No._______ Offeree Name_______________________
U.S. ELECTRICAR, INC.
REGULATION S
COMMON STOCK SUBSCRIPTION AGREEMENT
May 1, 1996
THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES LAWS ("BLUE SKY LAWS"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES OR TO U.S. PERSONS (AS DEFINED IN REGULATION S) WITHOUT REGISTRATION
UNDER THE SECURITIES ACT, AND AS REQUIRED BY BLUE SKY LAWS IN EFFECT AS TO SUCH
TRANSFER, UNLESS AN EXEMPTION FROM SUCH REGISTRATION UNDER STATE AND FEDERAL LAW
IS AVAILABLE.
INSTRUCTIONS FOR SUBSCRIPTION
U.S. ELECTRICAR, INC.
A California Corporation
To Subscribe:
1. Offeree Questionnaire/Subscription Agreement.
Please complete the Offeree Questionnaire and execute the Subscription
Agreement at Page 10 and return all originals to the Corporation along
with the purchase price for the common stock shares being acquired.
2. Please make Check payable to:
U.S. ELECTRICAR, INC.
or request wire transfer instructions from the Corporation.
1
OFFEREE QUESTIONNAIRE
U.S. ELECTRICAR, INC.
U.S. Electricar, Inc.
San Francisco Executive Park
5 Thomas Mellon Circle
Suite 305
San Francisco, California 94134
Gentlemen:
The undersigned understands that: (i) you will rely on the information contained
herein for purposes of securities law compliance and determination; and (ii) the
securities will not be registered under the Securities Act of 1933, as amended
(the "Securities Act") in reliance upon the exemption from registration provided
by Regulation S promulgated under the Securities Act.
The undersigned further represents to you that: (i) the information contained
herein is complete and accurate and may be relied upon by you; and (ii) the
undersigned will notify you immediately of any material change in any of such
information occurring prior to the purchase of such securities, if any purchase
is made, by the undersigned.
THE UNDERSIGNED UNDERSTANDS AND AGREES THAT ALTHOUGH THIS QUESTIONNAIRE WILL BE
KEPT STRICTLY CONFIDENTIAL, U.S. ELECTRICAR, INC. MAY PRESENT THIS QUESTIONNAIRE
TO SUCH PARTIES AS IT DEEMS ADVISABLE IF CALLED UPON TO ESTABLISH THE
AVAILABILITY UNDER ANY FEDERAL OR STATE SECURITIES LAWS OF AN EXEMPTION FROM
REGISTRATION OF THIS OFFERING OR ANY OTHER COMPLIANCE WITH STATE OR FEDERAL
SECURITIES LAWS.
THIS QUESTIONNAIRE BY ITSELF IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY BUT MERELY A REQUEST FOR INFORMATION FOR COMPLIANCE WITH APPLICABLE
SECURITIES REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION AND STATE BLUE
SKY LAWS.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
2
U.S. ELECTRICAR, INC.
Please complete and return along with the Subscription
Agreement attached hereto to:
U.S. Electricar, Inc.
Attn: Corporate Secretary
San Francisco Executive Park
5 Thomas Mellon Circle
Suite 305
San Francisco, California 94134
TOTAL SUBSCRIPTION: Dollar Amount $ Number of Shares
----------------- --------
Make Check or Wire Transfer Payable to: U.S. Electricar, Inc.
REGISTRATION:
Please print name in which your Common Stock shares are to be registered
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RESIDENT ADDRESS: Investors must complete resident address for registration
purposes
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Street
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City Country Postal Code
MAILING ADDRESS: if different from resident address
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Corporation name (if applicable)
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Street
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City Country Postal Code
- - -------------------------------------------------------
Home Phone Business Phone
( ) ( )
- - ------------------------------ ---------------------------------------
CHECK ONE:
___ Individual Ownership
___ Corporate Ownership
___ Partnership Ownership
FOR TRUST:
______________________ Trust
___________ Date Established
- - --------------------------------------
Name of Trustee or other Administrator
FOR ANY ENTITY:
- - --------------------------------------
(Name of Person With Right To Control
the Voting of Securities on Behalf of Entity)
3
U.S. ELECTRICAR, INC.
The following information is to be provided by either (i) the individual who is
making the investment decision on behalf of the corporate, partnership, trust or
other entity investor or (ii) by the individual purchasing the Shares for his
own account:
- - --------------------------------------------------------------------------------
Print Name (and title if applicable)
1. Business or Professional Education:
Field of
School Study Degree
- - ------ -------- ------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
2. Current employment positions:
- - --------------------------------------------------------------------------------
3. Details of any training or experience in financial or business matters not
disclosed above:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
4. I have previously purchased securities on behalf of the Investor or on my own
behalf which were sold in reliance on Regulation S or a private offering
exemption from registration under the Securities Act of 1933, as amended:
------- Yes ------- No
Initial Initial
If yes, please give several examples.
Name of Type of Year of Amount
Corporation Investment Investment Invested
- - ----------- ---------- ---------- --------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(For Entity Investors)
5. Total assets if Investor is an entity: $_________________________________.
(For Individual Investors)
6. Net Worth (excess of total assets over total liabilities) and income if
Investor is an individual:
Net Worth: $____________________ Income: $_______________________.
4
THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR
UNDER ANY STATE SECURITIES LAWS ("BLUE SKY LAWS"), AND MAY NOT BE
OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED IN
REGULATION S) WITHOUT REGISTRATION UNDER THE SECURITIES ACT, AND AS
REQUIRED BY BLUE SKY LAWS IN EFFECT AS TO SUCH TRANSFER, UNLESS AN
EXEMPTION FROM SUCH REGISTRATION UNDER STATE AND FEDERAL LAW IS
AVAILABLE.
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made effective for reference purposes
only as of May 1, 1996, by and between U.S. Electricar, Inc., a California
corporation (the "Corporation") and the Investor whose signature appears on the
signature page to this Agreement (the "Investor").
R E C I T A L
The Investor desires to purchase from the Corporation, and the
Corporation desires to sell to the Investor, certain common stock shares of the
Corporation, on the terms and conditions hereinafter set forth.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained in this Agreement, the parties hereby
agree as follows:
1. Purchase and Sale of Shares.
a. Sale and Issuance of Shares. Subject to the terms and
conditions of this Agreement, the undersigned Investor agrees to purchase at the
Closing (as defined below) and the Corporation agrees to sell and issue to the
Investor at the Closing, that number of common stock shares (the "Shares") set
forth under Schedule 1 of the signature page attached to this Subscription
Agreement at a price of thirty cents ($0.30) per share (the "Purchase Price").
b. Payment and Delivery. The Investor shall purchase the
Shares by making payment to U.S. Electricar, Inc. in cash by check or wire
transfer of funds of the Purchase Price delivered to the Corporation on, or
before, the date set forth on Schedule 1 attached to the signature page hereto
(the "Closing").
2. Delivery of Shares. Upon the Investor's delivery of the Purchase
Price in full and a fully executed and completed original of this Subscription
Agreement and Offeree Questionnaire to the Corporation, and after the
Corporation determines that all applicable securities laws have been satisfied,
the Corporation will deliver to the Investor within ten (10) days after the
Closing a share certificate for the Shares.
3. Corporation's Representations, Warranties and Covenants. The
Corporation hereby represents, warrants and covenants to the Investor as
follows:
a. Corporate Organization and Standing. The Corporation is a
corporation duly organized, validity existing and in good standing under the
laws of the State of California. The Corporation has the requisite corporate
power to carry on its business as presently conducted, and as proposed or
contemplated to be conducted in the future, and to enter into and carry out the
provisions of this Agreement and the transactions contemplated hereby.
b. Authorization. All corporate action on the part of the
Corporation, its directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Corporation and the
performance of all of the Corporation's obligations hereunder has been taken.
This Agreement, when executed and delivered by the Corporation, shall constitute
a valid and binding obligation of the Corporation, enforceable in accordance
with its terms, except as may be limited by principles of public policy, and
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. The Shares, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable. The Corporation is, and at all times during the offer
and sale of the Shares, will be a "reporting issuer" as that term is defined
under Regulation S.
c. No Breach. The issue and sale of the Shares by the
Corporation does not and will not conflict with and does not and will not result
in a breach of any of the terms of the Corporation's incorporating documents or
any agreement or instrument to which the Corporation is a party. The
consummation of the transactions or performance of the obligations contemplated
by this Agreement will not result in a breach of any term of, or constitute a
default under, any statute, indenture, mortgage, or other agreement or
instrument to which the Corporation or any of its subsidiaries is or are a party
or by which any of them is or are bound.
d. Pending or Threatened Claims. Neither the Corporation nor
any of its subsidiaries is a party to any action, suit or proceeding which could
materially affect its business or financial condition, and no such actions,
suits or proceedings are contemplated or have been threatened.
e. No Preemptive Rights. There are no preemptive rights of
any shareholder of the Corporation with respect to the Shares.
4. Investor Representations and Warranties. The Investor represents
and warrants to the Corporation that:
a. Account/Regulation S. The Investor is acquiring the Shares
for investment for its own account, and not with a view to, or for resale in
connection with, any distribution thereof, and it has no present intention of
selling or distributing any of the Shares. The Investor understands that the
Shares have not been registered under the Securities Act of 1933, as amended
(the "Securities Act") by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment as expressed herein. The Investor understands
that the Corporation is relying on the rules and regulations governing offers
and sales made outside the United States to non-"U.S. Persons" pursuant to
Regulation S under the Securities Act.
b. Access to Data. The Investor has had an opportunity to
discuss the Corporation's business, management and financial affairs with its
management and to obtain any additional information which the Investor has
deemed necessary or appropriate for deciding whether or not to purchase the
Shares, including an opportunity to receive, review and understand the
disclosures and information regarding the Corporation's financial statements,
capitalization and other business information as set forth in Corporation's
Amended Form 10 filed with the Securities and Exchange Commission ("SEC") on
January 27, 1995 and subsequent 10-K and 10-KA and two 10-Qs filed with the SEC
on October 30, 1995, November 28, 1995, December 15, 1995 and March 18, 1996,
respectively, all incorporated herein by reference, together with all exhibits
referenced therein. Attached hereto as Exhibit A and incorporated herein by
reference are copies of the Corporation's Private Placement Memorandum dated
January 2, 1996 prepared for the Corporation's trade creditors. The Investor
acknowledges that no other representations or warranties, oral or written, have
been made by the Corporation or any agent thereof except as set forth in this
Agreement.
c. No Fairness Determination. The Investor is aware that no
federal, state or other agency has made any finding or determination as to the
fairness of the investment, nor made any recommendation or endorsement of the
Shares.
d. Knowledge And Experience. The Investor has such knowledge
and experience in financial and business matters, including investments in other
start-up companies, that it is capable of evaluating the merits and risks of the
investment in the Shares, and it is able to bear the economic risk of such
investment. Further, the individual executing this Agreement has such knowledge
and experience in financial and business matters that he is capable of utilizing
the information made available to him in connection with the offering of the
Shares, of evaluating the merits and risks of an investment in the Shares and of
making an informed investment decision with respect to the Shares, including
assessment of the Risk Factors attached hereto as Exhibit B and incorporated
herein by reference.
e. Limited Public Market. The Investor is aware that there is
currently a very limited "over-the-counter" public market for the Corporation's
registered securities and that the Corporation became a "reporting issuer" under
the Securities Exchange Act of 1934, as amended, on January 27, 1995. There is
no guarantee that a more established public market will develop at any time in
the future. The Investor understands that the Shares are all unregistered and
may not presently be sold in even this limited public market. The Investor
understands that the Shares cannot be readily sold or liquidated in case of an
emergency or other financial need. The Investor has sufficient liquid assets
available so that the purchase and holding of the Shares will not cause it undue
financial difficulties.
f. Commissions/Finders Fees. The Investor acknowledges that
the Company may issue up to 13,333,333 cashless exercise warrants in form and
substance as attached hereto as Exhibit C as investment banking fees to third
parties if up to $2,000,000 of common stock shares are sold by the Corporation
pursuant to this Offering.
g. Investment Experience. The Investor is an "accredited
investor" as that term is defined in Regulation D promulgated by the Securities
and Exchange Commission. The term "Accredited Investor" under Regulation D
refers to:
(i) A person or entity who is a director or executive
officer of the Corporation;
(ii) Any bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity; any broker or dealer registered pursuant to
Section 15 of the Exchange Act; insurance company as defined in Section 2(13) of
the Securities Act; investment company registered under the Investment Company
Act of 1940; or a business development Corporation as defined in Section
2(a)(48) of that Act; Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decision made solely
by persons that are accredited investors;
(iii) Any private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
(iv) Any organization described in Section 501(c)(3) of
the Internal Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the Shares
offered, with total assets in excess of $5,000,000;
(v) Any natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of his purchase exceeds
$1,000,000;
(vi) Any natural person who had an individual income in
excess of $200,000 during each of the previous two years or joint income with
that person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
(vii) Any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the Shares offered,
whose purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment; or
(viii) Any entity in which all of the equity owners are
accredited investors.
As used in this Section 4(g), the term "net worth" means the excess of total
assets over total liabilities. For the purpose of determining a person's net
worth, the principal residence owned by an individual should be valued at fair
market value, including the cost of improvements, net of current encumbrances.
As used in this Section 4(f), "income" means actual economic income, which may
differ from adjusted gross income for income tax purposes. Accordingly, the
undersigned should consider whether it should add any or all of the following
items to its adjusted gross income for income tax purposes in order to reflect
more accurately its actual economic income: Any amounts attributable to
tax-exempt income received, losses claimed as a limited partner in any limited
partnership, deductions claimed for depletion, contributions to an IRA or Keogh
retirement plan, and alimony payments.
5. Restrictions On Transfer Re Regulation S.
a. Not A "U.S. Person." The Investor hereby certifies that (i)
it is not a "U.S. Person" as defined under Rule 902, Section (o) of Regulation S
promulgated under the Securities Act (a copy of which is attached hereto as
Schedule 2) and is not acquiring the Shares for the account or benefit of any
U.S. Person, and (ii) it is acquiring the Shares in an "offshore transaction" as
defined under Section (i) of such Rule 902 (a copy of which is attached hereto
as Schedule 3).
b. Transfer Restrictions. The Investor shall not attempt to
have registered any transfer of the Shares not made in accordance with the
provisions of Regulation S. In addition to any other restrictions on transfer
set forth in this Agreement, the Investor agrees to transfer the Shares only (i)
in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act, or pursuant to an available exemption from
registration, and (ii) in accordance with any applicable state securities laws.
Unless so registered or exempt therefrom, such transfer restrictions shall
include but not be limited to and the Investor warrants and represents the
following:
(i) The Investor shall not sell the Shares publicly
or privately, or through any short sale, or other hedging transaction to any
U.S. Person, whether directly or indirectly, or for the account or benefit of
any such U.S. Person for the restrictive period mandated by Regulation S after
the purchase of the Shares unless registered or exempt from registration;
(ii) Any other offer or sale of the Shares shall be
made only if (A) during the restrictive period any subsequent purchaser
certifies in writing that it is not a U.S. Person and is not acquiring the
Shares for the account or benefit of any U.S. Person, or (B) after the
restrictive period the Shares are purchased in a transaction that did not
require registration under the Securities Act and applicable Blue Sky laws; and
(iii) Any transferee of the Shares shall agree in
writing to resell the Shares only in accordance with the provisions of
Regulation S, pursuant to registration under the Securities Act, or pursuant to
an available exemption from registration.
c. Restrictions On Resales In the United States. The Investor
understands and acknowledges that the Securities Act prohibits resales of
securities in the United States except pursuant to an effective registration
statement or an exemption from registration for which the Shares and the
Investor holding such Shares qualifies. The Investor understands and
acknowledges the requirements for qualifying for an exemption from registration
afforded by Section 4 of the Securities Act and that there can be no assurance
that the Investor will be able to qualify for such an exemption from
registration.
6. Public Offering Lock-Up. For one period of up to one-hundred-eighty
(180) days (the "Stand-off Period"), Investor shall not pledge, transfer or sell
its Shares to any person or entity if requested by the Corporation upon at least
thirty (30) days prior written notice given, on, or after, the termination of
the Regulation S restrictive period hereunder in contemplation of a public
registration. Notwithstanding the foregoing, this right may be exercised only
one time by the Corporation.
7. Restrictive Legends. Each certificate evidencing the Share which
the Investor may purchase hereunder and any other securities issued upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event (unless no longer required in the opinion of the counsel for the
Corporation) shall be imprinted with legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED OR SOLD WITHOUT REGISTRATION UNDER THE ACT UNLESS THE
CORPORATION RECEIVES AN OPINION OF COUNSEL, SATISFACTORY TO THE
CORPORATION, THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE OR
SUCH REGISTRATION IS NOT REQUIRED PURSUANT TO REGULATION S UNDER THE
ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN THAT CERTAIN MAY 1, 1996,
SUBSCRIPTION AGREEMENT BETWEEN THE ORIGINAL HOLDER HEREOF AND THE
CORPORATION.
The Corporation shall be entitled to enter stop transfer notices on its transfer
books with respect to the Shares.
8. Compliance with Regulation S and Removal of Restrictive Legend. The
Corporation covenants to comply fully with Rule 903 (including Rule 903(c)(2))
of Regulation S during the offer and sale of the Shares and during the
applicable restricted period under Rule 903(c)(2) (the "Restricted Period"). The
parties acknowledge that Rule 903(c)(2)--unlike Rule 903(c)(3)--does not contain
a provision requiring the imposition of a restrictive legend on securities sold
thereunder, and that the parties have voluntarily agreed to impose such a legend
on the Shares when issued, because certain requirements of Regulation S remain
to be satisfied during the subsequent Restricted Period. The Investor agrees to
cooperate with the Corporation in providing any certificates or other
information reasonably necessary for the Corporation to confirm that Rule 903
and Rule 903(c)(2) have been satisfied. The Investor acknowledges that no
representation, warranty or guaranty, express or implied, has been given to the
Investor by any officer, director, agent, or employee of, legal counsel to, or
any other person connected with, the Corporation regarding the availability at
any time of an exemption from registration under the Securities Act for any
offer, sale or other transfer or disposition of the Shares by the Investor. The
Investor understands and agrees that the availability of any such exemption from
registration must be determined solely by the Investor and the Investor's own
legal counsel based on the particular facts and circumstances existing at the
time of a proposed transaction.
9. Reliance. The Investor is aware that the Corporation is relying on
the accuracy of the above representations to establish compliance with Federal
and State securities laws. If any such warranties or representations are not
true and accurate in any respect as of the Closing, Investor shall so notify the
Corporation in writing immediately and shall be cause for rescission by the
Corporation at its sole election. The Investor shall indemnify the Corporation
and its affiliates, legal counsel and agents against all losses, claims, costs,
expenses and damages or liabilities, including reasonable attorneys' fees, which
such parties may suffer or incur caused or in connection with or arising out of,
directly or indirectly, from their reliance on such warranties and
representations.
10. Miscellaneous.
a. Survival. The representations, warranties, covenants and
agreements made herein shall survive the closing of the transactions
contemplated hereby.
b. Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
c. Entire Agreement. This Agreement, Exhibits and the Schedules
attached hereto constitute the entire agreement and understanding between the
parties with respect to the subject matters herein, and supersede and replace
any prior agreements and understandings, whether oral or written between and
among them with respect to such matters. The provisions of this Agreement may be
waived, altered, amended or repealed, in whole or in part, only upon the written
consent of the Corporation and the Investor.
d. Title and Subtitles. The titles of the Sections and
subsections of this Agreement are for the convenience of reference only and are
not to be considered in construing this Agreement.
e. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
f. Applicable Law. This Agreement shall be governed by and
construed in accordance with laws of the State of California, applicable to
contracts between California residents entered into and to be performed entirely
within the State of California.
g. Venue. Any action, arbitration, or proceeding arising
directly or indirectly from this Agreement or any other instrument or security
referenced herein shall be litigated or arbitrated, as appropriate, in the
County of San Francisco, State of California.
h. Authority. If Investor is a corporation, partnership, trust
or estate: (i) the individual executing and delivering this Agreement on behalf
of the Investor has been duly authorized and is duly qualified to execute and
deliver this Agreement on behalf of Investor in connection with the purchase of
the Shares and (ii) the signature of such individual is binding upon Investor.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
INVESTOR U.S. ELECTRICAR, INC.
By:________________________ By:_______________________
(Signature) (Signature)
- - --------------------------- --------------------------
(Print Name and Title) (Print Name and Title)
SCHEDULE 1
Purchase Price Per Share: $0.30
Aggregate Purchase Price $______________
Total Number of Shares _______________
Purchase Date: ____________, 1996
11
SCHEDULE 2
Definition of "U.S. Person"
"Reg. ss.230.902. As used in Regulation S, the following terms shall
have the meanings indicated:
. . .
(o) U.S. Person.
(1) "U.S. person" means:
(i) any natural person resident in the United States;
(ii) any partnership or corporation organized or incorporated
under the laws of the United States;
(iii) any estate of which any executor or administrator is a
U.S. person;
(iv) any trust of which any trustee is a U.S. person;
(v) any agency or branch of a foreign entity located in the
United States;
(vi) any non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary for the benefit or
account of a U.S. person;
(vii) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized, incorporated,
or (if an individual) resident in the United States; and
(viii) any partnership or corporation if:
(A) organized or incorporated under the laws of any foreign
jurisdiction; and
(B) formed by a U.S. person principally for the purpose of
investing in securities not registered under the Act, unless it is organized or
incorporated, and owned, by accredited investors (as defined in Rule 501(a)
under the Act (ss.230.501(a) of this chapter)) who are not natural persons,
estates or trusts.
(2) Notwithstanding paragraph (o)(1) of this section, any discretionary
account or similar account (other than an estate or trust) held for the benefit
or account of a non-U.S. person by a dealer or other professional fiduciary
organized, incorporated, or (if an individual) resident in the United States
shall not be deemed a "U.S. person."
(3) Notwithstanding paragraph (o)(1) of this section, any estate of
which any professional fiduciary acting as executor or administrator is a U.S.
person shall not be deemed a U.S. person if:
(i) an executor or administrator of the estate who is not a
U.S. person has sole or shared investment discretion with respect to the assets
of the estate; and
(ii) the estate is governed by foreign law.
(4) Notwithstanding paragraph (o)(1) of this section, any trust of
which any professional fiduciary acting as trustee is a U.S. person shall not be
deemed a U.S. person if a trustee who is not a U.S. person has sole or shared
investment discretion with respect to the trust assets, and no beneficiary of
the trust (and no settlor if the trust is revocable) is a U.S. person.
(5) Notwithstanding paragraph (o)(1) of this section, an employee
benefit plan established and administered in accordance with the law of a
country other than the United States and customary practices and documentation
of such country shall not be deemed a U.S. person.
(6) Notwithstanding paragraph (o)(1) of this section, any agency or
branch of a U.S. person located outside the United States shall not be deemed a
"U.S. person" if:
(i) the agency or branch operates for valid business reasons;
and
(ii) the agency or branch is engaged in the business of
insurance or banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located.
(7) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank, the Asian
Development Bank, the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar international
organizations, their agencies, affiliates and pension plans shall not be deemed
"U.S. persons."
12
SCHEDULE 3
Definition of "Offshore Transaction"
"Reg. ss.230.902. As used in Regulation S, the following terms shall
have the meanings indicated:
. . .
(i) Offshore Transaction.
(1) An offer or sale of securities is made in an "offshore transaction"
if:
(i) the offer is not made to a person in the United States;
and
(ii) either:
(A) at the time the buy order is originated, the buyer is
outside the United States, or the seller and any person acting on its behalf
reasonably believe that the buyer is outside the United States; or (B) for
purposes of: (1) ss.230.903, the transaction is executed in, on or through a
physical trading floor of an established foreign securities exchange that is
located outside the United States; or (2) ss.230.904, the transaction is
executed in, on or through the facilities of a designated offshore securities
market described in paragraph (a) of this section, and neither the seller nor
any person acting on its behalf knows that the transaction has been pre-arranged
with a buyer in the United States.
(2) Notwithstanding paragraph (i)(1) of this section, offers and sales
of securities specifically targeted at identifiable groups of U.S. citizens
abroad, such as members of the U.S. armed forces serving overseas, shall not be
deemed to be made in "offshore transactions."
(3) Notwithstanding paragraph (i)(1) of this section, offers and sales
of securities to persons excluded from the definition of "U.S. person" pursuant
to paragraph (o)(7) of this section or persons holding accounts excluded from
the definition of "U.S. person" pursuant to paragraph (o)(2) of this section,
solely in their capacities as holders of such accounts, shall be deemed to be
made in "offshore transactions."
13
EXHIBIT A - PRIVATE PLACEMENT MEMORANDUM
14
EXHIBIT B - RISK FACTORS
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, IN ADDITION TO THE MATTERS SET
FORTH ELSEWHERE IN THIS SUBSCRIPTION AGREEMENT, THE FOLLOWING FACTORS.
Debt Restructuring. In March 1995, as a result of the Corporation's
insolvency, the Corporation entered into agreements in March and April 1995 with
its secured creditors and largest unsecured creditor, to restructure this debt
in the aggregate amount of approximately $22 million. The Corporation, its
largest unsecured creditor, and the holders of more than 75% of the outstanding
principal of the secured debt agreed to add the unpaid interest to principal,
reset the maturity dates of the secured debt and its largest unsecured
creditor's debt to March and April 1996, respectively, and for substantially all
of the debt establish a new conversion rate to common stock of $0.30 per share.
They also agreed that conversion shall occur upon (1) a restructuring/repayment
workout plan accepted by the Corporation's unsecured creditors holding 80% or
more of the Corporation's unsecured trade debt, which plan must be approved by
the Corporation, or (2) the sole election of the Corporation's largest unsecured
creditor to cause conversion of this debt. Subsequently, the Corporation and the
Creditors described above agreed to extend the maturity date to March 25, 1997.
In addition, in April 1995, an informal committee of the Corporation's
unsecured trade creditors was established, and in August 1995, this committee
recommended for approval a voluntary restructuring of the Corporation's
unsecured debt which the Corporation presented to the creditors for their
approval in December 1995. As of January 31, 1996, the aggregate amount of the
Corporation's outstanding unsecured antecedent debt, including principal and
interest, was approximately $13,940,000.
The terms of the proposed debt restructuring are set forth in the
Private Placement Memorandum dated January 2, 1996, a copy of which is attached
hereto as Exhibit B. As described above, the conversion of the Corporation's
remaining secured debt into equity is contingent upon the holders of at least
80% of the outstanding unsecured debt participating in the restructuring plan.
As of April 2, 1996, the Corporation believes it has received and approved
approximately $11,331,000 or 81% acceptances by its antecedent creditors.
Outstanding antecedent debt of approximately $2,609,000 has not yet been
settled. The Corporation and its secured creditors may elect, however, to keep a
portion of the secured debt outstanding until substantially all of this
remaining unsecured debt has accepted the Corporation's debt restructuring plan.
THERE CAN BE NO ASSURANCE THAT THE CORPORATION WILL BE ABLE TO CONTINUE
TO EFFECTUATE THE DEBT RESTRUCTURING. TO THE EXTENT THAT THE CORPORATION IS
UNABLE TO CONTINUE TO EFFECTUATE THE VOLUNTARY RESTRUCTURING OR OTHERWISE
REFINANCE OR CONVERT SUCH DEBT AND ADDITIONAL FUNDING IS NOT AVAILABLE, THE
CORPORATION WOULD BE FORCED TO SEEK PROTECTION UNDER APPLICABLE BANKRUPTCY AND
INSOLVENCY LAWS.
Additional Funding. The Corporation's planned expenditures are based
primarily on its internal estimates of future sales and ability to raise
additional financing. If revenues or additional financing do not meet the
Corporation's expectations in any given period of time, the adverse impact on
the Corporation's finances will be magnified by the Corporation's inability to
adjust spending quickly enough to compensate for revenue or financing
shortfalls. Significant additional funding will be required throughout 1996 and
1997 to continue operations, and there can be no assurance that the Corporation
will be able to secure such additional financing on favorable terms, or at all.
As of January 31, 1996, the Corporation had cash of $444,000, including $305,000
held in escrow for antecedent debt and together with its subsidiaries had
receivables which were not more than sixty days past due of approximately
$735,000 which the Corporation believes have a reasonable likelihood of being
collected. There is no guaranty that all or any of the Corporation's remaining
unsecured creditors representing in excess of $2.6 million in debt will agree to
the proposed debt restructuring/repayment plan or any other plan. The holders of
the approximately $18.5 million of currently outstanding secured debt in the
Corporation have agreed to convert a portion or all of their debt into equity
under specified milestones which may or may not ever occur.
Going Concern/NOL. The Corporation has experienced recurring losses
from operations, use of cash from operations and had an accumulated deficit of
$72,036,000 at January 31, 1996, which deficit as of October 31, 1995, was
approximately $69,580,000. (See "Increasing and Continued Losses" below). There
is no guaranty, however, that any net operating losses will be available to the
Corporation in the future as an offset against future profits. A substantial
portion of the losses are attributable to research, development and other
start-up costs associated with the Corporation's changing business focus from
retail and mail order operations to the production of electric vehicles and
electric power-train "kit" systems. Cash flows from future operations may not be
sufficient to enable the Corporation to achieve profitable operations as
previously disclosed in the preceding paragraph. Market conditions and the
Corporation's financial position may inhibit its ability to achieve profitable
operations. These factors as well as others indicate the Corporation may be
unable to continue as a going concern unless it is able to obtain significant
additional financing and generate sufficient cash flows to meet its obligations
as they come due and sustain its operations. The Corporation estimates that it
will need additional outside financing for at least approximately three more
years to continue funding the development of its products and the growth of its
business before cash from operations is sufficient to fund the Corporation's
business operations. The Corporation estimates that it will need approximately
$2 million to $3 million in additional outside funding through the remaining
three months of fiscal year 1996, without the payment of past due debts owed
creditors. The Corporation's audited financial statements included in the Form
10-K for fiscal year 1995 also include a "Going Concern" qualification from the
Corporation's auditors.
15
Increasing and Continued Losses. The Corporation was founded in 1976,
but initial sales were very limited and the Corporation was unprofitable as a
manufacturer of solar powered toys. The Corporation has been profitable in only
one year, fiscal year 1986. For the fiscal years ended July 31, 1993, 1994 and
1995, the Corporation had substantial net operating losses of $2,607,000,
$25,021,000 and $37,565,000, respectively, on sales of $863,000, $5,787,000 and
11,625,000, respectively. Through the first six months of fiscal 1996, the
Corporation lost an additional $4,400,000 on sales of $3,011,000. There can be
no assurance that the Corporation will be able to achieve profitability.
Source of Revenues . In 1991, the Corporation started to generate a
significant portion of its revenues from the sale of electric vehicles. The
Corporation intends to substantially increase its revenue from the sale of
electric vehicles. However, there can be no assurance that demand for these
products will warrant the Corporation's anticipated expenditures, or that the
Corporation will be successful in engineering and marketing these products or
deriving any sort of profit from such revenues. Due to the lack of capital and
other factors, the Corporation has recently furloughed a significant portion of
its production workforce. This action will significantly impact the
Corporation's ability to generate revenue near term.
General Economic Conditions. The financial success of the Corporation
may be sensitive to adverse changes in general economic conditions, such as
inflation, unemployment, and consumer demand for the Corporation's products.
These changes could cause the cost of supplies, labor, and other expenses to
rise faster than the Corporation can raise prices. Such changing conditions also
could significantly reduce demand in the market place for the Corporation's
products. The Corporation has no control over any of these changes.
Growth Stage Company; Reevaluation of Business Plans. Although the
Corporation was originally founded in 1976, many aspects of the Corporation's
business are still in the early growth stage development, and its proposed
operations are subject to all of the risks inherent in a start-up or growing
business enterprise, including the likelihood of continued operating losses. The
likelihood of the success of the Corporation must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with the growth of an existing business, the
development of new products and channels of distribution, and current and future
development in several key technical fields, as well as the competitive and
regulatory environment in which the Corporation will operate.
In response to the severe cash shortage experienced by the Corporation,
in March 1995, the Corporation initiated steps to restructure its organization
and operations in an effort to stabilize and improve the Corporation's financial
condition. Since March 1995, the Corporation has focused its resources on the
production of off-road industrial vehicles and on-road buses and has, for the
time being, ceased ordering new inventory for its on-road conversion business;
however, the Corporation intends to finish converting and selling its existing
inventory of on-road vehicles. The Corporation is currently re-evaluating all
aspects of its business, including each of its product lines, in view of its
capital constraints as well as competitive market conditions. To the extent the
Corporation determines to discontinue any of its product lines, potential
sources of revenue from those product lines would be eliminated.
Dependence on Key Personnel . The success of the Corporation is largely
dependent on its key management and technical personnel, including Roy Kusumoto,
the Corporation's Chief Executive Officer, the loss of one or more of whom could
adversely affect the Corporation's business. Additionally, in order to
successfully implement its anticipated growth, the Corporation will be dependent
upon its ability to hire additional qualified personnel. There can be no
assurance that the Corporation will be able to retain or hire other necessary
personnel. The Corporation does not maintain key man life insurance on any of
its key personnel. The Corporation believes that its future success will depend
in part upon its continued ability to attract, retain and motivate additional
highly skilled personnel, including engineers, who are in great demand.
Insurance and Potential Liability. The Corporation maintains insurance,
including insurance relating to personal injury and product liability, in
amounts which the Corporation currently considers adequate. Nevertheless, a
partially or completely uninsured claim against the Corporation, if successful
and of sufficient magnitude, could have a material adverse effect on the
Corporation. In addition, the Corporation's severe cash shortage may adversely
effect its ability to continue to maintain its insurance coverage.
Nature of Industry . The electric vehicle industry is in its infancy.
Although the Corporation believes that it has manufactured more electric
vehicles than any other company in the United States based on its own knowledge
of the industry, there are many large and small companies, both domestic and
foreign, now in, poised to enter or entering this industry. This EV industry is
subject to rapid technological change. Most of the major domestic and foreign
automobile manufacturers (i) have produced design-concept electric vehicles,
and/or (ii) have developed improved electric storage, propulsion and control
systems, and/or (iii) are planning to enter the field. Various nonautomotive
companies are also developing improved electric storage, propulsion and control
systems. Demand for and interest in electric vehicles appears to be increasing.
However, growth in the present limited demand for electric vehicles depends upon
(A) future regulation and legislation requiring more use of non-polluting
vehicles, (B) the
16
environmental consciousness of customers and (C) the ability of electric
vehicles to successfully compete with vehicles powered with internal combustion
engines.
Uncertainty of Product Market and Acceptance; Changed Legislative
Climate. Because vehicles powered by internal combustion engines cause
pollution, there is significant public pressure in Europe and Asia, and enacted
or pending legislation in the United States at the federal level and in certain
states, to promote or mandate the use of vehicles with no tailpipe emissions
("zero emission vehicles") or reduced tailpipe emissions ("low emission
vehicles"). To date, substantially all zero emission vehicles designed and
produced have been electric vehicles, and most low emission vehicles have been
powered by natural gas or have been hybrid vehicles using two or more powering
systems. The Corporation believes that legislation requiring or promoting zero
emission vehicles or low emission vehicles is necessary to create a significant
commercial market for electric vehicles. There can be no assurance, however,
that further legislation will be enacted or that current legislation will not be
repealed or amended, or that a different form of zero emission or low emission
vehicle will not be invented, developed and produced, and achieve greater market
acceptance than electric vehicles. Following the state and federal elections in
November 1994, the Corporation believes that the changed legislative climate in
the United States may result in extensions, modifications or reductions of
current federal and state legislation, mandates and potential tax incentives
which could adversely affect the Corporation's business prospects if
implemented. In April 1996, California altered its mandate requirements by
extending the implementation date and establishing voluntary compliance.
Competition . There are many companies, including several major
automobile companies and electronics firms, actively engaged in the research and
development of electric vehicles. Many have far greater resources and marketing
abilities than the Corporation. Although the Corporation believes it has sold
more electric vehicles than any other company in the United States, there can be
no assurance that the Corporation will retain this advantage or be able to
compete in the future with the companies in or entering the electric vehicle
market. The major automobile manufacturers have a distinct advantage over the
Corporation if they decide to compete with the Corporation in the
retrofit/conversion EV business, should the Corporation continue in this
business. Their vast resources would pose a distinct disadvantage to the
Corporation. Direct competition from the "Big Three" could possibly inhibit the
Corporation from obtaining the vehicles it needed without additional cost. The
Corporation, believes, however, that the niche fleet market which it has
targeted is presently too small for the large automobile manufacturers to pursue
on a competitive basis with the Corporation.
Dependence On Suppliers/Outside Parties. Certain components used in the
Corporation's electric vehicles are available only from a limited number of
sources. If such sources are unable or unwilling for any reason to manufacture
and sell these unique components, the Corporation at the present time would have
no other supplier. Additionally, the Corporation intends to develop close
relationships with other suppliers of propriety components, such as batteries,
which the Corporation will integrate into its retrofitted and OEM electric
vehicles. The Corporation's reliance on these limited source suppliers could
cause shortages of certain key components, or the inability to find comparable
replacements at any cost or time could significantly impair the Corporation's
financial performance and relationships with its customers.
Rapid Technological Change . The Corporation's existing products are
designed for use with, and are dependent upon, existing electric vehicle
technology. As technologies change, and subject to the Corporation's limited
available resources, the Corporation plans to upgrade or adapt its products in
order to continue to provide products with the latest technology. However, there
can be no assurance that the Corporation will be able to avoid technological
obsolescence of its products or that the Corporation's research and development
efforts will be able to adapt to changes in or create the necessary
"leading-edge" technology to stay competitive. Further proprietary technology
development by others could prohibit the Corporation from using its own
technology.
Minimal Barriers to Entry . Other than its trademarks and its
distribution arrangements with suppliers of subcomponents, the Corporation does
not presently license or own any proprietary technology and, therefore, has
created little or no barrier to entry for competitors other than the time and
significant expense required to assemble and develop similar production and
design capabilities. Competitors of the Corporation may enter into exclusive
arrangements with current or potential suppliers for the Corporation, thereby
potentially giving such competitors a competitive edge which the Corporation
might not be able to overcome.
No Dividends. To date, the Corporation has not paid any dividends on
its Common Stock or Preferred Stock and does not intend to declare any dividends
in the foreseeable future on its Stock.
Preferred Stock Preferences. The Corporation's Series A and Series B
Preferred Stock has preference over the Common Stock with respect to the payment
of dividends and the distribution of assets in the event of a liquidation or
dissolution of the Corporation. In addition, the Board of Directors of the
Corporation also has the authority to issue additional preferred stock in one or
more series and to fix the voting and other powers, designations, dividends,
preferences and relative participation, optional, conversion, exchange,
redemption and other special rights and qualifications, limitations or
restrictions thereon of any such series
17
of preferred stock. Such rights could adversely affect the existing or future
rights of the shares of Common Stock with respect to the existing Series A
Preferred Stock and as to any new series of Preferred Stock. In connection with
the restructuring of the Corporation's unsecured debt, the Corporation shall
issue shares of Series B Preferred Stock that will have certain preferences over
the Common Stock and the Series A Preferred Stock with respect to dividends and
the distribution of assets in the event of a liquidation or dissolution. See
Risk Factors -Debt Restructuring.
Shares Eligible for Future Sale. No prediction can be made as to the
effect, if any, that substantial and significant sales of new shares of Common
Stock or the availability of such shares for sale will have on the market prices
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of Common Stock may be sold in the future may adversely affect
prevailing prices for the Corporation's Common Stock and could impair the
Corporation's ability to raise capital through the sale of its equity
securities.
Leverage; Cash Flow. Any indebtedness being assumed by the Corporation
in connection with its financing activities poses significant risks to potential
investors, particularly in view of the Corporation's loss history. The ability
of the Corporation to generate sufficient cash flow to make payments with
respect to any debt of the Corporation will depend upon the future performance
of the Corporation, which will be subject to factors beyond the Corporation's
control. No assurance can be given that the Corporation will be able to fund its
working capital needs and to satisfy its principal and interest requirements
from internally generated funds.
Creditor Claims and Litigation/Shareholder Claims. The Corporation has
been threatened with litigation from certain of its shareholders if a
restructuring of the shareholders' investment along the lines set forth in a
letter from their attorneys dated April 27, 1995 is not reached (a copy of which
has been delivered to and is available for review by the Purchaser and its
counsel upon request). The informal Creditors Committee of the Corporation has
recommended a voluntary moratorium on pursuing unsecured claims (a copy of which
is available for review by the Purchaser and its counsel upon request). There is
no guaranty, however, that this moratorium will continue. In addition, certain
unsecured creditors have nevertheless filed or threatened to file lawsuits if
they are not paid. As of October 30, 1995, lawsuits had been filed by unsecured
creditors for claims representing an aggregate of approximately $650,000 in
principal and interest.
18
WARRANT
THE SECURITIES REPRESENTED BY OR UNDERLYING THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES
ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION
THEREOF. THE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION AND QUALIFICATION WITHOUT AN OPINION OF COUNSEL FOR THE
HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
THE SECURITIES REPRESENTED BY OR UNDERLYING THIS INSTRUMENT ARE SUBJECT TO
RESTRICTIONS ON TRANSFER PURSUANT TO REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED EXCEPT PURSUANT TO THE PROVISIONS UNDER REGULATION S OR PURSUANT
TO REGISTRATION UNDER SUCH ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
REGISTRATION.
THE WARRANTS AND WARRANT SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND (I) THE WARRANTS AND THE WARRANT SHARES
MAY NOT BE EXERCISED, OFFERED OR SOLD BY OR ON BEHALF OF U.S. PERSONS, (II) THE
WARRANTS MAY NOT BE EXERCISED IN THE UNITED STATES AND (III) THE WARRANT SHARES
MAY NOT BE DELIVERED IN THE UNITED STATES UNLESS, IN EACH CASE, THERE IS A
REGISTRATION STATEMENT IN EFFECT COVERING THE WARRANTS AND WARRANT SHARES OR
THERE IS AVAILABLE AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
THE SECURITIES REPRESENTED BY OR UNDERLYING THIS INSTRUMENT ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT CERTAIN MAY 1, 1996
SUBSCRIPTION AGREEMENT BETWEEN THE ORIGINAL HOLDER HEREOF AND THE COMPANY.
NO. SERIES C-____
______________ SHARES
CASHLESS EXERCISE WARRANT TO PURCHASE COMMON STOCK
U.S. ELECTRICAR, INC., a California corporation (the "Corporation"),
hereby grants to _______________________ (the "Holder"), the right to purchase
from the Corporation _________________________________ (________) shares of the
common stock of the Corporation (the "Warrant Shares"), subject to the terms and
conditions set forth below. This Warrant is one of a duly authorized series of
Warrants of the Corporation (which Warrants are identical except for the
variations necessary to express the name of the Holder and number of "Warrant
Shares"), which Warrants together are designated "Series C Warrants" acquired
pursuant to the terms and conditions set forth in that certain May 1, 1996
Subscription Agreement (the Subscription Agreement").
1. TERM. This Warrant may be exercised at any time after the date
hereof through May 1, 1997 (the "Exercise Period").
2. PURCHASE PRICE. The purchase price for each share of the
Corporation's common stock purchasable hereunder shall be Thirty Cents ($0.30),
subject to adjustment as provided in Section 8 below (the "Warrant Exercise
Price").
3. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in
part (except for a cashless exercise which shall require exercise in full) , but
not for less than one hundred thousand (100,000) Warrant Shares (or such lesser
number of Warrant Shares as may at the time of exercise constitute the maximum
number exercisable) and in excess of 100,000 Warrant Shares in increments of
10,000 Warrant Shares. It is exercisable, subject to the satisfaction of
applicable securities laws, at any time during the Exercise Period by the
surrender of the Warrant to the Corporation at its principal office together
with the Notice of Exercise annexed hereto duly completed and executed on behalf
of the Holder, accompanied by payment in full of the amount of the aggregate
purchase price of the Warrant Shares in immediately available funds, except if
exercised under the cashless exercise option as provided below. The Corporation
agrees that the Warrant Shares so purchased shall be issued as soon as
practicable thereafter, and that the Holder shall be deemed the record owner of
such Warrant Shares as of and from the close of business on the date on which
this Warrant shall be surrendered, together with payment in full as required
above. It shall be a condition to the exercise of this Warrant that the Holder
or any transferee hereof certify to the Corporation, at the time of exercise,
either that he or it is not a U.S. Person (as defined in Regulation S under the
Securities Act of 1933, as amended (the "Securities Act") and that this Warrant
is not being exercised on behalf of a U.S. Person, or to provide an opinion of
counsel that the Warrant and the Warrant Shares to be delivered upon exercise
thereof have been registered under the Securities Act or that an exemption from
the registration requirements of the Securities Act is available. It shall be a
further condition to the exercise of this Warrant that the Warrant may not be
exercised in the United States and the Warrant Shares may not be delivered to
the United States absent registration under the Securities Act or an available
exemption from registration.
4. CASHLESS EXERCISE OPTION. Notwithstanding the foregoing, if on the
date of exercise the "Fair Market Value" of one Warrant Share is equal to or
greater than twice the Warrant Exercise Price and during the preceding 20
trading days prior to the date of exercise under this Warrant the average
trading volume was in excess of 100,000 shares per day, then in lieu of
exercising this Warrant for cash, the Holder may elect to receive Warrant Shares
equal to the value of this Warrant (or equal to the value of the portion of the
Warrant Shares thereof being cancelled) which shall be that number of Warrant
Shares equal to the quotient obtained by dividing (Z) the product obtained when
(i) the number of Warrant Shares being exercised/cancelled under this Warrant is
multiplied by (ii) the value of one Warrant Share for which this Warrant is
being cancelled on the exercise date (determined by subtracting the Warrant
Exercise Price for one Warrant Share on the exercise date from the "Fair Market
Value" (as hereinafter defined) of one Warrant Share on the exercise date) by
(ZZ) the Warrant Exercise Price for one Warrant Share on the exercise date
illustrated as follows:
X = Y(A-B)
------
B
Where X = the number of Warrant Shares to be issued to Holder
Y = the number of Warrant Shares being exercised/cancelled
under this Warrant
A = the "Fair Market Value" of one Warrant Share on the date
of exercise
B = Exercise Price on the date of exercise
Fair Market Value of one share of a Warrant Share shall mean:
-2-
A. If the Corporation's Common Stock is listed on a national securities
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation/ National Market System (NASDAQ/NMS), then the average price
of all of the closing or last sales prices, respectively, reported for the
twenty (20) trading days immediately preceding the exercise date.
B. If the Corporation's Common Stock is not listed on a national
securities exchange or quoted on NASDAQ/NMS, but is traded in the
over-the-counter market, then the average price of all of the mean prices
between the closing bid and asked prices of the Corporation's publicly traded
stock as listed and traded on the NASDAQ electronic bulletin board during the
twenty (20) trading days immediately preceding the exercise date.
In the event of a cashless exercise, the entire Warrant must be
surrendered, and no new Warrant shall be issued. In no event shall a cashless
exercise entitle the Holder to exercise more than the Warrant Shares set forth
on page 1 of this Warrant, less any number previously exercised.
5. WARRANT CONFERS NO RIGHTS OF SHAREHOLDER. The Holder shall not have
any rights as a shareholder of the Corporation with regard to the Warrant Shares
prior to actual exercise resulting in the purchase of the Warrant Shares.
6. HOLDER REPRESENTATIONS AND WARRANTIES. The Holder represents and
warrants to the Corporation that:
A. PURCHASE FOR OWN ACCOUNT/REGULATION S. The Holder
understands that neither this Warrant nor the Warrant Shares issuable upon the
exercise of this Warrant have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or any state securities laws, by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment as
expressed herein. The Holder is acquiring this Warrant for investment for its
own account, and not with a view to, or for resale in connection with, any
distribution thereof, and it has no present intention of selling or distributing
this Warrant. The Holder agrees that any Warrant Shares issuable upon exercise
of this Warrant will be acquired for investment for its own account, and not
with a view to, or for resale in connection with, any distribution thereof, and
such Warrant Shares will not be registered under the Securities Act and
applicable state securities laws and that such Warrant Shares may have to be
held indefinitely unless they are subsequently registered or qualified under the
Securities Act and applicable state securities laws or, based on an opinion of
counsel reasonably satisfactory to the Corporation, an exemption from such
registration and qualification is available. The Holder further understands that
the Corporation is relying on the rules and regulations governing offers and
sales made outside the United States to non-"U.S. Persons" pursuant to
Regulation S under the Securities Act. The Holder, by acceptance hereof,
consents to the placement of the following restrictive legends, or similar
legends, on each certificate to be issued to the Holder by the Corporation in
connection with the issuance of such Warrant Shares:
-3-
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY
STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR LAWS COVERING SUCH SECURITIES, OR (B) THE HOLDER
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE SECURITIES
SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND THE QUALIFICATION
REQUIREMENTS UNDER APPLICABLE STATE LAW.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER PURSUANT TO REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED EXCEPT PURSUANT TO THE PROVISIONS UNDER
REGULATION S OR PURSUANT TO REGISTRATION UNDER SUCH ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER SET FORTH IN THAT CERTAIN MAY 1, 1996 INVESTMENT BANKING
AGREEMENT BETWEEN THE ORIGINAL HOLDER HEREOF AND THE COMPANY.
B. ACCESS TO DATA. The Holder has had an opportunity to
discuss the Corporation's business, management and financial affairs with its
management and to obtain any additional information which the Holder has deemed
necessary or appropriate for deciding whether or not to purchase this Warrant
and the Warrant Shares, including the information provided or otherwise
disclosed under the Subscription Agreement. The Holder acknowledges that no
other representations or warranties, oral or written, have been made by the
Corporation or any agent thereof except as set forth in this Agreement.
C. NO FAIRNESS DETERMINATION. The Holder is aware that no
federal, state or other agency has made any finding or determination as to the
fairness of the investment, nor made any recommendation or endorsement of this
Warrant or the Warrant Shares.
D. KNOWLEDGE AND EXPERIENCE. The Holder has such knowledge and
experience in financial and business matters, including investments in other
start-up companies, that it is capable of evaluating the merits and risks of the
investment in this Warrant and the Warrant Shares, and it is able to bear the
economic risk of such investment. Further, the Holder has such knowledge and
experience in financial and business matters that he is capable of utilizing the
information made available to him in connection with the offering of this
Warrant and the Warrant Shares, of evaluating the merits and risks of an
investment in this Warrant and the Warrant Shares and of making an informed
investment decision with respect to this Warrant and the Warrant Shares.
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E. LIMITED PUBLIC MARKET. The Holder is aware that there is
currently a very limited "over-the-counter" public market for the Corporation's
registered securities and that the Corporation became a "reporting issuer" under
the Securities Exchange Act of 1934, as amended, on January 27, 1995. There is
no guarantee that a more established public market will develop at any time in
the future. The Holder understands that this Warrant and the Warrant Shares are
all unregistered and may not presently be sold in even this limited public
market. The Holder understands that this Warrant and the Warrant Shares cannot
be readily sold or liquidated in case of an emergency or other financial need.
The Holder has sufficient liquid assets available so that the purchase and
holding of this Warrant and the Warrant Shares will not cause it undue financial
difficulties.
G. INVESTMENT EXPERIENCE. The Holder is an "accredited
investor" as that term is defined in Regulation D promulgated by the Securities
and Exchange Commission. The term "accredited investor" under Regulation D
refers to:
(1) A person or entity who is a director or executive officer of the
Corporation;
(2) Any bank as defined in Section 3(a)(2) of the Securities Act, or
any savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity; any broker or dealer registered
pursuant to Section 15 of the Exchange Act; insurance company as
defined in Section 2(13) of the Securities Act; investment company
registered under the Investment Company Act of 1940; or a business
development company as defined in Section 2(a)(48) of that Act; Small
Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions for the benefit of its employees, if such
plan has total assets in excess of $5,000,000; employee benefit plan
within the meaning of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings
and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decision made
solely by persons that are accredited investors;
(3) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(4) Any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring this
Warrant or the Warrant Shares, with total assets in excess of
$5,000,000;
(5) Any natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his purchase exceeds
$1,000,000;
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(6) Any natural person who had an individual income in excess of
$200,000 during each of the previous two years or joint income with
that person's spouse in excess of $300,000 in each of those years and
has a reasonable expectation of reaching the same income level in the
current year;
(7) Any trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring this Warrant or the Warrant
Shares, whose purchase is directed by a person who has such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment; or
(8) Any entity in which all of the equity owners are accredited
investors.
As used in this Section 6(g), the term "net worth" means the excess of
total assets over total liabilities. For the purpose of determining a
person's net worth, the principal residence owned by an individual
should be valued at fair market value, including the cost of
improvements, net of current encumbrances. As used in this Section
6(g), "income" means actual economic income, which may differ from
adjusted gross income for income tax purposes. Accordingly, the
undersigned should consider whether it should add any or all of the
following items to its adjusted gross income for income tax purposes in
order to reflect more accurately its actual economic income: Any
amounts attributable to tax-exempt income received, losses claimed as a
limited partner in any limited partnership, deductions claimed for
depletion, contributions to an IRA or Keogh retirement plan, and
alimony payments.
H. RESTRICTIONS ON TRANSFER RE REGULATION S.
(1) NOT A "U.S. PERSON." The Holder hereby certifies
that (i) it is not a "U.S. Person" as defined under Rule 902, Section (o) of
Regulation S promulgated under the Securities Act (a copy of which is attached
hereto as Schedule 2) and is not acquiring this Warrant or the Warrant Shares
for the account or benefit of any U.S. Person, and (ii) it is acquiring this
Warrant and the Warrant Shares in an "offshore transaction" as defined under
Section (i) of such Rule 902 (a copy of which is attached hereto as Schedule 3).
(2) TRANSFER RESTRICTIONS. The Holder shall not attempt
to have registered any transfer of this Warrant or the Warrant Shares not made
in accordance with the provisions of Regulation S. In addition to any other
restrictions on transfer set forth in this Warrant, the Holder agrees to
transfer this Warrant or the Warrant Shares only (i) in accordance with the
provisions of Regulation S, pursuant to registration under the Securities Act,
or pursuant to an available exemption from registration, and (ii) in accordance
with any applicable state securities laws. Unless so registered or exempt
therefrom, such transfer restrictions shall include but not be limited to and
the Holder warrants and represents the following:
(I) The Holder shall not sell this Warrant or the
Warrant Shares publicly or privately, or through any short sale, or other
hedging transaction to any U.S. Person, whether directly or indirectly, or for
the account or benefit of any such U.S. Person for the restrictive period
mandated by Regulation S after the purchase of this Warrant or the Warrant
Shares, as applicable, unless registered or exempt from registration;
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(II) Any other offer or sale of this Warrant or
the Warrant Shares shall be made only if (A) during the restrictive period any
subsequent purchaser certifies in writing that it is not a U.S. Person and is
not acquiring this Warrant or the Warrant Shares for the account or benefit of
any U.S. Person, or (B) after the restrictive period this Warrant and the
Warrant Shares are purchased in a transaction that did not require registration
under the Securities Act and applicable Blue Sky laws; and
(III) Any transferee of this Warrant or the
Warrant Shares shall agree in writing to resell this Warrant or the Warrant
Shares, as applicable, only in accordance with the provisions of Regulation S,
pursuant to registration under the Securities Act, or pursuant to an available
exemption from registration.
(3) RESTRICTIONS ON RESALES IN THE UNITED STATES. The
Holder understands and acknowledges that the Securities Act prohibits resales of
securities in the United States except pursuant to an effective registration
statement or an exemption from registration for which the securities and the
Holder holding such securities qualifies. The Holder understands and
acknowledges the requirements for qualifying for an exemption from registration
afforded by Section 4 of the Securities Act and that there can be no assurance
that the Holder will be able to qualify for such an exemption from registration.
7. RESERVATION OF SHARES. The Corporation agrees at all times during
the Exercise Period to have authorized and reserved, for the exclusive purpose
of issuance and delivery upon exercise of this Warrant, a sufficient number of
shares of its common stock to provide for the exercise of the rights represented
hereby.
8. ADJUSTMENT FOR RE-CLASSIFICATION OF CAPITAL STOCK. If the
Corporation at any time during the Exercise Period shall, by subdivision,
combination or re-classification of securities, change any of the securities to
which purchase rights under this Warrant exist under the same or different
number of securities of any class or classes, this Warrant shall thereafter
entitle the Holder to acquire such number and kind of securities as would have
been issuable as a result of such change with respect to the Warrant Shares
immediately prior to such subdivision, combination, or re-classification. If
shares of the Corporation's common stock are subdivided into a greater number of
shares of common stock, the purchase price for the Warrant Shares upon exercise
of this Warrant shall be proportionately reduced and the Warrant Shares shall be
proportionately increased; and conversely, if shares of the Corporation's common
stock are combined into a smaller number of common stock shares, the price shall
be proportionately increased, and the Warrant Shares shall be proportionately
decreased.
9. PUBLIC OFFERING LOCK-UP. For a period of up to one-hundred-eighty
(180) days (the "Stand-off Period"), Holder shall not if requested by the
Corporation at any time in contemplation of a public registration, sell, pledge
or otherwise transfer any Warrant Shares (or any other shares exchanged
therefor). Notwithstanding the foregoing, the Corporation may exercise this
public offering lock-up only one time.
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10. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt by
the Corporation of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any Warrant or stock certificate, and in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and upon reimbursement to the Corporation of all reasonable expenses
incidental thereto, and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Corporation will make and deliver a new Warrant
or stock certificate of like tenor and dated as of such cancellation, in lieu of
this Warrant or stock certificate.
11. ASSIGNMENT. The Holder of this Warrant shall not assign or transfer
this Warrant or any of the Warrant Shares without the transferee meeting the
suitability requirements set forth in Section 6 (above) and without the consent
of the Corporation and in compliance with applicable state and federal
securities laws. In giving its consent, the Corporation may request an opinion
of counsel reasonably acceptable to it that such transfer is in compliance with
all applicable state and federal securities laws.
12. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
between California residents entered into and to be performed entirely within
the State of California.
13. NOTICES. Any notice required or permitted under this Warrant shall
be given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified by hand or professional courier service or for
mailings from and to any address in North America (Canada, United States and
Mexico) five (5) days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party in the Subscription Agreement,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
14. ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
15. AMENDMENTS. Any terms of this Warrant may be amended with the
written consent of the Corporation and the holders of Series C Warrants
representing not less than 67% of the shares of Common Stock issuable upon
exercise of all Series C Warrants.
Dated: May __, 1996 U.S. ELECTRICAR, INC.
By:_________________________
(Signature)
----------------------------
(Print Name & Title)
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NOTICE OF EXERCISE
TO: U.S. ELECTRICAR, INC.
(1) The undersigned hereby elects to purchase ______ shares of Common
Stock of Electricar, Inc., pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, for
investment, and that the undersigned will not offer, sell or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended (the "Securities
Act"), including, but not limited to, Regulation S promulgated thereunder, or
any state securities laws.
(3) The undersigned hereby certifies that either (i) the undersigned is
not a U.S. Person (as such term is defined in Regulation S under the Securities
Act), or (ii) the undersigned has delivered to the Corporation an opinion of
counsel to the effect that this Warrant and the Warrant Shares to be delivered
upon exercise thereof have been registered under the Securities Act or an
exemption from such registration is available.
(4) The undersigned further certifies that this Warrant is not being
exercised in the United States and understands and agrees that the Warrant
Shares may not be delivered to the United States absent registration under the
Securities Act or an available exemption from such registration.
(5) Please issue a certificate representing said shares of Common Stock
in the name of the undersigned.
(6) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned.
-----------------------
(Name)
- - ------------------------ -----------------------
(Date) (Signature)
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