THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR ISSUABLE HEREUNDER 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 THIS INSTRUMENT OR ISSUABLE HEREUNDER ARE SUBJECT
TO RESTRICTIONS ON TRANSFER PURSUANT TO REGULATIONS 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 BY THIS INSTRUMENT OR ISSUABLE HEREUNDER ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT CERTAIN JANUARY 15, 1997
SUBSCRIPTION AND LOAN AGREEMENT BETWEEN THE ORIGINAL HOLDER HEREOF AND THE
COMPANY (THE "SUBSCRIPTION AGREEMENT").
U.S. ELECTRICAR, INC.
CONVERTIBLE BOND
TO PURCHASE COMMON STOCK
San Francisco, California
U.S.$200,000 April 30, 1997
U.S. ELECTRICAR, INC., a California corporation (the "Company"), the
principal office of which is located at 5 Thomas Mellon Circle, Ste. 254, San
Francisco, CA 94134, for value received hereby promises to pay to FONTAL
INTERNATIONAL, LTD., or registered assigns, the sum of Two Hundred Thousand
Dollars ($200,000.00) or such lesser amount as shall then equal the outstanding
principal amount hereof on the terms and conditions set forth hereinafter. The
principal hereof and any unpaid accrued interest hereon, as set forth below,
shall be due and payable on July 9, 1997 (the "Due Date"). Payment for all
amounts due hereunder shall be made at the election of the Company by wire
transfer, as instructed by the Holder, or by mail to the registered address of
the Holder. The Holder of the Bond is subject to certain restrictions set forth
in the Subscription Agreement and shall be entitled to certain rights and
privileges set forth in the Subscription Agreement.
The following is a statement of the rights of the Holder of this Bond
and the conditions to which this Bond is subject, and to which the Holder
hereof, by the acceptance of this Bond, agrees:
1. Definitions. As used in this Bond, the following terms, unless the
context otherwise requires, have the following meanings:
a. "Company" includes any corporation which shall succeed to
or assume the obligations of the Company under this Bond.
b. "Holder," when the context refers to a holder of this Bond,
shall mean any person who shall at the time be the registered holder of this
Bond.
20
2. Interest. Until all outstanding principal and interest on this Bond
shall have been paid in full, interest shall be payable on the outstanding
principal balance of this Bond, in arrears on the Due Date, at the rate of ten
percent (10.0%) per annum accruing from January 15, 1997.
3. Prepayment. The Company may prepay any portion or all of the
principal balance or interest of this Bond upon ten (10) days' prior written
notice. Any prepayment of this Bond will be credited first against accrued
interest then principal.
4. Conversion.
a. Holder's Conversion Rights. So long as any principal
remains outstanding hereunder up to and through the Due Date (the "Conversion
Period"), Holder may, at its option by written notice to the Company, convert
all or any part of the principal and interest due hereunder in increments of
$100,000 or more (or such lesser amount as may remain outstanding under this
Bond at the time of conversion) into Common Stock of the Company at Thirty Cents
($0.30) per share.
b. General Conversion Terms. Upon Holder's election to convert
this Bond, the applicable amount of outstanding principal and interest of this
Bond shall be converted so long as such conversion is exempt from applicable
state and federal registration requirements and the terms and conditions set
forth below. The Company shall not be obligated to issue certificates evidencing
the shares of the securities issuable upon such conversion unless this Bond is
either delivered to the Company or its transfer agent, or the Holder notifies
the Company or its transfer agent that such Bond has been lost, stolen or
destroyed and executes an agreement and provides collateral satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection with
such Bond. The Company shall, as soon as practicable after such delivery, or
such agreement and indemnification, issue and deliver at such office to such
Holder of such Bond, a certificate or certificates for the securities to which
the Holder shall be entitled accompanied by appropriate restrictive legends on
transfer, a check payable to the Holder in the amount of any cash amounts
payable as the result of a conversion into fractional shares of Common Stock, as
the case may be, and a new Bond upon the same terms this Bond for any remaining
principal in the case of a conversion of only a portion of this Bond. Such
conversion shall be deemed to have been made immediately prior to the close of
business of the date of receipt of written notice by the Company causing
conversion. The person or persons entitled to receive Common Stock issuable upon
such conversion shall be treated for all purposes and the record Holder or
Holders of such Common Stock on such date.
5. Bond Confers No Rights of Shareholder. The Holder shall not have any
rights as a shareholder of the Company with regard to the shares issuable
hereunder prior to actual conversion hereunder.
6. Reservation of Shares. The Company agrees at all times during the
Conversion Period to have authorized and reserved, for the exclusive purpose of
issuance and delivery upon conversion of this Bond, a sufficient number of
shares of its Common Sock to provide for the conversion of the rights
represented hereby to the extent ascertainable.
7. Adjustments. If the Company at any time during the Conversion Period
shall, by subdivision, combination or re-classification of securities, change
any of the Company's Common Stock to which purchase rights under this Bond exist
into the same or different
21
number of securities of any class or classes, this Bond 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 shares hereunder
immediately prior to such subdivision, combination, or re-classification. If
shares of the Company's Common Stock are subdivided into a greater number of
shares of Common Stock, the conversion price for the shares hereunder upon
conversion of this Bond shall be proportionately reduced and such shares be
proportionately increased; and conversely, if shares of the Company's Common
Stock are combined into a smaller number of Common Stock shares, the price shall
be proportionately increased, and the Common Stock shares hereunder shall be
proportionately decreased.
8. 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
Company at any time in contemplation of a public registration, sell, pledge or
otherwise transfer any capital stock acquired hereunder (or any other shares
exchanged therefor), if this Bond has been converted, to any person or entity.
Notwithstanding the foregoing, this lock-up right may be exercised by the
Company only one time.
9. Assignment. Subject to any restrictions on transfer described
elsewhere herein, the rights and obligations of the Company and the Holder of
this Bond shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties hereto.
10. Transfer of this Bond or Securities Issuable on Conversion Hereof.
With respect to any offer, sale or other disposition of this Bond or any
underlying securities, the Holder will give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of such Holder's counsel, to the effect that such offer, sale or other
distribution may be effected without registration or qualification (under any
federal or state law than in effect, including but not limited to Regulation S
under the Securities Act of 1933, as amended (the "Act")). Furthermore, no such
transfer shall be made unless the transferee meets the same investor suitability
standards set forth in the Subscription Agreement. Promptly upon receiving such
written notice and reasonably satisfactory opinion, if so requested, the
Company, as promptly as practicable, shall notify such Holder that such Holder
may sell or otherwise dispose of this Bond or the underlying securities, as the
case may be, all in accordance with the terms of the written notice delivered to
the Company. If a determination has been made pursuant to this Section that the
opinion of counsel for the Holder is not reasonably satisfactory to the Company,
the Company shall so notify the Holder promptly after such determination has
been made. Each Bond or underlying securities thus transferred shall bear
legends as to the applicable restrictions on transferability in order to ensure
compliance with the Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restriction.
11. Notices. All notices, requests, demands, instructions or other
communications required or permitted to be given under this Bond shall be in
writing and shall be deemed to have been duly given upon delivery, if delivered
personally, or if given by prepaid telegram, or if mailed from and to an address
in North America (Canada, United States or Mexico) mailed first-class, postage
prepaid, registered or certified mail, return receipt requested, shall be deemed
to have been given five (5) days after such delivery, to the address set forth
in the Subscription Agreement. Either party hereto may change the address to
which such communications are to be directed by giving written notice to the
other party hereto of such change in the manner above provided.
22
12. Governing Law. This Agreement 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 with the
State of California. Venue for all purposes in connection with this Bond shall
be San Francisco, California.
13. Attorney's Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Bond, 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.
14. Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Bond.
IN WITNESS WHEREOF, the Company has caused this Bond to be issued as of
the date first set forth above.
U.S. ELECTRICAR, INC.
By: / s / Roy Y. Kusumoto
-----------------------------------
(Signature)
Roy Y. Kusumoto
----------------------------------
(Print Name and Title)
23