, CO 80401
Attention: Donald A. French
Telecopy No.: 303/278-7007

If to Invacare:

Invacare Corporation
899 Cleveland Street
Elyria, OH 44036-2125
Attention: Thomas R. Miklich
Telecopy No.: 216/366-9008

6.2 Assignment. This Agreement shall inure to the benefit of and be binding upon any permitted successor and assign of the parties hereto, provided that (a) Invacare may not, except as otherwise provided in Section 2.2(c), assign this Agreement or any rights or obligations hereunder without the prior written consent of Unique and (b) Unique may assign or transfer its rights and obligations hereunder to (i) any of its Affiliates, or (ii) with Invacare's written permission, to any purchaser of substantially all the assets and business of Unique.

6.3 Entire Agreement. This Agreement, the Supply Agreement and the Confidentiality Agreement constitute the entire agreement and understanding of the parties hereto with respect to its Subject matter and supersede any and all prior written and oral agreements with respect thereto. This Agreement may not be changed, waived or discharged except by written instrument signed by duly authorized representatives of the parties.

6.4 Compliance with Applicable Law. Invacare shall at all times conduct its activities under this Agreement so as to ensure that its activities do not cause Unique or any of its Affiliates to be in violation of any applicable laws or regulations. Invacare shall at all times (a) refrain from any conduct, including specific sales, which, in the reasonable opinion of Unique, might cause Unique or its Affiliates to be in violation of any applicable laws or regulations and (b) take such actions and cause Invacare's agents, employees and representatives to take such actions as Unique may reasonably request in order to ensure Invacare's compliance with its obligations under this Section 6.4.

6.5 Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Colorado.

6.6 Severability. Each section, subsection, phrase and sentence of this Agreement constitutes a separate and distinct undertaking, covenant and/or provision hereof. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. In the event that any provision of this Agreement shall be finally determined to be unlawful, such provision shall be deemed severed from this Agreement, but every other provision of this Agreement shall remain in full force and effect, and in substitution for any such provision held unlawful, there shall be substituted a provision of similar import reflecting the original intent of the parties hereto to the extent permissible under law.

6.7 Waiver. Any waiver by either party hereto of any breach of, or failure to comply with or failure to enforce at any time, any of the provisions of this Agreement shall not be construed as or constitute a continuing waiver of such provision or a waiver of any other breach of, or failure to comply with, any other provision of this Agreement, nor shall it in any way affect the validity of' this Agreement or any part thereof or the right of any party hereto thereafter to enforce each and every provision of this Agreement.

6.8 Captions. The captions of the Sections and subsections contained in this Agreement are provided for convenience or reference only and shall not be deemed to constitute a part hereof

6.9 Public Announcements. Neither party shall without prior written consent of the other party, make any public announcements or issue any press release except as may, in the opinion of counsel, be necessary to comply with the requirements of any law, government order or regulation.

IN WITNESS WHEREOF, the following duly authorized representatives of the parties have executed this Agreement in two originals as of the date first above written and each party retains one fully executed original.

UNIQUE MOBILITY, INC.

By: /s/
Title:

INVACARE CORPORATION

By: /s/
Title:

EX-13.1 7 interimdata.txt PORTIONS OF ANNUAL REPORT Interim Financial Data (Unaudited) (in thousands of dollars, except per share data)

EX-23.1 8 kpmg10ka33101cons.txt KPMG CONSENT Exhibit 23.1 Consent of Independent Auditors The Board of Directors and Shareholders UQM Technologies, Inc.: Our report dated May 18, 2001, states that we did not audit the financial statements of Taiwan UQM Electric Co., Ltd. (a 38.25% owned investee company). The financial statements of Taiwan UQM Electric Co, Ltd. were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Taiwan UQM Electric, Co., Ltd. for the year ended March 31, 1999 is based solely on the report of the other auditors. We consent to the incorporation by reference in the registration statements on Forms S-8 (Nos. 33-23113, 33-24071, 33-34612, 33-35055, 33-34613, 33-41325, 33-64852, 33-47454, 33-81430 and 33-92288) and in the registration statements on Forms S-3 (Nos. 33-6116, 33-63399, 333-01919, 333-13883, 333-44597, 333-23843, 33-50393, 333-52861, 333-67313 and 333-78525) of UQM Technologies, Inc. of our report dated May 18, 2001 relating to the consolidated balance sheets of UQM Technologies, Inc. and subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended March 31, 2001, which report appears in the March 31, 2001 Annual Report on Form-K of UQM Technologies, Inc. /s/KPMG LLP KPMG LLP EX-23.2 9 horwathcons10k.htm HORWATH CONSENT Horwath Consent

Independent Auditors' Consent

The Board of Directors and Stockholders

UQM Technologies, Inc.

We consent to the inclusion of our report dated January 19, 1999, relating to the balance sheets of Taiwan UQM Electric Co., Ltd. as of December 31, 1998 and 1997, and the related statements of income, shareholders' equity, and cash flows for each of the years in the two-year period ended December 31, 1998, which report appears in the annual report on Form 10-K/A of UQM Technologies, Inc. for the year ended March 31, 2001.

Horwath & Company

Taipei, Republic of China

January 23, 2002

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