-----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, WFqMesCIfzzME63GPWSM2unc6mtC+aGGOiDR6dvKWwz+nJIiB1sCL3HEb4tN7okM 5fCu5fkeCHa0Gu3wrtVKbQ== 0000950005-97-000316.txt : 19970317 0000950005-97-000316.hdr.sgml : 19970317 ACCESSION NUMBER: 0000950005-97-000316 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970314 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: US ELECTRICAR INC CENTRAL INDEX KEY: 0000922237 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [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: 000-25184 FILM NUMBER: 97557113 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(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended January 31, 1997 ---------------- or (___) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) 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 of 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) Indicate by check mark whether he 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 March 11, 1997, there were 126,231,929 shares of Common Stock, no par value, outstanding. INDEX U.S. ELECTRICAR, INC.
Page No. ------- PART 1. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) ............................................ 3 Consolidated Balance Sheets: January 31, 1997 and July 31, 1996 ......................................... 3 Consolidated Statements of Operations: Three and Six months ended January 31, 1997 and 1996 ........................ 4 Consolidated Statements of Cash Flows: Six months ended January 31, 1997 and 1996 .................................. 5 Notes to Consolidated Financial Statements: for the Three and Six months ended January 31, 1997 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 ........................................................... 14 Item 2. Changes in Securities ....................................................... 14 Item 3. Defaults upon Senior Securities ............................................. 14 Item 4. Submission of Matters to a Vote of Security Holders ......................... 14 Item 5. Other Information ........................................................... 15 Item 6. Exhibits and Reports on Form 8-K ............................................ 16 SIGNATURE ..................................................................................... 17 EXHIBIT INDEX.................................................................................. 18
2 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 January 31, 1997 July 31, 1996 ---------------- ------------- (Unaudited) ASSETS CURRENT ASSETS: Cash $ 10 $ 13 Accounts receivable, net of allowances of $434 and $596 679 856 Inventory 1,969 2,387 Prepaids and other current assets 178 184 -------- -------- Total Current Assets 2,836 3,440 PROPERTY, PLANT AND EQUIPMENT - NET 1,274 835 OTHER ASSETS 47 88 -------- -------- TOTAL ASSETS $ 4,157 $ 4,363 ======== ======== LIABILITIES AND SHAREHOLDERS' (DEFICIT) CURRENT LIABILITES: Accounts payable $ 2,896 $ 2,868 Accrued payroll and related expense 594 441 Accrued warranty expense 974 1,156 Reserve for lease obligations 70 112 Accrued Interest 649 208 Other accrued expenses 1,000 721 Customer deposits and deferred revenue 451 323 Capital leases payable 369 0 Bonds and notes payable 9,257 7,283 -------- -------- Total Current Liabilities 16,260 13,112 LONG TERM DEBT 3,987 3,987 SHAREHOLDERS' (DEFICIT): Series A preferred stock - No par value; 30,000,000 shares authorized; 3,821,000 and 4,010,000 shares issued and outstanding at 1/31/97 and 7/31/96 2,800 2,983 Series B preferred stock - No par value; 5,000,000 shares authorized; 1,587,000 shares issued and outstanding 3,175 3,175 Stock notes receivable (1,098) (1,061) Common Stock - No par value; 300,000,000 shares authorized; 126,209,000 and 120,220,000 shares issued and outstanding at 1/31/97 and 7/31/96 60,699 59,157 Accumulated deficit (81,666) (76,990) -------- -------- Total Shareholders' (Deficit) (16,090) (12,736) -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) $ 4,157 $ 4,363 ======== ======== Note: The balance sheet at July 31, 1996 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 January 31 Six Months Ended January 31, --------------------------------- ---------------------------------- 1997 1996 1997 1996 ------------- ------------- ------------- ------------- NET SALES $ 371 $ 917 $ 898 $ 3,011 COST OF SALES 649 1,168 1,412 3,489 ------------- ------------- ------------- ------------- GROSS MARGIN (278) (251) (514) (478) ------------- ------------- ------------- ------------- OTHER COSTS AND EXPENSES: Research & development 467 380 633 716 Selling, general & administrative 887 1,446 1,487 2,683 Interest and financing fees 373 486 412 913 Acquisition of a research company 1,630 ------------- ------------- ------------- ------------- Total other costs and expenses 1,727 2,312 4,162 4,312 ------------- ------------- ------------- ------------- LOSS BEFORE GAIN ON DEBT RESTRUCTURING (2,005) (2,563) (4,676) (4,790) GAIN ON DEBT RESTRUCTURING 107 390 ------------- ------------- ------------- ------------- NET LOSS $ (2,005) $ (2,456) $ (4,676) $ (4,400) ============= ============= ============= ============= PER COMMON SHARE: Loss before gain on debt restructuring $ (0.016) $ (0.044) $ (0.038) $ (0.084) Gain on debt restructuring 0.002 0.007 ============= ============= ============= ============= Net loss per common share $ (0.016) $ (0.042) $ (0.038) $ (0.077) ============= ============= ============= ============= WEIGHTED AVERAGE SHARES OUTSTANDING 126,196,062 58,220,984 123,725,462 56,873,171
4 U.S. ELECTRICAR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) - ---------------------------------------------------------------------------------------------------------------
Six Months Ended January 31 ----------------------------- 1997 1996 ------- ------- OPERATIONS Net loss $(4,676) $(4,400) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and Amortization 275 694 Change in allowance for doubtful accounts 0 (21) Provision to reduce inventory values (31) (1,724) Debt restructuring 0 0 Purchase of a research company 1,630 0 Stock option compensation 0 0 Interest income on stock notes receivable (37) (35) Accretion on royalties payable 0 27 Change in operating assets and liabilities: Accounts Receivable 188 (274) Inventory 478 2,872 Prepaids and other assets 100 (110) Accounts payable and accrued expenses 453 542 Customer deposits and deferred revenue (7) (463) ------- ------- Net cash used by operating activities (1,627) (2,892) ------- ------- INVESTING: Repayments on advances to Systronix Corporation 209 Purchases of property, plant and equipment, net of disposals (95) 86 ------- ------- Net cash provided by investing activities 114 86 ------- ------- FINANCING: Payments on notes payable (672) (58) Borrowings on notes payable 2,182 2,288 Proceeds from issuance of common stock 701 ------- ------- Net cash provided by financing activities 1,510 2,931 ------- ------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (3) 125 CASH AND EQUIVALENTS: Beginning of period 13 319 ------- ------- End of period $ 10 $ 444 ======= =======
5 U.S. ELECTRICAR, INC, AND SUBSIDIARIES CONSOLIDATED STSTEMENTS OF CASH FLOWS (Continued) (UNAUDITED) (In thousands) - ---------------------------------------------------------------------------------------------------------------------------
Six Months Ended January 31, ---------------------------- 1997 1996 -------- ------- NONCASH INVESTING AND FINANCING ACTIVITIES: Conversion of Series A preferred stock to common stock $ 140 1,134 Conversion of Series S bonds to common stock 210 Conversion of convertible notes to common stock 600 Assumption of notes payable in connection with acquisition 800 Note issued in connection with acquisition 830 Note assumed by buyer in connection with divestiture (1,013) Conversion of accrued interest to notes payable 147 Acquisition of capital assets through capital leases 361 Decrease in accounts receivable from divestiture of IEV 365 Decrease in inventory from divestiture of IEV 470 Decrease in accounts payable and accrued expenses from divestiture of IEV (172) Increase in inventory from acquisition of Systronix Corporation (499) Increase in prepaids from acquisition of Systronix (94) Increase in accounts payable and accrued expenses from acquisition of Systronix (361) Increase in customer deposits from acquisition of Systronix 135
6 U. S. ELECTRICAR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS For the Three and Six Months Ended January 31, 1997 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 January 31, 1997 and the interim results of operations and cash flows for the three and six month periods ended January 31, 1997 and 1996. The balance sheet at July 31, 1996, 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, 1996 and January 31, 1997 inventories are reported at market value. The inventory valuation adjustments are estimates based on sales of inventory subsequent to July 31, 1996, and the projected impact of certain economic, marketing and business factors. Warranty reserves and certain accrual expenses are based upon an analysis 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, 1996. 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, 1996, 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. The results of operations for the three and six 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 $76,990,000 at July 31, 1996 and $81,666,000 at January 31, 1997. A substantial portion of the losses are attributable to research, development and other start-up costs associated with the Company's focus on the development and manufacture of electric vehicles, including electric powered buses, the conversion of gas powered cars and light trucks to electric power and off-road electric powered industrial vehicles. During the three years ended July 31, 1996, the Company obtained approximately $45 million (net of debt repayments) in cash from financial 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 six months ended January 31, 1997, the Company raised an additional $1,510,000, net of repayments, through the issuance of secured convertible debt. 7 It is management's intention to complete its debt restructuring and to seek additional financing through private placements as well as other means. Subsequent to January 31, 1997, in February, 1997, the Company reached an agreement with Hyundai Motor Company ("HMC") and Hyundai Electronics Industries Co., Ltd. ("HEI") whereby HMC and HEI shall collectively invest $3.6 million in the Company and secure a technology license for an additional payment of $2.0 million. The Company expects the transactions to close in March 1997 with $5.45 million to have been received by the Company by the closing and the balance to be received over 6 years. 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): January 31, 1997 July 31, 1996 ---------------- ------------- (unaudited) Finished Goods $755 $1,000 Work-in-process 501 710 Raw materials 1,022 1,450 Valuation adjustment (309) (773) ------- ------- $1,969 $2,387 ======= ======= 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):
January 31, 1997 July 31, 1996 --------------- ------------- Series S secured convertible bonds, interest at 10%; principal and interest due March 1997, secured by the personal property of the parent company. $3,000 $3,000 Convertible secured notes under a Supplemental Loan Agreement with ITOCHU Corporation; interest at 10%, principal and interest due April 1997, secured by the personal property of the parent company. 3,000 3,000 Convertible secured note (acquisition of Nordskog); due January 1997, with interest at 9% payable quarterly; secured by certain machinery and equipment of the subsidiary; in September 1996, the assets associated with the previous acquisition of Nordskog were sold in exchange for the assumption of this note - 1,013 Secured promissory note - Credit Managers Association of California ("CMAC") as exclusive agent for Non-Qualified Creditors; interest at 3%, with principal and interest due April 1999; secured with an interest in a sinking fund escrow consisting of 10% of any financing received subsequent to April 1996; the Board of Directors may waive the sinking fund set aside on a case-by-case basis 95 95 Secured subordinated promissory note - CMAC as exclusive agent for Qualified Creditors; interest at 3%, with principal and interest due April 1999; secured with an interest in a sinking fund escrow as noted above 560 560 Secured subordinated promissory note - CMAC as exclusive agent for Non-Qualified Creditors; interest at 3% for the first 5 years, 6% for years 6 and 7, and then at prime plus 3% through date of maturity; interest payments are made upon payment of principal, with principal and interest due no later than April 2016; secured with an interest in a sinking fund escrow as noted above; payments on this note are subordinated to payment in full on all principal and accrued interest owed on the above 3-year non-qualified and qualified notes 3,332 3,332 Promissory note - accrued interest on Nordskog convertible secured note converted to a new note; due upon receipt of additional financing by the Company, with interest at 9%. 147 -
9 January 31, July 31, 1997 1996 ------- ------- NOTE 4 - Long-Term Debt (Continued) Promissory note payable to principals of Systronix Corporation in connection with the acquisition of Systronix; interest at 10%, due April 1, 1997 480 -- Convertible secured promissory note payable to Itochu Corporation; interest at 10%, due December 1997; convertible into common stock at $0.30 per share 1,050 100 Convertible secured promissory note payable to Fontal International, Ltd.; interest at 10%, due in April, 1997; convertible into common stock at $0.30 per share 1,150 -- Convertible secured promissory note payable to Fontal International, Ltd.; interest at 10% due July, 1997; convertible into common stock at $0.30 per share 260 -- Other 170 170 ------- ------- 13,244 11,270 Less current maturities 9,257 7,283 ------- ------- $ 3,987 $ 3,987 ======= ======= 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The matters addressed in this report, with the exception of the historical information presented, incorporate certain forward-looking statements involving risks and uncertainties, including the risks discussed in the report under the heading "Certain Factors That May Affect Future Results", as reported by the Company in the Form 10-K filed with the Commission on November 12, 1996. GENERAL U.S. Electricar, Inc. and Subsidiaries (the "Company") develops, converts, assembles, manufactures and distributes 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 included 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 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 were 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. The Company was forced to severely curtail its activities in the second half of 1995 due to a lack of funds. Certain facilities were closed and operations were consolidated, and the Company initiated programs to restructure its debt and raise interim funding. During 1996, the Company restructured a significant portion 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. The Company curtailed the manufacture and sale of off-road industrial vehicles in the third and fourth quarters of 1996 and reduced the carrying values of the assets associated with this product line. In 1996, the Company incurred a loss of $9,354,000. In September 1996, a substantial portion of the assets of Industrial Electric Vehicles, Inc., (formerly Nordskog Electric Vehicles, Inc. (Nordskog), prior to its acquisition by the Company) were sold. Consideration for this sale included the assumption of, and release of liability for, the note payable that totaled $1,013,000 at July 31, 1996 to Nordskog. On October 25, 1996, the Company acquired substantially all the tangible and intangible assets, and assumed certain liabilities, of Systronix Corporation (Systronix), for stock, note and cash. LIQUIDITY AND CAPITAL RESOURCES ` The Company has experienced significant recurring cash flow shortages due to operating losses primarily attributable to research, development ,administrative and other expenses associated with the Company's efforts to become an international manufacturer and distributor of electric vehicles. Cash flows from operations have been extremely negative and have not been sufficient to meet the Company's obligations as they came due. The Company has therefore had to raise 11 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 anticipates that it will require substantial additional outside financing for at least two more years. During the six months ended January 31, 1997, the Company spent $1,627,000 in cash on operating activities to fund the net loss of $4,676,000 resulting from factors explained in the following section of this discussion and analysis. Accounts receivable, exclusive of the divestiture of the industrial electric vehicles business, decreased by $188,000. The reduction of accounts receivable attributable to this divestiture was $365,000, net of allowances. Inventory, net of the divestiture of the industrial electric vehicles business, which reduced inventory by $470,000, and the acquisition of Systronix Corporation, which increased inventory by $499,000, decreased by $478,000. The operations of the Company during the six months ended January 31, 1997 were financed primarily by $472,000 received from the issuance of promissory notes, an additional $810,000 received from Fontal International, Ltd. and $900,000 received from Itochu Corporation, for the issuance of convertible secured promissory notes. Repayments on the promissory notes were made in the amount of $322,000 during the period. In addition, payments of $350,000 were made during the period against the $829,978 promissory note issued to the principals of Systronix Corporation, the payment schedule was amended, and the maturity date of the note was extended to April 1, 1997. IF THE COMPANY IS UNABLE TO RESTRUCTURE 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. AS OF MARCH 11, THE COMPANY HAS COMMITMENTS FOR FUNDS TOTALING OVER $5.0 MILLION (See Item 5, below), WHICH THE COMPANY EXPECTS TO RECEIVE IN MARCH 1997. HOWEVER, SIGNIFICANT ADDITIONAL FUNDING WILL BE NEEDED IN 1997 AND 1998. 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 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. RESULTS OF OPERATIONS Net sales declined $546,000, or 59.5%, in the second quarter of 1997 from the second quarter of 1996, and declined $2,113,000, or 70.2%, in the first half of 1997 from the first half of 1996. The decline in sales was primarily due to the Company's inability to raise the funds necessary to continue its operations at the same levels as the first quarter of 1996. Significant declines occurred in all product lines. 12 Sales of converted sedans and light trucks declined from 4 units in the second quarter of 1996 to 3 units in the second quarter of 1997, and unit sales for the first half of 1997 were down 60.5% to 15 units from 38 units in the first half of 1996. Total revenue from this product line was $106,000 in the second quarter of 1997 and $515,000 in the first half, down 10.2% and 58.2%, respectively from the corresponding periods of 1996. There were no sales of industrial vehicles and associated parts and service in the second quarter of 1997, since this business was sold on September 5, 1996. Sales for this product line in 1996 were $697,000 in the second quarter and $1,341,000 in the first half. The Company realized revenues of $144,000 in the second quarter of 1997 from various engineering contracts of the Components Division, acquired in October, 1996. Cost of sales as a percent of sales increased to 174.9% in the second quarter of 1997 from 127.4% in the second quarter of 1996, and cost of sales as a percent of sales increased to 157.2% in the first half of 1997 from 115.9% in the first half of 1996. The increase in costs was largely due to the low levels of production and high costs from purchasing parts in small quantities. Efforts to reduce manufacturing overhead continue, but the costs are still high relative to the low levels of production. Research and development expense increased in the second quarter of 1997 by $87,000, or 22.9%, from the second quarter of 1996. The Company has reduced its technical staff and curtailed purchasing engineering services due to a severe lack of funds. In October, 1996, the Company acquired Systronix Corporation, which is primarily a research company at the present time. For the first half of 1997, research and development expense decreased $83,000, or 11.6% from the first half of 1996. Selling, general and administrative expense decreased $559,000, or 38.7% in the second quarter of 1997, and decreased $1,196,000, or 44.6% in the first half of 1997, from the corresponding periods in 1996. This was primarily as a result of a significant reduction in staff and outside services due to the aforementioned lack of funds. Interest and financing fees in the second quarter of 1997 declined $113,000, or 23.3%, from the second quarter of 1996. For the first half of 1997, interest and financing fees decreased $501,000, or 54.9% from the first half of 1996. During 1996, the Company converted $15,548,000 of principal and accrued interest to common stock, resulting in a significant decrease in interest expense. Additional borrowing in 1997 resulted in an increase in interest expense in the second quarter of 1997 compared to the first quarter. As a result of the foregoing changes in net sales, cost of sales, other costs and expenses, the acquisition of a research company and the gain on debt restructuring, the net loss decreased $451,000, or 18.4%, from $2,456,000 in the second quarter of 1996 to $ 2,005,000 in the second quarter of 1997. For the first half of 1997, the net loss increased $276,000, or 6.3% to $4,676,000 from $4,400,000 in the first half of 1996. 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings: 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 and costs, and other relief. The Company believes the allegations against it are without merit. The Company sought dismissal of such claims, by demurring to the Complaint and the First Amended Complaint. The demurrer to the First Amended Complaint was sustained without leave to amend. Judgement was entered in favor of the Company and its former officer on February 7, 1997. On January 16, 1997, the Company was served a Complaint for Damages originally filed in San Francisco Superior Court on September 30, 1996 against the Company by Anthony O. Vicari, Plaintiff in Propria Persona. The Complaint alleges that on or about October, 1994, plaintiff and the Company entered into an oral agreement whereby the plaintiff agreed to seek and arrange a joint business venture agreement for the manufacture and sale of of the Company's electric vehicles to Grupo Industrial CASA, S.A. de C.V., a Mexican Corporation, and that the Company agreed to compensate the plaintiff for said services in the amount of one million dollars and to issue to plaintiff eighty thousand shares of Company stock. The Complaint further alleges that the Company breached the oral agreement on or about December 20, 1994. The Complaint seeks compensatory damages in an unspecified amount, punitive damages, the issuance of eighty thousand shares of stock, and attorney fees and costs. On February 18, 1997, the Company filed an Answer to the Complaint wherein the Company denies the allegations and seeks dismissal of the Complaint. Item 2. Changes in Securities: None. Item 3. Defaults Upon Senior Securities: None. See Item 5 for debt maturing in the near future. Item 4. Submission of Matters to a Vote of Securities Holders: None. 14 Item 5. Other Information: (a) Agreement with Hyundai On February 27, 1997, the Company executed a definitive Stock Purchase Agreement and Technology License Agreement with Hyundai Motor Company ("HMC") and Hyundai Electronics Industries Co., Ltd. ("HEI"). Under the terms of the Stock Purchase Agreement, HMC and HEI shall collectively receive 12,000,000 shares of stock in the Company for an investment of $3.6 million, or $0.30 per share. The shares to be issued have not been registered under the Securities Act of 1933 in reliance upon Regulation S, promulgated thereunder. Pursuant to the Technology License Agreement, HMC and HEI shall pay $2.0 million for a permanent license to use certain technical data in the manufacture and assembly of the PantherTM series of electric drivetrains designed by the Company's Components Division for use within motor vehicles built by Hyundai or its subsidiaries. The Company expects the transactions to close in March 1997 with $5.45 million to be received by the Company at closing, and the balance to be paid over 6 years. (b) Fontal Convertible Debt On March 6, 1997, the Company and Fontal International, Ltd., Geneva, Switzerland, executed a Loan Agreement whereby Fontal extended a loan to the Company in the amount of $200,000. The Loan was evidenced by a Promissory Note which provides for a due date of July 15, 1997, an interest rate of ten percent (10%) per annum, and the right to convert principal and accrued interest at any time, in one or more installments, into shares of the Company's common stock at the conversion rate described below. The note and any shares issuable upon conversion thereof have not been registered under the Securities Act of 1933 in reliance upon Regulation S promulgated thereunder. The number of shares to be issued pursuant to any election to convert any or all of the Loan amount shall equal the quotient obtained by dividing (x) the amount of the loan to be converted, by (y) the conversion price of $0.30 per share. The total number issuable pursuant to such conversion of principal is therefore 666,667 shares. (c) Certain Debt Maturities Series S Bonds: The Company has outstanding Series S secured convertible bonds in the principal amount of $3.0 million. The maturity date on these bonds is March 25, 1997. ITOCHU: The Company has outstanding secured notes under a Supplemental Loan Agreement with ITOCHU Corporation in the principal amount of $3.0 million. The maturity date on these notes is April 17, 1997. Systronix: In connection with the acquisition on October 25, 1996, of all of the assets and certain liabilities of Systronix Corporation, the Company issued an $829,978.39 Promissory Note due November 25, 1996, secured by the acquired assets pursuant to a security agreement ("the Note"). Payments of $350,000 have been made on the note, the payment schedule was amended, and the maturity date of the note was extended to April 1, 1997. 15 Item 6. Exhibits and Reports on Firm 8-K: (a) Exhibits: 10.98 Stock Purchase Agreement and Technology License Agreement dated February 27, 1997 by and between the Company and Hyundai Motor Company and Hyundai Electronics Industries Co., Ltd. (b) Reports on Form 8-K The Company filed a report on Form 8-K with the Commission on January 10, 1997 reporting the execution of a Supplemental Loan Agreement with ITOCHU Corporation whereby ITOCHU extended a $900,000 convertible loan to the Company. The Company filed a report on Form 8-K with the Commission on January 30, 1997 reporting the execution of Loan Agreements with Fontal International, Ltd. whereby Fontal extended two convertible loans to the Company in the aggregate amount of $260,000. The Company filed a report on Form 8-K with the Commission on February 26, 1997 reporting the execution of a Loan Agreement with Fontal International, Ltd. whereby Fontal extended a $140,000 convertible loan to the Company, and reporting the execution of a Supplemental Loan Agreement with ITOCHU Corporation whereby ITOCHU extended a $400,000 convertible loan to the Company. 16 SIGNATURE Pursuant to the requirements of Section 13 or 15 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 on March 11, 1997. 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) 17 EXHIBIT INDEX Exhibit No. Description Page No. - -------------------------------------------------------------------------------- 10.98 Stock Purchase Agreement and Technology License Agreement dated February 27, 1997 by and between the Company andHyundai Motor Company and Hyundai Electronics Industries Co., Ltd. 19 27 Financial Data Schedule 63 18 EX-10.98 2 COMMON STOCK PURCHASE AGREEMENT U.S. ELECTRICAR, INC. REGULATION S COMMON STOCK PURCHASE AGREEMENT FEBRUARY 27, 1997 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. 19 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. COMMON STOCK PURCHASE AGREEMENT THIS COMMON STOCK PURCHASE AGREEMENT is made effective for reference purposes only as of February 27, 1997, by and between U.S. Electricar, Inc., a California corporation (the "Corporation") and HYUNDAI MOTOR COMPANY 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/Execution of Technical Agreement. 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 Agreement at the price set forth under Schedule 1 of the signature page attached to this Agreement (the "Purchase Price"). All monetary references in this Agreement are to United States of America dollars. b. Payment and Delivery. The Investor shall purchase the Shares by (i) the cancellation of any indebtedness owed to Investor by the Corporation as set forth on Schedule 1 and (ii) making payment to U.S. Electricar, Inc. in cash by check or wire transfer of the balance of funds necessary to equal 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"). c. License Agreement. Contemporaneously with Investor's purchase of the Shares, Investor and the Corporation shall enter into a License Agreement in form and substance as shall be mutually agreed upon by the parties as evidenced by their execution thereof in consideration of Investor's payment to the Corporation in cash at the Closing of that sum as set forth on Schedule 1., and the payment obligations set forth in said Amendment. 2. Delivery of Shares. Upon the Investor's delivery of the Purchase Price in full and a fully executed and completed original of this Agreement to the Corporation, and after the Corporation determines that all applicable securities laws have been satisfied, the Corporation will deliver to the Investor at the address indicated on Schedule 1 within five (5) business days after the Closing a share certificate for the Shares dated as of the Closing. As of the Closing, the Investor shall be deemed the owner of the Shares. Investor shall provide the Corporation with instructions for registration and delivery of the Shares as set forth on Schedule 1. Any instructions for registration of the Shares in a name other than that of the Investor shall require such registered owner to affirm Investor's warranties and representations set forth herein. 20 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. The Corporation is duly qualified to do business in the jurisdictions where it is currently doing business. 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 or any order, writ, judgment or decree 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. Except as disclosed in Exhibit A ("Risk Factors"), attached hereto and incorporated herein by this reference, 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. f. Authorized Shares. The Corporation has sufficient authorized and unissued shares of its common stock to provide for the issuance and delivery of the Shares as provided under this Agreement. g. Compliance with Regulation S. The Corporation represents and warrants that it has complied, and covenants that until the end of the applicable Regulation S restricted period it will comply with all of the requirements of Rule 903(a), (b) and (c)(3) of Regulation S applicable to the Corporation with respect to the offer and sale of the Shares, including but not limited to the requirement not to engage in any "directed selling efforts" (as defined in Regulation S) in the United States 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. 21 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 filings with the Securities and Exchange Commission through December 16, 1996, all incorporated herein by reference, together with all exhibits referenced therein as well as the Corporation's Private Placement Memorandum dated January 2, 1996 prepared for the Corporation's trade creditors. Attached hereto as Exhibit B and incorporated herein by reference is the Corporation's approximate Pro-Form Capitalization as of the date hereof. 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 A 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. 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; 22 (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(f), 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 restricted 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 restricted 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 restricted 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 who acquires the Shares during the Regulation S restricted period 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. 23 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 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 restricted 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 Shares 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 legends 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 MAY ALSO BE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER DURING A "STAND-OFF PERIOD" OF UP TO 180 DAYS AS PROVIDED IN THAT CERTAIN FEBRUARY ____, 1997, AGREEMENT BETWEEN THE ORIGINAL HOLDER HEREOF AND THE CORPORATION. THE CORPORATION WILL NOTIFY THE TRANSFER AGENT OF THE STARTING DATE OF ANY SUCH STAND-OFF PERIOD AND WILL ISSUE STOP-TRANSFER INSTRUCTIONS APPLICABLE TO THE STAND-OFF PERIOD. WHENEVER THE TRANSFER AGENT HAS RECEIVED NO SUCH STOP TRANSFER INSTRUCTIONS FROM THE CORPORATION, THE TRANSFER AGENT IS HEREBY AUTHORIZED AND DIRECTED TO CONCLUSIVELY PRESUME THAT NO STAND-OFF PERIOD IS IN EFFECT TO PREVENT THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE. IMMEDIATELY AFTER THE EXPIRATION DATE OF ANY STAND-OFF PERIOD (WHICH SHALL FALL NOT LATER THAN 180 DAYS AFTER THE STARTING DATE), THIS RESTRICTIVE LEGEND AND ANY RELATED STOP TRANSFER INSTRUCTIONS GIVEN BY THE CORPORATION TO THE TRANSFER AGENT SHALL BE OF NO FURTHER FORCE OR EFFECT, AND THE TRANSFER AGENT IS HEREBY AUTHORIZED AND DIRECTED, AT ANY TIME ON OR AFTER THE EXPIRATION DATE OF THE STAND-OFF PERIOD, TO ISSUE A NEW CERTIFICATE WITHOUT THIS LEGEND IN EXCHANGE FOR THIS LEGENDED CERTIFICATE UPON SURRENDER BY AND AT THE REQUEST OF THE HOLDER WITHOUT FURTHER AUTHORIZATION FROM THE CORPORATION. The Corporation shall be entitled to enter stop transfer notices on its transfer books with respect to the Shares during the Regulation S restricted period and the Stand-off Period. 8. 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. 24 9. 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 and the Exhibits and 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. Titles 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. HYUNDAI MOTOR COMPANY By: /s/ Y.I. Lee By: /s/ Roy Y. Kusumoto ------------------------ ---------------------------------- Y.I. Lee/Vice President Roy Y. Kusumoto/President and CEO SCHEDULE 1 Purchase Price Per Share: US $0.30 Aggregate Purchase Price US $2,520,000 Total Number of Shares 8,400,000 Purchase Date: March 1, 1997 Name of Registered Owner(s) of Shares Hyundai Motor Company Address for delivery of Shares 140-2 Kye-Dong, Chongro-Ku, Seoul 110-793 Korea 25 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." 26 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." 27 EXHIBIT A - 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 AGREEMENT, THE FOLLOWING FACTORS. 28 EXHIBIT B - APPROXIMATE PRO FORMA CAPITALIZATION EXHIBIT A 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. As a result of the Corporation's insolvency in March 1995, the Corporation entered into agreements in March and April 1995 with its secured creditors and largest unsecured creditor, to restructure debt in the aggregate amount of approximately $22 million. In addition, in April 1995, an informal committee of the Corporation's unsecured antecedent trade creditors was established, and in August 1995, this committee recommended for approval by the Corporation's creditors and shareholders a voluntary restructuring of the Corporation's unsecured trade debt ("Debt Restructuring Plan"). In early 1996, the Corporation's shareholders approved and accepted the terms of the restructuring plan. The terms of the Debt Restructuring Plan are set forth in the Private Placement Memorandum dated January 2, 1996, a copy of which has been delivered to and is available for review by the Purchaser and its counsel upon request. Pursuant to the Debt Restructuring Plan, and as of October 31, 1996, the Corporation believes it has received and approved approximately $11,751,000 or 84% acceptances by its antecedent trade creditors. Outstanding antecedent debt of approximately $2,254,000 has not been settled. As of January 1997, the Corporation issued 1,587,473 shares of Series B Convertible Preferred Stock as payment of $3,175,000 of debt owed to qualified unsecured creditors under the Corporation's Debt Restructuring Plan. This stock is convertible into 10,583,682 shares of common stock. In addition, the Corporation and its secured creditors have converted approximately $15,000,000 in debt into approximately 50,000,000 shares of common stock. The Corporation and its secured creditors may elect, however, to keep the remainder of the secured debt outstanding until substantially all of this remaining unsecured antecedent trade 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 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 October 31, 1996, the Corporation had cash of $51,000, including $2,000 held in escrow for antecedent debt and together with its subsidiaries had receivables which were not more than sixty days past due of approximately $357,000 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 $2.2 million in debt will agree to the proposed debt restructuring/repayment plan or any other plan. In connection with the sale, the Company issued 13 million cashless warrants with an exercise price of $0.30 per share. These warrants can be exercised for no cash if the price of the Company's common stock is at least double the exercise price for a period of 20 days. Going Concern/NOL. The Corporation has experienced recurring losses from operations, use of cash from operations and had an accumulated deficit of $79,661,000 at October 31, 1996, which deficit as of July 31, 1996, was approximately $76,990,000. (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 29 of electric vehicles and electric power-train 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 two 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 $8 million in additional outside funding through calendar 1997, without the payment of past due debts owed to creditors. The Corporation's audited financial statements included in the Form 10-K for fiscal year 1996 also include a "Going Concern" qualification from the Corporation's auditors. 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, 1994, 1995 and 1996, the Corporation had substantial net operating losses of $25,021,000, $37,565,000 and $9,354,000, respectively, on sales of $5,787,000, $11,625,000 and $4,209,000, respectively. Through the first three months of fiscal 1997, the Corporation lost an additional $2,671,000 on sales of $527,000. 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. Beginning in March 1995, the Corporation focused its resources on the production of off-road industrial vehicles and on-road buses and 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. In Fall 1996, the Corporation sold the assets of Industrial Electric Vehicles, Inc., and ceased production of industrial vehicles domestically. For the first nine months of Fiscal 1996, industrial vehicle sales were $1.7 million, or approximately 50% of the Corporation's sales. In December 1996, the Corporation decided to concentrate its sales activities on two product lines; the first product line is the drive train system; and the second is the Electrolite Vehicle. 30 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, and Dan Rivers, Don Kang and Abas Goodarzi, 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 affect 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 non-automotive 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 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. Additional information regarding the status of legislative mandates and initiative is available in the Corporation's Form 10K for the fiscal year ended July 31, 1996 filed with the Securities and Exchange Commission. 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. 31 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.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 of preferred stock. Such rights could adversely affect the existing or future rights of the units 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. Units Eligible for Future Sale. No prediction can be made as to the effect, if any, that substantial and significant sales of new units of Common Stock or the availability of such unitsfor 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. As of January 31, 1997, the Corporation had issued and outstanding approximately 131,000,000 shares, of which over 1,000,000 shares are free trading with the remainder restricted pursuant to Rule 144 or Regulation S. 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 informal Creditors Committee of the Corporation recommended in 1995 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 guarantee, however, that this moratorium will continue. In addition, certain unsecured creditors representing approximately $650,000 in principal and interest 32 have nevertheless filed or threatened to file lawsuits if they are not paid. Judgments have been awarded to unsecured creditors who filed lawsuits for claims representing an aggregate of approximately $450,000 in principal and interest. On September 30, 196, a suit was filed by Anthony Vicari in proper against the Corporation in San Francisco Superior Court, alleging that plaintiff and defendant entered into an oral agreement whereby defendant agreed to give plaintiff $1,000,000 and 80,000 shares of defendant's stock as compensation for seeking and arranging a joint business venture agreement with a Mexican company. The complaint seeks compensatory damages in an unspecified amount, punitive damages, attorneys' fees and costs, specific performance under the oral agreement, and an aware of 80,000 shares of stock. The Corporation was served on January 16, 1997, and has just begun to investigate this matter and has retained counsel. 33 EXHIBIT B - APPROXIMATE PRO FORMA CAPITALIZATION U.S. Electricar, Inc. Stock Capitalization Table January 31, 1997 (UNAUDITED)
Shares @ Shares @ Shares @ Shares 7/31/95 7/31/96 1/31/97 - -------------------------------------------------------------------------------------------------------- Common 55,672,992 120,220,248 130,969,477 Series A Preferred 6,274,335 4,010,159 3,860,931 Series B Convertible Preferred 1,587,473 1,587,473 - -------------------------------------- --------------------------------------------- 61,947,327 125,817,880 136,417,881 - -------------------------------------- --------------------------------------------- --------------------------------------------- Warrants 4,667,428 2,180,000 2,180,000 --------------------------------------------- --------------------------------------------- Cashless Warrants 15,333,332 15,333,332 --------------------------------------------- --------------------------------------------- Options -- Employee Plan 16,399,200 16,570,778 23,770,778 --------------------------------------------- --------------------------------------------- Options -- Non-Plan 2,268,766 1,695,000 1,695,000 --------------------------------------------- - -------------------------------------- --------------------------------------------- Total: 85,282,721 161,596,990 179,396,991 - -------------------------------------- --------------------------------------------- --------------------------------------------- Convertible Debt and Bonds: 20,000,000 24,866,666 --------------------------------------------- - -------------------------------------- --------------------------------------------- Total Shares -- Fully Diluted 85,282,721 181,596,990 204,263,657 - -------------------------------------- --------------------------------------------- ProForma ------------------------------------------------------------------ Common Stock (Hyundai) 12,000,000 ------------------------------------------------------------------ ------------------------------------------------------------------ Convertible Debt 4,799,999 ------------------------------------------------------------------ - -------------------------------------- --------------------------------------------- Total Shares -- Fully Diluted 85,282,721 181,596,990 221,063,656 - -------------------------------------- ---------------------------------------------
34 ADDENDUM Hyundai Motor Company ("HMC") and Hyundai Electronics Industries Co., Ltd. ("HEI") and U.S. Electricar, Inc. ("USE") February 27, 1997 Regarding the 12 April 1996 Agreement bvetween HMC and USE/SC (hereinafter "the Agreement"), it is agreed that all references to HMC may mena either HMC exclusively or HMC and HEI. Specially, due to the participation of HEI, each party agrees the amendment of the Agreement as follows; 1) with respect to the purchase of 12,000,000 shares of USE, the break down and the price shall be as follows; HMC: 8,400,000 shares (70%) at a price of US $0.30. HEI: 3,600,000 shares (30%) at a price of US $0.30. 2) HMC and HEI shall pay royalties as follows; HMC: US $1,295,000 of the paid-up royalty and US $105,000 of the running royalty*). HEI: US $555,000 of the paid-up royalty and US $45,000 of the running royalty*). *) The running royalty shall be paid on or before the anniversary of the Effective date of the License Agreement, through and including the sixth anniversary of the License Agreement. All other terms and conditions of the 12 April 1996 Agreement remain in full force and effect. Hyundai Motor Company By: /s/ Y. I. Lee --------------------------------- Y. I. Lee / Vice President Hyundai Electronics & Industries Co., Ltd. By: /s/ J. S. Lee --------------------------------- J. S. Lee / Executive Managing Director U.S. Electricar, Inc. By: /s/ Roy Y. Kusumoto --------------------------------- Roy Y. Kusumoto / President & CEO 35 LICENSE AGREEMENT This License Agreement is entered into on February 27, 1997, by and between U.S. Electricar, Inc., a California corporation (hereinafter referred to as "Licensor"), and Hyundai Motor Company and Hyundai Electronics Industries Co., Ltd. (hereinafter jointly referred to as "Licensee"). WITNESSETH: WHEREAS, Licensor has acquired or developed considerable technical information and expertise relating to the design, assembly, manufacture and sale of the Panther(TM) Systems; and WHEREAS, Licensee desires to secure from Licensor the right to use such technical information and expertise in order to develop, manufacture, assemble, sell and distribute the Panther(TM) Systems; and WHEREAS, it is the mutual intent of the parties to set forth the terms and conditions under which Licensor will permit Licensee to use said technical information. NOW, THEREFORE, the parties hereby agree as follows: I. DEFINITIONS (A) "Licensed Panther(TM) Systems" as used herein shall mean Propulsion Systems for Electric Vehicles which are or will be developed by Licensor during the term of this License Agreement, including upgrades to said systems developed by Licensor, all of which may be assembled by Licensee, or Licensee's designated manufacturer, in accordance with the Technical Data. Notwithstanding the foregoing, Licensor may customize a propulsion system exclusively for a customer other than Licensee using Technical Data and the Licensed Panther(TM) Systems ("Customized System"). (B) "Licensed Component(s)" as used herein shall mean such parts of the Licensed Panther(TM) Systems as are designed and manufactured by Licensor at its plants and identified in Exhibit A attached hereto, all of which Licensed Components may be manufactured by Licensee in accordance with the Technical Data. (C) "Licensed Item(s)" as used herein shall mean Licensed Panther(TM) Systems and Licensed Component(s). (D) "Technical Data" as used herein shall mean such technical data and any patents relating thereto, assembly, subassembly and parts drawings, and applicable material specifications, stamping, casting and forging drawings, labor and tool routing sheets, process specifications, drawings of special tools, fixtures, dies, jigs, gauges and patterns, and production and inspection procedures as are designed or created by Licensor and used by it in the development and assembly of Licensed Panther(TM) Systems, and the manufacture of Licensed Components, and which are specified in Exhibits A and B attached hereto and incorporated herein by this reference. (E) "Korea" as used herein means the territory of Korea. 36 II. GRANT Subject to the terms and conditions of this License Agreement, Licensor hereby grants to Licensee license to use Technical Data in the manufacture and assembly of Licensed Panther(TM) Systems, and the manufacture and assembly of Licensed Components for use in such Licensed Items, for the following purposes: 1) Use within motor vehicles built by Licensee or built by subsidiaries owned more than fifty percent (50%) by Licensee (hereinafter referred to as "Licensee Motor Vehicles"), or for use as spare parts for such Licensee Motor Vehicles; 2) The manufacturing and distributing licenses to the Licensed Panther(TM) Systems shall also be exclusive to HMC for the territory of Korea; and 3) Motor vehicles manufactured pursuant to this Article II may be exported to any other country. III. OWNERSHIP OF TECHNICAL DATA AND LICENSED ITEMS (A) During the term of this License Agreement, the Technical Data and the Licensed Items shall remain owned by Licensor. In addition to any other rights it may have, Licensor expressly retains the right to customize a propulsion system exclusively for a customer other than Licensee, provided that: (B) Nothing in this License Agreement shall be deemed to constitute a transfer of title, or any interest other than a license, in the Technical Data or the Licensed Items. (C) Any improvements, enhancements, and/or modifications made by Licensee to the Technical Data or the Licensed Items shall be the property of Licensee. Licensor shall have a fully-paid, worldwide, non-exclusive license to use, manufacture, sell, distribute and sublicense such improvements, enhancements, and/or modifications. The obligations of Licensee to provide Licensor with information regarding any improvements, enhancements or modifications to the technology is expressly understood to be ongoing. In furtherance of this obligation, Licensee will meet at least quarterly with Licensor to review the status of transfer of technical data, as well as progress on improvements, updates or upgrades thereto. (D) Any improvements, enhancements, and/or modifications made by Licensor to the Technical Data shall be the property of Licensor. Licensee shall have such license rights in the improvements, enhancements, and/or modifications made by Licensor as have been granted to Licensee in Article II above. The obligations of Licensor to provide Licensee with information regarding any improvements, enhancements or modifications to the technology is expressly understood to be ongoing. In furtherance of this obligation, Licensor will meet at least quarterly with Licensee to review the status of transfer of technical data, as well as progress on improvements, updates or upgrades thereto (E) The parties agree to cooperate with and to assist each other in protecting the intellectual property rights to the Technical Data, the Licensed Items, and any improvements, enhancements, and/or modifications made thereto by Licensee or Licensor, including assistance in filing for patent protection worldwide. The parties agree that this is one of the material terms of this License Agreement, and each recognizes the importance of protecting the intellectual property and providing assistance in filing for patent protection worldwide. Each party further agrees that these obligations are expressly understood to be ongoing throughout the term of this License Agreement. 37 IV. DISCLOSURE OF TECHNICAL DATA (A) Licensor shall supply the Technical Data to Licensee as requested by Licensee during the term of this License Agreement. Unless the parties shall otherwise agree, the Technical Data shall be supplied in written form at the office of Licensor located in Torrance, California. In addition, Licensor shall also supply to Licensee identification listings of basic manufacturing and inspection equipment for use by the latter in connection with the development, assembly and manufacture of Licensed Items. (B) In no event shall Licensor disclose or supply any Technical Data to Licensee on or after the date of termination of this License Agreement. All Technical Data to be supplied under the terms of this License Agreement shall be in the language and the system of measures used by Licensor. (C) The Technical Data is confidential. Licensee shall preserve and protect the confidential nature of the Technical Data, and accordingly shall not disclose the Technical Data to third parties without the written consent of Licensor. Said consent will not, however, be required in order to disclose the Technical Data to the following parties, provided that, in each case, said parties shall agree in writing that (i) the Technical Data will only be used to develop, assemble, and manufacture Licensed Items under this License Agreement, and (ii) the Technical Data shall not be disclosed to third parties. 1. To those of their respective employees necessary to enable Licensee and/or Licensee's designated manufacturer to manufacture and assemble Licensed Panther(TM) Systems and Licensed Components. 2. To suppliers of Licensee and/or Licensee's designated manufacturer to the extent necessary to enable such suppliers to deliver to Licensee and/or Licensee's designated manufacturer the materials and components required to manufacture and assemble Licensed Components and Licensed Panther(TM) Systems. 3. To subcontractors and sub-subcontractors of Licensee and/or Licensee's designated manufacturer to the extent necessary to enable such subcontractors and sub-subcontractors to perform work required to manufacture and assemble Licensed Components and Licensed Panther(TM) Systems. The disclosures permitted under (1), (2) and (3) above of this Article IV shall not relieve Licensee, or permitted third parties under this License Agreement, of the obligation to maintain the Technical Data in confidence. (D) Notwithstanding the foregoing, the obligation provided for in this Article IV shall not apply to any information: 1) which is already known to Licensee at the time of disclosure; or 2) which becomes lawfully known to the public through sources other than Licensee; and 3) which is received by Licensee from a third party where the disclosure by the third party is not in violation of any law or contract. V. TECHNICAL ASSISTANCE (A) Licensor shall use its reasonable efforts to furnish, upon written request of Licensee, the services of engineers, and/or technicians ("technicians") in Korea to assist Licensee in acquiring knowledge and training relating to the development or assembly of Licensed Panther(TM) Systems and manufacture of Licensed Components in accordance with the Technical Data (hereinafter referred to as "Technical Assistance"). Such technicians shall be made available to Licensee for reasonable periods of time 38 throughout the term of this License Agreement. Subject to the agreement on the terms of visit, Licensee agrees to pay for the out-of-pocket expenses incurred by such technicians in providing said services, such expenses to include airfare, room and board. (B) Licensor shall permit a reasonable number of Licensee's employees to visit the plants of Licensor for reasonable training periods to enable Licensee's employees to gain knowledge with respect to the assembly of Licensed Panther(TM) Systems and the manufacture of Licensed Components in accordance with the Technical Data and training program. Licensor and Licensee shall consult and agree upon the number of Licensee's employees to visit and the duration of the visits, it being understand that the aggregate duration of all such visits during any one (1) year shall not exceed sixty (60) man-days unless Licensor shall otherwise agree. All salaries, costs and expenses of Licensee's technicians for such periods of training shall be paid by Licensee. (C) All employees or other representatives of either party hereto, while at the premises of the other party, shall comply with all the then regularly established and existing rules and regulations of such other party. VI. INDEMNITIES (A) Licensor shall not be liable to Licensee for any claim by any third party for personal injury or property damages based on breach of warranty or products liability allegedly due to a defect in a motor vehicle manufactured by HMC and using the Technical Data or Technical Assistance transferred under this Agreement. Specifically, Licensor shall not be liable for claims of personal injury or damage to property based on the design, manufacture, or assembly of Hyundai motor vehicles utilizing the Technical Data or Technical Assistance. Nevertheless, with respect to a claim made where the claim is based solely on an alleged defect in the Technical Data or Technical Assistance, Licensor shall defend and indemnify Licensee with respect to such claim. If a claim is made where the claim is based on both: (i) an alleged defect in the Technical Data or Technical Assistance; and (ii) an alleged defect in the design, materials or workmanship produced by Licensee; then each party shall bear its own costs of suit and its allocable share of any damages. (B) Licensor warrants and represents that (i) it is the Licensor and proprietor of all right, title and interest in and to the Technical Data; (ii) it has the right and authority to enter into this Agreement and to license the Technical Data to Licensee in accordance with the terms hereof, and as of the date hereof, has no actual knowledge of any claim that the Technical Data infringes any copyright, patent, trade secret or other proprietary rights of any third party, and (iii) the performance of the terms of this Agreement and of Licensor's duties to Licensee hereunder will not breach any separate agreement or arrangement by which Licensor is bound. (C) Licensor hereby agrees to defend, indemnify and hold Licensee, its directors, shareholders, agents, officers, employees, authorized assignees and successors in interest harmless from and against any claims, suits, losses, damages, judgments, fines, costs, expenses, obligations, recoveries and deficiencies, including penalties, interests, and reasonable attorney fees, and all liability that Licensee may incur or suffer resulting from any claim of infringement of any patent, copyright, trademark, trade secret or any other intellectual property right of any third party by the Technical Data or resulting from its use under this Agreement. 39 (D) Where indemnification is required or appears probable pursuant to paragraphs (A) and (C) herein, the Licensee shall provide prompt written notice to the Licensor, and cooperate reasonably and at the Licensor's expense with the Licensor. Licensee shall not settle any claim hereunder, without the Licensor's prior approval. The foregoing rights to indemnification are contingent upon the Licensee: (i)promptly notifying the Licensor in writing; (ii) allowing the Licensor, at Licensor's expense, to direct the defense or settlement of such claim or suit; and (iii) giving to the Licensor, at the Licensor's expense, reasonable information and assistance for such defense or settlement, including providing such witnesses for testimony as may reasonably be required. (E) The indemnity provisions herein shall continue throughout the term of this Agreement and shall survive any termination or expiration of this Agreement. VII. ROYALTIES In consideration for the rights granted to Licensee hereunder, Licensee agrees to pay a fee to Licensor in the total sum of $2 million. At Licensor's request, $1.85 million of said fee shall be paid by Licensee to Licensor within ____ days of the Effective Date of this License Agreement. The remaining $150,000 portion of said $2 million fee shall be paid on a periodic installment basis as follows: a $25,000 payment by Licensee to Licensor on or before the anniversary of the Effective Date of this License Agreement, through and including the sixth anniversary of this License Agreement, for a total of $150,000 in installment payments (6 x $25,000). VIII. BOARD MEMBERSHIP Licensor hereby agrees to take such steps as may be required to appoint a person designated by Licensee to the Board of Directors of Licensor or as an Observer to said Board, as Licensee may elect in its sole discretion, such appointment to be effective within ______ days of the execution of this Agreement. Licensor also hereby agrees, during the term of the Agreement, to provide Licensee (either through Licensee's designee serving on the Licensor's Board of Directors or otherwise upon the Licensee's written request to the Licensor) with prompt delivery of, or access to, the Licensor's corporate, business, accounting and financial information and documents, including but not limited to all information and documents made available or discussed at meetings of the Licensor's Board of Directors, all documents and reports filed or proposed to be filed by the Licensor with any executive, legislative, administrative or judicial office or agency; and all corporate minutes, articles of incorporation, bylaws, contracts, agreements, shareholder lists, correspondence, press releases, financial statements, books and records, and other documents of the Licensor (collectively "Information"); provided, however, that Licensee shall hold in strict confidence all Information which has not yet been made generally available to the public and shall not engage, directly or indirectly, in any transaction involving securities of the Licensor while in possession of Information which is material and has not yet been made generally available to the public. IX. TRADEMARKS AND PUBLICITY (A) Nothing in this License Agreement shall be construed to authorize the use by Licensee of any trademarks or other distinctive marks or signs owned by Licensor unless prior approval in writing is received from Licensor. Licensee shall only utilize its own trademarks. Licensee may, if it so elects, affix to any Licensed Item made by Licensee under this License Agreement such marks as the parties may agree upon in writing. 40 (B) Notwithstanding anything contained in this License Agreement to the contrary, the parties shall have the right to use the trademarks of the other parties in connection with announcements regarding the relationship of the parties. No such announcement shall be made, however, without the prior consent of the other party. Consent of the other party shall be deemed to have been given if a written copy of the notice is provided to the other party, and such party does not object in writing to such announcement. Neither party shall unreasonably withhold its consent to such announcements. X. FAILURES AND DELAYS IN PERFORMANCE Neither Licensor nor Licensee shall be liable in damages or otherwise for any delay or default in performance under this License Agreement where such delay or default is due to any cause beyond its control or is caused by war, strikes, other labor trouble, shortage of labor or material, riots, fires, floods, public calamity, transportation difficulties, or by an act or omission of any governmental authority. XI. TERM AND TERMINATION (A) This License Agreement shall be effective from the date when this License Agreement is signed by the parties hereto ("Effective Date") and continue in effect until December 31, 2010. (B) Without limiting any other rights either party may have, it is specifically understand that: 1) In the event of either party's dissolution, or the liquidation of either party's assets, or the filing of a voluntary petition in bankruptcy, or the filing of an involuntary petition in bankruptcy that is not dismissed within sixty (60) days after filing; or 2) In the event either party breaches any material term hereunder more than twice in any twelve (12) month period and the defaulting party has received written notice of each breach; then the other party shall have the right, at its sole option and upon written notice to the bankrupt and/or defaulting party, to terminate this License Agreement immediately. (C) The parties agree and acknowledge that this License Agreement constitutes, and throughout its term shall continue to be, an executory contract under which Licensor is a licensor of a right to intellectual property, pursuant to 11 U.S.C. ss. 365(n), and therefore that this License Agreement is, in the event of a future bankruptcy filing against Licensor, subject to the provisions of 11 U.S.C. ss. 365(n), and accordingly, in such event, Licensee would have the rights and privileges enumerated in 11 U.S.C. ss. 365(n). XII. CONSEQUENCES OF TERMINATION Upon termination of this License Agreement for any reason, except breach of its terms by Licensee, Licensee shall have a permanent, fully-paid license to the Technical Data, under the same terms as set forth in Article II, without any additional payments. Licensor shall retain title and ownership to the Technical Data. If Licensee breaches the License Agreement, all Technical Data shall be returned to Licensor. Licensee shall have no rights to improvements, enhancements, or modifications to the Technical Data or Licensed Items made by Licensor subsequent to the termination of this License Agreement. 41 XIII. ASSIGNMENT AND SUBLICENSE RIGHTS Except as otherwise provided in this License Agreement, Licensee shall not assign or sublicense its rights under this License Agreement. Licensee may appoint subcontractors as its subcontractors to undertake the manufacture or assembly of Licensed Components. XIV. DISCLAIMER OF AGENCY This License Agreement shall not constitute Licensee as the legal representative or agent of Licensor, nor shall Licensee have the right or authority to assume, create or incur any liability or any obligation of any kind, express or implied, against, or in the name of, or on behalf of, Licensor. XV. GENERAL PROVISIONS (A) Title and Subtitles. The titles of the Articles and Paragraphs of this License Agreement are for the convenience of reference only, and are not to be considered in construing this License Agreement. (B) Counterparts. This License 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. (C) Entire Agreement. This License Agreement is the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all documents and correspondence with respect to such subject matter prior to the date hereof. No amendment to this License Agreement shall be effective unless in writing and signed by all parties hereto. (D) Waiver. The failure of a party to insist on the strict performance of any provision of this License Agreement or to exercise any right, power, or remedy upon a breach hereof shall not constitute a waiver of any provision of this License Agreement or limit the party's right thereafter to enforce any provision or exercise any right. (E) Notice. Any notice, payment, report or other communication required or permitted to be given by one party to any other party by this License Agreement shall be in writing and either (i) served personally on the other party, (ii) sent by express, registered or certified first class mail, postage prepaid, addressed to the other party or parties at its/their address indicated next to their signatures below, or to such other address as any addressee shall have theretofore furnished to the other parties by like notice, (iii) delivered by commercial courier to the other party, or (iv) sent by facsimile with the original sent by express mail. Such notice shall be deemed received on the second day after transmittal if sent by one day courier together with a transmission of such notice by facsimile if the recipient has the capability to notice a facsimile at its address, and if sent by other methods shall be deemed received upon receipt. (F) Governing Law. This License Agreement has been entered into in California, and shall be governed by the laws of the State of California, United States of America. 42 (G) Arbitration. All disputes arising in connection with this License Agreement shall be finally settled under the rules of Conciliation and Arbitration of the International Chamber of Commerce ("ICOC") by one or more arbitrators appointed in accordance with ICOC rules. The place of arbitration shall be the country of the respondents. IN WITNESS WHEREOF, the parties have executed this License Agreement as of the date first above stated. Hyundai Motor Company By: / s / Y. I. Lee -------------------------------------------- Y. I. Lee / Vice President Hyundai Electronics & Industries Co., Ltd. By: / s / J. S. Lee -------------------------------------------- J. S. Lee / Executive Managing Director U.S. Electricar, Inc. By: / s / Roy Y. Kusumoto -------------------------------------------- Roy Y. Kusumoto / President & CEO * NOTE: (1) This License Agreement includes the Addendum dated February 27, 1997. (2) "Exhibit A" means the drawing tree of Licensed Panther(TM) Systems. (3) "Exhibit B" means the "Technical Data List" which will be attached to this License Agreement. 43 EXHIBIT A The following drawing tree graphic data is available from the Company upon request. CEU P60 V10000AA P60NVRT DWG TREE DRAWING NUMBER V10000TA [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 4/19/96] 44 CEU P60 V20000A- P60/6 INVRT DWG TREE DRAWING NUMBER V20000T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 12/20/96] 45 BCU ASSEMBLY B10000A- BCU DWG TREE DRAWING NUMBER B10000T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 1/2/97] 46 GDU G01000A- GDU DWG TREE DRAWING NUMBER G10000T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 11/18/96] 47 EDM P60 ASSEMBY M01000AA EDM DWG TREE DRAWING NUMBER M01000TA [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 11/14/96] 48 A/C SYSTEM A01000A- A/C SYSTEM DWG TREE DRAWING NUMBER A0100T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 9/24/96] 49 POWER STEERING UNIT (PSU) P01000A- PSU DWG TREE DRAWING NUMBER P01000T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 7/26/96] 50 HVDC CONTRACTOR ASSY K10100A- HVDC CONTRACTOR ASSY DWG TREE DRAWING NUMBER K10100T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 9/16/96] 51 CEI HARNESS KIT K20100A- CEU HARNESS KIT DWG TREE DRAWING NUMBER K20100T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 9/5/96] 52 BATTERY VOLT-AMP DISPLAY D01000A- BATTERY VOLT-AMP DISPLAY DWG TREE DRAWING NUMBER D01000T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 1/2/97] 53 BATTERY V-I SENSE BOARD K30100A- BATTERY V-I SENSE BOARD DWG TREE DRAWING NUMBER K30100T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 1/2/97] 54 PRELIMINARY CEU P90 V30000A- P90 INVRT DWG TREE DRAWING NUMBER V30000T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 12/20/96] 55 PRELIMINARY CEU P120 V40000A- P12 INVRT DWG TREE DRAWING NUMBER V40000T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 12/20/96] 56 ACCENT CONVERSION SAC100A- ACCENT CONVERSION DWG TREE DRAWING NUMBER SAC100T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 11/18/96] 57 HYUNDAI HYBRID SOC AND BIAS POWER ASSEMBLY B01000A- HYUNDAI HYBRID SOC AND BIAS POWER ASSY DWG TREE DRAWING NUMBER B01000T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 11/14/96] 58 HYUNDAI SERIES-TYPE HYBRID EV BCU SYSTEM SBCU01A- HYUNDAI SERIES-TYPE HYBRID EV BCU SYSTEM DWG TREE DRAWING NUMBER SBCU01T- [GRAPHIC OF DRAWING TREE BY CINDA TANG, SYSTRONIX CORPORATION TORRANCE CALIFORNIA DATED 11/14/96] 59 EXHIBIT B TECHNICAL DATA 1. System Engineering 1) concept and technical background 2) simulation and analysis 3) design and test specification including testing know-how 4) test procedure of system performance 5) evaluation and verification for system performance 2. Hardware Engineering (Design Concept, Technical Background and Implementation) 1) power electronics 2) signal processing (digital and analog) 3) unit-to-unit and human-to-system interface 4) EMI/EMC solution 3. Software Engineering (Design Concept, Technical Background and Implementation) 1) development environment (S/W and H/W tool and documentation) 2) flow chart and algorithm 2-1) flow chart: (CEU, APC and BCU) a) main program functions b) list of names of all main modules with the description of the main functions performed by each module c) communication methods for RS232 and CAN 2-1) algorithms not described in the flow charts a) module control (CEU and APC) b) motion control c) general fault detection and handling d) charging and state of charge (CEU and BCU) 3) debugging for each function in Panther system 4) additional necessary information regarding manufacturing 4. Mechanical Matching Engineering 1) design concept 2) technical background and implementation 5. Manufacturing Engineering 1) concept and technical background 2) manufacturing and / or assembly process in mass production 6. Qualification 1) qualification program (including test specification) 2) reliability program (including test specification) 3) durability program (including test specification) 60 EXHIBIT B (Continued) 7. Others 1) safety, diagnostics - test background - tool and implementation 2) industrial standard (UL, IEEE, etc.) 61 ADDENDUM Hyundai Motor Company ("HMC") and Hyundai Electronics Industries Co., Ltd. ("HEI") and U.S. Electricar, Inc. ("USE") February 27, 1997 Regarding the 27 February Agreement bvetween HMC and HEI and USE (hereinafter "the License Agreement "), each party agrees to add the following paragraph to the end of paragraph VI(A) of the License Agreement dated February 27, 1997. "Licensor shall maintain a reasonable amount of product liability insurance to cover its obligations hereunder. The Licensor shall also name the Licensee as an additional named insured on its product liability insurance policies so that Licensee will be covered by Licensor's product liability insurance in the event that any claim is made against Licensee based on an alleged defect in the Technical Data or Technical Assistance transferred under this Agreement." All other terms and conditions of the 27 February 1997 License Agreement remain in full force and effect. Hyundai Motor Company By: /s/ Y. I. Lee --------------------------------- Y. I. Lee / Vice President Hyundai Electronics & Industries Co., Ltd. By: /s/ J. S. Lee --------------------------------- J. S. Lee / Executive Managing Director U.S. Electricar, Inc. By: /s/ Roy Y. Kusumoto --------------------------------- Roy Y. Kusumoto / President & CEO 62 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS IN THE ANNUAL REPORT ON FORM 10-Q OF U.S. ELECTRICAR, INC. FOR THE QUARTER ENDED JANUARY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUL-31-1997 AUG-01-1996 JAN-31-1997 10 0 679 0 1,969 2,836 1,274 0 4,157 16,260 3,987 60,699 0 5,975 (81,666) 4,157 898 898 1,412 3,532 1,630 0 412 (4,676) 0 (4,676) 0 0 0 (4,676) (0.04) (0.04)
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