-----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, I9DUNYbqvt7S8ulT/R4CTzsZvE9GsdQmxQnGPv8r/q2tXoMNZuUXIDQdRAaD7oRC lywaVRtmW24I08cMvjerew== 0000950005-96-000378.txt : 19960629 0000950005-96-000378.hdr.sgml : 19960629 ACCESSION NUMBER: 0000950005-96-000378 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960614 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: US ELECTRICAR INC CENTRAL INDEX KEY: 0000922237 STANDARD INDUSTRIAL CLASSIFICATION: 3711 IRS NUMBER: 953056150 STATE OF INCORPORATION: CA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-79542 FILM NUMBER: 96581480 BUSINESS ADDRESS: STREET 1: 5 THOMAS MELLON CIRCLE STREET 2: SUITE 305 CITY: SAN FRANCISCO STATE: CA ZIP: 94134 BUSINESS PHONE: 4156562400 MAIL ADDRESS: STREET 1: 5 THOMAS MELLON CIRCLE STREET 2: SUITE 305 CITY: SAN FRANCISCO STATE: CA ZIP: 94134 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (_x_) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended April 30, 1996 or (__) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From __________ To _________. Commission File No. 0-25184 U.S. ELECTRICAR, INC. --------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 95-3056150 (State or other jurisdiction of (IRS employer identification number) incorporation or organization) 5 Thomas Mellon Circle, Suite 305, San Francisco, CA 94134 ---------------------------------------------------------- (Address of Principal Executive Offices and Zip Code) Registrant's telephone number, including area code: (415) 656-2400 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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (_x_) No (__) As of June 12, 1996, there were 70,662,488 shares of Common Stock, no par value, outstanding. Exhibit Index appears on Page 21. Page 1/63 INDEX U.S. ELECTRICAR, INC.
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Consolidated Balance Sheets: July 31, 1995 and April 30, 1996................................................................3 Consolidated Statements of Operations: Three and Nine months ended April 30, 1995 and 1996.............................................4 Consolidated Statements of Cash Flows: Nine months ended April 30, 1995 and 1996.......................................................5 Notes to Consolidated Financial Statements: for the Three and Nine months ended April 30, 1995 and 1996.....................................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................11 PART II. OTHER INFORMATION Item 1. Legal Proceedings..............................................................................17 Item 2. Changes in Securities..........................................................................17 Item 3. Defaults upon Senior Securities................................................................17 Item 4. Submission of Matters to a Vote of Security Holders............................................17 Item 5. Other Information..............................................................................18 Item 6. Exhibits and Reports on Form 8-K...............................................................18 SIGNATURE ...............................................................................................19 Exhibit Index ...............................................................................................20
Page 2/63 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS U.S. ELECTRICAR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data)
As of As of July 31, 1995 April 30, 1996 -------------- --------------- ASSETS (Unaudited) CURRENT ASSETS: Cash $ 319 $ 1,810 Accounts receivable, net of allowances of $503 and $672 1,364 976 Inventory 4,832 2,321 Prepaids and other current assets 375 138 -------------- --------------- Total Current Assets 6,890 5,245 PROPERTY, PLANT AND EQUIPMENT - NET 3,112 990 INTANGIBLE ASSETS - NET 29 OTHER ASSETS 199 451 -------------- --------------- TOTAL ASSETS $ 10,230 $ 6,686 ============== =============== LIABILITIES AND SHAREHOLDERS' (DEFICIT) CURRENT LIABILITIES: Accounts payable $ 11,082 $ 3,523 Accrued payroll and related expense 410 526 Accrued warranty expense 1,358 1,339 Reserve for lease obligations 770 156 Accrued Interest 1,378 2,732 Other accrued expenses 1,086 1,128 Customer deposits 763 445 Bonds and notes payable 17,370 14,208 -------------- --------------- Total Current Liabilities 34,217 24,057 LONG TERM DEBT 8,898 ROYALTIES PAYABLE 773 SHAREHOLDERS' (DEFICIT): Series A preferred stock - No par value; 30,000,000 shares authorized; 6,275,000 and 4,688,000 shares issued and outstanding at 7/31/95 and 4/30/96 5,148 3,565 Series B preferred stock - No par value; 5,000,000 shares authorized; 1,507,000 issued and outstanding at 4/30/96 3,015 Stock notes receivable (987) (1,043) Common Stock - No par value; 300,000,000 shares authorized; 55,223,000 and 70,053,000 shares issued and outstanding at 7/31/95 and 4/30/96 38,715 43,728 Accumulated deficit (67,636) (75,534) -------------- --------------- Total Shareholders' (Deficit) (24,760) (26,269) -------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) $ 10,230 $ 6,686 ============== =============== Note: The balance sheet at July 31, 1995 has been derived from the audited financial statements at that date. See notes to consolidated financial statements.
3 U.S. ELECTRICAR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except for per share and share data)
Three Months Ended April 30, Nine Months Ended April 30, -------------------------------- ------------------------------ 1995 1996 1995 1996 --------------- --------------- -------------- -------------- NET SALES $ 897 $ 478 $ 10,794 $ 3,489 COST OF SALES 3,209 1,571 18,298 5,060 --------------- --------------- -------------- -------------- GROSS MARGIN (2,312) (1,093) (7,504) (1,571) --------------- --------------- -------------- -------------- OTHER COSTS AND EXPENSES: Research & development 1,080 413 6,057 1,129 Selling, general & administrative 4,248 2,503 13,042 5,186 Interest and financing fees 1,708 453 5,417 1,366 Impairment of long-lived assets 894 894 Provision for facility closures, liquidation of inventory, consolidation of operations & contract terminations 2,594 5,372 --------------- --------------- -------------- -------------- Total other costs and expenses 9,630 4,263 29,888 8,575 --------------- --------------- -------------- -------------- LOSS BEFORE GAIN ON DEBT RESTRUCTURING (11,942) (5,356) (37,392) (10,146) GAIN ON DEBT RESTRUCTURING 1,858 2,248 --------------- --------------- -------------- -------------- NET LOSS $ (11,942) $ (3,498) $ (37,392) $ (7,898) =============== =============== ============== ============== PER COMMON SHARE: Loss before gain on debt restructuring $ (0.63) $ (0.09) $ (2.08) $ (0.17) Gain on debt restructuring 0.03 0.04 --------------- --------------- -------------- -------------- Net loss per common share $ (0.63) $ (0.06) $ (2.08) $ (0.13) =============== =============== ============== ============== WEIGHTED AVERAGE SHARES OUTSTANDING 18,933,774 62,665,378 17,953,724 58,803,907
4 U.S. ELECTRICAR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
Nine Months Ended April 30 -------------------------- 1995 1996 ------------ ----------- OPERATIONS Net loss $(37,392) $ (7,898) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and Amortization 5,887 1,014 Change in allowance for doubtful accounts 677 170 Provision to reduce inventory values 3,145 (1,100) Provision for facilities closure, consolidation of operations and contract terminations 3,239 Provision for impairment of long lived assets 894 Loss on disposal of assets 246 Stock issued for services 186 Stock option compensation 634 Interest income on stock notes receivable (62) (60) Royalties payable 35 (773) Change in operating assets and liabilities: Accounts Receivable 126 219 Inventory (1,561) 3,610 Prepaids and other assets 756 (15) Accounts payable and accrued expenses, net of debt restructuring 8,593 426 Customer deposits (810) (319) ------------ ----------- Net cash (used) by operating activities (16,547) (3,586) ------------ ----------- INVESTING: Purchases of property, plant and equipment, net of disposals (735) ------------ ----------- Net cash (used) provided by investing activities (735) ------------ ----------- FINANCING: Payments on notes payable (264) (40) Borrowings on notes payable 2,197 2,388 Borrowings on bonds 12,000 Bond issuance costs (1,860) Proceeds from issuance of common stock 2,701 Exercise of options and warrants 158 28 ------------ ----------- Net cash provided by financing activities 12,231 5,077 ------------ ----------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (5,051) 1,491 CASH AND EQUIVALENTS: Beginning of period 5,327 319 ------------ ----------- End of period $ 276 $ 1,810 ============ ===========
5 U.S. ELECTRICAR, INC, AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (UNAUDITED) (In thousands)
NINE MONTHS ENDED APRIL 30, --------------------------- 1995 1996 ----------- ---------- NONCASH INVESTING AND FINANCING ACTIVITIES: Conversion of Series A preferred stock to common stock $ 1,792 $ 1,583 Conversion of Series S bonds to common stock 701 Value of warrants issued in connection with convertible bonds 1,920 Issuance of common stock for notes receivable 28 Preferred Stock issued in connection with debt restructuring 3,015 Notes payable issued in connection with debt restructuring 4,017
6 U. S. ELECTRICAR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS For the Three and Nine Months Ended April 30, 1995 and 1996 NOTE 1 - Basis of Presentation The accompanying unaudited financial statements have been prepared from the records of the Company without audit, and in the opinion of management, include all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position at April 30, 1996; the interim results of operations for the three and nine month periods ended April 30, 1995 and 1996; and cash flows for the nine month periods then ended. The balance sheet at July 31, 1995, presented herein, has been prepared from the audited financial statements of the Company for the fiscal year then ended. The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. The July 31, 1995 and April 30, 1996 inventories are reported at market value. The inventory valuation adjustments are estimates based on sales of inventory subsequent to July 31, 1995, and the projected impact of certain economic, marketing and business factors. Warranty reserves and certain accrual expenses are based upon on analyses of future costs expected to be incurred in meeting contracted obligations. The amounts estimated for the above, in addition to other estimates not specifically addressed, could differ from actual results; and the difference could have a significant impact on the financial statements. Accounting policies followed by the Company are described in Note 1 to the audited financial statements for the fiscal year ended July 31, 1995. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted for purposes of the interim financial statements. The financial statements should be read in conjunction with the audited financial statements, including the notes thereto, for the year ended July 31, 1995, which are included in the Company's Form 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as filed with the Securities and Exchange Commission. Effective with fiscal 1996, the Company adopted FASB No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of" and, accordingly, reduced the carrying values of assets used for the manufacture of off-road industrial vehicles to estimated fair values in connection with the curtailment of the manufacture and sale of such vehicles during the quarter. The results of operations for the three and nine month periods presented herein are not necessarily indicative of the results to be expected for the full year. NOTE 2 - Going Concern The Company has experienced recurring losses from operations and use of cash from operations and had an accumulated deficit of $67,636,000 at July 31, 1995 and $75,534,000 at April 30, 1996. A substantial portion of the losses are attributable to product development and high start-up costs incurred in connection with the Company's activities related to the development, manufacture and sale of battery powered electric vehicles, including buses, small delivery vehicles and off-road industrial vehicles, and the conversion of gas powered cars and light trucks to electric power. 7 U. S. ELECTRICAR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Continued) During the three years ended July 31, 1995, the Company obtained approximately $42 million (net of debt repayments) in cash from financing activities through private placements of common stock and Series A preferred stock, the exercise of options and warrants, and the issuance of convertible subordinated notes payable and secured convertible bonds and notes. During the nine months ended April 30, 1996, the Company raised an additional $2.4 million through the issuance of secured convertible debt and $2.7 million through sales of unregistered common stock. Through April 1996, the Company had obtained settlements for $11.3 million of approximately $14 million of unsecured trade debt obligated prior to March 18, 1995. Most of this debt was settled as part of an initial closing of the Company's Debt Restructuring Plan. In connection with this closing, the Company issued $781,000 of three year and $3.2 million of 20 year promissory notes and 1.5 million shares of Series B Preferred Stock valued at $3.0 million. The Company also paid $249,000 to the unsecured creditors who agreed to accept the 20 year promissory note as part of the settlement for their claims. In addition, the Company obtained one year extensions to March 25 and April 17, 1997 of the maturities of $13.0 of convertible debt. It is management's intention to continue its debt restructuring and to seek additional financing through private placements as well as other means. As of June 12, 1996, however, the Company had no firm commitments to provide significant additional financing to the Company. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Cash flows from operations for the foreseeable future may not be sufficient to enable the Company to meet its obligations. Market conditions and the Company's financial position may inhibit its ability to achieve profitable operations. These factors as well as the future availability or inadequacy of financing to meet future needs, could force the Company to delay, modify, suspend or cease some or all aspects of its planned operations, and/or seek protection under applicable state and federal bankruptcy and insolvency laws. NOTE 3 - Inventories Inventories are comprised of the following (in thousands): July 31, April 30, 1995 1996 ----------- ----------- (unaudited) Finished goods $ 2,503 $ 1,132 Work-in-process 1,566 601 Raw materials 4,007 2,733 Valuation adjustment (3,244) (2,145) ----------- ----------- $ 4,832 $ 2,321 =========== =========== 8 U. S. ELECTRICAR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 4 - Notes and Bonds Payable, Long-term Debt and Other Financing Notes and bonds payable and long-term debt are comprised of the following (in thousands):
July 31, April 30, 1995 1996 ------------- ------------ (unaudited) Series S secured convertible bonds, interest at 10%, principal and interest due March 25, 1997, secured by personal property of the parent Company. $ 8,500 $ 7,870 Convertible subordinated note - ITOCHU Corporation, interest at prime rate, principal and interest due June 10, 1997, unsecured. 4,880 4,880 Convertible secured notes under a Supplemental Loan Agreement with ITOCHU Corporation, interest at 10%, principal and interest due April 17, 1997, secured by the personal property of the parent Company. 1,856 3,000 Series I secured convertible bonds, interest at 10%, principal and interest due March 25, 1997, secured by the personal property of the parent Company. 1,000 2,144 Convertible secured note, interest at 9% payable quarterly, principal due January 31, 1997, secured by certain machinery and equipment of acquired subsidiary, Industrial Electric Vehicles, Inc. 982 979 Secured promissory note - Credit Managers Association of America ("CMAC") as exclusive agent for the Non-Qualified Creditors, interest at 3%, principal and interest due April 22, 1999, secured with an interest in a sinking fund escrow held by CMAC. 249 Secured subordinated promissory note - CMAC as exclusive agent for the Qualified Creditors, interest at 3%, principal and interest due April 22, 1999, secured with an interest in a sinking fund escrow held by CMAC. 532 Secured subordinated promissory note - CMAC as exclusive agent for the Non-Qualified Creditors, interest at 3% for five years, 6% for two years and prime rate plus 3% for thirteen years, principal and interest due April 22, 2016, secured with an interest in a sinking fund escrow held by CMAC. 3,237
9 U. S. ELECTRICAR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 4 - Notes and Bonds Payable, Long-term Debt and Other Financing (Continued) July 31, April 30, 1995 1996 -------------- --------------- (unaudited) Other 152 215 -------------- --------------- Total notes and bonds payable 17,370 23,106 Less current portion 17,370 14,208 -------------- --------------- Total long-term debt $ -0- $ 8,898 ============== =============== In August 1995, the Company issued $1,144,000 of Series I secured convertible bonds and received a matching $1,144,000 from Itochu Corporation pursuant to a Supplemental Loan Agreement dated April 13, 1995 between Itochu and the Company, whereby Itochu agreed to lend to the Company amounts equal to funds the Company receives from other outside lenders or investors up to a maximum of $3,000,000. Itochu had previously loaned the Company $1,856,000 under this agreement during the year ended July 31, 1995. In April 1996, the Company issued two promissory notes due April 22, 1999, for $249,000 and $532,000 and one promissory note due April 22, 2016 for $3,237,000 to the Credit Managers Association of California ("CMAC") as the exclusive agent for certain unsecured creditors who settled with the Company in connection with its Debt Restructuring Plan. The Company has not paid six interest payments due quarterly from January 31, 1995 through April 30, 1996 totaling approximately $133,000 causing an event of default on the convertible secured note issued in connection with the acquisition of Industrial Electric Vehicles, Inc. (formerly Nordskog Electric Vehicles, Inc.). As of June 12, 1996, the note holder has not yet exercised any of its remedies with respect to the acceleration of the principal and interest nor the collateral securing this note. The full amount of the note has been classified as a current liability as of July 31, 1995 and April 30, 1996 due to the event of default. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The matters addressed below, with the exception of the historical information presented, may incorporate certain forward-looking statements involving risks and uncertainties, including the risks discussed under the heading "Certain Factors That May Affect Future Results" and elsewhere in this report. GENERAL U. S. Electricar, Inc. and Subsidiaries (collectively, the "Company") develop, convert, assemble, manufacture and distribute battery-powered electric vehicles, including on-road pick-up trucks, passenger cars, buses and delivery vehicles, and a variety of off-road industrial vehicles. The Company's product lines include converted vehicles (originally built to be powered by internal combustion engines) and vehicles that are built specifically to be battery powered. The Company's fiscal year ends July 31. All year references refer to fiscal years. During 1994 and the first half of 1995, the Company's approach to its business was intended to establish manufacturing, marketing and support functions of a large scale company so that the transition from development and prototype activities to volume production of on-road electric vehicles could be made as quickly as possible once component parts design, systems integration and assembly processes were developed. The Company raised approximately $38 million to fund its activities during this period. However, the Company was not able to achieve volume production primarily because the development of such designs and processes was not completed prior to the Company's capital becoming severely depleted, which occurred in the second half of 1995. The Company incurred losses totaling $62,586,000 during 1994 and 1995 and $7,898,000 during the first nine months of 1996. The Company was forced to severely curtail its operations in the second half of 1995 due to a lack of funds. Certain facilities were closed, operations were consolidated and major contracts were terminated. The Company initiated programs to restructure its debt and raise interim funding which continued through the first nine months of 1996. During the first nine months of 1996, the Company restructured most of its debt and raised approximately $5 million in interim funding. However, its operations continued to be impacted by an insufficient amount of funds to adequately support its planned sales volumes and product development programs. In the third quarter of 1996, the Company curtailed the manufacture and sale of off-road industrial vehicles and reduced the carrying values of the assets associated with this product line. LIQUIDITY AND CAPITAL RESOURCES The Company has experienced significant recurring cash flow shortages due to operating losses. Cash flows from operations have been extremely negative and have not been sufficient for the Company to meet its obligations as they came due. The Company has therefore had to raise funds through numerous financial transactions and from various resources. At least until the Company reaches break-even volume in sales and develops and/or acquires the capability and technology necessary to manufacture and sell its electric vehicles profitably, it will need to continue to rely extensively on cash from debt and equity financing. The Company 11 anticipates that it will require substantial additional outside financing for at least the next two fiscal years. During the nine months ended April 30, 1996, the Company spent $3,586,000 in cash on operating activities to fund the net loss of $7,898,000 resulting from factors explained in the following section of this discussion and analysis. In addition, during the third quarter of 1996, the Company used $335,000 for advances on the purchase of certain intellectual property assets. Inventories declined during the nine months ended April 30, 1996 by approximately $2.5 million primarily as a result of the Company's efforts to reduce its inventory of converted sedans and light trucks, and its inability to replenish stocks of raw material needed for current production due to a chronic shortage of available funds. The operations of the Company during the nine months ended April 30, 1996 were financed primarily by $1,144,000 received from the issuance of Series I secured convertible bonds, a matching $1,144,000 received from Itochu Corporation pursuant to a Supplemental Loan Agreement dated April 13, 1995 and $2.7 million received from sales of unregistered common stock under Regulation S. In accordance with the Supplemental Loan Agreement, Itochu agreed to lend to the Company amounts under secured convertible notes equal to funds the Company receives from other outside lenders or investors up to a maximum of $3,000,000. Itochu had previously loaned the Company $1,856,000 under this Agreement during the preceding fiscal year. The Company has not paid six interest payments due quarterly from January 31, 1995 through April 30, 1996 totaling approximately $133,000 causing an event of default on the convertible secured note issued in connection with the acquisition of Industrial Electric Vehicles, Inc. (formerly Nordskog Electric Vehicles, Inc.). As of June 12, 1996, the note holder has not yet exercised any of its remedies with respect to acceleration of the principal and interest nor the collateral securing this note. However, discussions have been initiated regarding a restructuring of this debt. During 1995, the Company, the holders of its Series S and Series I secured convertible bonds and Itochu Corporation entered into agreements to restructure approximately $22 million of convertible debt. In July 1995, $8,200,000 of this debt was converted to common stock at $0.30 per share. Maturity dates of much of this debt were set or reset for either March 25 or April 17, 1996, and the conversion rate to acquire common stock for most of this debt was established at $0.30 per share. They also agreed that conversion of the remaining debt shall occur upon (1) the Company's election after a Debt Restructuring Plan has been accepted by the Company's unsecured creditors holding 80% or more of the Company's unsecured trade debt, or (2) Itochu's sole election to cause conversion of this debt. In March 1996, the maturity dates of the Series S and Series I bonds were extended to March 25, 1997 and the maturity dates of the convertible secured notes due Itochu were extended to April 17, 1997. During 1995, the Company fell behind significantly in its payments to suppliers and other creditors due to a chronic shortage of cash. In March 1995, an unofficial Creditors Committee under the auspices of the Credit Managers Association of California ("CMAC") was established to represent the interests of the unsecured creditors in structuring a workout of trade debt incurred before March 18, 1995 ("Debt Restructuring Plan"). In May 1995, the Company granted CMAC, as trustee for the unsecured creditors of the Company whose claims arose prior to March 18, 1995, a security interest in certain collateral of the Company. At the Annual Meeting of Shareholders held in February 1996, the Company's shareholders gave approval for an increase in the number of authorized shares of 12 common stock to 300 million and for authorization of a new series of preferred stock needed for its Debt Restructuring Plan. Through April 1996, the Company had obtained settlements for $11.3 million of approximately $14 million of unsecured trade debt obligated prior to March 18, 1995. Most of this debt was settled as part of an initial closing of the Company's Debt Restructuring Plan. In connection with this closing, the Company issued $781,000 of three year and $3.2 million of 20 year promissory notes and 1.5 million shares of Series B Preferred Stock valued at $3.0 million. The Company also paid $249,000 to the unsecured creditors who agreed to accept the 20 year promissory note as part of the settlement for their claims. In addition, during the twelve months prior to the initial closing of the Debt Restructuring Plan, the Company had paid $284,000 to certain unsecured creditors in full settlement of their claims. It is management's intention to continue its debt restructuring and to seek additional financing through private placements as well as other means. As of June 12, 1996, however, the Company had no firm commitments to provide significant additional financing to the Company. IF THE COMPANY IS UNABLE TO COMPLETE THE VOLUNTARY RESTRUCTURING OF ITS DEBT OR OTHERWISE REFINANCE OR CONVERT SUCH DEBT, AND ADDITIONAL FUNDING IS NOT AVAILABLE, THE COMPANY WOULD BE FORCED TO SEEK PROTECTION UNDER APPLICABLE STATE AND FEDERAL BANKRUPTCY AND INSOLVENCY LAWS. IN ADDITION, SIGNIFICANT ADDITIONAL FUNDING WILL BE NEEDED DURING THE REMAINDER OF 1996 AND IN 1997 AND 1998. AS OF JUNE 12, 1996, THE COMPANY HAD NO FIRM COMMITMENTS FROM ANY PERSON OR ENTITY TO PROVIDE CAPITAL AND THERE CAN BE NO ASSURANCE THAT ADDITIONAL FUNDS WILL BE AVAILABLE FROM ANY SOURCE AT THE TIME THE COMPANY WILL NEED SUCH FUNDS. THE INABILITY OF THE COMPANY TO OBTAIN ADDITIONAL FUNDING ON TERMS ACCEPTABLE TO THE COMPANY WILL HAVE A MATERIAL ADVERSE EFFECT ON ITS BUSINESS. THE FUTURE UNAVAILABILITY OR INADEQUACY OF FINANCING TO MEET FUTURE NEEDS COULD FORCE THE COMPANY TO DELAY, MODIFY, SUSPEND OR CEASE SOME OR ALL ASPECTS OF ITS PLANNED OPERATIONS, AND/OR SEEK PROTECTION UNDER APPLICABLE STATE AND FEDERAL BANKRUPTCY AND INSOLVENCY LAWS. RESULTS OF OPERATIONS Net sales declined $419,000, or 47%, in the third quarter of 1996 from the third quarter of 1995 and declined $7,305,000, or 68%, in the first nine months of 1996 from the first nine months of 1995. These declines in sales in the periods reported for 1996 were primarily due to the Company's inability to raise the funds necessary to support its operations at levels comparable to the corresponding periods of 1995. The largest decline occurred in the converted sedan and light truck product line where there were no unit sales of vehicles in the third quarter of 1996; however, there was revenue of $108,000 (principally due to activities under long term contracts) in the third quarter of 1996, down 69% from the same quarter of 1995. Unit sales of vehicles for the first nine months of 1996 were 38 compared with 177 in the same period of 1995. Revenue from this product line was $1,494,000 in the first nine months of 1996, down 80% from the corresponding period of 1995. There were no sales of buses in the third quarter of 1996 compared with the sale of one bus in 13 the third quarter of 1995. There were sales of two buses in the first nine months of 1996 for $284,000, down 54% from sales of five buses for $616,000 in the first nine months of 1995. Sales of off-road industrial vehicles and associated parts and service were $370,000 in the third quarter of 1996, down 24% from the same quarter of 1995, and sales of off-road industrial vehicles and associated parts and service were $1,711,000 in the first nine months of 1996, down 39% from the corresponding period of 1995. During the third quarter of 1996, the Company curtailed the manufacture and sale of off-road industrial vehicles. Cost of sales as a percent of sales decreased slightly to 328.7% in the third quarter of 1996 from 357.7% in the third quarter of 1995 and cost of sales as a percent of sales decreased to 145.0% in the first nine months of 1996 from 169.5% in the same period of 1995. These improvements in cost of sales as a percent of sales for the periods in 1996 compared with the same periods in 1995 were primarily due to lower costs associated with the converted sedans and light trucks and with buses. Most of these vehicles sold in the first nine months of 1996 were produced in prior periods and placed in inventory at estimated net realizable values. The manufacturing costs in excess of estimated net realizable values were expensed in prior periods. Cost of sales in the third quarter of 1996 included a charge of $600,000 to increase reserves for inventories of off-road industrial vehicles in connection with the curtailment of the manufacture and sale of such vehicles. Research and development expense in the third quarter of 1996 declined $667,000, or 62%, from the third quarter of 1995 and declined $4,928,000, or 81%, in the first nine months of 1996 from the first nine months of 1995 as a result of a substantial reduction by the Company of its technical resources. Following the end of the first half of 1995, the Company reduced its engineering staff and decreased its purchasing of technical services due to a severe lack of funds. Selling, general and administrative expense in the third quarter of 1996 declined $1,745,000, or 41%, from the third quarter of 1995 and declined $7,856,000, or 60%, in the first nine months of 1996 from the first nine months of 1995 primarily as a result of significant reductions in selling, marketing and administrative staff and in the purchasing of various outside services and travel due to the aforementioned lack of funds. Interest and financing fees in the third quarter of 1996 declined $1,255,000, or 73%, from the third quarter of 1995 and declined $4,051,000, or 75%, in the first nine months of 1996 from the first nine months of 1995. Interest and financing fees in the third quarter of 1995 included $1,170,000 and in the first nine months of 1995 included $3,780,000 of amortized fees associated with the issuance of $12,000,000 of Series S secured convertible bonds in September 1994. There was no amortization of fees associated with these bonds in the third quarter and first nine months of 1996 as all of the fees were fully amortized by March 1995, the original maturity date of the bonds. The Company adopted FASB No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of" effective in 1996. During the third quarter of 1996, the Company reduced the carrying values of certain long-lived assets to their estimated fair values in connection with the curtailment of the manufacture and sale of off-road industrial vehicles. This reduction resulted in a charge to operations of $894,000 in the current quarter for the impairment of long-lived assets. The third quarter of 1995 included a provision of $2,594,000 and the first nine months of 1995 included a provision of $5,372,000 for facility closures, consolidation 14 of operations and contract termination's as a result of the Company's decision to close many of its facilities and cancel several contracts due to a severe lack of funds. In connection with the settlement of $11.3 million of unsecured trade debt under the Company's Debt Restructuring Plan, several unsecured creditors agreed to settle their claims for amounts less than original debt owed to them. The reductions from the original amounts owed and the settlement amounts resulted in a gain on debt restructuring of $2,248,000 in the first nine months of 1996, of which $1,858,000 was recorded in the third quarter when the Company completed the initial closing of its Debt Restructuring Plan. As a result of the forgoing changes in net sales, cost of sales, other costs and expenses and gain on debt restructuring, the net loss decreased $8,440,000, or 71%, from $11,942,000 in the third quarter of 1995 to $3,498,000 in the third quarter of 1996, and the net loss decreased $29,494,000, or 79%, from $37,392,000 in the first nine months of 1995 to $7,898,000 in the first nine months of 1996. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS Future trends for the Company's revenue and profitability remain difficult to predict. The Company operates in a rapidly changing and developing market that involves a number of risks, some of which are beyond the Company's control. In addition, as previously disclosed in this Form 10-Q, the Company's financial condition remains extremely precarious. The following discussion highlights certain of these risks. GOING CONCERN/NET OPERATING LOSSES. The Company has experienced recurring losses from operations, use of cash from operations and had an accumulated deficit of $75,534,000 at April 30, 1996. There is no assurance, however, that any net operating losses will be available to the Company in the future as an offset against future profits for income tax purposes. A substantial portion of the losses are attributable to product development and other start-up costs associated with the Company's business focus on the development, production and sale of battery powered electric vehicles. Cash flows from future operations may not be sufficient to enable the Company to achieve profitable operations. Market conditions and the company's financial position may inhibit its ability to achieve profitable operations. These factors, as well as others, indicate the Company may be unable to continue as a going concern unless it is able to obtain significant additional financing and generate sufficient cash flows to meet its obligations as they come due and sustain its operations. As of June 12, 1996, the Company had no firm commitments from any person or entity to provide capital and there can be no assurance that additional funds will be available from any source at the time the Company will need such funds. CONTINUED LOSSES. For the fiscal years ended July 31, 1993, 1994 and 1995, the Company had substantial net losses of $2,607,000, $25,021,000 and $37,565,000, respectively, on sales of $863,000, $5,787,000 and $11,625,000, respectively. Through the first nine months of fiscal 1996, the Company lost an additional $7,898,000 on sales of $3,489,000. NATURE OF INDUSTRY. The electric vehicle ("EV") industry is in its infancy. Although the Company believes that it has manufactured more electric vehicles than any other company in the United States based upon its own knowledge of the industry, there are many large and small companies, both domestic and foreign, 15 now in, poised to enter, or entering this industry. This EV industry is subject to rapid technological change. Most of the major domestic and foreign automobile manufacturers (i) have produced design-concept electric vehicles, and/or (ii) have developed improved electric storage, propulsion and control systems, and/or (iii) and are planning to enter the field. Various non-automotive companies are also developing improved electric storage, propulsion and control systems. Growth of the present limited demand for electric vehicles depends upon (A) future regulation and legislation requiring more use of non-polluting vehicles, (B) the environmental consciousness of customers and (C) the ability of electric vehicles to successfully compete with vehicles powered with internal combustion engines. CHANGED LEGISLATIVE CLIMATE. Because vehicles powered by internal combustion engines cause pollution, there has been significant public pressure in Europe and Asia, and enacted or pending legislation in the United States at the federal level and in certain states, to promote or mandate the use of vehicles with no tailpipe emissions ("zero emission vehicles") or reduced tailpipe emissions ("low emission vehicles"). Legislation requiring or promoting zero emission vehicles is necessary to create a significant market for electric vehicles. There can be no assurance, however, that further legislation will be enacted or that current legislation or state imposed mandates will not be repealed or amended (as recently occurred in California), or that a different form of zero emission or low emission vehicle will not be invented, developed and produced, and achieve greater market acceptance than electric vehicles. Extensions, modifications or reductions of current federal and state legislation, mandates and potential tax incentives could adversely affect the Company's business prospects if implemented. 16 PART 11. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No litigation matters were filed against the Company during the three month period ending April 30, 1996. See Item 5 below. ITEM 2. CHANGES IN SECURITIES The Company has authorized five (5) million shares of a new series of preferred stock designated as Series B Convertible Preferred Stock ("Series B"). Series B has rights, preferences and privileges senior to the Series A Preferred Stock and Common Stock of the Company. For a full description of the Series B, see Exhibit 3.15, Restated and Amended Articles of Incorporation of U.S. Electricar, Inc., a copy of which is attached hereto and made a part of this filing by this reference. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Nordskog: In connection with the acquisition on July 30, 1993 of Nordskog Electric Vehicles, Inc. (since renamed Industrial Electric Vehicles, Inc., hereinafter "IEVI"), the Company issued a $1,000,000 secured convertible promissory note due January 31, 1997 with interest at 9% payable quarterly (the "Nordskog Note"). The Nordskog Note is secured by certain machinery and equipment owned by IEVI. Six quarterly interest payments of $23,000 due on each of January 31, April 30, July 31, October 31, 1995, and January 31 and April 30, 1996, have not been paid and remained unpaid at June 14, 1996 causing an event of default under the Nordskog Note. As a result of the event of default, the holder of the Nordskog Note may, at its option, and upon written notice, declare the principal balance of the Nordskog Note, together with accrued interest thereon, to be due and payable immediately. As of June 12, 1996, the holder of the Nordskog Note has not yet exercised this option or given such written notice to the company, nor has the holder exercised any of its remedies with respect to the collateral securing the Nordskog Note. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's annual meeting of stockholders was held February 23, 1996. The following matters were voted upon at the annual meeting. A. To approve an amendment to the Company's Articles of Incorporation to increase the authorized number of shares of common stock issuable by the Company from 100,000,000 to 300,000,000. The results of the voting were as follows: Number of common shares voted FOR 39,788,716 Percentage of common shares voted FOR1: 65.5% Number of Series A Preferred Shares voted FOR 2,934,683 Percentage of Series A shares voted FOR1 55.5% Page 17/63 - - ------------------------------- 1 Based on total number of shares outstanding as of the record date. B. To approve an amendment to the Company's Articles of Incorporation to authorize the issuance of Series B Convertible Preferred stock. The results of the voting were as follows: Number of common shares voted FOR 37,409,794 Percentage of common shares voted FOR1: 61.6% Number of Series A Preferred Shares voted FOR 2,900,874 Percentage of Series A shares voted FOR1 54.9% C. To provide authorization for the Board of Directors to effect a reverse stock split of the company's common stock in a ratio of up to one-for-twenty, at any time until the next annual meeting of shareholders. The results of the voting were as follows: Number of common shares voted FOR 39,151,561 Percentage of common shares voted FOR1: 64.6% Number of Series A Preferred Shares voted FOR 2,915,282 Percentage of Series A shares voted FOR1 55.2% E. Election of seven (7) directors of the Company, each to serve until the next annual meeting of shareholders or until their respective successors are elected and qualified. The results of the voting were as follows: Each director received an affirmative vote of over 53% of the total number of shares outstanding. F. To approve an amendment to the Company's 1993 Employee and Consultant Stock Plan (the "Plan") to increase the number of shares of common stock authorized for grant under the terms of the Plan from 15,000,000 to 30,000,000. The results of the voting were as follows: Number of common and Series A shares voted FOR 41,239,894 Percentage of common and Series A shares voted FOR1: 91.7% G. To ratify the selection of Moss Adams LLP as independent auditors of the Company for the fiscal year ended July 31, 1996. The results of the voting were as follows: Number of common and Series A shares voted FOR 44,615,671 Percentage of common and Series A shares voted FOR1: 99.1% ITEM 5: OTHER INFORMATION. On May 20, 1996, a suit was filed by a shareholder against the Company, one of its former officers, and a third party individual in the San Francisco Superior Court. The suit alleges that the individual made fraudulent and negligent misrepresentations to induce the shareholder to purchase shares of Company stock for $100,000; that the former officer concealed material facts from the shareholder; and that defendants (including the Company) all breached fiduciary duties to the shareholder. The complaint seeks compensatory damages, punitive damages, attorneys fees and costs, and other relief. The Company has not yet responded to the complaint; however, the Company believes the allegations against it are without merit, and the Company intends to seek dismissal of such claims. Page 18/63 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits: The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this report and such Exhibit Index is hereby incorporated herein by reference. (b) Reports on Form 8-K: Not applicable. The Company did not file any reports on Form 8-K during the three months ended April 30, 1996 [This space intentionally left blank.] Page 19/63 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. U.S. ELECTRICAR, INC. (Registrant) /s/ Roy Y. Kusumoto - - --------------------------------- By: Roy Y. Kusumoto Chief Executive Officer, President and Acting Chief Financial Officer (Principal executive officer and principal financial and accounting officer) Date: June 12, 1996 [Exhibit Index follows.] Page 20/63
EXHIBIT INDEX Exhibit No. Description Page No. - - ------------------------------------------------------------------------------------------------------------------- 3.15 Restated and Amended Articles of Incorporation of U.S. Electricar filed March 18, 1996 22 10.93 Regulation S Common Stock Subscription Agreement dated May 1, 1996, with Gerlach & Co. 34 11. Statement re computation of per share earnings [losses] 62 27. Financial Data Schedule 63
Page 21/63 EX-3.15 2 EXHIBIT 3.15 RESTATED AND AMENDED ARTICLES OF INCORPORATION OF U.S. ELECTRICAR, INC. The undersigned, Roy Kusumoto and John J. Micek, III, do hereby certify as follows: 1. They are the President and Secretary, respectively, of U.S. Electricar, Inc., a California corporation (this or the "Corporation"). 2. The Articles of Incorporation of this Corporation are amended and restated in their entirety to read as follows: "I The name of this Corporation is U.S. Electricar, Inc. II The purpose of this Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust corporation business or the practice of a profession permitted to be incorporated by the California Corporations Code. III This Corporation is authorized to issue two classes of shares of stock, to be designated Common Stock and Preferred Stock, respectively. This Corporation is authorized to issue Three Hundred Million (300,000,000) shares of Common Stock and Thirty-five Million (35,000,000) shares of Preferred Stock. The Preferred Stock authorized by these Articles of Incorporation shall be issued from time to time in one or more series. The Preferred Stock shall be comprised of two series comprising an aggregate of Thirty-five Million (35,000,000) shares, of which Thirty Million (30,000,000) shares shall be designated "Series A Convertible Preferred Stock" (also referred to as "Series A Stock" or "Series A Preferred Stock") and Five Million (5,000,000) shares shall be designated "Series B Convertible Preferred Stock" (also referred to as "Series B Stock" or "Series B Preferred Stock"). The rights, preferences, privileges and restrictions of the Series A Stock and Series B Stock and of the holders thereof shall be as follows: (a) DIVIDENDS. (1) Series A Stock Right to Cash Dividends. Each holder of outstanding shares of Series A Stock shall be entitled to receive, when and if declared by the Board of Directors and out of any assets legally available therefor, non-cumulative dividends in cash in an amount equal to 6% of $0.60 per share of Series A Preferred Stock per annum (the "Series A Preferential Dividend"), payable in cash during each fiscal year of this Corporation and in preference to any declaration or payment (payable other than in Common Stock) to the Common Stock (but not without the holders of Series B Stock first receiving the Series B Preferential Dividend (as defined below), as adjusted pursuant to Article III (a)(3) below). (2) Series B Stock Right to Cash Dividends. Each holder of outstanding shares of Series B Stock shall be entitled to receive, when and if declared by the Board of Directors and out of any assets at the time legally available therefor, non-cumulative dividends in cash in an amount equal to 7% of $2.00 per share of Series B Preferred Stock per annum (the "Series B Preferential Dividend"), payable in cash during each fiscal year of this Corporation and in preference to any declaration or payment (payable other than in Common Stock) to the Common Stock and Series A Stock, as adjusted pursuant to Article III (a)(3) below). (3) Partial Cash Payment. If the Board of Directors shall declare a dividend on the Series A Stock or Series B Stock and the amount available for payment thereof is insufficient to permit the payment of the full preferential amounts required to be paid to the holders of outstanding shares of Series A Stock and/or Series B Stock, then the amount available for such dividend payments shall be distributed ratably first among the holders of shares of Series B Stock according to the number of issued and outstanding shares of Series B Stock held by each such holder until each such holder has received its Series B Preferential Dividend in full, then the amount available for such dividend payments shall be distributed ratably among the holders of shares of Series A Stock according to the number of issued and outstanding shares of Series A Stock held by each such holder until each such holder has received its Series A Preferential Dividend in full. After payment in full during any fiscal year of all Series B Preferential Dividends and all Series A Preferential Dividends, each holder of Common Stock (other than those holders whose Common Stock was converted from Preferred Stock during such fiscal year after receiving their Series A or Series B Preferential Dividend, as the case may be) shall be entitled to receive, when and if declared by the Board of Directors and out of any funds legally available therefor, non-cumulative dividends in an amount equal to the as-converted per share amount paid to the Series A Preferred Stock, payable in cash during each fiscal year of the Corporation. (4) Dividends After Payment of Preferential Dividends. After the holders of record of the Common Stock, Series A Stock and Series B Stock have been paid their Preferential Dividends in full, then the holders of record of Series A Stock, Series B Stock and Common Stock shall share ratably in any additional dividends during such fiscal year on an as converted basis (i.e, the number of shares of Common Stock which would be outstanding if the Series A Stock and Series B Stock were converted to Common Stock). -2- (5) Payment Other Than Cash. Except as provided in subsection (7) below, if the Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights to purchase any such securities or evidences of indebtedness, then, in each such case, the holders of Series A Preferred Stock and Series B Preferred Stock shall be entitled to a proportionate share of any such distribution as though the holders of Series A Preferred Stock and Series B Preferred Stock were the holders of the number of shares of Common Stock of the Corporation into which their respective shares of Series A Preferred Stock and Series B Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation who are entitled to receive such distribution. (6) Series B Stock Right to Stock Dividend. Until and unless the Series B Stock has been registered under the Securities Act of 1933, as amended, the holders of the Series B Stock shall be entitled to receive common stock dividends in preference to any stock dividend on the Series A Preferred Stock and Common Stock (the "Series B Stock Dividend Preference") at the "monetary equivalent" rate of 7% of $2.00 per share per annum issuable on the first and second anniversary dates (each a "Record Date") following the date these Restated and Amended Articles have been filed with the California Secretary of State (the "Filing Date"). The "value" of each share of Common Stock so issued as a stock dividend for purposes of calculating the "monetary equivalent" rate of each such share dividend shall be determined by taking the greater of (i) the "Fair Market Value" of the Company's Common Stock determined on the applicable Record Date and (ii) the "Original Conversion Price" (as defined below). "Fair Market Value" shall be the average price of all of the mean prices between the high bid and low ask closing prices of the Company's publicly traded stock as listed and traded on the NASDAQ electronic bulletin board, or other listed exchange, during the ten (10) trading days immediately preceding the Record Date. Any fractional stock dividends shall be issued in cash based on their cash equivalent value. For example, if the Fair Market Value is $1.00 on the first Record Date and the Original Conversion Price is still $0.30, then if a holder owned 100 shares of Series B Stock, he would receive $7.00 worth of Common Stock, or seven shares of Common Stock. (7) Dividend Adjustment. The Series A Preferential Dividend and Series B Preferential Dividend amounts and the Series B Stock Dividend Preference shall be appropriately adjusted for any stock dividends, combinations and splits. (b) PREFERENCE ON LIQUIDATION. (1) Preference Price. In the event of any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, the holders of the outstanding shares of Series A Stock and Series B Stock shall simultaneously be entitled to be paid out of the assets of this Corporation available for distribution to its shareholders, whether from capital, surplus funds or earnings, before any payment is made in respect of the shares of Common Stock or other equity security of this -3- Corporation of a lesser priority than the Series A Stock and Series B Stock in an amount equal to (i) $0.60 per share in the case of the Series A Stock, plus all declared and unpaid dividends thereon (the "Series A Liquidation Preference Price"); and (ii) $2.00 per share in the case of the Series B Stock together with an amount equal to the greater of (A) seven percent (7%) of such $2.00 compounded annually at the rate of 7%, for each year (or fraction thereof) after the Filing Date less the amount, if any, of any cash dividends actually paid to the Series B Stock through the date of liquidation, or (B) any declared and unpaid dividends thereon (the "Series B Liquidation Preference Price"). After payment of the Preference Prices to the holders of Series A Stock and Series B Stock, the holders of Common Stock shall be paid an amount per share equal to the per share Series A Liquidation Preference Price paid to the holders of Series A Preferred Stock. After payment therefor to the holders of the Common Stock, the remaining assets of the Corporation shall be distributed to the holders of shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock in an equal amount per share as if all Series A Preferred Stock and Series B Preferred Stock had been converted into Common Stock as of the date of such liquidation. (2) Partial Payment. If, upon any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary, the assets of this Corporation available for distribution to its shareholders shall be insufficient to pay the full Preference Prices required to be paid to the holders of the outstanding shares of Series A Stock and the holders of the outstanding shares of Series B Stock, then all of the assets of this Corporation legally available for distribution to the holders of equity securities shall be distributed ratably first among the holders of the outstanding shares of Series B Stock based upon their Preference Price until payment in full of the Preference Price on all Series B Stock, then ratably among the holders of the outstanding shares of Series A Stock until payment in full of their Preference Price and then ratably among the holders of the outstanding shares of Common Stock in an amount per share equal to the per share Series A Liquidation Preference Price until payment in full of such Preference Price. (3) Certain Transactions. The sale, transfer or other conveyance of all or substantially all of the assets of this Corporation or a sale, transfer or other conveyance of a majority of the outstanding voting securities of this Corporation (on a fully-diluted basis) in any transaction or related series of transactions, whether by merger or consolidation or otherwise, shall not be deemed to be a liquidation, dissolution or winding up of this Corporation, as those terms are used in this Section. (4) Consent to Certain Distributions. Each holder of outstanding shares of Series A Stock and each holder of outstanding shares of Series B Stock shall, by virtue of its acceptance of a stock certificate evidencing such shares, be treated as having consented, for purposes of Sections 502, 503, and 506 of the California Corporations Code, to distributions made by this Corporation for the repurchase of shares of Common Stock from directors or employees of, or consultants or advisers to, this Corporation upon the termination of employment by, or service to, this Corporation or any subsidiary of this Corporation or otherwise. -4- (5) Appraisal. If any of the assets of the Corporation are to be distributed other than in cash under this Section (b), then the Board of Directors of the Corporation shall promptly engage independent competent appraisers to determine the value of the assets to be distributed to the holders of Series A Preferred Stock and the holders of Series B Preferred Stock. The Corporation shall, upon receipt of such appraisers' valuation, give prompt written notice of the appraisers' valuation to each holder of Series A Preferred Stock, Series B Preferred Stock and Common Stock of the Corporation, but in no event later than at least twenty (20) days prior to the transaction in question. (6) Liquidation Adjustment. Notwithstanding the foregoing, the amount to be paid for each share of Series A Preferred Stock, Series B Preferred Stock and Common Stock upon liquidation shall be appropriately adjusted for any combination(s), stock split(s), stock distribution(s) or dividend(s) with respect to such shares. (c) VOTING. (1) Generally. Except as otherwise required by law or expressly provided herein, each share of Series A Preferred Stock and each share of Series B Preferred Stock shall be entitled to vote on all matters submitted or required to be submitted to a vote of the shareholders of the Corporation and shall be entitled to the number of votes equal to the number of full shares of Common Stock into which such shares of Series A Preferred Stock and Series B Preferred Stock are convertible pursuant to the provisions hereof, at the record date for the determination of shareholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited. In each such case, except as otherwise required by law or expressly provided herein, the holders of shares of Series A Preferred Stock, Series B Preferred Stock and Common Stock shall vote together and not as separate classes. (2) Special Voting Rights for the Election of Directors. Each time the shareholders of the Corporation meet, or act by written consent in lieu of a meeting, for the purpose of electing Directors, until such time that fifty percent (50%) of the Series B Preferred Stock shares originally issued and outstanding have been redeemed by the Company or converted into Common Stock, the holders of the Corporation's Series B Preferred Stock shall be entitled, voting as a separate class, to elect two, and only two, members of the Corporation's Board of Directors. The holders of the Corporation's Series A Preferred Stock and the holders of the Common Stock shall be entitled, voting together on an as converted basis as one class, to elect all of the remaining authorized members of the Board of Directors. (3) Removals or Resignations. Any vacancy created on the Corporation's Board of Directors shall be filled by a successor Director who shall be elected in a manner by which his or her predecessor was elected as provided above, except that vacancies filled other than at shareholder meetings may be filled by the -5- Board of Directors. Any Director who has been elected to the Corporation's Board of Directors as provided above may be removed during his term of office in accordance with the California Corporations Code, and any vacancy thereby created shall be filled as provided in this subparagraph. (4) Authorized Number of Directors. Until such time that fifty percent (50%) of the Series B Preferred Stock shares originally issued and outstanding have been redeemed by the Company or converted into Common Stock, the authorized number of directors of this Corporation shall not exceed eleven (11) without the consent of the holders of a majority of the outstanding shares of Series B Preferred Stock. (d) CONVERSION. The holders of the outstanding shares of Series A Stock and Series B Stock shall have the following conversion rights (the "Conversion Rights"): (1) Right to Convert. Each share of Series A Stock and Series B Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such shares, at the office of this Corporation or any transfer agent for the Corporation's shares into that number of shares of Common Stock which is equal to the quotient obtained by dividing (A) $0.60 for each share of Series A Stock and $2.00 for each share of Series B Stock by (B) the "Series A Conversion Price" and "Series B Conversion Price," respectively, (as such terms are hereinafter defined) in effect immediately prior to the time of such conversion. The initial price at which shares of Common Stock shall be deliverable upon conversion of shares of Series A Stock shall be $0.60 (as adjusted from time to time as herein provided, the "Series A Conversion Price"). The initial price at which shares of Common Stock shall be deliverable upon conversion of shares of Series B Stock shall be $0.30 (as adjusted from time to time as herein provided, the "Series B Conversion Price"). (2) Mechanics of Conversion. Each holder of outstanding shares of Series A Stock and Series B Stock who desires to convert the same into shares of Common Stock shall surrender the certificate or certificates therefor, duly endorsed, at the office of this Corporation or of any transfer agent for the Corporation's shares and shall give written notice to this Corporation at such office that such holder elects to convert the same and shall state therein the number of shares of Series A Stock or Series B Stock being converted. Thereupon, this Corporation shall issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay all declared but unpaid dividends on the shares being converted. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the certificate or certificates representing the shares to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date. -6- (3) Adjustment for Stock Splits and Combinations. If this Corporation at any time or from time to time after the Filing Date effects a division of the outstanding shares of Common Stock, the Series A Conversion Price and the Series B Conversion Price shall be proportionately decreased and, conversely, if this Corporation at any time, or from time to time, after the Filing Date combines the outstanding shares of Common Stock, the Series A Conversion Price and the Series B Conversion Price shall be proportionately increased. Any adjustment under this Section (d)(3) shall be effective on the close of business on the date such division or combination becomes effective. (4) Adjustment for Certain Dividends and Distributions. If this Corporation at any time or from time to time after the Filing Date pays or fixes a record date for the determination of holders of shares of Common Stock entitled to receive a dividend or other distribution in the form of shares of Common Stock, or rights or options for the purchase of, or securities convertible into, Common Stock, then in each such event the Series A Conversion Price and the Series B Conversion Price shall be decreased, as of the time of such payment or, in the event a record date is fixed, as of the close of business on such record date, by multiplying the Series A Conversion Price and the Series B Conversion Price by a fraction (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the time of such payment or the close of business on such record date and (ii) the denominator of which shall be (A) the total number of shares of Common Stock outstanding immediately prior to the time of such payment or the close of business on such record date plus (B) the number of shares of Common Stock issuable in payment of such dividend or distribution or upon exercise of such option or right of conversion; provided, however, that if a record date is fixed and such dividend is not fully paid or such other distribution is not fully made on the date fixed therefor, the Series A Conversion Price and the Series B Conversion Price shall not be decreased as of the close of business on such record date as hereinabove provided as to the portion not fully paid or distributed and thereafter the Series A Conversion Price and the Series B Conversion Price shall be decreased pursuant to this Section (4) as of the date or dates of actual payment of such dividend or distribution. (5) Adjustments for Other Dividends and Distributions. If this Corporation at any time or from time to time after the Filing Date pays, or fixes a record date for the determination of holders of shares of Common Stock entitled to receive, a dividend or other distribution in the form of securities of this Corporation other than shares of Common Stock or rights or options for the purchase of, or securities convertible into, Common Stock, then in each such event provision shall be made so that the holders of the outstanding shares of Series A Stock and the holders of the outstanding shares of Series B Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of this Corporation which they would have received had their respective shares of Series A Stock and Series B Stock been converted into shares of Common Stock on the date of such event and had such holders thereafter, from the date of such event to and including the actual date of conversion of their shares, retained -7- such securities, subject to all other adjustments called for during such period under this Section (d) with respect to the rights of the holders of the outstanding shares of Series A Stock and the holders of the outstanding shares of Series B Stock. (6) Adjustment for Reclassification, Exchange and Substitution. If, at any time or from time to time after the Filing Date, the number of shares of Common Stock issuable upon conversion of the shares of Series A Stock and Series B Stock is changed into the same or a different number of shares of any other class or classes of stock or other securities, whether by recapitalization, reclassification or otherwise (other than a recapitalization, division or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section (d)), then, in any such event, each holder of outstanding shares of Series A Stock and each holder of outstanding shares of Series B Stock shall have the right thereafter to convert such shares of Series A Stock and Series B Stock into the same kind and amount of stock and other securities receivable upon such recapitalization, reclassification or other change, as the maximum number of shares of Common Stock into which such shares of Series A Stock and Series B Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein. (7) Reorganizations, Mergers, Consolidations or Sales of Assets. If, at any time or from time to time after the Filing Date, there is a capital reorganization of the Common Stock (other than a recapitalization, division, combination, reclassification or exchange of shares provided for elsewhere in this Section (d)) or a merger or consolidation of this Corporation into or with another corporation or a sale of all or substantially all of this Corporation's properties and assets to any other person, then, as a part of such capital reorganization, merger, consolidation or sale, provision shall be made so that the holders of the outstanding shares of Series A Stock and the holders of the outstanding shares of Series B Stock shall thereafter receive upon conversion thereof the number of shares of stock or other securities or property of this Corporation, or of the successor corporation resulting from such merger or consolidation or sale, to which a holder of the number of shares of Common Stock into which their shares of Series A Stock and Series B Stock were convertible would have been entitled on such capital reorganization, merger, consolidation or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section (d) with respect to the rights of the holders of the outstanding shares of Series A Stock and Series B Stock after the capital reorganization, merger, consolidation, or sale to the end that the provisions of this Section (d) (including adjustment of the Series A Conversion Price and Series B Conversion Price and the number of shares into which the shares of Series A Stock and Series B Stock may be converted) shall be applicable after that event and be as nearly equivalent to such Conversion Prices and number of shares as may be practicable. -8- (8) Annual Adjustment to Series B Conversion Price. On the second, third, fourth and fifth anniversary dates after the Filing Date, the Series B Conversion price shall be adjusted to $0.45, $0.60, $0.75 and $1.00, respectively (as adjusted from time to time herein under this Section (d)). (9) Automatic Conversion. (i) Each outstanding share of Series A Stock shall automatically be converted into shares of Common Stock at the then effective Conversion price for the Series A Preferred Stock upon (a) the consummation of the sale of the Corporation's Common Stock in an underwritten public offering registered under the Securities Act of 1933, as amended (the "Securities Act"); or (b) the registration of the underlying Common Stock of the holders' Series A Preferred Stock under the Securities Act; or (c) a merger or consolidation with or into another corporation or a sale of more than fifty percent (50%) of the outstanding voting securities of this Corporation or a sale of all or substantially all of the Corporation's properties and assets. (ii) Each outstanding share of Series B Stock shall automatically be converted into shares of Common Sock at the then effective Conversion Price upon (a) the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offering and sale of shares of Common Stock for the account of the Corporation (other than a registration statement effected solely to implement an employee benefit plan, a transaction in which Rule 145 of the Securities and Exchange Commission is applicable or any other form or type of registration in which the shares of Common Stock issuable upon conversion of the shares of Series B Stock cannot be included pursuant to the Securities and Exchange Commission rules or practices) resulting in aggregate proceeds to the Corporation (before the payment of underwriting discounts and commissions and the expense of the offering) in excess of $10,000,000 and at a per share price of at least two times the original Conversion Price of the Series B Stock (appropriately adjusted for subdivisions, combinations and stock dividends); or (b) a merger or consolidation with or into another corporation or a sale of the shares of Common Stock of the Corporation or a sale of all or substantially all of the Corporation's properties and assets in which the aggregate gross cash proceeds received by the Corporation is at least $10,000,000 in cash or marketable securities. (iii) Upon the occurrence of an event specified in either Section (9)(i) or (9)(ii) above, the outstanding shares of Series A Stock and/or Series B Stock, as the case may be, shall be converted into outstanding shares of Common Stock, whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent. Upon the automatic conversion of the outstanding shares of Series A Stock and/or Series B Stock, the Corporation shall notify the holders of the outstanding shares of Series A Stock and the holders of outstanding shares of Series B Stock, as applicable, and thereafter such holders shall surrender the certificates representing such shares at the office of the Corporation or any transfer -9- agent for the shares. Thereupon there shall be issued and delivered to such holder, promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the surrendered shares of Series A Stock or Series B Stock of such holder were convertible on the date on which such automatic conversion occurred, and the Corporation shall promptly pay in cash all declared but unpaid dividends on the shares of Series A Stock and Series B Stock so converted. (10) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the shares of Series A Stock or Series B Stock. In lieu of any fractional share to which the holder of such shares would otherwise be entitled, the Corporation shall pay cash equal to the product of (i) such fraction multiplied by (ii) the fair market value of one share of the Common Stock on the date of conversion, as determined in good faith by a disinterested majority of the Board of Directors. (11) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Stock and Series B Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Stock and Series B Stock. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series A Stock and Series B Stock, the Corporation shall take such action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. (12) Notices. Any notice required by the provisions of this Section (d) to be given to a holder of shares of Series A Stock or Series B Stock shall be in writing and, if by personal delivery (including courier or Federal Express), shall be deemed to have been validly served, given or delivered upon actual delivery and if mailed, shall be deemed to have been validly served, given or delivered three (3) business days after deposit in the United States mails, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified, at the addresses appearing on the books of the Corporation (or such other address(es) as a party may designate for itself by like notice) or pursuant to written agreements between the parties. (13) No Dilution or Impairment. The Corporation shall not amend its Articles of Incorporation or participate in any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the rights of the holders of the -10- shares of Series A Stock and the holders of the shares of the Series B Stock against dilution (as contemplated herein) or other impairment of their rights. (e) NO RE-ISSUANCE. No share or shares of Series A Stock or Series B Stock acquired by the Corporation by reason of redemption, purchase or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Corporation shall be authorized to issue. (f) RESTRICTIONS AND LIMITATIONS. (1) Series B Protective Covenants. In addition to any other rights provided by law, so long as any shares of Series B Stock shall be outstanding, the Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of a majority of the outstanding shares of Series B Preferred Stock: (a) alter or change the rights, preferences or privileges of the Series B Preferred Stock; (b) increase the authorized number of shares of Series Preferred B Stock; (c) increase the authorized number of shares of Preferred Stock; or (d) create any new class or series of shares having preference over or being on a parity with the Series B Stock. IV (a) LIMITATION OF DIRECTORS' LIABILITY. The liability of the directors of this Corporation for monetary damages shall be eliminated to the fullest extend permissible under California law. (b) INDEMNIFICATION OF CORPORATE AGENTS. This Corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through bylaw provisions, agreements with agents, vote of shareholders or disinterested directors or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject only to the applicable limits set forth in Section 204 of the California Corporations Code with respect to actions for breach of duty to this Corporation and its shareholders. (c) REPEAL OR MODIFICATION. Any repeal or modification of the foregoing provisions of this Article IV shall not adversely affect any right of indemnification or limitation of liability of an agent of this Corporation relating to acts or omissions occurring prior to such repeal or modification." -11- 3. The foregoing Restated and Amended Articles of Incorporation have been duly approved and adopted by the Board of Directors of the Corporation. 4. The foregoing Restated and Amended Articles of Incorporation have been duly approved by the required vote of shareholders in accordance with Sections 902 and 903 of the California Corporations Code. The total number of shares outstanding is 60,713,083 shares of Common Stock and 5,283,140 shares of Series A Preferred Stock. The number of shares voting in favor of the amendment equaled or exceed the vote required. The percentage vote required was more than 50% of each class of the outstanding shares. Each of the undersigned declares under penalty of perjury under the laws of the State of California that the matters set forth herein are true and correct of his own knowledge. Date: February 23, 1996 __/s/ Roy Y. Kusumoto___________ ROY Y. KUSUMOTO, President __/s/ John J. Micek III__________ JOHN J. MICEK, III, Secretary -12- EX-10.93 3 EXHIBIT 10.93 No._______ Offeree Name_______________________ U.S. ELECTRICAR, INC. REGULATION S COMMON STOCK SUBSCRIPTION AGREEMENT May 1, 1996 THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS ("BLUE SKY LAWS"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED IN REGULATION S) WITHOUT REGISTRATION UNDER THE SECURITIES ACT, AND AS REQUIRED BY BLUE SKY LAWS IN EFFECT AS TO SUCH TRANSFER, UNLESS AN EXEMPTION FROM SUCH REGISTRATION UNDER STATE AND FEDERAL LAW IS AVAILABLE. INSTRUCTIONS FOR SUBSCRIPTION U.S. ELECTRICAR, INC. A California Corporation To Subscribe: 1. Offeree Questionnaire/Subscription Agreement. Please complete the Offeree Questionnaire and execute the Subscription Agreement at Page 10 and return all originals to the Corporation along with the purchase price for the common stock shares being acquired. 2. Please make Check payable to: U.S. ELECTRICAR, INC. or request wire transfer instructions from the Corporation. 1 OFFEREE QUESTIONNAIRE U.S. ELECTRICAR, INC. U.S. Electricar, Inc. San Francisco Executive Park 5 Thomas Mellon Circle Suite 305 San Francisco, California 94134 Gentlemen: The undersigned understands that: (i) you will rely on the information contained herein for purposes of securities law compliance and determination; and (ii) the securities will not be registered under the Securities Act of 1933, as amended (the "Securities Act") in reliance upon the exemption from registration provided by Regulation S promulgated under the Securities Act. The undersigned further represents to you that: (i) the information contained herein is complete and accurate and may be relied upon by you; and (ii) the undersigned will notify you immediately of any material change in any of such information occurring prior to the purchase of such securities, if any purchase is made, by the undersigned. THE UNDERSIGNED UNDERSTANDS AND AGREES THAT ALTHOUGH THIS QUESTIONNAIRE WILL BE KEPT STRICTLY CONFIDENTIAL, U.S. ELECTRICAR, INC. MAY PRESENT THIS QUESTIONNAIRE TO SUCH PARTIES AS IT DEEMS ADVISABLE IF CALLED UPON TO ESTABLISH THE AVAILABILITY UNDER ANY FEDERAL OR STATE SECURITIES LAWS OF AN EXEMPTION FROM REGISTRATION OF THIS OFFERING OR ANY OTHER COMPLIANCE WITH STATE OR FEDERAL SECURITIES LAWS. THIS QUESTIONNAIRE BY ITSELF IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY BUT MERELY A REQUEST FOR INFORMATION FOR COMPLIANCE WITH APPLICABLE SECURITIES REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION AND STATE BLUE SKY LAWS. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 2 U.S. ELECTRICAR, INC. Please complete and return along with the Subscription Agreement attached hereto to: U.S. Electricar, Inc. Attn: Corporate Secretary San Francisco Executive Park 5 Thomas Mellon Circle Suite 305 San Francisco, California 94134 TOTAL SUBSCRIPTION: Dollar Amount $ Number of Shares ----------------- -------- Make Check or Wire Transfer Payable to: U.S. Electricar, Inc. REGISTRATION: Please print name in which your Common Stock shares are to be registered | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RESIDENT ADDRESS: Investors must complete resident address for registration purposes | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Street | | | | | | | | | | | | | | | | | | | | | | | | | | | City Country Postal Code MAILING ADDRESS: if different from resident address | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporation name (if applicable) | | | | | | | | | | | | | | | | | | | | | | | | | | | Street | | | | | | | | | | | | | | | | | | | | | | | | | | | City Country Postal Code - - ------------------------------------------------------- Home Phone Business Phone ( ) ( ) - - ------------------------------ --------------------------------------- CHECK ONE: ___ Individual Ownership ___ Corporate Ownership ___ Partnership Ownership FOR TRUST: ______________________ Trust ___________ Date Established - - -------------------------------------- Name of Trustee or other Administrator FOR ANY ENTITY: - - -------------------------------------- (Name of Person With Right To Control the Voting of Securities on Behalf of Entity) 3 U.S. ELECTRICAR, INC. The following information is to be provided by either (i) the individual who is making the investment decision on behalf of the corporate, partnership, trust or other entity investor or (ii) by the individual purchasing the Shares for his own account: - - -------------------------------------------------------------------------------- Print Name (and title if applicable) 1. Business or Professional Education: Field of School Study Degree - - ------ -------- ------ - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 2. Current employment positions: - - -------------------------------------------------------------------------------- 3. Details of any training or experience in financial or business matters not disclosed above: - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 4. I have previously purchased securities on behalf of the Investor or on my own behalf which were sold in reliance on Regulation S or a private offering exemption from registration under the Securities Act of 1933, as amended: ------- Yes ------- No Initial Initial If yes, please give several examples. Name of Type of Year of Amount Corporation Investment Investment Invested - - ----------- ---------- ---------- -------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- (For Entity Investors) 5. Total assets if Investor is an entity: $_________________________________. (For Individual Investors) 6. Net Worth (excess of total assets over total liabilities) and income if Investor is an individual: Net Worth: $____________________ Income: $_______________________. 4 THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS ("BLUE SKY LAWS"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED IN REGULATION S) WITHOUT REGISTRATION UNDER THE SECURITIES ACT, AND AS REQUIRED BY BLUE SKY LAWS IN EFFECT AS TO SUCH TRANSFER, UNLESS AN EXEMPTION FROM SUCH REGISTRATION UNDER STATE AND FEDERAL LAW IS AVAILABLE. SUBSCRIPTION AGREEMENT THIS SUBSCRIPTION AGREEMENT is made effective for reference purposes only as of May 1, 1996, by and between U.S. Electricar, Inc., a California corporation (the "Corporation") and the Investor whose signature appears on the signature page to this Agreement (the "Investor"). R E C I T A L The Investor desires to purchase from the Corporation, and the Corporation desires to sell to the Investor, certain common stock shares of the Corporation, on the terms and conditions hereinafter set forth. A G R E E M E N T NOW, THEREFORE, in consideration of the mutual agreements, covenants, representations and warranties contained in this Agreement, the parties hereby agree as follows: 1. Purchase and Sale of Shares. a. Sale and Issuance of Shares. Subject to the terms and conditions of this Agreement, the undersigned Investor agrees to purchase at the Closing (as defined below) and the Corporation agrees to sell and issue to the Investor at the Closing, that number of common stock shares (the "Shares") set forth under Schedule 1 of the signature page attached to this Subscription Agreement at a price of thirty cents ($0.30) per share (the "Purchase Price"). b. Payment and Delivery. The Investor shall purchase the Shares by making payment to U.S. Electricar, Inc. in cash by check or wire transfer of funds of the Purchase Price delivered to the Corporation on, or before, the date set forth on Schedule 1 attached to the signature page hereto (the "Closing"). 2. Delivery of Shares. Upon the Investor's delivery of the Purchase Price in full and a fully executed and completed original of this Subscription Agreement and Offeree Questionnaire to the Corporation, and after the Corporation determines that all applicable securities laws have been satisfied, the Corporation will deliver to the Investor within ten (10) days after the Closing a share certificate for the Shares. 3. Corporation's Representations, Warranties and Covenants. The Corporation hereby represents, warrants and covenants to the Investor as follows: a. Corporate Organization and Standing. The Corporation is a corporation duly organized, validity existing and in good standing under the laws of the State of California. The Corporation has the requisite corporate power to carry on its business as presently conducted, and as proposed or contemplated to be conducted in the future, and to enter into and carry out the provisions of this Agreement and the transactions contemplated hereby. b. Authorization. All corporate action on the part of the Corporation, its directors and shareholders necessary for the authorization, execution, delivery and performance of this Agreement by the Corporation and the performance of all of the Corporation's obligations hereunder has been taken. This Agreement, when executed and delivered by the Corporation, shall constitute a valid and binding obligation of the Corporation, enforceable in accordance with its terms, except as may be limited by principles of public policy, and subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. The Shares, when issued in compliance with the provisions of this Agreement, will be validly issued, fully paid and nonassessable. The Corporation is, and at all times during the offer and sale of the Shares, will be a "reporting issuer" as that term is defined under Regulation S. c. No Breach. The issue and sale of the Shares by the Corporation does not and will not conflict with and does not and will not result in a breach of any of the terms of the Corporation's incorporating documents or any agreement or instrument to which the Corporation is a party. The consummation of the transactions or performance of the obligations contemplated by this Agreement will not result in a breach of any term of, or constitute a default under, any statute, indenture, mortgage, or other agreement or instrument to which the Corporation or any of its subsidiaries is or are a party or by which any of them is or are bound. d. Pending or Threatened Claims. Neither the Corporation nor any of its subsidiaries is a party to any action, suit or proceeding which could materially affect its business or financial condition, and no such actions, suits or proceedings are contemplated or have been threatened. e. No Preemptive Rights. There are no preemptive rights of any shareholder of the Corporation with respect to the Shares. 4. Investor Representations and Warranties. The Investor represents and warrants to the Corporation that: a. Account/Regulation S. The Investor is acquiring the Shares for investment for its own account, and not with a view to, or for resale in connection with, any distribution thereof, and it has no present intention of selling or distributing any of the Shares. The Investor understands that the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act") by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment as expressed herein. The Investor understands that the Corporation is relying on the rules and regulations governing offers and sales made outside the United States to non-"U.S. Persons" pursuant to Regulation S under the Securities Act. b. Access to Data. The Investor has had an opportunity to discuss the Corporation's business, management and financial affairs with its management and to obtain any additional information which the Investor has deemed necessary or appropriate for deciding whether or not to purchase the Shares, including an opportunity to receive, review and understand the disclosures and information regarding the Corporation's financial statements, capitalization and other business information as set forth in Corporation's Amended Form 10 filed with the Securities and Exchange Commission ("SEC") on January 27, 1995 and subsequent 10-K and 10-KA and two 10-Qs filed with the SEC on October 30, 1995, November 28, 1995, December 15, 1995 and March 18, 1996, respectively, all incorporated herein by reference, together with all exhibits referenced therein. Attached hereto as Exhibit A and incorporated herein by reference are copies of the Corporation's Private Placement Memorandum dated January 2, 1996 prepared for the Corporation's trade creditors. The Investor acknowledges that no other representations or warranties, oral or written, have been made by the Corporation or any agent thereof except as set forth in this Agreement. c. No Fairness Determination. The Investor is aware that no federal, state or other agency has made any finding or determination as to the fairness of the investment, nor made any recommendation or endorsement of the Shares. d. Knowledge And Experience. The Investor has such knowledge and experience in financial and business matters, including investments in other start-up companies, that it is capable of evaluating the merits and risks of the investment in the Shares, and it is able to bear the economic risk of such investment. Further, the individual executing this Agreement has such knowledge and experience in financial and business matters that he is capable of utilizing the information made available to him in connection with the offering of the Shares, of evaluating the merits and risks of an investment in the Shares and of making an informed investment decision with respect to the Shares, including assessment of the Risk Factors attached hereto as Exhibit B and incorporated herein by reference. e. Limited Public Market. The Investor is aware that there is currently a very limited "over-the-counter" public market for the Corporation's registered securities and that the Corporation became a "reporting issuer" under the Securities Exchange Act of 1934, as amended, on January 27, 1995. There is no guarantee that a more established public market will develop at any time in the future. The Investor understands that the Shares are all unregistered and may not presently be sold in even this limited public market. The Investor understands that the Shares cannot be readily sold or liquidated in case of an emergency or other financial need. The Investor has sufficient liquid assets available so that the purchase and holding of the Shares will not cause it undue financial difficulties. f. Commissions/Finders Fees. The Investor acknowledges that the Company may issue up to 13,333,333 cashless exercise warrants in form and substance as attached hereto as Exhibit C as investment banking fees to third parties if up to $2,000,000 of common stock shares are sold by the Corporation pursuant to this Offering. g. Investment Experience. The Investor is an "accredited investor" as that term is defined in Regulation D promulgated by the Securities and Exchange Commission. The term "Accredited Investor" under Regulation D refers to: (i) A person or entity who is a director or executive officer of the Corporation; (ii) Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Exchange Act; insurance company as defined in Section 2(13) of the Securities Act; investment company registered under the Investment Company Act of 1940; or a business development Corporation as defined in Section 2(a)(48) of that Act; Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000; employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decision made solely by persons that are accredited investors; (iii) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; (iv) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Shares offered, with total assets in excess of $5,000,000; (v) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000; (vi) Any natural person who had an individual income in excess of $200,000 during each of the previous two years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (vii) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment; or (viii) Any entity in which all of the equity owners are accredited investors. As used in this Section 4(g), the term "net worth" means the excess of total assets over total liabilities. For the purpose of determining a person's net worth, the principal residence owned by an individual should be valued at fair market value, including the cost of improvements, net of current encumbrances. As used in this Section 4(f), "income" means actual economic income, which may differ from adjusted gross income for income tax purposes. Accordingly, the undersigned should consider whether it should add any or all of the following items to its adjusted gross income for income tax purposes in order to reflect more accurately its actual economic income: Any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to an IRA or Keogh retirement plan, and alimony payments. 5. Restrictions On Transfer Re Regulation S. a. Not A "U.S. Person." The Investor hereby certifies that (i) it is not a "U.S. Person" as defined under Rule 902, Section (o) of Regulation S promulgated under the Securities Act (a copy of which is attached hereto as Schedule 2) and is not acquiring the Shares for the account or benefit of any U.S. Person, and (ii) it is acquiring the Shares in an "offshore transaction" as defined under Section (i) of such Rule 902 (a copy of which is attached hereto as Schedule 3). b. Transfer Restrictions. The Investor shall not attempt to have registered any transfer of the Shares not made in accordance with the provisions of Regulation S. In addition to any other restrictions on transfer set forth in this Agreement, the Investor agrees to transfer the Shares only (i) in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration, and (ii) in accordance with any applicable state securities laws. Unless so registered or exempt therefrom, such transfer restrictions shall include but not be limited to and the Investor warrants and represents the following: (i) The Investor shall not sell the Shares publicly or privately, or through any short sale, or other hedging transaction to any U.S. Person, whether directly or indirectly, or for the account or benefit of any such U.S. Person for the restrictive period mandated by Regulation S after the purchase of the Shares unless registered or exempt from registration; (ii) Any other offer or sale of the Shares shall be made only if (A) during the restrictive period any subsequent purchaser certifies in writing that it is not a U.S. Person and is not acquiring the Shares for the account or benefit of any U.S. Person, or (B) after the restrictive period the Shares are purchased in a transaction that did not require registration under the Securities Act and applicable Blue Sky laws; and (iii) Any transferee of the Shares shall agree in writing to resell the Shares only in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration. c. Restrictions On Resales In the United States. The Investor understands and acknowledges that the Securities Act prohibits resales of securities in the United States except pursuant to an effective registration statement or an exemption from registration for which the Shares and the Investor holding such Shares qualifies. The Investor understands and acknowledges the requirements for qualifying for an exemption from registration afforded by Section 4 of the Securities Act and that there can be no assurance that the Investor will be able to qualify for such an exemption from registration. 6. Public Offering Lock-Up. For one period of up to one-hundred-eighty (180) days (the "Stand-off Period"), Investor shall not pledge, transfer or sell its Shares to any person or entity if requested by the Corporation upon at least thirty (30) days prior written notice given, on, or after, the termination of the Regulation S restrictive period hereunder in contemplation of a public registration. Notwithstanding the foregoing, this right may be exercised only one time by the Corporation. 7. Restrictive Legends. Each certificate evidencing the Share which the Investor may purchase hereunder and any other securities issued upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event (unless no longer required in the opinion of the counsel for the Corporation) shall be imprinted with legend substantially in the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD WITHOUT REGISTRATION UNDER THE ACT UNLESS THE CORPORATION RECEIVES AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE OR SUCH REGISTRATION IS NOT REQUIRED PURSUANT TO REGULATION S UNDER THE ACT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT CERTAIN MAY 1, 1996, SUBSCRIPTION AGREEMENT BETWEEN THE ORIGINAL HOLDER HEREOF AND THE CORPORATION. The Corporation shall be entitled to enter stop transfer notices on its transfer books with respect to the Shares. 8. Compliance with Regulation S and Removal of Restrictive Legend. The Corporation covenants to comply fully with Rule 903 (including Rule 903(c)(2)) of Regulation S during the offer and sale of the Shares and during the applicable restricted period under Rule 903(c)(2) (the "Restricted Period"). The parties acknowledge that Rule 903(c)(2)--unlike Rule 903(c)(3)--does not contain a provision requiring the imposition of a restrictive legend on securities sold thereunder, and that the parties have voluntarily agreed to impose such a legend on the Shares when issued, because certain requirements of Regulation S remain to be satisfied during the subsequent Restricted Period. The Investor agrees to cooperate with the Corporation in providing any certificates or other information reasonably necessary for the Corporation to confirm that Rule 903 and Rule 903(c)(2) have been satisfied. The Investor acknowledges that no representation, warranty or guaranty, express or implied, has been given to the Investor by any officer, director, agent, or employee of, legal counsel to, or any other person connected with, the Corporation regarding the availability at any time of an exemption from registration under the Securities Act for any offer, sale or other transfer or disposition of the Shares by the Investor. The Investor understands and agrees that the availability of any such exemption from registration must be determined solely by the Investor and the Investor's own legal counsel based on the particular facts and circumstances existing at the time of a proposed transaction. 9. Reliance. The Investor is aware that the Corporation is relying on the accuracy of the above representations to establish compliance with Federal and State securities laws. If any such warranties or representations are not true and accurate in any respect as of the Closing, Investor shall so notify the Corporation in writing immediately and shall be cause for rescission by the Corporation at its sole election. The Investor shall indemnify the Corporation and its affiliates, legal counsel and agents against all losses, claims, costs, expenses and damages or liabilities, including reasonable attorneys' fees, which such parties may suffer or incur caused or in connection with or arising out of, directly or indirectly, from their reliance on such warranties and representations. 10. Miscellaneous. a. Survival. The representations, warranties, covenants and agreements made herein shall survive the closing of the transactions contemplated hereby. b. Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. c. Entire Agreement. This Agreement, Exhibits and the Schedules attached hereto constitute the entire agreement and understanding between the parties with respect to the subject matters herein, and supersede and replace any prior agreements and understandings, whether oral or written between and among them with respect to such matters. The provisions of this Agreement may be waived, altered, amended or repealed, in whole or in part, only upon the written consent of the Corporation and the Investor. d. Title and Subtitles. The titles of the Sections and subsections of this Agreement are for the convenience of reference only and are not to be considered in construing this Agreement. e. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. f. Applicable Law. This Agreement shall be governed by and construed in accordance with laws of the State of California, applicable to contracts between California residents entered into and to be performed entirely within the State of California. g. Venue. Any action, arbitration, or proceeding arising directly or indirectly from this Agreement or any other instrument or security referenced herein shall be litigated or arbitrated, as appropriate, in the County of San Francisco, State of California. h. Authority. If Investor is a corporation, partnership, trust or estate: (i) the individual executing and delivering this Agreement on behalf of the Investor has been duly authorized and is duly qualified to execute and deliver this Agreement on behalf of Investor in connection with the purchase of the Shares and (ii) the signature of such individual is binding upon Investor. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year hereinabove first written. INVESTOR U.S. ELECTRICAR, INC. By:________________________ By:_______________________ (Signature) (Signature) - - --------------------------- -------------------------- (Print Name and Title) (Print Name and Title) SCHEDULE 1 Purchase Price Per Share: $0.30 Aggregate Purchase Price $______________ Total Number of Shares _______________ Purchase Date: ____________, 1996 11 SCHEDULE 2 Definition of "U.S. Person" "Reg. ss.230.902. As used in Regulation S, the following terms shall have the meanings indicated: . . . (o) U.S. Person. (1) "U.S. person" means: (i) any natural person resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the United States; (iii) any estate of which any executor or administrator is a U.S. person; (iv) any trust of which any trustee is a U.S. person; (v) any agency or branch of a foreign entity located in the United States; (vi) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) any partnership or corporation if: (A) organized or incorporated under the laws of any foreign jurisdiction; and (B) formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Act (ss.230.501(a) of this chapter)) who are not natural persons, estates or trusts. (2) Notwithstanding paragraph (o)(1) of this section, any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States shall not be deemed a "U.S. person." (3) Notwithstanding paragraph (o)(1) of this section, any estate of which any professional fiduciary acting as executor or administrator is a U.S. person shall not be deemed a U.S. person if: (i) an executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and (ii) the estate is governed by foreign law. (4) Notwithstanding paragraph (o)(1) of this section, any trust of which any professional fiduciary acting as trustee is a U.S. person shall not be deemed a U.S. person if a trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person. (5) Notwithstanding paragraph (o)(1) of this section, an employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country shall not be deemed a U.S. person. (6) Notwithstanding paragraph (o)(1) of this section, any agency or branch of a U.S. person located outside the United States shall not be deemed a "U.S. person" if: (i) the agency or branch operates for valid business reasons; and (ii) the agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located. (7) The International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans shall not be deemed "U.S. persons." 12 SCHEDULE 3 Definition of "Offshore Transaction" "Reg. ss.230.902. As used in Regulation S, the following terms shall have the meanings indicated: . . . (i) Offshore Transaction. (1) An offer or sale of securities is made in an "offshore transaction" if: (i) the offer is not made to a person in the United States; and (ii) either: (A) at the time the buy order is originated, the buyer is outside the United States, or the seller and any person acting on its behalf reasonably believe that the buyer is outside the United States; or (B) for purposes of: (1) ss.230.903, the transaction is executed in, on or through a physical trading floor of an established foreign securities exchange that is located outside the United States; or (2) ss.230.904, the transaction is executed in, on or through the facilities of a designated offshore securities market described in paragraph (a) of this section, and neither the seller nor any person acting on its behalf knows that the transaction has been pre-arranged with a buyer in the United States. (2) Notwithstanding paragraph (i)(1) of this section, offers and sales of securities specifically targeted at identifiable groups of U.S. citizens abroad, such as members of the U.S. armed forces serving overseas, shall not be deemed to be made in "offshore transactions." (3) Notwithstanding paragraph (i)(1) of this section, offers and sales of securities to persons excluded from the definition of "U.S. person" pursuant to paragraph (o)(7) of this section or persons holding accounts excluded from the definition of "U.S. person" pursuant to paragraph (o)(2) of this section, solely in their capacities as holders of such accounts, shall be deemed to be made in "offshore transactions." 13 EXHIBIT A - PRIVATE PLACEMENT MEMORANDUM 14 EXHIBIT B - RISK FACTORS INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, IN ADDITION TO THE MATTERS SET FORTH ELSEWHERE IN THIS SUBSCRIPTION AGREEMENT, THE FOLLOWING FACTORS. Debt Restructuring. In March 1995, as a result of the Corporation's insolvency, the Corporation entered into agreements in March and April 1995 with its secured creditors and largest unsecured creditor, to restructure this debt in the aggregate amount of approximately $22 million. The Corporation, its largest unsecured creditor, and the holders of more than 75% of the outstanding principal of the secured debt agreed to add the unpaid interest to principal, reset the maturity dates of the secured debt and its largest unsecured creditor's debt to March and April 1996, respectively, and for substantially all of the debt establish a new conversion rate to common stock of $0.30 per share. They also agreed that conversion shall occur upon (1) a restructuring/repayment workout plan accepted by the Corporation's unsecured creditors holding 80% or more of the Corporation's unsecured trade debt, which plan must be approved by the Corporation, or (2) the sole election of the Corporation's largest unsecured creditor to cause conversion of this debt. Subsequently, the Corporation and the Creditors described above agreed to extend the maturity date to March 25, 1997. In addition, in April 1995, an informal committee of the Corporation's unsecured trade creditors was established, and in August 1995, this committee recommended for approval a voluntary restructuring of the Corporation's unsecured debt which the Corporation presented to the creditors for their approval in December 1995. As of January 31, 1996, the aggregate amount of the Corporation's outstanding unsecured antecedent debt, including principal and interest, was approximately $13,940,000. The terms of the proposed debt restructuring are set forth in the Private Placement Memorandum dated January 2, 1996, a copy of which is attached hereto as Exhibit B. As described above, the conversion of the Corporation's remaining secured debt into equity is contingent upon the holders of at least 80% of the outstanding unsecured debt participating in the restructuring plan. As of April 2, 1996, the Corporation believes it has received and approved approximately $11,331,000 or 81% acceptances by its antecedent creditors. Outstanding antecedent debt of approximately $2,609,000 has not yet been settled. The Corporation and its secured creditors may elect, however, to keep a portion of the secured debt outstanding until substantially all of this remaining unsecured debt has accepted the Corporation's debt restructuring plan. THERE CAN BE NO ASSURANCE THAT THE CORPORATION WILL BE ABLE TO CONTINUE TO EFFECTUATE THE DEBT RESTRUCTURING. TO THE EXTENT THAT THE CORPORATION IS UNABLE TO CONTINUE TO EFFECTUATE THE VOLUNTARY RESTRUCTURING OR OTHERWISE REFINANCE OR CONVERT SUCH DEBT AND ADDITIONAL FUNDING IS NOT AVAILABLE, THE CORPORATION WOULD BE FORCED TO SEEK PROTECTION UNDER APPLICABLE BANKRUPTCY AND INSOLVENCY LAWS. Additional Funding. The Corporation's planned expenditures are based primarily on its internal estimates of future sales and ability to raise additional financing. If revenues or additional financing do not meet the Corporation's expectations in any given period of time, the adverse impact on the Corporation's finances will be magnified by the Corporation's inability to adjust spending quickly enough to compensate for revenue or financing shortfalls. Significant additional funding will be required throughout 1996 and 1997 to continue operations, and there can be no assurance that the Corporation will be able to secure such additional financing on favorable terms, or at all. As of January 31, 1996, the Corporation had cash of $444,000, including $305,000 held in escrow for antecedent debt and together with its subsidiaries had receivables which were not more than sixty days past due of approximately $735,000 which the Corporation believes have a reasonable likelihood of being collected. There is no guaranty that all or any of the Corporation's remaining unsecured creditors representing in excess of $2.6 million in debt will agree to the proposed debt restructuring/repayment plan or any other plan. The holders of the approximately $18.5 million of currently outstanding secured debt in the Corporation have agreed to convert a portion or all of their debt into equity under specified milestones which may or may not ever occur. Going Concern/NOL. The Corporation has experienced recurring losses from operations, use of cash from operations and had an accumulated deficit of $72,036,000 at January 31, 1996, which deficit as of October 31, 1995, was approximately $69,580,000. (See "Increasing and Continued Losses" below). There is no guaranty, however, that any net operating losses will be available to the Corporation in the future as an offset against future profits. A substantial portion of the losses are attributable to research, development and other start-up costs associated with the Corporation's changing business focus from retail and mail order operations to the production of electric vehicles and electric power-train "kit" systems. Cash flows from future operations may not be sufficient to enable the Corporation to achieve profitable operations as previously disclosed in the preceding paragraph. Market conditions and the Corporation's financial position may inhibit its ability to achieve profitable operations. These factors as well as others indicate the Corporation may be unable to continue as a going concern unless it is able to obtain significant additional financing and generate sufficient cash flows to meet its obligations as they come due and sustain its operations. The Corporation estimates that it will need additional outside financing for at least approximately three more years to continue funding the development of its products and the growth of its business before cash from operations is sufficient to fund the Corporation's business operations. The Corporation estimates that it will need approximately $2 million to $3 million in additional outside funding through the remaining three months of fiscal year 1996, without the payment of past due debts owed creditors. The Corporation's audited financial statements included in the Form 10-K for fiscal year 1995 also include a "Going Concern" qualification from the Corporation's auditors. 15 Increasing and Continued Losses. The Corporation was founded in 1976, but initial sales were very limited and the Corporation was unprofitable as a manufacturer of solar powered toys. The Corporation has been profitable in only one year, fiscal year 1986. For the fiscal years ended July 31, 1993, 1994 and 1995, the Corporation had substantial net operating losses of $2,607,000, $25,021,000 and $37,565,000, respectively, on sales of $863,000, $5,787,000 and 11,625,000, respectively. Through the first six months of fiscal 1996, the Corporation lost an additional $4,400,000 on sales of $3,011,000. There can be no assurance that the Corporation will be able to achieve profitability. Source of Revenues . In 1991, the Corporation started to generate a significant portion of its revenues from the sale of electric vehicles. The Corporation intends to substantially increase its revenue from the sale of electric vehicles. However, there can be no assurance that demand for these products will warrant the Corporation's anticipated expenditures, or that the Corporation will be successful in engineering and marketing these products or deriving any sort of profit from such revenues. Due to the lack of capital and other factors, the Corporation has recently furloughed a significant portion of its production workforce. This action will significantly impact the Corporation's ability to generate revenue near term. General Economic Conditions. The financial success of the Corporation may be sensitive to adverse changes in general economic conditions, such as inflation, unemployment, and consumer demand for the Corporation's products. These changes could cause the cost of supplies, labor, and other expenses to rise faster than the Corporation can raise prices. Such changing conditions also could significantly reduce demand in the market place for the Corporation's products. The Corporation has no control over any of these changes. Growth Stage Company; Reevaluation of Business Plans. Although the Corporation was originally founded in 1976, many aspects of the Corporation's business are still in the early growth stage development, and its proposed operations are subject to all of the risks inherent in a start-up or growing business enterprise, including the likelihood of continued operating losses. The likelihood of the success of the Corporation must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the growth of an existing business, the development of new products and channels of distribution, and current and future development in several key technical fields, as well as the competitive and regulatory environment in which the Corporation will operate. In response to the severe cash shortage experienced by the Corporation, in March 1995, the Corporation initiated steps to restructure its organization and operations in an effort to stabilize and improve the Corporation's financial condition. Since March 1995, the Corporation has focused its resources on the production of off-road industrial vehicles and on-road buses and has, for the time being, ceased ordering new inventory for its on-road conversion business; however, the Corporation intends to finish converting and selling its existing inventory of on-road vehicles. The Corporation is currently re-evaluating all aspects of its business, including each of its product lines, in view of its capital constraints as well as competitive market conditions. To the extent the Corporation determines to discontinue any of its product lines, potential sources of revenue from those product lines would be eliminated. Dependence on Key Personnel . The success of the Corporation is largely dependent on its key management and technical personnel, including Roy Kusumoto, the Corporation's Chief Executive Officer, the loss of one or more of whom could adversely affect the Corporation's business. Additionally, in order to successfully implement its anticipated growth, the Corporation will be dependent upon its ability to hire additional qualified personnel. There can be no assurance that the Corporation will be able to retain or hire other necessary personnel. The Corporation does not maintain key man life insurance on any of its key personnel. The Corporation believes that its future success will depend in part upon its continued ability to attract, retain and motivate additional highly skilled personnel, including engineers, who are in great demand. Insurance and Potential Liability. The Corporation maintains insurance, including insurance relating to personal injury and product liability, in amounts which the Corporation currently considers adequate. Nevertheless, a partially or completely uninsured claim against the Corporation, if successful and of sufficient magnitude, could have a material adverse effect on the Corporation. In addition, the Corporation's severe cash shortage may adversely effect its ability to continue to maintain its insurance coverage. Nature of Industry . The electric vehicle industry is in its infancy. Although the Corporation believes that it has manufactured more electric vehicles than any other company in the United States based on its own knowledge of the industry, there are many large and small companies, both domestic and foreign, now in, poised to enter or entering this industry. This EV industry is subject to rapid technological change. Most of the major domestic and foreign automobile manufacturers (i) have produced design-concept electric vehicles, and/or (ii) have developed improved electric storage, propulsion and control systems, and/or (iii) are planning to enter the field. Various nonautomotive companies are also developing improved electric storage, propulsion and control systems. Demand for and interest in electric vehicles appears to be increasing. However, growth in the present limited demand for electric vehicles depends upon (A) future regulation and legislation requiring more use of non-polluting vehicles, (B) the 16 environmental consciousness of customers and (C) the ability of electric vehicles to successfully compete with vehicles powered with internal combustion engines. Uncertainty of Product Market and Acceptance; Changed Legislative Climate. Because vehicles powered by internal combustion engines cause pollution, there is significant public pressure in Europe and Asia, and enacted or pending legislation in the United States at the federal level and in certain states, to promote or mandate the use of vehicles with no tailpipe emissions ("zero emission vehicles") or reduced tailpipe emissions ("low emission vehicles"). To date, substantially all zero emission vehicles designed and produced have been electric vehicles, and most low emission vehicles have been powered by natural gas or have been hybrid vehicles using two or more powering systems. The Corporation believes that legislation requiring or promoting zero emission vehicles or low emission vehicles is necessary to create a significant commercial market for electric vehicles. There can be no assurance, however, that further legislation will be enacted or that current legislation will not be repealed or amended, or that a different form of zero emission or low emission vehicle will not be invented, developed and produced, and achieve greater market acceptance than electric vehicles. Following the state and federal elections in November 1994, the Corporation believes that the changed legislative climate in the United States may result in extensions, modifications or reductions of current federal and state legislation, mandates and potential tax incentives which could adversely affect the Corporation's business prospects if implemented. In April 1996, California altered its mandate requirements by extending the implementation date and establishing voluntary compliance. Competition . There are many companies, including several major automobile companies and electronics firms, actively engaged in the research and development of electric vehicles. Many have far greater resources and marketing abilities than the Corporation. Although the Corporation believes it has sold more electric vehicles than any other company in the United States, there can be no assurance that the Corporation will retain this advantage or be able to compete in the future with the companies in or entering the electric vehicle market. The major automobile manufacturers have a distinct advantage over the Corporation if they decide to compete with the Corporation in the retrofit/conversion EV business, should the Corporation continue in this business. Their vast resources would pose a distinct disadvantage to the Corporation. Direct competition from the "Big Three" could possibly inhibit the Corporation from obtaining the vehicles it needed without additional cost. The Corporation, believes, however, that the niche fleet market which it has targeted is presently too small for the large automobile manufacturers to pursue on a competitive basis with the Corporation. Dependence On Suppliers/Outside Parties. Certain components used in the Corporation's electric vehicles are available only from a limited number of sources. If such sources are unable or unwilling for any reason to manufacture and sell these unique components, the Corporation at the present time would have no other supplier. Additionally, the Corporation intends to develop close relationships with other suppliers of propriety components, such as batteries, which the Corporation will integrate into its retrofitted and OEM electric vehicles. The Corporation's reliance on these limited source suppliers could cause shortages of certain key components, or the inability to find comparable replacements at any cost or time could significantly impair the Corporation's financial performance and relationships with its customers. Rapid Technological Change . The Corporation's existing products are designed for use with, and are dependent upon, existing electric vehicle technology. As technologies change, and subject to the Corporation's limited available resources, the Corporation plans to upgrade or adapt its products in order to continue to provide products with the latest technology. However, there can be no assurance that the Corporation will be able to avoid technological obsolescence of its products or that the Corporation's research and development efforts will be able to adapt to changes in or create the necessary "leading-edge" technology to stay competitive. Further proprietary technology development by others could prohibit the Corporation from using its own technology. Minimal Barriers to Entry . Other than its trademarks and its distribution arrangements with suppliers of subcomponents, the Corporation does not presently license or own any proprietary technology and, therefore, has created little or no barrier to entry for competitors other than the time and significant expense required to assemble and develop similar production and design capabilities. Competitors of the Corporation may enter into exclusive arrangements with current or potential suppliers for the Corporation, thereby potentially giving such competitors a competitive edge which the Corporation might not be able to overcome. No Dividends. To date, the Corporation has not paid any dividends on its Common Stock or Preferred Stock and does not intend to declare any dividends in the foreseeable future on its Stock. Preferred Stock Preferences. The Corporation's Series A and Series B Preferred Stock has preference over the Common Stock with respect to the payment of dividends and the distribution of assets in the event of a liquidation or dissolution of the Corporation. In addition, the Board of Directors of the Corporation also has the authority to issue additional preferred stock in one or more series and to fix the voting and other powers, designations, dividends, preferences and relative participation, optional, conversion, exchange, redemption and other special rights and qualifications, limitations or restrictions thereon of any such series 17 of preferred stock. Such rights could adversely affect the existing or future rights of the shares of Common Stock with respect to the existing Series A Preferred Stock and as to any new series of Preferred Stock. In connection with the restructuring of the Corporation's unsecured debt, the Corporation shall issue shares of Series B Preferred Stock that will have certain preferences over the Common Stock and the Series A Preferred Stock with respect to dividends and the distribution of assets in the event of a liquidation or dissolution. See Risk Factors -Debt Restructuring. Shares Eligible for Future Sale. No prediction can be made as to the effect, if any, that substantial and significant sales of new shares of Common Stock or the availability of such shares for sale will have on the market prices prevailing from time to time. Nevertheless, the possibility that substantial amounts of Common Stock may be sold in the future may adversely affect prevailing prices for the Corporation's Common Stock and could impair the Corporation's ability to raise capital through the sale of its equity securities. Leverage; Cash Flow. Any indebtedness being assumed by the Corporation in connection with its financing activities poses significant risks to potential investors, particularly in view of the Corporation's loss history. The ability of the Corporation to generate sufficient cash flow to make payments with respect to any debt of the Corporation will depend upon the future performance of the Corporation, which will be subject to factors beyond the Corporation's control. No assurance can be given that the Corporation will be able to fund its working capital needs and to satisfy its principal and interest requirements from internally generated funds. Creditor Claims and Litigation/Shareholder Claims. The Corporation has been threatened with litigation from certain of its shareholders if a restructuring of the shareholders' investment along the lines set forth in a letter from their attorneys dated April 27, 1995 is not reached (a copy of which has been delivered to and is available for review by the Purchaser and its counsel upon request). The informal Creditors Committee of the Corporation has recommended a voluntary moratorium on pursuing unsecured claims (a copy of which is available for review by the Purchaser and its counsel upon request). There is no guaranty, however, that this moratorium will continue. In addition, certain unsecured creditors have nevertheless filed or threatened to file lawsuits if they are not paid. As of October 30, 1995, lawsuits had been filed by unsecured creditors for claims representing an aggregate of approximately $650,000 in principal and interest. 18 WARRANT THE SECURITIES REPRESENTED BY OR UNDERLYING THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT AN OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED. THE SECURITIES REPRESENTED BY OR UNDERLYING THIS INSTRUMENT ARE SUBJECT TO RESTRICTIONS ON TRANSFER PURSUANT TO REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED EXCEPT PURSUANT TO THE PROVISIONS UNDER REGULATION S OR PURSUANT TO REGISTRATION UNDER SUCH ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. THE WARRANTS AND WARRANT SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND (I) THE WARRANTS AND THE WARRANT SHARES MAY NOT BE EXERCISED, OFFERED OR SOLD BY OR ON BEHALF OF U.S. PERSONS, (II) THE WARRANTS MAY NOT BE EXERCISED IN THE UNITED STATES AND (III) THE WARRANT SHARES MAY NOT BE DELIVERED IN THE UNITED STATES UNLESS, IN EACH CASE, THERE IS A REGISTRATION STATEMENT IN EFFECT COVERING THE WARRANTS AND WARRANT SHARES OR THERE IS AVAILABLE AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT. THE SECURITIES REPRESENTED BY OR UNDERLYING THIS INSTRUMENT ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT CERTAIN MAY 1, 1996 SUBSCRIPTION AGREEMENT BETWEEN THE ORIGINAL HOLDER HEREOF AND THE COMPANY. NO. SERIES C-____ ______________ SHARES CASHLESS EXERCISE WARRANT TO PURCHASE COMMON STOCK U.S. ELECTRICAR, INC., a California corporation (the "Corporation"), hereby grants to _______________________ (the "Holder"), the right to purchase from the Corporation _________________________________ (________) shares of the common stock of the Corporation (the "Warrant Shares"), subject to the terms and conditions set forth below. This Warrant is one of a duly authorized series of Warrants of the Corporation (which Warrants are identical except for the variations necessary to express the name of the Holder and number of "Warrant Shares"), which Warrants together are designated "Series C Warrants" acquired pursuant to the terms and conditions set forth in that certain May 1, 1996 Subscription Agreement (the Subscription Agreement"). 1. TERM. This Warrant may be exercised at any time after the date hereof through May 1, 1997 (the "Exercise Period"). 2. PURCHASE PRICE. The purchase price for each share of the Corporation's common stock purchasable hereunder shall be Thirty Cents ($0.30), subject to adjustment as provided in Section 8 below (the "Warrant Exercise Price"). 3. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part (except for a cashless exercise which shall require exercise in full) , but not for less than one hundred thousand (100,000) Warrant Shares (or such lesser number of Warrant Shares as may at the time of exercise constitute the maximum number exercisable) and in excess of 100,000 Warrant Shares in increments of 10,000 Warrant Shares. It is exercisable, subject to the satisfaction of applicable securities laws, at any time during the Exercise Period by the surrender of the Warrant to the Corporation at its principal office together with the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, accompanied by payment in full of the amount of the aggregate purchase price of the Warrant Shares in immediately available funds, except if exercised under the cashless exercise option as provided below. The Corporation agrees that the Warrant Shares so purchased shall be issued as soon as practicable thereafter, and that the Holder shall be deemed the record owner of such Warrant Shares as of and from the close of business on the date on which this Warrant shall be surrendered, together with payment in full as required above. It shall be a condition to the exercise of this Warrant that the Holder or any transferee hereof certify to the Corporation, at the time of exercise, either that he or it is not a U.S. Person (as defined in Regulation S under the Securities Act of 1933, as amended (the "Securities Act") and that this Warrant is not being exercised on behalf of a U.S. Person, or to provide an opinion of counsel that the Warrant and the Warrant Shares to be delivered upon exercise thereof have been registered under the Securities Act or that an exemption from the registration requirements of the Securities Act is available. It shall be a further condition to the exercise of this Warrant that the Warrant may not be exercised in the United States and the Warrant Shares may not be delivered to the United States absent registration under the Securities Act or an available exemption from registration. 4. CASHLESS EXERCISE OPTION. Notwithstanding the foregoing, if on the date of exercise the "Fair Market Value" of one Warrant Share is equal to or greater than twice the Warrant Exercise Price and during the preceding 20 trading days prior to the date of exercise under this Warrant the average trading volume was in excess of 100,000 shares per day, then in lieu of exercising this Warrant for cash, the Holder may elect to receive Warrant Shares equal to the value of this Warrant (or equal to the value of the portion of the Warrant Shares thereof being cancelled) which shall be that number of Warrant Shares equal to the quotient obtained by dividing (Z) the product obtained when (i) the number of Warrant Shares being exercised/cancelled under this Warrant is multiplied by (ii) the value of one Warrant Share for which this Warrant is being cancelled on the exercise date (determined by subtracting the Warrant Exercise Price for one Warrant Share on the exercise date from the "Fair Market Value" (as hereinafter defined) of one Warrant Share on the exercise date) by (ZZ) the Warrant Exercise Price for one Warrant Share on the exercise date illustrated as follows: X = Y(A-B) ------ B Where X = the number of Warrant Shares to be issued to Holder Y = the number of Warrant Shares being exercised/cancelled under this Warrant A = the "Fair Market Value" of one Warrant Share on the date of exercise B = Exercise Price on the date of exercise Fair Market Value of one share of a Warrant Share shall mean: -2- A. If the Corporation's Common Stock is listed on a national securities exchange or is quoted on the National Association of Securities Dealers, Inc. Automated Quotation/ National Market System (NASDAQ/NMS), then the average price of all of the closing or last sales prices, respectively, reported for the twenty (20) trading days immediately preceding the exercise date. B. If the Corporation's Common Stock is not listed on a national securities exchange or quoted on NASDAQ/NMS, but is traded in the over-the-counter market, then the average price of all of the mean prices between the closing bid and asked prices of the Corporation's publicly traded stock as listed and traded on the NASDAQ electronic bulletin board during the twenty (20) trading days immediately preceding the exercise date. In the event of a cashless exercise, the entire Warrant must be surrendered, and no new Warrant shall be issued. In no event shall a cashless exercise entitle the Holder to exercise more than the Warrant Shares set forth on page 1 of this Warrant, less any number previously exercised. 5. WARRANT CONFERS NO RIGHTS OF SHAREHOLDER. The Holder shall not have any rights as a shareholder of the Corporation with regard to the Warrant Shares prior to actual exercise resulting in the purchase of the Warrant Shares. 6. HOLDER REPRESENTATIONS AND WARRANTIES. The Holder represents and warrants to the Corporation that: A. PURCHASE FOR OWN ACCOUNT/REGULATION S. The Holder understands that neither this Warrant nor the Warrant Shares issuable upon the exercise of this Warrant have been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment as expressed herein. The Holder is acquiring this Warrant for investment for its own account, and not with a view to, or for resale in connection with, any distribution thereof, and it has no present intention of selling or distributing this Warrant. The Holder agrees that any Warrant Shares issuable upon exercise of this Warrant will be acquired for investment for its own account, and not with a view to, or for resale in connection with, any distribution thereof, and such Warrant Shares will not be registered under the Securities Act and applicable state securities laws and that such Warrant Shares may have to be held indefinitely unless they are subsequently registered or qualified under the Securities Act and applicable state securities laws or, based on an opinion of counsel reasonably satisfactory to the Corporation, an exemption from such registration and qualification is available. The Holder further understands that the Corporation is relying on the rules and regulations governing offers and sales made outside the United States to non-"U.S. Persons" pursuant to Regulation S under the Securities Act. The Holder, by acceptance hereof, consents to the placement of the following restrictive legends, or similar legends, on each certificate to be issued to the Holder by the Corporation in connection with the issuance of such Warrant Shares: -3- THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS COVERING SUCH SECURITIES, OR (B) THE HOLDER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE SECURITIES SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE LAW. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER PURSUANT TO REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED EXCEPT PURSUANT TO THE PROVISIONS UNDER REGULATION S OR PURSUANT TO REGISTRATION UNDER SUCH ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT CERTAIN MAY 1, 1996 INVESTMENT BANKING AGREEMENT BETWEEN THE ORIGINAL HOLDER HEREOF AND THE COMPANY. B. ACCESS TO DATA. The Holder has had an opportunity to discuss the Corporation's business, management and financial affairs with its management and to obtain any additional information which the Holder has deemed necessary or appropriate for deciding whether or not to purchase this Warrant and the Warrant Shares, including the information provided or otherwise disclosed under the Subscription Agreement. The Holder acknowledges that no other representations or warranties, oral or written, have been made by the Corporation or any agent thereof except as set forth in this Agreement. C. NO FAIRNESS DETERMINATION. The Holder is aware that no federal, state or other agency has made any finding or determination as to the fairness of the investment, nor made any recommendation or endorsement of this Warrant or the Warrant Shares. D. KNOWLEDGE AND EXPERIENCE. The Holder has such knowledge and experience in financial and business matters, including investments in other start-up companies, that it is capable of evaluating the merits and risks of the investment in this Warrant and the Warrant Shares, and it is able to bear the economic risk of such investment. Further, the Holder has such knowledge and experience in financial and business matters that he is capable of utilizing the information made available to him in connection with the offering of this Warrant and the Warrant Shares, of evaluating the merits and risks of an investment in this Warrant and the Warrant Shares and of making an informed investment decision with respect to this Warrant and the Warrant Shares. -4- E. LIMITED PUBLIC MARKET. The Holder is aware that there is currently a very limited "over-the-counter" public market for the Corporation's registered securities and that the Corporation became a "reporting issuer" under the Securities Exchange Act of 1934, as amended, on January 27, 1995. There is no guarantee that a more established public market will develop at any time in the future. The Holder understands that this Warrant and the Warrant Shares are all unregistered and may not presently be sold in even this limited public market. The Holder understands that this Warrant and the Warrant Shares cannot be readily sold or liquidated in case of an emergency or other financial need. The Holder has sufficient liquid assets available so that the purchase and holding of this Warrant and the Warrant Shares will not cause it undue financial difficulties. G. INVESTMENT EXPERIENCE. The Holder is an "accredited investor" as that term is defined in Regulation D promulgated by the Securities and Exchange Commission. The term "accredited investor" under Regulation D refers to: (1) A person or entity who is a director or executive officer of the Corporation; (2) Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Exchange Act; insurance company as defined in Section 2(13) of the Securities Act; investment company registered under the Investment Company Act of 1940; or a business development company as defined in Section 2(a)(48) of that Act; Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000; employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decision made solely by persons that are accredited investors; (3) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; (4) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring this Warrant or the Warrant Shares, with total assets in excess of $5,000,000; (5) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000; -5- (6) Any natural person who had an individual income in excess of $200,000 during each of the previous two years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring this Warrant or the Warrant Shares, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment; or (8) Any entity in which all of the equity owners are accredited investors. As used in this Section 6(g), the term "net worth" means the excess of total assets over total liabilities. For the purpose of determining a person's net worth, the principal residence owned by an individual should be valued at fair market value, including the cost of improvements, net of current encumbrances. As used in this Section 6(g), "income" means actual economic income, which may differ from adjusted gross income for income tax purposes. Accordingly, the undersigned should consider whether it should add any or all of the following items to its adjusted gross income for income tax purposes in order to reflect more accurately its actual economic income: Any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to an IRA or Keogh retirement plan, and alimony payments. H. RESTRICTIONS ON TRANSFER RE REGULATION S. (1) NOT A "U.S. PERSON." The Holder hereby certifies that (i) it is not a "U.S. Person" as defined under Rule 902, Section (o) of Regulation S promulgated under the Securities Act (a copy of which is attached hereto as Schedule 2) and is not acquiring this Warrant or the Warrant Shares for the account or benefit of any U.S. Person, and (ii) it is acquiring this Warrant and the Warrant Shares in an "offshore transaction" as defined under Section (i) of such Rule 902 (a copy of which is attached hereto as Schedule 3). (2) TRANSFER RESTRICTIONS. The Holder shall not attempt to have registered any transfer of this Warrant or the Warrant Shares not made in accordance with the provisions of Regulation S. In addition to any other restrictions on transfer set forth in this Warrant, the Holder agrees to transfer this Warrant or the Warrant Shares only (i) in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration, and (ii) in accordance with any applicable state securities laws. Unless so registered or exempt therefrom, such transfer restrictions shall include but not be limited to and the Holder warrants and represents the following: (I) The Holder shall not sell this Warrant or the Warrant Shares publicly or privately, or through any short sale, or other hedging transaction to any U.S. Person, whether directly or indirectly, or for the account or benefit of any such U.S. Person for the restrictive period mandated by Regulation S after the purchase of this Warrant or the Warrant Shares, as applicable, unless registered or exempt from registration; -6- (II) Any other offer or sale of this Warrant or the Warrant Shares shall be made only if (A) during the restrictive period any subsequent purchaser certifies in writing that it is not a U.S. Person and is not acquiring this Warrant or the Warrant Shares for the account or benefit of any U.S. Person, or (B) after the restrictive period this Warrant and the Warrant Shares are purchased in a transaction that did not require registration under the Securities Act and applicable Blue Sky laws; and (III) Any transferee of this Warrant or the Warrant Shares shall agree in writing to resell this Warrant or the Warrant Shares, as applicable, only in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration. (3) RESTRICTIONS ON RESALES IN THE UNITED STATES. The Holder understands and acknowledges that the Securities Act prohibits resales of securities in the United States except pursuant to an effective registration statement or an exemption from registration for which the securities and the Holder holding such securities qualifies. The Holder understands and acknowledges the requirements for qualifying for an exemption from registration afforded by Section 4 of the Securities Act and that there can be no assurance that the Holder will be able to qualify for such an exemption from registration. 7. RESERVATION OF SHARES. The Corporation agrees at all times during the Exercise Period to have authorized and reserved, for the exclusive purpose of issuance and delivery upon exercise of this Warrant, a sufficient number of shares of its common stock to provide for the exercise of the rights represented hereby. 8. ADJUSTMENT FOR RE-CLASSIFICATION OF CAPITAL STOCK. If the Corporation at any time during the Exercise Period shall, by subdivision, combination or re-classification of securities, change any of the securities to which purchase rights under this Warrant exist under the same or different number of securities of any class or classes, this Warrant shall thereafter entitle the Holder to acquire such number and kind of securities as would have been issuable as a result of such change with respect to the Warrant Shares immediately prior to such subdivision, combination, or re-classification. If shares of the Corporation's common stock are subdivided into a greater number of shares of common stock, the purchase price for the Warrant Shares upon exercise of this Warrant shall be proportionately reduced and the Warrant Shares shall be proportionately increased; and conversely, if shares of the Corporation's common stock are combined into a smaller number of common stock shares, the price shall be proportionately increased, and the Warrant Shares shall be proportionately decreased. 9. PUBLIC OFFERING LOCK-UP. For a period of up to one-hundred-eighty (180) days (the "Stand-off Period"), Holder shall not if requested by the Corporation at any time in contemplation of a public registration, sell, pledge or otherwise transfer any Warrant Shares (or any other shares exchanged therefor). Notwithstanding the foregoing, the Corporation may exercise this public offering lock-up only one time. -7- 10. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or stock certificate, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Corporation will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of this Warrant or stock certificate. 11. ASSIGNMENT. The Holder of this Warrant shall not assign or transfer this Warrant or any of the Warrant Shares without the transferee meeting the suitability requirements set forth in Section 6 (above) and without the consent of the Corporation and in compliance with applicable state and federal securities laws. In giving its consent, the Corporation may request an opinion of counsel reasonably acceptable to it that such transfer is in compliance with all applicable state and federal securities laws. 12. GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California applicable to contracts between California residents entered into and to be performed entirely within the State of California. 13. NOTICES. Any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified by hand or professional courier service or for mailings from and to any address in North America (Canada, United States and Mexico) five (5) days after deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party in the Subscription Agreement, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties. 14. ATTORNEYS' FEES. If any action at law or in equity is necessary to enforce or interpret the terms of this Warrant, the prevailing party shall be entitled to reasonable attorneys' fees, costs and disbursements in addition to any other relief to which such party may be entitled. 15. AMENDMENTS. Any terms of this Warrant may be amended with the written consent of the Corporation and the holders of Series C Warrants representing not less than 67% of the shares of Common Stock issuable upon exercise of all Series C Warrants. Dated: May __, 1996 U.S. ELECTRICAR, INC. By:_________________________ (Signature) ---------------------------- (Print Name & Title) -8- NOTICE OF EXERCISE TO: U.S. ELECTRICAR, INC. (1) The undersigned hereby elects to purchase ______ shares of Common Stock of Electricar, Inc., pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full. (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of Common Stock are being acquired solely for the account of the undersigned and not as a nominee for any other party, for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the "Securities Act"), including, but not limited to, Regulation S promulgated thereunder, or any state securities laws. (3) The undersigned hereby certifies that either (i) the undersigned is not a U.S. Person (as such term is defined in Regulation S under the Securities Act), or (ii) the undersigned has delivered to the Corporation an opinion of counsel to the effect that this Warrant and the Warrant Shares to be delivered upon exercise thereof have been registered under the Securities Act or an exemption from such registration is available. (4) The undersigned further certifies that this Warrant is not being exercised in the United States and understands and agrees that the Warrant Shares may not be delivered to the United States absent registration under the Securities Act or an available exemption from such registration. (5) Please issue a certificate representing said shares of Common Stock in the name of the undersigned. (6) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned. ----------------------- (Name) - - ------------------------ ----------------------- (Date) (Signature) -9- EX-11 4 EXHIBIT 11 EXHIBIT 11 U.S. ELECTRICAR, INC. AND SUBSIDIARIES STATEMENT RE: COMPUTATION OF NET LOSS PER SHARE (UNAUDITED) (In thousands, except for per share amounts) Three Months Ended April 30 Nine Months Ended April 30 --------------------------- -------------------------- 1995 1996 1995 1996 ------------ --------- ---------- ---------- NET LOSS $ (11,942) $ (3,498) $ (37,392) $ (7,898) WEIGHTED AVERAGE SHARES OUTSTANDING: (1) 18,934 62,665 17,954 58,804 NET LOSS PER COMMON SHARE ($0.63) ($0.06) ($2.08) ($0.13) (1) Common Stock equivalents are not included since the Company had net losses in the periods presented. 62 EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS IN THE QUARTERLY REPORT ON FORM 10-Q OF U.S. ELECTRICAR, INC. FOR THE QUARTER ENDED APRIL 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUL-31-1996 AUG-01-1995 APR-30-1996 1,810 0 976 0 2,321 5,245 990 0 6,686 24,057 8,898 43,728 0 6,580 (76,577) 6,686 3,489 3,489 5,060 11,375 894 0 1,366 (10,146) 0 (10,146) 0 (2,248) 0 (7,898) (0.13) (0.13)
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