AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERIGON INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 95-4318554
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
404 EAST HUNTINGTON DRIVE
MONROVIA, CALIFORNIA 91016
(818) 932-1200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
LON E. BELL, PH.D.
PRESIDENT
AMERIGON INCORPORATED
404 EAST HUNTINGTON DRIVE
MONROVIA, CALIFORNIA 91016
(818) 932-1200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
--------------------------
COPIES OF COMMUNICATIONS TO:
D. STEPHEN ANTION, ESQ. SHELDON E. MISHER, ESQ.
O'MELVENY & MYERS LLP BACHNER, TALLY, POLEVOY & MISHER LLP
400 SOUTH HOPE STREET, 15TH FLOOR 380 MADISON AVENUE, 18TH FLOOR
LOS ANGELES, CALIFORNIA 90071-2899 NEW YORK, NEW YORK 10017
(213) 669-6000 (212) 687-7000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If the registrant elects to deliver its latest joint annual report to
security holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ----------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ----------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
Units (2)(3)................................................................... $17,250,000 $5,227.27
Class A Common Stock, no par value per share (4)............................... $23,287,500 $7,056.82
Unit Purchase Option (5)....................................................... $1.50 $.00
Units (3)(6)................................................................... $1,950,000 $590.91
Class A Common Stock, no par value per share (7)............................... $2,025,000 $613.64
Total........................................................................ $44,512,502 $13,488.64
(FOOTNOTES ON NEXT PAGE)
PURSUANT TO RULE 416, THERE ARE ALSO BEING REGISTERED SUCH ADDITIONAL SHARES
OF CLASS A COMMON STOCK AS MAY BECOME ISSUABLE PURSUANT TO THE ANTI-DILUTION
PROVISIONS OF THE CLASS A WARRANTS AND THE UNIT PURCHASE OPTION.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(FOOTNOTES FROM COVER)
- --------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 2,250 Units subject to the Underwriter's over-allotment option.
(3) Each Unit will consist of a minimum of 175 and a maximum of 240 shares of
Class A Common Stock, no par value per share, and an equal number of Class A
Warrants. Each Class A Warrant will entitle the registered holder thereof to
purchase one share of Class A Common Stock.
(4) Issuable upon exercise of the Class A Warrants included in the Units to be
sold to the public.
(5) To be issued to the Underwriter.
(6) Issuable upon exercise of the Underwriter's Unit Purchase Option.
(7) Issuable upon exercise of the Class A Warrants included in the Units
issuable upon exercise of the Underwriter's Unit Purchase Option.
SUBJECT TO COMPLETION, DATED DECEMBER 6, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
AMERIGON INCORPORATED
15,000 UNITS
EACH CONSISTING OF A MINIMUM OF 175 AND A MAXIMUM OF 240 SHARES
OF CLASS A COMMON STOCK AND AN EQUAL NUMBER OF CLASS A WARRANTS
---------------------
Each unit ("Unit") hereby offered (the "Offering") by AMERIGON INCORPORATED,
a California corporation (the "Company"), consists of a minimum of 175 and a
maximum of 240 shares of the Company's Class A Common Stock, no par value per
share ("Class A Common Stock"), and an equal number of warrants to purchase
shares of Class A Common Stock (the "Class A Warrants"). The components of the
Units will be separately transferable upon issuance. It is currently expected
that the offering price will be $1,000 per Unit. The actual number of shares of
Class A Common Stock and Class A Warrants to be included in each Unit will be
determined by negotiations between the Company and D.H. Blair Investment Banking
Corp. (the "Underwriter"), based primarily upon the market price of the
outstanding Class A Common Stock and a determination of the number of shares of
Class A Common Stock and Class A Warrants needed to successfully market the
Units in light of market conditions. Each Class A Warrant entitles the
registered holder thereof to purchase, at any time until the fifth anniversary
of the date hereof (the "Effective Date"), one share of the Company's Class A
Common Stock at an exercise price of 135% of the amount equal to $1,000 divided
by the number of shares of Class A Common Stock included in each Unit, subject
to adjustment. Commencing on the later of one year after the Effective Date or
the date of issuance of the Units, the Company may, upon 30 days' written
notice, redeem each Class A Warrant in exchange for $0.05 per Class A Warrant,
provided that before any such redemption, the closing Bid Price of the Class A
Common Stock as reported by the Nasdaq SmallCap Market or the closing Bid Price
on any national stock exchange (if the Company's Class A Common Stock is listed
thereon) shall have, for 30 consecutive business days ending within 15 days of
the date of the notice of redemption, averaged in excess of 175% of the Class A
Warrant exercise price per share (subject to adjustment in the event of any
reverse stock splits or other similar events). See "Description of Securities."
The Company's Class A Common Stock is traded on the Nasdaq SmallCap Market
under the symbol "ARGNA". The Company has applied for inclusion of the Class A
Warrants on the Nasdaq SmallCap Market. The last sale price of the Company's
Class A Common Stock on December 5, 1996 as reported by Nasdaq was $5.75 per
share. See "Price Range of Common Stock and Dividends." The Units offered hereby
will not be listed separately on Nasdaq. The exercise price and other terms of
the Class A Warrants were determined in part by negotiation between the Company
and the Underwriter and do not necessarily bear any relationship to the
Company's assets, book value, results of operations, net worth, or any other
recognized criteria of value. FOR INFORMATION CONCERNING A SECURITIES AND
EXCHANGE COMMISSION INVESTIGATION RELATING TO THE UNDERWRITER, SEE "RISK
FACTORS" AND "UNDERWRITING."
The Company has agreed to register subsequent to the Offering for resale
(the "Subsequent Offering") by certain securityholders (the "Selling
Securityholders") 1,620,000 Class A Warrants (the "Selling Securityholder
Warrants") and the Class A Common Stock underlying the Selling Securityholder
Warrants. The Selling Securityholder Warrants and the securities underlying such
warrants are sometimes collectively referred to as the "Selling Securityholder
Securities." The Selling Securityholder Warrants are issuable on the closing of
the Offering to the Selling Securityholders upon the automatic conversion of
convertible subordinated debentures acquired by them in the Company's private
placement completed in October 1996. The Selling Securityholders have agreed not
to sell any of the Selling Securityholder Warrants for at least 90 days after
the closing of the Offering and, for the period expiring 270 days after such
closing, have agreed to certain resale restrictions. See "Shares Eligible for
Future Sale." Sales of the Selling Securityholder Warrants or the underlying
securities, or the potential of such sales, may have an adverse effect on the
market price of the securities offered hereby.
------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 7 AND
"DILUTION" BEGINNING ON PAGE 21.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
Per Unit..................................................... $ $ $
Total (3).................................................... $ $ $
(1) Does not reflect additional compensation to the Underwriter in the form of
(i) a non-accountable expense allowance of $450,000 ($517,500 if the
Over-Allotment Option referred to below is exercised in full); and (ii) an
option (the "Unit Purchase Option") to purchase up to 1,500 Units at $1,300
per Unit over a three-year period commencing on the date that is the second
anniversary of the Effective Date. In addition, the Company has agreed to
indemnify the Underwriter against certain civil liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of $400,000 and the Underwriter's
non-accountable expense allowance, both of which are payable by the Company.
(3) The Company has granted the Underwriter a 45-day option (the "Over-Allotment
Option") to purchase up to 2,250 additional Units on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
the Over-Allotment Option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ , and $ , respectively. See "Underwriting."
The Units are offered by the Underwriter on a "firm commitment" basis when,
as and if delivered to and accepted by the Underwriter, and subject to the
Underwriter's right to reject orders in whole or in part and to certain other
conditions. It is expected that delivery of the certificates representing the
Units will be made at the offices of D.H. Blair Investment Banking Corp., 44
Wall Street, New York, New York 10005, on or about , 1996.
------------------------------
D.H. BLAIR INVESTMENT BANKING CORP.
---------------
The date of this Prospectus is , 1996.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
COMMON STOCK OF THE COMPANY AND/OR CLASS A WARRANTS AT LEVELS ABOVE THOSE
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE NASDAQ SMALLCAP MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMPANY'S
CLASS A COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-2 under the
Securities Act of 1933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in
such Registration Statement and the exhibits thereto. For further information
with respect to the Company and the Units, reference is hereby made to the
Registration Statement and the exhibits thereto, which may be inspected without
charge at the public reference facilities maintained at the principal office of
the Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549 and
at the Commission's regional offices at 7 World Trade Center, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained upon written
request from the public reference section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Electronic registration
statements made through the Electronic Data Gathering, Analysis, and Retrieval
System are publicly available through the Commission's Web site
(http://www.sec.gov). Statements contained in the Prospectus as to the contents
of any contract or other document referred to herein are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports and other
information with the Commission. Such reports and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at the addresses shown above. Copies of such
material can be obtained from the Public Reference Section of the Commission at
the address shown above at prescribed rates or through the Commission's Web
site. Reports and other information concerning the Company may also be inspected
at the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
The Class A Common Stock is listed on the Nasdaq SmallCap Market (symbol
ARGNA). Certain information, reports and proxy statements of the Company are
also available for inspection at the offices of the Nasdaq National Market
Reports Section, 1735 K Street, Washington, D.C. 20006.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of such person, a copy of any or all of the documents referred to in
"Incorporation of Certain Information by Reference" which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents. Requests for such copies should be directed to Amerigon Incorporated,
404 East Huntington Drive, Monrovia, California 91016-3600, Attention: R. John
Hamman, Jr. (telephone 818-932-1200).
2
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS
OR INCORPORATED HEREIN. INVESTORS SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION
SET FORTH UNDER THE HEADING "RISK FACTORS." UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO THE RELEASE OF THE ESCROW
SHARES (AS HEREINAFTER DEFINED) OR TO THE EXERCISE OF (I) THE OVER-ALLOTMENT
OPTION, (II) THE CLASS A WARRANTS, (III) THE UNIT PURCHASE OPTION, (IV) OPTIONS
TO PURCHASE SHARES OF CLASS A COMMON STOCK RESERVED FOR ISSUANCE UNDER THE
COMPANY'S 1993 STOCK OPTION PLAN, AS AMENDED, AND (V) OTHER OUTSTANDING WARRANTS
TO PURCHASE SHARES OF CLASS A COMMON STOCK.
THE COMPANY
GENERAL
Amerigon Incorporated (the "Company" or "Amerigon") is a development stage
company formed in 1991 to develop, manufacture and market proprietary high
technology automotive components and systems for sale to automobile and other
original equipment manufacturers. The Company's business strategy is to apply
aerospace and defense industry technology to products for the automotive market.
The Company has principally focused on developing proprietary positions in the
following technologies: (i) thermoelectric heated and cooled seats; (ii) radar
for maneuvering and safety; (iii) voice interactive navigation and
entertainment; and (iv) electric vehicle components and production systems.
The Company has substantially completed development of the first generation
of its Interactive Voice System ("IVS-TM-") audio-navigation product. The
IVS-TM- provides spoken-word navigation directions to driver and passengers
using an in-vehicle compact audio disc system. To date, the IVS-TM- product has
not been commercially successful and likely would require substantial further
development before it could be expected to achieve significant sales. The
Company is presently seeking to sell the IVS-TM- product line and the Company's
interests in related technology or to find a strategic or financial partner to
help further develop and market the IVS-TM- product. If the Company is unable to
consummate such a sale or arrange such a relationship in the near future, the
Company plans to discontinue sales and further development of the IVS-TM- and
related technology. See "--Business Strategy; Recent Developments."
The Company's other products are in various stages of development. The
Company is presently working with three of the world's largest automotive
original equipment manufacturers on pre-production development programs for
heated and cooled seats. In addition, the Company has sold multiple prototypes
of its heated and cooled seats and radar for maneuvering and safety to potential
customers for evaluation and demonstration.
BUSINESS STRATEGY; RECENT DEVELOPMENTS
The Company was founded on the premise that technology proven for use in the
defense and aerospace industries could be successfully adapted to the automotive
and transportation industries. Amerigon has focused on technologies that it
believes can be readily adapted to automotive needs for advanced vehicle
electronics and for electric vehicle systems. The Company seeks to avoid direct
competition with established automotive suppliers of commodity products by
identifying market opportunities where the need for rapid technological change
gives an edge to new market entrants with proprietary products.
The Company has recently determined to focus its resources primarily on
developing its heated and cooled seat and radar for maneuvering and safety
technologies. The Company has adopted this strategy primarily because the
Company believes that the markets for these products have greater near-term
potential than the markets for its other products, and because these
technologies afford the Company its best opportunities to exploit competitive
advantages over rival companies. The Company also would expect continued
necessary development and marketing of the Company's voice interactive
navigation technologies and electric vehicle systems to entail very high costs,
to the point that they would likely exceed the Company's financial resources.
Even if the Company were able to overcome this financial challenge, management
also believes that the Company might not be able to develop and successfully
market the next generation of
3
IVS-TM-, and might not be able to successfully develop and profitably
manufacture electric vehicles or their components, without commercial or
technical assistance from one or more strategic partners. Accordingly, the
Company is presently seeking to sell the IVS-TM- product line and the Company's
interests in related technology or to find a strategic or financial partner to
help further develop and market the IVS-TM- product. If the Company is unable to
consummate such a sale or arrange such a relationship in the near future, the
Company plans to discontinue sales and further development of the IVS-TM- and
related technology. See "Risk Factors--Possible Termination of License of Voice
Recognition Software Technology." The Company is also presently seeking
strategic and financial partners to help support continued development and
marketing of the Company's electric vehicle systems. If the Company is unable to
arrange such a relationship in the near term, the Company will attempt to sell
its proprietary interests and other assets in and relating to its electric
vehicle technology or abandon their development. See "Risk Factors--Possible
Disposition or Abandonment of Electric Vehicle and IVS-TM- Product Businesses."
The Company has recently experienced serious cash shortfalls. In October
1996, the Company completed a private placement (the "Bridge Financing") of 60
bridge units (each a "Bridge Unit"), each consisting of one $47,500 10%
unsecured promissory note (each a "Bridge Note") and one $2,500 10% convertible
subordinated debenture (each a "Bridge Debenture") to enable it to continue
operations until the completion of the Offering. A portion of the proceeds of
the Offering will be applied to repayment of the Bridge Notes. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Use of Proceeds."
THE OFFERING
Securities Offered by the
Company........................... 15,000 Units, each consisting of a minimum of 175 and a
maximum of 240 shares of the Company's Class A Common
Stock and an equal number of Class A Warrants. See
"Description of Securities."
Terms of Class A Warrants......... Each Class A Warrant entitles the registered holder
thereof to purchase, at any time until the fifth
anniversary of the Effective Date, one share of the
Company's Class A Common Stock, subject to earlier
redemption by the Company. The exercise price for the
Class A Warrants will be 135% of the amount equal to
$1,000 divided by the number of shares of Class A Common
Stock included in each Unit. See "Description of
Securities--Class A Warrants."
Number of Shares of Capital Stock
Outstanding:
Before the Offering (1)......... 7,068,500 shares of Class A Common Stock, of which
3,000,000 shares are Escrow Shares(2).
After the Offering (3)........ . 10,668,500 shares of Class A Common Stock, of which
3,000,000 shares are Escrow Shares(2)(4).
Use of Proceeds................... Repayment of indebtedness, payment of deferred executive
salaries, production engineering, manufacturing,
research and development, marketing and working capital
purposes. See "Use of Proceeds."
Risk Factors...................... The securities offered hereby involve a high degree of
risk. See "Risk Factors."
Nasdaq Symbols.................... Class A Common Stock--ARGNA
Class A Warrants--ARGNW (proposed)
(FOOTNOTES ON NEXT PAGE)
4
- ------------------------
(1) Does not include 264,757 shares of Class A Common Stock issuable upon
exercise of outstanding warrants and 530,000 shares of Class A Common Stock
presently reserved for issuance under the Company's 1993 Stock Option Plan,
as amended, under which options to purchase 312,543 shares of Class A Common
Stock are outstanding.
(2) In connection with the Company's 1993 initial public offering, 3,000,000
shares (the "Escrow Shares") of the Company's Class A Common Stock were
deposited in escrow by certain shareholders of the Company, which Escrow
Shares are to be released to such shareholders for no consideration if the
Company attains certain pre-tax earnings levels during the fiscal years
ending December 31, 1996, 1997 and 1998. If such earnings are achieved, the
Company will record a substantial non-cash charge to earnings, for financial
reporting purposes, as compensation expense relating to the value of the
Escrow Shares released to current and former Company officers and employees.
On April 30, 1999, all Escrow Shares that have not been so released from
escrow will automatically be exchanged for shares of Class B Common Stock
which will then be released from escrow. The Class B Common Stock is neither
transferable nor convertible and its rights with respect to dividends and
liquidation distributions are inferior to those of the Class A Common Stock.
Therefore, the Class B Common Stock has limited economic value. See "Risk
Factors--Potential Charges to Income," "Principal Shareholders-- Escrow
Shares" and "Description of Securities--Common Stock."
(3) Does not include (i) a minimum of 787,500 and a maximum of 1,080,000 shares
of Class A Common Stock issuable upon exercise of the Over-Allotment Option
and the Class A Warrants included in the Units issuable upon exercise of the
Over-Allotment Option; (ii) a minimum of 2,625,000 and a maximum of
3,600,000 shares of Class A Common Stock issuable upon exercise of the Class
A Warrants included in the Units offered hereby; (iii) a minimum of 525,000
and a maximum of 720,000 shares of Class A Common Stock issuable upon
exercise of the Unit Purchase Option and the Class A Warrants included in
the Units included in the Unit Purchase Option; (iv) a minimum of 280,218
and a maximum of 284,388 shares of Class A Common Stock issuable upon
exercise of outstanding warrants; and (v) 530,000 shares of Class A Common
Stock presently reserved for issuance under the Company's 1993 Stock Option
Plan, as amended, under which options to purchase 312,543 shares of Class A
Common Stock are outstanding. See "Description of Securities" and
"Underwriting."
(4) Assumes that each Unit consists of the maximum of 240 shares of Class A
Common Stock and 240 Class A Warrants. If each Unit consists of the minimum
of 175 shares of Class A Common Stock and 175 Class A Warrants, 9,693,500
shares of Class A Common Stock will be outstanding after the Offering, of
which 3,000,000 shares will be Escrow Shares.
5
SUMMARY FINANCIAL INFORMATION
The summary financial data presented below should be read in conjunction
with the financial statements and related notes thereto appearing elsewhere in
this Prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
PERIOD FROM PERIOD FROM
APRIL 23, APRIL 23,
1991 1991
FISCAL YEARS (INCEPTION) NINE MONTHS ENDED (INCEPTION)
ENDED DECEMBER 31, TO ---------------------------- TO
------------------------------- DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1993 1994 1995 1995 1995 1996 1996
--------- --------- --------- ------------- ------------- ------------- -------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
OPERATING DATA:
Total revenues...................... $ 2,289 $ 2,640 $ 7,809 $ 14,638 $ 4,806 $ 6,501 $ 21,139
Costs and expenses:
Direct development contract and
related grant costs............. 525 928 5,332 6,785 3,895 9,142 15,927
Direct grant costs................ 1,649 803 339 4,522 390 101 4,623
Research and development.......... 1,578 2,137 2,367 6,659 1,785 1,544 8,203
Selling, general and
administrative, including
reimbursable administrative
costs........................... 2,340 3,235 3,135 10,377 1,820 1,838 12,215
--------- --------- --------- ------------- ------------- ------------- -------------
Total costs and expenses............ 6,092 7,103 11,173 28,343 7,890 12,625 40,968
--------- --------- --------- ------------- ------------- ------------- -------------
Operating loss...................... $ (3,803) $ (4,463) $ (3,364) $ (13,705) $ (3,084) $ (6,124) $ (19,829)
--------- --------- --------- ------------- ------------- ------------- -------------
--------- --------- --------- ------------- ------------- ------------- -------------
Net loss............................ $ (3,640) $ (4,235) $ (3,237) $ (13,187) $ (2,960) $ (6,245) $ (19,432)
--------- --------- --------- ------------- ------------- ------------- -------------
--------- --------- --------- ------------- ------------- ------------- -------------
Net loss per share.................. $ (1.64) $ (1.28) $ (0.98) -- $ (0.90) $ (1.54) --
Weighted average number of shares
outstanding....................... 2,213 3,300 3,306 -- 3,300 4,060 --
AS OF SEPTEMBER 30, 1996
---------------------------------------
AS OF DECEMBER 31, PRO FORMA AS
1995 ACTUAL PRO FORMA(1) ADJUSTED(2)
---------------------- --------- ------------- -------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital................................. $ 6,481 $ 351 $ 351 $ 13,101
Total assets.................................... 8,995 5,876 8,876 17,226
Long term debt.................................. 68 50 50 50
Total liabilities............................... 1,797 4,872 7,872 3,472
Deficit accumulated during development stage.... (13,187) (19,432) (19,432) (19,932)
Total shareholders' equity...................... 7,198 1,004 1,004 13,754
- --------------------------
(1) Gives pro forma effect to the October 1996 issuance of the Bridge Units, net
of approximately $500,000 of issuance costs, as if the issuance had occurred
as of September 30, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(2) As adjusted to give effect to the sale of the 15,000 Units offered hereby at
an offering price of $1,000 per Unit and the application of the net proceeds
therefrom (including the automatic conversion of the Bridge Debentures into
Class A Warrants, the repayment of the principal on the Bridge Notes and the
corresponding charge to operations upon repayment thereof estimated at
$500,000). See "Use of Proceeds," "Capitalization" and "Management's
Discussions and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
6
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE IN NATURE AND INVOLVE A
HIGH DEGREE OF RISK. PRIOR TO MAKING AN INVESTMENT DECISION, PROSPECTIVE
INVESTORS SHOULD GIVE CAREFUL CONSIDERATION TO, AMONG OTHER THINGS, THE RISK
FACTORS SET FORTH BELOW. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. REFERENCE IS MADE IN PARTICULAR TO THE
DESCRIPTION OF THE COMPANY'S PLANS AND OBJECTIVES FOR FUTURE OPERATIONS,
ASSUMPTIONS UNDERLYING SUCH PLANS AND OBJECTIVES AND OTHER FORWARD-LOOKING
STATEMENTS INCLUDED IN "PROSPECTUS SUMMARY," "RISK FACTORS," "USE OF PROCEEDS,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "BUSINESS" IN THIS PROSPECTUS. SUCH STATEMENTS MAY BE IDENTIFIED
BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT,"
"BELIEVE," "ESTIMATE," "ANTICIPATE," "CONTINUE," OR SIMILAR TERMS, VARIATIONS OF
SUCH TERMS OR THE NEGATIVE OF SUCH TERMS. SUCH STATEMENTS ARE BASED ON
MANAGEMENT'S CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF FACTORS AND
UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
DESCRIBED IN THE FORWARD-LOOKING STATEMENTS. FACTORS WHICH COULD CAUSE SUCH
RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING
STATEMENTS INCLUDE THOSE SET FORTH BELOW.
DEVELOPMENT STAGE COMPANY
The Company's proposed future operations are subject to numerous risks
associated with establishing new businesses, including, but not limited to,
unforeseeable expenses, delays and complications, as well as specific risks of
the industry in which the Company competes. There can be no assurance that the
Company will be able to market any product on a commercial scale, achieve
profitable operations or remain in business. To date, the Company's first
developed product, the IVS-TM-, has not been commercially successful. The
Company was formed in April 1991 and most of its products are still in the
development stage. In addition, several of the Company's products are aimed at
the electric vehicle market, which is still in its infancy and may never achieve
commercial prominence. The likelihood of the success of the Company must be
considered in light of the problems, expenses, difficulties, complications and
delays frequently encountered in connection with establishing a new business,
including, without limitation, uncertainty as to market acceptance of the
Company's products, marketing problems and expenses, competition and changes in
business strategy. There can be no assurance that the Company will be successful
in its proposed business activities.
Moreover, except for the IVS-TM-, the Company's other products are in
various stages of prototype development and will require the expenditure of
significant funds for further development and testing in order to commence
commercial sales. No assurance can be given that the Company will obtain such
additional funds or that it will be successful in resolving all technical
problems relating to its products or in developing the technology used in its
prototypes into commercially viable products. The Company does not expect to
generate any significant revenues from the sale of seat or radar products for at
least 12 to 24 months, and no assurance can be given that such sales will ever
materialize. Further, there can be no assurance that any of the Company's
products, if successfully developed, will be capable of being produced in
commercial quantities at reasonable costs or will be successfully marketed and
distributed. See "--Limited Marketing Capabilities; Uncertainty of Market
Acceptance."
SUBSTANTIAL OPERATING LOSSES SINCE INCEPTION
The Company has incurred substantial operating losses since its inception.
At December 31, 1995 and at September 30, 1996, the Company had accumulated
deficits since inception of $13,187,000 and $19,432,000, respectively. During
the years ended December 31, 1994 and 1995, the Company had net losses of
$4,235,000 and $3,237,000, respectively. For the nine months ended September 30,
1995 and 1996, the Company had net losses of $2,960,000 and $6,245,000,
respectively. The Company has incurred additional losses and its accumulated
deficit has increased since September 30, 1996. The Company's accumulated
deficits are attributable to the costs of developmental and other start-up
activities, including the industrial design, development and marketing of the
Company's products and a significant loss
7
incurred on a major electric vehicle development contract. The Company has
continued to incur losses due to continuing expenses without significant
revenues or profit margins on the sale of products, and expects to incur
significant losses for the foreseeable future.
NEED FOR ADDITIONAL FINANCING
The Company has experienced negative cash flow since its inception and has
expended, and expects to continue to expend, substantial funds to continue its
development efforts. The Company has not generated and does not expect to
generate in the foreseeable future sufficient revenues from the sales of its
principal products to cover its operating expenses. Even after completion of the
Offering, the Company will require additional financing through bank borrowings,
debt or equity financing or otherwise to finance its planned operations. If
additional funds are not obtained when needed, the Company will be required to
significantly curtail its activities, dispose of one or more of its technologies
and/or cease operations and liquidate. If and when the Company is able to
commence commercial production of its heated and cooled seat or radar products,
the Company will incur significant expenses for tooling product parts and to set
up manufacturing and/or assembly processes. In part as a result of the Company's
anticipated capital requirements, management is currently seeking to sell the
IVS-TM- product line or enter into collaborative or other arrangements with
financial or strategic corporate partners to develop the IVS-TM- product and its
electric vehicle technologies. See "--Possible Disposition or Abandonment of
Electric Vehicle and IVS-TM- Product Businesses." No assurance can be given that
such alternate funding sources can be obtained or will provide sufficient, or
any, financing for the Company. Moreover, the licensing agreements for the
Company's current and potential future rights to licensed technology generally
require the payment of minimum royalties. For the fiscal year ended December 31,
1995, the Company paid a total of approximately $121,000 in royalties. In the
event the Company is unable to pay such royalties or otherwise breaches such
licensing agreements, the Company would lose its rights to the technology, which
would have a material adverse effect on the Company's business.
POSSIBLE DISPOSITION OR ABANDONMENT OF ELECTRIC VEHICLE AND IVS-TM- PRODUCT
BUSINESSES
To date, the Company has focused on and invested substantial capital in four
product technologies: (i) thermoelectric heated and cooled seats; (ii) radar for
maneuvering and safety; (iii) voice interactive navigation and entertainment;
and (iv) electric vehicle components and production systems. See
"Business--Products." The Company has recently determined to focus its resources
primarily on developing its heated and cooled seat and radar technologies. The
Company is presently seeking to sell the IVS-TM- product line or find a
strategic or financial partner to help further develop and market the IVS-TM-
product. The Company is also presently seeking strategic and financial partners
to help support continued development and marketing of the Company's electric
vehicle systems. No assurance can be given that the Company's change in business
strategy will prove successful or even beneficial to the Company. Further, no
assurance can be given that the Company will be able to complete a sale of the
IVS-TM- product line, obtain additional funding or attract strategic or
financial partners or that, if such funding or partners were to be obtained, the
electric vehicle or IVS-TM- products could be successfully developed. If the
Company is unable to arrange such a relationship in the near term, the Company
will attempt to sell its proprietary interests and other assets in and related
to these technologies or abandon their development. No assurance can be given
that the Company would be able to effect such a sale on terms favorable to the
Company or at all.
ELECTRIC VEHICLE COST OVERRUNS AND SIGNIFICANT CONTRACT LOSSES
In its results for the nine months ended September 30, 1996, the Company
reported cost overruns on the approximately $9.6 million electric vehicle
contract now in process that resulted in the Company recording charges to
operations for the ultimate estimated loss at completion of the contract of
approximately $1,625,000. The Company may continue to experience cost overruns
on this contract due to unanticipated design and development problems and
continuing delays in the completion of this contract,
8
as well as other factors. Furthermore, the customer under the contract is
entitled to withhold 10% of the contract price payable to the Company for a
period of time following the final shipment and to offset such amount against
any claims the customer may have against the Company, including any warranty
claims. Any such withholding and/or offset would further exacerbate the
Company's liquidity problems. The Company will also be obliged to fulfill
warranty obligations on electric vehicles delivered under the contract for a
period of one year, which may result in additional expense to the Company.
UNCERTAIN MARKET DEMAND FOR IVS-TM-; FURTHER REFINEMENT NEEDED; POSSIBLE
DISPOSITION
Development of the first generation IVS-TM- audio navigation product was
completed and commercial sales commenced in December 1995. To date, sales of the
product have been weak due to lower than anticipated consumer acceptance of the
product and overall market demand. In 1995, the Company had pre-production
orders for approximately 2,000 units. As of September 30, 1996, only
approximately 2,700 units have been produced and sold. Of the units sold so far,
approximately 270 are subject to one customer's right to return units for a
refund of approximately $77,000. No assurance can be given that such units will
not be returned. Moreover, the Company believes that the current IVS-TM- product
is not commercially viable and will require further development, at significant
cost, in order to have a reasonable prospect for commercial viability,
particularly with respect to sales to automobile manufacturers. Based upon the
results to date, the strategy of attempting to sell the IVS-TM- product in the
aftermarket is questionable. As a result of weak demand for the product in its
current form and the capital resources necessary to refine and market it, the
Company is presently seeking to sell the IVS-TM- product line and the Company's
interests in related technology or to find a strategic or financial partner to
help further develop and market the IVS-TM- product. If no such sale or
relationship is consummated in the near future, the Company intends to
discontinue sales and further development of the IVS-TM- and related technology.
See "--Possible Disposition or Abandonment of Electric Vehicle and IVS-TM-
Product Businesses."
POSSIBLE TERMINATION OF LICENSE OF VOICE-RECOGNITION SOFTWARE TECHNOLOGY USED IN
IVS-TM-
The Company has failed to make advance royalty payments required by the
terms of the governing license agreement for certain voice-recognition software
technology used in the IVS-TM-. The license agreement affords the licensor the
opportunity to terminate the agreement under such circumstances. If the licensor
were to terminate such license, in order to continue to manufacture and sell the
IVS-TM-, the Company would either need to reach an accommodation with such
licensor or identify and secure a license to use a substitute software
technology, neither of which can be assured. The adaptation of substitute
software technology under such circumstances might result in additional
development costs to the Company. If the Company were unable to reach an
accommodation with the licensor or identify and secure a substitute license, the
Company's ability to sell the IVS-TM- product line and the Company's interests
in related technology might be impaired.
LACK OF EXCLUSIVE LICENSES ON IVS-TM- AND HEATED AND COOLED SEATS; POTENTIAL
LOSS OF EXCLUSIVITY OF LICENSE ON RADAR FOR MANEUVERING AND SAFETY
The Company has entered into an agreement with the IVS-TM- licensor, Audio
Navigation Systems, LLC ("ANS"), formerly Audio Navigation Systems, Inc., which
resolved prior differences of interpretation of the license agreement covering
the IVS-TM- technology. The new agreement provides, among other things, that ANS
can produce, market and/or license others to make an interactive voice system
product that could compete directly with the Company's IVS-TM- product. The
Company believes that ANS may introduce a competitive product in 1997. Such
competition could have an adverse effect on the value of the Company's IVS-TM-
product and on any future versions of such product. The Company also lacks an
exclusive license for its heated and cooled seat technology. Consequently, such
technology may be licensed to other entities, which may introduce seat products
competitive with those of the Company. Such competitive products may
9
be superior to the Company's seat products, and such competition may have a
material adverse effect on sales of the Company's seat products and on the
business and financial condition of the Company.
The Company's exclusive license from the Regents of the University of
California for the Company's radar technology requires the Company to achieve
commercial sales of products by the end of 1998. Commercial sales are defined as
sales of non-prototype products to at least one original equipment manufacturer.
Failure to achieve commercial sales for a particular application will result in
the loss of exclusivity of the license for that application, in which event the
licensor will have the right to grant other entities a non-exclusive license for
that application at terms no more favorable than those enjoyed by the Company.
LIMITED PROTECTION OF PATENTS AND PROPRIETARY RIGHTS; POTENTIAL DISPUTE WITH
LICENSOR OF SEAT TECHNOLOGY
The Company believes that patents and proprietary rights have been and will
continue to be important in enabling the Company to compete. There can be no
assurance that the Company's or its licensors' patents and proprietary rights
will not be challenged or circumvented or will provide the Company with any
meaningful competitive advantages or that any pending patent applications will
issue. Failure to obtain patents in certain foreign countries may materially
adversely affect the Company's ability to compete effectively in certain
international markets.
The Company has a different understanding regarding technology improvements
made by the Company than that of the licensor of certain technology used in the
Company's heated and cooled seats. Such licensor has informed the Company that
he believes that he is entitled to a license to use any improvements to such
technology that the Company might develop. If such licensor were deemed to have
such rights to use such improvements, such licensor may develop and sell seat
products competitive with those of the Company, which competition may have a
material adverse effect on sales of the Company's seats and its business and
financial condition generally.
The Company also relies on trade secrets that it seeks to protect, in part,
through confidentiality and non-disclosure agreements with employees, customers
and other parties. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any such breach or
that the Company's trade secrets will not otherwise become known to or
independently developed by competitors. The Company may be involved from time to
time in litigation to determine the enforceability, scope and validity of
proprietary rights. Any such litigation could result in substantial cost to the
Company and diversion of effort by the Company's management and technical
personnel. Additionally, with respect to licensed technology, there can be no
assurance that the licensor of the technology will have the resources, financial
or otherwise, or desire to defend against any challenges to the rights of such
licensor to its patents.
DEPENDENCE ON ACCEPTANCE BY AUTOMOBILE MANUFACTURERS AND CONSUMERS; MARKET
COMPETITION
The Company's ability to successfully market its seats and radar products
will in large part be dependent upon the willingness of automobile manufacturers
to incur the substantial expense involved in the purchase and installation of
the Company's products and systems, and, ultimately, upon the acceptance of the
Company's products by consumers. The Company's potential customers may be
reluctant to modify their existing automobile models, where necessary, to
incorporate the Company's products. In addition, automobile manufacturers may be
reluctant to purchase key components from a small, development-stage company
with limited financial and other resources. The Company's ability to
successfully market its seats and radar products will also be dependent in part
upon its ability to persuade automobile manufacturers that the Company's
products are sufficiently unique that they cannot be obtained elsewhere. See
"--Competition; Possible Obsolescence of Technology" and "--Lack of Exclusive
Licenses on IVS-TM- and Heated and Cooled Seats; Potential Loss of Exclusivity
of License on Radar for Maneuvering and Safety." There
10
can be no assurance that the Company will be successful in this effort.
Furthermore, in the event the Company is successful in obtaining favorable
responses from automobile manufacturers, the Company may need to license its
technology to potential competitors to ensure adequate additional sources of
supply in light of automobile manufacturers' reluctance to purchase products
from a sole source supplier (particularly where the continued viability of such
supplier is in doubt, as may be the case with the Company). Acceptance of the
Company's components and systems for electric vehicles is dependent upon market
acceptance of electric vehicles, as to which there can be no assurance.
LACK OF CAPITAL TO FUND PROPOSED ELECTRIC VEHICLE JOINT VENTURE; STRATEGY
UNTESTED
In February 1996, the Company entered into a memorandum of understanding
(which by its terms expired on August 29, 1996) with a strategic partner to
enter into a proposed joint venture in India to develop, market and/or
manufacture electric vehicles. The terms of the memorandum of understanding
called for the Company to contribute cash and certain technology to the proposed
joint venture in exchange for a minority equity stake. The Company presently
lacks the capital to make such a financial contribution to a joint venture
entity, and currently does not propose to apply any of the net proceeds of the
Offering for such purpose. Accordingly, unless the terms of the joint venture
were to be revised so as to eliminate or substantially reduce the Company's
required capital contribution, or unless the Company can find a new or
additional joint venture partner, the Company would be unable to participate in
the proposed joint venture on its original terms. No assurance can be given that
the Company will be able to reduce its required capital contribution to the
proposed joint venture or obtain additional financing for the proposed joint
venture. Furthermore, there can be no assurance that the Company and its
proposed partner will ever consummate the proposed joint venture.
Even if the Company were able to obtain sufficient funding to participate in
the proposed joint venture in India or similar joint ventures in other
countries, there can be no assurance that the governments of such countries
would grant the necessary permits, authority and approvals for any such joint
venture or similar enterprise or for the development, manufacture and sale of
electric vehicles, that consumer interest would be sufficient or economic
factors affecting consumer demand would be favorable to make such ventures
financially feasible, or that competition will not exist or develop that would
materially adversely affect the financial feasibility of such ventures. In
addition, many of the Company's competitors in the electric vehicle market have
greater financial resources than the Company. See "--Dependence on Acceptance by
Automobile Manufacturers and Consumers; Market Competition" and "--Competition;
Possible Obsolescence of Technology."
The Company has treated certain costs totaling approximately $700,000
incurred in connection with prototype development in anticipation of the
formation of the Indian joint venture as capitalized expenses. In the event that
the joint venture is never formed, the Company will in the future be required to
treat such costs as current period expenses. In such event, such expenses will
reduce income or increase losses during the period in which they are charged. If
the joint venture is formed and the Company obtains contracts from it that are
related to the prototype development, such costs will be expensed and matched
against the related revenues.
LIMITED MANUFACTURING EXPERIENCE
To date, the Company has been engaged in only limited manufacturing,
principally of the IVS-TM- in small quantities, and there can be no assurance
that the Company's efforts to establish its manufacturing operations for any of
its products (including electric vehicles) will not exceed estimated costs or
take longer than expected or that other unanticipated problems will not arise
which will materially adversely affect the Company's operations, financial
condition and/or business prospects. The Company has already experienced
significant delays and cost overruns in connection with its electric vehicle
contracts. See "--Electric Vehicle Cost Overruns and Significant Contract
Losses." Automobile manufacturers demand on-time delivery of quality products,
and some have required the payment of substantial financial penalties for
11
failure to deliver components to their plants on a timely basis. Such penalties,
as well as costs to avoid them, such as working overtime and overnight air
freighting parts that normally are shipped by other less expensive means of
transportation, could have a material adverse effect on the Company's business
and financial condition. Moreover, the inability to meet demand for the
Company's products on a timely basis would materially adversely affect the
Company's reputation and prospects. The Company currently is seeking to identify
and hire a vice president of operations with manufacturing experience. However,
no assurance can be given that the Company will be successful in identifying or
hiring such an individual on terms affordable to the Company (or on any terms).
RESTATEMENT OF 1996 1ST QUARTER AND 2ND QUARTER FINANCIAL RESULTS
On October 24, 1996, the Company filed two Forms 10-Q/A amending the
Company's quarterly reports on Form 10-Q for the periods ended March 31, 1996
and June 30, 1996, respectively, to adjust revenues and expenses associated with
development contracts. In the six months ended June 30, 1996, these adjustments
resulted in a decrease in revenues from development contracts and related grants
of $1,500,000 and a decrease in expenses related to direct development contract
costs and related grants of $570,000, which caused an increased operating loss
and net loss of $930,000. Net loss per share for such period increased by $.23.
DEPENDENCE ON AND STRAINED RELATIONS WITH VENDORS AND SUPPLIERS
The Company is dependent on various vendors and suppliers for the components
of its products. Although the Company believes that there are a number of
alternative sources for most of these components, certain components are only
available from a limited number of suppliers. Due to the Company's recent cash
shortfalls, prior to the completion of the Bridge Financing, the Company was
unable to pay most of its vendors and suppliers on a timely basis. As a result,
although most of the Company's accounts payable are now current, the Company
believes that its relations with many of such vendors and suppliers may be
strained. Many of such vendors and suppliers will no longer extend trade credit
to the Company. There can be no assurance that any of such vendors and suppliers
will not limit or cease doing business with the Company in the future or further
alter the terms on which they do business with the Company. The loss of any
significant supplier, in the absence of a timely and satisfactory alternative
arrangement, or an inability to obtain essential components on reasonable terms
or at all, could materially adversely affect the Company's business and
operations. The Company's business and operations could also be materially
adversely affected by delays in deliveries from suppliers.
DEFAULT UNDER BANK CREDIT LINE
The Company has a secured line of credit from a commercial bank to borrow
funds based on costs incurred and billings made under a major electric vehicle
development contract. The Company has experienced significant delays and cost
overruns under such electric vehicle contract, which may delay or impair the
Company's ability to collect the remaining payments due under this contract. See
"--Electric Vehicle Cost Overruns and Significant Contract Losses." The line of
credit is secured by a security interest in all of the Company's personal
property, including, but not limited to, all accounts receivable, equipment,
inventory and general intangibles. As of December 5, 1996, the Company had
approximately $1,100,000 outstanding under the secured line of credit. The
Company intends to use part of the proceeds of the Offering to repay all amounts
due under the line of credit. See "Use of Proceeds." The line of credit expired
by its terms but has been extended until December 31, 1996.
The Company has breached certain financial covenants under the line of
credit, which default would entitle the bank to declare all sums outstanding
under the line of credit immediately due and payable. However, the bank has
agreed to forbear until December 31, 1996 from exercising its rights and
remedies with respect to the Company's breaches of the financial covenants.
12
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Class A Common Stock by existing stockholders pursuant to
Rule 144 under the Securities Act, pursuant to the Subsequent Offering or
otherwise, or the potential of such sales, could have an adverse effect on the
price of the Company's securities. Pursuant to the Subsequent Offering,
1,620,000 Selling Securityholder Warrants and the underlying Class A Common
Stock will be registered for resale subsequent to this Offering, subject to a
contractual restriction that the Selling Securityholders not sell any of the
Selling Securityholder Warrants for at least 90 days after the date of this
Prospectus and, during the period from 91 to 270 days after the date of this
Prospectus, may only sell specified percentages of such Selling Securityholder
Warrants. Approximately 7,068,500 shares of Class A Common Stock are outstanding
prior to completion of the Offering. 3,000,000 of such shares are Escrow Shares
not transferable unless released from escrow pursuant to the Escrow Agreement.
See "Principal Shareholders--Escrow Shares." Of the 4,068,500 shares of Class A
Common Stock outstanding prior to the Offering that are not Escrow Shares,
795,197 are "restricted securities," all of which are currently eligible for
sale pursuant to Rule 144 under the Securities Act. However, all directors and
executive officers of the Company and certain holders of the outstanding shares
of Class A Common Stock have agreed not to sell any shares of Common Stock for a
period of 13 months from the date of this Prospectus without the prior written
consent of the Underwriter. In addition, the holders of the Unit Purchase Option
and the holders of 760,000 shares of Class A Common Stock or options and
warrants to purchase shares of Class A Common Stock have certain demand and
"piggy-back" registration rights with respect to their securities. Exercise of
such rights could involve substantial expense to the Company. See "Description
of Securities," "Shares Eligible for Future Sale," "Subsequent Offering" and
"Underwriting."
In connection with certain threatened claims against the Company and its
directors and officers, certain of the Company's shareholders have indicated to
the Company that they may attempt to sell all or part of their holdings of Class
A Common Stock. See "--Legal Proceedings."
OUTSTANDING OPTIONS AND WARRANTS
Upon completion of this Offering, the Company will have outstanding (i) a
minimum of 2,625,000 and a maximum of 3,600,000 Class A Warrants to purchase
shares of Class A Common Stock; (ii) the Selling Securityholder Warrants to
purchase 1,620,000 shares of Class A Common Stock; (iii) the Unit Purchase
Option to purchase an aggregate of a minimum of 525,000 and a maximum of 720,000
shares of Class Common Stock, assuming exercise of the underlying Class A
Warrants; (iv) 530,000 shares of Class A Common Stock reserved for issuance upon
exercise of options under the Company's 1993 Stock Option Plan, under which
options to purchase 312,543 shares of Class A Common Stock are outstanding; and
(v) a minimum of 280,218 and a maximum of 284,388 shares of Class A Common Stock
issuable upon exercise of outstanding warrants. Holders of such warrants and
options are likely to exercise them when, in all likelihood, the Company could
obtain additional capital on terms more favorable than those provided by such
warrants and options. Further, while these warrants and options are outstanding,
the Company's ability to obtain additional financing on favorable terms may be
adversely affected.
LEGAL PROCEEDINGS
HBI Financial Inc., a shareholder of the Company, and certain affiliated
persons and entities (collectively, "HBI"), have threatened various claims
against the Company and its directors and officers arising out of the December
1995 private placement by the Company of 750,000 shares of Class A Common Stock.
HBI alleges that the Company made false and misleading statements and failed to
disclose certain information in connection with such private placement. The
Company believes these allegations to be without merit. While, to the Company's
knowledge, HBI has commenced no legal action against the Company in connection
with such claims, no assurance can be given that HBI will not do so in the
future. If HBI were to commence such legal action, the Company would be forced
to defend such action and/or settle with HBI, the costs of which defense and/or
any resulting liability or settlement could
13
have a material adverse effect on the Company's financial condition. John W.
Clark, a director of the Company, is a general partner of an affiliate of HBI
Financial Inc.
The Company is subject to other litigation in the ordinary course of its
business, none of which is expected to have a material adverse effect on the
Company. See "Business--Legal Proceedings."
LIMITED MARKETING CAPABILITIES; UNCERTAINTY OF MARKET ACCEPTANCE
Because of the sophisticated nature and early stage of development of its
products, the Company will be required to educate potential customers and
successfully demonstrate that the merits of the Company's products justify the
costs associated with such products. In certain cases, the Company will likely
encounter resistance from customers reluctant to make the modifications
necessary to incorporate the Company's products into their products or
production processes. In some instances, the Company may be required to rely on
its distributors or other strategic partners to market its products. The success
of any such relationship will depend in part on the other party's own
competitive, marketing and strategic considerations, including the relative
advantages of alternative products being developed and/or marketed by any such
party. There can be no assurance that the Company will be able to market its
products properly so as to generate meaningful product sales.
TIME LAG FROM PROTOTYPE TO COMMERCIAL SALES
The sales cycle in the automotive components industry is lengthy and can be
as long as six years or more for products that must be designed into a vehicle,
since some companies take that long to design and develop a car. Even when
selling parts that are neither safety-critical nor highly integrated into the
vehicle, there are still many stages that an automotive supply company must go
through before achieving commercial sales. The sales cycle is lengthy because an
automobile manufacturer must develop a high degree of assurance that the
products it buys will meet customer needs, interface as easily as possible with
the other parts of a vehicle and with the automobile manufacturer's production
and assembly process, and have minimal warranty, safety and service problems. In
the case of electric vehicles, another factor affecting the pace of
commercialization is the pace of development of the electric vehicle industry
itself. Since that industry has been and probably will continue to be slow to
develop, electric vehicle products can generally be expected to require even
longer times for commercialization than products intended for use in
conventional gasoline-powered vehicles.
SPECIAL FACTORS APPLICABLE TO THE AUTOMOTIVE INDUSTRY IN GENERAL
The automobile industry is cyclical and dependent on consumer spending. The
Company's future sales may be subject to the same cyclical variations as the
automotive industry in general. There have been recent reports of declines in
sales of automobiles on a worldwide basis, and there can be no assurance that
continued or increased declines in automobile production would not have a
material adverse effect on the Company's business or prospects. Additionally,
automotive customers typically reserve the right to unilaterally cancel
contracts completely or to require unilateral price reductions. Although they
generally reimburse companies for actual out-of-pocket costs incurred with
respect to the particular contract up to the point of cancellation, these
reimbursements typically do not cover costs associated with acquiring general
purpose assets such as facilities and capital equipment, and may be subject to
negotiation and substantial delays in receipts by the Company. Any unilateral
cancellation of, or price reduction with respect to, any contract that the
Company may obtain could reduce or eliminate any financial benefits anticipated
from such contract and could have a material adverse effect on the Company's
financial condition and results of operations.
COMPETITION; POSSIBLE OBSOLESCENCE OF TECHNOLOGY
The automotive component and electric vehicle industries are subject to
intense competition. Most of the Company's competitors are substantially larger
in size, have substantially greater financial, marketing
14
and other resources than the Company, and have more extensive experience and
records of successful operations than the Company. Competition extends to
attracting and retaining qualified technical and marketing personnel. There can
be no assurance that the Company will successfully differentiate its products
from those of its competitors, that the marketplace will consider the Company's
current or proposed products to be superior or even comparable to those of its
competitors, or that the Company can succeed in establishing relationships with
automobile manufacturers. Furthermore, no assurance can be given that
competitive pressures faced by the Company will not adversely affect its
financial performance. Due to the rapid pace of technological change, the
Company's products may even be rendered obsolete by future developments in the
industry. The Company's competitive position would be adversely affected if it
were unable to anticipate such future developments and obtain access to the new
technology.
DEPENDENCE ON KEY PERSONNEL; NEED TO RETAIN TECHNICAL PERSONNEL
The Company's success will depend to a large extent upon the continued
contributions of Lon E. Bell, Ph.D., Chief Executive Officer, President and
Chairman of the Board of Directors and the founder of the Company, and Joshua M.
Newman, Vice President of Corporate Development and Planning and a Director. The
Company has obtained key-person life insurance coverage in the amount of
$2,000,000 on the life of Dr. Bell and in the amount of $1,000,000 on the life
of Mr. Newman. The Company is currently applying for an increase in the coverage
amount on the life of Mr. Newman to $2,000,000. Neither Dr. Bell nor Mr. Newman
is bound by an employment agreement with the Company. The loss of the services
of Dr. Bell, Mr. Newman or any of the Company's executive personnel could
materially adversely affect the Company. The success of the Company will also
depend, in part, upon its ability to retain qualified engineering and other
technical and marketing personnel. There is significant competition for
technologically qualified personnel in the geographical area of the Company's
business and the Company may not be successful in recruiting or retaining
sufficient qualified personnel.
POTENTIAL CHARGES TO INCOME
In connection with the Company's initial public offering completed in 1993,
the Escrow Shares were placed (and currently remain) in an escrow account, and
are subject to release to the beneficial owners of such shares in the event the
Company attains certain pre-tax income goals. In the event any Escrow Shares are
released to persons who are current or former officers or other employees of the
Company, compensation expense will be recorded for financial reporting purposes.
Accordingly, in the event of the release of the Escrow Shares from escrow, the
Company will recognize during the periods in which the earnings thresholds are
met or are probable of being met one or more substantial non-cash charges which
would have the effect of substantially increasing the Company's loss or reducing
or eliminating earnings, if any, at such time. Although the amount of
compensation expense recognized by the Company will not affect the Company's
total shareholders' equity or reduce its working capital, it may have a
depressive effect on the market price of the Company's securities. The Company
also expects to incur a non-recurring charge to operations in each fiscal
quarter up to and including the fiscal quarter in which the closing of the
Offering occurs relating to the repayment of the Bridge Notes and associated
costs of their issuance the aggregate amount of which, together with the charge
the Company will incur upon repayment of the Bridge Notes, will be approximately
$500,000. See "Principal Shareholders--Escrow Shares" and Management's
Discussion and Analysis of Financial Condition and Results of Operations."
POTENTIAL PRODUCT LIABILITY
The Company's business will expose it to potential product liability risks
which are inherent in the manufacturing, marketing and sale of automotive
components. In particular, there may be substantial warranty and liability risks
associated with critical safety components of the Company's products. If
available, product liability insurance generally is expensive. While the Company
presently has $5,000,000 of product liability coverage with respect to the
IVS-TM- product and its electric vehicle prototypes, there can be no assurance
that it will be able to obtain or maintain such insurance on acceptable terms
with respect to
15
other products the Company may develop, or that any insurance obtained will
provide adequate protection against any potential liabilities. In the event of a
successful claim against the Company, a lack or insufficiency of insurance
coverage could have a material adverse effect on the Company's business and
operations.
GOVERNMENT AUDITS OF GRANTS
For the year ended December 31, 1995, and for the nine months ended
September 30, 1996, the Company received a total of $1,469,000 and $1,454,000,
respectively, in Federal and state government grants to fund the Company's
development of various of its products, including electric vehicles. The
Company's grants are subject to periodic audit by such government authorities
for the purpose of confirming, among other things, progress in development and
that grant moneys are being used and accounted for as required by the granting
authority. If, as a result of any such audit, a granting authority were to
disallow expenses submitted for reimbursement, such authority could seek
recovery of such funds from the Company. The Company is not aware of any pending
or threatened audits with respect to the Company's grants and does not have any
reason to believe that any grant moneys have been applied in a manner
inconsistent with grant requirements or that any grant audits are otherwise
warranted or likely. However, no assurance can be given that any such audits
will not be commenced in the future or that, if commenced, any such audits would
not result in an obligation of the Company to reimburse funds to the granting
authority.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Units in the Offering will experience immediate and
substantial dilution of approximately $3.66 or 64% (if each Unit contains the
minimum of 175 shares of Class A Common Stock) or $2.38 or 57% (if each Unit
contains the maximum of 240 shares of Class A Common Stock) per share in the net
tangible book value per share of Class A Common Stock. Additional dilution to
public investors may result to the extent that the Class A Warrants, Unit
Purchase Option or other outstanding options or warrants to purchase Class A
Common Stock are exercised at a time when the net tangible book value per share
exceeds the exercise price of such securities. See "Dilution."
NO DIVIDENDS
The Company has not paid any cash dividends on its Common Stock since its
inception and, by reason of its present financial status and its contemplated
financial requirements, does not anticipate paying any cash dividends in the
foreseeable future. It is anticipated that earnings, if any, which may be
generated from operations will be used to finance the operations of the Company.
FLUCTUATIONS IN QUARTERLY RESULTS; SIGNIFICANT DECLINE IN REVENUES EXPECTED;
POSSIBLE VOLATILITY OF STOCK PRICE
Factors such as announcements by the Company of quarterly variations in its
financial results, or unexpected losses, could cause the market price of the
Class A Common Stock of the Company to fluctuate significantly. The results of
operations in previous quarters have been partially dependent on large grants,
orders and development contracts, which may not recur in the future. In
addition, the Company's quarterly operating results may fluctuate significantly
in the future due to a number of other factors, including timing of product
introductions by the Company and its competitors, availability and pricing of
components from third parties, timing of orders, foreign currency exchange
rates, technological changes and economic conditions generally. Development
contract revenues are expected to decline significantly in the next two fiscal
quarters because the activity on the Company's major electric vehicle
development contract is expected to diminish during the fourth quarter of 1996
and ultimately conclude at the end of 1996 with no replacement contract
presently scheduled to follow. In recent years, the stock markets in general,
and the share prices of technology companies in particular, have experienced
extreme
16
fluctuations. These broad market and industry fluctuations may adversely affect
the market price of the Class A Common Stock. In addition, failure to meet or
exceed analysts' expectations of financial performance may result in immediate
and significant price and volume fluctuations in the Class A Common Stock.
SIGNIFICANT INFLUENCE OF PRINCIPAL SHAREHOLDER
Upon completion of the Offering, the Company's principal shareholder, Dr.
Bell, will beneficially own approximately 32% of the outstanding shares of Class
A Common Stock of the Company (approximately 31% if the Underwriters'
over-allotment option is exercised in full) assuming that each Unit includes the
maximum of 240 shares of Class A Common Stock, and, therefore, will have the
power to significantly influence the management and policies of the Company. See
"Principal Shareholders" and "Description of Securities."
ANTI-TAKEOVER EFFECTS OF UNISSUED PREFERRED STOCK
The Company's Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
shareholders. The rights of the holders of Class A Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any shares of
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. However, the Company has no present plans to issue shares
of Preferred Stock.
RISK OF FOREIGN SALES
A substantial percentage of the Company's revenues to date have been from
sales to foreign countries and accordingly, the Company's business is subject to
many of the risks of international operations, including governmental controls,
tariff restrictions, foreign currency fluctuations and currency control
regulations.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
Commencing one year from the date of this Prospectus, the Class A Warrants
may be redeemed by the Company at a redemption price of $.05 per Warrant upon
not less than 30 days' prior written notice if the closing bid price of the
Class A Common Stock shall have averaged in excess of 175% of the Class A
Warrant exercise price per share for 30 consecutive trading days ending within
15 days of the notice. Redemption of the Class A Warrants could force the
holders (i) to exercise the Class A Warrants and pay the exercise price therefor
at a time when it may be disadvantageous for the holders to do so, (ii) to sell
the Class A Warrants at the then current market price when they might otherwise
wish to hold the Class A Warrants, or (iii) to accept the nominal redemption
price which, at the time the Class A Warrants are called for redemption, is
likely to be substantially less than the market value of the Class A Warrants.
See "Description of Securities--Class A Warrants."
CURRENT PROSPECTUS AND STATE REGISTRATION TO EXERCISE WARRANTS
Holders of Class A Warrants will be able to exercise the Class A Warrants
only if (i) a current prospectus under the Securities Act relating to the
securities underlying the Class A Warrants is then in effect and (ii) such
securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states in which the various holders of Class A
Warrants reside. Although the Company has undertaken and intends to use its best
efforts to maintain a current prospectus covering the securities underlying the
Class A Warrants following completion of the Offering to the extent required by
17
Federal securities laws, there can be no assurance that the Company will be able
to do so. The value of the Class A Warrants may be greatly reduced if a
prospectus covering the securities issuable upon the exercise of the Class A
Warrants is not kept current or if the securities are not qualified, or exempt
from qualification, in the states in which the holders of Class A Warrants
reside. Persons holding Class A Warrants who reside in jurisdictions in which
such securities are not qualified and in which there is no exemption will be
unable to exercise their Class A Warrants and would either have to sell their
Class A Warrants in the open market or allow them to expire unexercised. If and
when the Class A Warrants become redeemable by the terms thereof, the Company
may exercise its redemption right even if it is unable to qualify the underlying
securities for sale under all applicable state securities laws. See "Description
of Securities--Class A Warrants."
POSSIBLE ADVERSE EFFECT ON LIQUIDITY OF THE COMPANY'S SECURITIES DUE TO THE
INVESTIGATION OF D.H. BLAIR INVESTMENT BANKING CORP. AND D.H. BLAIR & CO.,
INC. BY THE SECURITIES AND EXCHANGE COMMISSION
The Commission is conducting an investigation concerning various business
activities of the Underwriter and D.H. Blair & Co., Inc. ("Blair & Co."), a
selling group member which will distribute substantially all of the Units
offered hereby. The investigation appears to be broad in scope, involving
numerous aspects of the Underwriter's and Blair & Co.'s compliance with the
Federal securities laws and compliance with the Federal securities laws by
issuers whose securities were underwritten by the Underwriter or Blair & Co., or
in which the Underwriter or Blair & Co. made over-the-counter markets, persons
associated with the Underwriter or Blair & Co., such issuers and other persons.
The Company has been advised by the Underwriter that the investigation has been
ongoing since at least 1989 and that it is cooperating with the investigation.
The Underwriter cannot predict whether this investigation will ever result in
any type of formal enforcement action against the Underwriter or Blair & Co.,
or, if so, whether any such action might have an adverse effect on the
Underwriter or the securities offered hereby. The Company has been advised that
Blair & Co. intends to continue to make a market in the securities following the
Offering. An unfavorable resolution of the Commission's investigation could have
the effect of limiting such firm's ability to make a market in the Company's
securities, which could adversely affect the liquidity or price of such
securities. See "Underwriting."
ADVERSE EFFECT ON LIQUIDITY ASSOCIATED WITH POSSIBLE RESTRICTIONS ON
MARKET-MAKING ACTIVITIES IN THE COMPANY'S SECURITIES
The Underwriter has advised the Company that Blair & Co., among others,
intends to continue to make a market in the Company's securities. Rule 10b-6
under the Securities Act of 1934, as amended (the "Exchange Act"), may prohibit
Blair & Co. from engaging in any market-making activities with regard to the
Company's securities for the period from nine business days (or such other
applicable period as Rule 10b-6 may provide) prior to any solicitation by the
Underwriter of the exercise of Class A Warrants until the later of the
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that the Underwriter may have to receive a fee for the
exercise of Class A Warrants following such solicitation. As a result, Blair &
Co. may be unable to provide a market for the Company's securities during
certain periods while the Class A Warrants are exercisable. In addition, under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the Selling Securityholder Warrants may not simultaneously
engage in market-making activities with respect to any securities of the Company
for the applicable "cooling off" period (at least two and possibly nine business
days) prior to the commencement of such distribution. Accordingly, in the event
the Underwriter or Blair & Co. is engaged in a distribution of the Selling
Securityholder Warrants, neither of such firms will be able to make a market in
the Company's securities during the applicable restrictive period. Any temporary
cessation of such market-making activities could have an adverse effect on the
market price of the Company's securities. See "Underwriting."
18
ARBITRARY DETERMINATION OF PRICE AND TERMS OF UNITS
The public offering price of the Units and the exercise price and other
terms of the Class A Warrants have been determined in part by negotiation
between the Company and the Underwriter and are not necessarily related to the
Company's asset value, net worth, results of operations or other established
criteria of value. See "Underwriting."
19
USE OF PROCEEDS
The net proceeds of the Offering, at an assumed public offering price of
$1,000 per Unit, are estimated to be approximately $13,100,000 ($15,125,000 if
the Over-Allotment Option is exercised in full) after deducting underwriting
discounts and estimated expenses of the Offering. A portion of the net proceeds
will be allocated to the retirement of debt as follows: (i) the Bridge Notes
bearing interest at 10% per annum and due and payable upon the earlier to occur
of the closing of the Offering or October 31, 1997, in the amount of $2,850,000
plus accrued interest from October 31, 1996 (the proceeds from which have been
and are being used to finance the Company's operations, including payments to
vendors and suppliers and other general and administrative expenses, pending
completion of the Offering); (ii) all outstanding amounts due under a secured
bank line of credit bearing interest at the bank's "prime rate" plus 1.3% per
annum and due and payable December 31, 1996 (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources"), in the amount of approximately $1,100,000 (the proceeds from which
have been and are being used to finance the Company's performance under a
contract to develop passenger electric vehicle systems for an Asian
manufacturing company, and the Company's obligations under which have been
partially guaranteed by Lon E. Bell, Ph.D., Chief Executive Officer, President
and Chairman of the Board of Directors, founder of the Company and a principal
shareholder of the Company); and (iii) the September 1996 working capital loan
made by Dr. Bell bearing interest at 8% per annum and due and payable on demand,
in the principal amount of $200,000 (the proceeds from which were used to
augment the Company's short-term working capital). In addition, the Company
intends to apply approximately $100,000 of the net proceeds of the Offering to
pay deferred executive salaries. The Company intends to apply the balance of the
net proceeds of the Offering (approximately $8,820,000) to fund near-term
production engineering, manufacturing, research and development and marketing of
its products, allocated approximately as follows: $7,320,000 to the Company's
thermoelectric heated and cooled seats and radar for maneuvering and safety
technologies, and $1,500,000 to the Company's electric vehicle components and
production systems technologies and voice interactive navigation and
entertainment. To the extent that the Company has net proceeds from the Offering
that it is not able to use for the foregoing purposes, the Company intends to
use such net proceeds for general corporate purposes. Pending the uses described
above, the net proceeds of the Offering will be invested in short-term
interest-bearing securities or money market funds.
The amounts and timing of such expenditures may vary significantly depending
upon numerous factors, including the progress of the Company's research and
development programs, the timing of development contracts and grant funding, if
any, technological advances, determinations as to commercial potential and the
status of competitive products. Expenditures may also be dependent upon the
establishment of strategic arrangements with other companies, the availability
of financing and other factors. Subject to the variables set forth above, the
Company anticipates that the net proceeds of this Offering, together with its
existing resources, should be sufficient to finance its working capital
requirements for approximately the next 12 months.
20
DILUTION
The following discussion and tables allocate no value to the Class A
Warrants and assume no exercise of the Underwriter's Over-Allotment Option.
As of September 30, 1996, the Company had a net tangible book value of
$1,004,000 or approximately $.25 per share of Class A Common Stock. Net tangible
book value per share represents the amount of the Company's total tangible
assets, less liabilities, divided by the number of shares of Class A Common
Stock outstanding (excluding the Escrow Shares). Giving retroactive effect to
the sale of the 15,000 Units offered hereby at an assumed price of $1,000 per
Unit, and giving pro forma effect to the $500,000 charge to operations to be
incurred upon repayment of the Bridge Notes, the pro forma net tangible book
value at September 30, 1996 would have been (i) $2.05 per share if each Unit
contains the minimum of 175 shares of Class A Common Stock, representing an
immediate increase in net tangible book value of $1.80 per share to the present
shareholders and an immediate dilution of $3.66 per share to new investors from
the public offering price, and (ii) $1.79 per share if each Unit contains the
maximum of 240 shares of Class A Common Stock, representing an immediate
increase in net tangible book value of $1.54 per share to the present
shareholders and an immediate dilution of $2.38 per share to new investors from
the public offering price. Dilution per share represents the difference between
the public offering price and the pro forma net tangible book per share value
after the Offering.
The following table illustrates the per share dilution to be incurred by
public investors from the public offering price:
IF EACH UNIT IF EACH UNIT
CONTAINS THE CONTAINS THE
MINIMUM OF MAXIMUM OF
175 SHARES OF 240 SHARES OF
CLASS A CLASS A
COMMON STOCK COMMON STOCK
-------------------- --------------------
Assumed public offering price per share of Class A Common Stock................... $ 5.71 $ 4.17
Net tangible book value before Offering....................................... .25 .25
Increase attributable to new investors........................................ 1.80 1.54
--- ---
Pro forma net tangible book value after Offering.................................. 2.05 1.79
--------- ---------
Dilution of net tangible book value to new investors.............................. $ 3.66 $ 2.38
--------- ---------
--------- ---------
21
The following table sets forth the difference between the present
shareholders and the public investors with respect to the number of shares of
Class A Common Stock purchased from the Company, the total consideration paid
and the average price per share:
IF EACH UNIT CONTAINS THE
MINIMUM OF 175 SHARES OF CLASS A COMMON STOCK
--------------------------------------------------------------------------
PERCENT OF PERCENT OF AVERAGE PRICE
NUMBER TOTAL AMOUNT TOTAL PER SHARE
-------------- ------------ ------------- ------------ ---------------
Current Shareholders........................ 4,068,500(1) 61% $ 20,045,000 57% $ 4.93
Investors in the Offering................... 2,625,000 39% 15,000,000 43% $ 5.71
-------------- ----- ------------- -----
6,693,500(1) 100.0% $ 35,045,000 100.0%
-------------- ----- ------------- -----
-------------- ----- ------------- -----
IF EACH UNIT CONTAINS THE
MAXIMUM OF 240 SHARES OF CLASS A COMMON STOCK
--------------------------------------------------------------------------
PERCENT OF PERCENT OF AVERAGE PRICE
NUMBER TOTAL AMOUNT TOTAL PER SHARE
-------------- ------------ ------------- ------------ ---------------
Current Shareholders........................ 4,068,500(1) 53% $ 20,045,000 57% $ 4.93
Investors in the Offering................... 3,600,000 47% 15,000,000 43% $ 4.17
-------------- ----- ------------- -----
7,668,500(1) 100.0% $ 35,045,000 100.0%
-------------- ----- ------------- -----
-------------- ----- ------------- -----
- ------------------------
(1) Excludes the Escrow Shares. See "Principal Shareholders--Escrow Shares."
22
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Class A Common Stock has traded on the Nasdaq SmallCap Market
under the symbol ARGNA since June 10, 1993. The Company has applied for
inclusion of the Class A Warrants on the Nasdaq SmallCap Market. The Units will
not be listed or traded separately on Nasdaq. The following table sets forth the
high and low bid prices for the Class A Common Stock as reported on the Nasdaq
SmallCap Market for each quarterly period (or part thereof) from the beginning
of the first quarter of 1994 through September 30, 1996.
HIGH LOW
--------- ---------
1994
1st Quarter.............................................................. $ 10.00 $ 7.50
2nd Quarter.............................................................. 9.75 8.00
3rd Quarter.............................................................. 10.00 9.00
4th Quarter.............................................................. 12.00 9.75
1995
1st Quarter.............................................................. 13.50 9.50
2nd Quarter.............................................................. 10.50 9.50
3rd Quarter.............................................................. 12.50 9.00
4th Quarter.............................................................. 11.25 10.25
1996
1st Quarter.............................................................. 10.75 10.00
2nd Quarter.............................................................. 12.00 9.00
3rd Quarter.............................................................. 11.00 7.50
The last reported sales price of the Class A Common Stock on the Nasdaq
SmallCap Market on December 5, 1996 was $5.75 per share. As of December 5, 1996,
there were approximately 50 holders of record of the Class A Common Stock (not
including beneficial owners holding shares in nominee accounts).
The Company has not paid any cash dividends since its formation and, given
its present financial status and its anticipated financial requirements, does
not expect to pay any cash dividends in the foreseeable future. It is
anticipated that earnings, if any, which may be generated from operations will
be used to finance the operations of the Company.
23
CAPITALIZATION
The following table sets forth (i) the capitalization of the Company at
September 30, 1996, (ii) the pro forma capitalization of the Company at
September 30, 1996 giving effect to the Bridge Financing as if it had occurred
on that date and (iii) the pro forma capitalization of the Company at September
30, 1996 as adjusted at that date to give effect to the sale of the Units
offered hereby at an assumed offering price of $1,000 per unit (and the
application of the net proceeds therefrom) and assuming the minimum and maximum
shares of Class A Common Stock per Unit. See "Use of Proceeds," "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the financial statements of the Company and related notes thereto included
elsewhere in this Prospectus.
SEPTEMBER 30, 1996
(IN THOUSANDS)
-----------------------------------------------
PRO FORMA
(AS ADJUSTED)(1)(3)
PRO FORMA ----------------------
ACTUAL (1)(2) MINIMUM MAXIMUM
---------- ----------- ---------- ----------
Short term debt
Capital lease--short term portion............................... $ 19 $ 19 $ 19 $ 19
Note payable to shareholder..................................... 200 200 -- --
Bank loan payable............................................... 2,532 2,532 1,432 1,432
10% Notes payable(4)............................................ -- 2,850 -- --
10% Convertible subordinated debentures(4)...................... -- 150 -- --
---------- ----------- ---------- ----------
Total short term debt............................................. 2,751 5,751 1,451 1,451
---------- ----------- ---------- ----------
Long term portion of capital lease................................ 50 50 50 50
Shareholders' equity
Preferred stock, no par value;
5,000,000 shares authorized, none issued...................... -- -- -- --
Common stock:
Class A, no par value; 17,000,000 shares authorized and
4,068,500 shares issued and outstanding actual and pro
forma, excluding 3,000,000 shares issued and held in escrow;
17,000,000 shares authorized and 6,693,500 shares minimum
and 7,668,500 shares maximum issued and outstanding,
excluding 3,000,000 shares issued and held in escrow, as
adjusted.................................................... 17,321 17,321 30,421 30,421
Class B, no par value; 3,000,000 shares authorized, none
issued...................................................... -- -- -- --
Warrants to purchase common stock............................. -- -- 150 150
Contributed capital........................................... 3,115 3,115 3,115 3,115
Deficit accumulated during development stage(2)............... (19,432) (19,432) (19,932) (19,932)
---------- ----------- ---------- ----------
Total shareholders' equity.................................... 1,004 1,004 13,754 13,754
---------- ----------- ---------- ----------
Total capitalization.............................................. $ 3,805 $ 6,805 $ 15,255 $ 15,255
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
- ------------------------
(1) Does not include (i) a minimum of 787,500 and a maximum of 1,080,000 shares
of Class A Common Stock issuable upon exercise of the Over-Allotment Option
and the Class A Warrants included in the Units issuable upon exercise of the
Over-Allotment Option; (ii) a minimum of 2,625,000 and a maximum of
3,600,000 shares of Class A Common Stock issuable upon exercise of the Class
A Warrants included in the Units offered hereby; (iii) a minimum of 525,000
and a maximum of 720,000 shares of Class A Common Stock issuable upon
exercise of the Unit Purchase Option and the Class A
24
Warrants included in the Units included in the Unit Purchase Option; (iv) a
minimum of 280,218 and a maximum of 284,388 shares of Class A Common Stock
issuable upon exercise of outstanding warrants; (v) 530,000 shares of Class
A Common Stock presently reserved for issuance under the Company's 1993
Stock Option Plan, as amended, under which options to purchase 312,543
shares of Class A Common Stock are outstanding. "Description of Securities"
and "Underwriting."
(2) Gives pro forma effect to the October 1996 issuance of the Bridge Units, net
of approximately $500,000 of issuance costs, as if the issuance had occurred
as of September 30, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(3) As adjusted to give effect to the sale of the 15,000 Units offered hereby at
an offering price of $1,000 per Unit and the application of the net proceeds
therefrom (including the automatic conversion of the Bridge Debentures into
Class A Warrants, the repayment of the principal on the Bridge Notes and the
corresponding charge to operations upon repayment thereof estimated at
$500,000). See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(4) The Bridge Notes and Bridge Debentures are payable on the earlier of the
closing of this Offering or October 31, 1997; provided that the Bridge
Debentures will automatically convert upon the closing of the Offering into
an aggregate of 1,620,000 Selling Securityholder Warrants.
BRIDGE FINANCING
In October 1996, the Company completed the Bridge Financing from which it
received net proceeds of approximately $2,500,000. The Bridge Notes and the
Bridge Debentures are payable, together with interest at the rate of 10% per
annum, on the earlier of October 31, 1997 or the closing of the Offering. See
"Use of Proceeds." The Bridge Debentures are convertible upon the Closing of the
Offering into the Selling Securityholder Warrants, each of which will be
identical to the Class A Warrants included in the Units offered hereby, and
which will entitle the holders thereof to purchase an aggregate of 1,620,000
shares of Class A Common Stock. The Company has agreed to register subsequent to
the Offering for resale the Selling Securityholder Securities, subject to the
contractual restriction that the Selling Securityholders have agreed not to
exercise the Selling Securityholder Warrants for a period of one year from the
closing of the Offering and not to sell the Selling Securityholder Warrants
except after specified periods commencing 90 days after the closing date of the
Offering. See "Subsequent Offering."
25
SELECTED FINANCIAL DATA
The selected financial data of the Company presented below as of and for the
four years ended December 31, 1995, as of and for the period April 23, 1991
(Inception) to December 31, 1991 and for the period April 23, 1991 (Inception)
to December 31, 1995 have been derived from the audited financial statements of
the Company. The selected financial data of the Company presented below at
September 30, 1996 and for the nine months ended September 30, 1995 and 1996 and
for the period April 23, 1991 (Inception) to September 30, 1996 have been
derived from unaudited financial statements of the Company and, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
interim periods. The results of operations for the nine months ended September
30, 1996 are not necessarily indicative of future results of operations. The
selected financial data presented below should be read in conjunction with the
financial statements and related notes thereto appearing elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
NINE MONTHS
PERIOD FROM PERIOD FROM ENDED
APRIL 23, 1991 FISCAL YEARS ENDED DECEMBER 31, APRIL 23, 1991 -------------
(INCEPTION) TO ------------------------------------------ (INCEPTION) TO SEPTEMBER 30,
DECEMBER 31, 1991 1992 1993 1994 1995 DECEMBER 31, 1995 1995
------------------- --------- --------- --------- --------- ----------------- -------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
OPERATING DATA:
Total revenues..... $ -- $ 1,900 $ 2,289 $ 2,640 $ 7,809 $ 14,638 $ 4,806
Costs and expenses:
Direct
development
contract and
related grant
costs.......... -- -- 525 928 5,332 6,785 3,895
Direct grant
costs.......... 84 1,647 1,649 803 339 4,522 390
Research and
development.... 221 356 1,578 2,137 2,367 6,659 1,785
Selling, general
and
administrative,
including
reimbursable
administrative
costs.......... 311 1,356 2,340 3,235 3,135 10,377 1,820
------ --------- --------- --------- --------- -------- -------------
Total costs and
expenses......... 616 3,359 6,092 7,103 11,173 28,343 7,890
------ --------- --------- --------- --------- -------- -------------
Operating Loss..... (616) (1,459) (3,803) (4,463) (3,364) (13,705) (3,084)
Interest Income.... -- -- 163 228 127 518 124
Interest Expense... -- -- -- -- -- -- --
------ --------- --------- --------- --------- -------- -------------
Net loss........... $ (616) $ (1,459) $ (3,640) $ (4,235) $ (3,237) $ (13,187) $ (2,960)
------ --------- --------- --------- --------- -------- -------------
------ --------- --------- --------- --------- -------- -------------
Net loss per
share............ $ (.61) $ (1.46) $ (1.64) $ (1.28) $ (.98) -- $ (0.90)
Weighted average
number of shares
outstanding...... 1,000 1,000 2,213 3,300 3,306 -- 3,300
PERIOD FROM
APRIL 23, 1991
SEPTEMBER 30, (INCEPTION) TO
1996 SEPTEMBER 30, 1996
------------- ------------------
OPERATING DATA:
Total revenues..... $ 6,501 $ 21,139
Costs and expenses:
Direct
development
contract and
related grant
costs.......... 9,142 15,927
Direct grant
costs.......... 101 4,623
Research and
development.... 1,544 8,203
Selling, general
and
administrative,
including
reimbursable
administrative
costs.......... 1,838 12,215
------------- --------
Total costs and
expenses......... 12,625 40,968
------------- --------
Operating Loss..... (6,124) (19,829)
Interest Income.... 42 560
Interest Expense... (163) (163)
------------- --------
Net loss........... $ (6,245) $ (19,432)
------------- --------
------------- --------
Net loss per
share............ $ (1.54) --
Weighted average
number of shares
outstanding...... 4,060 --
AS OF DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital (deficit)................................... $ (438) $ (1,644) $ 8,833 $ 4,149 $ 6,481
Total assets................................................ 55 969 9,721 7,162 8,995
Long-term debt.............................................. -- -- -- 78 68
Total liabilities........................................... 460 2,494 701 2,376 1,797
Deficit accumulated during development stage................ (616) (2,075) (5,715) (9,950) (13,187)
Total shareholders' equity (accumulated deficit)............ (405) (1,525) 9,020 4,786 7,198
AS OF
SEPTEMBER 30, 1996
------------------
BALANCE SHEET DATA:
Working capital (deficit)................................... $ 351
Total assets................................................ 5,876
Long-term debt.............................................. 50
Total liabilities........................................... 4,872
Deficit accumulated during development stage................ (19,432)
Total shareholders' equity (accumulated deficit)............ 1,004
26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements of the Company and related notes thereto appearing
elsewhere in this Prospectus, and is qualified in its entirety by the same and
by other more detailed financial information appearing elsewhere in this
Prospectus.
OVERVIEW OF DEVELOPMENT STAGE ACTIVITIES
The Company's operations during the development stage have focused on the
research and development of technologies to adapt them for a variety of uses in
the automotive industry. Generally, the Company licenses the rights to these
technologies from the holders of the related patents. As development proceeds,
the Company seeks to generate revenues from the sale of prototypes, then from
specific development contracts, pre-production orders and, ultimately,
production orders. The benefit of prototype sales is to gain experience and
information regarding the performance of the prototypes and to develop customer
interest in and comfort with the technology. Development contracts are from
customers interested in developing a particular use or project using the
Company's technologies and are generally longer term activities (from six months
to one year) involving, in some cases, pre-production orders of larger
quantities of the product for final testing by the customer before submitting a
production order. Revenues obtained as grant funding from government agencies
interested in promoting the technologies for specific tasks or projects, and
development funds from prototype sales to customers help offset the development
expenses overall. Throughout the development stage, development costs and
administrative expenses have and are expected to continue to exceed the revenues
from customers and from grant agencies.
The Company received no funds to offset its development expenses from any
funding source in 1991 and, in 1992, secured its first outside grant funding
totaling $1,900,000. In 1993, the Company sold $188,000 in prototypes of its
developing technology adaptations and, in addition, recorded $2,101,000 in grant
revenue. In 1994, the sale of prototypes increased and the Company recorded its
first development contract revenues, increasing revenues from these sources to
$1,336,000. Grant revenues became less important as a source of total revenues,
decreasing in 1994 to 49% of total revenues from 92% in 1993. In 1995, the
Company recorded development funding revenue from customers of $5,418,000 plus
related grant funds of $1,872,000. The Company also recorded additional grant
revenue of $519,000.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
REVENUES. Revenues for the nine months ended September 30, 1996 ("1996")
were $6,501,000 as compared with revenues of $4,806,000 in the nine months ended
September 30, 1995. Approximately $5,535,000 of 1996 revenue relates to a single
electric vehicle development contract and related grants, which is an increase
of approximately $1,871,000 over 1995. Development contract revenues are
expected to decline significantly in the next two fiscal quarters because the
activity on the major electric vehicle development contract is expected to
diminish during the fourth quarter of 1996 and ultimately conclude at the end of
1996 with no replacement contract presently scheduled to follow. Therefore, the
Company does not expect any revenues from this major electric vehicle
development contract in 1997. The percentage of completion method of accounting
is used for this contract and, accordingly, revenues and gross profit are
recognized as work is performed based on the relationship between actual costs
incurred and total estimated costs at completion. Revenues and gross profit are
recognized prospectively after taking into account revisions in estimated total
contract costs and contract values, and estimated losses are recorded when
identified. As discussed below, the Company recorded a charge to operations of
approximately $1,625,000 during the nine months ended September 30, 1996 to
provide for the ultimate estimated loss expected on the contract. Grant revenue
is recorded when reimbursable costs are incurred.
27
The level of activity in the contract involved considerably more labor and
material expenses in 1996 compared to the beginning stages of the contract in
1995, when engineering design was the principal activity. In 1996, two
prototypes of the vehicle to be built under the contract were constructed and
improved with design modification changes. Kits for all vehicle frames with
motor controllers required under the contract were completed and shipped to the
customer and final tooling for body panels and interior portions of the vehicle
and remaining parts were being ordered.
During 1996, development continued on the Company's climate control seat
system and radar system, some of which was funded pursuant to development
contracts. The magnitude of the revenues recognized for the development of the
seat systems, radar systems and for the sale of IVS products in 1996 was
$847,000, compared to $727,000 in 1995. The Company began selling IVS-TM-
products in December 1995. Demand for the IVS-TM- product in 1996 was weak.
Grant revenues in 1996 of approximately $119,000 were related to new grants
for the IVS-TM- and radar products, compared to $480,000 in 1995 that were
related to two prior electric vehicle projects and a project in the seat systems
area. Certain other grant revenues that are related to the electric vehicle
development have been combined with the development contract revenue. These
grant revenues totaled $815,000 in 1996 compared to $872,000 in 1995.
DIRECT DEVELOPMENT CONTRACT AND RELATED GRANT COSTS. Direct development
contract and related grant costs increased to $9,142,000 in 1996 from $3,895,000
in 1995 due to the increased activity in the Company's electric vehicle program.
In 1996, two prototypes of the vehicle were constructed and improved with design
modification changes, kits for all vehicle frames with motor controllers were
completed and shipped to the customer, and final tooling for body panels and
interior portions of the vehicle and remaining parts were being ordered. In
1995, engineering design was the principal activity. The amount for 1996
includes a provision of $1,625,000 for the ultimate loss expected on the
Company's major electric vehicle contract that was provided for primarily in the
second quarter of 1996. The cost overruns were caused by unanticipated design
and development problems and continued delays in the completion of the contract,
as well as other factors, which resulted in higher labor costs together with
higher than expected tooling and material costs.
DIRECT GRANT COSTS. Direct Grant Costs in 1996 were $101,000 compared to
$390,000 in 1995. These costs are related to the projects for which grant
revenues are reported. The decrease in amount reflects the reduction in grant
project activities during 1996.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$1,544,000 in 1996 compared to $1,785,000 in 1995. These expenses represent
unfunded research and development expenses. Expenses of research and development
projects that are specifically funded by development contracts from customers
are classified under direct development contract and related grant costs or
direct grant costs. The Company's research and development expenses fluctuate
significantly from period to period, due to both changing levels of activity and
changes in the amount of such activities that are covered by customer contracts
or grants. Where possible, the Company seeks funding from third parties for its
research and development activities.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES. SG&A expenses were
$1,838,000 in 1996 compared to $1,820,000 in 1995. Direct and indirect overhead
expenses included in SG&A which are associated with development contracts are
allocated to such contracts.
INTEREST INCOME (EXPENSE). The interest expense in 1996 is related to the
bank line of credit obtained to finance work on the major electric vehicle
contract. There was no such loan in 1995. Interest income decreased to $42,000
in 1996 compared to $124,000 in 1995 reflecting the overall lower cash balance
during 1996.
28
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Total revenues increased by $5,169,000 to $7,809,000 in the year ended
December 31, 1995 from the year ended December 31, 1994 due to the increase in
development contract work for customers. Development contract revenues including
revenues from the sales of prototypes increased to $7,290,000, which includes
$1,872,000 of grant funding related to these development activities, compared to
$1,336,000 in 1994. The substantial increase in development revenues is
primarily attributable to revenues in 1995 from the Company's electric vehicle
development contract which were $4,040,000 compared to $48,000 in 1994. These
contracts are related to orders for prototype models and kits to make
approximately 50 electric vehicles. Grant revenue from activities not related to
development contracts decreased from $1,304,000 in 1994 to $519,000 in 1995 due
to the completion in 1994 of three grants accounting for $577,000 of the
decrease and due to the decrease in billings for two other grants.
Direct costs for development contracts and related grants increased from
$928,000 in 1994 to $5,332,000 in 1995 primarily as a result of the Company's
electric vehicle development contract together with development contract costs
in the climate control seat and radar programs. In the electric vehicle program
the costs primarily consisted of tooling costs for prototype materials, internal
and external engineering services and consulting. Direct costs for grants
decreased from $803,000 in 1994 to $339,000 in 1995, due to the decrease in the
number of and activity under grants as described above.
Research and development expenses include the unfunded portion of direct
wages of Company engineers and technicians, outside consultants, prototype
tooling and prototype materials. Such expenses increased from $2,137,000 in 1994
to $2,367,000 in 1995 primarily due to costs associated with completing the
development of the Company's IVS-TM- product. Included in the research and
development expenses are fees for licenses and royalties of $248,000 in 1994 and
$345,000 in 1995. Research and development is expected to continue at high
levels as work continues toward the commercialization of the Company's electric
vehicle, radar and seat products as well as on improvements to the IVS-TM-
product.
SG&A decreased from $3,235,000 in 1994 to $3,135,000 in 1995. Increases in
rent, legal expenses, sales commissions and depreciation were offset by
decreases in the provision for doubtful accounts and recruiting expenses.
Interest income decreased from $228,000 in 1994 to $127,000 in 1995 due to the
lower amount of invested cash in 1995.
Future fiscal periods will be negatively impacted to the extent the Company
incurs charges to income resulting from the vesting of options granted at prices
below fair market value on date of grant and the vesting of performance options
on the date such performance goals are attained (See Note 8 of Notes to the
Financial Statements). Substantial charges to income will also be incurred at
such time that financial or per share targets for the release of shares held in
escrow are met (See Note 7 of Notes to the Financial Statements).
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Total revenues increased from $2,289,000 in the year ended December 31, 1993
to $2,640,000 in the year ended December 31, 1994. Revenues for 1994 included
$1,336,000 in development contracts from customers compared to $188,000 in 1993.
The increase in sales of prototypes and development contract revenue compared to
1993 is because the Company's products were further along in the development
cycle and due to increased marketing efforts which expanded in 1994. Also, the
Company was able to offer more advanced prototypes of the Company's products to
automotive manufacturers for testing and analysis. Revenue from grants decreased
from $2,101,000 in 1993 to $1,304,000 in 1994 due to an electric vehicle
"Showcase" grant program completed in 1993 with a grant-funded follow-on program
that began in 1993 and was completed in the first half of 1994.
Direct costs for development contracts and related grants increased from
$525,000 in 1993 to $928,000 in 1994. The increase is due to the increased
numbers of customer prototypes. In 1993, the costs of
29
producing prototypes was greater relative to the related revenues because the
state of development and ease of production was not as advanced as in 1994, and
also because the Company was not able to charge as much to customers as in 1994.
Research and development expenses increased from $1,578,000 in 1993 to
$2,137,000 in 1994 due to accelerated development of its products, primarily the
IVS-TM- System, Climate Controlled Seat System and the Ultra Wideband Radar
products. Research and Development activities provide benefit to some of the
specific prototypes sold and development contracts since most of the technology
is common within a product line. Included in these expenses in 1994 was $248,000
in license acquisition costs and minimum royalties related to the IVS-TM-, the
Climate Controlled Seat and the radar technology.
SG&A expenses increased from $2,340,000 in 1993 to $3,235,000 in 1994
primarily due to the hiring of additional personnel (from approximately 43 to
69), development of a marketing department and marketing activities, and other
increases in administrative expenses in support of the increases in development
activities. Many of these increases in activities initially occurred in the
second six months of 1993, but had a full year effect in 1994. In addition, SG&A
expenses increased in 1994 by approximately $240,000 due to the start of the
lease in February 1994 at the present location. Previously, the Company occupied
office space at minimal expense. SG&A expenses in 1993 included $549,000 in
compensation expense related to the granting of stock options compared to $1,000
of such expenses in 1994.
Interest income of $163,000 was earned in 1993 on invested cash as compared
with $228,000 in 1994. The net loss increased from $3,640,000 in 1993 to
$4,235,000 in 1994 due primarily to the increase in development activity
expenses relative to the amount of grant and customer funding obtained, and, in
part, to the increases in selling expenses to increase that activity and to the
increase in costs associated with being in a new facility for the full year in
1994.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital of $351,000. The
Company's principal sources of operating capital have been the proceeds of its
initial public offering in September 1993, the private placement of common stock
in December 1995 and the October 1996 Bridge Financing discussed below, together
with revenues from grants, development contracts and the sale of prototypes to
customers. To a lesser extent, the Company received capital contributions from
the Company's principal shareholders before becoming a public company and has
received loans from the Company's Chief Executive Officer and principal
shareholder subsequent to such date.
Cash and cash equivalents decreased by $4,218,000 during the period from
December 31, 1995 to September 30, 1996. Operating activities used $6,796,000,
of which $6,245,000 was for the operating loss, $1,098,000 was for the increase
in unbilled revenues and accounts receivable (primarily related to the
development contract and grant related to the Company's electric vehicle
program), and $700,000 was related to work in anticipation of a proposed joint
venture company in India. Reductions of $501,000 in prepaid expenses and other
assets related to the electric vehicle program and increases in accounts payable
of $410,000 partially offset the other uses of cash for operating activities.
Investing activities used $187,000 related to the purchase of property and
equipment.
Financing activities provided $2,765,000 of which $2,532,000, net of
repayments, was from borrowing under a revolving bank line of credit established
to finance the cash flows of the major electric vehicle contract. The line of
credit expired by its terms but was extended until December 31, 1996. As of
September 30, 1996, the Company was in violation of certain financial and other
covenants contained in the loan agreement. However, the bank has agreed to waive
its rights and remedies with respect to some of such violations and to forbear
until December 31, 1996 from exercising its rights and remedies with respect to
all others. See "Risk Factors--Default Under Bank Credit Line." A portion of the
proceeds of the Offering will be applied to repayment of obligations incurred by
the Company under the credit line. See "Use of Proceeds."
30
The Company expects to incur losses for the foreseeable future due to the
continuing cost of its product development and marketing activities. To fund its
operations, the Company will continue to need cash from financing sources unless
and until such time as sufficient profitable production contracts are obtained.
Cash inflows during the development and early stage production period are
dependent upon achieving certain billing milestones under existing development
contracts and grants, and on obtaining new production and/or development
contracts. Cash outflows are dependent upon the level and timing of production
and/or development work and the amount of research and development and overhead
expenses. Cash inflows must be supplemented by cash from debt and/or equity
financing.
Subsequent to September 30, 1996, the Company's working capital diminished
to almost zero. In October 1996, the Company completed the Bridge Financing. The
Bridge Debentures will, upon completion of the Offering, automatically convert
into an aggregate of 1,620,000 Class A Warrants. The net proceeds to the Company
from the Bridge Financing were approximately $2,500,000, net of costs of
issuance of approximately $500,000. A portion of the proceeds of the Offering
will be applied to repayment of the Bridge Notes. See "Use of Proceeds." A
substantial portion of the costs of issuance of the Bridge Financing will be
charged to operations upon repayment of the Bridge Notes.
Except for the historical information contained herein, the matters
discussed above include forward looking statements that involve risks and
uncertainties, including with respect to the electric vehicle project, potential
further delays in the completion of the contract, unanticipated costs associated
with the project which may cause the estimated loss to increase, unanticipated
product design problems and inability to obtain a financial or strategic
partner, and with respect to the overall operations and expected future
operating losses, the timing and amount of financing required to continue
operations, and other risks detailed from time to time in the Company's other
filings with the Commission.
CHARGE TO INCOME IN THE EVENT OF RELEASE OF SHARES FROM ESCROW
In the event any Escrow Shares are released from escrow to persons who are
officers and other employees of the Company, compensation expense will be
recorded for financial reporting purposes. Therefore, in the event the Company
attains any of the earnings thresholds required for the release of Escrow Shares
from escrow, such release will be deemed additional compensation expense of the
Company and the Company will recognize during the periods in which the earnings
thresholds are met or are probable of being met or such minimum bid prices
attained what will likely be one or more substantial charges which would have
the effect of substantially increasing the Company's loss or reducing or
eliminating earnings, if any, at such time. Although the amount of compensation
expense recognized by the Company will not affect the Company's total
shareholders' equity or its working capital, it may have a depressive effect on
the market price of the Company's common stock.
31
BUSINESS
GENERAL
Amerigon is a development stage company formed in 1991 to develop,
manufacture and market proprietary high technology automotive components and
systems for sale to automobile and other original equipment manufacturers. The
Company's business strategy is to apply aerospace and defense industry
technology to products for the automotive market. The Company has principally
focused on developing proprietary positions in the following technologies: (i)
thermoelectric heated and cooled seats; (ii) radar for maneuvering and safety;
(iii) voice interactive navigation and entertainment; and (iv) electric vehicle
components and production systems.
The Company has substantially completed development of the first generation
of IVS-TM-. The IVS-TM- provides spoken-word navigation directions to driver and
passengers using an in-vehicle compact audio disc system. To date, the IVS-TM-
product has not been commercially successful and likely would require
substantial further development before it could be expected to achieve
significant sales. The Company is presently seeking to sell the IVS-TM- product
line and the Company's interests in related technology or to find a strategic or
financial partner to help further develop and market the IVS-TM- product. If the
Company is unable to consummate such a sale or arrange such a relationship in
the near future, the Company plans to discontinue sales and further development
of the IVS-TM- and related technology. See "Risk Factors-- Possible Termination
of License of Voice Recognition Software Technology."
The Company's other products are in various stages of development. The
Company is presently working with three of the world's largest automotive
original equipment manufacturers on pre-production development programs for
heated and cooled seats. In addition, the Company has sold multiple prototypes
of its heated and cooled seats and radar for maneuvering and safety to potential
customers for evaluation and demonstration.
The Company was founded on the premise that technology proven for use in the
defense and aerospace industries could be successfully adapted to the automotive
and transportation industries. Amerigon has focused on technologies that it
believes can be readily adapted to automotive needs for advanced vehicle
electronics and for electric vehicle systems. The Company seeks to avoid direct
competition with established automotive suppliers of commodity products by
identifying market opportunities where the need for rapid technological change
gives an edge to new market entrants with proprietary products.
The Company has recently determined to focus its resources primarily on
developing its heated and cooled seat and radar for maneuvering and safety
technologies. The Company has adopted this strategy primarily because the
Company believes that the markets for these products have greater near-term
potential than the markets for its other products, and because these
technologies afford the Company its best opportunities to exploit competitive
advantages over rival companies. The Company also would expect continued
necessary development and marketing of the Company's voice interactive
navigation technologies and electric vehicle systems to entail very high costs,
to the point that they would likely exceed the Company's financial resources.
Even if the Company were able to overcome this financial challenge, management
also believes that the Company might not be able to develop and successfully
market the next generation of IVS-TM-, and might not be able to successfully
develop and profitably manufacture electric vehicles or their components,
without commercial or technical assistance from one or more strategic partners.
Accordingly, the Company is presently seeking to sell the IVS-TM- product line
and the Company's interests in related technology or to find a strategic or
financial partner to help further develop and market the IVS-TM- product. If the
Company is unable to consummate such a sale or arrange such a relationship in
the near future, the Company plans to discontinue sales and further development
of the IVS-TM- and related technology. The Company is also presently seeking
strategic and financial partners to help support continued development and
marketing of the Company's electric vehicle systems. If the Company is unable to
arrange such a relationship in the near term, the Company will attempt to sell
its proprietary interests
32
and other assets in and relating to its electric vehicle technology or abandon
their development. See "Risk Factors--Possible Disposition or Abandonment of
Electric Vehicle and IVS-TM- Product Businesses."
The Company has recently experienced serious cash shortfalls. In October
1996, the Company completed the Bridge Financing to enable it to continue
operations until the completion of the Offering. A portion of the proceeds of
the Offering will be applied to repayment of the Bridge Notes. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Use of Proceeds."
PRODUCTS
CLIMATE CONTROL SEAT SYSTEM
The Company's Climate Control Seat ("CCS") system utilizes non-exclusive,
licensed, patented technology to improve the temperature comfort of automobile
passengers. The CCS uses one or more small (approximately two-inch square and
one-eighth inch thick) thermoelectric modules, which are solid-state devices the
surfaces of which turn hot or cold depending on the polarity of applied direct
current electricity. Heat-transfer parts attached to the modules cool or heat
air that is blown past them. The conditioned air is then circulated through
ducts and pads in the seat so that the surface of the seat grows warm or cool
for the passengers, with small quantities of conditioned air passing through the
seat to flow directly on the passengers. Each seat has individual electronic
controls to adjust the level of heating or cooling. The CCS uses substantially
less energy than conventional air conditioners by focusing the cooling directly
on the passengers through the seat, rather than cooling the entire ambient air
volume and the interior surfaces of the vehicle.
The CCS offers several benefits compared to conventional heated car seats.
First, the thermoelectric technology provides both heating and cooling. The
system also provides environmental benefits because it cools without the use of
fluorine-based refrigerants or other liquids. The CCS could be used as the sole
source of climate control in certain cars, such as low cost European cars or
electric vehicles. Only a portion of the cars sold in Europe come equipped with
factory air conditioning because of cost and effect on gas mileage, and the
range of electric vehicles is greatly reduced by the large amount of energy
required to operate traditional air conditioners. For some consumers, seat-based
cooling is expected to be sufficient, while others will prefer it to be
augmented with moderate cooling of the ambient air. In either case, there is the
potential for significant reductions in energy usage, which would result in
greater gas mileage in conventional vehicles and greater range in electric
vehicles.
Additional development is needed before the CCS can be commercialized. In
particular, a production-engineered design is being modified to make the units
less complex, more energy efficient and less expensive to manufacture and
install. The Company is also working to reduce fan noise and condensation
resulting from operation of the seat in the cooling mode. The Company's initial
marketing of the CCS has been to automobile and vehicle seat manufacturers
directly. The Company is presently working with three of the world's largest
automotive original equipment manufacturers on pre-production development
programs for the CCS. However, there can be no assurance that these development
programs will lead to commercial production orders.
Since Amerigon's CCS system provides both heating and cooling, the Company
believes that the potential market for CCS is larger than the market for heated
seats alone. The Company also believes that the CCS concept could be applied to
seats other than those used in motor vehicles, e.g. to aircraft, theater, and
stadium seating.
RADAR FOR MANEUVERING AND SAFETY
In January 1994, the Company obtained a limited exclusive license from the
Regents of the University of California (Lawrence Livermore National Laboratory)
to certain "pulse-echo," "ultra-wideband" radar
33
technology for use in certain specified passenger vehicle applications. The
license requires the Company to achieve commercial sales of products by the end
of 1998. Failure to achieve commercial sales will result in the loss of
exclusivity of the license with respect to any particular application. See
"--Proprietary Rights and Patents." This technology was originally developed as
part of a laser fusion program to measure the short bursts of energy emitted
during fusion experiments. This type of radar sends out from one to two million
short radio impulses every second to a distance of 5 to 10 meters, each lasting
a billionth of a second. These short impulses enable the radar to operate across
a wider and lower band of radio frequency, making it less likely to suffer from
interference from other radar signals, and allowing it to penetrate dirt, snow
and ice.
The Company has applied this technology to develop demonstration prototypes
of a parking aid and a lane change aid. The parking aid detects a vehicle or
other object that reflects radar signals behind the automobile and provides an
audible or visual signal as the driver approaches it. The lane change aid
detects vehicles to the side of the automobile when the driver attempts to turn
or change lanes and emits an audible warning signal. The Company began marketing
these radar products extensively in 1994 and has received contracts to design
evaluation prototypes from eight automotive manufacturers for both the parking
and lane change aids. These products are now under evaluation by customers. The
Company's near term objective is to obtain further development agreements from
some of these customers to customize the system design during 1997.
Several automotive original equipment manufacturers are now offering
ultrasonic or infrared laser distance sensors for parking aids. The Company
believes that the advantage of its radar technology is superior performance.
Competing products in the automotive industry have utilized ultrasonic and
infrared sensors which require line of sight from the sensor to the target and
installation with outside lenses. Dirt, ice, rain, fog or snow can obstruct the
function of such systems. Although they offer reasonable accuracy at short
distances, they are comparatively range-limited and are subject to false trigger
problems due to interference with the required line of sight. Amerigon's radar
technology, on the other hand, is less susceptible to these environmental
conditions, and can even penetrate plastic, allowing it to be mounted inside
plastic bumpers or tail light assemblies. Although there is currently
considerable interest among automobile manufacturers for various radar products,
there is substantial competition from large and well-established companies for
these product opportunities, including for possible industrial applications. See
"--Competition--Radar for Maneuvering and Safety." In addition, considerable
research and development will be required to develop the Company's radar
technology into finished products, including design and development of
application software and antenna systems and production engineering to reduce
costs and increase reliability.
INTERACTIVE VOICE SYSTEMS (IVS-TM-)
The IVS-TM- was initially designed to apply voice recognition technology
incorporating proprietary features and computer systems to provide an
inexpensive and easy-to-use tool for people to receive directions to their
destination while driving their vehicle. To date, the IVS-TM- product has not
been commercially successful and likely would require substantial further
development before it could be expected to achieve significant sales. In 1995,
the Company had pre-production orders for approximately 2,000 units. As of
September 30, 1996, only approximately 2,700 units have been produced and sold.
The Company has not accepted a recent order for a small number of additional
units. The Company is presently seeking to sell the IVS-TM- product line and the
Company's interests in related technology or to find a strategic or financial
partner to help further develop and market the IVS-TM- product. Further
development efforts would focus on streamlining data-entry, lowering costs,
improving the compatibility of the product with audio compact disc ("CD") units
and exploring other applications of the technology. If the Company is not able
to sell its interests in the IVS-TM- product line and related technology, or
obtain a financial or strategic partner in the near term, the Company will
discontinue sales and further development
34
of IVS-TM- and related technology. See "Risk Factors--Possible Disposition or
Abandonment of Electric Vehicle and IVS-TM- Product Businesses."
The IVS-TM- provides navigation directions through the car's CD system using
actual spoken words stored on the CD through digital compression technology. The
car CD system or radio functions normally when the IVS-TM- is not giving or
receiving instructions, but can be temporarily interrupted to use the IVS-TM-
functions. The IVS-TM- has three components: a small microphone mounted near the
sun visor, similar to a cellular phone microphone; an electronic module
(approximately two-thirds the size of a standard video cassette tape) that is
mounted inside the dashboard, under the seat or in the trunk; and a standard
automobile CD player and radio. In most instances, the CD player is modified by
its manufacturer to provide additional ports in the back of the unit for
connecting to the IVS-TM- electronic module.
The system operates by requesting a starting point and a destination point,
each of which must be spelled out, one letter at a time, by the driver or a
passenger, and confirmed by the unit. Way-points may include specific street
names and addresses, cross-streets or "points of interest" (such as airports,
hotels, gas stations, major restaurants, ATMs and tourist attractions.). The
IVS-TM- provides step-by-step verbal instructions on how to reach the
destination. The IVS-TM- uses a proprietary routing algorithm that selects the
most favorable route to a given destination taking into account average highway
and street speeds, one way streets and distances.
The operating software and digital map data for the IVS-TM- are stored on a
CD that is inserted in the car stereo when the system is in use. The CDs, which
contain encrypted maps for various metropolitan areas, are packaged inside the
same box with the IVS-TM- hardware. Customers call a toll-free number to access
the maps they wish from the selection available on the CDs. Upon payment by
credit card for requested metropolitan areas, the customer is provided a code
number that unlocks the encrypted maps once the number is spoken into the
IVS-TM- unit.
To date the Company has completed encrypted maps for twenty metropolitan
areas including Atlanta, Boston, Chicago, Dallas/Ft. Worth, Denver, Detroit,
Houston, Indianapolis, Las Vegas, the five counties in Los Angeles, Miami, New
York and Northern New Jersey, Orlando, Philadelphia, Phoenix, Sacramento, San
Diego, San Francisco, Seattle and Washington D.C./Baltimore. Using map
technology licensed from an unrelated third party, the Company does map checking
and limited upgrading to make the maps suitable for use with the IVS-TM-.
The Company believes that the IVS-TM- has several advantages over other
navigation systems which generally utilize manual keyboards or touch screens to
input data, visual map displays for showing locations, and global positioning
satellite systems or other expensive sensors for identifying the vehicle's
location. The IVS-TM- is not only less costly but simpler and safer to use
because it relies solely on verbal instructions, and drivers are not distracted
by the need to look at a visual display or manipulate a keyboard or other
complicated controls. In addition, competitive navigation systems with visual
displays require extensive modification to the interior of a vehicle if the
display is to fit in the dashboard, thereby reducing the feasibility of offering
the product as a dealer-installed option or aftermarket product.
In December 1995 and January 1996, the Company shipped the first IVS-TM-
product to be sold initially to the consumer electronics market. Four
manufacturers of automotive CD players (Kenwood, Alpine, Clarion and Fujitsu-Ten
Eclipse) have modified certain of their CD player models for compatibility with
the IVS-TM-. To date, the IVS-TM- has only been sold to the retail aftermarket.
The Company is exploring voice remote control of certain automotive
electrical systems such as, among other things, raising and lowering windows,
changing seat positions and changing heating and air conditioning settings.
There are additional possible applications of the system using the capability
inherent in the basic IVS-TM- system.
The Company has failed to make advance royalty payments required by the
terms of the governing license agreement for certain voice-recognition software
technology used in the IVS-TM-. The license
35
agreement affords the licensor the opportunity to terminate the agreement under
such circumstances. If the licensor were to terminate such license, in order to
continue to manufacture and sell the IVS-TM-, the Company would either need to
reach an accommodation with such licensor or identify and secure a license to
use a substitute software technology, neither of which can be assured. The
adaptation of substitute software technology under such circumstances might
result in additional development costs to the Company. If the Company were
unable to reach an accommodation with the licensor or identify and secure a
substitute license, the Company's ability to sell the IVS-TM- product line and
the Company's interests in related technology might be impaired.
ELECTRIC VEHICLE SYSTEMS
The Company is seeking financial partners to help fund further research and
development of its electric vehicle technology and strategic partners to assist
the Company in manufacturing and distribution. If the Company is not able to
obtain such financial or strategic partners, the Company will abandon further
development of its electric vehicle technology or attempt to sell its
proprietary interests and other assets in and relating thereto. See "Risk
Factors--Possible Disposition or Abandonment of Electric Vehicle and IVS-TM-
Product Businesses."
By developing its own products and managing programs related to electric
vehicles (such as the Showcase Electric Vehicle Program and the Running Chassis
Program), the Company has developed a base of knowledge and expertise concerning
electric vehicles. The Company's experience has included the ground-up design of
electric vehicles and testing and integration of state of the art components
being made available for electric vehicles by other companies. The Company's
electric vehicle systems program is presently focused on two main fronts. The
first comprises the development and production of electric vehicles, principally
for developing country markets. The Company hopes to implement this initiative
in the near-term through a proposed joint venture project in India (see
"--Electric Vehicles"). The Company's other main electric vehicle undertaking
would center on the marketing and distribution of its Energy Management System
(see "--Energy Management System").
ELECTRIC VEHICLES. The Company has nearly completed a contract for
approximately $9.6 million to develop approximately fifty aluminum-chassis
passenger electric vehicle systems for an Asian manufacturing company. The
electric vehicles produced under this contract include two of the Company's
other proprietary products, the CCS and the Energy Management System. In its
results for the nine months ended September 30, 1996, the Company reported cost
overruns on this contract that resulted in the Company recording charges to
operations for the ultimate estimated loss at completion of the contract of
approximately $1,625,000. The Company may continue to experience cost overruns
on this contract due to unanticipated design and development problems and
continuing delays in the completion of this contract, as well as other factors.
In February 1996, the Company entered into a memorandum of understanding
(which expired on August 29, 1996) with a strategic partner to enter into a
proposed joint venture in India to develop, market and/or manufacture electric
vehicles. The terms of the memorandum of understanding called for the Company to
contribute cash and certain technology to the proposed joint venture in exchange
for a minority equity stake. The Company presently lacks the capital to make
such a financial contribution to the joint venture entity, and currently does
not propose to apply any of the net proceeds of the Offering for such purpose.
Accordingly, unless the terms of the joint venture were to be revised so as to
eliminate or substantially reduce the Company's required capital contribution,
or unless the Company can find a new or additional joint venture partner, the
Company would be unable to participate in the proposed joint venture on its
original terms. See "Risk Factors--Lack of Capital to Fund Proposed Electric
Vehicle Joint Venture; Strategy Untested." Notwithstanding the expiration of the
memorandum of understanding, the Company believes that a joint venture with the
same strategic partner on similar terms remains possible, although there can be
no assurance it will be consummated.
36
The proposed joint venture called for the Company to produce approximately
60 electric mini-cars in knock-down kits for assembly in India. The Indian
co-venturer would have been expected to build the manufacturing capability for
full-scale production. In anticipation of the formation of the Indian joint
venture, the Company has begun prototype development work on a mini-car called
the "REVA," designed principally for the Indian market. The Company has produced
five fully-functional REVA prototypes.
The Company intends to focus its electric vehicle development activity on
vehicles intended for use in developing Asian countries. The Company believes
that there may be considerable demand for low cost electric vehicles in these
markets. For example, in India, auto capacity is currently estimated at 300,000,
which is comparatively small when measured against India's 20 million household
middle class population. Less than 20% of these households own cars; more than
50% own motorcycles. As a result, in India there is a growing demand for
vehicles and a large unfilled backlog of orders. Because of this backlog, Indian
consumers typically must put down a 10% cash deposit for a car and often have to
wait for up to a year or more for delivery. In India, most cars sell for $7,500
or more and are expensive to operate due to the limited availability of gas and
high costs of maintenance. The REVA is designed to be priced at less than $6,000
and to be relatively inexpensive to operate due to the availability of
electricity for re-charging batteries in most households and the minimal number
of parts compared to gas-powered cars. If the proposed Indian joint venture were
to go forward successfully, the Company might search for similar opportunities
in other developing countries. The Company has no present plans to try to sell
its electric vehicles in the United States.
ENERGY MANAGEMENT SYSTEM. The Company's "Energy Management System" is a
proprietary computer-based system under development by the Company for electric
vehicles. The Energy Management System has two functions. First, it optimizes
battery charging and use based on the age and condition of the battery to
maximize vehicle range and extend battery life. The second function is to
automatically adjust the operation of the systems of an electric vehicle to
improve performance. For example, if the vehicle air conditioner is running, the
system can momentarily turn it down during acceleration so that additional
energy is available for propelling the vehicle. The system can also predict
available range for typical freeway, city or mountain driving, and whether
specific trips are possible (such as a commute to work or a trip to the grocery
store). These features of the Energy Management System are important in electric
vehicle applications because the range of electric vehicles initially will be
limited to approximately 60 to 120 miles between charges, and because the
frequency of battery replacement will be more important in determining the cost
of operating an electric vehicle than the cost of the electricity necessary to
recharge the battery.
The Energy Management System consists of two components: first, a
custom-developed printed circuit board with a micro-processor computer chip and
other standard, commercially available computer components, that serves as the
"brain" of the system; and second, custom-developed sensors installed on each of
the vehicle's batteries to provide information concerning the batteries' status.
Optimal decisions are either implemented automatically by the system or
communicated to the driver through a text display in the instrument panel. The
Company has completed initial research and development of prototype Energy
Management Systems and is installing units in the electric vehicles it assembles
under development orders and in prototypes for the proposed Indian joint
venture.
The Company intends to try to market the Energy Management System by
licensing its technology to other companies making electric vehicles. See
"--Proprietary Rights and Patents." However, the system requires customization
for the particular electric vehicle it is to control, including modification of
the software, and requires extensive integration into the vehicle since it must
connect with various other systems, receive sensor inputs from throughout the
vehicle, and communicate with a visual display in the instrument panel. Because
of these integration requirements, the Company or its licensees would need to
undertake significant application engineering to adapt this product for each
electric vehicle model. Furthermore, because development of the electric vehicle
industry is subject to numerous uncertainties, the Company cannot predict
whether there would ever be commercial sales of its system. Substantial
37
additional investments in development of this product would be based upon
customer interest as the electric vehicle market develops.
MARKETING AND SALES
In the automotive components industry, products typically proceed through
five stages of research and development and commercialization. Initial research
on the product concept comes first, in order to assess its technical feasibility
and economic costs and benefits, and often includes the development of an
internal prototype for the supplier's own evaluation of the product. If the
product appears feasible, a functioning prototype or demonstration prototype is
manufactured by the component supplier to demonstrate and test the features of
the product. This prototype is then marketed to automotive companies to generate
sales of evaluation prototypes for internal evaluation by the automobile
manufacturer. If the automobile manufacturer remains interested in the product
after testing initial evaluation prototypes, it typically works with the
component supplier to refine the product and then purchase second and subsequent
generation engineering prototypes for further evaluation. Finally, the
automobile manufacturer determines to either purchase the component for a
production vehicle or terminate interest in the component.
The time required to progress through these five stages of commercialization
varies widely. Automotive companies will take longer to evaluate components that
are critical to the safe operation of the vehicle where a product failure can
result in a passenger death. Conversely, if the product is not safety critical,
the evaluation can proceed more quickly since the risk of product liability is
smaller. Another factor influencing the time required to complete the product
sales cycle relates to the required level of integration of the component into
other vehicle systems. Products that are installed by the factory generally
require a medium amount of time to evaluate since other vehicle systems are
affected and because a decision to introduce the product into the vehicle is not
easily reversed, as it is with dealer-installed options. Products that are
installed by an auto dealer take the least amount of time to evaluate since they
have little impact on other vehicle systems. The Company's products vary in how
they fit within these two factors affecting the time required for completing the
sales cycle. The CCS has a moderate effect on other vehicle systems and would be
a factory installed item. The Company's radar system and energy management
system would also be factory installed and would have a greater impact on other
vehicle systems.
The Company's CCS, radar products and IVS-TM-, all of which are derived from
technologies used in the aerospace or defense industries, are designed primarily
to be applied to new gasoline-powered vehicles, with possible aftermarket
application to existing gasoline-powered vehicles. The energy management system
and the electric vehicle systems are uniquely designed for application to
electric vehicles.
PROPRIETARY RIGHTS AND PATENTS
The Company acquires developed technologies through licenses and joint
development contracts in order to optimize the Company's expenditure of capital
and time, and to adapt and commercialize such technologies in automotive
products which are suitable for mass production. The Company also develops
technologies or furthers the development of acquired technologies through
internal research and development efforts by Company engineers.
The Company has adopted a policy of seeking to control, where practical, the
exclusive rights to use technology related to its products through patents or
licenses for proprietary technologies or processes. The Company currently has
several license arrangements and outstanding patent applications.
ANS, the licensor of the IVS-TM- technology, has been granted United States
patents on the audio navigation technology. Feher Design Inc., the licensor of
the CCS technology, was issued three United States patents and has applied for
foreign patent protection on the technology. The Company is aware that a
Japanese patent has already been issued to another entity on technology similar
to the CCS technology.
38
The Company's limited exclusive license from the Regents of the University
of California (Lawrence Livermore National Laboratory) for the Company's radar
technology requires the Company to achieve commercial sales of products by the
end of 1998. Commercial sales are defined as sales of non-prototype products to
at least one original equipment manufacturer. Failure to achieve commercial
sales for a particular application will result in the loss of exclusivity of the
license for that application, in which event the licensor will have the right to
grant other entities a non-exclusive license for that application at terms no
more favorable than those enjoyed by the Company.
The Company was recently issued a patent on a key function of the Energy
Management System and has applied for additional patents. The Company believes
that those elements of the Energy Management System not covered by the patent
are protected as trade secrets. Lawrence Livermore National Laboratory has been
issued four United States patents on the technology since 1994 and has filed
several additional United States patent applications. The Company has additional
patent applications in progress or filed on improvements to each of its
technologies.
Because of rapid technological developments in the automotive industry and
the competitive nature of the market, the patent position of any component
manufacturer is subject to uncertainties and may involve complex legal and
factual issues. Consequently, although the Company either owns or has licenses
to certain patents, and is currently processing additional patent applications,
it is possible that no patents will issue from any pending applications or that
claims allowed by any existing or future patents issued or licensed to the
Company will be challenged, invalidated, or circumvented, or that any rights
granted thereunder will not provide adequate protection to the Company. There is
an additional risk that the Company may be required to participate in
interference proceedings to determine the priority of inventions or may be
required to commence litigation to protect its rights, which could result in
substantial costs to the Company.
In addition to its patent rights, the Company relies upon certain
proprietary know-how and trade secrets in its business and has entered into
employee and third party non-disclosure agreements to protect its proprietary
technology. The Company has not received any notice that its products infringe
on the proprietary rights of third parties.
COMPETITION
The automotive components and systems business is highly competitive. The
Company may experience competition directly from automobile manufacturers, most
of which have the capability to manufacture competing products. Many of the
existing and potential competitors of the Company have considerably greater
financial and other resources than the Company, including, but not limited to,
an established customer base, greater research and development capability,
established manufacturing capability and greater marketing and sales resources.
The Company also competes indirectly with related products that do not offer
equivalent features to the Company's products, but can substitute for the
Company's products. The Company believes that its products will compete on the
basis of price, performance and quality.
CCS
The Company is not aware of any competitors that are offering systems for
both heating and cooling automotive car seats, although substantial competition
exists for the supply of heated-only seats. It is possible that competitors will
be able to expand or modify their current products by adding a cooling function
to their seats based upon a technology not covered by patented technology
licensed to the Company, or by licensing rights to these patents from the
inventor. The CCS competes indirectly with alternative methods of providing
passenger climate control in a vehicle such as heating and air conditioning
systems, which are currently available for almost all vehicles. The Company
hopes to develop a market niche for this product initially as a luxury in
conventional gasoline-powered cars in Europe, where gasoline prices are
relatively high, as well as in electric vehicles which, due to their reliance on
batteries, could
39
benefit from a less energy intensive source of climate control. The Company is
aware that a Japanese patent has already been issued to another entity on
technology similar to the CCS technology.
RADAR FOR MANEUVERING AND SAFETY
The potential market for automotive radar has attracted many aerospace
companies who have developed a variety of radar technologies. A few automotive
original equipment manufacturers are now offering ultrasonic or infrared laser
distance sensors for parking aids. These companies have far greater technical
and other resources than does the Company. While the Company believes that its
licensed radar technology has competitive advantages which are protected by
intellectual property rights in the applications the Company is developing, it
is possible that the market will not accept the Company's radar products or that
competitors will find ways to offer similar products without infringing on the
Company's intellectual property rights.
IVS-TM-
The Company is aware that there are 20 or more competitors developing
car-based navigation systems, and is aware of at least 13 companies that have
systems that are very advanced in the development cycle, including systems from
Blaupunkt-werk GmbH, Bosch Electronics, Clarion Corporation of America, Motorola
Incorporated, Sanyo Fisher USA Corp., Siemens Automotive LP, Sony Electronics,
Phillips Electronics, Pioneer Electronic Corp. and General Motors Corporation.
Several of these competitors have achieved significant sales of their systems in
Japan and Europe, and recently have introduced their product in the United
States or are planning to introduce their product in the United States. Many of
these competitors have established relationships with automobile manufacturers.
The Company expects that new competitors will enter the market once United
States sales are established. All the competitive systems of which the Company
is currently aware of utilize visual displays and, unlike the Company's IVS-TM-,
most of them rely on global positioning satellite systems to identify the
location of the vehicle. While these features of competitive navigation systems
may enhance consumer acceptance of the systems, they are more costly than the
Company's system.
Under a recent agreement in principle with ANS, one of the licensors of the
Company's IVS-TM- technology, ANS will have rights which will allow it to
manufacture, sell and/or license the voice recognition use in navigation which
would allow it to compete with the Company. ANS does not at this time have a
product for commercial sale. The Company is not aware of any other competitor
that has offered a voice recognition system for identifying the vehicle location
or desired destination, although at least two competitors use a voice
recognition system to allow drivers to control some of the functions of the
system, such as the movement of the map or the visual display, and several
competitors use speech output, but not input, systems to provide verbal
directions to the destination.
ELECTRIC VEHICLE SYSTEMS
ELECTRIC VEHICLES. The potential market for electric vehicles and electric
vehicle systems, when and if it develops into a significant commercial market,
is expected to attract many of the domestic and international automobile
manufacturers. Currently, many automobile manufacturers are doing development
work on electric vehicles, and some have announced plans to enter the commercial
market. General Motors Corporation has recently introduced a production electric
vehicle that is now available for lease in the United States.
The Company has experience in the design and prototyping of Electric Vehicle
Systems which it believes provide certain niche market opportunities. The
Company believes such a niche now exists in developing Asian countries.
Accordingly, the Company initially intends to sell its Electric Vehicle Systems
in selected Asian markets where competition at this time is from a limited
number of higher priced gasoline-powered cars. The emergence of a significant
market, if such emergence occurs, will cause other
40
competitors to enter the market, all of which may have far greater depth of
technical, manufacturing, and marketing resources than does the Company. The
Company does not intend to enter the U.S. market at this time.
ENERGY MANAGEMENT SYSTEM. The Company is aware of one competitor, Hughes
Power Control Systems, which is developing and offering a product which competes
directly with the Energy Management System. The Company is also aware of several
automobile manufacturers that plan to incorporate the function of the Energy
Management System into electronic modules currently manufactured or which may be
manufactured in the future.
EMPLOYEES
As of November 1, 1996, the Company had 83 employees. Approximately 21 of
the Company's employees, or about 25% of the Company's personnel, are covered
under a collective bargaining agreement. The Company considers its employee
relations to be satisfactory.
PROPERTIES
The Company maintains its corporate headquarters and research and
development facilities in leased space in a Monrovia, California industrial
park. The lease expires February 14, 1997, but the Company has a right to extend
it until July 31, 1997. The Company has also leased a manufacturing and office
facility in Alameda, California through December 31, 1996. The Company believes
that its facilities are adequate for its present and immediately projected
needs.
LEGAL PROCEEDINGS
HBI has threatened various claims against the Company and its directors and
officers arising out of the December 1995 private placement by the Company of
shares of Class A Common Stock. HBI alleges that the Company made false and
misleading statements and failed to disclose certain information in connection
with such private placement. The Company believes these allegations to be
without merit. While, to the Company's knowledge, HBI has commenced no legal
action against the Company in connection with such claims, no assurance can be
given that HBI will not do so in the future. If HBI were to commence such legal
action, the Company would be forced to defend such action and/or settle with
HBI, the costs of which defense and/or any resulting liability or settlement
could have a material adverse effect on the Company's financial condition. John
W. Clark, a director of the Company, is a general partner of an affiliate of HBI
Financial Inc.
On November 14, 1996, Gibbins Pattern & Plastic, Inc. ("Gibbins"), a
supplier to the Company, filed suit against the Company in Michigan state court
in the circuit court for the County of Wayne, Michigan for breach of contract,
open account/account stated, and unjust enrichment/quantum meruit. Gibbins
alleges that the Company has failed to pay for delivered products. The Company
has withheld certain payments because Gibbins has failed to provide the Company
with assurance of future performance. Gibbins has claimed a total of $231,548 in
damages. The Company intends to defend the matter vigorously and believes that
the lawsuit will not have a material adverse effect on the Company.
41
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company are as follows:
NAME AGE POSITION
- --------------------------------- --- ---------------------------------------------------------------
Lon E. Bell, Ph.D................ 56 President, Chief Executive Officer, and Chairman of the Board
Daniel R. Coker.................. 44 Vice President of Sales and Marketing
R. John Hamman, Jr............... 55 Vice President of Finance and Chief Financial Officer
James L. Mertes.................. 44 Vice President of Operations and Quality
Joshua M. Newman................. 38 Vice President of Corporate Development and Planning, Secretary
and Director
Roy A. Anderson.................. 75 Director
Roger E. Batzel.................. 75 Director
John W. Clark.................... 51 Director
A. Stephens Hutchcraft, Jr....... 66 Director
Michael R. Peevey................ 58 Director
Norman R. Prouty, Jr............. 57 Director
Dr. Lon E. Bell has been the President, Chief Executive Officer and Chairman
of the Board of the Company since its formation in April 1991. Dr. Bell
co-founded Technar Incorporated with Dr. Allen Gillespie and Mr. Robert Diller,
Amerigon's Chief Engineer, in 1967, which developed and manufactured automotive
components, and served as its Chairman and President until selling majority
ownership of Technar to TRW Inc. in 1986. Dr. Bell continued managing Technar as
its President until 1991, when he left to form the Company. Dr. Bell received
his undergraduate degree in mathematics from the California Institute of
Technology in 1962, where he also was granted a Masters degree in rocket
propulsion in 1963 and a Ph.D. in mechanical engineering in 1968.
Daniel R. Coker joined the Company as Vice President of Sales and Marketing
in March, 1996. Previously, he worked with Arvin, Inc., a tire pressure sensor
manufacturer, from 1986 through 1995 as Vice President and General Manager of
North American Operations. Mr. Coker received his BS degree from Tennessee
Technological University in 1974.
R. John Hamman, Jr. joined the Company in August, 1995 as Vice President of
Finance and Chief Financial Officer. From 1986 to 1994, he was Vice President of
Finance for Amcare, Inc., a provider of pharmaceutical drugs and supplies to
long-term care facilities. Mr. Hamman received his BS degree from Denison
University and an MBA degree from Northwestern University, and is a CPA.
James L. Mertes joined the Company in 1993 as Vice President of Quality and
was promoted to Vice President of Operations and Quality in 1994. Immediately
prior to joining the Company, Mr. Mertes was Director of Quality at TRW Sensor
Operations, a unit of TRW Inc., for two years.
Joshua M. Newman joined the Company in March 1992 as Vice President of
Corporate Development and Planning, and became a Director in April 1993. Prior
to joining the Company, Mr. Newman worked as a management consultant, first for
the Boston Consulting Group from 1988 through December 1990, and then as an
independent electric vehicle consultant until joining the Company. Mr. Newman
received his undergraduate degree in history from the University of California
at Davis in 1981 and an MBA from Harvard University in 1988.
42
Roy A. Anderson has been a Director of the Company since the closing of the
Company's initial public offering. Mr. Anderson is Chairman Emeritus of Lockheed
Corporation. He served as Chairman of the Board and Chief Executive Officer of
Lockheed from 1977 until his retirement on December 31, 1985. He remained on
Lockheed's board of directors until December 31, 1990, and also served as a
consultant to that company until December 31, 1992. Mr. Anderson is a member of
the boards of the Los Angeles Music Center, the Greater Los Angeles United Way,
the Los Angeles World Affairs Council. He is Chairman and Chief Executive
Officer of the Weingart Foundation and Co-Chairman of the Select Panel of
Project California.
Roger E. Batzel has been a Director of the Company since the closing of the
Company's initial public offering. In April 1988, he retired after 16 years as
Director of Lawrence Livermore National Laboratory and became Director Emeritus.
From March 1, 1988 to the present, Mr. Batzel has been a scientist at Lawrence
Livermore National Laboratory, serving initially as associate director at large,
and then as a consultant, and beginning in 1991 as a laboratory associate.
John W. Clark has been a Director of the Company since July 1996. Since May
1995, Mr. Clark has been a General Partner of Westar Capital Associates, a
private equity investment company. From 1990 to May 1995, he was a private
investor. Prior to 1990, Mr. Clark was President of Valentec International
Corporation, a producer of metal and electronic components for military and
commercial products. Mr. Clark serves as a director for All Post, Inc., Dogloo,
Inc., and Scripps Clinic MSO, Inc.
A. Stephens Hutchcraft, Jr. has been a Director of the Company since the
closing of the Company's initial public offering. From December 1992 through
December 1993, Mr. Hutchcraft served as Chairman and Chief Executive Officer of
Kaiser Aluminum & Chemical Corporation, and served as its President from 1982 to
May 1993. He has been a Director of that Company since 1982.
Michael R. Peevey has been a Director of the Company since the closing of
the Company's initial public offering. From October 1990 until he retired in
March 1993, Mr. Peevey was President of Southern California Edison and SCE
Corporation. Prior thereto, he was Executive Vice President of such entities
since January 1986. Mr. Peevey has been President and Chief Executive Officer of
New Energy Partners since March 1995. Mr. Peevey serves as a Director of
ElectroRent Corporation, Dames & Moore, Inc. and Ocal, Inc.
Norman R. Prouty has been a Director of the Company since the closing of the
Company's initial public offering. Mr. Prouty was a general partner of the
investment banking firm of Lazard Freres & Co., from 1990 to 1993 and a limited
partner during 1994. The firm subsequently became a limited liability company
and Mr. Prouty was a Limited Managing Director during 1995 until his retirement
on December 31, 1995. Since January 1996, Mr. Prouty has been a private
investor. Previously, Mr. Prouty was a Vice President and Senior Credit Officer
of Citibank, N.A. where he was engaged in domestic and international banking for
approximately 20 years.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Articles of Incorporation limit the liability of its
directors. As permitted by the California General Corporation Law, directors
will not be liable to the Company for monetary damages arising from a breach of
their fiduciary duty as directors in certain circumstances. Such limitation does
not affect liability for any breach of a director's duty to the Company or its
shareholders (i) with respect to approval by the director of any transaction
from which he derives an improper personal benefit, (ii) with respect to acts or
omissions involving an absence of good faith, that he believes to be contrary to
the best interests of the Company or its shareholders, that involve intentional
misconduct or a knowing and culpable violation of law, that constitute an
unexcused pattern of inattention that amounts to an abdication of his duty to
the Company or its shareholders, or that show a reckless disregard for his duty
to the Company or its shareholders in circumstances in which he was or should
have been aware, in the ordinary course of performing his duties, of a risk of
serious injury to the Company or its shareholders, or (iii) based
43
on transactions between the Company and its directors or another corporation
with interrelated directors or on improper distributions, loans or guarantees
under applicable sections of the California General Corporation Law. Such
limitation of liability also does not affect the availability of equitable
remedies such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the full extent permitted by California law, including
circumstances in which indemnification is otherwise discretionary under
California law, and the Company has entered into indemnity agreements with its
directors and officers providing such indemnity.
CERTAIN TRANSACTIONS
Lon E. Bell, Ph.D., Chief Executive Officer, President and Chairman of the
Board of Directors, founder of the Company and a principal shareholder of the
Company, co-founded CALSTART (a non-profit consortium of companies engaged in
the development and manufacture of products that benefit the environment) in
1992, served as its interim President, and for the last three years has served
on its Board of Directors and been a member of its Executive Committee.
The Company leased space from CALSTART from June 1992 until April 1994 at no
charge, at which time the Company moved to its current facility. On April 1,
1996, the Company signed a lease with CALSTART for a 24,000 square foot
manufacturing and office facility located in Alameda, California for a term
beginning November 15, 1995 and ending December 31, 1996 for an advance payment
of $450,000 and approximately $11,500 per month.
The Company managed the Showcase Program, co-managed the Neighborhood
Electric Vehicle Program, and currently manages three other electric vehicle
programs for CALSTART, for which the Company recognized revenues of $679,000
from CALSTART in 1992, $1,649,000 in 1993, $802,000 in 1994, and $2,198,000 in
1995. Such amounts represent reimbursement of expenses incurred by the Company
in managing the Showcase Program in 1992, for four programs in 1993, for three
programs in 1994, and for four programs in 1995.
Effective March 31, 1993, Dr. Bell granted an option to Mr. Newman to
purchase up to 354,485 shares of Class A Common Stock owned by Dr. Bell, of
which 75% relate to Dr. Bell's Escrow Shares held in escrow. Of the 354,485
shares, 81,787 are presently fully vested and 245,361 will vest at such time, if
ever, as such Escrow Shares are released as Class A Common Stock from escrow. Of
the option grant, options on 27,337 shares have expired without becoming vested
and options on 60,000 shares have been exercised and sold through December 5,
1996. The exercise price is $1.15 per share and the options expire March 31,
2003.
In May 1993, Dr. Bell granted options to purchase 10,000 shares of his Class
A Common Stock each to Directors Messrs. Anderson, Batzel, Hutchcraft, Peevey
and Prouty. Of the 50,000 options, 12,500 (or 2,500 options per director) are
fully vested and the balance will vest at such time, if ever, as the Escrow
Shares are released as Class A Common Stock from the escrow. The exercise price
is $6.00 per share and the options expire in 1999.
In August 1995, Dr. Bell granted options to purchase 10,000 shares of his
Class A Common Stock to Mr. Hamman at $12.00 per share of which 2,500 became
vested in August 1996 and the remaining 7,500 options will vest at such time, if
ever, as the Escrow Shares are released as Class A Common Stock from escrow.
Such options expire in August 2000.
In March 1996, Dr. Bell granted options to purchase 5,000 shares of his
Class A Common Stock to Mr. Coker. Of the 5,000 options, 1,250 will vest in
March of 1997 and the balance will vest at such time, if ever, as the Escrow
Shares are released as Class A Common Stock from the escrow. The exercise price
is $10.38 per share and the options expire in March 2001.
44
In September 1996, Dr. Bell extended a $200,000 working capital loan to the
Company. The loan bears interest at 8% per annum and is payable on demand. A
portion of the proceeds of the Offering will be used to pay interest and
principal on such working capital loan. See "Use of Proceeds."
In the event that the Company goes forward with its proposed joint venture
project in India, the Company and its potential joint venture partner intend to
grant Mr. Prouty options to purchase an equity interest in the joint venture
entity if Mr. Prouty is able to arrange financing for the project from third
party investors.
The Company periodically engages Adaptrans, an entity owned by David Bell,
Dr. Bell's son, for engineering design services. Such services primarily involve
assistance in the development and refinement of the Energy Management System.
Adaptrans is engaged only on an "as needed" basis and the Company pays
approximately $8,000 per month for such services. Through November 30, 1996, the
Company had paid Adaptrans a total of $167,200 for such services.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Stock as of September 30, 1996 by (i)
each person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Class A Common Stock; (ii) each of the Company's directors
and nominees; (iii) each of the named executive officers identified in the
Company's Proxy Statement dated June 17, 1996 and (iv) all executive officers
and directors of the Company as a group:
AMOUNT AND PERCENT OF CLASS
NATURE OF -----------------------
BENEFICIAL BEFORE AFTER
NAME AND ADDRESS(1) OWNERSHIP OFFERING OFFERING(2)
- ------------------------------------------------------------------------------------------ ------------- -------- ------------
Lon E. Bell(3)(4)(5)...................................................................... 3,451,938 48.9% 32.4%
Joshua M. Newman(5)(6).................................................................... 21,787 * *
Roy A. Anderson(5)(7)(8).................................................................. 42,500 * *
Roger E. Batzel(5)(7)(8).................................................................. 42,500 * *
John W. Clark............................................................................. 12,500 * *
A. Stephens Hutchcraft, Jr.(5)(7)(8)...................................................... 42,500 * *
Michael R. Peevey(4)(6)(7)................................................................ 42,500 * *
Norman R. Prouty(4)(6)(7)................................................................. 42,500 * *
DDJ Capital Management, LLC............................................................... 560,000 7.9% 5.2%
All executive officers and directors as a group (9 persons)(4)(7)......................... 3,704,538 51.1% 34.7%
- ------------------------
* Less than 1%.
(1) For all shareholders other than DDJ Capital Management, LLC, the address is
c/o the Company, 404 E. Huntington Drive, Monrovia, CA 91016. The address
for DDJ Capital Management, LLC is 141 Linden Street, Suite 4, Wellesley, MA
02181.
(2) Assumes that each Unit will include the maximum of 240 shares of Class A
Common Stock.
(3) 2,592,903 of the shares are held in Escrow. See "Escrow Shares" below.
(4) By virtue of the number of shares of stock owned by Dr. Lon Bell, and his
position as an officer, director and founder of the Company, he is deemed
the "parent" of the Company within the meaning of the rules and regulations
promulgated under the Securities Act of 1933 (the "Act"). Dr. Bell has
transferred by gift and sale an aggregate of 26,666 shares to each of three
trusts, for which he and his spouse are co-trustees, created for the benefit
of his children. Such shares total 79,998 and are included in Dr. Bell's
beneficial ownership in the above table.
45
(5) Of these shares, Dr. Bell has granted the following options to purchase
shares of his Class A Common Stock: 267,148 shares to Joshua Newman; 10,000
shares to R. John Hamman, Jr.; 411,072 shares to other employees and
consultants; and 10,000 shares each to Messrs. Anderson, Batzel, Hutchcraft,
Peevey and Prouty. Of the total options outstanding, options to purchase
349,795 shares of Class A Common Stock relate to Dr. Bell's Escrow Shares
and are exercisable only at such time, if ever, as the Escrow Shares are
released as Class A Common Stock from Escrow, and the remaining options do
not relate to Escrow Shares. All of the 738,220 shares issuable upon the
exercise of these options are included in Dr. Bell's beneficial ownership in
the above table.
(6) Includes 21,787 shares issuable upon exercise of options granted by Dr.
Bell, which have vested to date. Does not include 245,361 shares issuable
upon the exercise of options to purchase Dr. Bell's Escrow Shares, which
vest only at such time, if ever, as the Escrow Shares are released from
Escrow.
(7) Includes, as to each of Messrs. Anderson, Batzel, Hutchcraft, Peevey and
Prouty, 2,500 shares issuable upon the exercise of options granted by Dr.
Bell. Does not include, as to each person, 7,500 shares issuable upon the
exercise of options to purchase Dr. Bell's Escrow Shares, which vest only at
such time, if ever, as the Escrow Shares are released from Escrow.
(8) Includes, as to each of Messrs. Anderson, Batzel, Hutchcraft, Peevey and
Prouty, 40,000 shares issuable upon exercise of options granted under the
Company's 1993 Stock Option Plan.
ESCROW SHARES
As a condition of the Company's Initial Public Offering ("IPO") in June
1993, the Company's then existing shareholders (the "Original Shareholders")
placed the Escrow Shares into escrow pursuant to an agreement (the "Escrow
Agreement") by and among the Original Shareholders, the Company, and the escrow
agent. The Escrow Agreement will terminate upon the earlier of the release of
all the Escrow Shares or April 30, 1999 (the "Escrow Period"). During the Escrow
Period, the Original Shareholders may vote, but may not transfer, the Escrow
Shares; however, options for Escrow Shares may be granted. The Escrow Shares
will automatically be released from escrow to the Original Shareholders upon
satisfaction of certain conditions with respect to 1,000,000 shares, referred to
as "Escrow Target I," and with respect to an additional 2,000,000 shares,
referred to as "Escrow Target II." Such conditions are as follows:
(a) Escrow Target I: 1,000,000 of the Escrow Shares will be released in
the event that the Company's Minimum Pretax Income (as defined below) for
any of the fiscal years ending December 31, 1996, 1997 and 1998 equals or
exceeds the following amounts, after giving effect to the shares issued
pursuant to the Offering, and after giving effect to the exercise of
warrants presently outstanding and the Class A Warrants to be issued in
connection with the Offering:
PRO FORMA AFTER
THE
PRO FORMA OFFERING AND
AFTER THE EXERCISE OF
FISCAL YEAR ENDING OFFERING WARRANTS
- --------------------------------------------------- ----------- ------------------
(IN THOUSANDS)
December 31, 1996.................................. $ 8,750 $ 13,900
December 31, 1997.................................. 13,125 20,850
December 31, 1998.................................. 17,500 27,800
(b) Escrow Target II: The remaining 2,000,000 Shares held in Escrow will
be released in the event that the Company's Minimum Pretax Income (as
defined below) for any of the fiscal years ending December 31, 1996, 1997
and 1998 equals or exceeds the following amounts, after giving effect
46
to the shares issued pursuant to the Offering, and after giving effect to
the exercise of warrants presently outstanding and to be issued in
connection with the Offering:
PRO FORMA AFTER
THE
PRO FORMA OFFERING AND
AFTER THE EXERCISE OF
FISCAL YEAR ENDING OFFERING WARRANTS
- --------------------------------------------------- ----------- ------------------
(IN THOUSANDS)
December 31, 1996.................................. $ 15,750 $ 25,020
December 31, 1997.................................. 21,000 33,360
December 31, 1998.................................. 26,250 41,700
"Minimum Pretax Income" means for any fiscal year the Company's net income
before provision for income taxes and exclusive of (i) any extraordinary items,
(ii) charges to income resulting from the release of the Escrow Shares or (iii)
charges to income resulting from options granted by Dr. Bell or of options
granted under the Company's 1993 Stock Option Plan, as reflected in the
Company's audited financial statements. The Escrow Agreement provides that the
minimum pretax income conditions in Escrow Target I and Escrow Target II be
adjusted for any issuance of Class A Common Stock after the IPO other than stock
issued upon the exercise of the underwriter's over-allotment option granted in
connection with the IPO, underwriter's warrants granted in connection with the
IPO or options under the 1993 Stock Option Plan.
The escrow targets set forth above were determined by negotiation between
the Company and the underwriter of the IPO and should not be construed to imply
or predict any future earnings by the Company or any increase in the market
price of its securities.
On April 30, 1999, all shares that have not been released from escrow will
automatically be exchanged for shares of Class B Common Stock, which will then
be released from escrow. The Class B Common Stock is neither transferable nor
convertible and its rights with respect to dividends and liquidation
distributions are inferior to those of the Class A Common Stock. See
"Description of Securities--Common Stock." Therefore, the Class B Common Stock
has limited economic value. Any money, securities, rights or property
distributed in respect of the Escrow Shares, including any property distributed
as dividends or pursuant to any stock split, merger, recapitalization,
dissolution, or total or partial liquidation of the Company, shall be held in
escrow until release of the Escrow Shares. Any dividends or other distributions
made with respect to Escrow Shares for which the relevant earnings levels have
not been reached within the Escrow Period will be forfeited and contributed to
the capital of the Company on April 30, 1999.
The Company expects that the release, if any, of the Escrow Shares will be
deemed compensatory and, accordingly, will result in substantial charges to
earnings equal to the fair market value of the Escrow Shares as of the date on
which they are released. Such charges could substantially increase the loss or
reduce or eliminate the Company's net income for financial reporting purposes
for the periods in which the Escrow Shares are released or are probable of being
released. Although the amount of compensation expense recognized by the Company
will not affect total stockholders' equity, it may have a negative effect on the
market price of the Company's securities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Pursuant to the terms of a shareholders agreement among the Original
Shareholders, if Class B Common Stock is issued at the end of the Escrow Period,
and if any such shareholder, or the beneficiary of the trust which is the
shareholder, is not or ceases to be an employee, director or consultant of the
Company, then all of his shares of Class B Common Stock will be forfeited and
contributed to the capital of the Company by the shareholder for no additional
consideration. Furthermore, the agreement provides that Class B Common Stock may
be forfeited by each shareholder in order to ensure that each shareholder will
hold no more than one share of Class B Common Stock for each share of Class A
Common Stock held by such shareholder, if only Escrow Target I has been met
(after giving effect to the release of one-third of
47
the Escrow Shares to such shareholder), or no more than three shares of Class B
Common Stock for each share of Class A Common Stock held by such shareholder, if
neither target is met.
The following table sets forth the number of Escrow Shares owned by all
original shareholders of the Company:
Dr. Bell......................................................... 2,592,903
Allen Gillespie.................................................. 218,100
Robert Diller.................................................... 129,000
Trusts for the benefit of Dr. Bell's children.................... 59,997
---------
3,000,000
---------
---------
SUBSEQUENT OFFERING
The Company has agreed to register, subsequent to the Offering, an
additional 1,620,000 Class A Warrants (the "Selling Securityholder Warrants")
for sale by the holders thereof (the "Selling Securityholders") and 1,620,000
shares of Class A Common Stock (the "Selling Securityholder Stock") underlying
the Selling Securityholder Warrants, all for resale from time to time by the
Selling Securityholders subject to the restrictions described below. The Selling
Securityholders will obtain the Selling Securityholder Warrants upon completion
of the Offering as a result of the automatic conversion of the Bridge
Debentures. See "Management's Discussion and Analysis--Liquidity and Capital
Resources." The Selling Securityholder Warrants and the Selling Securityholder
Stock are sometimes collectively referred to herein as the "Selling
Securityholder Securities."
The Selling Securityholder Warrants are identical to the Class A Warrants
included in the Units offered hereby. All of the Selling Securityholder Warrants
issued upon conversion of the Bridge Debentures and the Class A Common Stock
issuable upon exercise of such Selling Securityholder Warrants will be
registered under the Securities Act and will become tradeable subsequent to the
Effective Date subject to the following contractual restrictions: each Selling
Securityholder has agreed (i) not to sell, transfer, or otherwise dispose
publicly of the Selling Securityholder Warrants except after the time periods
and in the percentage amounts set forth below, on a cumulative basis, and (ii)
not to exercise the Selling Securityholder Warrants for a period of one year
from the closing of the Offering. Purchasers of the Selling Securityholder
Warrants will not be subject to such restrictions.
PERCENTAGE ELIGIBLE
LOCK-UP PERIOD FOR RESALE
- --------------------------------------------------------------------------- ---------------------
Before 90 days after Closing............................................... 0%
Between 91 and 150 days.................................................... 25%
Between 151 and 210 days................................................... 50%
Between 211 and 270 days................................................... 75%
After 270 days............................................................. 100%
After the one year period following the effective date of the Offering, the
Selling Securityholders will be able to exercise the Selling Securityholder
Warrants and sell the Class A Common Stock issuable upon exercise thereof
without restriction. The Company will not receive any proceeds from the sale of
the Selling Securityholder Warrants. Sales of Selling Securityholder Warrants
issued upon conversion of the Bridge Debentures or the securities underlying
such Class A Warrants or even the potential of such sales could have an adverse
effect on the market prices of the Class A Common Stock and the Class A
Warrants.
There are no material relationships between any of the Selling
Securityholders and the Company, nor have any such material relationships
existed within the past three years. The Company has been informed
48
by the Underwriter that there are no agreements between the Underwriter and any
Selling Securityholder regarding the distribution of the Selling Securityholder
Warrants or the underlying securities.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Selling Securityholder Warrants may not
simultaneously engage in market-making activities with respect to any securities
of the Company during the applicable "cooling-off" period (at least two and
possibly nine business days) prior to the commencement of such distribution.
Accordingly, in the event the Underwriter or Blair & Co. is engaged in a
distribution of the Selling Securityholder Warrants, neither of such firms will
be able to make a market in the Company's securities during the applicable
restrictive period. However, neither the Underwriter nor Blair & Co. has agreed
to nor is either of them obligated to act as broker-dealer in the sale of the
Selling Securityholder Warrants, and the Selling Securityholders may be
required, and in the event Blair & Co. is a market-maker, will likely be
required, to sell such securities through another broker-dealer. In addition,
each Selling Securityholder desiring to sell Warrants will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-6 and 10b-7, which provisions
may limit the timing of the purchases and sales of shares of the Company's
securities by such Selling Securityholder.
The Selling Securityholders and broker-dealers, if any, acting in connection
with such sales might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act and any commission received by them and any
profit on the resale of the securities might be deemed to be underwriting
discount and commissions under the Securities Act.
DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 40,000,000 shares of Class A
Common Stock, no par value, 3,000,000 shares of Class B Common Stock, no par
value, and 5,000,000 shares of preferred stock, no par value (the "Preferred
Stock").
UNITS
Each Unit consists of a minimum of 175 and a maximum of 240 shares of the
Company's Class A Common Stock, no par value per share, and an equal number of
Class A Warrants. The actual number of shares of Class A Common Stock and Class
A Warrants to be included in each Unit will be determined by negotiations
between the Company and the Underwriter, based primarily upon the market price
of the outstanding Class A Common Stock and a determination of the number of
shares of Class A Common Stock and Class A Warrants needed to successfully
market the Units in light of market conditions. The components of the Units will
be separately transferable upon issuance.
COMMON STOCK
The holders of each class of common stock have one vote per share on each
matter considered by shareholders. The holders of common stock may cumulate
their votes in the election of directors upon giving notice as required by law.
Shareholders have no preemptive rights. All outstanding shares are, and all
shares to be sold and issued in the Offering will be, fully paid, non-assessable
and legally issued. The Board of Directors is authorized to issue additional
shares of common stock within the limits authorized by the Company's charter and
without shareholder action. Reference is made to the Company's Articles of
Incorporation and By-Laws, as well as to the applicable provisions of the
California General Corporation Law, for a more detailed description of the
rights and liabilities of shareholders.
CLASS A COMMON STOCK
Prior to the Offering, 7,068,500 shares of Class A Common Stock have been
issued and are outstanding, held of record by 50 shareholders (not including
beneficial owners holding in nominee accounts), of which 3,000,000 shares are
Escrow Shares subject to release to the beneficial owners of such
49
shares in the event the Company attains certain pre-tax income goals. See
"Principal Shareholders-- Escrow Shares." Upon consummation of the sale of the
Units offered hereby, there will be 9,693,500 shares of Class A Common Stock
issued and outstanding assuming that each Unit includes the minimum of 175
shares of Class A Common Stock, and 10,668,500 shares of Class A Common Stock
issued and outstanding assuming that each Unit includes the maximum of 240
shares of Class A Common Stock, 3,000,000 of which, in either case, will be
Escrow Shares.
CLASS B COMMON STOCK
No shares of Class B Common Stock are issued and outstanding. The Class B
Common Stock is non-transferable and non-convertible. Further, the Class B
Common Stock is subject to forfeiture under certain circumstances. See
"Principal Shareholders--Escrow Shares." Holders of the Class B Common Stock
will be entitled to receive, on a per share basis, only five percent (5%) of the
dividends as may be declared by the Board of Directors on the Class A Common
Stock, and five percent (5%) of the amount receivable by holders of Class A
Common Stock upon liquidation or dissolution of the Company.
PREFERRED STOCK
Shares of Preferred Stock may be issued from time to time in one or more
series and the Board of Directors, without further shareholder approval, is
authorized to fix the dividend rights and terms, conversion rights, voting
rights (whole, limited or none), redemption rights and terms, liquidation
preferences, sinking funds and any other rights, preferences, privileges and
restrictions applicable to each such series of Preferred Stock. The purpose of
authorizing the Board of Directors to determine such rights and preferences is
to eliminate delays associated with a shareholder vote on specific issuances.
The issuance of the Preferred Stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could, among other
things, adversely affect the voting power of the holders of Class A Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company. Such issuance also could adversely affect the
distributions on and liquidation preference of the Class A Common Stock by
creating one or more series of Preferred Stock with distribution or liquidation
preferences senior to the Class A Common Stock. The Company does not currently
intend to issue any shares of its authorized Preferred Stock.
CLASS A WARRANTS
Each Class A Warrant entitles the registered holder thereof to purchase, at
any time until the fifth anniversary of the Effective Date, one share of the
Company's Class A Common Stock at an exercise price of 135% of the amount equal
to $1,000 divided by the number of shares of Class A Common Stock included in
each Unit, subject to adjustment. Commencing one year from the date hereof, the
Company may, upon 30 days' written notice, redeem each Class A Warrant in
exchange for $0.05 per Class A Warrant if the closing Bid Price of the Class A
Common Stock as reported by Nasdaq or the closing Bid Price on any national
stock exchange (if the Company's Class A Common Stock is listed thereon) shall
have, for 30 consecutive business days ending within 15 days of the date of the
notice of redemption, averaged in excess of 175% of the Class A Warrant exercise
price per share (subject to adjustment in the event of any reverse stock splits
or other similar events). The notice of redemption will be sent to the
registered address of the registered holder of the Class A Warrant. All Class A
Warrants must be redeemed if any are redeemed; provided, however, that the Class
A Warrants underlying the Unit Purchase Option may only be redeemed under
limited circumstances. See "Underwriting."
The Class A Warrants will be issued pursuant to a warrant agreement (the
"Warrant Agreement") among the Company, the Underwriter and U.S. Stock Transfer
Corporation as warrant agent (the "Warrant Agent"), and will be evidenced by
warrant certificates in registered form. The exercise price of the Class A
Warrants was determined by negotiation between the Company and the Underwriter
and should not be construed to be predictive of, or to imply that, any price
increases will occur in the
50
Company's securities. The exercise price of the Class A Warrants and the number
and kind of shares of Class A Common Stock or other securities and property to
be obtained upon exercise of the Class A Warrants are subject to adjustment in
certain circumstances, including a stock split of, or stock dividend on, or a
subdivision, combination or recapitalization of, the Class A Common Stock or the
issuance of shares of Class A Common Stock at less than the market price of the
Class A Common Stock. Additionally, an adjustment would be made upon the sale of
all or substantially all of the assets of the Company for less than the market
value thereof, a merger or other unusual events (other than share issuances
pursuant to employee benefit and stock incentive plans for directors, officers
and employees of the Company) so as to enable holders of the Class A Warrants to
purchase the kind and number of shares or other securities or property
(including cash) receivable in such event by a holder of the kind and number of
shares of Class A Common Stock that might otherwise have been purchased upon
exercise of such Class A Warrant. No adjustment for previously paid cash
dividends, if any, will be made upon exercise of the Class A Warrants.
The Class A Warrants may be exercised upon surrender of the Class A Warrant
certificate on or prior to the expiration date (or earlier redemption date) of
such Class A Warrants at the offices of the Warrant Agent with the form of
"Election of Purchase" on the reverse side of the Class A Warrant certificate
completed and executed as indicated, accompanied by payment of the full exercise
price (by certified or bank check payable to the order of the Company) for the
number of Class A Warrants being exercised. Shares of Class A Common Stock
issuable upon exercise of Class A Warrants and payment in accordance with the
terms of the Warrants will be fully paid and non-assessable.
The Class A Warrants do not confer upon the holders of Class A Warrants any
voting or other rights of the shareholders of the Company. Upon notice to the
holders of Class A Warrants, the Company has the right to reduce the exercise
price or extend the expiration date of the Class A Warrants. Although this right
is intended to benefit the holders of Class A Warrants, to the extent the
Company exercises this right when the Class A Warrants would otherwise be
exercisable at a price higher than the prevailing market price of the Class A
Common Stock, the likelihood of exercise, and resultant increase in the number
of shares outstanding, may result in making more costly, or impeding, a change
in control of the Company.
The description above is subject to the provisions of the Warrant Agreement,
as amended, which has been filed as an exhibit to the Registration Statement, of
which this Prospectus forms a part, and reference is made to such exhibit for a
detailed description thereof.
UNIT PURCHASE OPTION
The Company has agreed to grant to the Underwriter, upon the closing of the
Offering, the Unit Purchase Option to purchase up to 1,500 Units. These Units
will, when issued, be identical to the Units offered hereby, except that the
Class A Warrants included in the Unit Purchase Option are subject to redemption
by the Company, in accordance with the terms of the Warrant Agreement, at any
time after the Unit Purchase Option has been exercised and the underlying Class
A Warrants are outstanding. The Unit Purchase Option cannot be transferred,
sold, assigned or hypothecated for two years, except to any officer of the
Underwriter or members of the selling group or their officers. The Unit Purchase
Option is exercisable during the three-year period commencing two years from the
date hereof at an exercise price of $1,300 per Unit (130% of the initial public
offering price) subject to adjustment in certain events to protect against
dilution. The holders of the Unit Purchase Options have certain demand and
piggyback registration rights. See "Underwriting."
REGISTRATION RIGHTS
Commencing one year from the date of this Prospectus, the holders of the
Unit Purchase Option will have certain demand and piggyback registration rights
relating to such options and the underlying securities. These registration
rights are in addition to the similar demand and piggyback registration rights
granted to the holders of outstanding warrants issued to the Underwriter in
connection with the initial
51
public offering of the Company in 1993, which, upon completion of the Offering,
will entitle the holders thereof to purchase up to a minimum of 220,218 shares
of the Company's Class A Common Stock exercisable at $8.99 per share, or a
maximum of 224,388 shares of Class A Common Stock exercisable at $8.82 per
share, until June 4, 1998. The Company has also granted certain piggyback
registration rights to HBI, Sutro & Co., Incorporated, The Galileo Fund, L.P.
and The Copernicus Fund, L.P. with respect to an aggregate of 797,325 shares of
Class A Common Stock. The exercise of the registration rights relating to the
Unit Purchase Option or the outstanding warrants may involve substantial expense
to the Company and have a depressive effect on the market price of the Company's
securities.
The Company has also agreed to register, subsequent to the Offering, the
Selling Securityholder Securities for resale by the holders thereof. See "See
Subsequent Offering."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Class A Common Stock and
the Warrant Agent for the Class A Warrants is U.S. Stock Transfer Corporation,
1745 Gardena Avenue, Suite 200, Glendale, California 91204.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to the Offering, the Company will have outstanding an
aggregate of 7,068,500 shares of Class A Common Stock. 3,000,000 of such shares
are Escrow Shares not transferable unless released from escrow pursuant to the
Escrow Agreement. See "Principal Shareholders -- Escrow Shares." In addition, an
aggregate of 264,757 shares of Class A Common Stock are issuable pursuant to
outstanding warrants. Of the 4,068,500 shares of Class A Common Stock
outstanding prior to the Offering that are not Escrow Shares, 795,197 are
"restricted securities" as that term is defined under Rule 144. All such shares
of Class A Common Stock will be eligible for sale under Rule 144 (subject to the
restrictions on transfer agreed to between the current shareholders and the
Underwriter, as set forth below, and the restrictions on transfer with respect
to the Escrow Shares) and will be freely transferable without restriction under
the Securities Act except for any shares purchased by any person who is or
thereby becomes an "affiliate" of the Company, which shares will be subject to
the resale limitations contained in Rule 144 promulgated under the Securities
Act.
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated), with respect to restricted securities that satisfy
a two-year holding period, may sell within any three-month period a number of
restricted shares which does not exceed the greater of 1% of the then
outstanding shares of such class of securities or the average weekly trading
volume during the four calendar weeks prior to such sale. Sales under Rule 144
are also subject to certain requirements as to the manner of sale, notice and
the availability of current public information about the Company. Rule 144 also
permits, under certain circumstances, the sale of shares by a person who is not
an affiliate of the Company, with respect to restricted securities that satisfy
a three-year holding period, without regard to the volume or other resale
limitations. For shares issued in consideration of an unsecured or non-recourse
promissory note, the holding period does not commence until the note is paid in
full. The above is a brief summary of Rule 144 and is not intended to be a
complete description thereof.
The "restricted" Class A Common Stock currently is eligible for sale
pursuant to Rule 144. However, the directors and executive officers of the
Company and certain holders of 5% or more of the outstanding Class A Common
Stock have agreed not to sell, assign or transfer any of their shares of Class A
Common Stock, options or warrants for a period of 13 months after the closing
date of the Offering without the prior consent of the Underwriter. In addition,
the Company has granted certain registration rights with respect to the Unit
Purchase Option and the securities underlying it. See "Underwriting."
Pursuant to registration rights acquired in the Bridge Financing, the
Company will, subsequent to the Offering, register for resale on behalf of the
Selling Securityholders, the Selling Securityholder Securities,
52
subject to the contractual restriction that the Selling Securityholders have
agreed (i) not to exercise the Selling Securityholder Warrants for a period of
one year for the closing of the Offering and (ii) not to sell the Selling
Securityholder Warrants except pursuant to the restrictions set forth below:
PERCENTAGE ELIGIBLE
LOCK-UP PERIOD FOR RESALE
- --------------------------------------------------------------------------- ---------------------
Before 90 days after closing............................................... 0%
Between 91 and 150 days after closing...................................... 25%
Between 151 and 210 days after closing..................................... 50%
Between 211 and 270 days after closing..................................... 75%
After 270 days after closing............................................... 100%
Following the Offering, no predictions can be made of the effect, if any, of
future public sales of restricted shares or the availability of restricted
shares for sale in the public market. Moreover, the Company cannot predict the
number of shares of Class A Common Stock that may be sold in the future pursuant
to Rule 144 because such sales will depend on, among other factors, the market
price of the Class A Common Stock and the individual circumstances of the
holders thereof. The availability for sale of substantial amounts of Class A
Common Stock acquired through the exercise of the Class A Warrants under Rule
144, other options or the Unit Purchase Option could adversely affect prevailing
market prices for the Class A Common Stock.
Beginning one year from the date of this Prospectus, the holders of the Unit
Purchase Option will have demand and piggy-back registration rights relating to
such options and the underlying securities and the holders of warrants issued to
the underwriter in connection with the Company's initial public offering in 1993
will have certain demand and piggy-back registration rights with respect to a
minimum of 220,218 and a maximum of 224,388 shares of Class A Common Stock into
which such warrants are exercisable. See "Underwriting." The Company has also
granted certain piggyback registration rights to HBI, Sutro & Co., Incorporated,
The Galileo Fund, L.P. and The Copernicus Fund, L.P. with respect to an
aggregate of 797,325 shares of Class A Common Stock.
Except as set forth above, no stockholder of the Company, nor any holder of
warrants to purchase shares of the Class A Common Stock, has any registration
rights.
53
UNDERWRITING
D.H. Blair Investment Banking Corp. (the "Underwriter") has agreed, subject
to the terms and conditions of the Underwriting Agreement, to purchase the
15,000 Units offered hereby from the Company on a "firm commitment" basis, if
any are purchased. It is expected that Blair & Co., will distribute as a selling
group member substantially all of the Units offered hereby. Blair & Co. is
substantially owned by family members of J. Morton Davis. Mr. Davis is the sole
stockholder of the Underwriter.
The Underwriter has advised the Company that it proposes to offer the Units
to the public at the public offering price set forth on the cover page of this
Prospectus, and that it may allow, to selected dealers who are members of the
National Association of Securities Dealers, Inc. (the "NASD"), concessions, not
in excess of $ per Unit, of which not in excess of $ per Unit may be
reallowed to other dealers who are members of the NASD. After the public
offering, the public offering price, concessions and reallowances may be changed
by the Underwriter.
The Company has granted an option to the Underwriter, exercisable during the
45-day period from the date of this Prospectus, to purchase up to 2,250
additional Units at the public offering price set forth on the cover page of
this Prospectus, less the underwriting discounts and commissions. The
Underwriter may exercise this option in whole, or, from time to time, in part,
solely for the purpose of covering over-allotments, if any, made in connection
with the sale of the Units offered hereby.
The Company has agreed to pay to the Underwriter a non-accountable expense
allowance representing 3% of the aggregate offering price of the Units offered
hereby (plus 3% of the aggregate offering price of any Units purchased pursuant
to the Underwriter's Over-allotment Option), $40,000 of which has been paid to
date.
The Company has agreed to sell to the Underwriter and its designees, on the
closing date of the Offering, for nominal cost, the Unit Purchase Option (the
"Unit Purchase Option") to purchase up to 1,500 Units at an exercise price of
$1,300 per Unit, subject to certain anti-dilution provisions. The Units
purchasable upon exercise of the Unit Purchase Option are identical to the Units
offered hereby, except that the Warrants contained therein are subject to
redemption by the Company, in accordance with the terms of the Warrant
Agreement, only after the Unit Purchase Option has been exercised and the
underlying warrants are outstanding. The Unit Purchase Option will be
exercisable during the three-year period commencing two years from the date of
this Prospectus. The Unit Purchase Option may not be transferred, sold, assigned
or hypothecated for two years from the date of this Prospectus except to any
NASD member participating in the offering or any officers of the Underwriter or
any such NASD member. The Company has agreed to register under the Securities
Act at its expense on one occasion, and at the expense of the Underwriter on
another occasion, the Unit Purchase Option and/or the underlying securities at
the request of the holder thereof. The Company has also agreed to certain
"piggyback" registration rights for the holders of the Unit Purchase Option
and/or the underlying securities.
For the life of the Unit Purchase Option, the holders are given the
opportunity to profit from a rise in the market price of the Company's Common
Stock and Class A Warrants with a resulting dilution in the interest of other
shareholders. The Company may find it more difficult to raise additional equity
capital while the Unit Purchase Option is outstanding and, at any time when the
holders of the Unit Purchase Option might be expected to exercise it, the
Company would probably be able to obtain equity capital on terms more favorable
than those provided in the Unit Purchase Option.
Except for HBI, the Copernicus Fund and the Galileo Fund, all of the current
directors and executive officers of the Company, all shareholders owning 5% or
more of the issued and outstanding Class A Common Stock of the Company and
certain holders of 1% but less than 5% of all of the issued and outstanding
Class A Common Stock of the Company have agreed not to sell, transfer or assign
any of their shares of Common Stock, options or warrants without the prior
written consent of the Underwriter for a
54
period of 13 months from the closing date of the Offering, other than (i) bona
fide gifts and transfers to trusts for estate planning purposes where the
transferee agrees to be bound by the transfer restrictions described herein and
(ii) the sale of shares owned by Lon E. Bell, Ph.D., pursuant to the exercise,
by the holders thereof, of options on such shares previously granted by Dr.
Bell.
In connection with the Offering, the Company has extended the term of an
agreement providing for the payment of a fee to the Underwriter in the event the
Underwriter is responsible for a merger or other acquisition transaction to
which the Company is a party until five years from the date of completion of the
Offering.
The Underwriter acted as the sole underwriter for the Company's initial
public offering in June 1993. In connection therewith, the Underwriter received
warrants which, upon completion of the Offering, will entitle the holders
thereof to purchase a minimum of 220,218 shares of Class A Common Stock
exercisable at $8.99 per share, or a maximum of 224,388 shares of Class A Common
Stock exercisable at $8.82 per share.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities, including
liabilities under the Securities Act.
The Company has agreed not to solicit Class A Warrant exercises other than
through the Underwriter, unless the Underwriter declines to make such
solicitation. Upon any exercise of the Class A Warrants after the first
anniversary of the date of this Prospectus, the Company will pay the Underwriter
a fee of 5% of the aggregate exercise price of the Class A Warrants, if (i) the
market price of the Company's Common Stock on the date the Class A Warrants are
exercised is greater than the then exercise price of the Class A Warrants; (ii)
the exercise of the Class A Warrants was solicited by a member of the NASD, as
designated in writing on the warrant certificate subscription form; (iii) the
Class A Warrants are not held in a discretionary account; (iv) disclosure of
compensation arrangements was made both at the time of the Offering and at the
time of exercise of the Class A Warrants; and (v) the solicitation of exercise
of the Class A Warrant was not in violation of Rule 10b-6 promulgated under the
Exchange Act.
In connection with the Offering, the Underwriter may engage in passive
market making transactions in the Class A Common Stock on Nasdaq in accordance
with Rule 10b-6A under the Securities Exchange Act of 1934, as amended, during
the two business day period before commencement of offers or sales of the Units.
The passive market making transactions must comply with applicable volume and
price limits and be identified as such. In general, a passive market maker may
display its bid at a price not in excess of the highest independent bid for the
security; if all independent bids are lowered below the passive market maker's
bid, however, such bid must then be lowered when certain purchase limits are
exceeded. Unless granted an exemption by the Commission from Rule 10b-6, the
Underwriter will be prohibited from engaging in any other market marking
activities with regard to the Company's securities for the period from nine
business days (or such other applicable period as Rule 10b-6 may provide) prior
to any solicitation by the Underwriter of the exercise of the Class A Warrants
until the later of the termination of such solicitation activity or the
termination (by waiver or otherwise) of any right that the Underwriter may have
to receive a fee for the exercise of Class A Warrants following such
solicitation. As a result, the Underwriter may be unable to continue to provide
a market for the Company's securities during certain periods while the Class A
Warrants are exercisable.
The Company has agreed with the Underwriter that the Underwriter will have
the right to appoint one director to the Company's Board of Directors for a
period of five years following the completion of the Offering.
The public offering price of the Units and the exercise prices and other
terms of the Class A Warrants have been determined by negotiations between the
Company and the Underwriter and are not necessarily related to the Company's
asset value, net worth or other established criteria of value. Factors
considered in determining the offering price of the Units and the exercise price
and other terms of the Class A Warrants
55
include the present state of the Company's development, the future prospects of
the Company, an assessment of management, the general condition of the
securities markets and other factors deemed relevant.
The Underwriter has informed the Company that the Commission is conducting
an investigation concerning various business activities of the Underwriter and
Blair & Co., a selling group member which will distribute substantially all of
the Units offered hereby. The investigation appears to be broad in scope,
involving numerous aspects of the Underwriter's and Blair & Co.'s compliance
with Federal securities laws and compliance with the Federal securities laws by
issuers whose securities were underwritten by the Underwriter or Blair & Co., or
in which the Underwriter or Blair & Co. made over-the-counter markets, persons
associated with the Underwriter or Blair & Co., such issuers and other persons.
The Company has been advised by the Underwriter that the investigation has been
ongoing since at least 1989 and that the Underwriter is cooperating with the
investigation. The Underwriter cannot predict whether this investigation will
ever result in a formal enforcement action against the Underwriter or Blair &
Co. or, if so, whether any such action might have an adverse effect on the
Underwriter, Blair & Co. or the securities offered hereby. The Company has been
advised that the Underwriter or Blair & Co. intends to make a market in the
securities following the Offering. An unfavorable resolution of the Commission's
investigation could have the effect of limiting such firm's ability to make a
market in the Company's securities, which could adversely affect the liquidity
or price of such securities.
LEGAL MATTERS
Certain legal matters in connection with the Offering have been passed upon
for the Company by O'Melveny & Myers LLP, Los Angeles, California. Bachner,
Tally, Polevoy & Misher LLP, New York, New York, have acted as counsel to the
Underwriter in connection with the Offering.
EXPERTS
The financial statements as of December 31, 1995 and 1994 and for each of
the three years ended December 31, 1995, and for the period April 23, 1991
(Inception) to December 31, 1995 included in this Prospectus have been so
included in reliance on the report (which contains an explanatory paragraph
relating to the Company's need to obtain financing to repay its debt and finance
continued operations) of Price Waterhouse LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Pursuant to Item 12 of the Instructions to Form S-2, the following documents
are hereby incorporated herein in their entirety by reference thereto:
(1) The Company's Annual Report on Form 10-K for the Company's fiscal year
ended December 31, 1995.
(2) The Company's Quarterly Report on Form 10-Q/A for the three-month period
ended March 31, 1996.
(3) The Company's Quarterly Report on Form 10-Q/A for the three-month period
ended June 30, 1996.
(4) The Company's Quarterly Report on Form 10-Q for the three-month period
ended September 30, 1996.
(5) The Company's Current Report on Form 8-K filed July 17, 1996.
56
INDEX TO FINANCIAL STATEMENTS
PAGE
---------
Report of Independent Accountants.......................................................................... F-2
Balance Sheet.............................................................................................. F-3
Statement of Operations.................................................................................... F-4
Statement of Shareholders' Equity.......................................................................... F-5
Statement of Cash Flows.................................................................................... F-6
Notes to Financial Statements.............................................................................. F-7
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Amerigon Incorporated (a Development Stage Enterprise)
In our opinion, the accompanying balance sheet and the related statements of
operations, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Amerigon Incorporated (a
Development Stage Enterprise) at December 31, 1994 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, and for the period from April 23, 1991 (inception) to
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The Company has incurred significant losses during 1996, is in default of
its bank line of credit agreement, and has entered into a bridge financing
agreement. As more fully described in Note 14 to the financial statements, the
Company will need to obtain additional financing to repay its debt and finance
continued operations.
PRICE WATERHOUSE LLP
Costa Mesa, California
February 26, 1996, except
as to Note 14 which is as
of December 4, 1996
F-2
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
(IN THOUSANDS)
ASSETS
DECEMBER 31,
-----------------
1994 1995
------- -------- SEPTEMBER 30,
1996
-------------
(UNAUDITED)
Current assets:
Cash and cash equivalents.................................................................... $ 2,405 $ 4,486 $ 268
Short term investments....................................................................... 2,910 -- --
Accounts receivable less allowance of $100 in 1994 and 1995 (Note 13)........................ 768 1,052 1,053
Unbilled revenue (Notes 10 and 11)........................................................... 275 1,468 2,565
Inventory (Note 4)........................................................................... -- 243 127
Deferred contract costs...................................................................... -- -- 700
Prepaid expenses and other assets............................................................ 89 961 460
------- -------- -------------
Total current assets..................................................................... 6,447 8,210 5,173
Property and equipment, net (Note 4)......................................................... 715 785 703
------- -------- -------------
Total assets............................................................................. $ 7,162 $ 8,995 $ 5,876
------- -------- -------------
------- -------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable (Note 13)................................................................... $ 262 $ 1,123 $ 1,533
Deferred revenue (Note 10)................................................................... 1,754 94 141
Accrued liabilities (Note 4)................................................................. 282 512 416
Note payable to shareholder.................................................................. 200
Bank loan payable............................................................................ 2,532
------- -------- -------------
Total current liabilities................................................................ 2,298 1,729 4,822
------- -------- -------------
Long-term portion of capital lease (Note 12)..................................................... 78 68 50
------- -------- -------------
Commitments (Notes 9 and 12)
Shareholders' equity: (Notes 7 and 8)
Preferred Stock, no par value; 5,000 shares authorized, none issued and outstanding
Common Stock:
Class A--No par value; 17,000 shares authorized, 3,300 and 4,050 issued and outstanding in
1994 and 1995, respectively. (An additional 3,000 shares held in escrow)................. 11,634 17,270 17,321
Class B--No par value; 3,000 shares authorized, none issued and outstanding................
Contributed capital.......................................................................... 3,102 3,115 3,115
Deficit accumulated during development stage................................................. (9,950) (13,187) (19,432)
------- -------- -------------
Total shareholders' equity............................................................... 4,786 7,198 1,004
------- -------- -------------
Total liabilities and shareholders' equity............................................... $ 7,162 $ 8,995 $ 5,876
------- -------- -------------
------- -------- -------------
See accompanying notes to the financial statements.
F-3
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
FROM FROM
APRIL 23, APRIL 23,
1991 1991
(INCEPTION) NINE MONTHS ENDED (INCEPTION)
YEAR ENDED DECEMBER 31, TO SEPTEMBER 30, TO
------------------------------- DECEMBER 31, -------------------- SEPTEMBER 30,
1993 1994 1995 1995 1995 1996 1996
--------- --------- --------- ------------- --------- --------- -------------
(UNAUDITED) (UNAUDITED)
Revenues:
Development contracts and
related grants........... $ 188 $ 1,336 $ 7,290 $ 8,814 $ 4,326 $ 6,382 $ 15,196
Grants..................... 2,101 1,304 519 5,824 480 119 5,943
--------- --------- --------- ------------- --------- --------- -------------
Total revenues............... 2,289 2,640 7,809 14,638 4,806 6,501 21,139
--------- --------- --------- ------------- --------- --------- -------------
Costs and expenses:
Direct development contract
and related grant
costs.................... 525 928 5,332 6,785 3,895 9,142 15,927
Direct grant costs......... 1,649 803 339 4,522 390 101 4,623
Research and development... 1,578 2,137 2,367 6,659 1,785 1,544 8,203
Selling, general and
administrative, including
reimbursable
administrative costs..... 2,340 3,235 3,135 10,377 1,820 1,838 12,215
--------- --------- --------- ------------- --------- --------- -------------
Total costs and expenses..... 6,092 7,103 11,173 28,343 7,890 12,625 40,968
--------- --------- --------- ------------- --------- --------- -------------
Operating loss............... (3,803) (4,463) (3,364) (13,705) (3,084) (6,124) (19,829)
Interest income.............. 163 228 127 518 124 42 560
Interest expense............. (163) (163)
--------- --------- --------- ------------- --------- --------- -------------
Net loss..................... $ (3,640) $ (4,235) $ (3,237) $ (13,187) $ (2,960) $ (6,245) $ (19,432)
--------- --------- --------- ------------- --------- --------- -------------
--------- --------- --------- ------------- --------- --------- -------------
Net loss per share........... $ (1.64) $ (1.28) $ (0.98) $ (0.90) $ (1.54)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average number of
shares outstanding......... 2,213 3,300 3,306 3,300 4,060
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
See accompanying notes to the financial statements.
F-4
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
COMMON STOCK
--------------------------------- DEFICIT
ACCUMULATED
PREFERRED STOCK CLASS A CLASS B DURING THE
--------------- ---------------- --------------- CONTRIBUTED DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at April 23, 1991 (Inception)... -- -- 1,000 $ 100 -- -- -- -- $ 100
Contributed capital--founders'
services provided without
compensation........................ $ 111 111
Net loss.............................. $ (616) (616)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at December 31, 1991............ -- -- 1,000 100 -- -- 111 (616) (405)
Transfer of common stock to employee by
principal shareholder for services.... 150 150
Contributed capital--founders' services
provided without compensation......... 189 189
Net loss.............................. (1,459) (1,459)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at December 31, 1992............ -- -- 1,000 100 -- -- 450 (2,075) (1,525)
Issuance of common stock (public
offering)........................... 2,300 11,534 11,534
Options granted by pricipal
shareholder for services............ 549 549
Contribution of notes payable to
contributed capital................. 2,102 2,102
Net loss.............................. (3,640) (3,640)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at December 31, 1993............ -- -- 3,300 11,634 -- -- 3,101 (5,715) 9,020
Compensation recorded for variable
plan stock option (Note 8).......... 1 1
Net loss.............................. (4,235) (4,235)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at December 31, 1994............ -- -- 3,300 11,634 -- -- 3,102 (9,950) 4,786
Private placement of common stock..... 750 5,636 1 5,637
Compensation recorded for variable
plan stock option (Note 8).......... 12 12
Net loss.............................. (3,237) (3,237)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at December 31, 1995............ -- -- 4,050 17,270 -- -- 3,115 (13,187) 7,198
Unaudited Information:
Exercise of stock options............. 19 145 145
Expenses of sale of stock............. (94 ) (94)
Net loss.............................. (6,245) (6,245)
------ ------ ------ ------- ------ ------ ----------- ----------- ------
Balance at September 30, 1996........... -- -- 4,069 $17,321 -- -- $3,115 $(19,432) $1,004
------ ------ ------ ------- ------ ------ ----------- ----------- ------
------ ------ ------ ------- ------ ------ ----------- ----------- ------
See accompanying notes to the financial statements
F-5
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
FROM APRIL NINE MONTHS ENDED FROM APRIL
23, 1991 23, 1991
YEAR ENDED DECEMBER 31, (INCEPTION) SEPTEMBER 30, (INCEPTION)
------------------------------- TO DECEMBER -------------------- TO SEPTEMBER
1993 1994 1995 31, 1995 1995 1996 30, 1996
--------- --------- --------- ------------- --------- --------- -------------
(UNAUDITED) (UNAUDITED)
Operating Activities:
Net Loss........................... $ (3,640) $ (4,235) $ (3,237) $ (13,187) $ (2,960) $ (6,245) $ (19,432)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization.... 65 176 283 554 221 269 823
Provision for doubtful
accounts....................... -- 100 10 110 -- -- 110
Stock option compensation........ 549 1 12 712 -- -- 712
Contributed capital--founders'
services provided without cash
compensation................... -- -- -- 300 -- -- 300
Change in operating assets and
liabilities:
Accounts receivable............ (544) (286) (294) (1,162) 457 (1) (1,163)
Unbilled revenue............... 436 (32) (1,193) (1,468) (1,036) (1,097) (2,565)
Inventory...................... -- -- (243) (243) (515) 116 (127)
Deferred contract costs........ -- -- -- -- -- (700) (700)
Prepaid expenses and other
assets....................... (55) (23) (872) (960) (204) 501 (459)
Accounts payable............... 162 (203) 861 1,123 342 410 1,533
Deferred revenue............... 46 1,708 (1,660) 94 (868) 47 141
Accrued liabilities............ 102 92 230 512 (22) (96) 416
--------- --------- --------- ------------- --------- --------- -------------
Net cash used in operating
activities....................... (2,879) (2,702) (6,103) (13,615) (4,585) (6,796) (20,411)
--------- --------- --------- ------------- --------- --------- -------------
Investing activities:
Purchase of property and
equipment........................ (134) (635) (353) (1,271) (276) (187) (1,458)
Proceeds from disposition of
property......................... -- 9 -- 9 -- -- 9
Short term investments............. -- (2,910) 2,910 -- 2,910 -- --
--------- --------- --------- ------------- --------- --------- -------------
Net cash used in investing
activities..................... (134) (3,536) 2,557 (1,262) 2,634 (187) (1,449)
--------- --------- --------- ------------- --------- --------- -------------
Financing activities:
Proceeds from sale of common stock,
net.............................. 11,534 -- 5,636 17,270 -- (94) 17,176
Proceeds from sale of warrants..... -- -- 1 1 -- -- 1
Proceeds from exercise of stock
options.......................... -- -- -- -- -- 145 145
Borrowing under line of credit..... -- -- 1,100 1,100 -- 5,180 6,280
Repayment of line of credit........ -- -- (1,100) (1,100) -- (2,648) (3,748)
Repayment of capital lease......... -- -- (10) (10) (10) (18) (28)
Proceeds from note payable to
shareholder...................... -- -- -- -- -- 200 200
Notes payable contributed to
capital.......................... -- -- -- 2,102 -- -- 2,102
--------- --------- --------- ------------- --------- --------- -------------
Net cash provided by financing
activities..................... 11,534 -- 5,627 19,363 (10) 2,765 22,128
--------- --------- --------- ------------- --------- --------- -------------
Net increase (decrease) in cash...... 8,521 (6,238) 2,081 4,486 (1,961) (4,218) 268
Cash and cash equivalents at
beginning of period................ 122 8,643 2,405 -- 2,405 4,486 --
--------- --------- --------- ------------- --------- --------- -------------
Cash and cash equivalents at end of
period............................. $ 8,643 $ 2,405 $ 4,486 $ 4,486 $ 444 $ 268 $ 268
--------- --------- --------- ------------- --------- --------- -------------
--------- --------- --------- ------------- --------- --------- -------------
See accompanying notes to the financial statements
F-6
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--THE COMPANY:
Amerigon Incorporated (the "Company" or "Amerigon") is a development stage
enterprise, which was incorporated in California on April 23, 1991, primarily to
develop, manufacture and market proprietary, high technology automotive
components and systems for gasoline-powered and electric vehicles.
Amerigon's activities through December 31, 1995 include (1) obtaining the
rights to the basic technology and continuing development of the audio
navigation system, the climate control seat system, and certain ultra-wideband
radar applications; (2) obtaining financing from grants and other sources and
conducting development programs related to electric vehicles and its other
products; (3) marketing of these development stage products to automotive
companies and their suppliers; and (4) completing the development, in December
1995, of the audio navigation system and selling the first commercial units.
The Company's strategy has been to augment the expenditure of its own funds
on research and development by seeking and obtaining various grants which
support the development of electric vehicles and related technologies. Through
such grant funded activities and development contracts with customers, the
Company has opportunities to gain access to new technologies and to extend its
own product development efforts.
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The financial statements include amounts that are based on management's
judgments. Certain reclassifications have been made for consistent presentation.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of all financial instruments, comprising cash and cash
equivalents, accounts receivable and unbilled revenues, accounts payable,
accrued expenses and capital leases, approximate fair value because of the short
maturities of these instruments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
All investments with original maturities of less than 90 days are considered
cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which subject the Company to concentration of credit
risk consist primarily of cash equivalents, accounts receivable and unbilled
revenue. Cash equivalents are invested in the money market account of a major
U.S. financial services company and the risk is considered limited. The risk
associated with accounts receivable and unbilled revenue is limited by the large
size and credit worthiness
F-7
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
of the Company's commercial customers and the federal and California government
agencies providing grant funding. Three government agencies are included in the
$2,520,000 of accounts receivable and unbilled revenues at December 31, 1995,
representing 22%, 15% and 12%, respectively, of the total. No individual
commercial customer represents greater than 10% of the total. One government
agency and one commercial customer represent 16% and 52%, respectively, of
revenues for the year ending December 31, 1995. Two government agencies and one
commercial customer represent 28%, 10%, and 10%, respectively, of revenues for
the year ending December 31, 1994. For the year ending December 31, 1993, one
funding agency represented 59% of revenues. In addition, revenues from foreign
customers represented 54% of total revenues for the year ended December 31, 1995
and insignificant percentages of revenues for the two preceding years.
INVENTORY
Inventory, other than inventoried purchases relating to development
contracts, is valued at the lower of cost, on the first-in, first-out basis, or
market. Inventory related to development contracts is stated at cost, and is
removed from inventory when used in the development project.
PROPERTY AND EQUIPMENT
Property and equipment, including additions and improvements, are recorded
at cost. Expenditures for repairs and maintenance are charged to expense as
incurred. When property or equipment is retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the accounts. Gains
or losses from retirements and disposals are recorded as other income or
expense.
Property and equipment are depreciated over their estimated useful lives
ranging from three to five years. Leasehold improvements are amortized over the
shorter of their estimated useful lives or the term of the lease. Depreciation
and amortization are computed using the straight-line method.
DEVELOPMENT CONTRACT REVENUES
The Company has entered into a series of fixed-price development contracts,
which include (1) specific engineering and tooling services to prepare the
Company's products and the related manufacturing processes for commercial sales
to certain original equipment manufacturers ("OEMs"); (2) the development of
complete electric vehicle systems (Note 10); and (3) prototype products
developed during the research and development process, some of which are sold to
third parties for evaluation purposes. Revenue is recognized on development
contracts using the percentage of completion method or, in the case of short
duration contracts, when the prototype or service is delivered. Revenues earned
are recorded on the balance sheet as Unbilled Revenue until billed. All amounts
received from customers in advance of the development effort are reflected on
the balance sheet as Deferred Revenue until such time as the contracted work is
performed.
GRANT REVENUES
Revenue from government agency grants and other sources pursuant to cost
reimbursement and cost sharing arrangements (Note 11) is recognized when
reimbursable costs have been incurred. Grant revenues earned are recorded on the
balance sheet as Unbilled Revenue until billed.
F-8
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
RESEARCH AND DEVELOPMENT EXPENSES
Research and development activities are expensed as incurred. These amounts
represent direct expenses for wages, materials and services associated with
development contracts, grant program activities and the development of the
Company's products. The Company has expensed, as Research and Development,
payments for license rights to technology and minimum royalties which amounted
to $345,000 in 1995, $248,000 in 1994 and $260,000 in 1993. Research and
development does not include any overhead or administrative costs.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), effective for years beginning after December 15, 1995. For purposes of
recording expense associated with stock-based compensation, the Company intends
to continue to apply the provisions of APB Opinion 25 and related
interpretations. The effect of adoption of SFAS 123 in the year ending December
31, 1996 is not known.
INCOME TAXES
Income taxes for periods subsequent to the Company's election to report as a
"C" Corporation for tax purposes are determined under guidelines prescribed by
Financial Accounting Standards Board Statement No. 109 (SFAS 109), "Accounting
for Income Taxes." Under the liability method specified by SFAS 109, the
deferred tax assets and liabilities are measured each year based on the
difference between the financial statement and tax bases of the assets and
liabilities at the applicable enacted Federal and state tax rates. A valuation
allowance is provided for the portion of net deferred tax assets considered
unlikely to be realized.
NET LOSS PER SHARE
The Company's net loss per share calculations are based upon the weighted
average number of shares of common stock outstanding. Excluded from this
calculation are the 3,000,000 Escrowed Contingent Shares (Note 7). Common stock
equivalents (stock options and stock warrants) are anti-dilutive in 1995 and
1994 and are excluded from the net loss per share calculation.
INTERIM RESULTS (UNAUDITED)
The accompanying balance sheet at September 30, 1996 and the statements of
operations and cash flows for the nine month periods ended September 30, 1995
and 1996 and for the period April 23, 1991 (inception) to September 30, 1996,
and the statement of shareholders' equity for the nine month period ended
September 30, 1996 are unaudited. In the opinion of management, these statements
have been prepared on the same basis as the audited financial statements and
include all adjustments, consisting of only normal recurring adjustments,
necessary for the fair statement of results of the interim periods. The data
disclosed in the notes to the financial statements for those periods are also
unaudited.
F-9
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
RECLASSIFICATIONS
Certain amounts for the year ended December 31, 1995 have been reclassified
to be consistent with the presentation for the nine months ended September 30,
1996 and 1995.
NOTE 3--GOING CONCERN:
The Company is a development stage enterprise and has incurred losses from
operations since its inception of $13,187,000 through December 31, 1995. The
Company may continue to incur losses for the foreseeable future due to the costs
anticipated to be incurred with the development, manufacture and marketing of
its products. (See Note 14.)
NOTE 4--DETAILS OF CERTAIN FINANCIAL STATEMENT COMPONENTS (IN THOUSANDS):
DECEMBER 31,
--------------------
1994 1995
--------- ---------
INVENTORY:
Raw materials and component parts.......................................... -- $ 243
Finished goods............................................................. -- --
--------- ---------
-- $ 243
--------- ---------
--------- ---------
PROPERTY AND EQUIPMENT:
Equipment.................................................................. $ 372 $ 611
Computer equipment......................................................... 476 578
Leasehold improvements..................................................... 139 151
--------- ---------
987 1,340
Less: accumulated depreciation and amortization............................ (272) (555)
--------- ---------
$ 715 $ 785
--------- ---------
--------- ---------
ACCRUED EXPENSES:
Accrued salaries........................................................... $ 116 $ 328
Accrued vacation........................................................... 152 165
Other accrued liabilities.................................................. 14 19
--------- ---------
$ 282 $ 512
--------- ---------
--------- ---------
NOTE 5--INCOME TAXES:
There are no assets or liabilities for income taxes, nor income tax expense
included in the financial statements because the Company has incurred losses
since inception for both book and tax purposes. Prior to the effective date of
the initial public offering in 1993, the Company elected to be taxed as an S
corporation for both federal and state income tax purposes. As a result, the
Company was not subject to federal taxation and was subject to state taxation at
a reduced rate (2.5%). Subsequent to the public offering, the Company has
incurred net operating losses for federal and state purposes of $9,559,000 and
$4,778,000 respectively, and has generated tax credits for certain research and
development activities of
F-10
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--INCOME TAXES: (CONTINUED)
$301,000 and $167,000 for federal and state purposes, respectively. Federal net
operating losses and tax credits expire from 2008 through 2010 and state net
operating losses expire from 1998 through 2000. The use of such net operating
losses would be limited in the event of a change in control of the Company.
A valuation allowance of $3,919,000 has been provided for the entire amount
of the deferred tax assets created by these net operating loss and tax credit
carry-forwards, which represents an increase in the valuation allowance of
$1,327,000 from December 31, 1994. The remaining temporary differences are
primarily attributable to depreciation, unbilled grant revenue, deferred revenue
and accrued compensated absences.
NOTE 6--LINE OF CREDIT
On November 27, 1995, the Company entered into a line of credit agreement
with a bank under which the Company may borrow up to $4 million based on certain
costs incurred and billings made under a major electric vehicle development
contract (Note 10). The line of credit provides for interest at the prime rate
plus 1.3% and payments from the customer are applied as repayments, unless
otherwise paid by the Company. All assets of the Company have been pledged as
collateral and the loan has been guaranteed by the Company's president, a
principal shareholder. The loan agreement restricts the Company's payment of
dividends and any redemptions or retirement of stock. The agreement contains
certain required financial statement ratios and limits certain loans,
investments, acquisitions and dispositions of assets. The loan agreement expires
June 30, 1996. No amounts are outstanding under the line of credit at December
31, 1995.
NOTE 7--SHAREHOLDERS' EQUITY:
COMMON STOCK
The Class A and Class B Common Stock are substantially the same on a
share-for-share basis, except that holders of outstanding shares of Class B
Common Stock will be entitled to receive dividends and distributions upon
liquidation at a per share rate equal to five percent of the per share rate
received by holders of outstanding shares of Class A Common Stock. The Class B
Common Stock is neither transferable nor convertible and is subject to
cancellation under certain circumstances.
PUBLIC OFFERING OF CLASS A COMMON STOCK
In June 1993, the Company sold 2,300,000 shares of its Class A Common Stock
for net proceeds of $11,534,000. The Company issued Warrants to purchase 204,757
shares of Class A Common Stock, as subsequently adjusted pursuant to
anti-dilution provisions (Note 8). Immediately prior to the public offering,
$2,102,000 of the outstanding balance of notes payable to shareholders were
contributed by the shareholders to the capital of the Company.
PRIVATE PLACEMENT OF CLASS A COMMON STOCK
On December 29, 1995, the Company sold 750,000 shares of its Class A Common
Stock for $6,000,000 and received net proceeds of $5,636,000. The investors
received registration rights pursuant to which the Company must register these
shares. The stock purchase agreement also restricts the sale of additional
F-11
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--SHAREHOLDERS' EQUITY: (CONTINUED)
stock until June 30, 1996. In addition, the Company issued Warrants to purchase
60,000 shares of Class A Common Stock (Note 8).
ESCROW AGREEMENT
Prior to the effective date of the June 1993 initial public offering,
3,000,000 shares of the Company's Class A Common Stock ("Escrowed Contingent
Shares") were deposited into escrow by the then existing shareholders in
proportion to their then current holdings. These shares are not transferable
(but may be voted) and will be released from escrow in the event the Company
attains certain earnings levels (which have been adjusted for the December 29,
1995, private placement) during the period through December 31, 1998 or the
market price of the Class A Common Stock reaches specified levels during the
period through June 10, 1996.
The release of the Escrowed Contingent Shares will be deemed compensatory
and, accordingly, will result in charges to earnings equal to the fair market
value of the Escrowed Contingent Shares recorded ratably over the period
beginning on the date when management determines that any of the specified
events are probable of being attained and ending on the date when the goal is
attained causing the Escrowed Contingent Shares to be released. At the time a
goal is attained, previously unrecognized compensation expense will be adjusted
by a one-time charge based on the then fair market value of the shares released
from Escrow. Such charges could substantially reduce the Company's net income or
increase the Company's loss for financial reporting purposes in the periods such
charges are recorded. The specified events are not considered probable of
attainment at this time.
On April 30, 1999, all shares that have not been released from Escrow will
automatically be exchanged for shares of Class B Common Stock, which will then
be released from Escrow. Any dividends or other distributions made with respect
to Escrowed Contingent Shares that have not been released from Escrow as Class A
Common Stock will be forfeited and contributed to the capital of the Company on
April 30, 1999.
NOTE 8--STOCK OPTIONS AND STOCK WARRANTS:
1993 STOCK OPTION PLAN
Under the Company's 1993 Stock Option Plan (the "Plan"), as amended in June
1995, 550,000 shares of the Company's Class A Common Stock are reserved for
issuance, pursuant to which officers and employees of the Company as well as
other persons who render services to or are otherwise associated with the
Company are eligible to receive qualified ("incentive") and/or non-qualified
stock options.
The Plan, which expires in April 2003, is administered by the Board of
Directors or a stock option committee designated by the Board of Directors. The
selection of participants, allotment of shares, determination of price and other
conditions of purchase of options is to be determined by the Board or stock
option committee at its sole discretion, in order to attract and retain
personnel instrumental to the success of the Company. Incentive stock options
granted under the Plan are exercisable for a period of up to 10 years from the
date of grant at an exercise price which is not less than the fair market value
of the Common Stock on the date of the grant, except that the term of an
incentive stock option granted under the Plan to a shareholder owning more than
10% of the voting power of the Company on the date of grant
F-12
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--STOCK OPTIONS AND STOCK WARRANTS: (CONTINUED)
may not exceed five years and its exercise price may not be less than 110% of
the fair market value of the Common Stock on the date of the grant.
OPTIONS GRANTED BY PRINCIPAL SHAREHOLDER ("BELL OPTIONS")
Dr. Lon Bell, the president and principal shareholder of the Company, has
granted options to purchase shares of his Class A Common Stock, 75% of which are
Escrowed Contingent Shares. The holder of these options can exercise the
portions of his options related to Escrowed Contingent Shares only upon release
of these shares from escrow as Class A Common Stock. The option holder has no
right to purchase Class B Common Stock should such shares be released (Note 7).
Any options granted at prices below fair market value on the date of grant
result in compensation expense with respect to options to purchase the 25% of
such shares not placed in escrow. Compensation expense and a corresponding
adjustment to contributed capital on options to purchase Escrowed Contingent
Shares will be recorded when they are released or it is determined they are
probable of being released as Class A Common Stock.
In 1993, options were granted at prices below fair market value for which
compensation expense was recorded for the non-escrowed shares. Additional
compensation expense will be recorded if the related Escrowed Contingent Shares
are released from escrow. Certain of the Bell options granted during 1993 to one
individual were granted contingent on certain future performance criteria and
are accounted for as a variable plan. The Company recorded $1,000 and $12,231 of
compensation expense in 1994 and 1995, respectively related to 1,500 and 5,028
of those options, respectively.
The following table summarizes stock option activity:
1993 STOCK OPTION PLAN BELL OPTIONS
------------------------- -------------------------
NUMBER PRICE NUMBER PRICE
--------- -------------- --------- --------------
Outstanding at December 31, 1992............................ -- --
Granted................................................... 80,000 $ 6.00-8.00 850,572 $ 1.15-8.00
Canceled.................................................. -- (27,337) 1.15
--------- ---------
Outstanding at December 31, 1993............................ 80,000 6.00-8.00 823,235 1.15-8.00
Granted................................................... 63,574 8.25-11.69 -- --
Canceled.................................................. (2,064) 9.00-9.75 -- --
Exercised................................................. -- -- -- --
--------- ---------
Outstanding at December 31, 1994............................ 141,510 $ 6.00-11.69 823,235 $ 1.15-8.00
Granted................................................... 179,775 9.81-12.75 16,614 10.75-12.00
Canceled.................................................. (5,339) 10.50-11.69 (4,640) 1.15
Exercised................................................. -- -- (1,500) 1.15
--------- ---------
Outstanding at December 31, 1995............................ 315,946 6.00-12.75 833,709 1.15-12.00
--------- ---------
--------- ---------
Exercisable at December 31, 1995............................ 279,839 $ 6.00-12.75 162,187 $ 1.15-12.00
--------- ---------
--------- ---------
Shares available for option grants.......................... 234,054
---------
---------
Pursuant to employment agreements with certain key employees, the Company
may grant Company options at the prevailing market price when certain
performance goals are attained. These options are not
F-13
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--STOCK OPTIONS AND STOCK WARRANTS: (CONTINUED)
considered granted as of December 31, 1995 as neither the option price nor the
number of shares subject to option are determinable.
STOCK WARRANTS
In connection with the Company's June 1993 initial public offering, the
Company issued to the underwriters warrants to purchase 204,757 shares of Class
A Common Stock at $9.67 per share through June 9, 1998, as adjusted for
anti-dilution provisions in the warrant agreements. The Company issued to third
parties warrants to purchase 60,000 shares of Class A Common Stock at $10.25 per
share as a financial advisory fee in connection with the private placement on
December 29, 1995. These warrants expire on December 28, 2000.
NOTE 9--LICENSES:
AUDIO NAVIGATION SYSTEM. The Company has licensed several technologies and
map data sources in connection with its Audio Navigation System and is subject
to royalty payments under each license agreement. In 1993, the Company entered
into a worldwide license to manufacture and sell certain voice activated
navigation systems and software to automotive OEMs and automotive aftermarket
companies. The Company must pay royalties on net commercial sales of the
patented hardware. The terms of the license also include a royalty on sales of
non-patented hardware and a royalty on sales of software. The Company would
receive back from the licensor a royalty on sales by the licensor of software to
the consumer electronics markets. The total minimum royalty due under the
license agreement is $750,000, payable in installments through June 30, 2002. A
minimum royalty of $50,000 was paid and expensed as Research and Development in
each of the years ending June 30, 1995 and 1994. The minimum royalty applicable
to the year ending June 30, 1996, is also $50,000. Failure to pay the minimum
royalty results in the loss of the license.
The Company also licenses the right to use certain voice recognition
technology under which a royalty is due based on the cumulative sales of
hardware units. In addition, the Company uses certain geographic data bases for
which it pays a fee based on each map area sold. There are no minimum royalties
under these two agreements.
CLIMATE CONTROLLED SEAT SYSTEM. In 1992, the Company obtained the worldwide
license to manufacture and sell technology for a climate control seat system to
individual automotive OEMs. Under the terms of the license agreement, royalties
are payable based on cumulative net sales. The Company has paid minimum
royalties of $11,500 and $20,800 in 1994 and 1995, respectively.
ULTRA-WIDEBAND RADAR. In January 1994, the Company entered into a license
agreement for exclusive rights in certain automotive applications to certain
radar technology. A licensing fee of $100,000 was paid in January 1994.
Royalties are required to be paid based on cumulative net sales and are subject
to minimum annual royalties beginning in 1995. The minimum royalty payment for
1995 was $50,000 and was expensed as Research and Development.
NOTE 10--MAJOR CONTRACTS
On December 8, 1994, the Company announced that it had entered into
contracts with two Asian manufacturing companies to produce approximately 50
aluminum chassis passenger electric vehicle
F-14
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--MAJOR CONTRACTS (CONTINUED)
systems. These contracts, together with 1995 additions, are valued at
approximately $9,600,000, of which the Company received $1,650,000 during 1994
and $2,230,000 during 1995. The contracts are scheduled to be completed in 1996.
For the years ended December 31, 1994 and 1995, the Company recognized $48,000
and $4,040,000 in revenue, respectively, from these contracts. At December 31,
1995, $209,000 is included in Unbilled Revenue representing amounts recognized
as revenue for which billings had not been presented to customers.
In 1995, the Company completed development contracts related to specific
engineering and tooling of the Company's audio navigation system.
NOTE 11--GRANTS
Grant funding received by the Company are essentially cost sharing
arrangements whereby the Company obtains reimbursement from the funding source
for a portion of direct costs and reimbursable administrative expenses incurred
in managing specific programs related to the technologies utilized in the
Company's products. The Company is obligated to provide specified services and
to undertake specified activities under its arrangement with the funding sources
for these programs.
In 1992, CALSTART, Inc. ("CALSTART"), a not-for-profit consortium of public
and private entities (Note 13), was organized to support programs designed to
promote the development of advanced transportation including the advancement of
electric vehicles. CALSTART's support is primarily through the direct or
indirect arrangement of grant funding for such programs. Since 1993, the Company
has been selected by CALSTART to manage or co-manage several such programs. The
Company has also received grants from the California Energy Commission, the
Federal Transit Administration and from the Southern California Air Quality
Management District related to work on its electric vehicle and its climate
control seat technology.
As of December 31, 1995, the Company has recorded $1,260,000 relating to
reimbursable costs incurred for which billings had not yet been presented to the
funding agencies. The Company is entitled to obtain future reimbursement from
its funding sources for up to $1,330,000 of direct costs and reimbursable
administrative costs incurred in managing grant programs now in process, most of
which are expected to be completed during 1996.
NOTE 12--COMMITMENTS:
As of December 31, 1995, the Company had in effect compensation agreements
with certain key employees, including each of the officers, which provide for
annual compensation amounts, semi-annual increases in salary based upon the
Consumer Price Index and annual increases based on merit. Several of these
agreements also provide for bonuses based upon performance, and several include
a guaranteed minimum bonus provision. These compensation agreements do not
include an obligation of continued employment; however, bonuses based upon
individual performance objectives achieved prior to termination would be payable
to terminated employees.
In February 1994, the Company executed a sublease on a facility in Monrovia,
California and, in December 1994, the Company executed an amendment to the
sublease adding additional space. As of December 31, 1995, the monthly rent was
$24,000. The lease expires in August 1996, but contains options to renew to July
31, 1997. In December 1995, the Company executed a sublease to December 31,
1996, on
F-15
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--COMMITMENTS: (CONTINUED)
a facility in Alameda, California, from CALSTART (Note 13) for a monthly rental
amount of $14,000 and an advance payment of $450,000 which the Company is
amortizing to expense over the term of the lease.
In December 1994, the Company entered into a 60-month capital lease contract
for an IBM computer system with an implicit interest rate of 11.8% and, in July
1995, entered into a 36 month capital lease contract with an implicit interest
rate of 19.7% for additional computer equipment.
The future minimum annual commitments under capital leases as of December
31, 1995 are as follows:
MINIMUM ANNUAL OPERATING
CAPITAL LEASE LEASE
YEAR AMOUNT AMOUNT
- ------------------------------------------------------------------ -------------- ----------
1996.............................................................. $ 28,000 $ 336,000
1997.............................................................. 28,000 --
1998.............................................................. 27,000 --
1999.............................................................. 22,000 --
-------------- ----------
Total Lease Commitments........................................... 105,000 $ 336,000
----------
----------
Less amount representing interest................................. (20,000)
--------------
$ 85,000
--------------
--------------
The liability for this capitalized amount is classified in the Balance Sheet
as follows:
Current Portion.................................................... $ 17,000
Long-term Portion.................................................. 68,000
---------
Total.............................................................. $ 85,000
---------
---------
Rent expense for the years ended December 31, 1993, 1994 and 1995 were none,
$193,000 and $291,000, respectively.
NOTE 13--RELATED PARTY TRANSACTIONS:
Dr. Bell, the President and principal shareholder of the Company, co-founded
CALSTART (Notes 11 and 12) in 1992, served as its interim President, and for the
last three years has served on CALSTART's Board of Directors and is a member of
its Executive Committee.
The Company leased space from CALSTART from June 1992 until April 1994 at no
charge, at which time the Company moved to its current facility. In December
1995, the Company signed a 13 month lease with CALSTART for a 24,000 square foot
manufacturing and office facility located in Alameda, California for an advance
payment of $450,000 and $14,000 per month (Note 12).
As of December 31, 1995, the Company owes $150,000 to CALSTART related to
the lease, and CALSTART owes to the Company $135,000 relating to amounts
withheld from payments made by CALSTART under several grant programs which will
be paid to the Company upon completion of the respective grant programs.
F-16
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 14--SUBSEQUENT EVENTS:
BRIDGE FINANCING
In October 1996, the Company completed a private placement (the "Bridge
Financing") of 60 bridge units (each a "Bridge Unit"), each consisting of one
$47,500 10% unsecured promissory note made by the Company (each a "Bridge Note")
and one $2,500 10% convertible subordinated debenture (each a "Bridge
Debenture"). The Bridge Debentures are due October 31, 1997 and will, upon
successful completion of a public offering involving warrants to purchase Class
A Common Stock, automatically convert into 27,000 warrants to purchase Class A
Common Stock per Bridge Debenture at approximately 135% of the proposed public
offering price for the Class A Common Stock. The holders of such warrants will
not be able to exercise the warrants until one year after the effective date of
the proposed public offering. The Bridge Notes are due at the earlier of the
completion of the public offering or one year from the date of issuance. The net
proceeds to the Company from the Bridge Financing were approximately $2,500,000,
net of issuance costs of $500,000.
BANK LINE OF CREDIT
During the third quarter of 1996, the Company's line of credit with a bank
(Note 6) was extended to October 31, 1996. It has since been extended to
December 31, 1996. At September 30, 1996, the Company was in violation of
certain financial and other covenants contained in the loan agreement. However,
the bank has agreed to waive certain of these violations and to forbear until
December 31, 1996 from exercising its rights and remedies with respect to all
others.
INDISPENSIBLE FINANCING
During 1996, the Company has incurred significant losses on its major
electric vehicle development contract, is in default of its bank line of credit
agreement, and has entered into a Bridge Financing agreement whereby the
borrowings under the agreement are due in October 1997. The Company will need to
obtain additional financing to repay its debt and fund continued operations. The
Company is presently attempting to complete a public offering of its common
stock. The outcome of such efforts cannot be assured.
NOTE 15--SUBSEQUENT EVENT (UNAUDITED):
During the nine months ended September 30, 1996, the Company experienced
significant cost overruns on the major electric vehicle development contract
(Note 10) resulting from unanticipated design and development difficulties and
delays in the completion of the contract. Accordingly, the Company recorded a
charge to operations of approximately $1,625,000 during the nine months ended
September 30, 1996 for the ultimate estimated loss at completion of the
contract.
F-17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES
IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
PAGE
-----
Available Information.......................... 2
Prospectus Summary............................. 3
Risk Factors................................... 7
Use of Proceeds................................ 20
Dilution....................................... 21
Price Range of Common Stock and Dividends...... 23
Capitalization................................. 24
Selected Financial Data........................ 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 27
Business....................................... 32
Management..................................... 42
Certain Transactions........................... 44
Principal Shareholders......................... 45
Subsequent Offering............................ 48
Description of Securities...................... 49
Shares Eligible for Future Sale................ 52
Underwriting................................... 54
Legal Matters.................................. 56
Experts........................................ 56
Incorporation of Certain Information by
Reference..................................... 56
Index to Financial Statements.................. F-1
AMERIGON
INCORPORATED
15,000 UNITS
EACH CONSISTING OF A MINIMUM OF 175
AND A MAXIMUM OF 240 SHARES OF
CLASS A COMMON STOCK AND AN
EQUAL NUMBER OF CLASS A WARRANTS
---------------------
PROSPECTUS
---------------------
D.H. BLAIR INVESTMENT
BANKING CORP.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the Offering, other than underwriting
commissions and discounts, are as follows:
SEC registration fee.......................................... $13,488.64
NASD filing fee............................................... 4,951.25
NASDAQ fee.................................................... 8,500.00
*Printing and engraving expenses............................... *
*Accounting fees and expenses................................ . *
*Legal fees and expenses....................................... *
*Blue Sky filing fees and expenses............................. *
*Transfer Agent's fees and expenses............................ *
*Underwriter's nonaccountable expense allowance................ 450,000.00
*Miscellaneous expenses........................................ *
----------
*Total..................................................... $ *
----------
----------
- ------------------------
* To be supplied by Amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation and Bylaws of the Company require the Company
to indemnify its officers and directors to the fullest extent permitted by
Section 317 of the California General Corporation Law and applicable law.
Section 317 of the California General Corporation Law makes provision for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Reference is also made to those
provisions of the Underwriting Agreement filed herewith as Exhibit 1.1 and to
the form of indemnity agreement filed herewith as Exhibit 10.8 indemnifying
officers and directors of the Company against certain liabilities.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
1.1 Form of Underwriting Agreement
3.1.1 Amended and Restated Articles of Incorporation (the "Articles") of the Company(1)
3.1.2 Certificate of Amendment of Articles filed with the California Secretary of State on December 5, 1996.
3.2 Bylaws of the Company as amended to date(1)
4.1 Form of Warrant Agreement to be entered into among the Company, the Underwriter and U.S. Stock Transfer
Corporation as Warrant Agent
4.2 Form of Warrant Certificate for Class A Warrant
4.3 Form of Specimen Certificate of Company's Class A Common Stock(1)
4.4 Escrow Agreement among the Company, U.S. Stock Transfer Corporation and the shareholders named
therein(1)
5.1 Opinion of O'Melveny & Myers LLP regarding legality of securities being registered.*
II-1
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
10.1 1993 Stock Option Plan, together with Form of Incentive Stock Option Agreement and Nonqualified Stock
Option Agreement.(1)
10.2 Promissory Note Payable from the Company to Lon E. Bell dated September 9, 1996.
10.3 Form of Underwriter's Unit Purchase Option
10.4 Stock Option Agreement, effective March 31, 1993, between Lon E. Bell and Joshua Newman.(1)
10.5 Stock Option Agreement, effective August 9, 1995, between Lon E. Bell and R. John Hamman, Jr.
10.6.1 Stock Option Agreement ("Bell Stock Option Agreement"), effective May 13, 1993, between Lon E. Bell and
Roy A. Anderson.
10.6.2 List of omitted Bell Stock Option Agreements with Company directors.
10.7.1 Standard Sublease (the "Monrovia Lease"), dated February 14, 1994, between the Company and
Environmental Systems Group of Joy Technologies, Inc. ("Joy") (formerly Joy Manufacturing Company)
for facilities located in Monrovia, California.(2)
10.7.2 Letter dated February 7, 1996 from the Company to Joy extending the term of the Monrovia Lease to
February 14, 1997.
10.7.3 Letter dated December 3, 1996 from the Company to McDermott, Inc., successor to Joy, extending the term
of the Monrovia Lease to July 31, 1997.
10.8 Form of Indemnity Agreement between the Company and each of its officers and directors.(1)
10.9 Product Adaptation and Supply Contract, dated as of November 25, 1994, by and between the Company and a
party the identity of which is the subject of a request by the Company for confidential treatment.**
10.10 Settlement and License Agreement, dated as of May 10, 1996, by and between the Company, Audio
Navigation Systems, LLC, Alcom Engineering Corporation and Audio Navigation Systems, Inc., together
with Addendum thereto dated June 12, 1996.
10.11 License Agreement, dated as of January 20, 1994, by and between the Company and the Regents of the
University of California, together with a letter from the Regents to the Company dated September 19,
1996 relating thereto.**
10.12 Option and License Agreement dated as of November 2, 1992 between the Company and Feher Design, Inc.(1)
10.13 License Agreement, dated as of October 19, 1993, by and between the Company and Lernout & Hauspie
Speech Products, N.V., as amended.
10.14 License Agreement, dated as of March 15, 1995, by and between the Company and Navigation Technologies
Corporation.
10.15 Shareholders Agreement, dated May 13, 1993, by and among the Company and the shareholders named
therein.(1)
10.16 Running Chassis Program Management Agreement between the Company and CALSTART dated September 8,
1993.(2)
10.17 Thermoelectric Air Conditioning System Program Contract between the Company and the South Coast Air
Quality Management District dated May 4, 1995.(3)
10.18 Thermoelectric Heating and Cooling for Electric Vehicles Program Contract between the Company and the
State of California (Energy Resources and Development Commission) dated May 12, 1994.(3)
10.19 Agreement for the Multi-Year Electric Vehicle Running Chassis Program between the Company and CALSTART
dated May 31, 1994.(3)
10.20 Modification No. 001 of Participation Agreement between the Company and CALSTART, dated October 9,
1995.(4)
II-2
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
10.21 Agreement for the Development of an Agile Assembly Line For the Production of Electric Vehicles and
Components between the Company and CALSTART, Inc., dated November 9, 1995.(4)
10.22.1 Security and Loan Agreement, dated November 20, 1995, between the Company and Imperial Bank (the
"Imperial Bank Agreement").(5)
10.22.2 Credit Terms and Conditions, dated November 20, 1995, relating to the Imperial Bank Agreement.(5)
10.22.3 Modification to Security and Loan Agreement, effective as of June 26, 1996, entered into between the
Company and Imperial Bank.
10.22.4 Letter from Imperial Bank to the Company dated December 4, 1996 extending the term of the Company's
credit line under the Imperial Bank Agreement until December 31, 1996.
10.24 Stock Purchase Agreement and Registration Rights Agreement between the Company and Fidelity Copernicus
Fund, L.P. and Fidelity Galileo Fund, L.P., dated December 29, 1995.(6)
10.25 Stock Purchase Agreement and Registration Rights Agreement between the Company and HBI Financial Inc.,
dated December 29, 1995.(6)
10.26 Amerigon Client Contract, dated April 1, 1996, between the Company and Technology Strategies &
Alliances.
10.27 Agreement, dated as of June 1, 1996, by and between the Company and the International Association of
Machinists and Aerospace Workers, District Lodge 725.
21.1 List of Subsidiaries
23.1 Consent of Price Waterhouse LLP
23.2 Consent of O'Melveny & Myers LLP (contained in Exhibit 5.1)*
24.1 Power of Attorney (see first signature page of this Registration Statement on Form S-2)
- ------------------------
* To be filed by amendment.
** Confidential treatment has been requested for a portion of this Exhibit.
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form SB-2, File No. 33-61702-LA, and incorporated by reference.
(2) Previously filed as an exhibit to the Company's Annual Report on Form 10-KSB
for the fiscal year ending December 31, 1993 and incorporated by reference.
(3) Previously filed as an exhibit to the Company's Annual Report on Form 10-KSB
for the fiscal year ending December 31, 1994 and incorporated by reference.
(4) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ending December 31, 1995 and incorporated by reference.
(5) Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed December 21, 1995 and incorporated by reference.
(6) Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed January 5, 1996 and incorporated by reference.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to its Articles of Incorporation or Bylaws and the
California General Corporations Law, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
II-3
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Monrovia, State of California, on December 5, 1996.
AMERIGON INCORPORATED
By: /s/ LON E. BELL
-----------------------------------------
Lon E. Bell, Ph.D.
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Lon E. Bell and R. John Hamman, Jr., his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement (or any other registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933), and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or either of them or their or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive
/s/ LON E. BELL Officer and Chairman of
- ------------------------------ the Board (Principal December 5, 1996
Lon E. Bell Executive Officer)
Vice President of
/s/ JOSHUA M. NEWMAN Corporate Development
- ------------------------------ and Planning, Secretary December 5, 1996
Joshua M. Newman and Director
Vice President of Finance
/s/ R. JOHN HAMMAN, JR. and Chief Financial
- ------------------------------ Officer (Principal December 5, 1996
R. John Hamman, Jr. Financial and Accounting
Officer)
II-5
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
/s/ ROY A. ANDERSON
- ------------------------------ Director December 5, 1996
Roy A. Anderson
/s/ ROGER E. BATZEL
- ------------------------------ Director December 5, 1996
Roger E. Batzel
/s/ JOHN W. CLARK
- ------------------------------ Director December 5, 1996
John W. Clark
/s/ A. STEPHENS HUTCHCRAFT,
JR.
- ------------------------------ Director December 5, 1996
A. Stephens Hutchcraft, Jr.
/s/ MICHAEL R. PEEVEY
- ------------------------------ Director December 5, 1996
Michael R. Peevey
/s/ NORMAN R. PROUTY, JR.
- ------------------------------ Director December 5, 1996
Norman R. Prouty, Jr.
II-6
15,000 Units
(each Unit consisting of (i) __ shares of Class A Class A Common Stock,
no par value, and (ii) ____ redeemable Class A Warrants to purchase
one share of Class A Common Stock at an exercise price of $___
from the date of issuance through __________, 2001.)
AMERIGON INCORPORATED
UNDERWRITING AGREEMENT
____________, 1996
D.H. Blair Investment Banking Corp.
44 Wall Street
New York, New York 10005
AMERIGON INCORPORATED, a California corporation (the "Company"),
proposes to issue and sell to D.H. Blair Investment Banking Corp. ("you" or the
"Underwriter") pursuant to this Underwriting Agreement (the "Agreement") an
aggregate of 15,000 Units, each unit being hereinafter referred to as a "Unit"
and consisting of (i) _____ shares of Class A Common Stock, no par value per
share ("Shares"), and (ii) ______ redeemable Class A Warrants ("Class A
Warrants"). Each Class A Warrant is exercisable from the date of issuance
through ____________, 2001, at an exercise price of $_____ to purchase one share
of Class A Common Stock. The Class A Warrants may be referred to herein as the
"Warrants." The Warrants are subject to redemption in certain instances
commencing one year from the date of this Agreement. In addition, the Company
proposes to grant to the Underwriter the option referred to in Section 2(b) to
purchase all or any part of an aggregate of 2,250 additional Units. Unless the
context otherwise indicates, the term "Units" shall include the 2,250 additional
Units referred to above.
The aggregate of 15,000 Units to be sold by the Company, together with
all or any part of the 2,250 Units which the Underwriter has the option to
purchase, and the Shares and the Warrants comprising such Units, are herein
called the "Units." The Class A Common Stock of the Company to be outstanding
after giving effect to the sale of the Shares is herein called the "Class A
Common Stock." The Shares and Warrants included in the Units (including the
Units which the Underwriter has the option to purchase as described in Section
11 hereof) are herein collectively called the "Securities."
You have advised the Company that you desire to purchase the Units.
The Company confirms the agreement made by it with respect to the purchase of
the Units by you, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) A registration statement (File No. 333-____ ) on Form S-2
relating to the public offering of the Units, including a form of prospectus
subject to completion, copies of which have heretofore been delivered to you,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission under the Act,
and one or more amendments to such registration statement may have been so
filed. After the execution of this Agreement, the Company will file with the
Commission either (i) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
either (A) if the Company relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Units that shall identify the Preliminary
Prospectus (as hereinafter defined) that it supplements containing such
information as is required or permitted by Rules 434, 430A and 424(b) under the
Act or (B) if the Company does not rely on Rule 434 under the Act, a prospectus
in the form most recently included in an amendment to such registration
statement (or, if no such amendment shall have been filed, in such registration
statement), with such changes or insertions as are required by Rule 430A under
the Act or permitted by Rule 424(b) under the Act, and in the case of either
clause (i)(A) or (i)(B) of this sentence, as have been provided to and approved
by you prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the Commission
to be effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been furnished to
and approved by you prior to the execution of this Agreement.
As used in this Agreement, the term "Registration Statement" means
such registration statement, as amended at the time when it was or is declared
effective, including all exhibits thereto and including any information omitted
therefrom pursuant to Rule 430A under the Act and included in the Prospectus (as
hereinafter defined); the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or any amendment
thereto (including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment thereto at the time it was or is
declared effective); the term "Prospectus" means (A) if the Company relies on
Rule 434 under the Act, the Term Sheet relating to the Units that is first filed
pursuant to Rule 424(b)(7) under the Act, together with the Preliminary
Prospectus identified therein that such Term Sheet supplements, (B) if the
Company does not rely on Rule 434 under the Act, the prospectus first filed with
the Commission pursuant to Rule 424(b) under the Act or (C) if the Company does
not rely on Rule 434 under the Act and if no prospectus is required to be filed
pursuant to said Rule 424(b), such term means the prospectus included in the
Registration Statement; except that if such registration statement or prospectus
is amended or such prospectus is supplemented, after the effective date of such
registration statement and prior to the Option Closing Date (as hereinafter
defined), the terms "Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term "Prospectus"
shall include the prospectus as so
-2-
supplemented, or both, as the case may be; and the term "Term Sheet" means any
term sheet that satisfies the requirements of Rule 434 under the Act. Any
reference to the "date" of a Prospectus that includes a Term Sheet shall mean
the date of such Term Sheet.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time the
Registration Statement becomes effective and at all times subsequent thereto
up to and on the Closing Date (as hereinafter defined) or the Option Closing
Date, as the case may be, (i) the Registration Statement and Prospectus will
in all material respects conform to the requirements of the Act and the Rules
and Regulations; and (ii) neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
statements therein not misleading; provided, however, that the Company makes
no representations, warranties or agreements as to information contained in
or omitted from the Registration Statement or Prospectus in reliance upon,
and in conformity with, written information furnished to the Company by or on
behalf of the Underwriter specifically for use therein or in the preparation
thereof. It is understood that the statements set forth in the Prospectus on
page 2 with respect to stabilization, under the heading "Underwriting," under
the heading "Risk Factors -- Possible Adverse Effect on Liquidity of the
Company's Securities Due to the Investigation of D.H. Blair Investment
Banking Corp. and D.H. Blair & Co., Inc. by the Securities and Exchange
Commission," the first sentence under the heading "Risk Factors -- Adverse
Effect on Liquidity Associated with Possible Restrictions on Market-Making
Activities in the Company's Securities" and the identity of counsel to the
Underwriter under the heading "Legal Matters" constitute the only information
furnished in writing by or on behalf of the Underwriter for inclusion in the
Registration Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with full power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus and is
duly qualified to do business as a foreign corporation and is in good standing
in all other jurisdictions in which the nature of its business or the character
or location of its properties requires such qualification, except where failure
to be so qualified will not materially adversely affect the Company's business,
properties or financial condition, taken as a whole.
(d) The authorized, issued and outstanding capital stock of the
Company as of September 30, 1996 is as set forth in the Prospectus under
"Capitalization;" the shares of issued and outstanding capital stock of the
Company set forth thereunder have been duly authorized, validly issued and are
fully paid and non-assessable; except as set forth in the Prospectus, no
options, warrants, or other rights to purchase, agreements or other obligations
to issue, or agreements or other rights to convert any obligation into, any
shares of capital stock of the Company have been granted or entered into by the
Company; and the capital stock conforms to all statements relating thereto
contained in the Registration Statement and Prospectus.
(e) The Units and the Shares are duly authorized, and when
issued and delivered against payment therefor pursuant to this Agreement, will
be duly authorized, validly
-3-
issued, fully paid and nonassessable and free of preemptive rights of any
security holder of the Company. Neither the filing of the Registration
Statement nor the offering or sale of the Units as contemplated in this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Class A Common
Stock, except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued and delivered
against payment therefor pursuant to this Agreement, will have been duly
executed, issued and delivered and will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms, except as
may be limited by bankruptcy, insolvency, moratorium or similar laws relating to
or affecting creditors' rights generally and by general principles of equity,
and entitled to the benefits provided by the warrant agreement pursuant to which
such Warrants are to be issued (the "Warrant Agreement"), which will be
substantially in the form filed as an exhibit to the Registration Statement.
The shares of Class A Common Stock issuable upon exercise of the Warrants have
been reserved for issuance upon the exercise of the Warrants and when issued in
accordance with the terms of the Warrants and the Warrant Agreement upon payment
of the exercise price therefor, will be duly and validly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights and no
personal liability will attach to the ownership thereof. The Warrant Agreement
has been duly authorized and, when executed and delivered by the Company
pursuant to this Agreement, will have been duly executed and delivered by the
Company and will constitute the valid and legally binding obligation of the
Company enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, moratorium or similar laws relating to or affecting
creditors' rights generally and by general principles of equity. The Warrants
and the Warrant Agreement conform to the respective descriptions thereof in the
Registration Statement and Prospectus.
The Shares and the Warrants contained in the Units subject to the Unit
Purchase Option have been duly authorized and, when duly issued and delivered
upon payment of the exercise price therefor, such Warrants will constitute valid
and legally binding obligations of the Company enforceable in accordance with
their terms, except as may be limited by bankruptcy, insolvency, moratorium or
similar laws relating to or affecting creditors' rights generally and by general
principles of equity, and entitled to the benefits provided by the Warrant
Agreement. The Shares included in the Unit Purchase Option (and the shares of
Class A Common Stock issuable upon exercise of such Warrants) when issued and
sold in accordance with the terms of the Unit Purchase Option or the Warrants,
as the case may be, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights and no personal liability will
attach to the ownership thereof.
(f) This Agreement, the Unit Purchase Option and the agreement
with you regarding mergers, acquisitions, joint ventures and certain other
forms of transactions, in the form previously delivered to the Company by you
(the "M/A Agreement") have been duly and validly authorized, executed and
delivered by the Company. The Company has corporate power and authority to
authorize, issue and sell the Units to be sold by it hereunder on the terms
and conditions set forth herein, and no consent, approval, authorization or
other order of any governmental authority is required in connection with such
authorization, execution and
-4-
delivery or with the authorization, issue and sale of the Units or the Unit
Purchase Option, except such as may be required under the Act or state
securities laws.
(g) Except as described in the Prospectus, the Company is not in
violation, breach or default of or under, and consummation of the transactions
herein contemplated and the fulfillment of the terms of this Agreement will not
conflict with, or result in a material breach or violation of, any of the terms
or provisions of, or constitute a material default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets of the Company is subject, nor will
such action result in any violation of the provisions of the articles of
incorporation or the by-laws of the Company, as amended, or any material
violation of any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental body
having jurisdiction over the Company.
(h) Except as described in the Prospectus, the Company has good
and marketable title to all properties and assets described in the Prospectus as
owned by it, free and clear of all liens, charges, encumbrances or restrictions,
except such as are not materially significant or important in relation to its
business, all of the material leases and subleases under which the Company is
the lessor or sublessor of properties or assets or under which the Company holds
properties or assets as lessee or sublessee as described in the Prospectus are
in full force and effect, and, except as described in the Prospectus, the
Company is not in default in any material respect with respect to any of the
terms or provisions of any of such leases or subleases, and no claim has been
asserted by anyone adverse to rights of the Company as lessor, sublessor, lessee
or sublessee under any of the leases or subleases mentioned above, or affecting
or questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus; and the Company owns or leases all
such properties described in the Prospectus as are necessary to its operations
as now conducted and, except as otherwise stated in the Prospectus, as proposed
to be conducted as set forth in the Prospectus.
(i) Price Waterhouse LLP, who have given their reports on
certain financial statements filed and to be filed with the Commission as a part
of the Registration Statement, which are incorporated in the Prospectus, are
with respect to the Company, independent public accountants as required by the
Act and the Rules and Regulations.
(j) The financial statements, together with related notes, set
forth in the Prospectus (or if the Prospectus is not in existence, the most
recent Preliminary Prospectus) present fairly in all material respects the
financial position and results of operations and changes in cash flow of the
Company on the basis stated in the Registration Statement, at the respective
dates and for the respective periods to which they apply. Said statements and
related notes have been prepared in accordance with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved, except for the absence of year-end adjustments
-5-
to interim statements. The information set forth under the captions "Dilution,"
"Capitalization," and "Selected Financial Data" in the Prospectus fairly
present, on the basis stated in the Prospectus, in all material respects the
information included therein.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), except as
contemplated thereby or in connection with the transactions contemplated by this
Agreement, the Company has not incurred any liability or obligation, direct or
contingent, not in the ordinary course of business, or entered into any
transaction not in the ordinary course of business, which is material to the
business of the Company, and there has not been any change in the capital stock
of, or any incurrence of short-term or long-term debt by, the Company or any
issuance of options, warrants or other rights to purchase the capital stock of
the Company or any adverse change or any development involving, so far as the
Company can now reasonably foresee a prospective adverse change in the condition
(financial or other), net worth, results of operations, business, key personnel
or properties of it which would be materially adverse to the business or
financial condition of the Company, taken as a whole, and the Company has not
become a party to, and neither the business nor the property of the Company has
become the subject of, any material litigation whether or not in the ordinary
course of business.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company, taken as a whole, nor are there any such actions,
suits or proceedings related to environmental matters or related to
discrimination on the basis of age, sex, religion or race, and no labor disputes
involving the employees of the Company exist or, to the knowledge of the
Company, are threatened which might be expected to materially adversely affect
the conduct of the business, property or operations or the financial condition
or results of operations of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid or is contesting in good faith all taxes shown as due thereon; and
there is no tax deficiency which has been or to the knowledge of the Company is
reasonably likely to be asserted against the Company.
(n) Except as described in the Prospectus, the Company has
sufficient licenses, permits and other governmental authorizations currently
required for the conduct of its business or the ownership of its properties as
described in the Prospectus and is in all material respects complying therewith
and owns or possesses adequate rights to use all material patents, patent
applications, trademarks, service marks, trade-names, trademark registrations,
service mark registrations, copyrights and licenses necessary for the conduct of
such business and has not received any notice of conflict with the asserted
rights of others in respect thereof. To the
-6-
knowledge of the Company, none of the activities or business of the Company are
in violation of, or cause the Company to violate, any law, rule, regulation or
order of the United States, any state, county or locality, or of any agency or
body of the United States or of any state, county or locality, the violation of
which would have a material adverse impact upon the condition (financial or
otherwise), business, property, prospective results of operations, or net worth
of the Company, taken as a whole.
(o) The Company has not, directly or indirectly, at any time
(i) made any contributions to any candidate for political office, or failed to
disclose fully any such contribution in violation of law or (ii) made any
payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(p) On the Closing Dates (hereinafter defined) all transfer or
other taxes (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction), if any, which are required to be paid in
connection with the sale and transfer of the Units to the Underwriter hereunder
will have been fully paid or provided for by the Company and all laws imposing
such taxes will have been fully complied with.
(q) All contracts and other documents of the Company which are,
under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Class A Common Stock to facilitate
the sale or resale of the Units hereby.
(s) Except as set forth in Schedule 1(s) hereto, the Company has
no subsidiaries and except as described or referenced in the Prospectus, the
Company does not own, directly or indirectly, any capital stock or other equity
ownership or proprietary interests in any other corporation, association, trust,
partnership, joint venture or other entity. Schedule 1(s) sets forth the
jurisdiction of incorporation of each subsidiary (the "Subsidiaries") of the
Company and the amount and percentage of capital stock of such subsidiary owned
by the Company, which capital stock is owned by the Company, except as described
in the Prospectus, free and clear of all liens, security interests and
encumbrances.
(t) The Company has not entered into any agreement pursuant to
which any person is entitled either directly or indirectly to compensation from
the Company for services as a finder in connection with the proposed public
offering.
-7-
(u) Except as previously disclosed in writing by the Company to
the Underwriter, to the Company's knowledge after due inquiry, no officer,
director, 5% shareholder or 1% shareholder of the Company has any affiliation or
association with any member of the National Association of Securities Dealers
Inc. ("NASD").
(v) The Company is not, and upon receipt of the proceeds from
the sale of the Units will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
(w) The Company has not distributed and will not distribute
prior to the First Closing Date any offering material in connection with the
offering and sale of the Units other than the Preliminary Prospectus,
Prospectus, the Registration Statement or the other materials permitted by the
Act, if any.
(x) The conditions for use of Form S-2, as set forth in the
General Instructions thereto, have been satisfied.
(y) There are no business relationships or related-party
transactions of the nature described in Item 404 of Regulation S-K involving the
Company, the Subsidiaries and any person described in such Item that are
required to be disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and that have not been so
disclosed.
[(z) The Company has complied with all provisions of Section
517.075 Florida Statutes relating to doing business with the government of Cuba
or with any person or affiliate located in Cuba.]
2. PURCHASE, DELIVERY AND SALE OF THE UNITS.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties, and agreements herein
contained, the Company agrees to issue and sell to the Underwriter, and the
Underwriter agrees to buy from the Company at $______ per Unit, at the place and
time hereinafter specified, 15,000 Units (the "First Units").
Delivery of the First Units against payment therefor shall take
place at the offices of D.H. Blair Investment Banking Corp., 44 Wall Street, New
York, N.Y. (or at such other place as may be designated by agreement between
you and the Company) at 10:00 a.m., New York time, on ___________, 1996 or at
such later time and date as you and the Company may agree, such time and date of
payment and delivery for the First Units being herein called the "First Closing
Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter to
purchase all or any part of an aggregate
-8-
of an additional 2,250 Units at the same price per Unit as the Underwriter shall
pay for the First Units being sold pursuant to the provisions of subsection (a)
of this Section 2 (such additional Units being referred to herein as the "Option
Units"). This option may be exercised within 45 days after the effective date
of the Registration Statement upon notice by the Underwriter to the Company
advising as to the amount of Option Units as to which the option is being
exercised, the names and denominations in which the certificates for such Option
Units are to be registered and the time and date when such certificates are to
be delivered. Such time and date shall be designated by the Underwriter but
shall not be earlier than four nor later than ten full business days after the
exercise of said option, nor in any event prior to the First Closing Date, and
such time and date is referred to herein as the "Option Closing Date." Delivery
of the Option Units against payment therefor shall take place at the offices of
D.H. Blair Investment Banking Corp., 44 Wall Street, New York, N.Y. The Option
granted hereunder may be exercised only to cover overallotments in the sale by
the Underwriter of First Units referred to in subsection (a) above. In the
event the Company declares or pays a dividend or distribution on its Class A
Common Stock, whether in the form of cash, shares of Class A Common Stock or any
other consideration, prior to the Option Closing Date, such dividend or
distribution shall also be paid on the Option Units on the Option Closing Date.
(c) The Company will make the certificates for the securities
comprising the Units to be purchased by the Underwriter hereunder available to
you for checking one full business day prior to the First Closing Date or the
Option Closing Date (which are collectively referred to herein as the "Closing
Dates"). The certificates shall be in such names and denominations as you may
request, at least two full business days prior to the Closing Dates. Time shall
be of the essence and delivery at the time and place specified in this Agreement
is a further condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Securities
comprising the Units to be purchased by the Underwriter hereunder will be
delivered by the Company to you against payment of the purchase price, by
certified or bank cashier's checks in New York Clearing House funds, payable to
the order of the Company.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Units pursuant to the
provisions of subsection (b) above, payment for such Units shall be made to or
upon the order of the Company by certified or bank cashier's checks payable in
New York Clearing House funds at the offices of D.H. Blair Investment Banking
Corp., at the time and date of delivery of such Units as required by the
provisions of subsection (b) above, against receipt of the certificates for the
Securities comprising the Option Units by the Underwriter registered in such
names and in such denominations as the Underwriter may request.
It is understood that you propose to offer the Units to be
purchased hereunder to the public upon the terms and conditions set forth in the
Registration Statement, after the Registration Statement becomes effective.
-9-
3. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible. If
required, the Company will file the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act. Upon notification from the Commission that the
Registration Statement has become effective, the Company will so advise you and
will not at any time, whether before or after the effective date, file the
Prospectus, Term Sheet or any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been advised
and furnished with a copy or to which you or your counsel shall have objected in
writing or which is not in compliance with the Act and the Rules and
Regulations. At any time prior to the later of (A) the completion by the
Underwriter of the distribution of the Units contemplated hereby (but in no
event more than nine months after the date on which the Registration Statement
shall have become or been declared effective) and (B) 25 days after the date on
which the Registration Statement shall have become or been declared effective,
the Company will prepare and file with the Commission, promptly upon your
request, any amendments or supplements to the Registration Statement or
Prospectus which, in your reasonable opinion, may be necessary or advisable in
connection with the distribution of the Units.
As soon as the Company is advised thereof, the Company will
advise you, and confirm the advice in writing, of the receipt of any comments of
the Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or any
amended Prospectus, of any request made by the Commission for amendment of the
Registration Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any state
or regulatory body of any stop order or other order or threat thereof suspending
the effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Units for offering in any jurisdiction, or of the
institution of any proceedings for any of such purposes, and will use its best
efforts to prevent the issuance of any such order, and, if issued, to obtain as
soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company
authorizes the Underwriter and dealers to use the Prospectus in connection with
the sale of the Units for such period as in the opinion of counsel to the
Underwriter the use thereof is required to comply with the applicable provisions
of the Act and the Rules and Regulations. In case of the happening at any time
within such period as a Prospectus is required under the Act to be delivered in
connection with sales by an underwriter or dealer of any event of which the
Company has knowledge and which materially affects the Company or the securities
of the Company, or which in the opinion of counsel for the Company or counsel
for the Underwriter should be set forth in an amendment to
-10-
the Registration Statement or a supplement to the Prospectus in order to make
the statements therein not then misleading in light of the circumstances
existing at the time the Prospectus is required to be delivered to a purchaser
of the Units, or in case it shall be necessary to amend or supplement the
Prospectus to comply with law or with the Rules and Regulations, the Company
will notify you promptly and forthwith prepare and furnish to you copies of such
amended Prospectus or of such supplement to be attached to the Prospectus, in
such quantities as you may reasonably request, in order that the Prospectus, as
so amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which they
are made, not misleading. The preparation and furnishing of any such amendment
or supplement to the Registration Statement or amended Prospectus or supplement
to be attached to the Prospectus shall be without expense to the Underwriter,
except that in case the Underwriter is required, in connection with the sale of
the Units to deliver a Prospectus nine months or more after the effective date
of the Registration Statement, the Company will upon request of and at the
expense of the Underwriter, amend or supplement the Registration Statement and
Prospectus and furnish the Underwriter with reasonable quantities of
prospectuses complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and Regulations
and the Securities Exchange Act of 1934 and the rules and regulations thereunder
in connection with the offering and issuance of the Units.
(b) The Company will use its best efforts to qualify to register
the Units for sale under the securities or "blue sky" laws of such jurisdictions
as the Underwriter may designate and will make such applications and furnish
such information as may be required for that purpose and to comply with such
laws, provided the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent of service
of process in any jurisdiction in any action other than one arising out of the
offering or sale of the Units. The Company will, from time to time, prepare and
file such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriter may reasonably
request.
(c) If the sale of the Units provided for herein is not
consummated for any reason caused by the Company, the Company shall pay all
costs and expenses incident to the performance of the Company's obligations
hereunder, as set forth in Section 8.
(d) The Company will use its best efforts, if requested by the
Underwriter, to obtain and keep current a listing in the Standard & Poors or
Moody's Industrial OTC Manual.
(e) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Securities Exchange Act of 1934, the
Company, at its expense, will furnish to its shareholders an annual report
(including financial statements audited by independent public accountants), in
reasonable detail and at its expense, will furnish to you
-11-
during the period ending five (5) years from the date hereof, (i) as soon as
practicable after the end of each fiscal year, a balance sheet of the Company
and any of its subsidiaries as at the end of such fiscal year, together with
statements of income, surplus and cash flow of the Company and any subsidiaries
for such fiscal year, all in reasonable detail and accompanied by a copy of the
certificate or report thereon of independent accountants; (ii) as soon as
practicable after the end of each of the first three fiscal quarters of each
fiscal year, consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are available, a copy of all
reports (financial or other) mailed to security holders; (iv) as soon as they
are available, a copy of all non-confidential reports and financial statements
furnished to or filed with the Commission or any securities exchange or
automated quotation system on which any class of securities of the Company is
listed; and (v) such other information as you may from time to time reasonably
request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above will
be on a consolidated basis to the extent the accounts of the Company and its
subsidiary or subsidiaries are consolidated in reports furnished to its
shareholders generally.
(g) The Company will deliver to you at or before the First
Closing Date at least one signed copy of the Registration Statement including
all financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to you such number of conformed copies of the
Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon the order of the Underwriter, from
time to time until the effective date of the Registration Statement, as many
copies of any Preliminary Prospectus filed with the Commission prior to the
effective date of the Registration Statement as the Underwriter may reasonably
request. The Company will deliver to the Underwriter on the effective date of
the Registration Statement and thereafter for so long as a Prospectus is
required to be delivered under the Act, from time to time, as many copies of the
Prospectus, in final form, or as thereafter amended or supplemented, as the
Underwriter may from time to time reasonably request. The Company, not later
than (i) 5:00 p.m., New York City time, on the date of determination of the
public offering price, if such determination occurred at or prior to 12:00 noon,
New York City time, on such date or (ii) 6:00 p.m., New York City time, on the
business day following the date of determination of the public offering price,
if such determination occurred after 12:00 noon, New York City time, on such
date, will deliver to the Underwriter, without charge, as many copies of the
Prospectus and any amendment or supplement thereto as the Underwriter may
reasonably request for purposes of confirming orders that are expected to settle
on the First Closing Date.
(h) The Company will make generally available to its security
holders and to the registered holders of its Warrants and deliver to you as soon
as it is practicable to do so but in no event later than 90 days after the end
of twelve months after its current fiscal quarter, an earnings statement (which
need not be audited) covering a period of at least 12
-12-
consecutive months beginning after the effective date of the Registration
Statement, which shall satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the
Units for the purposes set forth under "Use of Proceeds" in the Prospectus. The
Company shall not use any of the proceeds from the Offering to repay any
indebtedness of the Company, including but not limited to indebtedness to any
current executive officers, directors or principal shareholders of the Company;
provided, that a portion of the proceeds will be used to repay the Bridge Notes,
a portion of the proceeds may be used to repay bank debt and trade payables and,
upon the repayment in full and termination of the Company's Imperial Bank loan,
a portion of the proceeds may be used to repay loans from Lon E. Bell Ph.D. (not
to exceed $500,000) and to pay deferred wages to executive officers and founders
of the Company (up to a maximum of $75,000).
(j) The Company will, promptly upon your request, prepare and
file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action, which
in the reasonable opinion of Bachner, Tally, Polevoy & Misher LLP, counsel to
the Underwriter, may be reasonably necessary or advisable in connection with the
distribution of the Units, and will use its best efforts to cause the same to
become effective as promptly as possible.
(k) The Company will, prior to the Effective Date of the
Registration Statement, and at all times thereafter, have authorized and
reserved sufficient shares of Class A Common Stock issuable upon exercise of the
Warrants included in the Units, upon exercise of the Unit Purchase Option to be
issued to the Underwriter (including the Warrants included therein) and upon
exercise of the Warrants included in the Underwriter's Option Units.
(l) The Underwriter shall receive agreements from each officer
and director of the Company, each stockholder holding in excess of 5% of the
outstanding Common Stock (except for HBI Financial, The Copernicus Fund, L.P.
and The Galileo Fund, L.P.) and each other stockholder known by the Company to
hold in excess of 1% of the outstanding Common Stock to the effect that (i) such
stockholder shall not publicly sell, assign or transfer any of their securities
of the Company for a period of 13 months from the First Closing Date (other than
(A) bona fide gifts and transfers to trusts for estate planning purposes where
the transferee agrees to be bound by this provision and (B) the sale of shares
owned by Lon E. Bell, Ph.D. pursuant to the exercise, by the holders thereof, of
options on such shares previously granted by Dr. Bell); (ii) such stockholder
shall not exercise any preemptive rights which it might hold with respect to the
Offering; and (iii) such stockholder waives any registration rights it may have
with respect to the Offering and for a period of 13 months thereafter. In order
to enforce this covenant, the Company shall impose stop-transfer instructions
with respect to the shares owned by such shareholders until the end of such
period.
(m) Prior to completion of this offering, the Company will make
all filings required to obtain the listing of the Warrants on the Nasdaq
SmallCap Market or a listing
-13-
on such other market or exchange as the Underwriter consents to, and will effect
and use its best efforts to maintain such listing for at least five years from
the date of this Agreement.
(n) The Company and Lon E. Bell, Ph.D. represent that it or he
has not taken and agree that it or he will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result in the stabilization or manipulation of the price of
the Units, Shares or the Warrants or to facilitate the sale or resale of the
Securities.
(o) On the Closing Date and simultaneously with the delivery of
the Units, the Company shall execute and deliver to you the Unit Purchase
Option. The Unit Purchase Option will be substantially in the form of the
Underwriter's Unit Purchase Option filed as an Exhibit to the Registration
Statement.
(p) During the 18 month period commencing on the date of this
Agreement, the Company will not, without the prior written consent of the
Underwriter, grant any options to employees to purchase shares of Class A Common
Stock at an exercise price less than the fair market value of the Class A Common
Stock on the date of grant. During the three year period from the First Closing
Date, the Company will not, without the prior written consent of the
Underwriter, offer or sell any of its securities pursuant to Regulation S under
the Act.
(q) Lon E. Bell, Ph.D. shall be the Chief Executive Officer,
President and Chairman of the Board and Joshua M. Newman shall be the Vice
President - Corporate Development and Planning of the Company on the Closing
Dates. Prior to completion of this offering, the Company will have obtained key
person life insurance on the lives of each of Dr. Bell and Mr. Newman in an
amount of not less than $2 million and will use its best efforts to maintain
such insurance for a minimum period of either three years from the Effective
Date of the Registration Statement or the respective terms of the employment
agreements between the Company and such officers, whichever period is longer.
For a period of thirteen months from the First Closing Date, the cash
compensation of the executive officers of the Company shall not be increased
from the cash compensation levels disclosed in the Prospectus.
(r) On the Closing Date, and simultaneously with the delivery of
the Units, the Company shall execute and deliver to you the M/A Agreement.
(s) So long as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement to become effective in compliance with the Act and without any lapse
of time between the effectiveness of any such post-effective amendments and
cause a copy of each Prospectus, as then amended, to be delivered to each holder
of record of a Warrant and to furnish to you and each dealer as many copies of
each such Prospectus as you or such dealer may reasonably request. The Company
shall not call for redemption any of the Warrants unless a registration
statement covering the
-14-
securities underlying the Warrants has been declared effective by the Commission
and remains current at least until the date fixed for redemption. In addition,
for so long as any Warrant is outstanding, the Company will promptly notify the
Underwriter of any material change in the business, financial condition or
prospects of the Company; provided, that the Company shall not be required to
disclose confidential information regarding any contemplated transactions.
(t) Upon the exercise of any Warrant or Warrants (except for
Warrants included in the Unit Purchase Option) after _________, 199_, the
Company will pay D.H. Blair Investment Banking Corp. a fee of 5% of the
aggregate exercise price of the Warrants, of which a portion may be reallowed
to the dealer who solicited the exercise (which may also be D.H. Blair
Investment Banking Corp.) if (i) the market price of the Company's Common
Stock is greater than the exercise price of the Warrants on the date of
exercise; (ii) the exercise of the Warrant was solicited by a member of the
National Association of Securities Dealers, Inc., (iii) the Warrant is not
held in a discretionary account; (iv) the disclosure of compensation
arrangements has been made in documents provided to customers, both as part
of the original offering and at the time of exercise, and (v) the
solicitation of the Warrant was not in violation of Rule 10b-6 promulgated
under the Securities Exchange Act of 1934, as amended. The Company agrees
not to solicit the exercise of any Warrants other than through D.H. Blair
Investment Banking Corp. and will not authorize any other dealer to engage in
such solicitation without the prior written consent of D.H. Blair Investment
Banking Corp.
(u) For a period of five (5) years from the Effective Date of
the Registration Statement, the Company (i) at its expense, shall cause its
regularly engaged independent certified public accountants to review (but not
audit) the Company's financial statements for each of the first three (3) fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's 10-Q quarterly report and the mailing of quarterly
financial information to shareholders and (ii) shall not change its accounting
firm to other than a "Big Six" firm without the prior written consent of the
Chairman or the President of the Underwriter, which consent shall not be
unreasonably withheld or delayed.
(v) As promptly as practicable after the Closing Date, the
Company will prepare, at its own expense, hard cover "bound volumes" relating to
the offering, and will distribute at least four of such volumes to the
individuals designated by the Underwriter or counsel to the Underwriter.
(w) Prior to the First Closing Date, (i) the Company will have
at least two (2) non-affiliated members on its Board of Directors; and (ii) the
Company shall engage a public relations firm reasonably acceptable to the
Underwriter.
(x) For a period of five years from the First Closing Date, D.H.
Blair Investment Banking Corp. shall have the right, but not the obligation, to
designate one director of the Board of Directors of the Company.
(y) The Company shall, for a period of six years after date of
this Agreement, submit such reports to the Secretary of the Treasury and to
shareholders as such Secretary may require pursuant to Section 1202 of the
Internal Revenue Code, as amended, or
-15-
regulations promulgated thereunder, in order for the Company to qualify as a
"small business" so that shareholders may realize special tax treatment with
respect to their investment in the Company.
(z) Within five (5) business days after the Effective Date,
the Company will file with the Commission, and use its best efforts to cause
to become effective, a registration statement on Form S-3 relating to the
Selling Securityholder Securities (as defined in the Prospectus).
4. CONDITIONS TO UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase and pay for the Units which it has agreed to purchase
hereunder, are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations and warranties of the
Company herein and to the performance by the Company of its obligations
hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M., New York time,
on the date on which the amendment to the registration statement originally
filed with respect to the Units or to the Registration Statement, as the case
may be, containing information regarding the public offering price of the Units
has been filed with the Commission, or such later time and date as shall have
been agreed to by you; if required, the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto shall have
been filed with the Commission in the manner and within the time period required
by Rule 434 and 424(b) under the Act; on or prior to the Closing Dates no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that or a similar purpose shall have been
instituted or shall be pending or, to your knowledge or to the knowledge of the
Company, shall be contemplated by the Commission; any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Bachner, Tally, Polevoy & Misher LLP, counsel to the
Underwriter;
(b) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of O'Melveny & Myers LLP, counsel
for the Company, in form and substance satisfactory to counsel for the
Underwriter.
In rendering such opinion, such counsel may rely upon the
Company's representations and warranties in this Agreement and upon certificates
of any officer of the Company or public officials as to matters of fact; and may
rely as to all matters of law other than the law of the United States or of the
State of California upon opinions of counsel satisfactory to you, in which case
the opinion shall state that they have no reason to believe that you and they
are not entitled to so rely.
(c) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of Parker, Christie & Hale LLP,
patent counsel for the Company, in form and substance satisfactory to
counsel for the Underwriter.
(d) All corporate proceedings and other legal matters relating
to this Agreement, the Registration Statement, the Prospectus and other related
matters shall be reasonably satisfactory to or reasonably approved by Bachner,
Tally, Polevoy & Misher LLP, counsel to the Underwriter, and you shall have
received from such counsel a signed opinion, dated as of the First Closing Date,
with respect to the validity of the issuance of the Units, the form of the
Registration Statement and Prospectus (other than the financial statements and
other financial data contained therein), the execution of this Agreement and
other related matters as you may reasonably require. The Company shall have
furnished to counsel for the Underwriter
-16-
such documents as they may reasonably request for the purpose of enabling them
to render such opinion.
(e) You shall have received a letter prior to the effective date
of the Registration Statement and again on and as of the First Closing Date from
Price Waterhouse LLP, independent public accountants for the Company,
substantially in the form approved by you, and including estimates of the
Company's revenues and results of operations for the period ending at the end of
the month immediately preceding the effective date and results of the comparable
period during the prior fiscal year.
(f) At the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true and
correct with the same effect as if made on and as of the Closing Dates and
the Company shall have performed all of its obligations hereunder and
satisfied all the conditions on its part to be satisfied at or prior to such
Closing Date; (ii) the Registration Statement and the Prospectus and any
amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; (iii)
there shall have been, since the respective dates as of which information is
given, no material adverse change, or any development involving a prospective
material adverse change, in the business, properties, condition (financial or
otherwise), results of operations, capital stock, long-term or short-term
debt or general affairs of the Company from that set forth in the
Registration Statement and the Prospectus, except changes which the
Registration Statement and Prospectus indicate might occur after the
effective date of the Registration Statement, and the Company shall not have
incurred any material liabilities or entered into any material agreement not
in the ordinary course of business other than as referred to in the
Registration Statement and Prospectus; and (iv) except as set forth in the
Prospectus, no action, suit or proceeding at law or in equity shall be
pending or, to the knowledge of the Company, threatened against the Company
which would be required to be set forth in the Registration Statement, and no
proceedings shall be pending or threatened against the Company before or by
any commission, board or administrative agency in the United States or
elsewhere, wherein an unfavorable decision, ruling or finding would
materially and adversely affect the business, property, condition (financial
or otherwise), results of operations or general affairs of the Company, and
(v) you shall have received, at the First Closing Date, a certificate signed
by each of the Chairman of the Board or the President and the principal
financial or accounting officer of the Company, dated as of the First Closing
Date, evidencing compliance with the provisions of this subsection (f).
(g) Upon exercise of the option provided for in Section 2(b)
hereof, the obligations of the Underwriter to purchase and pay for the Option
Units referred to therein will be subject (as of the date hereof and as of the
Option Closing Date) to the following additional conditions:
-17-
(i) The Registration Statement shall remain effective
at the Option Closing Date, and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been instituted or shall be pending,
or, to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any reasonable request on the
part of the Commission for additional information shall have been
complied with to the satisfaction of Bachner, Tally, Polevoy &
Misher LLP, counsel to the Underwriter.
(ii) At the Option Closing Date there shall have been
delivered to you the signed opinions of O'Melveny & Myers LLP,
counsel for the Company, and Christie, Parker & Hale, patent
counsel for the Company, each dated as of the Option Closing Date,
in form and substance satisfactory to Bachner, Tally, Polevoy &
Misher LLP, counsel to the Underwriter, which opinions shall be
substantially the same in scope and substance as the opinion
furnished to you at the First Closing Date pursuant to Sections
4(b) and 4(c) hereof, except that such opinions, where
appropriate, shall cover the Option Units.
(iii) At the Option Closing Date there shall have been
delivered to you a certificate of the Chairman of the Board or
the President and the principal financial or accounting officer
of the Company, dated the Option Closing Date, substantially the
same in scope and substance as the certificate furnished to you
at the First Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date there shall have been
delivered to you a letter in form and substance satisfactory to
you from Price Waterhouse LLP, dated the Option Closing Date and
addressed to the Underwriter confirming the information in their
letter referred to in Section 4(e) hereof and stating that
nothing has come to their attention during the period from the
ending date of their review referred to in said letter to a date
not more than five business days prior to the Option Closing Date
which would require any change in said letter if it were required
to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the
Option Units shall be reasonably satisfactory in form and
substance to you, and you and Bachner, Tally, Polevoy &
Misher LLP, counsel to the Underwriter, shall have been furnished
with all such documents, certificates, and opinions as you may
reasonably request in connection with this transaction in order
to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained
herein.
-18-
(h) No action shall have been taken by the Commission or the
NASD the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal or
agent) in the Units, Class A Common Stock or the Warrants and no proceedings for
the taking of such action shall have been instituted or shall be pending, or, to
the knowledge of the Underwriter or the Company, shall be contemplated by the
Commission or the NASD. The Company represents that at the date hereof it has
no knowledge that any such action is in fact contemplated by the Commission or
the NASD. The Company shall have advised the Underwriter of any NASD
affiliation of any of its officers, directors, shareholders or their affiliates.
(i) If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement and all
obligations of the Underwriter under this Agreement may be cancelled at, or at
any time prior to, each Closing Date by you. Any such cancellation shall be
without liability of the Underwriter to the Company.
5. CONDITION TO THE OBLIGATIONS OF THE COMPANY. The obligations of
the Company to sell and deliver the Units is subject to the condition that at
the Closing Dates, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued under the Act or any proceedings
therefor initiated or threatened by the Commission.
If the condition to the obligations of the Company provided for in
this Section has been fulfilled on the First Closing Date but is not fulfilled
after the First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Units on exercise of the
option provided for in Section 2(b) hereof shall be affected.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees), to which the Underwriter or such controlling person may become
subject, under the Act or otherwise, and will reimburse, as incurred, the
Underwriter and such controlling persons for any reasonable legal or other
expenses reasonably incurred in connection with investigating, defending against
or appearing as a third party witness in connection with any losses, claims,
damages or liabilities, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in (A) the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, (B) any blue sky application or other document
executed by the Company specifically for that purpose or based upon written
information furnished by the Company filed in any state or other jurisdiction in
order to qualify any or all of the Units under the securities laws thereof (any
such application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement,
-19-
any Preliminary Prospectus, Prospectus, or any amendment or supplement
thereto, or in any Blue Sky Application, a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to
the extent, but only to the extent, that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of the Underwriter specifically for use in the preparation of the
Registration Statement or any such amendment or supplement thereof or any
such Blue Sky Application or any such Preliminary Prospectus or the
Prospectus or any such amendment or supplement thereto; and provided,
further, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability is asserted by any person if
such person did not receive a copy of the Prospectus (or the Prospectus as
amended or supplemented) at or prior to the confirmation of the sale of such
shares to such person in any case where such delivery is required by the Act
and the untrue statement or omission of a material fact contained in the
Preliminary Prospectus (or the Prospectus) was corrected in the Prospectus
(or the Prospectus as amended or supplemented). This indemnity will be in
addition to any liability which the Company may otherwise have.
(b) The Underwriter will indemnify and hold harmless the
Company, each of its directors, each nominee (if any) for director named in
the Prospectus, each of its officers who have signed the Registration
Statement, and each person, if any, who controls the Company within the
meaning of the Act, against any losses, claims, damages or liabilities (which
shall, for all purposes of this Agreement, include, but not be limited to,
all reasonable costs of defense and investigation and all reasonable
attorneys' fees) to which the Company or any such director, nominee, officer
or controlling person may become subject under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by the Underwriter specifically
for use therein or in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify in writing the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the
-20-
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that if the indemnified party is the Underwriter or a person who controls the
Underwriter within the meaning of the Act, the fees and expenses of such counsel
shall be at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party or
(ii) the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party and in the
reasonable judgment of the indemnified party, it is advisable for the
indemnified party to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for the
indemnified party). No settlement of any action against an indemnified party
shall be made without the consent of the indemnifying party, which shall not be
unreasonably withheld in light of all factors of importance to such indemnifying
party.
7. CONTRIBUTION.
In order to provide for just and equitable contribution under the
Act in any case in which (i) the Underwriter makes claim for indemnification
pursuant to Section 6 hereof but it is judicially determined (by the entry of
a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the
fact that the express provisions of Section 6 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of
the Underwriter, then the Company and the Underwriter shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees) in either such case (after contribution from others) in such
proportions that the Underwriter is responsible in the aggregate for that
portion of such losses, claims, damages or liabilities represented by the
percentage that the underwriting discount per Unit appearing on the cover
page of the Prospectus bears to the public offering price appearing thereon,
and the Company shall be responsible for the remaining portion, provided,
however, that if such allocation is not permitted by applicable law then the
relative fault of the Company and the Underwriter in connection with the
statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. The relative fault shall
be determined by reference to, among other things, whether in the case of an
untrue statement of a material fact or the omission
-21-
to state a material fact, such statement or omission relates to information
supplied by the Company or the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the Underwriter agree that it
would not be just and equitable if the respective obligations of the Company
and the Underwriter to contribute pursuant to this Section 7 were to be
determined by pro rata or per capita allocation of the aggregate damages or
by any other method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this Section 7. No
person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation. If the full amount
of the contribution specified in this paragraph is not permitted by law, then
the Underwriter and each person who controls the Underwriter shall be
entitled to contribution from the Company to the full extent permitted by
law. The foregoing contribution agreement shall in no way affect the
contribution liabilities of any persons having liability under Section 11 of
the Act other than the Company and the Underwriter. No contribution shall be
requested with regard to the settlement of any matter from any party who did
not consent to the settlement; provided, however, that such consent shall not
be unreasonably withheld in light of all factors of importance to such party.
8. COSTS AND EXPENSES.
(a) Whether or not this Agreement becomes effective or the sale
of the Units to the Underwriter is consummated, the Company will pay all costs
and expenses incident to the performance of this Agreement by the Company
including, but not limited to, the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
supplemented, or the Term Sheet, the fee of the NASD in connection with the
filing required by the NASD relating to the offering of the Units contemplated
hereby; all expenses, including reasonable fees and disbursements of counsel to
the Underwriter, in connection with the qualification of the Units under the
state securities or blue sky laws which the Underwriter shall designate; the
cost of printing and furnishing to the Underwriter copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Selling Agreement and the Blue Sky Memorandum, any fees relating to the listing
of the Units, Class A Common Stock and Warrants on the Nasdaq SmallCap Market or
any other securities exchange, the cost of printing the certificates
representing the securities comprising the Units, the fees of the transfer agent
and warrant agent and the cost of publication of at least two "tombstones" of
the offering (at least one of which shall be in national business newspaper and
one of which shall be in a major New York newspaper) and the cost of preparing
at least four hard cover "bound volumes" relating to the offering, in accordance
with the Underwriter's request. The Company shall pay any and all taxes
(including any transfer, franchise, capital stock or other tax imposed by any
jurisdiction) on sales to the Underwriter hereunder. The Company will also pay
all costs and expenses incident to the
-22-
furnishing of any amended Prospectus or of any supplement to be attached to the
Prospectus as called for in Section 3(a) of this Agreement except as otherwise
set forth in said Section.
(b) In addition to the foregoing expenses the Company shall at
the First Closing Date pay to D.H. Blair Investment Banking Corp. in its
individual rather than representative capacity, a non-accountable expense
allowance of $_______ of which $40,000 has been paid. In the event the
overallotment option is exercised, the Company shall pay to D.H. Blair
Investment Banking Corp. at the Option Closing Date an additional amount equal
to 3% of the gross proceeds received upon exercise of the overallotment option.
In the event the transactions contemplated hereby are not consummated by reason
of any action by the Underwriter (except if such prevention is based upon a
breach by the Company of any covenant, representation or warranty contained
herein or because any other condition to the Underwriter's obligations hereunder
required to be fulfilled by the Company is not fulfilled) the Company shall not
be liable for such non-accountable expense, except that you may retain the
$40,000 paid to you. In the event the transactions contemplated hereby are not
consummated by reason of any action of the Company or because of a breach by the
Company of any covenant, representation or warranty herein, the Company shall be
liable for the accountable expenses of the Underwriter, including legal fees, up
to a maximum of $450,000 (in addition to the Company Expenses for which the
Company shall in all events remain liable), provided, however, that if the
proposed financing is not completed because the Company prevents it based solely
on reasons relating to pricing, the Company's liability for such expense
allowance (excluding the Company's expenses) shall be limited to (i) $300,000 if
the number of shares included in each Unit is more than 250, (ii) $225,000 if
the number of shares included in each Unit is more than 275 and (iii) $150,000
if the number of shares included in each Unit is more than 310.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Underwriter or from any other person for
services as a finder in connection with the proposed offering, and the Company
agrees to indemnify and hold harmless the Underwriter against any losses,
claims, damages or liabilities, joint or several (which shall include, but not
be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees), to which the Underwriter may become subject insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a
finder's fee in connection with the proposed offering by reason of such person's
or entity's influence or prior contact with the indemnifying party.
9. EFFECTIVE DATE.
The Agreement shall become effective upon its execution except that
you may, at your option, delay its effectiveness until 11:00 A.M., New York time
on the first full business day following the effective date of the Registration
Statement, or at such earlier time after the effective date of the Registration
Statement as you in your discretion shall first commence the public offering by
the Underwriter of any of the Units. The time of the public offering shall mean
the time of release by you of the first newspaper advertisement with respect to
the Units, or
-23-
the time when the Units are first generally offered by you to dealers by letter
or telegram, whichever shall first occur. This Agreement may be terminated by
you at any time before it becomes effective as provided above, except that
Sections 3(c), 6, 7, 8, 13, 14 and 15 shall remain in effect notwithstanding
such termination.
10. TERMINATION.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 13, 14
and 15 hereof, may be terminated at any time prior to the First Closing Date,
and the option referred to in Section 2(b) hereof, if exercised, may be
cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriter for the resale of the Units agreed to be purchased hereunder by
reason of (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree;
(ii) trading in securities on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq SmallCap Market or the Nasdaq National Market having been
suspended or limited; (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and effect on the date
hereof); (iv) a banking moratorium having been declared by federal or New York
state authorities; (v) an outbreak of international hostilities or other
national or international calamity or crisis or change in economic or political
conditions having occurred; (vi) a pending or threatened legal or governmental
proceeding or action relating generally to the Company's business, or a
notification having been received by the Company of the threat of any such
proceeding or action, which could materially adversely affect the Company;
(vii) except as contemplated by the Prospectus, the Company is merged or
consolidated into or acquired by another company or group or there exists a
binding legal commitment for the foregoing or any other material change of
ownership or control occurs; (viii) the passage by the Congress of the United
States or by any state legislative body or federal or state agency or other
authority of any act, rule or regulation, measure, or the adoption of any
orders, rules or regulations by any governmental body or any authoritative
accounting institute or board, or any governmental executive, which is
reasonably believed likely by the Underwriter to have a material impact on the
business, financial condition or financial statements of the Company or the
market for the securities offered pursuant to the Prospectus; (ix) any adverse
change in the financial or securities markets beyond normal market fluctuations
having occurred since the date of this Agreement, or (x) any material adverse
change having occurred, since the respective dates of which information is given
in the Registration Statement and Prospectus, in the earnings, business
prospects or general condition of the Company, financial or otherwise, taken as
a whole whether or not arising in the ordinary course of business.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10 or in
Section 9, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
-24-
11. UNIT PURCHASE OPTION.
At or before the First Closing Date, the Company will sell to D.H.
Blair Investment Banking Corp. or its designees for a consideration of $____,
and upon the terms and conditions set forth in the form of Unit Purchase Option
annexed as an exhibit to the Registration Statement, a Unit Purchase Option to
purchase an aggregate of 1,500 Units. In the event of conflict in the terms of
this Agreement and the Unit Purchase Option, the language of the Unit Purchase
Option shall control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties
and other statements of the Company or Dr. Bell, where appropriate, and the
undertakings set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriter, the Company or any of its officers or directors or any controlling
person and will survive delivery of and payment of the Units and the termination
of this Agreement.
13. NOTICE.
Any communications specifically required hereunder to be in writing,
if sent to the Underwriter, will be mailed, delivered and confirmed to them at
D.H. Blair Investment Banking Corp., 44 Wall Street, New York, New York 10005,
with a copy sent to Bachner, Tally, Polevoy & Misher LLP, Attention: Sheldon E.
Misher, Esq., 380 Madison Avenue, New York, New York 10017, or if sent to the
Company, will be mailed, delivered and confirmed to it at Amerigon Incorporated,
404 East Huntington Drive, Monrovia, CA 91016, Attention: Lon E. Bell, Ph.D.,
with a copy sent to O'Melveny & Myers LLP, 400 South Hope Street, Los Angeles,
CA 90071, Attention: D. Stephen Antion, Esq.
14. PARTIES IN INTEREST.
The Agreement herein set forth is made solely for the benefit of the
Underwriter, the Company and, to the extent expressed, any person controlling
the Company or the Underwriter, and directors of the Company, nominees for
directors (if any) named in the Prospectus, its officers who have signed the
Registration Statement, and their respective executors, administrators,
successors, assigns and no other person shall acquire or have any right under or
by virtue of this Agreement. The term "successors and assigns" shall not
include any purchaser, as such purchaser, from any Underwriter of the Units.
15. APPLICABLE LAW.
This Agreement will be governed by, and construed in accordance with,
the laws of the State of New York applicable to agreements made and to be
entirely performed within New York.
-25-
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
AMERIGON INCORPORATED
By:
------------------------------------
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
D.H. BLAIR INVESTMENT BANKING CORP.
By:
------------------------------------
Authorized Officer
I hereby agree to be bound by the provisions of Sections 3(n) and 12
hereof.
- ------------------------------
Lon E. Bell, Ph.D.
-26-
EXHIBIT 3-1.2
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
AMERIGON INCORPORATED
Lon E. Bell and Joshua M. Newman certify that:
1. They are the duly elected and acting Chairman of the Board and
Secretary, respectively, of Amerigon Incorporated, a California corporation
(the "Corporation").
2. Article III, paragraph (1) of the Corporation's Amended and
Restated Articles of Incorporation are amended to read as follows:
"(1) The total number of shares which the corporation is authorized
to issue is 48,000,000, of which 40,000,000 shall be Class A Common
Stock, without par value, 3,000,000 shall be Class B Common Stock,
without par value, and 5,000,000 shall be Preferred Stock, without
par value."
3. The foregoing amendment of the Amended and Restated Articles of
Incorporation has been duly approved by the Board of Directors of the
Corporation.
4. The foregoing amendment has been duly approved by the required
vote of shareholders in accordance with Section 902 of the California General
Corporation Law; the total number of outstanding shares of the Corporation is
7,068,500; the number of shares voting in favor of the amendment equaled or
exceeded the vote required; and the percentage vote required was more than
50% of the outstanding shares.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true
and correct of our own knowledge.
Executed at Monrovia, California, on November 27, 1996.
/s/ Lon E. Bell
------------------------------------
Lon E. Bell
/s/ Joshua Newman
-----------------------------------
Joshua M. Newman
WARRANT AGREEMENT
AGREEMENT, dated as of this ____th day of ___________, 199_, by and
among AMERIGON INCORPORATED, a California corporation ("Company"), U.S. STOCK
TRANSFER CORPORATION, as Warrant Agent (the "Warrant Agent"), and D.H. BLAIR
INVESTMENT BANKING CORP., a New York corporation (the "Underwriter").
W I T N E S S E T H
WHEREAS, in connection with (i) a public offering of up to 17,250
units ("Units"), each unit consisting of _____ shares of Class A Common Stock,
no par value per share, of the Company ("Shares" or "Class A Common Stock") and
______ redeemable Class A Warrants pursuant to an underwriting agreement (the
"Underwriting Agreement") dated _______________, 199_ between the Company and
Blair, (ii) the issuance to the Underwriter or its designees of Unit Purchase
Options to purchase an aggregate of 1,500 additional Units, to be dated as of
__________, 199_ (the "Unit Purchase Options"), and (iii) the conversion of
certain convertible subordinated debentures issued in a private placement by the
Company in October 1996 into 1,620,000 Class A Warrants, the Company may issue
up to ______ Class A Warrants (the Class A Warrants may be referred to as
"Warrants"); and
WHEREAS, each Class A Warrant initially entitles the Registered Holder
thereof to purchase one (1) share of Class A Common Stock; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the Registered Holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall
have the following meanings, unless the context shall otherwise require:
(a) "Aggregate Per Share Price" shall mean the Purchase Price per
share multiplied by the number of shares of Class A Common Stock purchasable
upon the exercise of a Warrant.
(b) "Calculation Date" shall have the meaning set forth in Section 8
hereof.
(c) "Class A Aggregate Per Share Price" shall mean $_______ [Class A
Warrant Exercise Price].
(d) "Class A Warrants" shall mean the warrants to purchase shares of
Class A Common Stock of the Company issued pursuant to this Agreement.
(e) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage, which at the date hereof consists of 40,000,000 shares of Class A
Common Stock, no par value, and 3,000,000 shares of Class B Common Stock, no par
value.
(f) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business shall be
administered, which office is located at the date hereof at 1745 Gardena Avenue,
Glendale, California 91204.
(g) "Exercise Date" shall mean, as to any Warrant, the date on which
the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and
(b) payment in cash, or by official bank or certified check made payable to the
Company, or otherwise as provided in Section 4(b), of an amount in lawful money
of the United States of America equal to the applicable Purchase Price.
(h) "Market Price" shall mean shall mean (i) the average closing bid
price of the Class A Common Stock, for thirty (30) consecutive business days
ending on the Calculation Date, as reported by Nasdaq, if the Class A Common
Stock is traded on the Nasdaq SmallCap Market, or (ii) the average last reported
sale price of the Class A Common Stock, for thirty (30) consecutive business
days ending on the Calculation Date, as reported by the primary exchange on
which the Class A Common Stock is traded, if the Class A Common Stock is traded
on a national securities exchange, or by Nasdaq, if the Class A Common Stock is
traded on the Nasdaq National Market.
(i) "Purchase Price" shall mean the purchase price to be paid upon
exercise of each Class A Warrant in accordance with the terms hereof, which
price shall be $_____, subject to adjustment from time to time pursuant to the
provisions of Section 9 hereof, and subject to the Company's right to reduce the
Purchase Price upon notice to all Registered Holders of Warrants.
(j) "Redemption Date" shall have the meaning set forth in Section 8
hereof.
(k) "Redemption Price" shall mean the price at which the Company may,
at its option in accordance with the terms hereof, redeem the Class A Warrants,
which price shall be $0.05 per Warrant.
-2-
(l) "Registered Holder" shall mean as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Warrant
Agent pursuant to Section 6.
(m) "Transfer Agent" shall mean U.S. Stock Transfer Corporation, as
the Company's transfer agent, or its authorized successor, as such.
(n) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time)
on _________, 200_ or, with respect to Warrants which are outstanding as of the
applicable Redemption Date (as defined in Section 8) and specifically excluding
Warrants issuable upon exercise of Unit Purchase Options if the Unit Purchase
Options have not been exercised, the Redemption Date, whichever is earlier;
provided that if such date shall in the State of New York be a holiday or a day
on which banks are authorized or required to close, then 5:00 P.M. (New York
time) on the next following day which in the State of New York is not a holiday
or a day on which banks are authorized or required to close. Upon notice to all
Registered Holders, the Company shall have the right to extend the Warrant
Expiration Date.
SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.
(a) A Class A Warrant initially shall entitle the Registered Holder
of the certificate representing such Warrant (the "Warrant Certificate") to
purchase one share of Class A Common Stock upon the exercise thereof, in
accordance with the terms hereof, subject to modification and adjustment as
provided in Section 9.
(b) The Class A Warrants included in the offering of Units will be
detachable and separately transferable immediately from the shares of Class A
Common Stock constituting part of such Units.
(c) Upon execution of this Agreement, Warrant Certificates
representing the number of Class A Warrants sold pursuant to the Underwriting
Agreement shall be executed by the Company and delivered to the Warrant Agent.
Upon written order of the Company signed by its President or Chairman or a Vice
President and by its Secretary or an Assistant Secretary, the Warrant
Certificates shall be countersigned, issued and delivered by the Warrant Agent
as part of the Units.
(d) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of __________ shares
of Class A Common Stock, subject to adjustment as described herein, upon the
exercise of Warrants in accordance with this Agreement.
(e) From time to time, up to the Warrant Expiration Date, the Warrant
Agent shall countersign and deliver Warrant Certificates in required whole
number denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this
-3-
Agreement; provided that no Warrant Certificates shall be issued except
(i) those initially issued hereunder, (ii) those issued on or after the date
hereof, upon the exercise of fewer than all Warrants represented by any Warrant
Certificate, to evidence any unexercised Warrants held by the exercising
Registered Holder, (iii) those issued upon any transfer or exchange pursuant to
Section 6; (iv) those issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7; (v) those issued pursuant
to the Unit Purchase Options; and (vi) at the option of the Company, in such
form as may be approved by the its Board of Directors, to reflect any adjustment
or change in the Purchase Price, the number of shares of Class A Common Stock
purchasable upon exercise of the Warrants or the Target Price therefor made
pursuant to Section 8 hereof.
(f) Pursuant to the terms of the Unit Purchase Options, the
Underwriter may purchase up to 1,500 Units, which include up to ______ Class A
Warrants. Notwithstanding anything to the contrary contained herein, the
Warrants underlying the Unit Purchase Options shall not be subject to redemption
by the Company except under the terms and conditions set forth in the Unit
Purchase Options.
SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Class A Warrants may be listed, or
to conform to usage or to the requirements of Section 2(d). The Warrant
Certificates shall be dated the date of issuance thereof (whether upon initial
issuance, transfer, exchange or in lieu of mutilated, lost, stolen, or destroyed
Warrant Certificates) and issued in registered form. Warrant Certificates shall
be numbered serially with the letters AW on Class A Warrants of all
denominations.
(b) Warrant Certificates shall be executed on behalf of the Company
by its Chairman of the Board, President or any Vice President and by its
Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be an officer of the Company or to hold the
particular office referenced in the Warrant Certificate before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issue and delivery thereof, such Warrant Certificates may nevertheless
be countersigned by the Warrant Agent, issued and delivered with the same force
and effect as though the person who signed such Warrant Certificates had not
ceased to be an officer of the Company or to hold such office. After
countersignature by the Warrant Agent,
-4-
Warrant Certificates shall be delivered by the Warrant Agent to the Registered
Holder without further action by the Company, except as otherwise provided by
Section 4(a) hereof.
SECTION 4. EXERCISE.
(a) Each Warrant may be exercised by the Registered Holder thereof at
any time on or after the date hereof, but not after the Warrant Expiration Date,
upon the terms and subject to the conditions set forth herein and in the
applicable Warrant Certificate. A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the Exercise Date and
the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder of those securities upon the
exercise of the Warrant as of the close of business on the Exercise Date. As
soon as practicable on or after the Exercise Date, the Warrant Agent shall
deposit the proceeds received from the exercise of a Warrant and shall notify
the Company in writing of the exercise of the Warrants. Promptly following, and
in any event within five business days after the date of such notice from the
Warrant Agent, the Warrant Agent, on behalf of the Company, shall cause to be
issued and delivered by the Transfer Agent, to the person or persons entitled to
receive the same, a certificate or certificates for the securities deliverable
upon such exercise (plus a Warrant Certificate for any remaining unexercised
Warrants of the Registered Holder), unless prior to the date of issuance of such
certificates the Company shall instruct the Warrant Agent to refrain from
causing such issuance of certificates pending clearance of checks received in
payment of the Purchase Price pursuant to such Warrants. Notwithstanding the
foregoing, in the case of payment made in the form of a check drawn on an
account of the Underwriter or such other investment banks and brokerage houses
as the Company shall approve in writing to the Warrant Agent, certificates shall
immediately be issued without prior notice to the Company or any delay. Upon
the exercise of any Warrant and clearance of the funds received, the Warrant
Agent shall promptly remit the payment received for the Warrant (the "Warrant
Proceeds") to the Company or as the Company may direct in writing, subject to
the provisions of Sections 4(b) and 4(c) hereof.
(b) If, at the Exercise Date in respect of the exercise of any
Warrant after ________________________________________________________________
__________________, 199_, (i) the market price of the Company's Class A Common
Stock is greater than the then Purchase Price of the Warrant, (ii) the exercise
of the Warrant was solicited by a member of the National Association of
Securities Dealers, Inc. ("NASD") as designated in writing on the Warrant
Certificate Subscription Form, (iii) the Warrant was not held in a discretionary
account, (iv) disclosure of compensation arrangements was made both at the time
of the original offering and at the time of exercise; and (v) the solicitation
of the exercise of the Warrant was not in violation of Rule 10b-6 (as such rule
or any successor rule may be in effect as of such time of exercise) promulgated
under the Securities Exchange Act of 1934, then the Warrant Agent,
simultaneously with the distribution of the Warrant Proceeds to the Company
shall, on behalf of the Company, pay from the Warrant Proceeds, a fee of 5% (the
"Exercise Fee") of the Purchase Price to the Underwriter (of which a portion may
be reallowed by the Underwriter to the dealer who solicited the exercise, which
may also be the Underwriter or D.H. Blair & Co., Inc.). In the event the
Exercise Fee is not received within five days of the date on which the Company
receives Warrant Proceeds, then the Exercise Fee shall begin accruing
-5-
interest at an annual rate of prime plus four percent (4%), payable by the
Company to the Underwriter at the time the Underwriter receives the Exercise
Fee. Within five days after exercise the Warrant Agent shall send to the
Underwriter a copy of the reverse side of each Warrant exercised. The
Underwriter shall reimburse the Warrant Agent, upon request, for its reasonable
expenses relating to compliance with this section 4(b). The Company shall pay
all fees and expenses including all blue sky fees and expenses and all
out-of-pocket expenses of the Underwriter, including legal fees, in connection
with the solicitation, redemption or exchange of the Warrants. In addition, the
Underwriter and the Company may at any time during business hours, examine the
records of the Warrant Agent, including its ledger of original Warrant
Certificates returned to the Warrant Agent upon exercise of Warrants. The
provisions of this paragraph may not be modified, amended or deleted without the
prior written consent of the Underwriter.
(c) In order to enforce the provisions of Section 4(b) above, in the
event there is any dispute or question as to the amount or payment of the
Exercise Fee, the Warrant Agent is hereby expressly authorized to withhold
payment to the Company of the Warrant Proceeds unless and until the Company
establishes an escrow account for the purpose of depositing the entire amount of
the Exercise Fee, which amount will be deducted from the net Warrant Proceeds to
be paid to the Company. The funds placed in the escrow account may not be
released to the Company without a written agreement from the Underwriter that
the required Exercise Fee has been received by the Underwriter or a final,
non-appealable determination by a court of competent jurisdiction that the
Underwriter is not entitled to such funds.
SECTION 5. RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES; ETC.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Class A Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Class A Common Stock
as shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Class A Common Stock which shall be
issuable upon exercise of the Warrants shall, at the time of delivery, be duly
and validly issued, fully paid, nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, (other than those which the Company
shall promptly pay or discharge or liens imposed solely as a result of actions
or agreements of the warrantholder) and that upon issuance such shares shall be
listed on each national securities exchange on which the other shares of
outstanding Class A Common Stock of the Company are then listed or shall be
eligible for inclusion in the Nasdaq National Market or the Nasdaq SmallCap
Market if the other shares of outstanding Class A Common Stock of the Company
are so included.
(b) The Company covenants that if any securities to be reserved for
the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably possible, endeavor
to secure such registration or approval. The Company will use
-6-
reasonable efforts to obtain appropriate approvals or registrations under state
"blue sky" securities laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent of service of process in any jurisdiction. With respect to any
such securities, however, Warrants may not be exercised by, or shares of Class A
Common Stock issued to, any Registered Holder in any state in which such
exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Class A Common Stock, as the
case may be, are to be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate representing any Warrant being exercised, then
no such delivery shall be made unless the person requesting the same has paid to
the Warrant Agent the amount of transfer taxes or charges incident thereto, if
any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition
the Company's Transfer Agent from time to time for certificates representing
shares of Class A Common Stock issuable upon exercise of the Warrants, and the
Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company for shares of
Class A Common Stock issuable upon exercise of the Warrants.
SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of the terms and provisions hereof, the Company shall execute
and the Warrant Agent shall countersign, issue and deliver in exchange therefor
the Warrant Certificate(s) which the Registered Holder making the exchange shall
be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in accordance with its regular
practice. Upon due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute and the Warrant Agent
shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
-7-
(d) A service charge may be imposed by the Warrant Agent for any
exchange or registration of transfer of Warrant Certificates. In addition, the
Company may require payment by such holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange
in case of mutilated Warrant Certificates shall be promptly cancelled by the
Warrant Agent and thereafter retained by the Warrant Agent until termination of
this Agreement or resignation as Warrant Agent, or, with the prior written
consent of the Underwriter (not to be unreasonably withheld), disposed of or
destroyed, at the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary.
SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company and
the Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall ( in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a bona
fide purchaser) countersign and deliver to the Registered Holder in lieu thereof
a new Warrant Certificate of like tenor representing an equal aggregate number
of Class A Warrants. Applicants for a substitute Warrant Certificate shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Warrant Agent may prescribe.
SECTION 8. REDEMPTION.
(a) Subject to the provisions of paragraph 2(f) hereof, on not less
than thirty (30) days notice (in the form provided in subsection 8(c) below)
given at any time after ______________, 199_ (the "Redemption Notice"), to
Registered Holders of the Warrants being redeemed at any time after ______, the
Warrants may be redeemed, at the option of the Company, at a redemption price of
$0.05 per Warrant, provided the Market Price shall exceed $_____ (the "Target
Price"), subject to adjustment as set forth in Section 8(f), below. All
Warrants of a class must be redeemed if any of that class are redeemed, provided
that the Warrants underlying the Unit Purchase Option may only be redeemed in
compliance with and subject to the terms and conditions of the Unit Purchase
Option. For purposes of this Section 8, the Calculation Date shall mean a date
within 15 days of the mailing of the Redemption Notice. The date fixed for
redemption of the Warrants is referred to herein as the "Redemption Date".
-8-
(b) If the conditions set forth in Section 8(a) are met, and the
Company desires to exercise its right to redeem the Warrants, it shall request
the Underwriter to mail a Redemption Notice to each of the Registered Holders of
the Warrants to be redeemed, first class, postage prepaid, not later than the
thirtieth day before the date fixed for redemption, at their last address as
shall appear on the records maintained pursuant to Section 6(b). Any notice
mailed in the manner provided herein shall be conclusively presumed to have been
duly given whether or not the Registered Holder receives such notice.
(c) The Redemption Notice shall specify (i) the redemption price,
(ii) the Redemption Date, (iii) the place where the Warrant Certificates shall
be delivered and the redemption price paid, (iv) that the Underwriter will
assist each Registered Holder of a Warrant in connection with the exercise
thereof and (v) that the right to exercise the Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the Redemption
Date. No failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity of the proceedings for such redemption except
as to a Registered Holder (a) to whom notice was not mailed or (b) whose notice
was defective. An affidavit of the Warrant Agent or of the Secretary or an
Assistant Secretary of the Underwriter or the Company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 P.M.
(New York time) on the business day immediately preceding the Redemption Date.
On and after the Redemption Date, Registered Holders of the Warrants shall have
no further rights except to receive, upon surrender of the Warrant, the
Redemption Price.
(e) From and after the Redemption Date, the Company shall, at the
place specified in the Redemption Notice, upon presentation and surrender to the
Company by or on behalf of the Registered Holder thereof of one or more Warrant
Certificates evidencing Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Registered Holder a sum equal to
the Redemption Price of each such Warrant, payable in cash or certified or bank
check. From and after the Redemption Date and upon the deposit or setting aside
by the Company of a sum sufficient to redeem all the Warrants called for
redemption, such Warrants shall expire and become void and all rights hereunder
and under the Warrant Certificates, except the right to receive payment of the
Redemption Price, shall cease.
(f) If the shares of the Company's Class A Common Stock are
subdivided or combined into a greater or smaller number of shares of Class A
Common Stock, the Target Price shall be proportionally adjusted by the ratio
which the total number of shares of Class A Common Stock outstanding immediately
prior to such event bears to the total number of shares of Class A Common Stock
to be outstanding immediately after such event.
-9-
SECTION 9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF
COMMON STOCK OR WARRANTS.
(a) Subject to the exceptions referred to in Section 9(g) below, in
the event the Company shall, at any time or from time to time after the date
hereof, sell any shares of Common Stock for a consideration per share less than
the Market Price (as defined in Section 1, except that for all purposes of this
Section 9, the time periods set forth in Section 1(g)(i) and (ii) shall be ten
(10) consecutive business days) on the date of the sale or issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or subdivide or
combine the outstanding shares of Common Stock into a greater or lesser number
of shares (any such sale, issuance, subdivision or combination being herein
called a "Change of Shares"), then, and thereafter upon each further Change of
Shares, the Purchase Price in effect immediately prior to such Change of Shares
shall be changed to a price (including any applicable fraction of a cent)
determined by multiplying the Purchase Price in effect immediately prior thereto
by a fraction, the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding immediately prior to the issuance of such
additional shares and (ii) the number of shares of Common Stock which the
aggregate consideration received (determined as provided in subsection 9(f)(F)
below) for the issuance of such additional shares would purchase at the Market
Price and the denominator of which shall be the sum of the number of shares of
Common Stock outstanding immediately after the issuance of such additional
shares. Such adjustment shall be made successively whenever such an issuance is
made. For purposes of this Section 9, the Transaction Date shall mean the date
of the sale, issuance, modification or other transaction referred to in this
Section 9.
Upon each adjustment of the Purchase Price pursuant to this
Section 9, the total number of shares of Class A Common Stock purchasable upon
the exercise of each Class A Warrant shall (subject to the provisions contained
in Section 9(b) hereof) be such number of shares (calculated to the nearest
one-hundredth; PROVIDED, HOWEVER, that in no event shall the Class A Aggregate
Per Share Price increase as a result of such rounding calculation) purchasable
at the Purchase Price in effect immediately prior to such adjustment multiplied
by a fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Class A Warrants outstanding, in lieu of the
adjustment in the number of shares of Class A Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Class A Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Class A Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment. Upon each
adjustment of the number of Warrants pursuant to this Section 9, the
-10-
Company shall, as promptly as practicable, cause to be distributed to each
Registered Holder of Warrant Certificates on the date of such adjustment Warrant
Certificates evidencing, subject to Section 10 hereof, the number of additional
Warrants to which such Holder shall be entitled as a result of such adjustment
or, at the option of the Company, cause to be distributed to such Holder in
substitution and replacement for the Warrant Certificates held by him prior to
the date of adjustment (and upon surrender thereof, if required by the Company)
new Warrant Certificates evidencing the number of Warrants to which such Holder
shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback, mortgage or other
financing transaction), the Company shall cause effective provision to be made
so that each holder of a Warrant then outstanding shall have the right
thereafter, by exercising such Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Class A Common
Stock that might have been purchased upon exercise of such Warrant immediately
prior to such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance. Any such provision shall include
provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 9. The Company
shall not effect any such consolidation, merger or sale of all or substantially
all of the assets or stock of the Company unless prior to or simultaneously with
the consummation thereof the successor (if other than the Company) resulting
from such consolidation or merger or the corporation purchasing all or
substantially of the assets or stock or other appropriate corporation or entity
shall assume, by written instrument executed and delivered to the Warrant Agent,
the obligation to deliver to the holder of each Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holders may be entitled to purchase and the other obligations of the Company
under this Agreement. The foregoing provisions shall similarly apply to
successive reclassifications, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price
or the number of shares of Class A Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(e) hereof, continue to express the Purchase Price per
share, the number of shares purchasable thereunder and the Redemption Price
therefor as the Purchase Price per share, and the number of shares purchasable
and the Redemption Price therefor were expressed in the Warrant Certificates
when the same were originally issued.
-11-
(e) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Class A Common Stock
purchasable upon exercise of each Warrant after such adjustment and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the Registered Holder of each Warrant shall then be entitled,
and the adjustment in Redemption Price resulting therefrom, and (iii) a
statement showing in detail the method of calculation and the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any securities
issued or sold or deemed to have been issued, (b) the number of shares of Common
Stock outstanding or deemed to be outstanding, and (c) the Purchase Price in
effect immediately prior to such issue or sale and as adjusted and readjusted
(if required by Section 9) on account thereof. The Company will promptly file
such certificate with the Warrant Agent and furnish a copy thereof to be sent by
ordinary first class mail to the Underwriter and to each Registered Holder of
Warrants at his last address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder whose
notice was defective. The affidavit of an officer of the Warrant Agent or the
Secretary of the Company that such notice has been mailed shall, in the absence
of fraud or negligence, be prima facie evidence of the facts stated therein.
The Company will, upon the written request at any time of the Underwriter,
furnish to the Underwriter a report by Price Waterhouse L.L.P., or other
independent public accountants of recognized national standing (which may be the
regular auditors of the Company) selected by the Company to verify such
computation and setting forth such adjustment or readjustment and showing in
detail the method of calculation and the facts upon which such adjustment or
readjustment is based. The Company will also keep copies of all such
certificates and reports at its principal office.
(f) For purposes of Section 9(a) and 9(b) hereof, the following
provisions (A) to (G) shall also be applicable:
(A) The number of shares of Common Stock outstanding at any
given time shall include shares of Common Stock owned or held by or
for the account of the Company and the sale or issuance of such
treasury shares or the distribution of any such treasury shares shall
not be considered a Change of Shares for purposes of said sections.
(B) No adjustment of the Purchase Price shall be made unless
such adjustment would require an increase or decrease of at least $.10
in the Purchase Price; provided that any adjustments which by reason
of this clause (B) are not required to be made shall be carried
forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment(s) so
carried forward, shall require an increase or decrease of at least
$.10 in the Purchase Price then in effect hereunder.
-12-
(C) In case of (1) the sale by the Company for cash (or as a
component of a unit being sold for cash) of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common
Stock or any securities convertible into or exchangeable for Common
Stock without the payment of any further consideration other than
cash, if any (such securities convertible, exercisable or exchangeable
into Common Stock being herein called "Convertible Securities"), or
(2) the issuance by the Company, without the receipt by the Company of
any consideration therefor, of any rights or warrants to subscribe for
or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights,
warrants or options shall consist of cash, whether or not such rights,
warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum
aggregate consideration payable to the Company upon the exercise of
such rights, warrants or options, plus the consideration, if any,
received by the Company for the issuance or sale of such rights,
warrants or options, plus, in the case of such Convertible Securities,
the minimum aggregate amount of additional consideration, other than
such Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities issuable
upon the exercise of such rights, warrants or options) is less than
the Market Price on the Transaction Date, then the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (as of the date of the issuance or sale of such
rights, warrants or options) shall be deemed to be outstanding shares
of Common Stock for purposes of Sections 9(a) and 9(b) hereof and
shall be deemed to have been sold for cash in an amount equal to such
price per share.
(D) In case of the sale by the Company for cash of any
Convertible Securities, whether or not the right of conversion or
exchange thereunder is immediately exercisable, and the price per
share for which Common Stock is issuable upon the conversion or
exchange of such Convertible Securities (determined by dividing
(x) the total amount of consideration received by the Company for the
sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by
(y) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of such Convertible Securities) is less
than the Market Price on the Transaction Date, then the total maximum
number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities (as of the date of the
-13-
sale of such Convertible Securities) shall be deemed to be outstanding
shares of Common Stock for purposes of Sections 9(a) and 9(b) hereof
and shall be deemed to have been sold for cash in an amount equal to
such price per share.
(E) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in (C) or
(D) above or any other securities of the Company convertible,
exchangeable or exercisable for shares of Common Stock, for any reason
other than an event that would require adjustment to prevent dilution,
so that the consideration per share received by the Company after such
modification is less than the Market Price on the Transaction Date,
the Purchase Price to be in effect after such modification shall be
determined by multiplying the Purchase Price in effect immediately
prior to such event by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on the date prior to the
modification plus the number of shares of Common Stock which the
aggregate consideration receivable by the Company for the securities
affected by the modification would purchase at the Market Price and of
which the denominator shall be the number of shares of Common Stock
outstanding on such date plus the number of shares of Common Stock to
be issued upon conversion, exchange or exercise of the modified
securities at the modified rate. Such adjustment shall become
effective as of the date upon which such modification shall take
effect. On the expiration of any such right, warrant or option or the
termination of any such right to convert or exchange any such
Convertible Securities referred to in Paragraph (C) or (D) above, the
Purchase Price then in effect hereunder shall forthwith be readjusted
to such Purchase Price as would have obtained (a) had the adjustments
made upon the issuance or sale of such rights, warrants, options or
Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the
exercise of such rights, warrants or options or upon the conversion or
exchange of such Convertible Securities and (b) had adjustments been
made on the basis of the Purchase Price as adjusted under clause (a)
for all transactions (which would have affected such adjusted Purchase
Price) made after the issuance or sale of such rights, warrants,
options or Convertible Securities.
(F) In case of the sale for cash of any shares of Common Stock,
any Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or
Convertible Securities, the consideration received by the Company
therefore shall be deemed to be the gross sales price therefor without
deducting therefrom any expense paid or incurred by the Company or any
underwriting discounts or commissions or concessions paid or allowed
by the Company in connection therewith.
-14-
(G) In case any event shall occur as to which the provisions of
Section 9 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by
the Warrants in accordance with the essential intent and principles of
Section 9, then, in each such case, the Board of Directors of the
Company shall in good faith by resolution provide for the adjustment,
if any, on a basis consistent with the essential intent and principles
established in Section 9, necessary to preserve, without dilution, the
purchase rights represented by the Warrants. The Company will promptly
make the adjustments described therein.
(g) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Class A Common Stock purchasable upon the exercise of each
Warrant will be made, however,
(i) upon the exercise of any of the options presently
outstanding under the Company's 1993 Stock Option Plan (the "Plan")
for officers, directors and certain other key personnel of the
Company; or
(ii) upon the issuance or exercise of any securities which
may hereafter be granted or exercised under the Plan or under any
other employee benefit plan of the Company approved by the Company's
stockholders; or
(iii) upon the sale or exercise of the Warrants, including
without limitation the sale or exercise of any of the Warrants
comprising the Unit Purchase Options or upon the sale or exercise of
the Unit Purchase Options; or
(iv) upon the sale of any shares of Common Stock and/or
Convertible Securities in a firm commitment underwritten public
offering, including, without limitation, shares sold upon the exercise
of any overallotment option granted to the underwriters in connection
with such offering; or
(v) upon the sale by the Company of any shares of Common
Stock and/or Convertible Securities in a private placement for which
the Underwriter is the Placement Agent; or
(vi) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common
Stock or Convertible Securities, whether or not such rights, warrants
or options were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold;
(vii) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether or not
any adjustment in the Purchase Price was made or required to be made
upon the issuance or sale of such
-15-
Convertible Securities and whether or not such Convertible Securities
were outstanding on the date of the original sale of the Warrants or
were thereafter issued or sold; or
(viii) upon the issuance of shares of Class B Common Stock of
the Company pursuant to the terms of the Escrow Agreement, [dated June
10, 1993], between the Company and ___________.
(h) As used in this Section 9, the term "Common Stock" shall mean and
include the Company's Common Stock authorized on the date of the original issue
of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company. The shares issuable upon exercise of
the Warrants shall include only shares of such class designated in the Company's
Articles of Incorporation as Class A Common Stock on the date of the original
issue of the Units or (i) in the case of any reclassification, change,
consolidation, merger, sale or conveyance of the character referred to in
Section 9(c) hereof, the stock, securities or property provided for in such
section, or (ii) in the case of any reclassification or change in the
outstanding shares of Class A Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 9, or as to the amount
of any such adjustment, if required, shall be binding upon the holders of the
Warrants and the Company if made in good faith by the Board of Directors of the
Company.
(j) If and whenever the Company shall grant to the holders of Class A
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding, the
rights, warrants or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Class A Common
Stock then issuable upon exercise of his Warrants. Such grant by the Company to
the holders of the Warrants shall be in lieu of any adjustment which otherwise
might be called for pursuant to this Section 9.
-16-
SECTION 10. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
(a) If the number of shares of Class A Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the
Company nevertheless shall not be required to issue fractions of shares, upon
exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. With respect to any fraction of a share called for
upon the exercise of any Warrant, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the current market value of such
fractional share, determined as follows:
(1) If the Class A Common Stock is listed on a national
securities exchange or admitted to unlisted trading privileges on such
exchange or is traded on the Nasdaq National Market, the current
market value shall be the last reported sale price of the Class A
Common Stock on such exchange or market on the last business day prior
to the date of exercise of this Warrant or, if no such sale is made on
such day or no closing sale price is quoted, the average of the
closing bid and asked prices for such day on such exchange or market;
or
(2) If the Class A Common Stock is not listed or admitted to
unlisted trading privileges on a national securities exchange or is
not traded on the Nasdaq National Market, the current market value
shall be the mean of the last reported bid and asked prices reported
by the Nasdaq SmallCap Market or, if not traded thereon, by the
National Quotation Bureau, Inc. on the last business day prior to the
date of the exercise of this Warrant; or
(3) If the Class A Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the current market value shall be an amount determined in
such reasonable manner as may be prescribed by the Board of Directors
of the Company.
SECTION 11. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Class A Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Warrants, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue or reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such holder shall have exercised such Warrants and
been issued shares of Class A Common Stock in accordance with the provisions
hereof.
SECTION 12. RIGHTS OF ACTION. All rights of action with respect to
this Agreement are vested in the respective Registered Holders of the Warrants,
and any Registered
-17-
Holder of a Warrant, without consent of the Warrant Agent or of the holder of
any other Warrant, may, in his own behalf and for his own benefit, enforce
against the Company his right to exercise his Warrants for the purchase of
shares of Class A Common Stock in the manner provided in the Warrant Certificate
and this Agreement.
SECTION 13. AGREEMENT OF WARRANT HOLDERS. Every holder of a
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 7 hereof.
SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be delivered to the
Warrant Agent and cancelled by it and retired. The Warrant Agent shall also
cancel the Warrant Certificate or Warrant Certificates following exercise of any
or all of the Warrants represented thereby or delivered to it for transfer or
exchange.
SECTION 15. CONCERNING THE WARRANT AGENT. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay the Company, as provided in
Section 4, all moneys received by the Warrant Agent upon the exercise of such
Warrants. The Warrant Agent shall, upon request of the Company from time to
time, deliver to the Company such complete reports of registered ownership of
the Warrants and such complete records of transactions with respect to the
Warrants and the shares of Common Stock as the Company may request. The Warrant
Agent shall also make available to the Company and the Underwriter for
inspection by their
-18-
agents or employees, from time to time as either of them may request, such
original books of accounts and record (including original Warrant Certificates
surrendered to the Warrant Agent upon exercise of Warrants) as may be maintained
by the Warrant Agent in connection with the issuance and exercise of Warrants
hereunder, such inspections to occur at the Warrant Agent's Corporate Office,
during normal business hours.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same. It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it harmless
against any and all losses, expenses and liabilities, including judgments, costs
and reasonable counsel fees, for anything done or omitted by the Warrant Agent
in the execution of its duties and powers hereunder except losses, expenses and
liabilities arising as a result of the Warrant Agent's negligence or wilful
misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or wilful misconduct), after giving 30
days' prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability
of the Warrant
-19-
Agent to act as such hereunder, the Company shall appoint a new warrant agent in
writing. If the Company shall fail to make such appointment within a period of
15 days after it has been notified in writing of such resignation by the
resigning Warrant Agent, then the Registered Holder of any Warrant Certificate
may apply to any court of competent jurisdiction for the appointment of a new
warrant agent. Any new warrant agent, whether appointed by the Company or by
such a court, shall be a bank or trust company having a capital and surplus, as
shown by its last published report to its stockholders, of not less than
$10,000,000 or a stock transfer company that is a registered transfer agent
under the Securities Exchange Act of 1934. After acceptance in writing of such
appointment by the new warrant agent is received by the Company, such new
warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any consolidation
to which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 16. MODIFICATION OF AGREEMENT. Subject to the provisions
of Section 4(b), the parties hereto and the Company may by supplemental
agreement make any changes or corrections in this Agreement (i) that they shall
deem appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or manifest mistake or error herein contained; (ii) to
reflect an increase in the number of Class A Warrants which are to be governed
by this Agreement resulting from (a) a subsequent public offering of Company
securities which includes Class A Warrants or (b) a subsequent private placement
of Company securities which includes Class A Warrants, in either case having the
same terms and conditions as the Class A Warrants originally covered by or
subsequently added to this Agreement under this Section 16, PROVIDED, HOWEVER,
that in the case of a private placement, the amendment to this Agreement will be
effective only at such time as the resale of such Warrants, as well as the
-20-
securities underlying such Warrants is covered by an effective registration
statement under the Act; or (iii) that they may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Warrant
Certificates; PROVIDED, HOWEVER, that this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing not less
than 50% of the Warrants then outstanding; and PROVIDED, FURTHER, that no change
in the number or nature of the securities purchasable upon the exercise of any
Warrant, or the Purchase Price therefor, or the acceleration of the Warrant
Expiration Date, shall be made without the consent in writing of the Registered
Holder of the Warrant Certificate representing such Warrant, other than such
changes as are specifically prescribed by this Agreement as originally executed
or are made in compliance with applicable law.
SECTION 17. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at
the address of such holder as shown on the registry books maintained by the
Warrant Agent; if to the Company, at Amerigon Incorporated, 404 East Huntington
Drive, Monrovia, California 91016, attention: President, or at such other
address as may have been furnished to the Warrant Agent in writing by the
Company; if to the Warrant Agent, at its Corporate Office; if to the
Underwriter, at D.H. Blair Investment Banking Corp., 44 Wall Street, New York,
New York 10005.
SECTION 18. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Company and, the Warrant Agent and their
respective successors and assigns, and the holders from time to time of Warrant
Certificates . Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 20. TERMINATION. This Agreement shall terminate at the
close of business on the earlier of the Warrant Expiration Date or the date upon
which all Warrants (including the warrants issuable upon exercise of the Unit
Purchase Options) have been exercised, except that the Warrant Agent shall
account to the Company for cash held by it and the provisions of Section 15
hereof shall survive such termination.
-21-
SECTION 21. COUNTERPARTS. This Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
AMERIGON INCORPORATED
By:
------------------------------
U.S STOCK TRANSFER CORPORATION
By:
------------------------------
Authorized Officer
D.H. BLAIR INVESTMENT BANKING CORP.
By:
------------------------------
Martin A. Bell
Vice Chairman and
General Counsel
-22-
EXHIBIT A
[FORM OF FACE OF CLASS A WARRANT CERTIFICATE]
No. AW __________Class A Warrants
VOID AFTER ______________________
CLASS A WARRANT CERTIFICATE FOR PURCHASE
OF CLASS A COMMON STOCK
AMERIGON INCORPORATED
This certifies that FOR VALUE RECEIVED __________________ or
registered assigns (the "Registered Holder") is the owner of the number of
Class A Warrants ("Class A Warrants") specified above. Each Class A Warrant
represented hereby initially entitles the Registered Holder to purchase, subject
to the terms and conditions set forth in this Warrant Certificate and the
Warrant Agreement (as hereinafter defined), one fully paid and nonassessable
share of Class A Common Stock, no par value ("Class A Common Stock"), of
Amerigon Incorporated, a California corporation (the "Company"), at any time
between ____________, and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of U.S. Stock
Transfer Corporation as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $_____ (the "Purchase Price") in lawful money of the
United States of America in cash or by official bank or certified check made
payable to Amerigon Incorporated.
This Warrant Certificate and each Class A Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
______________, by and among the Company, the Warrant Agent and D.H. Blair
Investment Banking Corp.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Class A Common Stock
subject to purchase upon the exercise of each Class A Warrant represented hereby
are subject to modification or adjustment.
Each Class A Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Class A Common Stock will
be issued. In the case of the exercise of less than all the Class A Warrants
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new
A-1
Warrant Certificate or Warrant Certificates of like tenor, which the Warrant
Agent shall countersign, for the balance of such Class A Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_________________, or such earlier date as the Class A Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Class A Warrants represented hereby unless a registration
statement under the Securities Act of 1933, as amended, with respect to such
securities is effective. The Company has covenanted and agreed that it will
file a registration statement and will use its best efforts to cause the same to
become effective and to keep such registration statement current while any of
the Class A Warrants are outstanding. The Class A Warrants represented hereby
shall not be exercisable by a Registered Holder in any state where such exercise
would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class A Warrants, each of such new Warrant Certificates to
represent such number of Class A Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Class A Warrant Certificate at such office, a new Warrant
Certificate or Warrant Certificates representing an equal aggregate number of
Class A Warrants will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Class A Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class A Warrants represented hereby may be redeemed at the
option of the Company, at a redemption price of $.05 per Class A Warrant at
any time after _________________, provided the Market Price (as defined in
the Warrant Agreement) for the Class A Common Stock shall exceed $______ per
share. Notice of redemption shall be given not later than the thirtieth day
before the date fixed for redemption, all as provided in the Warrant
Agreement. On and after the date fixed for redemption, the Registered Holder
shall have no rights with respect to the Class A Warrants represented hereby
except to receive the $.05 per Class A Warrant upon surrender of this Warrant
Certificate.
A-2
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class A Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
the Class A Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
AMERIGON INCORPORATED
Dated: By:
------------- ------------------------------
By:
------------------------------
[seal]
Countersigned:
U.S. STOCK TRANSFER CORPORATION
- ------------------------------------
as Warrant Agent
By:
---------------------------------
Authorized Officer
A-3
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $_______ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise _______ Class A Warrants represented by this Warrant Certificate, and
to purchase the securities issuable upon the exercise of such Class A Warrants,
and requests that certificates for such securities shall be issued in the name
of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
and be delivered to
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
and if such number of Class A Warrants shall not be all the Class A Warrants
evidenced by this Warrant Certificate, that a new Class A Warrant Certificate
for the balance of such Class A Warrants be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
The undersigned represents that the exercise of the Class A Warrants
evidenced hereby was solicited by a member of the National Association of
Securities Dealers, Inc. If not
A-4
solicited by an NASD member, please write "unsolicited" in the space below.
Unless otherwise indicated by listing the name of another NASD member firm, it
will be assumed that the exercise was solicited by D.H. Blair Investment
Banking Corp. or D.H. Blair & Co., Inc.
----------------------------------------
(Name of NASD Member)
Dated: X
-------------- -----------------------------------
----------------------------------------
----------------------------------------
Address
----------------------------------------
Taxpayer Identification Number
----------------------------------------
Signature Guaranteed
----------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-5
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF TRANSFEREE
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
_________________ of the Class A Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________________________ Attorney to transfer this Warrant
Certificate on the books of the Company, with full power of substitution in the
premises.
Dated: X
-------------- -----------------------------------
Signature Guaranteed
----------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-6
EXHIBIT A
[FORM OF FACE OF CLASS A WARRANT CERTIFICATE]
No. AW __________Class A Warrants
VOID AFTER ______________________
CLASS A WARRANT CERTIFICATE FOR PURCHASE
OF CLASS A COMMON STOCK
AMERIGON INCORPORATED
This certifies that FOR VALUE RECEIVED __________________ or
registered assigns (the "Registered Holder") is the owner of the number of
Class A Warrants ("Class A Warrants") specified above. Each Class A Warrant
represented hereby initially entitles the Registered Holder to purchase, subject
to the terms and conditions set forth in this Warrant Certificate and the
Warrant Agreement (as hereinafter defined), one fully paid and nonassessable
share of Class A Common Stock, no par value ("Class A Common Stock"), of
Amerigon Incorporated, a California corporation (the "Company"), at any time
between ____________, and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of U.S. Stock
Transfer Corporation as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $_____ (the "Purchase Price") in lawful money of the
United States of America in cash or by official bank or certified check made
payable to Amerigon Incorporated.
This Warrant Certificate and each Class A Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
______________, by and among the Company, the Warrant Agent and D.H. Blair
Investment Banking Corp.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Class A Common Stock
subject to purchase upon the exercise of each Class A Warrant represented hereby
are subject to modification or adjustment.
Each Class A Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Class A Common Stock will
be issued. In the case of the exercise of less than all the Class A Warrants
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new
A-1
Warrant Certificate or Warrant Certificates of like tenor, which the Warrant
Agent shall countersign, for the balance of such Class A Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_________________, or such earlier date as the Class A Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Class A Warrants represented hereby unless a registration
statement under the Securities Act of 1933, as amended, with respect to such
securities is effective. The Company has covenanted and agreed that it will
file a registration statement and will use its best efforts to cause the same to
become effective and to keep such registration statement current while any of
the Class A Warrants are outstanding. The Class A Warrants represented hereby
shall not be exercisable by a Registered Holder in any state where such exercise
would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class A Warrants, each of such new Warrant Certificates to
represent such number of Class A Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Class A Warrant Certificate at such office, a new Warrant
Certificate or Warrant Certificates representing an equal aggregate number of
Class A Warrants will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Class A Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class A Warrants represented hereby may be redeemed at the option
of the Company, at a redemption price of $.05 per Class A Warrant at any time
after ____________________, provided the Market Price (as defined in the Warrant
Agreement) for the Class A Common Stock shall exceed $______ per share. Notice
of redemption shall be given not later than the thirtieth day before the date
fixed for redemption, all as provided in the Warrant Agreement. On and after
the date fixed for redemption, the Registered Holder shall have no rights with
respect to the Class A Warrants represented hereby except to receive the $.05
per Class A Warrant upon surrender of this Warrant Certificate.
A-2
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class A Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
the Class A Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
AMERIGON INCORPORATED
Dated: By:
------------- ------------------------------
By:
------------------------------
[seal]
Countersigned:
U.S. STOCK TRANSFER CORPORATION
- ------------------------------------
as Warrant Agent
By:
---------------------------------
Authorized Officer
A-3
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $_______ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise _______ Class A Warrants represented by this Warrant Certificate, and
to purchase the securities issuable upon the exercise of such Class A Warrants,
and requests that certificates for such securities shall be issued in the name
of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
and be delivered to
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
and if such number of Class A Warrants shall not be all the Class A Warrants
evidenced by this Warrant Certificate, that a new Class A Warrant Certificate
for the balance of such Class A Warrants be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
The undersigned represents that the exercise of the Class A Warrants
evidenced hereby was solicited by a member of the National Association of
Securities Dealers, Inc. If not
A-4
solicited by an NASD member, please write "unsolicited" in the space below.
Unless otherwise indicated by listing the name of another NASD member firm, it
will be assumed that the exercise was solicited by D.H. Blair Investment
Banking Corp. or D.H. Blair & Co., Inc.
----------------------------------------
(Name of NASD Member)
Dated: X
-------------- -----------------------------------
----------------------------------------
----------------------------------------
Address
----------------------------------------
Taxpayer Identification Number
----------------------------------------
Signature Guaranteed
----------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-5
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF TRANSFEREE
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
[please print or type name and address]
_________________ of the Class A Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________________________ Attorney to transfer this Warrant
Certificate on the books of the Company, with full power of substitution in the
premises.
Dated: X
-------------- -----------------------------------
Signature Guaranteed
----------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-6
PROMISSORY NOTE PAYABLE
$200,000.00 September 9,1996
ON DEMAND, for value received, Amerigon Incorporated promises to pay to the
order of Lon E. Bell, two hundred thousand dollars in lawful money of the
United States of America, at Monrovia, California, with interest at the rate
of eight percent (8%) per annum. Should suit be commenced to enforce payment
of this note, Amerigon Incorporated promises to pay such additional sum as
the court may adjudge reasonable as attorney's fees in said suit.
Amerigon lncorporated
/s/ R. John Hamman, Jr.
------------------------------------
by R. John Hamman, Jr.
Vice President
Option to Purchase
1,500 Units
AMERIGON INCORPORATED
UNIT PURCHASE OPTION
Dated: December __, 1996
THIS CERTIFIES THAT_______ (herein sometimes called the "Holder") is
entitled to purchase from Amerigon Incorporated, a California corporation
(hereinafter called the "Company"), at the prices and during the periods as
hereinafter specified, up to ONE THOUSAND FIVE HUNDRED (1,500) Units ("Units"),
each Unit consisting of _____ shares of the Company's Class A Common Stock, no
par value, as now constituted ("Class A Common Stock"), and _______ Class A
warrants ("Class A Warrants"). Each Class A Warrant is exercisable to purchase
one share of Class A Common Stock at an exercise price of $_______ from ______
__, 199_ to ________ , 200_. The Class A Warrants are herein referred to as
the "Warrants."
The Units have been registered under a Registration Statement on
Form S-2, (File No. 333-_______ ) declared effective by the Securities and
Exchange Commission on _______ (the "Registration Statement". This Option,
together with options of like tenor, constituting in the aggregate options (the
"Options") to purchase 1,500 Units, subject to adjustment in accordance with
Section 8 of this Option (the "Option Units"), was originally issued pursuant to
an underwriting agreement between the Company and D.H. Blair Investment Banking
Corp., as underwriter (the "Underwriter") in connection with a public offering
(the "Offering") of 15,000 Units (the "Public Units") through the Underwriter,
in consideration of $1.50 received for the Options.
Except as specifically otherwise provided herein, the Class A Common
Stock and the Warrants issued pursuant to the option herein granted (the
"Option") shall bear the same terms and conditions as described under the
caption "Description of Securities" in the Registration Statement, and the
Warrants shall be governed by the terms of the Warrant Agreement dated as of
_______ __, 199_ executed in connection with such public offering (the "Warrant
Agreement"), and except that (i) the holder shall have registration rights under
the Securities Act of 1933, as amended (the "Act"), for the Option, the Class A
Common Stock and the Warrants included in the Option Units, and the shares of
Class A Common Stock underlying the Warrants, as more fully described in
Section 6 of this Option and (ii) the Warrants issuable upon exercise of the
Option will be subject to redemption by the Company pursuant to the Warrant
Agreement at any time after the Option has been exercised and the Warrants
underlying the Option Units are outstanding. Any such redemption shall be on
the same terms and conditions as the Warrants included in the Public Units (the
"Public Warrants"). The Company will list the Class A Common Stock underlying
this Option and, at the Holder's request the
Warrants, on the Nasdaq National Market, the Nasdaq SmallCap Market or such
other exchange or market as the Class A Common Stock or Public Warrants may then
be listed or quoted. In the event of any extension of the expiration date or
reduction of the exercise price of the Public Warrants, the same changes to the
Warrants included in the Option Units shall be simultaneously effected.
1. The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with Section 8 of this Option ("the
"Exercise Price"), and during the periods as follows:
(a) During the period from _______, 199_ to _______, 199_
inclusive, the Holder shall have no right to purchase any Option
Units hereunder, except that in the event of any merger,
consolidation or sale of all or substantially all the capital
stock or assets of the Company or in the case of any statutory
exchange of securities with another corporation (including any
exchange effected in connection with a merger of another
corporation into the Company) subsequent to _______, 199_, the
Holder shall have the right to exercise this Option and the
Warrants included herein at such time and receive the kind and
amount of shares of stock and other securities and property
(including cash) which a holder of the number of shares of Class
A Common Stock underlying this Option and the Warrants included
in this Option would have owned or been entitled to receive had
this Option been exercised immediately prior thereto.
(b) Between _______, and _______,200_ inclusive, the Holder
shall have the option to purchase Option Units hereunder at a
price of $_______ per Unit. For purposes of the adjustments
under Section 8 hereof, the Per Share Exercise Price shall be
deemed to be $_______, subject to further adjustment as provided
in such Section 8.
(c) After _________, 200_ the Holder shall have no right to
purchase any Units hereunder.
2. (a) The rights represented by this Option may be exercised at
any time within the period above specified, in whole or in part, by (i) the
surrender of this Option (with the purchase form at the end hereof properly
executed) at the principal executive office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company); and
(ii) payment to the Company of the exercise price then in effect for the number
of Option Units specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any. This Option shall be deemed to have
been exercised, in whole or in part to the extent specified, immediately prior
to the close of business on the date this Option is surrendered and payment is
made in accordance with the foregoing provisions of this Section 2, and the
person or persons in whose name or names the certificates for shares of Class A
Common Stock and
-2-
Warrants shall be issuable upon such exercise shall become the holder or holders
of record of such Class A Common Stock and Warrants at that time and date. The
certificates for the Class A Common Stock and Warrants so purchased shall be
delivered to the Holder as soon as practicable but not later than ten (10) days
after the rights represented by this Option shall have been so exercised.
(b) At any time during the period above specified, during which
this Option may be exercised, the Holder may, at its option, exchange this
Option, in whole or in part (an "Option Exchange"), into the number of Option
Units determined in accordance with this Section (b), by surrendering this
Option at the principal office of the Company or at the office of its stock
transfer agent, accompanied by a notice stating such Holder's intent to effect
such exchange, the number of Option Units into which this Option is to be
exchanged and the date on which the Holder requests that such Option Exchange
occur (the "Notice of Exchange"). The Option Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
shares of Class A Common Stock and Warrants issuable upon such Option Exchange
and, if applicable, a new Option of like tenor evidencing the balance of the
Option Units remaining subject to this Option, shall be issued as of the
Exchange Date and delivered to the Holder within seven (7) days following the
Exchange Date. In connection with any Option Exchange, this Option shall
represent the right to subscribe for and acquire the number of Option Units
(rounded to the next highest integer) equal to (x) the number of Option Units
specified by the Holder in its Notice of Exchange up to the maximum number of
Option Units subject to this option (the "Total Number") less (y) the number of
Option Units equal to the quotient obtained by dividing (A) the product of the
Total Number and the existing Exercise Price by (B) the Fair Market Value.
"Fair Market Value" shall have the meaning indicated in Subsections (i) through
(iv) below for the aggregate value of all shares of Class A Common Stock and
Warrants which comprise a Unit:
(i) If the Class A Common Stock or Warrants are listed on a
national securities exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on the Nasdaq
National Market or the Nasdaq SmallCap Market, the Fair Market Value
shall be the average of the last reported sale prices or the average
of the means of the last reported bid and asked prices, respectively,
of Class A Common Stock or Warrants, respectively, on such exchange or
market for the twenty (20) business days ending on the last business
day prior to the Exchange Date; or
(ii) If the Class A Common Stock or Warrants are not so
listed or admitted to unlisted trading privileges, the Fair Market
Value shall be the average of the means of the last reported bid and
asked prices of the Class A Common Stock or Warrants, respectively,
for the twenty (20) business days ending on the last business day
prior to the Exchange Date; or
-3-
(iii) If the Class A Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are
not so reported, the Fair Market Value shall be an amount, not less
than book value thereof as at the end of the most recent fiscal year
of the Company ending prior to the Exchange Date, determined in such
reasonable manner as may be prescribed by the Board of Directors of
the Company; or
(iv) If the Warrants are not so listed or admitted to
unlisted trading privileges, and bid and asked prices are not so
reported for Warrants, then Fair Market Value for the Warrants shall
be an amount equal to the difference between (i) the Fair Market Value
of the shares of Class A Common Stock and Warrants which may be
received upon the exercise of the Warrants, as determined herein, and
(ii) the Warrant Exercise Price.
3. Neither this Option nor the underlying securities shall be
transferred, sold, assigned, or hypothecated for a period of two years
commencing ___________, 199_, except that they may be transferred to successors
of the Holder, and may be assigned in whole or in part to any person who is an
officer of the Holder, any member participating in the selling group relating to
the Offering or any officer of such selling group member. Any such assignment
shall be effected by the Holder (i) executing the form of assignment at the end
hereof and (ii) surrendering this Option for cancellation at the office or
agency of the Company referred to in Section 2 hereof, accompanied by a
certificate (signed by an officer of the Holder if the Holder is a corporation),
stating that each transferee is a permitted transferee under this Section 3
hereof; whereupon the Company shall issue, in the name or names specified by the
Holder (including the Holder) a new Option or Options of like tenor and
representing in the aggregate rights to purchase the same number of Option Units
as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Class A
Common Stock which may be issued as part of the Option Units purchased hereunder
and the Class A Common Stock which may be issued upon exercise of the Warrants
will, upon issuance, be duly and validly issued, fully paid and nonassessable
and no personal liability will attach to the holder thereof. The Company
further covenants and agrees that during the periods within which this Option
may be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Class A Common Stock to provide for the
exercise of this Option and that it will have authorized and reserved a
sufficient number of shares of Class A Common Stock for issuance upon exercise
of the Warrants included in the Option Units.
5. This Option shall not entitle the Holder to any voting rights or
any other rights, or subject the Holder to any liabilities, as a stockholder
of the Company.
6. (a) The Company shall advise the Holder or its transferee,
whether the Holder holds the Option or has exercised the Option and holds Option
Units or any of the securities underlying the Option Units, by written notice at
least four weeks prior to the filing of any post-effective amendment to the
Registration Statement or of any new registration statement
-4-
or post-effective amendment thereto under the Act covering any securities of the
Company, for its own account or for the account of others, and will for a period
of seven years from the effective date of the Registration Statement, upon the
request of the Holder, include in any such post-effective amendment or
registration statement, such information as may be required to permit a public
offering of the Option, all or any of the Option Units, the Class A Common Stock
or Warrants included in the Option Units or the Class A Common Stock issuable
upon the exercise of the Warrants (the "Registrable Securities").
(b) If the Underwriter, D.H. Blair & Co., Inc., J. Morton Davis
or any 50% holder (as defined below) (each, a "Requesting Holder") shall give
notice to the Company at any time to the effect that such holder desires to
register under the Act this Option, the Option Units or any of the underlying
securities contained in the Option Units under such circumstances that a public
distribution (within the meaning of the Act) of any such securities will be
involved then the Company will promptly, but no later than two weeks after
receipt of such notice, file a post-effective amendment to the current
Registration Statement or a new registration statement on Form S-1 or such other
form as the holder requests pursuant to the Act, to the end that the Option, the
Option Units and/or any of the securities underlying the Option Units may be
publicly sold under the Act as promptly as practicable thereafter and the
Company will use its best efforts to cause such registration to become and
remain effective (including the taking of such steps as are necessary to obtain
the removal of any stop order); provided, that such holder shall furnish the
Company with appropriate information in connection therewith as the Company may
reasonably request in writing. Any Requesting Holder may, at its option,
request the filing of a post-effective amendment to the current Registration
Statement or a new registration statement under the Act on one occasion during
the four year period beginning one year from the effective date of the
Registration Statement. Any Requesting Holder may, at its option request the
registration of the Option and/or any of the securities underlying the Option in
a registration statement made by the Company as contemplated by Section 6(a) or
in connection with a request made pursuant to this Section 6(b) prior to
acquisition of the Option Units issuable upon exercise of the Option and even
though the Holder has not given notice of exercise of the Option. Any
Requesting Holder may, at its option, request such post-effective amendment or
new registration statement during the described period with respect to the
Option, the Option Units as a unit, or separately as to the Class A Common Stock
and/or Warrants included in the Option Units and/or the Class A Common Stock
issuable upon the exercise of the Warrants, and such registration rights may be
exercised by the Requesting Holder prior to or subsequent to the exercise of the
Option.
Within ten days after receiving any such notice pursuant to this
Section 6(b), the Company shall give notice to the other holders of the Options,
advising that the Company is proceeding with such post-effective amendment or
registration statement and offering to include therein the securities underlying
the Options of the other holders, provided that they shall furnish the Company
with such appropriate information (relating to the intentions of such holders)
in connection therewith as the Company shall reasonably request in writing. In
the event the registration statement is not filed within the period specified
herein and in the event the registration statement is not declared effective
under the Act prior to ________, 200_, then, at
-5-
the holders' request, the Company shall purchase the Options from the holder for
a per option price equal to the difference between (i) the Fair Market Value of
the Class A Common Stock on the date of notice multiplied by the number of
shares of Class A Common Stock issuable upon exercise of the Option and the
underlying Warrants and (ii) the average per share purchase price of the Option
and each share of Class A Common Stock underlying the Option. All costs and
expenses of the first such post-effective amendment or new registration
statement under this paragraph 6(b) shall be borne by the Company, except that
the holders shall bear the fees of their own counsel and any underwriting
discounts or commissions applicable to any of the securities sold by them. If
the Company determines to include securities to be sold by it in any
registration statement originally requested pursuant to this Section 6(b), such
registration shall instead be deemed to have been a registration under
Section 6(a) and not under this Section 6(b).
The Company will maintain such registration statement or
post-effective amendment current under the Act for a period of at least six
months (and for up to an additional three months if requested by the Holder)
from the effective date thereof.
(c) The term "50% holder" as used in this Section 6 shall mean
the holder of at least 50% of the Class A Common Stock and the Warrants
underlying the Options (considered in the aggregate) and shall include any owner
or combination of owners of such securities, which ownership shall be calculated
by determining the number of shares of Class A Common Stock held by such owner
or owners as well as the number of shares then issuable upon exercise of the
Warrants.
(d) Whenever pursuant to Section 6 a registration statement
relating to any Registrable Securities is filed under the Act, amended or
supplemented, the Company shall (i) supply prospectuses and such other documents
as the Holder may request in order to facilitate the public sale or other
disposition of the Registrable Securities, (ii) use its best efforts to register
and qualify any of the Registrable Securities for sale in such states as such
Holder designates, (iii) furnish indemnification in the manner provided in
Section 7 hereof, (iv) notify each Holder of Registrable Securities at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, contains
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and, at the request of any such Holder, prepare and furnish to such
Holder a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state material fact required to
be stated therein or necessary to make the statements therein not misleading and
(v) do any and all other acts and things which may be necessary or desirable to
enable such Holders to consummate the public sale or other disposition of the
Registrable Securities, the Holder shall furnish appropriate information in
connection therewith and indemnification as set forth in Section 7.
-6-
(e) The Company shall not permit the inclusion of any securities
other than the Registrable Securities to be included in any registration
statement filed pursuant to Section 6(b) hereof without the prior written
consent of the Requesting Holders.
(f) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (or, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) if such registration
includes an underwritten public offering, a "cold comfort" letter dated the
effective date of such registration statement and dated the date of the closing
under the underwriting agreement signed by the independent public accountants
who have issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(g) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonable
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to non-confidential books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
as any such Holder shall reasonably request.
7. (a) Whenever pursuant to Section 6 a registration statement
relating to the Registrable Securities is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless each holder of the
Registrable Securities covered by such registration statement, amendment or
supplement (such holder being hereinafter called the "Distributing Holder"), and
each person, if any, who controls (within the meaning of the Act) the
Distributing Holder, and each underwriter (within the meaning of the Act) of
such securities and each person, if any, who controls (within the meaning of the
Act) any such underwriter, against any losses, claims, damages or liabilities,
joint or several, to which the Distributing Holder, any such controlling person
or any such underwriter may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement or any
preliminary prospectus or final
-7-
prospectus constituting a part thereof or any amendment or supplement thereto,
or arise out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and will reimburse the Distributing Holder and each such controlling
person and underwriter for any legal or other expenses reasonably incurred by
the Distributing Holder or such controlling person or underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus, said final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished by such Distributing
Holder specifically for use in the preparation thereof.
(b) If requested by the Company prior to the filing of any
registration statement covering the Registrable Securities, each Distributing
Holder will agree, severally but not jointly, to indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the Company
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final prospectus or said amendment
or supplement in reliance upon and in conformity with written information
furnished by such Distributing Holder specifically for use in the preparation
thereof; except that the maximum amount which may be recovered from the
Distributing Holder pursuant to this Section 7 or otherwise shall be limited to
the amount of net proceeds received by the Distributing Holder from the sale of
the Registrable Securities.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses
-8-
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
(8) In addition to the provisions of Section 1(a) of this Option, the
Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Options shall be subject to adjustment from
time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Class A Common Stock in
shares of Class A Common Stock, (ii) subdivide or reclassify its
outstanding shares of Class A Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares of Class
A Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Class A Common
Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Class A Common
Stock outstanding immediately prior to such action. Such adjustment
shall be made successively whenever any event listed above shall
occur.
(b) Whenever the Exercise Price payable upon exercise of each
Option is adjusted pursuant to Section (a) above, (i) the number of
shares of Class A Common Stock included in an Option Unit shall
simultaneously be adjusted by multiplying the number of shares of
Class A Common Stock included in Option Unit immediately prior to such
adjustment by the Exercise Price in effect immediately prior to such
adjustment and dividing the product so obtained by the Exercise Price,
as adjusted and (ii) the number of shares of Class A Common Stock or
other securities issuable upon exercise of the Warrants included in
the Option Units and the exercise price of such Warrants shall be
adjusted in accordance with the applicable terms of the Warrant
Agreement.
(c) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least five
cents ($0.05) in such price; provided, however, that any adjustments
which by reason of this Subsection (c) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under this
Section 8 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this
Section 8 to the contrary notwithstanding, the Company shall be
entitled, but shall not be required, to make such changes in the
Exercise Price, in addition to those required by this Section 8, as it
shall determine, in its sole discretion, to be advisable in order that
any dividend or distribution in shares of Class A Common Stock, or any
-9-
subdivision, reclassification or combination of Class A Common Stock,
hereafter made by the Company shall not result in any Federal Income
tax liability to the holders of Class A Common Stock or securities
convertible into Class A Common Stock (including Warrants issuable
upon exercise of this Option).
(d) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly but no later than 10 days after any request
for such an adjustment by the Holder, cause a notice setting forth the
adjusted Exercise Price and adjusted number of Option Units issuable
upon exercise of each Option and, if requested, information describing
the transactions giving rise to such adjustments, to be mailed to the
Holders, at the address set forth herein, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. The Company
may retain a firm of independent certified public accountants selected
by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 8,
and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(e) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (a) above, the Holder of this Option
thereafter shall become entitled to receive any shares of the Company,
other than Class A Common Stock, thereafter the number of such other
shares so receivable upon exercise of this Option shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Class
A Common Stock contained in Subsections (a) to (c), inclusive above.
(f) In case any event shall occur as to which the other
provisions of this Section 8 or Section 1(a) hereof are not strictly
applicable but as to which the failure to make any adjustment would
not fairly protect the purchase rights represented by this Option in
accordance with the essential intent and principles hereof then, in
each such case, the Holders of Options representing the right to
purchase a majority of the Option Units may appoint a firm of
independent public accountants reasonably acceptable to the Company,
which shall give their opinion as to the adjustment, if any, on a
basis consistent with the essential intent and principles established
herein, necessary to preserve the purchase rights represented by the
Options. Upon receipt of such opinion, the Company will promptly mail
a copy thereof to the Holder of this Option and shall make the
adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
9. This Agreement shall be governed by and in accordance with the
laws of the State of New York, without giving effect to the principles of
conflicts of law thereof.
-10-
IN WITNESS WHEREOF, ____________ has caused this Option to be signed
by its duly authorized officers under its corporate seal, and this Option to be
dated ________, 199_.
AMERIGON INCORPORATED
By:
-----------------------------------
Lon E. Bell, Ph.D., President
(Corporate Seal)
Attest:
- ------------------------------
-11-
PURCHASE FORM
(To be signed only upon exercise of option)
The undersigned, the holder of the foregoing Option, hereby
irrevocably elects to exercise the purchase rights represented by such Option
for, and to purchase thereunder, Units of Amerigon Incorporated, each Unit
consisting of _________ shares of Class A Common Stock, no par value, and
_________ Class A Warrant(s) to purchase Class A Common Stock and herewith makes
payment of $_________ thereof.
Dated: Instructions for Registration of Stock and
------------ Warrants
----------------------------------------
Print Name
----------------------------------------
Address
----------------------------------------
Signature
OPTION EXCHANGE
The undersigned, pursuant to the provisions of the foregoing Option,
hereby elects to exchange its Option for _________ Units of Amerigon
Incorporated, each Unit consisting of ______ shares of Class A Common Stock, no
par value, and _________ Class A Warrant(s) to purchase Class A Common Stock,
pursuant to the Option Exchange provisions of the Option.
Dated:
----------------
----------------------------------------
Print Name
----------------------------------------
Address
----------------------------------------
Signature
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto ____________________ the right to purchase Units represented by
the foregoing Option to the extent of ___ Units , and appoints _____________
attorney to transfer such rights on the books of Amerigon Incorporated, with
full power of substitution in the premises.
Dated:
---------------
D.H. BLAIR INVESTMENT BANKING CORP.
By:
-----------------------------------
----------------------------------------
Address
In the presence of:
INCENTIVE STOCK OPTION AGREEMENT
August 9, 1995
THIS AGREEMENT is made as of August 9, 1995 by and between Dr. Lon E. Bell
("Bell") and R. John Hamman, Jr. ("Optionee").
R E C I T A L S
A. Bell is a founder and principal shareholder of Amerigon Incorporated (The
"Company").
B. Optionee is an employee of the Company.
C. Bell grants to Optionee an option to acquire shares of the Company's
Class A common Stock ("Common Stock") owned by Bell ("Bell Shares"), some of
which shares ("Bell Escrow Shares") are held in escrow (the "Escrow")
pursuant to a certain Escrow Agreement by and among Bell, D. H. Blair
Investment Banking Corporation (the "Underwriter"), an escrow agent and
certain other shareholders of the Company (the "Escrow Agreement").
A G R E E M E N T
NOW, THEREFORE in consideration of the foregoing premises and the mutual
covenants contained herein the parties hereto agree as follows:
1. Grant of Option. Bell hereby grants to Optionee, subject to the vesting
schedule set forth herein, an option to acquire 10,000 Bell Shares, of
which 2,500 are not held in Escrow (the "Unrestricted Shares"), and 2,500
are held in the Escrow Target 1, as described on page 42 of the Company's
stock prospectus dated June 10, 1993, and 5,000 are subject to Escrow
Target 2, as described in the same prospectus.
2. Option Price. Subject to the terms and conditions hereof, Optionee may
purchase the Option Shares at the price of $12.00 per share.
3. Term. This Option shall expire on the day before the fifth (5th)
anniversary of the Grant Date, unless such Option shall have been
terminated prior to that date in accordance with the provisions of this
Agreement. The terms "Parent" and "Subsidiary" herein mean a parent
corporation or a subsidiary corporation, as such terms are defined in
Section 424(e) and (f) of the Internal Revenue Code of 1986, as amended
("the Code").
Incentive Stock Option Agreement
R. John Hamman, Jr.
August 9, 1995
4. Shares Subject to Exercise. This option vests 8/9/1996. The 2,500
Unrestricted shares shall be subject to exercise on and after 8/9/1996. As
to the Escrow Shares, this Option vest only in the event and to the extent
the financial objectives for release of Bell Escrow Shares from Escrow, as
provided in the Escrow Agreement, are met and Bell Escrow Shares are
released from Escrow. All such shares shall thereafter remain subject to
exercise for the term specified in Paragraph 3 hereof, provided that
Optionee is then and has continuously been in the employ of the Company, a
Parent or a Subsidiary, subject, however, to the provisions of Paragraph 7
hereof.
5. Method and Time of Exercise. The Option may be exercised by written notice
delivered to Bell stating the number of shares with respect to which the
Option is being exercised, together with a check made payable to Bell in
the amount of the purchase price of such shares and a check made payable to
the Company in the amount of applicable federal, state, and local
withholding taxes and the written statement provided for in Paragraph 13
hereof. Not less than 100 shares may be purchased at any one time unless
the number purchased is the total number purchased under such Option at the
time. Only whole shares may be purchased.
6. Tax Withholding. As a condition to exercise of this Option, Bell may
require Optionee to pay to the Company all applicable federal, state, and
local taxes which the Company is required to withhold with respect to the
exercise of this Option.
7. Termination of Employment or Other Relationship. Upon termination of
Optionee's employment with or upon Optionee's ceasing to perform other
services for the Company, a Parent or Subsidiary, Optionee's rights to
exercise this Option shall be only as follows (in no case do the time
periods referred to below extend the term specified in this Option):
a. Death or Disability. Upon the death of Optionee, this Option may be
exercised (to the extent exercisable at Optionee's death), unless it
otherwise expires, within three months after the date of Optionee's
death by Optionee's representative or by the person entitled thereto
under Optionee's will or the laws of interstate succession. Upon the
disability (within the meaning of Section 22(e)(3) of the Code) of an
Optionee, this Option may be exercised (to the extent exercisable as
of the date of disability), unless it otherwise expires, within two
years after the date of Optionee's disability.
Incentive Stock Option Agreement
R. John Hamman, Jr.
August 9, 1995
b. Retirement. Upon the retirement (either pursuant to a Company
retirement plan, if any, or pursuant to the approval of the Company),
of an employee or the cessation of services provided by a former
employee as a consultant or director this Option may be exercised (to
the extent exercisable at the date of such termination or cessation)
by Optionee within two years after the date of Optionee's retirement
or cessation of services.
c. Other Termination. In the event Optionee leaves the employ of the
Company or ceases to provide services to the Company for any reason
other than as set forth in (a) and (b) above, this Option shall
terminate at the earlier of six months after the date: (A) Optionee's
employment terminates, or (B) Optionee ceases providing services to
the Company. The foregoing shall not extend this Option beyond the
term specified herein and this Option shall be exercisable only to the
extent exercisable at the date of termination of employment or
cessation of services.
8. Nontransferability. This Option may not be assigned or transferred except
by will or by the laws of descent and distribution, and may be exercised
only by Optionee during Optionee's lifetime and after Optionee's death, by
Optionee's personal representative or by the person entitled thereto under
Optionee's will or the laws of interstate succession.
9. Optionee Not a Shareholder. Optionee shall have no rights as a shareholder
with respect to the Common Stock of the Company covered by the Option until
the date of issuance of a stock certificate or stock certificates to
Optionee upon exercise of the Option. No adjustment will be made for
dividends or other rights for which the record date is prior to the date
such stock certificates or certificates are issued.
10. No Right to Employment. Nothing in this Option shall confer upon the
Optionee any right to continue in the employ of the Company or to continue
to perform services for the Company or any Parent or Subsidiary, or shall
interfere with or restrict in any way the rights of the Company to
discharge or terminate any officer, director, employee, independent
contractor or consultant at any time for any reason whatsoever, with or
without good cause.
Incentive Stock Option Agreement
R. John Hamman, Jr.
August 9, 1995
11. Adjustment of Shares; Termination of Options.
a. Adjustment of Shares. In the event of changes in the outstanding
Common Stock by reason of stock dividends, split-ups, consolidations,
recapitalizations, reorganizations or like events, an appropriate
adjustment shall be made in the number of shares set forth in
Paragraph 4 hereof, and in the number of shares and the option price
per share specified in this Agreement with respect to any unpurchased
shares. Appropriate adjustments for any options to purchase
fractional shares shall also be made. However, no fractional shares
shall be transferred.
b. Termination of Options on Merger, Sale of Liquidation of the Company.
In the event of any merger, consolidation of other reorganization of
the Company in which the Company is not the surviving or continuing
corporation or in the event of the liquidation or dissolution of the
Company, all options granted hereunder shall terminate on the
effective date of the merger, consolidation, reorganization,
liquidation or dissolution unless there is a written agreement with
respect thereto between Optionee and Bell, which expressly provides
otherwise.
12. Modification and Termination. The rights of Optionee are subject to
modification and termination in certain events as provided in this
Agreement.
13. Restrictions on Sale of Shares. Optionee represents and agrees that, upon
Optionee's exercise of the Option in whole or in part, unless there is in
effect at that time under the Securities Act of 1933 as amended, a
registration statement relating to the shares issued to Optionee, Optionee
will acquire the shares issuable upon exercise of this Option for the
purpose of investment and not with a view to their resale or further
distribution, and that upon each exercise thereof Optionee will furnish to
Bell and the Company a written statement of such effect, satisfactory to
Bell and the Company in form and substance. Optionee agrees that any
certificates issued upon exercise of this Option may bear a legend
indicating that their transferability is restricted in accordance with
applicable state or federal securities law. Any person or persons entitled
to exercise this option under the provisions of Paragraphs 7 and 8 hereof
shall, upon each exercise of the option under circumstances in which
Optionee would be required to furnish such a written statement, also
furnish to the Bell and the Company a written statement to the same effect,
satisfactory to Bell and the Company in form and substance.
Incentive Stock Option Agreement
R. John Hamman, Jr.
August 9, 1995
14. Complete Agreement. This Agreement contains the entire agreement among the
parties hereto with respect to the subjective matter hereof and supersedes
all previous and contemporaneous oral and written negotiations,
commitments, writings and understandings between the parties with respect
to the subject matter hereof.
15. Notices. All notices to Bell shall be addressed to Bell at the principal
office of the Company at the address set forth below and all notices to
Optionee shall be addressed to Optionee at the address set forth below, or
to such other address as either may designate to the other in writing. A
notice shall be deemed to be duly given if and when deposited with the
United States Postal Service, in a properly addressed sealed envelope,
postage prepaid. In lieu of giving notice by mail as aforesaid, written
notice under this Agreement may be given by personal delivery to Optionee
or to Bell (as the case may be).
16. Sale or Other Disposition. If Optionee at any time contemplates the
disposition (whether by sale, gift, exchange, or other form of transfer) of
any shares, of Common Stock acquired by exercise of this Option will first
notify the Company in writing of such proposed disposition and cooperate
with the Company in complying with all applicable requirements of law,
which, in the judgment of the Company, must be satisfied prior to such
disposition.
17. Hold-Back Agreement. In accepting the grant of this Option, Optionee
hereby agrees that in the event of an initial or subsequent public offering
of the Company's securities pursuant to which any of the Company's
securities are registered under the Securities Act, Optionee will agree to
refrain from selling or transferring any of the Common Stock issued or
issuable upon exercise of this Option as required by the Underwriter for a
period of up to 13 months after the closing date of such offering and to
sign a holdback agreement with respect thereto if requested by the
Underwriter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
OPTIONEE
By /s/ Lon E. Bell /s/ R. John Hamman, Jr.
------------------------------ -----------------------------
Dr. Lon E. Bell R. John Hamman, Jr.
Address: Dr. Lon E. Bell
Amerigon Incorporated
1201 E. Huntington Drive
Monrovia, CA 91016
STOCK OPTION AGREEMENT
This Agreement is made as of 13th May, 1993, by and between Dr. Lon E.
Bell ("Bell") and Roy Anderson ("Optionee").
R E C I T A L S
A. Bell is a founder and principal shareholder of Amerigon
Incorporated (the "Company").
B. Optionee has agreed to become a director of the Company.
C. The Company and D.H. Blair Investment Banking Corp. (the
"Underwriter"), have entered into a letter of intent dated March 3, 1993 (the
"LOI"), with respect to an initial public offering (the "Public Offering") of
2,000,000 shares of the Company's Class A Common Stock ("Common Stock").
D. In appreciation of Optionee's commitment to serve on the Company's
Board of Directors and service to the Company as a director, Bell wants to
grant Optionee an option to acquire shares of Common Stock owned by Bell (the
"Bell Shares"), some of which shares ("Bell Escrow Shares") are held in
escrow (the "Escrow") pursuant to a certain escrow agreement by and among
Bell, Underwriter, an escrow agent and certain other shareholders of the
Company (the "Escrow Agreement").
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements set forth below, the parties hereto hereby
agree as follows:
1. Grant of Option. Bell hereby grants to Optionee, effective on the
effective date of the Public Offering and subject to the vesting schedule set
forth herein, an option (the "Option") to acquire 10,000 Bell Shares (the
"Option Shares"), of which 2,500 shares (25%) are not held in Escrow (the
"Unrestricted Shares") and 7,500 shares (75%) are held in Escrow (the "Escrow
Shares").
2. Option Price. Subject to the terms and conditions hereof, Optionee
may purchase the Option Shares at a price equal to the Public Offering price
per share.
3. Term. This Option shall expire on June 1, 1999, unless such Option
shall have been terminated prior to that date in accordance with the
provisions of this Agreement.
1
The terms "Parent" and "Subsidiary" herein mean a parent corporation or a
subsidiary corporation, as such terms are defined in Sections 424(e) and (f) of
the Internal Revenue Code of 1986, as amended (the "Code").
4. Shares Subject to Exercise. The vesting of options hereunder is
subject to Optionee's continued service as a director of the Company to the date
of vesting. Unrestricted Shares vest as to 834 Shares on and after the date
Optionee becomes a director (the "Option Date"); 833 Shares on and after the
first anniversary thereof; and 833 Shares on and after the second anniversary
thereof. This Option vests as to 2,500 Escrow Shares on the Option Date; 2,500
Escrow Shares on the first anniversary thereof; and 2,500 Escrow Shares on the
second anniversary thereof; provided, however, that Escrow Shares may be
acquired only in the event and to the extent the financial objectives (the
"Financial Objectives") for release of Bell Escrow Shares from Escrow, as
provided in the Escrow Agreement, are met and Bell Escrow Shares are released
from Escrow. All such shares shall thereafter remain subject to exercise for
the term specified in Paragraph 3 hereof, subject, however, to the provisions of
Paragraph 7 hereof.
5. Method and Time of Exercise. The Option may be exercised by written
notice delivered to Bell stating the number of shares with respect to which the
Option is being exercised, together with a check made payable to Bell in the
amount of the purchase price of such shares and a check made payable to the
Company in the amount of applicable federal, state and local withholding taxes
and the written statement provided in Paragraph 13 hereof, if required by
Paragraph 13. Not less than 100 shares may be purchased at any one time unless
the number purchased is the total number purchasable under such Option at the
time. Only whole shares may be purchased.
6. Tax Withholding. As a condition to exercise of this Option, Bell may
require Optionee to pay to the Company all applicable federal, state and local
taxes which the Company is required to withhold with respect to the exercise of
this Option.
7. Termination of Employment or Other Relationship. Upon termination of
Optionee's relationship with the Company, a Parent or Subsidiary, Optionee's
rights to exercise this Option shall be only as follows (in no case do the time
periods referred to below extend the term specified in this Option):
2
a. Death or Disability. Upon the death of Optionee, this Option may
be exercised (to the extent exercisable at Optionee's death), unless it
otherwise expires, within three months after the date of Optionee's death by
Optionee's representative or by the person entitled thereto under Optionee's
will or the laws of intestate succession. Upon the disability (within the
meaning of Section 22(e)(3) of the Code) of an Optionee, this Option may be
exercised (to the extent exercisable as of the date of disability), unless it
otherwise expires, within thirty days after the date of Optionee's disability.
b. Retirement. Upon the retirement (either pursuant to a Company
retirement plan, if any, or pursuant to the approval of the Company), of an
employee or the cessation of services provided by a former employee as a
consultant or director this Option may be exercised (to the extent
exercisable at the date of such termination or cessation) by Optionee within
30 days after the date of Optionee's retirement or cessation of services.
c. Other Termination. In the event Optionee leaves the employ of the
Company or ceases to provide services to the Company for any reason other
than as set forth in (a) and (b), above, this Option shall terminate at the
earlier of 30 days after the date: (A) Optionee's employment terminates, or
(B) Optionee ceases providing services to the Company, or (C) the date
Optionee receives written notice that Optionee's employment or rendering of
services is or will be terminated. The foregoing shall not extend this
Option beyond the term specified herein and this Option shall be exercisable
only to the extent exercisable at the date of termination of employment or
cessation of services.
8. Nontransferability. This Option may not be assigned or transferred
except by will or by the laws of descent and distribution, and may be
exercised only by Optionee during Optionee's lifetime and after Optionee's
death, by Optionee's personal representative or by the person entitled
thereto under Optionee's will or the laws of intestate succession.
9. Optionee Not a Shareholder. Optionee shall have no rights as a
shareholder with respect to the Common Stock of the Company covered by this
Option until the date of issuance of a stock certificate or stock
certificates to Optionee upon exercise of this Option. No adjustment will be
made for dividends or other rights for which the record date is prior to the
date such stock certificate or certificates are issued.
3
10. No Right to Employment. Nothing in this Option shall confer upon
Optionee any right to continue in the employ of the Company or to continue to
perform services for the Company or any Parent or Subsidiary, or shall
interfere with or restrict in any way the rights of the Company to discharge
or terminate any officer, director, employee, independent contractor or
consultant at any time for any reason whatsoever, with or without good cause.
11. Adjustment of Shares; Termination of Options.
a. Adjustment of Shares. In the event of changes in the
outstanding Common Stock by reason of stock dividends, split-ups,
consolidations, recapitalizations, reorganizations or like events, an
appropriate adjustment shall be made in the number of shares set forth in
Paragraph 4 hereof, and in the number of shares and the option price per
share specified in this Agreement with respect to any unpurchased shares.
Appropriate adjustments for any options to purchase fractional shares shall
also be made. However, no fractional shares shall be transferred.
b. Termination of Options on Merger; Sale or Liquidation of the
Company. In the event of any merger, consolidation or other reorganization
of the Company in which the Company is not the surviving or continuing
corporation or in the event of the liquidation or dissolution of the Company,
all options granted hereunder shall terminate on the effective date of the
merger, consolidation, reorganization, liquidation or dissolution unless
there is a written agreement with respect thereto between Optionee and Bell,
which expressly provides otherwise.
12. Modification and Termination. The rights of Optionee are subject
to modification and termination in certain events as provided in this
Agreement.
13. Restrictions on Sale of Shares. Optionee represents and agrees
that upon Optionee's exercise of the Option, in whole or in part, unless
there is in effect at that time under the Securities Act of 1933, as amended
(the "Securities Act"), a registration statement relating to the shares
issued to Optionee, Optionee will acquire the shares issuable upon exercise
of this option for the purpose of investment and not with a view to their
resale or further distribution, and that upon such exercise thereof Optionee
will furnish to Bell and the Company a written statement to such effect,
satisfactory to Bell and the Company in form and substance. Optionee agrees
that any certificate issued upon exercise of this Option may bear a legend
indicating that their transferability is restricted in accordance with
applicable state and federal securities law. Any person or
4
persons entitled to exercise this Option under the provisions of Paragraphs 7
and 8 hereof shall, upon each exercise of the option under circumstances in
which Optionee would be required to furnish such a written statement, also
furnish to Bell and the Company a written statement to the same effect,
satisfactory to Bell and the Company in form and substance.
14. Notices. All notices to Bell shall be addressed to Bell at the
principal office of the Company at the address set forth below and all
notices to Optionee shall be addressed to Optionee at the address of Optionee
set forth below, or to such other address as either may designate to the
other in writing. A notice shall be deemed to be duly given if and when
deposited with the United States Postal Service, in a properly addressed
sealed envelope, postage prepaid. In lieu of giving notice by mail as
aforesaid, written notice under this Agreement may be given by personal
delivery to Optionee or to Bell (as the case may be).
15. Sale or Other Disposition. If Optionee at any time contemplates
the disposition (whether by sale, gift, exchange or other form or transfer)
of any shares of Common Stock acquired by exercise of this Option, Optionee
will first notify the Company in writing of such proposed disposition and
cooperate with the Company in complying with all applicable requirements of
law, which, in the judgment of the Company, must be satisfied prior to such
disposition.
16. Hold-Back Agreement. In accepting the grant of this Option,
Optionee hereby agrees that in the event of an initial or subsequent public
offering of the Company's securities pursuant to which any of the Company's
securities are registered under the Securities Act, the Optionee will agree
to refrain from selling or transferring any of the Common Stock issued or
issuable upon exercise of this Option as required by the underwriter of the
offering for a period of up to 13 months after the closing date of such
offering and to sign a hold-back agreement with respect thereto if requested
by the underwriter of the offering.
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
BELL OPTIONEE
/s/ Lon E. Bell /s/ Roy Anderson
- ----------------------------- --------------------------------
Dr. Lon E. Bell Roy Anderson
Address: Address:
Dr. Lon E. Bell 4367 Shepherds
Amerigon Incorporated
3601 Empire Avenue La Canada, CA 91011
Burbank, California 91505
6
LIST OF OMITTED
BELL STOCK OPTION AGREEMENTS
WITH DIRECTORS OF
AMERIGON INCORPORATED*
----------------------
1. Stock Option Agreement dated May 13, 1993 by and between Dr. Lon E. Bell
and Roger E. Batzel.
2. Stock Option Agreement dated May 13, 1993 by and between Dr. Lon E. Bell
and A. Stephens Hutchcraft, Jr.
3. Stock Option Agreement dated May 13, 1993 by and between Dr. Lon E. Bell
and Michael R. Peevey.
4. Stock Option Agreement dated May 13, 1993 by and between Dr. Lon E. Bell
and Norman R. Prouty, Jr.
- -------------------
* Each of the listed Bell Stock Option Agreements is substantially in the form
of the Bell Stock Option Agreement attached as Exhibit 10.6.1 to this Form S-2,
except with respect to the name of the Director executing such Agreement.
Amerigon Incorporated agrees to furnish supplementally a copy of any of the
omitted Bell Stock Option Agreements to the Commission upon request.
February 7, 1996
Mr. Edmund J. Freeman
Environmental Systems Group/Joy Manufacturing Co.
10700 North Freeway
Towerpark North
Houston, TX 77037
Dear Mr. Freeman:
Re: Standard Sublease on the property located at
404 East Huntington Drive, Monrovia, CA 91016
This is notification to you that Amerigon Incorporated hereby exercises its
option to renew the lease on the property referred to above as provided in
Paragraph 17 of the Addendum to the Standard Sublease agreement dated February
14, 1994. Amerigon elects at this time to renew for one six month period which
would extend the lease period from August 14, 1996 to February 14, 1997.
If you have any questions, please call me at 818-932-2080.
Very truly yours,
/s/ R. JOHN HAMMAN, JR.
R. John Hamman, Jr.
Vice President Finance
[AMERIGON LETTERHEAD]
December 3, 1996
Mr. Chris Modenbach
McDermott, Inc.
1450 Poydras St.
New Orleans, LA 70112
Dear Mr. Modenbach:
RE: Sublease of the property located at 404 E. Huntington Drive,
Monrovia, CA.
Amerigon leases the property referred to above from Environmental Systems
Group/Joy Manufacturing Company under a Standard Sublease agreement dated
February 14, 1994 underwhich there is are options to renew the sublease in
paragraph 17 of the addendum to the sublease.
Notice is hereby given of our intention to exercise the option to renew and
extend the sublease for the period February 14, 1996 to July 31, 1997, the end
of the term of the master lease.
If you have any questions, please call me at 818-932-2080.
Very truly yours,
/s/ R. John Hamman, Jr.
R. John Hamman, Jr.
Vice President Finance
PRODUCT ADAPTATION
AND SUPPLY CONTRACT
THIS CONTRACT is made and entered into as of the 25th day of November, 1994,
by and between * (hereinafter referred to as "Buyer") and Amerigon, Inc.
headquartered at 404 E. Huntington Dr., Monrovia, California 90638
(hereinafter referred to as "Seller").
WHEREAS, Buyer is interested in having Seller (i) make recommendations
regarding and (ii) design, develop and manufacture Electric Vehicle (EV)
components and 2 EVs for Buyer's EV project;
WHEREAS Seller is interested in performing such work and has agreed
with Buyer on the * AND AMERIGON MEETING MINUTES dated from 17 October
1994 to 20 October 1994 ("Meeting Minutes") in that regard, which Meeting
Minutes reflect Seller's expectation that it will sell 48 sets of EV parts
and 2 EVs;
NOW, THEREFORE, in view of the foregoing premises and in consideration
of the mutual covenants and promises contained in this Contract, Buyer and
Seller agree as follows:
ARTICLE 1. CONTRACT SCOPE
1.1. In this Contract Buyer agrees to order the design, development and
manufacture of 48 sets of EV components and 2 EVs for Buyer's EV project.
1.2. In this Contract, the Seller and the Buyer agree to the Meeting Minutes
for completing this project. The Buyer has therefore decided to award the
project to the Seller. Seller, therefore, in consideration of the payment to
be made by the Buyer to the Seller, has agreed to enter into a Contract which
will result in the development and manufacture of 50 sets of EV parts. Seller
agrees to complete the design of the vehicle and manufacture and subassemble
parts in the U.S. Final vehicle and frame assembly will be completed at the
Seller's facility by Seller for two vehicles and for 40 vehicles at Buyer's
facility by Buyer in *. Eight part sets will not be assembled and will
be provided to Buyer as spare part kits. The vehicle's exterior will be the
same as Buyer's prototype *EV-IV. The purposes of these vehicles are for
Buyer's evaluation and normal driving on public roads in *. The specific
tasks to be performed in connection with this Contract are set out and shall
be limited to those set forth in Exhibit A, which is attached to and
incorporated by reference in this Contract.
Page 1 of 8
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
ARTICLE 2. SELLER'S RESPONSIBILITY
2.1. The Seller will complete the design and development, tooling, prototype
evaluation, design validation and manufacturing of 50 sets of EV parts,
meeting overall vehicle and components specifications and program schedule
set forth in Exhibit's B, C and D.
2.2. The Seller will be responsible for manufacturing and procurement of all
components as set forth in Exhibit E, which outlines procurement
responsibility for both Seller and the Buyer.
2.3. Two of the Fifty EV part sets will be assembled by Seller for final
evaluation and will be sent to Buyer to be approved by Buyer, and forty-eight
sets of the EV parts will be supplied to Buyer for final vehicle and frame
assembly in *.
2.4. The Seller will assist Buyer and will provide sufficient technical
support to assure successful completion of vehicle assembly in *. This
includes technical support to Buyer and its supplier for final frame and
vehicle assembly and body in white components manufacturing.
2.5. The Seller will prepare and deliver to the Buyer all the detail and
master drawings, analysis report and testing results, process documentation
and assembly procedures.
2.6. The Seller will be responsible for component packaging suitable for Sea
shipment to *. (all shipments will be F.O.B. Seller's facility).
2.7. The Seller will be responsible for all deliverables as outlined in
Exhibit A ( Program Scope ), Exhibit D ( Program Schedule ) and Exhibit E
( Procurement Responsibility ).
2.8. The Seller will provide Buyer with all the fixtures and jigs for final
frame assembly in * and all the program specific component tooling after
completion of the work. The fixtures and jigs for final vehicle assembly
will be designed by Seller and fabricated by Buyer.
2.9. The Seller will install Climate Control Modules in the driver and
passenger seats of each vehicle.
ARTICLE 3. BUYER'S RESPONSIBILITY
3.1. The Buyer shall provide Seller with a clay model, specifications,
requirements and will continuously assist Seller to assure successful program
completion as outlined in Exhibit D.
Page 2 of 8
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
3.2. The Buyer is responsible for shipping and obtaining all relevant
documents needed for the importation of the parts and two prototype vehicles
into the Buyer's county. This includes all the import fees and taxes imposed in
Buyer's country.
3.3. The Buyer will be responsible for final frame and vehicle assembly in
*. The fixtures and jigs for vehicle assembly will be fabricated by Buyer.
3.4. The Buyer and Seller are responsible for procurement of components
according to Exhibit E.
ARTICLE 4. CONTRACT PRICE
4.1. The total contract price for completion of the work hereto is:
USD 8,252,000. (Eight Million, Two Hundred Fifty-two Thousand
U.S. Dollars only).
4.2. The Contract Price includes all design & development, component tooling &
prototype frame assembly fixtures, prototype build, evaluation & design
validation, production of 48 vehicle part kits, completion of 2 vehicles and
technical support.
4.3 The Contract Price includes all taxes, including income taxes, duties,
fees, levies, customs duties and other charges of any such kind, levied in
connection with this Contract or its performance imposed in the Seller's
country. A condition of this provision is that all deliverables under this
Contract will be shipped directly to a non-U.S. destination (i.e. *).
4.4. The Contract Price excludes incoming and/or withholding taxes as well as
any duties, customs, duties, fees, levies and other charge whatsoever levied in
connection with this Contract or its performance which may be payable in the
Buyer's country. Any of the above mentioned taxes, duties, fees, levies,
charges, and etc. shall, if they occur, be borne and paid for by the Buyer. The
Buyer shall consequently indemnify and keep the Seller harmless from any of the
above-mentioned taxes, duties, fees, levies, charges and etc.
4.5. If significant changes are made and agreed to by Buyer and Seller in the
specifications or scope of work to be performed under this Contract which will
result in increased or decreased costs incurred by Seller, Buyer and Seller
will negotiate an appropriate change in the Contract Price.
Page 3 of 8
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
ARTICLE 5. TERMS OF PAYMENT
5.1. The Contract Price stated in Article 4.1, shall be paid by the Buyer
(via Bank Transfer) as follows;
a) 20% of the Contract Price shall be paid as an advance payment
within fourteen (14) days after execution of this Contract by
Seller and Buyer.
b) 20% of the Contract Price shall be paid fourteen (14) days after
completion of vehicle design and shipment of the first drawing
package to Buyer.
c) 15% of the Contract Price shall be paid fourteen (14) days after
shipment of two (2) prototype vehicles.
d) 35% of the Contract Price shall be paid fourteen (14) days after
shipment of forty-eight (48) part kits.
e) 10% of the Contract Price shall be paid fourteen (14) days after
Buyer completes the assembly of forty (40) vehicles or, in any case,
within six months of shipment to Buyer of the 48 part kits in (d)
above.
5.2. The Buyer shall not be responsible for any deduction or retention of
payments by the Buyer to the Seller as may be imposed by law or as a result
of any other circumstances beyond the Buyer's control.
ARTICLE 6. PERFORMANCE OF WORK AND REMEDIES
6.1. Performance Of Work: The Seller and Buyer will use reasonable care in
performing the work which each is required to perform pursuant to Article 1
above and Exhibit A. At the completion of each phase of the Contract, Seller
will deliver to Buyer the deliverables referenced in Article 2.
6.2. Remedies: If Seller fails to use reasonable care in performing any task
that is included in the Contract which Seller is required to perform pursuant
to Article 1 and 2 above and Exhibit A, Buyer will give notice to Seller of
such failure. If Seller fails or neglects to carry out the Remedy or fails to
perform any provision of this Contract, the Buyer may after forty-five (45)
day's written notice to the Seller, and without prejudice to any other remedy
he may have, make good such deficiencies, and the Buyer's costs thereon shall
be deducted from the sums then or thereafter due to the Seller. Buyer's costs
under this paragraph will be limited to reasonable market rate costs for the
deficient items.
Page 4 of 8
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
ARTICLE 7. WORK PRODUCT
7.1 All designs, drawings, specifications, technical data, plans, instruments
and other work product produced by, through, or on behalf of, the Seller in
the performance of this Contract shall be, at all times, the property of the
Buyer, and the Buyer is vested with all rights therein.
ARTICLE 8. GUARANTEE
8.1. This guarantee is valid for a period of twelve (12) months from the date
of receipt of parts by Buyer.
8.2. The Seller guarantees that the goods are new and meet the specifications
set forth in Exhibits B, C and D, but only to the extent that Seller has
procurement responsibility for related components per Exhibit E.
8.3. Should the goods or any parts thereof be repaired, replaced or altered
at Seller's expense to fulfill the guarantee, the Seller shall provide a new
guarantee of the same conditions for such materials being required, replaced
or altered for a period of twelve (12) months from the date of completion of
such remedial work.
8.4. The Buyer shall notify the Seller in writing without delay, and no later
than 20 days after the date on which the defect appeared, of any defect that
has appeared and shall give the Seller every opportunity to inspect and
remedy them.
8.5. Should the Seller fail to take such remedial action within 30 days, the
Buyer may, at its option, take remedial action at the Seller's expense or
select to accept the goods not meeting the specifications herein with
adjustment in the purchase price. Any expenses charged to Seller by Buyer
under this provision will not exceed reasonable market prices for the items
involved.
ARTICLE 9. LIABILITY
9.1. The Seller will not knowingly incorporate in any drawing or other
document furnished to Buyer under this Contract any copyrighted material or
patented concept of a third party without first notifying the Buyer.
9.2. Recognizing that final vehicle assembly is the responsibility of the
Buyer and control over the use of the vehicles resides with Buyer, Buyer
indemnities and holds harmless Seller against any claims for loss or injury,
involving components, assemblies, or vehicles designed or delivered under
this Contract, made against Seller by Buyer's employees or agents or by third
parties.
Page 5 of 8
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
9.3. In no event the Buyer or Seller shall be liable for indirect or
consequential damages.
ARTICLE 10. FORCE MAJEURE
10.1. In this Contract, the event of Force Majeure shall mean
a) flood, storms and other natural disasters, war, civil commotion,
hostilities, rebellion, insurrection, strikes, freight embargo,
acts of ordinances of governmental or state authorities of both
countries.
b) any other circumstances like or unlike foregoing, which are beyond
the reasonable control of the party affected.
10.2. Upon learning of an event of Force Majeure which threatens its
performance hereunder, a party shall give the written notice thereof
immediately to the other parties hereto. Upon request of the other parties,
such a party shall provide further information concerning such an event.
10.3. In case of Force Majeure continues for more than 180 days, the Buyer
shall, without prejudicing the other rights under this Contract, have the
right to terminate this Contract.
ARTICLE 11. TERM AND TERMINATION
11.1. This Contract shall be effective as of the date written in the first
paragraph (unnumbered) of this Contract and expire upon the delivery of all
deliverables and completion of payments under the contract, unless earlier
terminated as provided in Section 11.2 below.
11.2. Either party may terminate this Contract immediately upon written
notice to the other party if the other party breaches any material obligation
under this Contract and fails to cure such breach within sixty (60) days
after being given written notice of such breach.
11.3. Either party may terminate this Contract immediately upon written
notice to the other party if one of the parties goes into liquidation,
bankruptcy proceedings are initiated against it, a receiver of its assets is
appointed, a general assignment for the benefit of its creditors is made or
if substantial change in the legal status, ownership or management takes
place. The same shall apply if force majeure for a period of more than 180
days.
11.4 The rights and obligations of the parties under Sections 8, 9, and 13
above shall survive termination or expiration of the Contract.
Page 6 of 8
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
ARTICLE 12. MISCELLANEOUS
12.1. Any modifications or amendments to this Contract are only valid if made
in writing to this Contract and if duly signed by the parties.
12.2. The language to be applied during the performance of the Contract is
English. All documents or correspondences shall be in English.
12.3. Should one or more stipulations of this Contract be held to be invalid,
unenforceable or illegal for any reason, the other stipulations of this
Contract shall nevertheless remain effective. In such case the hiatus in the
Contract shall be filled by valid provision coming as close as possible to
what the parties had intended if they had known the invalidity of the
respective stipulations.
12.4. Each party shall not assign the Contract or any part thereof, without
the written consent of the other party.
ARTICLE 13. ARBITRATION
13.1. The Buyer and Seller shall use their best efforts to settle any claimed
breach, dispute or controversies of this Contract, making a good-faith effort
to reach a just and equitable settlement satisfactory to both parties. If the
claim is not settled by the senior executives of the parties at that meeting,
then, unless the parties otherwise agree in writing, it shall be finally
settled by arbitration in accordance with the UNCITRAL Arbitration Rules in
effect on the date of this Contract. Such arbitration shall be the sole and
exclusive remedy between the parties with respect to such claim. Such
arbitration shall be held in Los Angeles, California, U.S.A.
13.2. The dispute referred to arbitration is not a reason to stop the
fulfillment of the other contractual obligation by the parties.
ARTICLE 14. PATENTS
14.1. The Seller shall be responsible for any infringement with regard to
patent, utility model, trade-mark or design in the EV project whether in the
Buyer's country or any other country or place. In the event that any dispute
relating to such right or rights might arise, Buyer Shall be entitled to
cancel this Contract at his own accord and shall remain immune from any
liability and responsibility for whatever arises from such dispute.
14.2. The Seller shall be solely responsible therefore and shall defend,
reimburse, indemnify and keep the Buyer innocent thereof at the Seller's risk
and expense.
Page 7 of 8
PRODUCT ADAPTATION AND SUPPLY CONTRACT
______________________________________________________________________________
ARTICLE 15. OBSERVANCE OF SECRECY
15.1 During the term of this Contract, the Seller shall hold confidential and
will note disclose in any manner to any third party or parties any information
concerning all information furnished by the Buyer under this Contract.
ARTICLE 16. SIGNATURE
IN WITNESS WHEREOF, this Contract to be executed by their duly authorized
representatives on the day and year first above written.
AMERIGON, INC. *
By: /s/ Zaya S. Younan By: /s/ *
-------------------------------- -------------------------------
Zaya S. Younan *
-------------------------------- -------------------------------
Title: Vice President Title: Vice President
-------------------------------- -------------------------------
Date: November 25, 1994 Date: November 25, 1994
-------------------------------- -------------------------------
Page 8 of 8
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
EXHIBIT A
Work Scope & Program Cost
Breakdown
EXHIBIT A
WORK SCOPE
ITEM AMERIGON * REMARK
- ------------------------------------------------------------------------------------------------------------------
1 STYLING &
SKIN (POINT & CARVE) O * WILL PROVIDE SKIN
DATA (COMPUTER DATA & DRAWING)
- ------------------------------------------------------------------------------------------------------------------
2 SKIN FAIRING; CURVE
DATA - SURFACE DATA O MAKING SMOOTH SURFACE USING CAD
SYSTEM
- ------------------------------------------------------------------------------------------------------------------
3 ENGINEERING
- - PACKAGE LAYOUT 0 0 - * WILL PROVIDE BASIC
LAYOUT DRAWING
- - MASTER DRAWING 0 - AMERIGON MUST MEASURE
ACCURATE CHASSIS
MOUNTING POINT (SENTRA
93,94 MY)
- - DETAIL DRAWING 0
- - ASSY DRAWING 0 - * WILL PROVIDE
COLOR COMBINATION CHART
- - INSTAL DRAWING 0
- -------------------------------------------------------------------------------------------------------------------
4 PROTOTYPE VEHICLE (2) O INCLUDE ALL PARTS
- -------------------------------------------------------------------------------------------------------------------
5 TOOLS & FIXTURE O ALL COMPONENTS AND FRAME
ASSEMBLY FIXTURES
- -------------------------------------------------------------------------------------------------------------------
6 PARTS (48) O O SEE PROCUREMENTS
RESPONSIBILITY (EXHIBIT E)
- -------------------------------------------------------------------------------------------------------------------
- - Amerigon must control all the sub-companies which provide components to
Amerigon for this EV project, in order to well correspond between * and
sub-companies under Amerigon's control.
- - Amerigon must design new *EV IV and all engineering drawings, however,
maintaining *EV III styling (exterior & interior) only.
- - * can not provide parts drawing because there is no drawing about
*EV III (That is hand made product).
- - * use CATIA computer system, so Amerigon must provide above mentioned
drawing by CATIA data and/or paper drawing. (Preliminary Release;
APR. 30, 1995, Final Release: OCT. 30, 1995).
- - Amerigon must make new EPL (Engineering parts List) Reference to the
Attachment Detail Parts List (15 pages).
1 of 3
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DEVELOPING FLOW
[Development Flowchart]
ACTIVITIES
DEFINITION
- - DESIGN AND DEVELOPMENT
Amerigon will perform the necessary design and analyses required to verify
the existing * body and frame design for their *EV. This includes
completing the body design (interior and exterior) with all the electrical and
component system integration. Amerigon will be responsible for developing all
the master and detailed drawings and tooling for limited volume manufacturing
purposes. This includes all the fit and function trials on prototype
components. During this period * will have engineering staff available
at Amerigon for training and program coordination with *. In addition, we
will hold meetings as required in * and the U.S. to discuss the program
status. Amerigon to supply the drawings necessary to fabricate the parts that
Amerigon has designed. For the skin-related interior and exterior body and
trim pieces and complicated cast pieces, Amerigon will supply section and part
drawings. Amerigon will not supply detailed drawings for carry-over parts but
will provide the outline package.
- - COMPONENT TOOLING & PROTOTYPE ASSEMBLY FIXTURES
Amerigon (including our suppliers) will design and assemble the component
tooling suitable to manufacture 50 sets of electric vehicle parts. All the
tooling with the exception of carryover parts will be manufactured by
Amerigon. Tooling will include simple assembly fixtures for completion of the
two vehicles and fixtures for final frame assembly in *. The
deliverables for this activity to Buyer are all the engineering drawings and
reports
- - PROTOTYPE BUILD, EVALUATION & DESIGN VALIDATION
Amerigon will build two complete vehicles for basic performance, stability and
limited durability testing. These two completed vehicles will be shipped to
* for their final approval. Amerigon will purchase all the necessary
components to complete these two vehicles including the carryover parts.
Amerigon will also provide * with all the needed information including
company names, addresses, and product description, etc., for carry-over parts.
The deliverables for this activity to Buyer are two (2) completed Evs.
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
ACTIVITIES
DEFINITION
- - PRODUCTION OF PARTS
Amerigon will manufacture two completed vehicles and 40 sets of parts as
assembly kits that will include sub-assembled components as outlined in
Procurement Responsibility. We will also manufacture 8 complete sets of parts
for use as spares. Amerigon will also provide an experienced engineer on-site
to assist * with final vehicle assembly limited to the time period shown
in the program schedule. The deliverable for this activity to Buyer are 48
sets of part kits.
- - TECHNICAL SUPPORT
Amerigon will do technical support for body in white component assembly in
* with his expense including freight, meal, accommodation charge
irrespective of the period.
- - Technical Support
- Request information for * Homolgation
- Owner's Manual
- Service Manual
- Assembly Manual
- Engineering Part List
- Tool and Jigs List
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
AMERIGON
- ------------------------------------------------------------------------------
SUMMARY OF PROPOSAL COSTS
PROGRAM ACTIVITY AMERIGON'S FINAL PROPOSAL QUOTATION
SUBMITTED 9-29-94
- ------------------------------------------------------------------------------
Design & Development $1,750,000
- ------------------------------------------------------------------------------
*Component Tooling & $2,827,500
Prototype Assembly
and Fixtures (Includes
RTM Tooling)
- ------------------------------------------------------------------------------
Prototype Build, $1,105,200
Evaluation & Design
Validation
- ------------------------------------------------------------------------------
*Production of 48 $2,230,750
Vehicle Part Kits
- ------------------------------------------------------------------------------
Installation of Climate $90,000
Control System in the seats
- ------------------------------------------------------------------------------
Tooling Cost for Final $92,850
Frame Assembly (Jigs & Assembly
Fixtures)
- ------------------------------------------------------------------------------
Technical Support for $72,000
Body in White
Component Assembly
in *
- ------------------------------------------------------------------------------
Packaging Cost $83,700
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL $8,252,000
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
*Note: The tooling cost includes RTM for body components. The cost for
production of 48 vehicles includes new responsibility for additional parts.
See attached revised procurement responsibility.
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
EXHIBIT B
Preliminary Overall Vehicle
Specification
EXHIBIT B
Preliminary Overall Vehicle Specification
for * *EV-IV
1.0 VEHICLE TYPE
Passenger: 4
Type: 2 Door Hatch Back
Drive: Front Wheel (Motor Direct Drive)
2.0 PHYSICAL DIMENSIONS
Overall Length: 4,055 mm
Width: 1,675 mm
Height: 1,490 mm
Wheelbase: 2,485 mm
Track Front: 1,440 mm
Rear: 1,425 mm
Curb Weight: 1,400 kg (target)
Weight Distribution: 50/50 With One Occupant
3.0 CLEARANCES
Nominal Ground Clearance: 165mm
Depth of pothole that can be cleared: N.A.
Angle of ramp that can be cleared: 15 DEG. (Min.)
Approach Angle: 17 DEG. (Min.)
Departure Angle: 17 DEG. (Min.)
Height of curb that can be cleared: N.A.
Front wheel to fender. Amerigon recommends 30-40 mm
(* to verify)
Rear wheel to fender: Amerigon recommends 30-40 mm
(* to verify)
4.0 ACCELERATION AND POWER
Acceleration: 0 to 400 m: 21.0 sec.
0 to 100 kph: 16 sec.
Max. Speed: More than 120 km/h
Hill Climbing Ability: 20% Min. at 15 kph for up to 5 Min.
Page 1 of 4
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
VEHICLE SPECIFICATION CONT.
5.0 RANGE (MAINTENANCE FREE LEAD ACID BATTERY)
Constant Speed 40 kph): More than 150 km
City Drive (*): More than 60 km
6.0 BRAKE
Performance
60 to 0 kph: 43 m (max.)
30 to 0 kph: 18 m (max.)
Max. Speed to 0 kph: 75 m
Max. deceleration by brakes: 1g (max.)
Wet Pavement 60 to 0 kph: 52 m (max.)
Uniformity of braking deceleration
Spec to be developed by *
Regeneration before brake application
Up to 0.3 g (Adjustable by controller) when acceleration pedal is fully
lifted. Maximum regen must be adjustable by *
Regenerative during brake application
Up to 0.6 g (Adjustable by controller) when accelerator is fully lifted.
Maximum regen must be adjustable by *
Response Time
Response Time from pedal application: 100 msec (max.)
Response Time from pedal release: 100 msec (max.)
Vehicle stability during braking
Must be able to maintain control under heavy braking.
Maximum 0.25 degree yaw.
Brake noise: Less than 50 db
Parking Brake: Meets FMVSS standards
7.0 SUSPENSION
According to Basic Vehicle (Carry Over)
8.0 TIRE AND WHEEL
Tire Size: 175/70/R13 - use Goodyear Invicta GLR
Temp.: T105/70/D14
Wheel Size: 5.5 J x 13
Page 2 of 4
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
VEHICLE SPECIFICATION CONT.
9.0 HANDLING
Lateral Acceleration: 0.75 g (min.)
Degree of body roll: 3.5 degree max. at 0.5 g
5.0 degree max. at max. accel.
10.0 DRIVE TRAIN
Motor & Controller Type: AC Induction
Power: Satisfy Vehicle Performance
Energy Used: Satisfy Driving Range
Transmission Type: Single Speed
Final Drive: Differential
11.0 OCCUPANT INTERACTION
Display Supported:
Speedometer, Odometer, Turn Signal, Drive Engaged, Battery Level,
Motor Temp., Lights for Brake, High Beam Low Energy Remaining,
Seat Belt, Door Opening, Hood Opening, Refer to Ordering Spec.
12.0 OCCUPANT PROTECTION AND SAFETY
Crash Worthiness: Per Amerigon's Specification (Do not do vehicle
tests, Simulation only)
Seat Belts: Frame will be hard points for 3 points belts
High Voltage Isolation Incorporated in controller
High Voltage Crash Disconnect
Battery Containment Requirements
Fail-safe models for loss of power brakes and steering revert to manual
Field of Vision: According to * *EV - III
Do not start*: At Charging
To prevent quick start, driver has to foot brake
pedal when start
13.0 DURABILITY
Warranty: 1 year 24,000 km (min.)
Target Life
Batteries: 1,000 Recharge cycle
Brakes: 120,000 km
Shock Absorbers: 150,000 km
Tire: 50,000 km
Battery pack replacement in field service possible
Page 3 of 4
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
VEHICLE SPECIFICATION CONT.
14.0 MAINTENANCE
Periodic maintenance: Check transmission oil
Check coolant
15.0 ENVIRONMENT
Temp. Range: -20 DEG. C to 40 DEG. C Operating
-40 DEG. C to 85 DEG. C Storage
Humidity Range: 0 to 100% Non-condensing
Rain on Chassis: Must not damage or impair function
Must not allow any current leakage from/into electrical
system
16.0 INTERFACES
Electrical Supply to Charger: 220 V 15 Amps. 60 Cycles
Test Equipment Interface: RS 232 C
Tow hooks and towing provisions 2 in front, 1 in rear
Vehicle ID Number: Assigned by *
Require warning level: SAE standard on high voltage
systems
Page 4 of 4
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
EXHIBIT C
Component Specification
EXHIBIT C
* *EV - IV COMPONENT SPECIFICATION
ITEMS REMARKS
- -------------------------------------------------------------------------------
transmission single speed same
- -------------------------------------------------------------------------------
brakes carry over same
vacuum assist
- -------------------------------------------------------------------------------
suspension carry over same
- -------------------------------------------------------------------------------
tires 175/70 R 13 Amerigon recommends using
T105/70 D 14 Goodyear Invicta GLR model
for low rolling resistance
- -------------------------------------------------------------------------------
wheels 5.5 J x 13 same
wheel covers
- -------------------------------------------------------------------------------
instruments digital clock same
gauges:
speedometer Amerigon will also include
trip odometer the Energy Management
motor temp System
current meter -display screen control
battery level meter panel
warning lights
turn signals
brake/parking brake
EV failure
door ajar
low battery
high beam
fog lamp
seat belt
rear glass heating
- -------------------------------------------------------------------------------
glass windscreen: laminated same
door: tempered
back: tempered with
heater (on timer)
- -------------------------------------------------------------------------------
seats front: same
bucket type
level to slide
level to recline
head rest: up/down
rear:
fixed bench
head rests
cloth covering
- -------------------------------------------------------------------------------
Page 1 of 3
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
COMPONENT SPECIFICATION CONT.
ITEMS REMARKS
- -------------------------------------------------------------------------------
interior console: same
with storage box
power window switch
ash tray: in dash
rear mirror: day/night
dual cloth visors
formed cloth headliner
door trim:
cloth in center
door speakers
trunk trim: fiberboard
pillar trim:
carpet
assist grip: passenger
coat hanger: rear seat
glove box: w/o lock
- -------------------------------------------------------------------------------
exterior bumper: 2.5 mph same
body color
door handle and trim
standard color
mirrors: manual remote
body color
glass seal: black PVC
wheelwell liners
tow hooks: front and rear
badges: film type
- -------------------------------------------------------------------------------
Audio ETR + cassette same, with the
antenna: induction type exception of external
on glass antenna
speaker: in front doors
5" or larger
- -------------------------------------------------------------------------------
Page 2 of 3
COMPONENT SPECIFICATION CONT.
ITEMS REMARKS
- -------------------------------------------------------------------------------
Electrical exterior lamp same
head lamp with turn
signal (semi-sealed
halogen type)
front fog lamp
rear combo lamp
license plate lamp
interior lamp
single horn
power windows
12V 60 AH aux btty
switches and controls:
fog lamp
hazards
power windows
door lock
emergency
direction (fwd, n, rev)
brake lights
horn
window heater
washer and wiper
variable intermittent
low and high settings
- -------------------------------------------------------------------------------
Heating four speed fan same
rotary temp switch
- -------------------------------------------------------------------------------
Climate Controlled CCS module in seat Amerigon recommends
Seat (option) control switch on console using optional unit
- -------------------------------------------------------------------------------
Page 3 of 3
EXHIBIT D
Summary of Program Schedule
Page 1 of 4
AMERIGON
- --------------------------------------------------------------------------------------------------------
* *EV - IV PRELIMINARY PROGRAM SCHEDULE
- --------------------------------------------------------------------------------------------------------
9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
- --------------------------------------------------------------------------------------------------------
Amerigon to provide original +
proposal
Draft and finalize agreement for
* approval ---
Technical discussion in * XX
- *EV III review --
- digitized *EV-IV data +
- define contact names +
- define COP, materials, +
and processes from
detailed parts list
Packaging
Preliminary skin fairing, ----
component selection,
layout
Frame Engineering XXXXXXXXXXXXXXXXXXXXXXXX
- Design --------------
- Tooling -----------
- Manufacture parts -----
Body Engineering XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- Design: Check surfaces, ---------------------
rebating, styling, exterior
parts -----------------
- Tooling
- Manufacture parts -----------
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
Page 2 of 4
AMERIGON
- --------------------------------------------------------------------------------------------------------
*EV - IV PRELIMINARY PROGRAM SCHEDULE (CONT.)
- --------------------------------------------------------------------------------------------------------
9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
- --------------------------------------------------------------------------------------------------------
Mechanical Systems XXXXXXXXXXXXXXXXXXXXXXXXXX
- Design and layout ------------------ . . . .
- Tooling ----------
- Manufacture parts --
Interior Engineering XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- Layout and ergonomics ----
- IP design and layout -----------------------
- IP tooling ----------------
- IP parts manufacture . . .---
- Door design and layout ---------------------
- Door tooling ------------
- Door parts manufacture . . . .--------
- Trim/seats/rebate design -------------------
- Trim/seats/rebate tooling ------------------
- Trim/seats/rebate parts . . .-----
manufacture
Electrical Engineering XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X X X X
- Design ------------------------
- Procure parts ----------------- - - - - - -
Prototype Construction XXXXXXXXXXXXXXX
- Frame ----
- Mechanical system ------
- Interior ----
- Body ----
- Electrical ------
- Testing . . --
Page 3 of 4
AMERIGON
- --------------------------------------------------------------------------------------------------------
*EV - IV PRELIMINARY PROGRAM SCHEDULE (CONT.)
- --------------------------------------------------------------------------------------------------------
9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
- --------------------------------------------------------------------------------------------------------
Ship 2 units to * +
* review 2 prototypes --
during testing at Amerigon
* agrees to release of +
parts
* agrees to release of +
tools XXXXXXXXXXXXXXXXX
----
Amerigon builds 48 kits -----
- Frame parts build ------
- Frame sub-assemblies ------
- COP procurement ------
- Kit assembly XXXX
- Ship kits to * --
Ship tools to * --
- Packing
- Ship
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
Page 4 of 4
AMERIGON
- --------------------------------------------------------------------------------------------------------
*EV - IV PRELIMINARY PROGRAM SCHEDULE (CONT.)
- --------------------------------------------------------------------------------------------------------
9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
- --------------------------------------------------------------------------------------------------------
Amerigon prepares drawings -------------------------. . .
Amerigon prepares operator ----------
manual
Amerigon prepares service ----------
manual
Amerigon provides technical ----------
advice on kit assembly
Amerigon provides preliminary +
layout
Amerigon provides final layout +
Amerigon provides +
homologation documents
Amerigon provides preliminary +
engineering parts list
Amerigon provides 2 revisions + +
of final engineering parts list
Amerigon provides preliminary +
assembly tooling list
Amerigon provides final +
assembly tooling list
_________________________________________________________
EXHIBIT E
Procurement Responsibility
_________________________________________________________
DETAIL PARTS BODY
&
PROCUREMENT RESPONSIBILITY
_________________________________________________________________________________________________________________________________
LIMITED PRODUCT
_____________________________________________
1000 BODY QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
___ ____________________ ___ _______ ________ ________ ___________ ________ ________ _________ _______________
1100 SPACE FRAME & PANEL ASSY IN *
1101 UNDERBODY FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON
1102 UNDERBODY PANEL * NEW PLASTIC AMERIGON AMERIGON AMERIGON AMERIGON
1103 FRONTEND FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON I/FR BPP FRAME
1104 SIDE FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON
1105 ROOF STRUCTURE FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON
1106 FRONT FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON
1107 REAR FRAME * NEW AL AMERIGON AMERIGON AMERIGON AMERIGON I/FR BPR RAIL
1108 WHEELHOUSE FRONT PANEL 1 NEW PLASTIC AMERIGON AMERIGON AMERIGON AMERIGON
1109 WHEELHOUSE REAR PANEL 1 NEW PLASTIC AMERIGON AMERIGON AMERIGON AMERIGON
1200 COVER PLATE RTM NOTE:
1201 SIDE PANEL 1/1 NEW FRP RTM AMERIGON AMERIGON AMERIGON * AMERIGON TO
1202 FRONT FENDER, LH/RH 1/1 NEW FRP RTM AMERIGON AMERIGON AMERIGON * INVESTIGATE TOOL
1203 ROOF 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON * COST AND TIMING
OF
1204 FRONTEND PANEL (COWL) * NEW FRP RTM AMERIGON AMERIGON AMERIGON * THE RTM PARTS.
1205 REAREND PANEL * NEW FRP RTM AMERIGON AMERIGON AMERIGON *
1300 HOOD
1301 PNL-HOOD OUTER 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON * SEE RTM NOTE
1302 PNL-HOOD INNER 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON *
1303 HINGE ASSY-HOOD, LH 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
1304 HINGE ASSY-HOOD, RH 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
1305 STAY ROD 1 NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
1306 BUMPER-HOOD OVER SLAM 2 COP RUBBER AMERIGON AMERIGON AMERIGON AMERIGON
1307 BUMPER-HOOD GUIDE 2 COP RUBBER AMERIGON AMERIGON AMERIGON AMERIGON
1308 WEATHER STRIP ASSY-HOOD
(REAR) 1 COP/ RUBBER AMERIGON AMERIGON AMERIGON AMERIGON
MODIFY
__________________________________________________________________________________________________________________________________
PAGE 1 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS BODY
&
PROCUREMENT RESPONSIBILITY
__________________________________________________________________________________________________________________________________
LIMITED PRODUCT
_____________________________________________
1000 BODY QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
___ ____________________ ___ _______ ________ ________ ___________ ________ ________ _________ _______________
1309 SEAL STRIP ASSY-HOOD 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
(FRONT) MODIFY
1310 STRIKER ASSY-HOOD 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
1311 LATCH ASSY-HOOD 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
1312 HANDLE ASSY-HOOD 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
LATCH RELEASE
1313 CABLE ASSY-HOOD 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
RELEASE
1400 DOOR
1401 PANEL-DR OUTER, LH 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON * SEE RTM NOTE
1402 PANEL-DR OUTER, RH 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON *
1403 MEMBER ASSY-DOOR 1 NEW STEEL/AL AMERIGON AMERIGON AMERIGON AMERIGON PIPE
REINFORCE, LH
1404 MEMBER ASSY-DOOR 1 NEW STEEL/AL AMERIGON AMERIGON AMERIGON AMERIGON PIPE
REINFORCE, RH
1405 PANEL-DOOR INNER, LH 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON *
1406 PANEL-DOOR INNER, RH 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON *
1407 FRAME ASSY-DOOR, LH 1 COP/NEW STEEL/AL AMERIGON AMERIGON AMERIGON AMERIGON
1408 FRAME ASSY-DOOR, RH 1 COP/NEW STEEL/AL AMERIGON AMERIGON AMERIGON AMERIGON
1407 HINGE ASSY-DOOR UPPER, 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
LH
1408 HINGE ASSY-DOOR UPPER, 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
RH
1409 HINGE ASSY-DOOR LOWER, 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
LH
1410 HINGE ASSY-DOOR LOWER, 1 COP/NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
RH
1411 REGULATOR ASSY-DOOR 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
WINDOW, LH
1412 REGULATOR ASSY-DOOR 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
WINDOW, RH
1413 LATCH ASSY-DOOR, LH 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
1414 LATCH ASSY-DOOR, RH 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
1415 STRIKER ASSY-DOOR 2 COP AMERIGON AMERIGON AMERIGON AMERIGON
1416 ROD DOOR INSIDE HANDLE, 1 NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
LH
1417 ROD DOOR INSIDE HANDLE, 1 NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
RH
1418 ROD DOOR SAFETY LOCK, 1 NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
LH
1419 ROD DOOR SAFETY LOCK, 1 NEW STEEL AMERIGON AMERIGON AMERIGON AMERIGON
RH
1420 KNOB-DR SAFETY LOCK, LH 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
__________________________________________________________________________________________________________________________________
PAGE 2 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS BODY
&
PROCUREMENT RESPONSIBILITY
__________________________________________________________________________________________________________________________________
LIMITED PRODUCT
_____________________________________________
1000 BODY QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
___ ____________________ ___ _______ ________ ________ ___________ ________ ________ _________ _______________
1421 KNOB-DOOR SAFETY 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
LOCK, RH
1422 HANDLE ASSY-DOOR 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
INSIDE, LH
1423 HANDLE ASSY-DOOR 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
INSIDE, RH
1424 HANDLE ASSY-DOOR 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
OUTSIDE, LH
1425 HANDLE ASSY-DOOR 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
OUTSIDE, RH
1426 CHECKER ASSY-DOOR, 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
LH
1427 CHECKER ASSY-DOOR, RH 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
1428 GLASS-DOOR DROP, LH 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
1429 GLASS-DOOR DROP, RH 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
1430 CHANNEL-DOOR QUADRANT, 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
LH
1431 CHANNEL-DOOR QUADRANT, 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
RH
1432 RUN ASSY-DOOR GLASS, LH 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
MODIFY
1429 RUN ASSY-DOOR GLASS, RH 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
MODIFY
1430 CHANNEL-DOOR GUIDE, LH 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
MODIFY
1431 CHANNEL-DOOR GUIDE, RH 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
MODIFY
1432 WEATHER STRIP-BODY 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
SIDE, LH MODIFY
1433 WEATHER STRIP-BODY 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
SIDE, RH MODIFY
1434 WEATHER STRIP-DOOR 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
SIDE, LH MODIFY
1435 WEATHER STRIP-DOOR 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
SIDE, RH MODIFY
1436 WEATHER STRIP ASSY-BELT 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
OUTSIDE, LH MODIFY
1437 WEATHER STRIP ASSY-BELT 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
OUTSIDE, RH MODIFY
1438 WEATHER STRIP-BELT 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
INSIDE, LH MODIFY
1439 WEATHER STRIP-BELT 1 COP/ AMERIGON AMERIGON AMERIGON AMERIGON
INSIDE, RH MODIFY
1440 PANEL ASSY-DOOR TRIM, 1 NEW WOOD AMERIGON AMERIGON AMERIGON AMERIGON
LH STOCK/
FRP
1441 PANEL ASSY-DOOR TRIM, 1 NEW WOOD AMERIGON AMERIGON AMERIGON AMERIGON
RH STOCK/
FRP
1442 PANEL ASSY-DOOR UPPER 1 NEW CLOTH AMERIGON AMERIGON AMERIGON AMERIGON
TRIM, RH
1143 PANEL ASSY-DOOR UPPER 1 NEW CLOTH AMERIGON AMERIGON AMERIGON AMERIGON
TRIM, LH
1444 MAP POCKET-FRONT DOOR 1 NEW ABS AMERIGON AMERIGON AMERIGON AMERIGON
TRIM, LH
__________________________________________________________________________________________________________________________________
PAGE 3 OF 15
DETAIL PARTS BODY
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------------------------
1000 BODY QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- --------- ---- --------- ---------- --------- ------------- ------- -------- --------- -------
1445 MAP POCKET-FRONT DOOR TRIM, RH 1 NEW ABS AMERIGON AMERIGON AMERIGON AMERIGON
1446 SEAL-DOOR TRIM, LH 1 NEW VINYL AMERIGON AMERIGON AMERIGON AMERIGON
1447 SEAL-DOOR TRIM, RH 1 NEW VINYL AMERIGON AMERIGON AMERIGON AMERIGON
1448 HANDLE ASSY-DOOR GRIP, LH 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
1449 HANDLE ASSY-DOOR GRIP, RH 1 NEW AMERIGON AMERIGON AMERIGON AMERIGON
1500 TAIL GATE
1501 PANEL-TAIL GATE OUTER 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON * SEE RTM NOTE
1502 PANEL-TAIL GATE INNER 1 NEW FRP RTM AMERIGON AMERIGON AMERIGON *
1503 HINGE ASSY-TAIL GATE, LH 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
1504 HINGE ASSY-TAIL GATE, RH 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
1505 BUMPER-TAIL GATE OVER SLAM 2 COP AMERIGON AMERIGON AMERIGON AMERIGON
1504 LIFTER-TAIL GATE 2 COP AMERIGON AMERIGON AMERIGON AMERIGON
1505 STRIKER ASSY-TAIL GATE 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
1506 LATCH ASSY-TAIL GATE 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
1507 DOOR ASSY-BATTERY RECHARGE 1 NEW FRP AMERIGON AMERIGON AMERIGON *
1508 BUMPER-BATTERY RECHARGE
OVER SLAM 2 COP RUBBER AMERIGON AMERIGON AMERIGON AMERIGON
1509 BATTERY RECHARGE DOOR LOCK SYS. * COP AMERIGON AMERIGON AMERIGON AMERIGON INCLUDE CABLE
1510 WEATHER STRIP-TAIL GATE 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
1600 KEY SET
1601 KEY SET 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
PAGE 4 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS INTERIOR TRIM
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------------
2000 INTERIOR TRIM QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- ----------------- --- ------ -------- ------- ----------- -------- -------- -------- -------
2100 INSTRUMENT PANEL
2101 INSTRUMENT PANEL ASSY 1 NEW ABS/PC OR PP INJECTION AMERIGON AMERIGON AMERIGON AMERIGON
2102 GLOVE BOX ASSY 1 NEW ABS OR PP INJECTION AMERIGON AMERIGON AMERIGON AMERIGON
2103 LOCK ASSY-GLOVE BOX 1 COP AMERIGON AMERIGON AMERIGON AMERIGON W/O KEY
2104 CLUSTER FACIA PANEL 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2105 CENTER FACIA PANEL 1 NEW ABS * WANTS INJ. AMERIGON AMERIGON AMERIGON AMERIGON
2106 TRAY-CTR FACIA 1 NEW ABS * WANTS INJ. AMERIGON AMERIGON AMERIGON AMERIGON PUSH & SLIDING
2107 SHROUD-STEERING COLUMN - UPR 1 COP/NEW PP OR ABS VAC CAST/FORM AMERIGON AMERIGON AMERIGON AMERIGON
2108 SHROUD-STEERING COLUMN - LWR 1 COP/NEW PP OR ABS VAC CAST/FORM AMERIGON AMERIGON AMERIGON AMERIGON
2109 CONSOLE ASSY 1 NEW ABS VAC CAST/FORM AMERIGON AMERIGON AMERIGON *
2200 SIDE TRIM
2201 FR & CTR PLR TRIM ASSY - LH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2202 FR & CTR PLR TRIM ASSY - RH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2203 QTR INR TRIM ASSY - LH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2204 QTR INR TRIM ASSY - RH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2205 QTR INR CTR TRIM ASSY - LH 1 NEW ABS + CLOTH VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON CLOTH COVER'G
2206 QTR INR CTR TRIM ASSY - RH 1 NEW ABS + CLOTH VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON CLOTH COVER'G
2207 COWL SIDE TRIM ASSY - LH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2208 COWL SIDE TRIM ASSY - RH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2209 DR SCUFF TRIM ASSY - LH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2210 DR SCUFF TRIM ASSY - RH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2211 REAR PLR TRIM ASSY - LH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2212 REAR PLR TRIM ASSY - RH 1 NEW ABS VACUUM FORM'G AMERIGON AMERIGON AMERIGON AMERIGON
2300 ROOF TRIM
2301 HEAD LINING ASSY 1 NEW CLOTH HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2302 ASSIST HANDLE ASSY 1 COP RETRACT. TYPE AMERIGON AMERIGON AMERIGON AMERIGON
2303 SUN VISOR ASSY - LH 1 COP MEET TO H/LING AMERIGON AMERIGON AMERIGON *
2304 SUN VISOR ASSY - RH 1 COP MEET TO H/LING AMERIGON AMERIGON AMERIGON *
PAGE 5 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS INTERIOR TRIM
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
-------------------------------------
2000 INTERIOR TRIM QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- --------------- --- ------- ----------- -------- ----------- ----- ------- -------- --------
2400 TRUNK TRIM
2401 REAR SHELF CENTER TRIM 1 NEW W/STOCK + W/PAPER HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON W/STOCK;WOODSTOCK
2402 LUGGAGE SIDE TRIM ASSY - LH 1 NEW BOARD + W/PAPER HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2403 LUGGAGE SIDE TRIM ASSY - RH 1 NEW BOARD + W/PAPER HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2404 LUGGAGE REAR TRIM ASSY 1 NEW BOARD + W/PAPER HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2405 LUGGAGE MAT 1 NEW W/PAPER TRIM'G OR CUT'G AMERIGON AMERIGON AMERIGON AMERIGON
2500 FLOOR & BRACKETS
2501 FLOOR CARPET ASSY 1 NEW NEEDLE TYPE HOT PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2502 BRACKET-CLUSATER GAUGE MTG.LH 1 NEW SPCC PRESS AMERIGON AMERIGON AMERIGON AMERIGON SUPPORT TO I/P
2503 BRACKET-CLUSATER GAUGE MTG.RH 1 NEW SPCC PRESS AMERIGON AMERIGON AMERIGON AMERIGON SUPPORT TO I/P
2504 BRACKET-GL/BOX HINGE MTG 1 NEW SPCC PRESS AMERIGON AMERIGON AMERIGON AMERIGON SUPPORT TO GL/BOX
2505 STRIKER ASSY-GL/BOX 1 COP/NEW SM2SC PRESS AMERIGON AMERIGON AMERIGON AMERIGON
2506 BRACKET ASSY-CTR SUPPORT 1 NEW SPCC PRESS AMERIGON AMERIGON AMERIGON AMERIGON SUPPORT TO I/P
2600 VENTILATION
2601 NOZZLE ASSY-DEFROSTER 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON * TO APPROVE
2602 NOZZLE ASSY-DEFROSTER SIDE, LH 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON STYLING
2603 NOZZLE ASSY-DEFROSTER SIDE, RH 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON
2604 VENT LOUVER ASSY-CTR 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON
2605 VENT LOUVER ASSY-SIDE, LH 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON
2606 VENT LOUVER ASSY-SIDE, RH 1 COP ABS AMERIGON AMERIGON AMERIGON AMERIGON
2607 HOSE ASSY-SIDE DEFROSTER, LH 1 NEW PP AMERIGON AMERIGON AMERIGON AMERIGON USE BEST PROCESS
2608 HOSE ASSY-SIDE DEFROSTER, RH 1 NEW PP AMERIGON AMERIGON AMERIGON AMERIGON USE BEST PROCESS
2609 DUCT ASSY-CTR AIR VENT 1 NEW ABS AMERIGON AMERIGON AMERIGON AMERIGON USE BEST PROCESS
2610 DUCT ASSY-SIDE AIR VENT, LH 1 NEW ABS AMERIGON AMERIGON AMERIGON AMERIGON USE BEST PROCESS
2611 DUCT ASSY-SIDE AIR VENT, RH 1 NEW ABS AMERIGON AMERIGON AMERIGON AMERIGON USE BEST PROCESS
2612 HEATER CONTROL COP AMERIGON AMERIGON AMERIGON AMERIGON
2613 HEATER ASSY COP AMERIGON AMERIGON AMERIGON AMERIGON ELECTRIC
PAGE 6 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS INTERIOR TRIM
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
----------------------------------------------------
2000 INTERIOR TRIM QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- ------------- --- ------- -------- ------- ----------- ----- -------- --------- -------
2700 SEAT
2701 FRONT SEAT ASSY, LH 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
2702 FRONT SEAT ASSY, RH 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
2703 HEAD REST ASSY 2 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
2704 CUSHION ASSY-REAR SEAT 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
2705 BACK ASSY-REAR SEAT 1 COP/MODIFY AMERIGON AMERIGON AMERIGON AMERIGON
2800 SEAT BELT
2801 BELT ASSY-FRONT SEAT, LH 1 COP AMERIGON AMERIGON * * ELR 3PT
2802 BELT ASSY-FRONT SEAT, RH 1 COP AMERIGON AMERIGON * * ELR 3PT
2803 BELT ASSY-FRONT SEAT, LH 1 COP AMERIGON AMERIGON * * ELR 3PT
2804 BELT ASSY-FRONT SEAT, RH 1 COP AMERIGON AMERIGON * * ELR 3PT
PAGE 7 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS EXTERIOR TRIM
&
PROCUREMENT RESPONSIBILITY
3000 EXTERIOR TRIM QTY COP/NEW MATERIAL PROCESS
- ---- ------------- --- ------- -------- -------
3100 LAMP
3101 LAMP ASSY-HEAD, LH (WITH T/SIGNAL) 1 NEW LENS:PC LENS:INJECTION
3102 LAMP ASSY-HEAD, RH (WITH T/SIGNAL) 1 HGS:VACUUM CAST'G
3103 LAMP ASSY-FRONT FOG 2 NEW/COP
3104 LAMP ASSY REAR COMB, LH 1 NEW LENS:ACRYL LENS:INJECTION
3105 LAMP ASSY REAR COMB, RH 1 HGS:VACUUM CAST'G
3106 LAMP ASSY-LICENSE PLATE 2 COP
3200 MIRROR & GLASS
3201 MIRROR ASSY-INSIDE REAR VIEW 1 COP
3202 MIRROR ASSY-OUTSIDE REAR VIEW, LH 1 COP/MODIFY BASE PLATE:NEW OR
3203 MIRROR ASSY-OUTSIDE REAR VIEW, RH 1 MODIFY
3204 GLASS ASSY-WINDSHIELD 1 NEW GLASS
3205 GLASS ASSY-TAIL GATE 1 NEW GLASS
3206 GLASS ASSY-FIXED GLASS, LH/RH 1/1 NEW GLASS
3207 COVER ASSY-COWL TOP 1 COP/NEW ABS OR PP VACUUM CASTING
3208 MOULD'G ASSY-WINDSHIELD GLASS 1 COP/NEW PVC EXTRUSION
3209 MOULD'G ASSY-TAIL GATE 1 COP/NEW PVC EXTRUSION
3210 MOULD'G ASSY-FIXED GLASS, LH/RH 1/1 COP/NEW PVC EXTRUSION
3300 BUMPER
3301 COVER-FRONT BUMPER 1 NEW TPO INJECTION OR ?
3302 RAIL-FRONT BUMPER 1 NEW AL
3303 COVER-REAR BUMPER 1 NEW TPO INJECTION OR ?
3304 RAIL-REAR BUMPER 1 NEW AL
3400 WIPER & WASHER
3401 WIPER ASSY-WINDSHIELD (WITH LINKAGE) 1 COP/MODIFY
3402 WASHER ASSY-WINDSHIELD 1 COP
3403 RESERVOIR ASSY-WINDSHIELD WASHER 1 COP
LIMITED PRODUCT
- -------------------------------------------------------------
ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ----------- ----- -------- --------- -------
AMERIGON AMERIGON AMERIGON AMERIGON ECE 20.02
AMERIGON AMERIGON AMERIGON AMERIGON
AMERIGON AMERIGON AMERIGON AMERIGON NEW LENS & MAT[cad 146]L
STYLING
AMERIGON AMERIGON AMERIGON AMERIGON
AMERIGON AMERIGON AMERIGON AMERIGON
AMERIGON AMERIGON AMERIGON AMERIGON
AMERIGON AMERIGON AMERIGON * MEET TO STYLING
AMERIGON AMERIGON AMERIGON AMERIGON
AMERIGON AMERIGON AMERIGON AMERIGON MEET TO STYLING
AMERIGON AMERIGON AMERIGON AMERIGON LAMINATED
AMERIGON AMERIGON AMERIGON AMERIGON TEMPERED
AMERIGON AMERIGON AMERIGON AMERIGON TEMPERED
AMERIGON AMERIGON AMERIGON *
AMERIGON AMERIGON AMERIGON AMERIGON * TO CONFIRM
AMERIGON AMERIGON AMERIGON AMERIGON * TO CONFIRM
AMERIGON AMERIGON AMERIGON AMERIGON * TO CONFIRM
AMERIGON AMERIGON AMERIGON AMERIGON FMVSS 215
AMERIGON AMERIGON AMERIGON AMERIGON FRONT END FRAME
AMERIGON AMERIGON AMERIGON AMERIGON FMVSS 215
AMERIGON AMERIGON AMERIGON AMERIGON REAR END FRAME
AMERIGON AMERIGON AMERIGON AMERIGON 2 SPEED INTERM'T
AMERIGON AMERIGON AMERIGON *
AMERIGON AMERIGON AMERIGON * WITH HOSE ASSY
PAGE 8 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS INTERIOR TRIM
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
----------------------------------------------
3000 EXTERIOR TRIM QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- ------------- --- ------- -------- ------- ----------- ----- -------- --------- -------
3500 TRIM
3501 EMBLEM 1 NEW TAPE * * * * DESIGN BY *
3502 WHEEL GUARD-FRONT, LH 1 NEW PE VACUUM FORMING AMERIGON AMERIGON AMERIGON *
3503 WHEEL GUARD-FRONT, RH 1 NEW PE VACUUM FORMING AMERIGON AMERIGON AMERIGON *
3504 WHEEL GUARD-REAR, LH 1 NEW PE VACUUM FORMING AMERIGON AMERIGON AMERIGON *
3505 WHEEL GUARD-REAR, RH 1 NEW PE VACUUM FORMING AMERIGON AMERIGON AMERIGON *
3506 MUD GUARD-FRONT, LH/RH 1/1 NEW/COP VACUUM FORMING AMERIGON AMERIGON AMERIGON * MEET TO STYLING
3507 MUD GUARD-FRONT, LH/RH 1/1 NEW/COP VACUUM FORMING AMERIGON AMERIGON AMERIGON * MEET TO STYLING
PAGE 9 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS POWER TRAIN
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
5000 POWER TRAIN QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2)
5001 TRANS AXLE ASSY-MANUAL 1 COP/NEW AMERIGON AMERIGON AMERIGON
5002 PINION-SPEEDOMETER 1 COP PLASTIC OR STEEL INJECTION AMERIGON AMERIGON AMERIGON
5003 RING-LOCK, SPEEDOMETER PINION 1 COP PLASTIC OR STEEL INJECTION AMERIGON AMERIGON AMERIGON
5004 SEAL-O RING, SPEEDOMETER PINION 1 COP RUBBER INJECTION AMERIGON AMERIGON AMERIGON
5005 COUPLING-INPUT SHAFT, TRANS 1 COP/NEW OVER S45C MACHINING AMERIGON AMERIGON AMERIGON
5006 ADAPTER PLATE-CLUTCH HOUSING 1 NEW AL CAST'G/MACHIN'G AMERIGON AMERIGON AMERIGON
5007 DOWEL PIN-BLOCK TO TRANSMISSION 2 COP/NEW SICC MACHINING AMERIGON AMERIGON AMERIGON
5008 BRACKET & INSULATOR ASSY(MOTOR & T/M) 3-4 COP/MODIFY STEEL-RUBBER AMERIGON AMERIGON AMERIGON
5000 POWER TRAIN PARTS(48) REMARKS
5001 TRANS AXLE ASSY-MANUAL AMERIGON
5002 PINION-SPEEDOMETER AMERIGON ABLE TO CHANGE WITH
5003 RING-LOCK, SPEEDOMETER PINION AMERIGON SPEEDO METER GEAR
5004 SEAL-O RING, SPEEDOMETER PINION AMERIGON ASSY-COP PART ONLY
5005 COUPLING-INPUT SHAFT, TRANS AMERIGON
5006 ADAPTER PLATE-CLUTCH HOUSING AMERIGON
5007 DOWEL PIN-BLOCK TO TRANSMISSION AMERIGON
5008 BRACKET & INSULATOR ASSY(MOTOR & T/M) AMERIGON BRACKET;MODIFY
PAGE 10 OF 15
DETAIL PARTS CHASSIS
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
6000 CHASSIS QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2)
6100 BRAKE
6101 FRONT WHEEL BRAKE ASSY, LH 1 COP AMERIGON AMERIGON AMERIGON
6102 FRONT WHEEL BRAKE ASSY, RH 1 COP AMERIGON AMERIGON AMERIGON
6103 REAR WHEEL BRAKE ASSY, LH 1 COP AMERIGON AMERIGON AMERIGON
6104 REAR WHEEL BRAKE ASSY, RH 1 COP AMERIGON AMERIGON AMERIGON
6105 BRAKE PEDAL ASSY 1 COP AMERIGON AMERIGON AMERIGON
6106 BRAKE MASTER CYLINDER & BOOSTER 1 COP AMERIGON AMERIGON AMERIGON
6107 BRAKE FLUID LINE 1 COP/MODIFY AMERIGON AMERIGON AMERIGON
6108 VACUUM HOSE 1 COP/MODIFY AMERIGON AMERIGON AMERIGON
6109 VACUUM PUMP 1 COP AMERIGON AMERIGON AMERIGON
6110 VACUUM PUMP MOUNT'G BRACKET 1 NEW AL AMERIGON AMERIGON AMERIGON
6111 PARKING BRAKE & CABLE 1 COP/MODIFY AMERIGON AMERIGON AMERIGON
6200 SUSPENSION
6201 FRONT HUB & KNUCKLE ASSY, LH 1 COP AMERIGON AMERIGON AMERIGON
6202 FRONT HUB & KNUCKLE ASSY, RH 1 COP AMERIGON AMERIGON AMERIGON
6203 FRONT STRUT ASSY, LH 1 COP AMERIGON AMERIGON AMERIGON
6204 FRONT STRUT ASSY, RH 1 COP AMERIGON AMERIGON AMERIGON
6205 LOWER ARM 1 COP AMERIGON AMERIGON AMERIGON
6206 STABILIZER BAR 1 COP/NEW AMERIGON AMERIGON AMERIGON
6207 CROSS MEMBER 1 COP AMERIGON AMERIGON AMERIGON
6208 REAR AXLE ASSY, LH 1 COP AMERIGON AMERIGON AMERIGON
6209 REAR AXLE ASSY, RH 1 COP AMERIGON AMERIGON AMERIGON
6210 REAR STRUT ASSY, LH 1 COP AMERIGON AMERIGON AMERIGON
6211 REAR STRUT ASSY, RH 1 COP AMERIGON AMERIGON AMERIGON
6212 REAR SUSPENSION CONTROL ARM * COP AMERIGON AMERIGON AMERIGON
6000 CHASIS PARTS(48) REMARKS
6100 BRAKE
6101 FRONT WHEEL BRAKE ASSY, LH *
6102 FRONT WHEEL BRAKE ASSY, RH *
6103 REAR WHEEL BRAKE ASSY, LH *
6104 REAR WHEEL BRAKE ASSY, RH *
6105 BRAKE PEDAL ASSY *
6106 BRAKE MASTER CYLINDER & BOOSTER *
6107 BRAKE FLUID LINE *
6108 VACUUM HOSE AMERIGON SAME AS EV ITEM
6109 VACUUM PUMP AMERIGON SAME AS EV ITEM
6110 VACUUM PUMP MOUNT'G BRACKET AMERIGON
6111 PARKING BRAKE & CABLE *
6200 SUSPENSION
6201 FRONT HUB & KNUCKLE ASSY, LH *
6202 FRONT HUB & KNUCKLE ASSY, RH *
6203 FRONT STRUT ASSY, LH * AMERIGON SUPPLY ALL SPRINGS
6204 FRONT STRUT ASSY, RH * AMERIGON SUPPLY ALL SPRINGS
6205 LOWER ARM *
6206 STABILIZER BAR AMERIGON
6207 CROSS MEMBER *
6208 REAR AXLE ASSY, LH *
6209 REAR AXLE ASSY, RH *
6210 REAR STRUT ASSY, LH * AMERIGON SUPPLY ALL SPRINGS
6211 REAR STRUT ASSY, RH * AMERIGON SUPPLY ALL SPRINGS
6212 REAR SUSPENSION CONTROL ARM *
PAGE 11 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS CHASSIS
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
6000 CHASSIS QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2)
6300 STEERING
6301 STEERING WHEEL 1 COP/MODIFY AMERIGON AMERIGON AMERIGON
6302 STEERING COLUMN & SHAFT 1 COP/MODIFY AMERIGON AMERIGON AMERIGON
6303 POWER STEERING GEAR BOX 1 COP AMERIGON AMERIGON AMERIGON
6304 POWER STEERING PUMP 1 COP AMERIGON AMERIGON AMERIGON
6305 POWER STEERING PUMP MOUNT'G BRACKET * NEW AMERIGON AMERIGON AMERIGON
6306 POWER STEERING HOSE * COP/MODIFY AMERIGON AMERIGON AMERIGON
6307 POWER STEERING MOTOR 1 COP AMERIGON AMERIGON AMERIGON
6308 POWER STEERING MOTOR MOUNT'G BRACKET 1 NEW AMERIGON AMERIGON AMERIGON
6309 ACCEL. PEDAL & CABLE ASSY * COP/MODIFY AMERIGON AMERIGON AMERIGON
6400 DRIVE SHAFT
6401 DRIVE SHAFT, LH COP/NEW AMERIGON AMERIGON AMERIGON
6402 DRIVE SHAFT, RH COP/NEW AMERIGON AMERIGON AMERIGON
6500 WHEEL & TIRE
6501 WHEEL 4 COP AMERIGON AMERIGON AMERIGON
6502 WHEEL COVER 4 COP AMERIGON AMERIGON AMERIGON
6503 TIRE 4 COP AMERIGON AMERIGON AMERIGON
6504 TEMPORARY TIRE 1 COP AMERIGON AMERIGON AMERIGON
6000 CHASIS PARTS(48) REMARKS
6300 STEERING
6301 STEERING WHEEL *
6302 STEERING COLUMN & SHAFT *
6303 POWER STEERING GEAR BOX *
6304 POWER STEERING PUMP AMERIGON
6305 POWER STEERING PUMP MOUNT'G BRACKET AMERIGON
6306 POWER STEERING HOSE *
6307 POWER STEERING MOTOR AMERIGON SAME AS EV ITEM
6308 POWER STEERING MOTOR MOUNT'G BRACKET AMERIGON
6309 ACCEL. PEDAL & CABLE ASSY *
6400 DRIVE SHAFT
6401 DRIVE SHAFT, LH * AMERIGON SUPPLY IF NEW
6402 DRIVE SHAFT, RH * AMERIGON SUPPLY IF NEW
6500 WHEEL & TIRE
6501 WHEEL *
6502 WHEEL COVER * REVIEW FOR STYLING
6503 TIRE *
6504 TEMPORARY TIRE *
PAGE 12 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS ELECTRIC
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------------------
7000 ELECTRIC QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48)
- ---- -------- --- ------- -------- ------- ----------- -------- -------- ---------
7001 HARNESS ASSY - MAIN 1 NEW
7002 HARNESS ASSY - ENGINE ROOM 1 NEW AMERIGON AMERIGON AMERIGON *
7003 HARNESS ASSY - INSTRUMENT 1 NEW AMERIGON AMERIGON AMERIGON *
7004 HARNESS ASSY - TRUNK ROOM 1 NEW AMERIGON AMERIGON AMERIGON *
7005 HARNESS ASSY - ROOM LAMP 1 NEW AMERIGON AMERIGON AMERIGON *
7006 HARNESS ASSY - DOOR (DRIVE) 1 NEW AMERIGON AMERIGON AMERIGON *
7007 HARNESS ASSY - DOOR (ASSIST) 1 NEW AMERIGON AMERIGON AMERIGON *
7008 HARNESS ASSY - CONTROL 1 NEW AMERIGON AMERIGON AMERIGON *
7009 BATTERY 1 COP AMERIGON AMERIGON AMERIGON *
7010 BATTERY MOUNTING 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7011 SWITCH ASSY - COMBINATION 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7012 SWITCH ASSY - FOG LAMP 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7013 SWITCH ASSY - STOP LAMP 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7014 SWITCH ASSY - POWER WINDOW (O) 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7015 SWITCH ASSY - POWER WINDOW (A) 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7016 SWITCH ASSY - HAZARD 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7017 SWITCH ASSY - DOOR (D) 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7018 SWITCH ASSY - DOOR (A) 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7019 SWITCH ASSY - REAR HEATED 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7020 SWITCH ASSY - DIRECTION 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7021 SWITCH ASSY - EMERGENCY 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7022 COVER - DOOR SWITCH 2 COP AMERIGON AMERIGON AMERIGON AMERIGON
7023 LIGHTER COMPL. - CIGARETTE 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7024 RELAY 5 COP AMERIGON AMERIGON AMERIGON *
7025 LAMP ASSY - ROOM 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7026 MOTOR ASSY - WINDSHIELD WIPER 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7027 MOTOR ASSY - WINDSHIELD WASHER 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7028 MOTOR ASSY - POWER WINDOW (LH) 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7029 MOTOR ASSY - POWER WINDOW (RH) 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7030 AUDIO ASSY - ETR 1 COP AMERIGON AMERIGON * *
7031 ANTENNA ASSY - ROD 1 COP AMERIGON AMERIGON * *
7032 SPEAKER ASSY - DOOR 2 COP AMERIGON AMERIGON * *
7000 ELECTRIC REMARKS
- ---- -------- -------
7001 HARNESS ASSY - MAIN
7002 HARNESS ASSY - ENGINE ROOM AMERIGON TO SUPPLY
7003 HARNESS ASSY - INSTRUMENT CONNECTORS & F. BOX
7004 HARNESS ASSY - TRUNK ROOM DETAIL DRWGS, PLUS
7005 HARNESS ASSY - ROOM LAMP MASTER HARNESS
7006 HARNESS ASSY - DOOR (DRIVE) PLUS WIRE LENGTHS
7007 HARNESS ASSY - DOOR (ASSIST)
7008 HARNESS ASSY - CONTROL
7009 BATTERY
7010 BATTERY MOUNTING
7011 SWITCH ASSY - COMBINATION MULTI-FUNCTION SW
7012 SWITCH ASSY - FOG LAMP * TO APPROVE
7013 SWITCH ASSY - STOP LAMP ALL SWITCH ASSYS.
7014 SWITCH ASSY - POWER WINDOW (D) DRIVE
7015 SWITCH ASSY - POWER WINDOW (A) ASSIST
7016 SWITCH ASSY - HAZARD
7017 SWITCH ASSY - DOOR (D)
7018 SWITCH ASSY - DOOR (A)
7019 SWITCH ASSY - REAR HEATED
7020 SWITCH ASSY - DIRECTION PRND SWITCH
7021 SWITCH ASSY - EMERGENCY
7022 COVER - DOOR SWITCH RUBBER
7023 LIGHTER COMPL. - CIGARETTE
7024 RELAY
7025 LAMP ASSY - ROOM
7026 MOTOR ASSY - WINDSHIELD WIPER
7027 MOTOR ASSY - WINDSHIELD WASHER
7028 MOTOR ASSY - POWER WINDOW (LH) SWITCH ON CONSOLE
7029 MOTOR ASSY - POWER WINDOW (RH)
7030 AUDIO ASSY - ETR SUPPLIER: *
7031 ANTENNA ASSY - ROD SUPPLIER: *
7032 SPEAKER ASSY - DOOR SUPPLIER: *
PAGE 13 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS ELECTRIC
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
------------------------------------------------
7000 ELECTRIC QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48)
- ---- -------- --- ------- -------- ------- ----------- -------- -------- ---------
7033 SPEAKER GRILLE - DOOR 2 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7034 CLUSTER ASSY - INSTRUMENT 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7035 SPEED SENSOR 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7036 INTERMITTENT WIPER RELAY 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7037 FLASHER ASSY - COMBINATION 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7038 SEAT BELT TIMER 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7039 FLASHER ASSY - COMBINATION 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
7040 HORN ASSY - HIGH 1 COP AMERIGON AMERIGON AMERIGON *
7041 DIGITAL CLOCK 1 COP/NEW AMERIGON AMERIGON AMERIGON AMERIGON
7000 ELECTRIC REMARKS
- ---- -------- -----------------------
7033 SPEAKER GRILLE - DOOR
7034 CLUSTER ASSY - INSTRUMENT * TO APPROVE
7035 SPEED SENSOR CABLELESS TYPE
7036 INTERMITTENT WIPER DELAY WITH TIMMER
7037 FLASHER ASSY - COMBINATION
7038 SEAT BELT TIMER LIGHT PLUS CHIME
7039 FLASHER ASSY - COMBINATION
7040 HORN ASSY - HIGH SINGLE HORN TYPE
7041 DIGITAL CLOCK
PAGE 14 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
DETAIL PARTS ELECTRIC VEHICLE
&
PROCUREMENT RESPONSIBILITY
LIMITED PRODUCT
---------------------------------
8000 ELECTRIC QTY COP/NEW MATERIAL PROCESS ENGINEERING TOOLS PROTO(2) PARTS(48) REMARKS
- ---- -------- --- ------- -------- ------- ----------- -------- -------- --------- -------
8001 MOTOR 1 COP AMERIGON AMERIGON AMERIGON *
8002 CONTROLLER 1 COP AMERIGON AMERIGON AMERIGON *
8003 CHARGING UNIT 1 COP AMERIGON AMERIGON AMERIGON * MAIN & 12V
8004 BATTERY 28 COP LEAD ACID AMERIGON AMERIGON AMERIGON * QTY HAVE TO
ACCORD TO MOTOR
& CONTROLLER
8005 POWER BRAKE SYSTEM 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
8006 POWER STEERING UNIT 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
8007 SAFETY UNIT 1 COP AMERIGON AMERIGON AMERIGON AMERIGON
* REGULATION
FOOT BRAKE STOPPING DISTANCE; 29 m OR LESS (AT SPEED OF 50Em/h
PARKING BRAKE; VEHICLE SHALL BE CAPABLE OF HOLDING MECHANICALLY THE MOTOR
VEHICLE STATIONARY ON A DRIVE PAVED ROAD WITH 20% (11.6) GRADIENT (AT THE
STATE OF G.V.B.) OTHER PARTS NOT SHOWN ON LIST WILL BE DESIGNED & SUPPLIED
BY AMERIGON. ALL PARTS RELATED TO STYLING WILL BE CONFIRMED WITH *.
PAGE 15 OF 15
- -------------------------
* Confidential portions omitted and filed separately with the Commission.
SETTLEMENT AND LICENSE AGREEMENT
BY, BETWEEN AND AMONG
AMERIGON, INC.,
AUDIO NAVIGATION SYSTEMS, LLC
ALCOM ENGINEERING CORPORATION
AND
AUDIO NAVIGATION SYSTEMS, INC.
DATED MAY 10, 1996
TABLE OF CONTENTS
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 "Actions" . . . . . . . . . . . . . . . . . . . 2
1.2 "Affiliate" . . . . . . . . . . . . . . . . . . 2
1.3 "Amerigon Licensed Patents" . . . . . . . . . . 3
1.4 "Amerigon Other Consideration". . . . . . . . . 3
1.5 "Amerigon Selling Price". . . . . . . . . . . . 3
1.6 "Amerigon Sublicensees" . . . . . . . . . . . . 3
1.7 "ANSLC Licensed Patents". . . . . . . . . . . . 4
1.8 "ANSLC Other Consideration" . . . . . . . . . . 4
1.9 "ANSLC Parties" . . . . . . . . . . . . . . . . 4
1.10 "ANSLC Selling Price" . . . . . . . . . . . . . 4
1.11 "ANSLC Sublicensees". . . . . . . . . . . . . . 4
1.12 "Consulting Agreement"......... . . . . . . . . 4
1.13 "Credit Card Processing Agreement". . . . . . . 4
1.14 "Disputed Matters" . . . . . . . . . . . . . . 5
1.15 "Effective Date" . . . . . . . . . . . . . . . 5
1.16 "Gen 4 Agreement" . . . . . . . . . . . . . . . 5
1.17 "Gen 4 Hardware". . . . . . . . . . . . . . . . 5
1.18 "Gen 4 Software". . . . . . . . . . . . . . . . 5
1.19 "Indemnified Parties".... . . . . . . . . . . . 6
1.20 "Interoperable Software". . . . . . . . . . . . 6
1.21 "Issued", "Issuing", "Issues" and "Issuance". . 6
1.22 "Legal Proceeding". . . . . . . . . . . . . . . 6
1.23 "Lunel" . . . . . . . . . . . . . . . . . . . . 6
1.24 "Manufacturing Apparatus" . . . . . . . . . . . 6
1.25 "Navigation-Related Features or Functions". . . 6
1.26 "Option and License Agreement". . . . . . . . . 6
1.27 "Other Consideration" . . . . . . . . . . . . . 6
1.28 "Outsourcing Agreement" . . . . . . . . . . . . 7
1.29 "Passcode Activation Patent". . . . . . . . . . 7
1.30 "Prior Agreements". . . . . . . . . . . . . . . 8
1.31 "Sales Fulfillment / Activation Technology" . . 8
1.32 "Selling Price" . . . . . . . . . . . . . . . . 8
1.33 "Specified Agreements". . . . . . . . . . . . . 9
1.34 "Specified Recoupment". . . . . . . . . . . . . 9
1.35 "Specified Software". . . . . . . . . . . . . . 9
1.36 "Unrelated Third Party" . . . . . . . . . . . . 9
1.37 "VANS Hardware" . . . . . . . . . . . . . . . . 9
1.38 "VANS Navigation Software". . . . . . . . . . . 10
1.39 "VANS Non-Navigation Software". . . . . . . . . 11
1.40 "VANS Product". . . . . . . . . . . . . . . . . 11
4
1.41 "VANS Software" . . . . . . . . . . . . . . . . . 11
1.42 "Voice-Interactive" . . . . . . . . . . . . . . . 11
2. PRIOR AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 11
3. RIGHTS TO EXISTING TECHNOLOGY . . . . . . . . . . . . . . . . . . 12
3.1 DELIVERY OF EXISTING VOICE FILES . . . . . . . . 12
3.2 DELIVERY OF SALES FULFILLMENT / ACTIVATION
TECHNOLOGY. . . . . . . . . . . . . . . . . . . . . . . 12
3.3 COVENANTS NOT TO SUE . . . . . . . . . . . . . . 12
3.3.1 BY AMERIGON . . . . . . . . . . . . . 12
3.3.2 BY ANSLC. . . . . . . . . . . . . . . 13
3.4 LIMITATION ON ANSLC'S RIGHTS TO GEN 4. . . . . . 13
3.5 LIMITATIONS ON AMERIGON'S RIGHTS . . . . . . . . 13
3.6 OWNERSHIP OF PROPRIETARY RIGHTS IN EXISTING
TECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . 13
3.6.1 GENERAL . . . . . . . . . . . . . . . 13
3.6.2 ANSI OWNERSHIP. . . . . . . . . . . . 14
3.6.3 AMERIGON OWNERSHIP. . . . . . . . . . 14
3.6.4 JOINT OWNERSHIP.. . . . . . . . . . . 14
3.7 OWNERSHIP OF TRADEMARKS. . . . . . . . . . . . . 14
3.7.1 IVS TRADEMARK . . . . . . . . . . . . 14
3.7.2 VANS TRADEMARK. . . . . . . . . . . . 15
. . . . . . . . . . . . . . . . . . . . . . 15
3.8 NO WARRANTIES RE TECHNOLOGY. . . . . . . . . . . 15
4. INDEMNIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1 THIRD PARTY CLAIMS AGAINST THE ANSLC
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 THIRD PARTY CLAIMS AGAINST AMERIGON. . . . . . . 16
4.3 LIMITATIONS. . . . . . . . . . . . . . . . . . . 16
5. CREATION OF ADDITIONAL VOICE FILES. . . . . . . . . . . . . . . . 16
5.1 ENGAGING LUNEL . . . . . . . . . . . . . . . . . 16
5.2 COSTS OF PRODUCING VOICE FILES . . . . . . . . . 17
5.3 ROYALTIES................. . . . . . . . . . . . 17
5.4 OWNERSHIP AND LICENSING OF VOICE FILES . . . . . 17
6. PATENT LICENSE FROM ANSLC TO AMERIGON . . . . . . . . . . . . . . 18
6.1 GENERAL. . . . . . . . . . . . . . . . . . . . . 18
6.2 PASSCODE ACTIVATION PATENT . . . . . . . . . . . 18
6.3 EXTENSION OF LICENSE TO AFFILIATES AND
SUBLICENSEES. . . . . . . . . . . . . . . . . . . . . . 18
5
7. PATENT LICENSE FROM AMERIGON TO ANSLC . . . . . . . . . . . . . . 18
7.1 GENERAL. . . . . . . . . . . . . . . . . . . . . 18
7.2 EXTENSION OF LICENSE TO AFFILIATES AND
SUBLICENSEES. . . . . . . . . . . . . . . . . . . . . . 19
8. PATENT NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . 19
9. DISCLOSURE OF PATENTS . . . . . . . . . . . . . . . . . . . . . . 19
10. EXPENSES OF PATENT PROSECUTION. . . . . . . . . . . . . . . . . . 19
11. PATENT LITIGATION AND APPORTIONMENT OF RECOVERY . . . . . . . . . 20
11.1 EACH PARTY RESPONSIBLE FOR PROTECTION OF ITS
PATENTS . . . . . . . . . . . . . . . . . . . . . . . . 20
11.2 RIGHT TO SHARE LITIGATION EXPENSES AND
APPORTIONMENT OF RECOVERIES . . . . . . . . . . . . . . 20
12. ROYALTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.1 ROYALTIES PAYABLE BY ANSLC . . . . . . . . . . . 21
12.1.1 HARDWARE. . . . . . . . . . . . . . . 21
12.1.2 SOFTWARE AND ANSLC OTHER
CONSIDERATION . . . . . . . . . . . . . . . . . 21
12.2 ROYALTIES PAYABLE BY AMERIGON. . . . . . . . . . 22
12.2.1 HARDWARE. . . . . . . . . . . . . . . 22
12.2.2 SOFTWARE AND AMERIGON OTHER
CONSIDERATION. . . . . . . . . . . . . . . . . . 23
12.3 EXPIRATION OF PAYMENT OBLIGATIONS. . . . . . . . 24
12.4 RESPONSIBILITY FOR AFFILIATES AND SUBLICENSEES . 24
12.4.1 ANSLC RESPONSIBILITY FOR
ANSLC AFFILIATES AND SUBLICENSEES. . . . . . . . 24
12.4.2 AMERIGON RESPONSIBILITY FOR
AMERIGON AFFILIATES AND SUBLICENSEES . . . . . . 24
13. ACCRUALS, RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . 24
13.1 ACCRUAL OF ROYALTIES . . . . . . . . . . . . . . . 24
13.2 STATEMENTS . . . . . . . . . . . . . . . . . . . . 25
13.3 LATE CHARGES . . . . . . . . . . . . . . . . . . . 25
13.4 FORM OF PAYMENTS . . . . . . . . . . . . . . . . . 25
13.5 CERTIFICATION. . . . . . . . . . . . . . . . . . . 25
13.6 RECORDS. . . . . . . . . . . . . . . . . . . . . . 26
13.7 TAXES. . . . . . . . . . . . . . . . . . . . . . . 27
14. SECURITY INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . 27
6
15. LIMITATIONS ON PUBLIC STATEMENTS. . . . . . . . . . . . . . . . . 28
15.1 GENERAL. . . . . . . . . . . . . . . . . . . . . 28
15.2 EXCEPTIONS AND EXCLUSIONS. . . . . . . . . . . . 29
15.3 PRESS RELEASE. . . . . . . . . . . . . . . . . . 29
16. RELEASES: DISMISSAL OF LEGAL PROCEEDING . . . . . . . . . . . . . 29
16.1 RELEASE BY AMERIGON. . . . . . . . . . . . . . . 29
16.2 RELEASE BY ANSLC PARTIES . . . . . . . . . . . . 30
16.3 STIPULATION FOR DISMISSAL OF LITIGATION. . . . . 31
16.4 COMPROMISE ONLY. . . . . . . . . . . . . . . . . 31
17. REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 32
17.1 MUTUAL REPRESENTATIONS . . . . . . . . . . . . . 32
17.2 REPRESENTATIONS BY ANSLC PARTIES . . . . . . . . 32
17 3 LIMITATIONS AND EXCLUSIONS . . . . . . . . . . . 32
18. CONFIDENTIALITY OBLIGATIONS . . . . . . . . . . . . . . . . . . . 32
19. DISPUTE RESOLUTION. . . . . . . . . . . . . . . . . . . . . . . . 33
19.1 GENERAL. . . . . . . . . . . . . . . . . . . . . 33
19.2 DISPUTE ESCALATION . . . . . . . . . . . . . . . 34
19.3 RESOLUTION OF DISPUTES RE SELLING PRICE ALLOCATION ISSUES. . 34
19.3.1 SELECTION OF ARBITRATOR. . . . . . . 34
19.3.2 HEARING AND RESOLUTION . . . . . . . 35
19.3.3 EXPENSES . . . . . . . . . . . . . . 35
19.4 ARBITRATION. . . . . . . . . . . . . . . . . . . 36
19.5 GENERAL PROVISIONS RE ARBITRATION. . . . . . . . 36
20. APPRAISAL OF FAIR MARKET VALUE. . . . . . . . . . . . . . . . . . 37
21. TERM OF LICENSE RIGHTS: LIMITATION OF REMEDIES. . . . . . . . . . 37
21.1 TERM OF LICENSE RIGHTS . . . . . . . . . . . . . 37
21.2 NO INJUNCTIVE RELIEF . . . . . . . . . . . . . . 38
22. PAYMENTS TO NAVTECH AND LERNOUT & HAUSPIE AND OTHER THIRD
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
23. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
24. COMPATIBILITY / INTEROPERABILITY. . . . . . . . . . . . . . . . . 39
24.1 VANS NON-NAVIGATION SOFTWARE . . . . . . . . . . 39
24.2 VANS NAVIGATION SOFTWARE . . . . . . . . . . . . 39
7
24.3 TRANSFERABILITY OF RIGHTS. . . . . . . . . . . . 39
24.4 LIMITED TECHNICAL SUPPORT. . . . . . . . . . . . 40
24.5 ROYALTY ADJUSTMENT . . . . . . . . . . . . . . . 40
25. OPERATION OF TOLL-FREE 800 NUMBER; OUTSOURCING AGREEMENT . . . . . 41
25.1 RIGHT START AGREEMENT. . . . . . . . . . . . . . 41
25.2 CREDIT CARD PROCESSING AGREEMENT . . . . . . . . 41
26. CUSTOMER LISTS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
27. RELATIONSHIP OF PARTIES. . . . . . . . . . . . . . . . . . . . . . 42
28. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
28.1 NOTICES AND COMMUNICATIONS . . . . . . . . . . . 42
28.2 EXCUSED PERFORMANCE. . . . . . . . . . . . . . . 43
28.3 ASSIGNMENT . . . . . . . . . . . . . . . . . . . 43
28.4 INTEGRATION. . . . . . . . . . . . . . . . . . . 44
28.5 MODIFICATION . . . . . . . . . . . . . . . . . . 44
28.6 WAIVER OR DELAY. . . . . . . . . . . . . . . . . 44
28.7 SEVERABILITY . . . . . . . . . . . . . . . . . . 44
28.8 SURVIVAL . . . . . . . . . . . . . . . . . . . . 44
28.9 GOVERNING LAW. . . . . . . . . . . . . . . . . . 44
28.10 HEADINGS . . . . . . . . . . . . . . . . . . . . 45
8
SETTLEMENT AND LICENSE AGREEMENT
This Settlement and License Agreement (the "Agreement") is made and
entered into this 9th day of May, 1996, by and between Amerigon, Inc., a
California corporation ("Amerigon"); Audio Navigation Systems, Inc., a
California corporation ("ANSI"); Audio Navigation Systems, LLC, a California
limited liability corporation ("ANSLC"); and Alcom Engineering Corporation,
a California corporation ("Alcom"), with reference to the following facts:
A. Amerigon and ANSI are parties to an Option and License Agreement
dated as of July 13, 1992.
B. Amerigon, ANSI and Alcom Engineering Corporation are parties to a
Consulting Agreement dated as of July 13, 1992.
C. Certain disputes have arisen between Amerigon and ANSI relating,
INTER ALIA, to their respective rights and obligations under the July 13, 1992
Option and License Agreement and the July 13, 1992 Consulting Agreement.
D. On May 17, 1995, Amerigon filed a complaint in Superior Court,
County of Los Angeles, State of California, AMERIGON. INC. v. AUDIO NAVIGATION
SYSTEMS, INC. ET AL., Case No. BC127921, and on June 1, 1995, Amerigon filed a
First Amended Complaint for Declaratory Relief in that action. On or about July
1, 1995, ANSI filed a General Denial and a Cross-Complaint for Declaratory
Relief in that action.
E. Subsequent to the commencement of the legal action described in
Paragraph D above, ANSI and Amerigon entered into an Agreement Re Gen 4
Navigation System dated July 24, 1995, which was amended by an Amendment dated
as of August 14, 1995.
F. Certain disputes have arisen between Amerigon and ANSI relating to
their respective rights and obligations under the July 24, 1995 Agreement Re Gen
4 Navigation System as amended by the August 14, 1995 Amendment.
G. Amerigon, on the one hand, and the ANSLC Parties, on the other hand,
wish fully and finally to resolve all differences, claims, demands, causes of
action and disputes of whatever nature or subject matter between them, including
but not limited to all disputes and claims arising out of any of the facts,
transactions and occurrences alleged in or in connection with the legal action
described in Paragraph D above and all disputes and claims arising out of or
relating to the July 13, 1992 Option and License Agreement, the July 13,
1992 Consulting Agreement and/or the July 24, 1995 Agreement Re Gen 4 Navigation
System, as amended by the August 14, 1995 Amendment.
1
H. All or substantially all of ANSI's rights in and to the technology,
patents and business that are the subject of this Agreement have been or will
be assigned to ANSLC.
I. Amerigon, on the one hand, and ANSI and ANSLC, on the other hand,
desire, pursuant to the terms and conditions set forth herein, to grant one
another certain rights and make certain commitments not to assert claims
against one another in the future in an effort to lessen the likelihood of
future disputes between the parties and to permit the parties to conduct their
respective businesses.
NOW THEREFORE, in consideration of the foregoing, and in consideration
of the representations, warranties and covenants set forth in this Agreement,
ANSI, ANSLC, Alcom and Amerigon agree as follows:
ALTHOUGH THIS AGREEMENT IS BEING EXECUTED ON MAY 10, 1996, THE PARTIES
AGREE THAT THIS AGREEMENT SHALL NOT BE BINDING OR EFFECTIVE UNLESS AND UNTIL
ANSLC CONCLUDES AN AGREEMENT WITH NAVTECH REASONABLY ACCEPTABLE TO ANSLC
GRANTING ANSLC LICENSE RIGHTS IN THE NAVTECH TECHNOLOGY COMPARABLE TO
THOSE HELD BY AMERIGON. IN THE EVENT NO SUCH AGREEMENT BETWEEN NAVTECH AND
ANSLC IS ENTERED INTO, THIS AGREEMENT SHALL BE VOID AND OF NO FORCE OR EFFECT,
EXCEPT THAT THIS PARAGRAPH AND SECTION 3.1 SHALL BE BINDING UPON THE PARTIES.
ANSLC SHALL NEGOTIATE IN GOOD FAITH IN AN EFFORT TO REACH AN AGREEMENT WITH
NAVTECH CONSISTENT WITH THE CORRESPONDENCE AND PROPOSALS HERETOFORE
EXCHANGED BETWEEN NAVTECH AND ANSLC. UPON EXECUTION OF SUCH AN AGREEMENT
BETWEEN NAVTECH AND ANSLC, ANSLC SHALL PROMPTLY NOTIFY AMERIGON IN
WRITING, AND AMERIGON AND ANSLC SHALL EXECUTE AN ADDENDUM CONFIRMING THAT THIS
AGREEMENT IS IN FULL FORCE AND EFFECT. THE DATE OF EXECUTION OF SUCH AN
AGREEMENT BETWEEN NAVTECH AND ANSLC SHALL BE THE "EFFECTIVE DATE" OF THIS
AGREEMENT. IN THE EVENT THE EFFECTIVE DATE HAS NOT OCCURRED ON OR BEFORE JUNE
15, 1996: (i) THERE SHALL NOT BE AN EFFECTIVE DATE OF THIS AGREEMENT, UNLESS THE
PARTIES MUTUALLY AGREE IN WRITING TO THE CONTRARY; AND (ii) THIS PARAGRAPH AND
SECTION 3.1 SHALL BE THE ONLY PROVISIONS OF THIS AGREEMENT BINDING UPON THE
PARTIES.
1. DEFINITIONS. As used in this Agreement, the following terms shall have the
following meanings:
1.1 "Actions" shall mean any allegations, claims, suits,
arbitrations, actions, or proceedings.
1.2 "Affiliate" shall mean, with respect to any applicable
party referred to in this Agreement, any corporation, limited liability
company, partnership or other entity (collectively, an "Entity") of
which such party (a) has legal, beneficial or equitable ownership, directly or
indirectly, or the right to acquire legal, beneficial or equitable ownership,
directly
2
or indirectly, of forty percent (40%) or more of the aggregate of all equity
interests in such Entity (no matter how evidenced) or (b) has legal, beneficial
or equitable ownership, directly or indirectly, or the right to acquire legal,
beneficial or equitable ownership, directly or indirectly, of forty percent
(40%) or more of the interests (no matter how evidenced) having the power to
direct the affairs of such Entity by reason of ownership of voting stock,
contract or otherwise; or (c) is directly or indirectly controlling, controlled
by or under common control with such applicable party. Without limiting
the foregoing definition, ANSI, ANSLC and Amerigon each agrees not to create any
Entity that does not meet the definition of an Affiliate hereunder for the
principal purpose of circumventing or frustrating the respective rights,
obligations and intentions of the parties as set forth in this Agreement.
Further without limiting the foregoing definition, the parties agree that ANSI
shall be deemed an Affiliate of ANSLC.
1.3 "Amerigon Licensed Patents" shall mean all patents (not
including any design patents) Issued or Issuing on patent applications entitled
to an effective filing date prior to May 10, 1998, for which, (a) at May 10,
1996, Amerigon or an Amerigon Affiliate is an actual or beneficial owner or an
assignee, or (b) at the date of the invention, the date of reduction to practice
or May 10, 1996 any named inventor was employed by Amerigon or an Amerigon
Affiliate or engaged by Amerigon or an Amerigon Affiliate pursuant to an
agreement requiring that the inventor assign patent rights in such invention to
Amerigon or an Amerigon Affiliate. The term "Amerigon Licensed Patents" shall
also include any patent which is a reissue or extension of any of the foregoing,
and any patent issuing on any patent application related as a divisional or a
continuation or a continuation-in-part of any of the foregoing. Without
limiting the foregoing, Amerigon Licensed Patents include those patents
identified in Schedule 1.3 attached hereto.
1.4 "Amerigon Other Consideration" means any Other
Consideration received by Amerigon or an Amerigon Affiliate.
1.5 "Amerigon Selling Price" shall mean the Selling Price at which a
VANS Product is sold, leased, licensed, made available or otherwise exploited by
Amerigon, an Amerigon Affiliate or an Amerigon Sublicensee to a third party
other than Amerigon, an Amerigon Affiliate, an Amerigon Sublicensee or an
Affiliate of an Amerigon Sublicensee.
1.6 "Amerigon Sublicensees" shall mean any person or entity to which
Amerigon grants any rights to make, or have made VANS Products or to practice or
have practiced any method or process involved in the manufacture or use thereof;
or to make, have made or use Manufacturing Apparatus or practice or have
practiced any method or process involved in the manufacture or use
3
thereof; or to use, lease, sell or otherwise transfer VANS Products;
1.7 "ANSLC Licensed Patents" shall mean all patents (not including
any design patents), Issued or Issuing on patent applications entitled to
an effective filing date prior to May 10, 1998, for which, (a) at May 10, 1996,
ANSLC or an ANSLC Affiliate is an actual or beneficial owner or an assignee, or
(b) at the date of the invention, the date of reduction to practice or May 10,
1996 any named inventor was employed by ANSLC or an ANSLC Affiliate or engaged
by ANSLC or an ANSLC Affiliate pursuant to an agreement requiring that the
inventor assign patent rights in such invention to ANSLC or an ANSLC Affiliate.
The term "ANSLC Licensed Patents" shall also include any patent which is a
reissue or extension of any of the foregoing, and any patent issuing on
any patent application related as a divisional or a continuation or a
continuation-in-part of any of the foregoing. Without limiting the foregoing,
ANSLC Licensed Patents include those Issued patents identified in Schedule 1.7
attached hereto, and patents hereafter Issuing on those patent applications
identified in Schedule 1.7.
1.8 "ANSLC Other Consideration" means any Other Consideration
received by ANSLC or an ANSLC Affiliate.
1.9 "ANSLC Parties" means, individually and collectively,
ANSI, ANSLC and Alcom.
1.10 "ANSLC Selling Price" shall mean the Selling Price at which a
VANS Product is sold, licensed or otherwise made available or exploited
by ANSLC, an ANSLC Affiliate or an ANSLC Sublicensee to a third party other than
ANSLC, an ANSLC Affiliate, an ANSLC Sublicensee or an Affiliate of an ANSLC
Sublicensee.
1.11 "ANSLC Sublicensees" shall mean any person or entity to which
ANSLC grants any rights to make, or have made VANS Products or to practice or
have practiced any method or process involved in the manufacture or use
thereof; or to make, have made or use Manufacturing Apparatus or practice or
have practiced any method or process involved in the manufacture or use
thereof; or to use, lease, sell or otherwise transfer VANS Products;
1.12 "Consulting Agreement" shall mean the Consulting Agreement dated
as of July 13, 1992 between and among Amerigon, ANSI and Alcom Engineering
Corporation.
1.13 "Credit Card Processing Agreement" shall mean the agreement
dated August 22, 1995 between ANSI and First U.S.A./DMGT pursuant to which First
U.S.A./DMGT has certain obligations with respect to the processing of credit
card transactions for sales of certain Gen 4 Software.
4
1.14 "Disputed Matters" shall mean all disputes, controversies
or conflicts between any of the ANSLC Parties, on the one hand, and Amerigon, on
the other hand, relating to any of the Specified Agreements and all disputes,
controversies or conflicts which are the subject of the Legal Proceeding.
1.15 "Effective Date" shall have the meaning specified on the first
page of this agreement, in the paragraph immediately preceding Section 1.
1.16 "Gen 4 Agreement" shall mean the Agreement Re Gen 4 Navigation
System dated July 24, 1995 between ANSI and Amerigon, as amended by the
Amendment dated as of August 14, 1995 between ANSI and Amerigon.
1.17 "Gen 4 Hardware" shall mean VANS Hardware consisting of a
printed circuit board and electronic components and connectors, cables,
housings, firmware and other tangible hardware in substantially the form that
exists as of the date of this Agreement for anticipated delivery by
Amerigon to Amerigon's customers such as Kenwood, Alpine, Clarion and Eclipse.
VANS Hardware shall be deemed to constitute Gen 4 Hardware if (a) such hardware
includes a system architecture that uses a Digital Signal Processor from Analog
Devices (#21MSP55) and a Motorola Central Processing Unit (#68340) (or backward
compatible direct successors thereto or a second-source chips generally
recognized in the industry as clones of such chips or clones of backward
compatible successors thereto) or (b) such hardware is characterized by the DSP,
operating as a slave to the CPU, being used for speech recognition and
speech generation; the CPU being used for CD data retrieval, navigation
calculations, and system control; the DSP receiving the data and program
code necessary for speech recognition and speech generation from a DRAM
accessible indirectly through the CPU; the DSP having dedicated SRAM for its
"scratch" calculations; and a ROM from which program code necessary to start the
system upon power-on is executed from the CPU. Gen 4 Hardware also includes
minor modifications to the foregoing that are intended to reduce cost or
to resolve technical problems or to improve performance, provided that the
hardware modifications do not change the fundamental system architecture of the
foregoing. Gen 4 Hardware expressly excludes any VANS Hardware that utilizes a
single chip that combines the functions of the Digital Signal Processor and the
Central Processing Unit.
1.18 "Gen 4 Software" shall mean operating system and application
Software for the Gen 4 Hardware which, when used on the Gen 4 Hardware,
provides Voice-Interactive Navigation-Related Features or Functions. The Gen
4 Software may include, without limitation, operating system software,
application programs, hardware device drivers for interfacing with audio CD
players and/or maps, including points of interest.
5
1.19 "Indemnified Parties" shall mean with respect to any party,
such party and its Affiliates, and their respective officers, directors,
agents and employees.
1.20 "Interoperable Software" shall have the meaning specified
in Section 24.1.
1.21 "Issued", "Issuing", "Issues" and "Issuance" shall refer to the
awarding of a patent based upon a patent application, whether such awarding
is affected by issuance, registration, deliverance, sealing, granting or any
other act.
1.22 "Legal Proceeding" shall mean the proceeding in Superior
Court, County of Los Angeles, State of California, AMERIGON INC. V.
AUDIO NAVIGATION SYSTEMS, INC. ET AL., Case No. BC127921.
1.23 "Lunel" shall mean Roy Lunel.
1.24 "Manufacturing Apparatus" shall mean any instrumentality
or aggregate of instrumentalities primarily designed for use in the
fabrication of a VANS Product.
1.25 "Navigation-Related Features or Functions" shall mean any
features or functions that facilitate any one or more of the following: (a)
determining and/or communicating to the user his/her current geographic
position; (b) determining and/or communicating to the user what course to
follow or how to navigate from one geographic location to another; (c)
determining and/or communicating to the user the position of a geographic
location of interest; or (d) otherwise utilizing map databases or geographic
databases to determine and/or communicate to the user information relating to
geographic location or position.
1.26 "Option and License Agreement" shall mean the Option and License
Agreement dated as of July 13, 1992 between Amerigon and ANSI.
1.27 "Other Consideration" shall mean any and all consideration
other than the Selling Price received by an applicable person or entity
in connection with the marketing, licensing, sale or other commercial
exploitation of the VANS Products or the Licensed Patents, regardless
of the form or characterization of such consideration, including
without limitation advances, one-time payments, stock or equity interests,
profit participations, assets, development or consulting fees, tooling
fees, advertising or promotional payments and any other form of compensation or
consideration, provided that, in the event an applicable entity sells a stock or
equity interest in connection with the marketing, licensing, sale or
other commercial exploitation of the VANS Products or the Licensed Patents,
"Other Consideration" shall include only that portion, if any, of the
6
consideration received for such stock or equity interest which exceeds the fair
market value of such stock or equity interest as of the date of such
transaction. The parties' intention in providing for Other Consideration to
include the above fair market portion of any value paid for a stock or
equity interest in connection with the marketing, licensing, sale or other
commercial exploitation of the VANS Products or the Licensed Patents is to
circumvent a party's ability to structure a transaction in order to avoid
payments to the other party hereunder simply by characterizing a payment
as part of the consideration received for a stock or equity interest rather than
as a license fee. By way of example only, if an entity licenses rights to one
or more VANS Products or Licensed Patents in a transaction in which such entity
receives (i) consulting fees; (ii) support fees; (iii) a one-time payment; and
(iv) an equity investment in which the licensee acquires a portion of the
stock of such entity, Other Consideration would include the consulting fees, the
support fees, the one-time payment and any portion of the amount paid for the
stock of such entity which exceeds the fair market value of the stock as of the
date of purchase. Any dispute over what portion of consideration paid for a
stock or equity interest exceeds the fair market value of such stock or equity
interest shall be resolved as set forth in Section 20. Further, in the
event that a VANS Product is incorporated into a larger product, and there
are no bona fide separately stated prices for the VANS Product and the non-VANS
portion of the larger product, the allocation of what portion of the Other
Consideration is attributable to the VANS Product and the non-VANS portion of
the larger product for the purpose of calculating payments hereunder shall
be made based on a reasonable good faith apportionment of the value of the VANS
Product and the value of the non-VANS portion of the larger product, where the
value of the VANS product is based upon the value added to the non-VANS portion
of the larger product by the VANS Product to Unrelated Third Party purchasers at
the distribution level at which sales to Unrelated Third Party Purchasers
actually occur.
1.28 "Outsourcing Agreement" shall mean the agreement dated October
1, 1995 between ANSI and The Right Start, Inc. pursuant to which The
Right Start, Inc. has certain obligations with respect to the operation of a
toll-free 800 number, and the providing of telemarketing, direct mail and
order fulfillment services for sales of certain Gen 4 Software.
1.29 "Passcode Activation Patent" shall mean all patents, if any,
Issued or Issuing on (a) the patent application(s) identified in Schedule
1.29 and any foreign filings thereon, or (b) any other patent applications
filed with respect to the Sales Fulfillment / Activation Technology,
including any patent which is a reissue or extension of any of the foregoing,
and any patent issuing on any such patent application(s) related as a divisional
or a continuation or a continuation-in-part of any of the foregoing.
7
1.30 "Prior Agreements" shall have the meaning specified in Section
2.
1.31 "Sales Fulfillment / Activation Technology" shall mean the
method and process utilized by ANSI for decryption and activation of Gen 4
Software and the program code utilized by ANSI to implement such method and
process.
1.32 "Selling Price" shall mean, with respect to any applicable
person or entity, the bona fide gross invoiced billing price at which a VANS
Product is sold, leased, licensed or otherwise made available or exploited
by such entity, less the following: (i) promotional, refund, returns or similar
credits or rebates which are actually granted or credited against amounts
invoiced; and (ii) any federal, state or foreign sales, excise or other taxes or
tariffs imposed on the licensing, manufacture and/or distribution of VANS
Products (not including taxes based on income). If said billing price
includes the following items, they may be deducted only if separately stated:
packing, transportation and insurance charges Commissions and costs payable
to sales representatives shall not be deductible from the gross invoiced billing
price for purposes of calculating the Selling Price. If a VANS Product includes
both VANS Hardware and VANS Software, and there are no BONA FIDE separately
stated prices for the VANS Hardware and the VANS Software incorporated in such
VANS Product, the allocation of what portion of the Selling Price is
attributable to the VANS Hardware and what portion is attributable to the VANS
Software for purposes of calculating payments hereunder shall be made based on
(i) the ratio of the average selling price or license fee charged by the
entity selling, leasing, licensing, making available or otherwise exploiting
the VANS Product for separate transactions with respect to the VANS Hardware and
VANS Software contained in such VANS Product during the same quarterly period
(or the most recent quarterly period in which sales or licenses have occurred),
if such products are or were sold or licensed separately, or (ii) in
the event the VANS Hardware and VANS Software contained in such VANS
Product are not and were not sold or licensed separately, such allocation
shall be based on a reasonable good faith apportionment of the relative
values, to Unrelated Third Party purchasers at the distribution level at which
sales to Unrelated Third Party Purchasers actually occur, of the VANS Hardware
and VANS Software comprising said VANS Product and the relative prices that
could be charged for such products if sold, leased, licensed, made available
or otherwise exploited separately. Further, in the event that a VANS
Product is incorporated into a larger product, and there are no bona fide
separately stated prices for the VANS Product and the non-VANS portion of the
larger product, the allocation of what portion of the Selling Price is
attributable to the VANS Product and the non-VANS portion of the larger product
shall be a reasonable good faith apportionment of the value of the VANS Product
and the value of
8
the non-VANS portion of the larger product, where the value of the VANS Product
is based upon the value added to the non-VANS portion of the larger product by
the VANS Product to Unrelated Third Party purchasers at the distribution level
at which sales to Unrelated Third Party Purchasers actually occur. By way of
example only, if a VANS product is incorporated into a larger CD product, where
the sales price (at the appropriate distribution level) of comparable non-VANS
CD products is $300 and the sales price of the larger, integrated product is
$450, the apportionment of value to the VANS product would be $150,
notwithstanding whatever price might by sought or paid for separately priced
stand-alone VANS products. Also by way of example only, in the event a VANS
Product consisting of a chipset is sold by ANSLC, an ANSLC Affiliate or an ANSLC
Sublicensee to an Unrelated Third Party for integration by such third party into
a consumer product, the Selling Price would be the Selling Price for such
chipset.
1.33 "Specified Agreements" shall mean the Consulting Agreement, the
Option and License Agreement, and the Gen 4 Agreement.
1.34 "Specified Recoupment" shall have the meaning specified in
Section 12.1.2.1.
1.35 "Specified Software" shall mean any software, including
without limitation operating system software, application programs, hardware
device drivers for interfacing with audio CD players, and/or maps, irrespective
of the form or medium in which such software is embodied, including
magnetic and/or optical storage media, CD-ROMs, firmware, and any other media
now known or hereafter invented, which software is created by or for ANSLC,
Amerigon, an ANSLC Affiliate or an Amerigon Affiliate or which is created,
manufactured, distributed, used or sold pursuant to license or
authorization from ANSLC, Amerigon, an ANSLC Affiliate or an Amerigon Affiliate.
1.36 "Unrelated Third Party" shall mean, as to Amerigon, any person or
entity other than Amerigon, an Amerigon Affiliate, an Amerigon Sublicensee or an
Affiliate of an Amerigon Sublicensee, and as to ANSLC shall mean any person or
entity other than ANLSC, an ANSLC Affiliate, an ANSLC Sublicensee or an
Affiliate of an ANSLC Sublicensee.
1.37 "VANS Hardware" shall mean (i) any hardware meeting all of the
criteria set forth in subparagraphs (a), (b), (c) and (d) below, or (ii) any
hardware that, in the form sold to end-user customers (including any software
resident in firmware on such hardware or otherwise provided or bundled with such
hardware) would be deemed to infringe or contributorily infringe United States
patent #5,274,560 if manufactured or sold without a license to such patent,
irrespective of whether such hardware meets the criteria set forth in
subparagraphs (a), (b), (c) and (d) below:
9
(a) The hardware (when used with software resident in firmware on
such hardware or otherwise provided for use with such hardware) is capable of
providing Voice-Interactive Navigation-Related Features or Functions, whether
or not such hardware also provides other features or functions;
(b) Substantially all of (i) the computing and memory storage
functions or (ii) the digital processing and memory storage functions
associated with the providing of Voice-Interactive Navigation-Related
Features or Functions are performed locally, in the hardware unit itself, and
not remotely. By way of example only, a cellular phone or other device
through which navigation information is communicated to a user would not be
deemed to constitute VANS Hardware where such device does not provide
substantially all of the computing and memory storage functions associated
with the providing of Voice-Interactive Navigation-Related Features or
Functions but merely communicates to the user navigation information
originating from a remote system.
(c) The designs or specifications for the hardware were created in
substantial and material part by or for ANSLC, Amerigon, an ANSLC Affiliate
or an Amerigon Affiliate or were designed, manufactured, distributed, used or
sold pursuant to license or authorization from ANSLC, Amerigon, an ANSLC
Affiliate or an Amerigon Affiliate. By way of example only, if ANSLC or
Amerigon is a value-added reseller for hardware designed in part by a third
party, and ANSLC or Amerigon, as applicable, contributes substantial and
material modifications to such third party hardware design, the designs or
specifications for such hardware will be deemed to have been created in
substantial and material part by or for ANSLC or Amerigon, as applicable.
(d) The hardware was designed in substantial part and is marketed in
substantial part for the purpose of providing Voice-Interactive Navigation-
Related Features or Functions (when used with software resident in firmware on
such hardware or otherwise provided for use with such hardware).
Notwithstanding anything to the contrary set forth in this Section 1.37, a
general purpose personal computer running a standard, generally available,
general-purpose operating system or operating environment and capable of
running a wide range of applications programs (E.G., an operating
system/environment such as MS-DOS, Windows, UNIX, Macintosh OS and similar
operating systems/environments) shall not constitute VANS Hardware.
1.38 "VANS Navigation Software" shall mean any Specified Software
that enables Voice-Interactive Navigation-Related Features or Functions,
which software either:
(a) is designed for operation on VANS Hardware; or
10
(b) is designed for operation on hardware that
(i) does not constitute VANS Hardware; and
(ii) performs substantially all of (a) the computing and memory
storage functions or (b) the digital processing and memory
storage functions associated with the providing of Voice-
Interactive Navigation-Related Features or Functions are
performed locally, in the non-VANS Hardware unit itself, and
not remotely.
By way of example only, in the case of software created by ANSLC or Amerigon
that enables Voice-Interactive Navigation-Related Features or Functions and
that is designed and marketed for operation on a general purpose laptop PC
running MS-DOS/Windows, where such laptop PC performs substantially all of
the computing and memory storage functions associated with the providing of
Voice-Interactive Navigation-Related Features or Functions locally, such
software would be deemed VANS Navigation Software and such laptop PC would
not be deemed VANS Navigation Hardware.
1.39 "VANS Non-Navigation Software" shall mean any Specified
Software that (a) is designed and marketed for operation on VANS Hardware and
(b) does not provide Navigation-Related Features or Functions. By way of
example only, software designed and marketed for operation on VANS Hardware
to play blackjack or other games which does not provide Navigation-Related
Features or Functions would constitute VANS Non-Navigation Software.
1.40 "VANS Product" shall mean any item of VANS Hardware or VANS
Software.
1.41 "VANS Software" shall mean any VANS Navigation Software and
any VANS Non-Navigation Software. For purposes of determining the percentage
royalty payable pursuant to Section 12.1 or 12.2, VANS Software shall be
considered part of the VANS Hardware (and therefore be subject to the two
percent (2%) royalty percentage) if such VANS Software is (a) embedded on
firmware in VANS Hardware, and (b) consists solely of operating system
software and/or device drivers and not applications programs.
1.42 "Voice-Interactive" shall mean, with respect to any system, a
system that responds to human vocal utterances and communicates to the user
via speech (whether such speech is synthesized, recorded or otherwise
generated by any process or method now known or hereafter invented).
2. PRIOR AGREEMENTS. All agreements, negotiations, representations and
obligations which may now be in effect between ANSI and Amerigon, including
without limitation the Specified
11
Agreements (collectively the "Prior Agreements"), whether oral or written,
and whether or not relating specifically to the Disputed Matters or the
subject matter of this Agreement, and whether or not specifically referred to
herein, are hereby terminated and superseded by this Agreement, except to the
extent set forth in Schedule 2.
3. RIGHTS TO EXISTING TECHNOLOGY.
3.1 DELIVERY OF EXISTING VOICE FILES. Not later than May 31, l996,
Amerigon will provide ANSLC with a copy of all then currently existing voice
files for Amerigon's VANS Navigation Software embodying the recorded speech
of Lunel. Such voice files will be provided to ANSLC in both compressed and
uncompressed formats, in SIX SYM CIX CMP format. Amerigon will also deliver
to ANSLC with such voice files such technical information as is reasonably
required to inform ANSLC how to access and utilize such voice files. IN THE
EVENT AMERIGON MAKES SUCH A DELIVERY OF VOICE FILES PRIOR TO THE EFFECTIVE
DATE, AND NO AGREEMENT IS REACHED BETWEEN NAVTECH AND ANSLC SUCH THAT THE
EFFECTIVE DATE DOES NOT OCCUR, ANSLC SHALL HAVE NO RIGHTS TO DISTRIBUTE,
SELL, LICENSE, MARKET OR COMMERCIALLY EXPLOIT THE VOICE FILES DELIVERED TO
ANSLC PURSUANT TO THIS SECTION.
3.2 DELIVERY OF SALES FULFILLMENT/ACTIVATION TECHNOLOGY. Upon
execution of this Agreement, ANSLC will provide Amerigon with a copy of those
items identified in Schedule 3.2. ANSLC will also deliver to Amerigon such
other technical information and materials as are reasonably required to
inform Amerigon how to utilize the Sales Fulfillment/Activation Technology.
3.3 COVENANTS NOT TO SUE.
3.3.1 BY AMERIGON. Except as otherwise provided in Section 18,
the Amerigon Releasing Parties hereby covenant not to bring any claim for
relief, whether by litigation or otherwise, based on allegations (whether
true or not) that any information, technology, knowledge, know-how or
products known to or in the possession of the ANSLC Parties at May 10, 1996
or any of the materials delivered by Amerigon to ANSLC pursuant to Section
3.1, include or incorporate in any way, or are in any way based on or derived
from, proprietary information or intellectual property (including copyrights,
trade secrets or otherwise) created, developed, authored or owned (legally,
equitably or beneficially) by or on behalf of any of the Amerigon Releasing
Parties. This covenant by the Amerigon Releasing Parties shall extend to any
other party (whether an ANSLC Affiliate, ANSLC Sublicensee, customer or
otherwise) only to the extent that such entity's information, technology,
know-how or products are derived from any information, technology, knowledge,
know-how or products of any of
12
the ANSLC Released Parties which were known to or in the possession of the ANSLC
Released Parties at May 10, 1996.
3.3.2 BY ANSLC. Except as otherwise provided in Section 18, the
ANSLC Releasing Parties hereby covenant not to bring any claim for relief,
whether by litigation or otherwise, based on allegations (whether true or
not) that any information, technology, knowledge, know-how or products known
to or in the possession of Amerigon at May 10, 1996 or any of the materials
delivered by ANSLC to Amerigon pursuant to Section 3.2 include or incorporate
in any way, or are in any way based on or derived from proprietary
information or intellectual property (including copyrights, trade secrets or
otherwise) that was created, developed, authored or owned (legally, equitably
or beneficially) by or on behalf of any of the ANSLC Releasing Parties.
This covenant by the ANSLC Releasing Parties shall extend to any other party
(whether an Amerigon Affiliate, Amerigon Sublicensee, customer or otherwise)
only to the extent that such entity's information, technology, know-how or
products are derived from any information, technology, knowledge, know-how or
products of any of the Amerigon Released Parties which were known to or in
the possession of any of the Amerigon Released Parties May 10, 1996.
3.4 LIMITATION ON ANSLC'S RIGHTS TO GEN 4. Notwithstanding the
provisions of Section 3.3, each of the ANSLC Parties agrees that it and the
ANSLC Affiliates and ANSLC Sublicensees will not design, manufacture or sell
or authorize or assist in the design, manufacture or sale of any VANS
Hardware utilizing a system architecture meeting the definition of Gen 4
Hardware hereunder. Nothing contained herein shall be deemed to limit the
ANSLC Parties' or their Affiliates' or Sublicensees' respective rights to
design, manufacture or sell, or authorize the design, manufacture or sale of
VANS Hardware that utilizes a single chip that combines the functions of the
Digital Signal Processor and the Central Processing Unit.
3.5 LIMITATIONS ON AMERIGON'S RIGHTS. Notwithstanding the
provisions of Section 3.3, Amerigon agrees that, for a period of twenty-four
(24) months following May 10, 1996, Amerigon, the Amerigon Affiliates and the
Amerigon Sublicensees will not sell commercially any VANS Hardware
incorporating a Texas Instruments TMS320C32 DSP chip (or backward compatible
direct successors thereto or a second-source chips generally recognized in
the industry as clones of such chips or clones of backward compatible
successors thereto).
3.6 OWNERSHIP OF PROPRIETARY RIGHTS IN EXISTING TECHNOLOGY.
3.6.1 GENERAL. Since the Option and License Agreement was
executed, various technology relating to VANS Products has been created by
ANSI or ANSI Affiliates and/or
13
Amerigon or Amerigon Affiliates, including, without limitation, corrections
and enhancements to maps, improvements and enhancements to VANS Navigation
Software, improvements and enhancements to speech software, and new software
(including software tools) that did not exist when the Option and License
Agreement was executed.
3.6.2 ANSI OWNERSHIP. The ANSLC Parties and Amerigon agree
that, as between the ANSLC Parties and Amerigon, ANSLC will own all
copyrights, patents, trade secrets and other proprietary rights in any
technology, inventions and works of authorship created, invented, discovered
or made by any of the ANSLC Parties at any time prior to the date of this
Agreement that relate to any VANS Products, subject to Amerigon's rights set
forth in Section 3.3 and Section 6. Without limiting the foregoing, the
parties agree that all inventions described in Schedule 1.7 and all patent
rights therein are owned by ANSLC, subject to Amerigon's rights set forth in
Section 3.3 and Section 6.
3.6.3 AMERIGON OWNERSHIP. The ANSLC Parties and Amerigon agree
that, as between the ANSLC Parties and Amerigon, on the other hand, Amerigon
will own all copyrights, patents, trade secrets and other proprietary rights
in any technology, inventions and works of authorship created, invented,
discovered or made by Amerigon or any Amerigon Affiliate at any time prior to
the date of this Agreement that relate to any VANS Products, subject to
ANSLC's rights set forth in Section 3.3 and Section 7.
3.6.4 JOINT OWNERSHIP. The ANSLC Parties and Amerigon agree
that, as between the ANSLC Parties and Amerigon, ANSLC and Amerigon will
jointly own in equal undivided shares all copyrights, patents, trade secrets
and other proprietary rights in any technology, inventions and works of
authorship created, invented, discovered or made by or through joint
collaborative efforts of the ANSLC Parties or any Affiliate of any of the
ANSLC Parties, on the one hand, and Amerigon and/or any Amerigon Affiliate,
on the other hand, at any time prior to the date of this Agreement where both
Amerigon or any of its Affiliates and the ANSLC Parties or any of their
respective Affiliates contributed substantial and significant legally
protectible elements. Notwithstanding such joint ownership, neither party
shall have any obligation, express or implied, to deliver to the other any
materials relating to or embodying any such jointly owned technology,
inventions or works of authorship, except to the extent of any obligations
expressly set forth in this Agreement.
3.7 OWNERSHIP OF TRADEMARKS. The ANSLC Parties and Amerigon agree
that, as between the ANSLC Parties and Amerigon:
3.7.1 IVS TRADEMARK. Amerigon shall retain exclusive
trademark rights to the mark "IVS," and ANSI agrees not to use or authorize
the use of "IVS" or any mark confusingly similar to IVS.
14
3.7.2 VANS TRADEMARK. ANSLC shall retain exclusive trademark
rights to the marks "VANS," "AudioNav," "Audio Navigation Systems" and "vehicle
audio navigation system," to the extent such marks are legally protectible.
The ANSLC Parties agrees that licensees and distributors of Amerigon that have
already commenced to use the "VANS" mark or similar marks shall have the right
to continue to use such mark, including without limitation that Eclipse
shall have the right to continue to use the marks "VAANS" and "voice activated
audio navigation system." Nothing contained in this Agreement shall be deemed
to constitute an admission or acknowledgement by the ANSLC Parties or Amerigon
as to the scope of protection for the terms "VANS" or "vehicle audio navigation
system."
3.8 NO WARRANTIES RE TECHNOLOGY. AMERIGON MAKES NO REPRESENTATION
OR WARRANTY OF ANY KIND TO ANY OF THE ANSLC PARTIES, AND THE ANSLC PARTIES MAKE
NO REPRESENTATION OR WARRANTY OF ANY KIND TO AMERIGON, WHETHER EXPRESS, IMPLIED
(EITHER IN FACT OR BY OPERATION OF LAW) OR STATUTORY WITH RESPECT TO THE VANS
PRODUCTS OR ANY TECHNOLOGY, INVENTIONS AND WORKS OF AUTHORSHIP OR ANY
PROPRIETARY RIGHTS CREATED, INVENTED, DISCOVERED OR MADE IN WHOLE OR IN PART BY
SUCH PARTY OR LICENSED TO THE OTHER PARTY PURSUANT TO THIS AGREEMENT. THE ANSLC
PARTIES AND AMERIGON EACH EXPRESSLY DISCLAIMS TO THE OTHER ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ALL IMPLIED
WARRANTIES AGAINST INFRINGEMENT. NEITHER THE ANSLC PARTIES, ON THE ONE HAND,
OR AMERIGON, ON THE OTHER HAND, WARRANTS OR REPRESENTS TO THE OTHER THAT ANY OF
THE TECHNOLOGY, INVENTIONS OR WORKS OF AUTHORSHIP CREATED OR INVENTED BY SUCH
PARTY OR LICENSED TO THE OTHER PARTY PURSUANT TO THIS AGREEMENT ARE ERROR-FREE
OR THAT OPERATION, USE OR IMPLEMENTATION THEREOF WILL BE UNINTERRUPTED.
4. INDEMNIFICATIONS
4.1 THIRD PARTY CLAIMS AGAINST THE ANSLC PARTIES. Except for
claims for which ANSLC has an indemnification obligation pursuant to this
Section 4, Amerigon agrees to indemnify and hold the ANSLC Parties and their
respective Indemnified Parties harmless from and against any claims, actions,
damages, liabilities, costs and expenses, including reasonable attorney's fees,
arising out of any claim brought by any Amerigon customer or licensee or other
third party arising out of Amerigon's operation of its business from and after
the Effective Date, including any claims arising out of the sale, licensing,
distribution, marketing or exploitation of VANS Products or Licensed Patents by
Amerigon, its Affiliates and Sublicensees, except to the extent such claims
arise out of (a) acts or deeds of any of the ANSLC Parties after the Effective
Date or (b) the sale, licensing, distribution, marketing or exploitation of VANS
Products or Licensed Patents by ANSLC, its Affiliates or Sublicensees.
15
4.2 THIRD PARTY CLAIMS AGAINST AMERIGON. Except for claims for
which Amerigon has an indemnification obligation pursuant to this Section
4, ANSLC agrees to indemnify and hold the Amerigon and its Indemnified Parties
harmless from and against any claims, actions, damages, liabilities, costs
and expenses, including reasonable attorney's fees, arising out of any claim
brought by any ANLSC customer or licensee or other third party arising out of
the operation by any of the ANSLC Parties of their respective businesses from
and after the Effective Date, including any claims arising out of the
sale, licensing, distribution, marketing or exploitation of VANS Products or
Licensed Patents by ANSLC, its Affiliates and Sublicensees, except to the extent
such claims arise out of (a) acts or deeds of Amerigon after the
Effective Date or (b) the sale, licensing, distribution, marketing or
exploitation of VANS Products or Licensed Patents by Amerigon, its Affiliates or
Sublicensees.
4.3 LIMITATIONS. The indemnification obligations set forth in this
Section 4 shall not apply with respect to claims asserted by third parties
unless the party claiming indemnification notifies the other of any such claims
promptly after the notifying party receives notice of such claims from the third
party and gives the other full opportunity to control the response thereto and
the defense thereof, including, without limitation, any agreement relating
to the settlement thereof. An indemnitor may settle any Action on terms and
conditions of such party's selection, provided they are not in conflict with the
terms of this Agreement and the indemnitor pays all settlement amounts. The
Indemnified Parties may participate in any Action at their expense, subject to
the additional rights described below. If an indemnitor fails to promptly
investigate, defend or settle, then the Indemnified Parties will,
following notification to the indemnitor, have the right from that time on to
have sole control of the defense of such Action and all negotiations for its
settlement or compromise, and in such event, the indemnitor will pay, as they
become due, all costs, expenses, and reasonable attorneys' fees incurred by the
Indemnified Parties in undertaking such actions and any judgments or decrees
which may be rendered against or any settlements or compromises that may be
entered into by the Indemnified Parties relating to a claim indemnified against
hereunder.
5. CREATION OF ADDITIONAL VOICE FILES.
5.1 ENGAGING LUNEL. ANSLC and Amerigon shall each have the right to
make arrangements for Lunel to produce additional voice files for use by the
respective parties. The parties shall consult with one another regarding the
scheduling of Lunel's time and shall coordinate their engagement of Lunel so
that both parties have reasonable access to and ability to utilize Lunel's
services for such purposes. Both parties will cooperate in good faith in
scheduling the use of Lunel's services so that neither party
16
monopolizes Lunel's time for an extended period or precludes the other from
having a reasonable ability to utilize Lunel's services.
5.2 COSTS OF PRODUCING VOICE FILES. In the event that ANSLC and
Amerigon each desire to have Lunel create an identical voice file, Amerigon and
ANSLC shall each bear one half of the commercially reasonable costs of producing
such voice file. In the event ANSLC or Amerigon engages Lunel to produce a
voice file which is not identical to a voice file sought by the other party, the
party engaging Lunel shall bear the full costs of creating such voice file. In
the event ANSLC engages Lunel to produce a voice file which is not identical to
a voice file sought by Amerigon, Amerigon agrees that during a period of one (1)
year from the Effective Date, it will use reasonable efforts to cooperate in
good faith to permit Lunel to use Amerigon's in-house studio to record such
voice files, provided that such studio time is scheduled on dates and times
reasonably convenient to Amerigon and that Amerigon has the personnel and
resources available to provide necessary technical support and supervision.
Amerigon shall charge ANSLC for use of such studio and related resources at
commercially reasonable rates. Amerigon shall have no obligation to permit any
personnel other than Lunel to have access to Amerigon's premises in
connection with such recording activities. In the event of any disputes between
Amerigon and ANSLC with respect to such recording activities or the technical
quality of such recordings, ANSLC's sole and exclusive remedy shall be to
arrange at ANSLC's expense to record such voice files at a studio other than the
one on Amerigon's premises. Amerigon will, upon ANSLC's request, provide ANSLC
with reasonable technical specifications (such as volume levels and descriptions
of equipment used in Amerigon's studio) to assist ANSLC in attempting to
replicate at another studio the sound quality of Lunel recordings made at
Amerigon's studio.
5.3 ROYALTIES. ANSLC and Amerigon shall each be responsible
for any royalties or per copy fees payable with respect to copies of voice files
made by it or under its authority.
5.4 OWNERSHIP AND LICENSING OF VOICE FILES. As between ANSLC and
Amerigon, ANSLC shall own all proprietary rights in any voice files which it
pays or has paid Lunel to create, Amerigon shall own all proprietary rights in
any voice files which it pays or has paid Lunel to create, and proprietary
rights in any voice files for which the costs are borne one-half by Amerigon and
one-half by ANSLC shall be jointly owned in equal undivided shares by Amerigon
and ANSLC, with each party having full non-exclusive rights to exercise all
rights of ownership with respect to such jointly owned voice files, provided
that notwithstanding such joint ownership, neither party shall have any
obligation to account to or pay the other party for the use of such jointly
owned voice files. For purposes of this Section, proprietary rights in voice
files shall include copyrights, rights of publicity and any other rights.
Nothing in this Section is intended to limit the rights
17
of either party pursuant to Section 3.3 with respect to voice files currently in
the possession of ANSLC or Amerigon or delivered pursuant to Section 3.1.
6. PATENT LICENSE FROM ANSLC TO AMERIGON.
6.1 GENERAL. ANSLC grants to Amerigon a worldwide nonexclusive
license under the ANSLC Licensed Patents as follows:
6.1.1 to make and have made VANS Products and to practice and
have practiced any method or process involved in the manufacture or use thereof;
6.1.2 to make, have made and use Manufacturing Apparatus and to
practice and have practiced any method or process involved in the manufacture or
use thereof;
6.1.3 to use, lease, sell and otherwise transfer VANS Products.
6.2 PASSCODE ACTIVATION PATENT. ANSLC grants to Amerigon a
worldwide nonexclusive license under the Passcode Activation Patent to
practice and have practiced any method or process in connection with the making,
use, lease, sale, transfer or other distribution or exploitation of VANS
Products.
6.3 EXTENSION OF LICENSE TO AFFILIATES AND SUBLICENSEES. The
licenses granted to Amerigon pursuant to this Section 6 includes the
right of Amerigon to sublicense Amerigon Sublicensees (which may include without
limitation Amerigon Affiliates). To the extent an Amerigon Sublicensee desires
to further sublicense any such rights, any such further sublicense agreement
must be entered into between Amerigon and the sublicensee, and not between an
Amerigon Sublicensee and the sublicensee. By way of example only, if Amerigon
sublicenses certain rights to an Amerigon Sublicensee, and such Amerigon
Sublicensee wishes to further sublicense certain rights such as manufacturing
rights, the sublicense of rights to the manufacturing sublicensee must be
entered into directly between Amerigon and such manufacturing sublicensee, and
not between the Amerigon Sublicensee and the manufacturing sublicensee.
Such manufacturing sublicensee would thereby become an Amerigon
Sublicensee. Each such Amerigon Sublicensee shall be bound by the terms and
conditions of Sections 6.3, 8, 13.6, 24.1, 24.2 and 24.4 of this Agreement as if
it were named herein in the place of Amerigon.
7. PATENT LICENSE FROM AMERIGON TO ANSLC.
7.1 GENERAL. Amerigon grants to ANSLC a worldwide nonexclusive
license under the Amerigon Licensed Patents as follows:
18
7.1.1 to make and have made VANS Products and to practice and
have practiced any method or process involved in the manufacture or use thereof;
7.1.2 to make, have made and use Manufacturing Apparatus and to
practice and have practiced any method or process involved in the manufacture or
use thereof;
7.1.3 to use, lease, sell and otherwise transfer VANS Products.
7.2 EXTENSION OF LICENSE TO AFFILIATES AND SUBLICENSEES. The licenses
granted to ANSLC pursuant to this Section 7 includes the right of ANSLC to
sublicense ANSLC Sublicensees (which may include without limitation Amerigon
Affiliates). To the extent an ANSLC Sublicensee desires to further sublicense
any such rights, any such further sublicense agreement must be entered into
between ANSLC and the sublicensee, and not between an ANSLC Sublicensee and the
sublicensee. Each such ANSLC Sublicensee shall be bound by the terms and
conditions of Sections 7.2, 8, 13.6, 24.1, 24.2 and 24.4 of this Agreement as if
it were named herein in the place of ANSLC.
8. PATENT NOTICES. Amerigon agrees to mark and to require Amerigon
Sublicensees to mark all VANS Products covered by the claim of an Issued ANSLC
Licensed Patent, and ANSLC agrees to mark and require ANSLC Sublicensees to mark
all VANS Products covered by the claim of an Issued Amerigon Licensed Patent,
with the words "U.S. Patent No." and the numbers of the applicable Issued
Licensed Patents.
9. DISCLOSURE OF PATENTS. Each party shall disclose to the other within
thirty (30) days following Issuance any Licensed Patents hereunder Issued to
such party.
10. EXPENSES OF PATENT PROSECUTION. Except as otherwise provided in
this Section, each party shall bear its own expenses with respect to the
prosecution of any applications for patents owned by such party pursuant to
Section 3.6. To the extent that either party believes that an invention has
been made jointly by one or more employees or persons engaged by Amerigon, on
the one hand, and one or more employees or persons engaged by any of the ANSI
Parties, on the other hand, ANSLC and Amerigon shall, at the request of either
party, negotiate in good faith in an effort to agree upon whether such invention
was made jointly and whether any patent application should be made jointly, it
being the parties intention to avoid any error in identifying the inventor(s) of
a patent that could bar issuance of or jeopardize the validity of the patent.
If the parties agree that a patent application is to be made jointly, the
parties shall negotiate in good faith with respect to appropriate sharing
of the expenses of prosecuting such patent application and with respect to
management and control of the prosecution of such patent application.
19
11. PATENT LITIGATION AND APPORTIONMENT OF RECOVERY.
11.1 EACH PARTY RESPONSIBLE FOR PROTECTION OF ITS PATENTS.
Amerigon shall be solely responsible for taking, at its expense, all actions,
legal or otherwise, which it deems reasonably necessary or desirable with
respect to infringements by third parties of the Amerigon Licensed Patents, and
ANSLC shall be solely responsible for taking, at its expense, all actions,
legal or otherwise, which it deems reasonably necessary or desirable with
respect to infringements by third parties of the ANSLC Licensed Patents.
Amerigon shall control the type and conduct of all such infringement actions
relating solely to Amerigon Licensed Patents (including without limitation sole
control over the settlement thereof) and ANSLC shall control the type and
conduct of all such infringement actions with respect to ANSLC Licensed
Patents (including without limitation sole control over the settlement thereof).
Amerigon and ANSLC each agrees to provide reasonable cooperation to the other in
connection with any such action and to keep the other informed of the progress
of any such action.
11.2 RIGHT TO SHARE LITIGATION EXPENSES AND APPORTIONMENT OF
RECOVERIES. Without limiting Amerigon's and ANSLC's respective rights to
control actions which either of them initiate to enforce their respective
Licensed Patents, as set forth in Section 11.1, in the event Amerigon undertakes
legal action with respect to alleged infringement by any third party of any of
the Amerigon Licensed Patents, or in the event ANSLC undertakes legal action
with respect to alleged infringement by any third party of any of the ANSLC
Licensed Patents, the party undertaking such action shall inform the other
party in writing of the action, including a description of the claims
asserted, the basis for the assertion of such claims, an estimate of the legal
fees and other expenses anticipated to be incurred in connection with such
action, and such other information reasonably requested by the other party. The
other party shall have the right, within sixty (60) days following receipt of
such information, to elect to bear up to fifty percent (50%) of the legal fees
and other expenses incurred in such action. In the event of such an election,
the party undertaking the action shall continue to have sole control over the
conduct of the action (including without limitation sole control over the
settlement thereof), shall bill the other party on a monthly basis for its share
of fees and expenses incurred in the preceding month, and shall keep the other
party reasonably apprised of all developments in the proceedings. Any recoveries
and/or settlement fees received from suits or settlements for alleged or actual
infringement in which fees and expenses are shared as set forth in this Section
shall, after payment of all fees and expenses, be divided between ANSLC and
Amerigon in the same proportion as the proportional sharing of fees and
expenses. By way of example only, if ANSLC undertakes legal action with respect
to alleged infringement by a third party of an ANSLC Licensed Patent, and
Amerigon elects to bear thirty percent (30%) of the legal fees and other
expenses
20
incurred in connection with such action, Amerigon would be entitled to receive
thirty percent (30%) of any recovery and/or settlement fees received.
12. ROYALTIES.
12.1 ROYALTIES PAYABLE BY ANSLC.
12.1.1 HARDWARE. With respect to VANS Hardware, ANSLC shall pay
to Amerigon the following amounts:
12.1.1.l Two Percent (2%) of the ANSLC Selling
Price with respect to all VANS Hardware.
12.1.1.2 To the extent that ANSLC or an ANSLC Affiliate
is entitled to receive royalties or other amounts calculated on the basis of the
ANSLC Selling Price (or a comparable royalty base), and the amount of such
royalties or other amounts exceeds Two Percent (2%) of the ANSLC Selling Price
for the VANS Hardware, all such royalties or other amounts in excess of Two
Percent (2%) of the ANSLC Selling Price shall be deemed to constitute
ANSLC Other Consideration. By way of example only, in the event ANSLC is
entitled to receive from an unrelated third party royalties equal to three
percent (3%) of the ANSLC Selling Price of VANS Hardware, ANSLC will pay to
Amerigon an amount equal to two percent (2%) of the ANSLC Selling Price with
respect to such VANS Hardware, and the remaining one percent (1%) of the ANSLC
Selling Price shall be deemed to constitute ANSLC Other Consideration, a
percentage of which shall be payable to Amerigon as set forth in Section 12.1.2.
12.1.2 SOFTWARE AND ANSLC OTHER CONSIDERATION. With respect to
VANS Software and ANSLC Other Consideration, ANSLC shall pay to Amerigon the
following amounts:
12.1.2.1 Fifteen Percent (15%) of the ANSLC Selling Price
with respect to all VANS Software and Fifteen Percent of all ANSLC Other
Consideration, provided that such amount shall be increased from Fifteen Percent
(15%) to Twenty Percent (20%) until such point ("Specified Recoupment") as the
sum of (a) the aggregate additional amounts paid by ANSLC pursuant to this
Section 12.1.2.1 as a result of such Five Percent (5%) increase plus (b) the
aggregate reduction in amounts paid by Amerigon to ANSLC pursuant to
Section 12.2.2.1 as a result of the Five Percent (5%) reduction described in
Section 12.2.2.1 equals Five Million Dollars ($5,000,000).
12.1.2.2 Thereafter, Ten Percent (10%) of the ANSLC
Selling Price with respect to all VANS Software and Ten Percent (10%) of all
ANSLC Other Consideration until such point as the aggregate amounts paid to
Amerigon pursuant to this Section
21
12.1.2.2 following Specified Recoupment equals Five Million Dollars
($5,000,000).
12.1.2.3 Thereafter, Seven and One Half Percent (7.5%)
of the ANSLC Selling Price with respect to all VANS Software and Seven and One
Half Percent (7.5%) of all ANSLC Other Consideration until such point as the
aggregate amounts paid to Amerigon pursuant to Sections 12.1.2.2 and this
Section 12.1.2.3 following Specified Recoupment equals Ten Million Dollars
($10,000,000).
12.1.2.4 Thereafter, Five Percent (5%) of the ANSLC
Selling Price with respect to all VANS Software and Five Percent (5%) of all
ANSLC Other Consideration.
12.1.2.5 To the extent that ANSLC or an ANSLC Affiliate
is entitled to receive royalties or other amounts calculated on the basis of
the ANSLC Selling Price with respect to VANS Software (or a comparable
royalty base), and the amount of such royalties or other amounts exceeds the
applicable percentage of the ANSLC Selling Price for such VANS Software which
is payable to Amerigon pursuant to this Section 12.1.2, all such royalties or
other amounts in excess of the percentage of the ANSLC Selling Price payable
to Amerigon shall be deemed to constitute ANSLC Other Consideration. By way
of example only, in the event ANSLC is entitled to receive from an unrelated
third party (i) royalties equal to twenty-five percent (25%) of the ANSLC
Selling Price of VANS Software; (ii) consulting fees; (iii) support fees;
(iv) a one-time payment; and (v) an equity investment in which the
licensee acquires an equity interest in ANSLC, Other Consideration would
include the consulting fees, the support fees, the one-time payment and that
portion of the equity investment which exceeds the fair market value of the
equity interest acquired, plus any portion of the royalty based on the
Selling Price of the VANS Software in excess of the royalty based on the
Selling Price of the VANS Software payable to Amerigon pursuant to
Section 12.1.2.1, 12.1.2.2, 12.1.2.3 or 12.1.2.4.
12.2 ROYALTIES PAYABLE BY AMERIGON.
12.2.1 HARDWARE. With respect to VANS Hardware, Amerigon
shall pay to ANSLC the following amounts:
12.2.1.1 Two Percent (2%) of the Amerigon Selling Price
with respect to all VANS Hardware.
12.2.1.2 To the extent that Amerigon or an Amerigon
Affiliate is entitled to receive royalties or other amounts calculated on
the basis of the Amerigon Selling Price (or a comparable royalty base), and the
amount of such royalties or other amounts exceeds Two Percent (2%) of the
Amerigon Selling Price for the VANS Hardware, all such royalties or other
amounts
22
in excess of Two Percent (2%) of the Amerigon Selling Price shall be deemed to
constitute Amerigon Other Consideration. By way of example only, in the event
Amerigon is entitled to receive from an unrelated third party royalties equal to
three percent (3%) of the Amerigon Selling Price of VANS Hardware, Amerigon will
pay to ANSLC an amount equal to two percent (2%) of the Amerigon Selling Price
with respect to such VANS Hardware, and the remaining one percent (1%) of the
Amerigon Selling Price shall be deemed to constitute Amerigon Other
Consideration, a percentage of which shall be payable to ANSLC as set forth
in Section 12.2.2.
12.2.2 SOFTWARE AND AMERIGON OTHER CONSIDERATION. With
respect to VANS Software and Amerigon Other Consideration, Amerigon shall pay
to ANSLC the following amounts:
12.2.2.1 Fifteen Percent (15%) of the Amerigon Selling
Price with respect to all VANS Software and Fifteen Percent (15%) of all
Amerigon Other Consideration, provided that such amount shall be reduced from
Fifteen Percent (10%) to Ten Percent (10%) until Specified Recoupment.
12.2.2.2 Thereafter, Ten Percent (10%) of the Amerigon
Selling Price with respect to all VANS Software and Ten Percent (10%) of all
Amerigon Other Consideration until such point as the aggregate amounts paid to
Amerigon pursuant to this Section 12.2.2.2 following Specified Recoupment equals
Five Million Dollars ($5,000,000).
12.2.2.3 Thereafter, Seven and One Half Percent (7.5%)
of the Amerigon Selling Price with respect to all VANS Software and Seven and
One Half Percent (7.5%) of all Amerigon Other Consideration until such point as
the aggregate amounts paid to Amerigon pursuant to Section 12.2.2.2 and this
Section 12.2.2.3 following Specified Recoupment equals Ten Million Dollars
($10,000,000).
12.2.2.4 Thereafter, Five Percent (5%) of the Amerigon
Selling Price with respect to all VANS Software and Five Percent (5%) of all
Amerigon Other Consideration.
12.2.2.5 To the extent that Amerigon or an Amerigon
Affiliate is entitled to receive royalties or other amounts calculated on the
basis of the Amerigon Selling Price with respect to VANS Software (or a
comparable royalty base), and the amount of such royalties or other amounts
exceeds the applicable percentage of the Amerigon Selling Price for such VANS
Software which is payable to ANSLC pursuant to this Section 12.2.2, all such
royalties or other amounts in excess of the percentage of the Amerigon Selling
Price payable to Amerigon shall be deemed to constitute Amerigon Other
Consideration.
23
12.3 EXPIRATION OF PAYMENT OBLIGATIONS. Except as otherwise
provided in Section 24.5 hereof, ANSLC's and Amerigon's payment obligations
pursuant to Sections 12.1 and 12.2 shall apply to sales, leases, licenses,
marketing and other exploitation of VANS Products and Licensed Patents during a
period commencing on the date of this Agreement and terminating ten (10) years
following the date of this Agreement and no amounts shall be payable pursuant to
Sections 12.1 or 12.2 with respect to sales, leases, licenses, marketing and
other exploitation of VANS Products or Licensed Patents after such ten (10) year
period. Royalties which have accrued hereunder during such ten (10) year
period shall remain payable in accordance with the terms of this Agreement
following expiration of such ten (10) year period.
12.4 RESPONSIBILITY FOR AFFILIATES AND SUBLICENSEES.
12.4.1 ANSLC RESPONSIBILITY FOR ANSLC AFFILIATES AND
SUBLICENSEES. ANSLC acknowledges and agrees that it is responsible and
liable hereunder for payment of amounts payable to Amerigon based on the Selling
Price at which a VANS Product is sold, licensed or otherwise made available or
exploited by ANSLC, an ANSLC Affiliate or an ANSLC Sublicensee to a third party
other than ANSLC, an ANSLC Affiliate, an ANSLC Sublicensee or an
Affiliate of an ANSLC Sublicensee, or based on ANSLC Other
Consideration received by ANSLC or an ANSLC Affiliate, irrespective of whether
ANSLC collects any monies from its Affiliates or Sublicensees with
respect to such sale, license or other transaction, and irrespective of
whether such VANS Product uses or incorporates any proprietary rights licensed
to ANSLC by Amerigon pursuant to this Agreement.
12.4.2 AMERIGON RESPONSIBILITY FOR AMERIGON AFFILIATES AND
SUBLICENSEES. Amerigon acknowledges and agrees that it is responsible and liable
hereunder for payment of amounts payable to ANSLC based on the Selling Price at
which a VANS Product is sold, licensed or otherwise made available or exploited
by Amerigon, an Amerigon Affiliate or an Amerigon Sublicensee to a third party
other than Amerigon, an Amerigon Affiliate, an Amerigon Sublicensee or an
Affiliate of an Amerigon Sublicensee, or based on Amerigon Other Consideration
received by Amerigon or an Amerigon Affiliate, irrespective of whether Amerigon
collects any monies from its Affiliates or Sublicensees with respect to such
sale, license or other transaction, and irrespective of whether such VANS
Product uses or incorporates any proprietary rights licensed to Amerigon by
ANSLC hereunder.
13. ACCRUALS, RECORDS AND REPORTS.
13.1 ACCRUAL OF ROYALTIES. Royalties payable to ANSLC based on the
Amerigon Selling Price shall accrue when VANS Products with respect to which
royalty payments are required by this Agreement are first sold, leased,
licensed or otherwise made
24
available or exploited by Amerigon, an Amerigon Affiliate or an Amerigon
Sublicensee to an Unrelated Third Party. Royalties payable to Amerigon based
on the ANSLC Selling Price shall accrue when VANS Products with respect to
which royalty payments are required by this Agreement are first sold, leased,
licensed or otherwise made available or exploited by ANSLC, an ANSLC
Affiliate or an ANSLC Sublicensee to an Unrelated Third Party. In the event
a VANS Product is made available to an Unrelated Third Party on a true
consignment basis, royalties shall accrue on the earlier of (a) receipt of
payment for such VANS Product or (b) sixty (60) days following delivery of
such VANS Product, unless such VANS Product is returned by the consignee
prior to the expiration of such sixty (60) day period. Royalties payable to
ANSLC based on Amerigon Other Consideration shall accrue when such Amerigon
Other Consideration is received by Amerigon or an Amerigon Affiliate.
Royalties payable to Amerigon based on ANSLC Other Consideration shall accrue
when such ANSLC Other Consideration is received by ANSLC or an ANSLC
Affiliate.
13.2 STATEMENTS. Quarterly accounting periods shall end on the last
day of each March, June, September and December during the term of this
Agreement. Within thirty (30) days after the end of each such period each
party to this Agreement shall furnish to the other a written report
containing the information specified in Section 13.5 and shall pay to the
other party all unpaid royalties accrued hereunder to the end of each such
period.
13.3 LATE CHARGES. Payment shall be deemed made when received. Late
charges at the rate of one percent (1) per month or the maximum rate
permitted by applicable law, whichever is lower, shall accrue on any due and
payable amounts that are not paid when due hereunder, including any accrued
but unpaid late charges. Accrual of such late charges shall be without
limitation of any other rights or remedies.
13.4 FORM OF PAYMENTS. All royalties and other payments due
hereunder shall be paid in United States dollars. All royalties for an
accounting period computed in other currencies shall be converted into United
States dollars at the exchange rate for bank transfers from such currency to
United States dollars as quoted by the head office of Citibank N.A., New
York, at the close of banking on the last day of such accounting period (or
the first business day thereafter if such last day shall be a non-business
day).
13.5 CERTIFICATION. Quarterly reports shall be certified by an
officer of the party submitting such report or his designee and shall contain
the following information:
13.5.1 Identification, description and quantity of each VANS
Product upon which royalties have accrued pursuant to Section 13.1;
25
13.5.2 Identification of the entity that sold, leased,
licensed, made available or otherwise exploited each VANS Product upon which
royalties have accrued pursuant to Section 13.1 and identification and basis
for calculation of such entity's Selling Price for such VANS Product,
including without limitation an itemization of all deductions from the gross
invoiced billing price pursuant to Section 1.32 ;
13.5.3 Identification of all Other Consideration upon which
royalties have accrued pursuant to Section 13.1;
13.5.4 Such other information as is reasonably required in order
to understand the calculation of amounts payable pursuant to such quarterly
report;
13.5.5 Identification of Sublicensees to which such party or any
of its Affiliates or Sublicensees has, since the previous quarterly report,
granted any rights to make, or have made VANS Products or to practice or have
practiced any method or process involved in the manufacture or use thereof;
or to make, have made or use Manufacturing Apparatus or practice or have
practiced any method or process involved in the manufacture or use thereof;
or to use, lease, sell or otherwise transfer VANS Products;
13.5.6 In the event no royalties are due, the quarterly report
shall so state.
13.6 RECORDS. Amerigon and ANSLC shall each keep and require its
respective Affiliates and Sublicensees to keep records in sufficient detail
to permit the determination of royalties payable hereunder. Amerigon and
ANSLC shall, at request of the other, permit an independent auditor selected
by the other, or any other person acceptable to both ANSLC and Amerigon, to
examine such records and other materials of Amerigon or ANSLC as may be
required by the auditor to verify or determine royalties paid or payable
under this Agreement. In the event ANSLC or Amerigon requests that the other
conduct an examination of one or more of such other party's Affiliates or
Sublicensees, such other party will engage an independent auditor acceptable
to both ANSLC and Amerigon, to examine such Affiliate's or Sublicensee's
records and shall share the results of such examination with the party
requesting such examination. Any audit of Amerigon or ANSLC or an Affiliate
or Sublicensee shall be conducted during ordinary business hours and only
once in each calendar year. Any auditor or other person shall be instructed
to report to the party requesting such audit only the amount of royalties
determined to be due and payable. The party requesting an audit shall bear
the expense of any such audit unless such audit reveals a shortfall of Fifty
Thousand Dollars ($50,000) or more in the amounts paid to such party, in
which event the costs of such audit shall (in addition to, and without
limitation of, any
26
other rights or remedies the requesting party may have hereunder or at law or
in equity) be borne by the other party hereto. In the event of any
discrepancy arising out of such audit which indicates that the other is owed
amounts hereunder, ANSLC or Amerigon shall, within thirty (30) days following
delivery to it of written confirmation establishing such discrepancy,
reimburse the other for the amount of any such discrepancy arising out of
such audit as well as the costs of the audit, if applicable, as provided
above. If no request for examination of such records and materials for a
particular quarterly accounting period has been made by ANSLC or Amerigon, as
applicable, within six (6) years after the end of said period, the right to
examine such records and materials for said period and the obligation to keep
such records and materials for said period shall terminate.
13.7 TAXES. Amerigon and ANSLC shall bear and pay all taxes
(including, without limitation, sales and value added taxes but excluding
income tax as specified below) imposed by any governmental authority of any
country in which such party conducts business as the result of the existence
of this Agreement or the exercise of rights hereunder, provided that each
party shall not bear and pay any income tax withholding imposed by any
national government upon the payments made to the other party pursuant to
Section 12 to the extent that such income tax is to be credited to taxes
payable by such other party to the United States government. Each party may
deduct any such withholding taxes from amounts otherwise payable to the other
party hereunder and furnish the other party with a tax certificate for such
withheld income tax.
14. SECURITY INTERESTS. ANSLC and Amerigon will endeavor in good faith to
negotiate and enter into Security Agreements within thirty (30) days
following the Effective Date, which Security Agreements shall thereupon be
attached to this Agreement as Schedule 14-A and 14-B. ANSLC and Amerigon
acknowledge and agree that they have not conducted due diligence with respect
to security interests that may previously have been granted by either ANSLC
or Amerigon, and that ANSLC's or Amerigon's ability to grant a security
interest consistent with this Section may be limited by previously granted
security interests. ANSLC and Amerigon further acknowledge and agree that
their respective obligations to endeavor in good faith to negotiate and enter
into Security Agreements will be subject to the parties' respective good
faith determinations that entering into such Security Agreements will not
unduly interfere with the parties' ability to secure financing or investments
or conduct business. Subject to the foregoing, ANSLC and Amerigon
acknowledge that it is their current intention that the Security Agreements
to be negotiated will likely provide key terms comparable to the following,
but such terms may be subject to change as the parties consider and negotiate
the implications of the Security Agreements:
27
(a) ANSLC would grant to Amerigon, and Amerigon would grant to
ANSLC, respectively, a security interest in the collateral (the
"Collateral") consisting of the proceeds of exploitation of the rights
granted to or acknowledged to belong to each of them under Sections 3,
6 and 7 hereof (the "Settlement Rights"), including but not limited to
licenses or sublicenses to others and consideration payable
thereunder; provided that the Collateral would not include the
Settlement Rights in and of themselves; and further provided that such
security interest would be subordinate to any consensual security
interest except to the extent of that portion of any specific proceeds
which is equal to the amount payable to the secured party pursuant
hereto on account of such proceeds.
(b) The Security Agreements would provide that such subordination
would be automatic and self-enforcing; for the inclusion of the
subordination statement in all financing statements, mortgages or
similar documents designed to perfect such security interest;
and for the obligation of ANSLC and Amerigon to execute
subordination agreements consistent with such subordination, both as
to priority and remedies, if requested to do so in connection with the
grant of any consensual security interests.
(c) The Security Agreements would provide that the Collateral
will secure obligations arising under this Settlement and License
Agreement and expenses of enforcement, including but not limited to
reasonable attorneys' fees; for the execution of additional documents
reasonably necessary to perfect the security interests granted; and
would contain other appropriate provisions, identical to both ANSLC
and Amerigon, as are consistent with the foregoing.
15. LIMITATIONS ON PUBLIC STATEMENTS.
15.1 GENERAL. Amerigon, on the one hand, and the ANSLC Parties,
on the other hand, each agrees to refrain from and agrees to direct its
employees to refrain from, making public statements maligning or impugning
the reputation or integrity of the other. Recognizing that it is difficult
for either party fully to police compliance with this Section, the parties
agree that a party shall not be deemed to be in default of this Section as a
result of statements made by one of its employees without knowledge or
support from such party's upper management, provided such party takes
reasonable corrective action after being notified of any such statements.
The parties further agree that statements to customers or prospective
customers comparing the performance of the parties' respective products shall
not be deemed to violate the terms of this Section 15.1, provided that each
party reserves its legal and/or equitable rights with respect to untruthful
or misleading
28
statements comparing the performance of the parties' respective products.
15.2 EXCEPTIONS AND EXCLUSIONS. Nothing contained herein shall be
deemed to limit the rights of either party to disclose information or make
statements:
15.2.1 to the extent ordered to do so by a court of competent
jurisdiction or regulatory agency or body or to the extent required in order
to make an appropriate response to a legitimate subpoena or legitimate
discovery request;
15.2.2 to the extent required by applicable law (including any
regulations or orders promulgated thereunder);
15.2.3 to the extent required in order to report income to
appropriate taxing authorities and/or to contest the imposition of any tax by
appropriate taxing authorities;
15.2.4 to such party's officers, directors, employees,
accountants and attorneys;
15.2.5 to the extent such disclosure is reasonably required
for a valid business purpose, including without limitation, to prospective
investors or prospective customers or to parties seeking to acquire all or
any portion of such party's stock or assets;
15.2.6 in connection with any legal proceedings between the
parties hereto relating to this Agreement.
15.3 PRESS RELEASE. Amerigon and ANSLC shall jointly issue a
press release on or shortly after the Effective Date in a form mutually
approved by ANSLC and Amerigon, such approval not to be unreasonably withheld
by either ANSLC or Amerigon.
16. RELEASES; DISMISSAL OF LEGAL PROCEEDING.
16.1 RELEASE BY AMERIGON. Except for the obligations, covenants,
representations and warranties provided for in this Agreement, Amerigon, for
and on behalf of itself and its predecessors, successors, assigns, heirs,
affiliates, employees, agents, legal representatives and partners
(individually and collectively referred to herein as the "Amerigon Releasing
Parties"), do hereby fully, finally and forever release and discharge the
ANSLC Parties, and their respective predecessors, successors, assigns, heirs,
affiliates, shareholders, officers, directors, employees, agents, legal
representatives, and parent, subsidiary or other related companies
(individually and collectively referred to herein as the "ANSLC Released
Parties") of and from any and all claims, rights, debts, liabilities,
demands, obligations, promises, damages, causes of action and
29
claims for relief of whatever kind or nature, known or unknown, which any of
the Amerigon Releasing Parties may have had or asserted, may now have or
assert or may hereafter have or assert against the ANSLC Released Parties, or
any of them, in whatever capacity any of the ANSLC Released Parties may have
been acting, for or by reason of any occurrence, matter or thing which has
occurred on or before the Effective Date, including without in any way limiting
the generality of the foregoing, any and all claims which were or could have
been asserted in connection with, or arising from or out of any of the
facts, transactions or occurrences alleged in or in connection with any of the
Disputed Matters.
It is expressly understood by Amerigon, on behalf of itself and the
Amerigon Releasing Parties, that Section 1542 of the California Civil Code
provides as follows:
"Section 1542. General Releases -- Claims Extinguished. A
general release does not extend to claims which the creditor does not know
or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."
To the extent the provisions of Section 1542 of the California Civil
Code as well as the provisions of any and all comparable or similar statutes
or principles of the law of California or any other state or federal
jurisdiction might otherwise be deemed applicable, they are hereby expressly
and with the advice of counsel waived by Amerigon, on behalf of itself and
the Amerigon Releasing Parties, and each of them, and Amerigon admits to full
knowledge and understanding of the consequences and effects of this waiver.
16.2 RELEASE BY ANSLC PARTIES. Except for the obligations,
covenants, representations and warranties provided for in this Agreement,
each of the ANSLC Parties, for and on behalf of itself and its respective
predecessors, successors, assigns, heirs, affiliates, shareholders, officers,
directors, employees, agents, legal representatives, and parent, subsidiary
or other related companies (individually and collectively referred to herein
as the "ANSLC Releasing Parties"), does hereby fully, finally and forever
release and discharge Amerigon and its predecessors, successors, assigns,
licensees, customers, heirs, affiliates, employees, agents, legal
representatives, partners, shareholders, officers, directors, employees,
agents, legal representatives, and parent, subsidiary or other related
companies (individually and collectively referred to herein as the "Amerigon
Released Parties") of and from any and all claims, rights, debts,
liabilities, demands, obligations, promises, damages, causes of action and
claims for relief of whatever kind or nature, known or unknown, which any of
the ANSLC Releasing Parties may have had or asserted,
30
may now have or assert or may hereafter have or assert against the Amerigon
Released Parties, or any of them, in whatever capacity any of the Amerigon
Released Parties may have been acting, for or by reason of any occurrence,
matter or thing which has occurred on or before the Effective Date, including
without in any way limiting the generality of the foregoing, any and all claims
which were or could have been asserted in connection with, or arising from or
out of any of the facts, transactions or occurrences alleged in or in connection
with any of the Disputed Matters.
It is expressly understood by ANSLC, on behalf of itself and the ANSLC
Releasing Parties, that Section 1542 of the California Civil Code provides as
follows:
"Section 1542. General Releases -- Claims Extinguished. A
general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
To the extent the provisions of Section 1542 of the California Civil
Code as well as the provisions of any and all comparable or similar statutes
or principles of the law of California or any other state or federal
jurisdiction might otherwise be deemed applicable, they are hereby expressly
and with the advice of counsel waived by ANSLC, on behalf of itself and the
ANSLC Releasing Parties, and each of them, and ANSLC admits to full knowledge
and understanding of the consequences and effects of this waiver.
16.3 STIPULATION FOR DISMISSAL OF LITIGATION. ANSI and Amerigon
agree to enter into, and shall direct their counsel to execute concurrently
with the execution of this Agreement, a stipulation dismissing with prejudice
the Legal Proceeding in its entirety, including all claims and counterclaims
therein, in the form attached hereto as Exhibit A. Amerigon shall file the
stipulation with the Court within ten (10) days after the date of this
Agreement and shall thereafter provide counsel for ANSI with a conformed copy
of the stipulation.
16.4 COMPROMISE ONLY. The releases set forth in this Section 16 are
made for purposes of settlement and compromise only. Neither this Agreement
nor anything contained herein, nor any act or thing done in connection
herewith, is intended to be or shall be construed or deemed to be an
admission of any party of liability, fault or wrongdoing, or an admission of
any party of any fact, allegation or claim whatsoever, including any fact,
allegation or claim alleged by any party in or in connection with the
Disputed Matters.
31
17. REPRESENTATIONS.
17.1 MUTUAL REPRESENTATIONS. Each party to this Agreement hereby
represents, warrants and agrees as follows:
17.1.1 Such party has received competent and independent
legal advice from its counsel regarding the meaning and legal effect of this
Agreement, and regarding the advisability of making the agreements provided for
herein, and fully understands the same;
17.1.2 Each person executing this Agreement on behalf of a
party hereto has the full right and authority to enter into this Agreement on
behalf of such party and the full right and authority to execute all instruments
provided for in this Agreement and to fully bind said party to the terms and
obligations of this Agreement;
17.1.3 Such party is the sole and lawful owner of all right,
title and interest in and to every claim or other matter which such party
purports to release herein, and that such party has full power to enter into
this Agreement and has not heretofore assigned, transferred or encumbered, or
purported to assign, transfer or encumber, voluntarily or involuntarily, to
any person or entity which is not a party to this Agreement, all or any
portion of the claims, obligations or rights covered by this Agreement.
17.2 REPRESENTATIONS BY ANSLC PARTIES. The ANSLC Parties warrant,
represent and agree that the ANLSC Parties have not heretofore derived any
revenues from the sale, licensing, distribution, or other exploitation of
VANS Software, including prototypes or pre-release versions thereof.
17.3 LIMITATIONS AND EXCLUSIONS. Except as expressly set forth in
this Agreement, neither party makes any representations or warranties,
express or implied to the other party to this Agreement, nor does either
party assume any liability in respect of any infringement of third party
patents or other rights of third parties due to the other party's operation
under the licenses and immunities from suit herein granted.
18. CONFIDENTIALITY OBLIGATIONS. Amerigon agrees to take reasonable steps
to hold in confidence and not reveal, report, publish, disclose or transfer
any information contained in pending ANSLC patent applications previously
disclosed to Amerigon, and Amerigon represents to ANSLC that it has not
disclosed to any third party on or prior to the Effective Date any such
confidential information. The ANSLC Parties agree to take reasonable steps
to hold in confidence and not reveal, report, publish, disclose or transfer
any of the following information previously disclosed to any of the ANSLC
Parties: information contained in Amerigon
32
business plans, information contained in pending Amerigon patent
applications, Amerigon interface specifications, Amerigon driver designs, and
Amerigon electronics designs. The ANSLC Parties represent that the ANSLC
Parties have not disclosed to any third party on or prior to the Effective
Date any such confidential information. Notwithstanding the foregoing, this
Section 18 is not intended to limit the rights of the parties to use or
incorporate information in connection with their own respective products and
business operations. Accordingly, to the extent information that is subject
to this Section 18 is utilized or incorporated by Amerigon or ANSLC in its
respective own products or business operations, Amerigon and ANSLC shall each
be free to disclose such information as it deems appropriate in the conduct
of its respective business (and a previous disclosure of such information as
incorporated in such products or business operations shall not be deemed a
breach of the representations made pursuant to this Section). By way of
example only, ANSLC would be free to utilize information contained in an
Amerigon business plan in the operation of its own business and to disclose
to third parties such information as it relates to the operation of ANSLC's
business, but ANSLC would be obligated to hold in confidence the fact that
such information was part of Amerigon's business plans. Also by way of
example only, ANSLC would be free to utilize information contained in
Amerigon electronics designs in the design of ANSLC's own products and to
disclose to third parties the electronics designs of ANSLC's own products,
but ANSLC would not be permitted to disclose to third parties the specifics
of the electronics designs of Amerigon's products. Also by way of example
only, a prior disclosure by ANSLC to third parties of the design of ANSLC's
own products would not be deemed a breach of ANSLC's representation pursuant
to this Section regarding no disclosure of confidential information prior to
the Effective Date. Notwithstanding anything to the contrary contained in
this Agreement, the disclosee's obligations under this Section 18 shall not
extend to information (a) publicly known or which becomes publicly known
other than as a result of the fault or negligence of the disclosee or the
disclosee's failing to perform any of its obligations hereunder; (b) already
known by the disclosee without an obligation of confidentiality at the time
of first disclosure by the disclosing party; (c) rightfully received by the
disclosee from a third party that has the right to provide such information
to the disclosee without obligations of confidentiality; or (d) rightfully
and independently developed or ascertained by the disclosee.
19. DISPUTE RESOLUTION.
19.1 GENERAL. Any disagreement, dispute, controversy or claim
arising out of or relating to this Agreement, or the obligations of the
parties hereunder (a "Dispute"), regardless of the magnitude thereof or the
amount in controversy or whether such Dispute would otherwise be considered
justiciable or ripe for resolution by a court or arbitral tribunal, shall be
resolved and
33
determined only in accordance with the following provisions of this Section 19.
19.2 DISPUTE ESCALATION. Neither party shall commence any
arbitration proceeding relating to any Dispute until the procedures set forth
in this Section 19.2 have been followed. Upon the written request of either
party each of the parties will appoint a designated representative whose task
it will be to attempt to resolve such dispute or to negotiate for an
adjustment to such provision of this Agreement. Such representatives will
discuss the problem and/or negotiate in good faith in an effort to resolve
the dispute or renegotiate the applicable section or provision without the
necessity of any formal proceedings. During the course of such negotiation,
all reasonable requests made by one party to the other for information,
including requests for copies of relevant documents, will be honored. The
specific format for such discussions will be left to the discretion of the
designated representatives but may include the preparation of agreed upon
statements of fact or written statements of position furnished to the other
party. If the designated representatives are unable to agree within thirty
(30) days of their first meeting, each party shall, upon request by either
party, appoint a designated officer to meet to attempt to resolve the
matter. No arbitration proceedings or litigation for the resolution of such
dispute may be commenced until such a meeting between officers has occurred
and either party has concluded in good faith that amicable resolution through
continued negotiation of the matter does not appear likely (unless either
party fails or refuses to schedule such a meeting of officers within a
reasonable time after a request by the other party).
19.3 RESOLUTION OF DISPUTES RE SELLING PRICE ALLOCATION ISSUES. In
the event of a dispute between ANSLC and Amerigon with respect to appropriate
calculation and allocation of portions of the Selling Price pursuant to
Section 1.32, ANSLC and Amerigon shall first follow the procedures set forth
in Section 19.2 in an effort to resolve such dispute. In connection with
such negotiations, ANSLC and Amerigon shall each present to the other written
data to support their respective contentions regarding appropriate allocation
of the Selling Price, which may include INTER ALIA written data relating to
the prices at which ANSLC, Amerigon and/or their respective Affiliates and
Sublicensees have sold or licensed various products, and written data
regarding pricing and valuation of third party software, hardware and
consumer electronics products, as appropriate. In connection with such
negotiations, each party shall make at least one proposal, in writing, for
appropriate allocation of the Selling Price.
19.3.1 SELECTION OF ARBITRATOR. If ANSLC and Amerigon are
unable to resolve such dispute over allocation of the Selling Price within
such thirty (30) day period, ANSLC and Amerigon shall agree on a single
arbitrator within
34
fifteen (15) days following the end of such thirty (30) day period who
shall be an individual knowledgeable about marketing, distribution and
pricing of computer hardware, software and consumer electronics products. If
ANSLC and Amerigon are unable to agree on a single arbitrator within such
fifteen (15) day period, the single arbitrator shall, at the written request
of either party, be appointed by the American Arbitration Association.
19.3.2 HEARING AND RESOLUTION. The single arbitrator selected shall
be directed to schedule a one day hearing within twenty (20) days after his
or her selection. At the hearing, ANSLC and Amerigon shall present the
arbitrator with the data previously exchanged between ANSLC and Amerigon
pursuant to Section 19.3 regarding appropriate allocation of the Selling
Price, and ANSLC and Amerigon shall each present the arbitrator with the most
recent proposed Selling Price allocation presented by ANSLC or Amerigon,
respectively, to the other party during negotiations pursuant to Section
19.3. Any data or information regarding pricing of third party hardware,
software or consumer electronics products and any documents which either
party intends to introduce at such hearing shall be provided to the other
party at least ten (10) days prior to the hearing, and neither ANSLC nor
Amerigon shall be permitted to introduce at the hearing any pricing data or
documents not so provided to the other party in advance of the hearing. At
the conclusion of the one day hearing, ANSLC and Amerigon shall each be
permitted to submit to the arbitrator a final proposed Selling Price
allocation (the "Final Proposed Allocations"). The arbitrator shall select
one of the two Final Proposed Allocations in its totality. The arbitrator
must select one of the two Final Proposed Allocations AS-IS, and shall not
be permitted to modify such allocation or to compromise between the two Final
Proposed Allocations. The Final Proposed Allocation so selected by the
arbitrator shall thereupon be deemed binding upon the parties with respect to
such disputed matter, retroactive to the commencement of any sales, licenses
or other transactions relating to the product in question.
19.3.3 EXPENSES. The arbitrator shall require, as part of the final
decision, that the party against whom the arbitrator renders a decision
reimburse any or all of the expenses and costs (including without limitation
attorneys' fees) incurred by the other party in connection with the
arbitration pursuant to this Section 19.3, and pay all costs and expenses of
the arbitration itself, such as compensation to the arbitrator and reporter
and the expense of hearing room facilities.
35
19.4 ARBITRATION. If any Dispute, other than a dispute with respect
to appropriate calculation and allocation of portions of the Selling Price
pursuant to Section 1.32 or a dispute over what portion of consideration paid
for a stock or equity interest exceeds the fair market value of such interest
pursuant to Section 1.27, is not resolved as a result of the procedures set
forth in Section 19.2, such Dispute shall be submitted to, and finally
determined by, arbitration in accordance with this Section 19.4.
19.4.1 Except as provided below or in Section 19.3, if any
dispute occurs between the parties arising out of or related to this
Agreement or its negotiation, execution or performance, whether such dispute
is in contract, tort or otherwise, and including disputes as to whether a
dispute is subject to arbitration, it will be submitted to binding
arbitration at the request of either party if the parties are unable to
resolve such dispute pursuant to Section 19.2. The arbitration will be
conducted by one arbitrator under the commercial arbitration rules of the
American Arbitration Association then in effect. The arbitrator will be
chosen from a panel of persons with a knowledge of industry practices in the
computer and consumer electronics industries and admitted to practice law in
at least one state.
19.4.2 In connection with any arbitration hearings, the
parties shall be entitled to submit written legal briefs for consideration by
the arbitrator in accordance with a schedule to be negotiated by the parties
or to be established by the arbitrator if the parties are unable to agree.
Except as provided in this Section 19.4 or Section 21.2, the arbitrator may
award any remedy consistent with the commercial arbitration rules. The
arbitrator will have the authority in the arbitrator's discretion to award
costs and attorneys' fees to the prevailing party. The arbitrator will not
have the power or authority to award any punitive, exemplary or other
non-compensatory damages, any penalties. The parties will be entitled to
discovery to the same extent provided for civil actions in the Central
District of the State of California. The parties agree to endeavor in good
faith to select an arbitrator within thirty (30) days after either party
provides written notice to the other of its election to arbitrate and to
endeavor in good faith to complete the arbitration within one hundred eighty
(180) days following such notice.
19.5 GENERAL PROVISIONS RE ARBITRATION. Any arbitration will be held
and the award deemed made in Los Angeles County, California. The parties
agree to be bound by the decision of the arbitrator and judgment upon the
award rendered thereby may be entered in any court having jurisdiction within
the State of
36
California. The parties hereby submit to the in personam jurisdiction of the
federal and state courts located in the State of California for all purposes
of this Section and any disputes arising under this Agreement.
20. APPRAISAL OF FAIR MARKET VALUE. In the event of a dispute between
ANSLC and Amerigon regarding what portion of consideration paid for a stock
or equity interest exceeds the fair market value of such interest pursuant to
Section 1.27, ANSLC and Amerigon shall attempt pursuant to Section 19.2 to
agree on the fair market value of such stock or equity interest or to agree
on a single appraiser mutually acceptable to both parties to make a binding
determination of such fair market value. If the parties are unable to agree
on the fair market value or on a single appraiser pursuant to the procedures
set forth in Section 19.2, then within five (5) days after written notice
from one party to the other, ANSLC and Amerigon shall each appoint one person
to render an appraisal of the fair market value of such stock or equity
interest, which appraisals shall be rendered by written decision within
thirty (30) days of the appointment of the second of the two appraisers. If
the higher of the resulting two appraisals is not more than fifteen percent
(15%) higher than the lower of the two appraisals, the average (I.E., the
mean) of the two appraisals will be final and conclusive upon both parties.
If the higher of the resulting two appraisals is more than fifteen (15%)
higher than the lower of the two appraisals, the two persons so chosen shall,
within five (5) days of the rendering of written appraisals by both
appraisers, appoint a third impartial appraiser, who shall render by written
decision an appraisal within thirty (30) days thereafter. In the event of
such an appointment of a third appraiser, the average (I.E., the mean) of the
appraised value rendered by such third appraiser and the closest to such
third appraiser's appraised value of the other two appraised values will be
final and conclusive upon both parties. All appraisers shall be reasonably
qualified and knowledgeable regarding the appraisal of businesses and stocks
such as those of ANSLC. If either party fails to designate its appraiser as
provided above, the appraiser designated by the other party will act as the
sole appraiser and will be deemed to be the single, mutually approved
appraiser to determine the fair market value of the stock or equity interest.
In such event, the sole appraiser shall render his or her written decision
within thirty (30) days of the expiration of said initial five (5) day
period. ANSLC shall provide the appraisers with such financial and other
information as the appraisers may reasonably request.
21. TERM OF LICENSE RIGHTS; LIMITATION OF REMEDIES.
21.1 TERM OF LICENSE RIGHTS. The license rights granted by ANSLC
to Amerigon and by Amerigon to ANSLC hereunder with respect to any patents
shall continue for the duration of the applicable patent, and the license
rights granted with respect to any other proprietary rights shall continue
for the duration of
37
such proprietary rights. Notwithstanding the foregoing sentence, the payment
of royalties as provided in Sections 12 and 13 hereof being an essential and
material element of this Agreement, the parties agree that: (a) the failure
to pay in full all royalties determined to be due pursuant to Section 19
hereof, or, if Section 19 shall be determined not to be controlling of the
issue, by a court of competent jurisdiction, within ten (10) days of the
final determination of the arbitrators, or, if applicable, entry of a final
judgment or order of such court; or (b) rejection of this Agreement under 11
U.S.C. Section 365, shall constitute a material breach of this Agreement and
shall terminate all rights of the breaching party to further use, sale and/or
sublicensing of the rights granted under Section 6 or 7 hereof, respectively,
but shall effect no such termination of the rights of the nonbreaching party,
subject to the provisions of 11 U.S.C. Section 365(n), to the extent
applicable.
21.2 NO INJUNCTIVE RELIEF. Except as provided in Section 21.1
hereof or in the Security Agreements to be entered into pursuant to Section
14 hereof, and notwithstanding anything to the contrary set forth elsewhere
herein, in no event shall ANSLC or Amerigon be entitled to terminate any of
the license rights granted pursuant to Sections 3, 6 or 7 hereof or to enjoin
or seek to enjoin the other party's exercise of any of the license rights
granted pursuant to Sections 3, 6 or 7 hereof, and each party hereby
expressly waives any right to injunctive or other equitable relief to
terminate or enjoin the exercise of any such rights, whether based on
statute, common law, or otherwise, arising out of any alleged default by the
other party or any of its Affiliates or Sublicensees. Nothing contained
herein shall be deemed to limit or restrict ANSLC's or Amerigon's rights or
remedies with respect to matters outside the scope of this Agreement, such as
patents which are not ANSLC Licensed Patents or Amerigon Licensed Patents
hereunder.
22. PAYMENTS TO NAVTECH AND LERNOUT & HAUSPIE AND OTHER THIRD PARTIES.
Amerigon and ANSLC shall each bear its own respective costs of any license
fees payable to third parties in connection with their respective
exploitation of VANS Products, including without limitation costs of license
fees payable to NavTech and Lernout & Hauspie.
23. NOTICES. Except for the patent notices referred to in Section 8,
neither party shall have any obligation to provide notices or credit of any
kind to the other party in connection with the exploitation of VANS Products.
ANSI expressly agrees that Amerigon shall be entitled to sell off its
existing inventory of VANS Products containing notices or credits in ANSI's
name.
38
24. COMPATIBILITY / INTEROPERABILITY.
24.1 VANS NON-NAVIGATION SOFTWARE. ANSLC and Amerigon each intends
that the other party to this Agreement not be prevented from creating VANS
Non-Navigation Software that operates on the VANS Hardware of the other party
and its Affiliates and Sublicensees ("Interoperable Software"). Accordingly,
each party agrees to provide and require each of its Affiliate and
Sublicensee to provide the other party to this Agreement with technical
information reasonably necessary to permit the other party to make
Interoperable VANS Non-Navigation Software to run on such VANS Hardware and
each party hereby grants the other a nonexclusive, worldwide right to make,
have made, practice, have practiced, copy, distribute, transmit, create
derivative works based upon, use, lease, sell and otherwise transfer and
exercise all proprietary rights in and to such Interoperable VANS
Non-Navigation Software. Without limiting the foregoing, to the extent that
either party or any Affiliate or Sublicensee of such party employs a
"lock-out" or similar mechanism designed to prevent or hinder the use of
unauthorized Interoperable VANS Non-Navigation Software on its VANS Hardware,
such party will provide the other and require each of its Affiliates and
Sublicensees to provide the other with technical information reasonably
necessary to circumvent or bypass such "lock-out" or similar mechanism.
24.2 VANS NAVIGATION SOFTWARE. To the extent that either party or
any Affiliate or Sublicensee of such party employs a "lock-out" or similar
mechanism designed to prevent or hinder the use of unauthorized VANS
Navigation Software on its VANS Hardware, and such entity permits any third
party other than an Affiliate of such entity to create VANS Navigation
Software that can be used on such party's VANS Hardware, the other party to
this agreement will thereupon be deemed to have the nonexclusive right to
make, have made, practice, have practiced, copy, distribute, transmit, create
derivative works based upon, use, lease, sell and otherwise transfer and
exercise all proprietary rights in and to Interoperable VANS Navigation
Software, and such entity will provide such technical information reasonably
necessary to permit the other party to make such VANS Navigation Software,
subject to the same geographic limitations imposed on such third party. By
way of example only, if either party permits an unrelated third party to
create Interoperable VANS Navigation Software that can be used on such
party's VANS Hardware and to distribute such VANS Navigation Software in
Japan, such party will provide the other party with such technical
information reasonable necessary to permit the other party to make
Interoperable VANS Navigation Software, and the other party shall have the
right to create Interoperable VANS Navigation Software and distribute such
Interoperable VANS Navigation Software in Japan.
24.3 TRANSFERABILITY OF RIGHTS. Nothing in this Agreement shall
be deemed to authorize Amerigon or ANSLC to provide
39
to any third party any of the technical information provided to it pursuant
to this Section 24 or to transfer or sublicense to any third party any of the
rights granted to it pursuant to this Section 24, except that Amerigon or
ANSLC shall each have the right to provide to a single Affiliate or
Sublicensee the technical information provided to it pursuant to this Section
24 and to transfer and sublicense to such Affiliate or Sublicensee all of the
rights granted to it pursuant to this Section 24, provided in the event of
such a transfer and sublicense by Amerigon or ANSLC, as the case may be,
Amerigon or ANSLC, as the case may be, shall retain no rights pursuant to
this Section 24 and all such rights shall thereafter be vested solely in such
Affiliate or Sublicensee (with such Affiliate or Sublicensee also having
the right to transfer and sublicense such rights to one of its Affiliates or
Sublicensees, provided that it retains no rights following such transfer, it
being the intention of Amerigon and ANSLC that a succession of
transfers/sublicenses to Affiliates or Sublicensees shall be permitted so
long as only a single entity has rights under this Section 24 at any time).
By way of example only, Amerigon would have the right to transfer its rights
pursuant to this Section 24 to a joint venture that is an Affiliate of
Amerigon, in which event Amerigon would thereafter retain no rights pursuant
to this Section 24. Nothing contained herein shall be deemed or construed
to restrict either party from lawfully creating and exploiting Interoperable
VANS Non-Navigation Software or Interoperable VANS Navigation Software to the
extent such software can be lawfully created and exploited without any grant
of rights pursuant to this Section.
24.4 LIMITED TECHNICAL SUPPORT. The parties do not intend that
either party or any Affiliate or Sublicensee be required pursuant to Section
24.1 or 24.2 to provide the other party with extensive technical support or
assistance in creating such Interoperable VANS Navigation Software, but the
parties do intend to require that reasonably sufficient specifications be
provided to permit the creation of Interoperable VANS Navigation Software and
that limited telephonic technical assistance be provided in the event of
errors or lack of clarity in such specifications.
24.5 ROYALTY ADJUSTMENT. Royalties payable with respect to
Interoperable VANS Navigation Software shall be as set forth in Section 12,
subject to adjustment pursuant to the provisions of this Section. If
Amerigon or ANSLC enters into an agreement with a third party providing for
lower royalties with respect to such Interoperable VANS Navigation Software,
or for a shorter duration of royalty obligations with respect to such
Interoperable VANS Navigation Software, it shall provide the other party with
written notice of such lower rate and/or shorter duration and the material
terms of such contract, including information regarding product volumes or
present-value dollar amounts commitments, and shall promptly provide the
other party with such additional information
40
as the other party may reasonably request regarding the pricing and duration
of payment obligations under such contract and the commitments provided by
such third party in consideration for such pricing and payment obligations.
For thirty (30) days after the receipt of such notice and information, the
other party shall have the option to make to the party providing such notice
commitments substantially equal to those made by the third party in exchange
for the same pricing and duration of payment obligations provided to such
third party and subject to the same limitations applicable to such third
party. The objective of this Section is to provide the parties with the
opportunity to obtain the lowest price and shortest duration of royalties
offered by the other party with respect to Interoperable VANS Navigation
Software by substantially matching any greater commitments made by such a
third party which result in a lower price for such third party. Accordingly,
the parties agree to discuss in good faith any greater third party
commitments and potential means for the other party to make comparable
commitments, to qualify for such lower rate and/or shorter duration. If the
other party elects to make comparable commitments on a going forward basis,
adjustments to the royalty rate and/or duration shall also be made on a going
forward basis to reflect the most favored pricing provisions of this Section
24.5. Except as otherwise provided in this Section 24.5, the royalty
obligations of the parties with respect to Interoperable VANS Navigation
Software shall be perpetual.
25. OPERATION OF TOLL-FREE 800 NUMBER; OUTSOURCING AGREEMENT. Effective
May 31, 1996 or the end of the calendar month in which the Effective Date
occurs, whichever is later, Amerigon will assume responsibility for operating
the toll-free 800 support service for the Gen 4 Hardware and Gen 4 Software,
and ANSI will have no further obligations or responsibilities in connection
therewith other than to effectuate an orderly transition of such service to
Amerigon without disruption of service.
25.1 RIGHT START AGREEMENT. Effective May 31, 1996 or the end of the
calendar month in which the Effective Date occurs, whichever is later, ANSI
will assign to Amerigon, and Amerigon will assume ANSI's prospective
obligations with respect to, the Outsourcing Agreement, or substantially the
equivalent will be accomplished by Amerigon's entering into a superseding
agreement with The Right Start, Inc. on substantially the same terms.
25.2 CREDIT CARD PROCESSING AGREEMENT. Effective May 31, 1996 or the
end of the calendar month in which the Effective Date occurs, whichever is
later, ANSI will assign to Amerigon, and Amerigon will assume ANSI's
prospective obligations with respect to, the Credit Card Processing
Agreement, or substantially the equivalent will be accomplished by Amerigon's
entering into a superseding agreement with First U.S.A./DMGT on
substantially the same terms.
41
26. CUSTOMER LISTS. ANSLC and Amerigon shall each retain exclusive rights
to any customer lists or similar data compiled by such party in connection
with its sales and marketing activities with respect to VANS Products, and
neither party shall have any obligation to provide the other party with any
such lists or data, except that ANSLC shall provide Amerigon upon execution
hereof with a customer lists and any available data regarding customers who
have activated disks for the Gen 4 Hardware via the toll free 800 number
prior to the date of Amerigon's assumption of responsibility for operation of
the 800 number. Amerigon shall be free to use such customer list and data in
any manner Amerigon desires.
27. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed to
create a joint venture, partnership or principal-agent relationship between
any of the ANSLC Parties, on the one hand, and Amerigon, on the other hand.
None of the ANSLC Parties is by virtue of this Agreement authorized as an
agent or legal representative of the Amerigon, and Amerigon is not by virtue
of this Agreement authorized as an agent or legal representative of any of
the ANSLC Parties . None of the ANSLC Parties is granted any right or
authority to assume or to create any obligation or responsibility, express or
implied, on behalf of or in the name of Amerigon or to bind Amerigon in any
manner, and Amerigon is not granted any right or authority to assume or to
create any obligation or responsibility, express or implied, on behalf of or
in the name of any of the ANSLC Parties or to bind any of the ANSLC Parties
in any manner.
28. MISCELLANEOUS.
28.1 NOTICES AND COMMUNICATIONS. Except as otherwise specifically
provided herein, any notice required or permitted to be sent by this
Agreement will be in writing and will be (a) delivered by hand, (b) sent by
fax (if the receiving machine confirms receipt through answerback and the
sending machine prints a paper copy of the answerback message), (c) mailed by
registered, certified mail or other pre-paid, receipted delivery service,
return receipt requested, to the address or fax number provided by this
Agreement, or (d) sent by a reputable next business day courier delivery
service such as Federal Express. Complying notices will be effective: (w)
when delivered by hand; (x) when sent by fax, (y) three (3) business days
after deposited in the mail in the manner required by subsection (c) above,
with proper postage prepaid, or (z) one (1) business day after deposit with
the delivery service. Notices will be addressed as follows or as from time to
time directed in writing by either party by notice given hereunder:
42
To Amerigon:
Amerigon, Inc.
404 East Huntington Drive
Monrovia, California 91016
Attn: President
Fax No. (818) 932-1220
-WITH 1ST CLASS MAIL COPY TO-
Blanc Williams Johnston & Kronstadt
1900 Avenue of the Stars
17th Floor
Los Angeles, California 90067
Attn: Allen R. Grogan, Esq.
To ANSI or ANSLC:
Audio Navigation Systems LLC
6611 Odessa Avenue
Van Nuys, California 91406-5799
Fax No. (818) 778-1005
-WITH 1ST CLASS MAIL COPY TO-
Stephen R. Mick, Esq.
Loeb and Loeb
1000 Wilshire Boulevard, Suite 1800
Los Angeles, California 90017-2475
28.2 EXCUSED PERFORMANCE. Neither party will be liable for delays in
or failure of performance required under this Agreement when such delay or
failure is due to acts of God, acts of civil or military authority, fire,
flood, strikes, war, epidemics, shortage of power, or other cause beyond such
party's reasonable control and without its fault or negligence, provided such
party: (A) uses best efforts to promptly notify the other in advance of
conditions which may result in any such delay in or failure of performance;
(B) uses best efforts to avoid or remove such conditions; and (C) immediately
continues performance when such conditions are removed.
28.3 ASSIGNMENT. Except as provided in this Section 28.3, this
Agreement may not be assigned in whole or in part by ANSLC or Amerigon
without the other party's prior written consent, which shall not be
unreasonably withheld or delayed. By way of example only, legitimate, good
faith and reasonable concerns that there exists a material risk of a
prospective assignee's insolvency, where such risk is materially greater than
the risk of the assignor's insolvency, would be reasonable grounds for
withholding consent. Also by way of example only, mere concern that a
prospective assignee is a potentially formidable competitor
43
that could place the other party at a competitive disadvantage shall not be
deemed reasonable grounds for withholding consent. ANSLC and Amerigon shall
each have the right, without seeking or obtaining the other party's consent,
to assign or transfer this Agreement or any interest herein (including
without limitation rights and duties of performance) to any entity (i) which
owns more than fifty percent (50%) of such party's issued and outstanding
voting stock, (ii) in which such party owns more than fifty percent (50%) of
the issued and outstanding voting stock, (iii) which acquires all or
substantially all of such party's operating assets, or (iv) into which such
party is merged or reorganized pursuant to any plan of merger or
reorganization.
28.4 INTEGRATION. This Agreement and the Schedules attached
hereto constitute the entire agreement of the parties and supersede any other
agreement or understanding, written or oral, that may have been made or
entered into with regard to the subject matter hereof by any of the ANSLC
Parties, on the one hand, and Amerigon, on the other hand. The Schedules
attached hereto are a material part of this Agreement and are incorporated
herein by this reference as if fully written in this Agreement.
28.5 MODIFICATION. This Agreement may not be altered, amended or
modified, except by formal agreement in writing signed by duly authorized
representatives of both parties, except as expressly provided herein.
28.6 WAIVER OR DELAY. Any waiver or delay in the exercise by a
party of its right to terminate or enforce any provision of this Agreement
for any breach by the other party will not prejudice such party's right of
termination or enforcement for such breach or any further, continuing or
other breach by the other party.
28.7 SEVERABILITY. If any provision of this Agreement is, for any
reason, held unenforceable or invalid in any respect under the laws of any
jurisdiction where enforcement is sought, the invalidity or unenforceability
will not affect: (i) any other provision of this Agreement and this Agreement
will be construed as if such unenforceable or invalid provision were not
contained herein; and (ii) enforcement or validity of such provision in any
other jurisdiction.
28.8 SURVIVAL. The respective obligations of the ANSLC Parties and
Amerigon hereunder which by their nature would continue beyond termination or
expiration hereof, including but not limited to obligations of
confidentiality and the limitations of liability, will survive termination or
expiration of this Agreement.
28.9 GOVERNING LAW. This Agreement will be construed and enforced
in accordance with the laws of California as applied to
44
contracts entered into in and performed in California between California
residents.
28.10 HEADINGS. The Article and Section headings of this Agreement are
for convenience only and will neither be considered a part of, nor affect the
construction or interpretation of, any provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of May 10, 1996.
AMERIGON, INC. AUDIO NAVIGATION SYSTEMS, INC.
By /s/ Joshua M. Newman By /s/ Ron Bernard
---------------------------- ----------------------------
Title Vice President Title President
------------------------- -------------------------
Date 5/10/96 Date 5/10/96
-------------------------- --------------------------
ALCOM ENGINEERING CORPORATION AUDIO NAVIGATION SYSTEMS, LLC
By /s/ Charles LaRue By /s/ Ron Bernard
---------------------------- ----------------------------
Title President Title President
------------------------- -------------------------
Date 5/10/96 Date 5/10/96
-------------------------- --------------------------
45
Schedule 1.29
Description or Identification of Passcode Activation
Patent Application
United States patent application "Method and System for Disseminating
Stored Programs and Data" currently enumerated as Loeb & Loeb patent file
PD-4611, and all foreign filings thereon.
1
Schedule 1.3
List of Amerigon Licensed Patents as of date of Agreement
NONE
1
Schedule 1.7
List of ANSLC Licensed Patents as of date of Agreement
1. United States patent #5,274,560, "Sensor free vehicle navigation system
utilizing a voice input/output interface for routing a drive from his
source point to his destination point" and all foreign filings thereon,
including without limitation the following filings: Brazil No. 9.107.099;
Canada No. 2,096,840; EPC No. 91918978.7; Japan No. 3-517237; S. Korea No.
701633/93; PCT No PCT/US91/03696; Taiwan No. 80104229.
2. United States patent #5,454,062, "Method for recognizing spoken words", and
all foreign filings thereon.
3. United States patent application "Methods and apparatus for improving the
reliability or recognizing words in a large database when the words are
spelled or spoken", currently enumerated as Loeb & Loeb patent file PD-
2950, and all foreign filings thereon.
4. United States patent application "Vehicle navigation system providing
travel directions based on existing travel conditions", currently
enumerated as Loeb & Loeb patent file PD-2916, and all foreign filings
thereon.
5. United States patent application "Navigation system utilizing audio CD
player for data storage", currently enumerated as Loeb & Loeb patent file
PD-2844, and all foreign filings thereon.
6. United States patent application "Sensor free vehicle navigation system
utilizing a voice input/output interface for routing a driver from his
source point to his destination point", currently enumerated as Loeb & Loeb
patent file PD-3004, and all foreign filings thereon.
1
Schedule 2
Transition Date and Surviving Obligations of
Parties Under Prior Agreements and Agreements
To Be Assigned
1. ANSI and Amerigon will continue to fulfill their respective obligations
under the Agreement Re Gen 4 Navigation System dated July 24, 1995, as amended
by an Amendment dated as of August 14, 1995 (the "Gen 4 Agreement"), and the Gen
4 Agreement will remain in full force and effect in accordance with its terms,
through [May 31, 1996]. Thereafter, all obligations of Amerigon and ANSI as set
forth in the Gen 4 Agreement will terminate and be of no further force or
effect, except that the terms of such agreement (including payment and
accounting terms) shall continue to govern all sales and distribution occurring
pursuant to such agreement through [May 31, 1996]. Without limiting the
foregoing, ANSI shall remain obligated to account for and pay to Amerigon its
share of "Adjusted Gross Revenues" as set forth in Section 6.3 of the Gen 4
Agreement, and Amerigon shall be obligated to account for and pay to ANSI
royalties as set forth in Section 6.4 of the Gen 4 Agreement, for all sales and
services provided thereunder through [May 31, 1996].
2. Except to the extent any terms of the Option and License Agreement dated as
of July 13, 1992 are incorporated by reference as part of the Gen 4 Agreement
with respect to activities governed by the Gen 4 Agreement, the Option and
License Agreement shall terminate and be of no further force or effect as of the
Effective Date.
3. ANSLC shall remain obligated to pay one-half of legal fees and costs
incurred by Amerigon on or before the Effective Date with respect to ANSLC
Licensed Patents in accordance with the terms of the existing agreement between
ANSI and Amerigon governing the sharing of such legal fees and costs.
2
Schedule 3.2
Materials relating to Sales Fulfillment / Activation Technology
To Be Delivered by ANSLC to Amerigon
1. Source code, random number generator, random number seed, random number
tables used for encryption (generation of a pass code on a PC).
2. Source code, random number generator, random number seed, random number
tables used for decryption (enabling the use of metro areas within the
navigator).
3. Specifications for software or procedures used by Right Start to facilitate
the sale of metro area usage to end users.
4. All lists, data bases, compilations, summaries or statistics relating to
customers, customer attributes, metro areas enabled, and type of navigator
prepared by Right Start and/or ANSI prior to the transfer of the Right
Start operation to the control of Amerigon.
1
Schedule 14-A
Security Agreement #1
(Grant of Security Interest by Amerigon to ANSLC)
To Be Attached When Agreed To
2
Schedule 14-B
Security Agreement #2
(Grant of Security Interest by ANSLC to Amerigon)
To Be Attached When Agreed To
3
ADDENDUM
TO SETTLEMENT AND LICENSE AGREEMENT
BY, BETWEEN AND AMONG
AMERIGON, INC., AUDIO NAVIGATION SYSTEMS, LLC,
ALCOM ENGINEERING CORPORATION AND AUDIO NAVIGATION SYSTEMS, INC.
Amerigon, Inc., a California corporation ("Amerigon"); Audio Navigation
Systems, Inc., a California corporation ("ANSI"); Audio Navigation Systems, LLC,
a California limited liability corporation ("ANSLC"); and Alcom Engineering
Corporation, a California corporation ("Alcom") are parties to a Settlement
and License Agreement (the "Agreement") dated May 10, 1996.
This Addendum reflects the following additional understandings and
agreements of the parties to the Agreement as follows:
1. Unless otherwise specified herein, any capitalized terms used in this
Addendum have the same meanings as specified in the Agreement.
2. Pursuant to the Agreement, the parties agreed that although
the Agreement was being executed on May 10, 1996, the Agreement would not be
binding or effective unless and until ANSLC concludes an agreement with NavTech
reasonably acceptable to ANSLC granting ANSLC license rights in the NavTech
technology comparable to those held by Amerigon. ANSLC warrants and represents
that ANSLC and NavTech are entering into such an agreement concurrently with
the execution of this Addendum. Accordingly, the parties agree that the
Effective Date of the Agreement shall be June 12, 1996.
3. Pursuant to Section 15.3 of the Agreement, Amerigon and ANSLC are
jointly to issue a press release on or shortly after the Effective Date in a
form mutually approved by ANSLC and Amerigon, such approval not to be
unreasonably withheld by either ANSLC or
1
Amerigon. Attached hereto as Exhibit "A" is the form of joint press release
mutually approved by ANSLC and Amerigon.
IN WITNESS WHEREOF, the parties have executed this Addendum this 12th day of
June, 1996.
AMERIGON, INC. AUDIO NAVIGATION SYSTEMS, INC.
By /s/ Joshua M. Newman By /s/ Ron Bernard
---------------------------- ----------------------------
Title Vice President Title President
------------------------- -------------------------
Date 6/12/96 Date 6/12/96
-------------------------- --------------------------
ALCOM ENGINEERING CORPORATION AUDIO NAVIGATION SYSTEMS, LLC
By /s/ Charles LaRue By /s/ Ron Bernard
---------------------------- ----------------------------
Title President Title President & CEO
------------------------- -------------------------
Date 6/11/96 Date 6/12/96
-------------------------- --------------------------
2
No. TCL-698-93
Revised 1/10/94
LICENSE AGREEMENT
For
ULTRA-WIDEBAND (UWB) IMPULSE RADAR-BASED TECHNOLOGY
FOR AUTOMOTIVE FIELD OF USE
Between
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
and
AMERIGON, INCORPORATED
LLNL Case No. TCL-698-93
Lawrence Livermore National Laboratory
University of California
P.O. Box 808, L-795, Livermore, CA 94550
Technology Transfer Initiatives Program
1-24, 1994
1
No. TCL-698-93
TABLE OF CONTENTS
1. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3. License Grant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4. Royalties and Payments . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. Progress and Royalty Reports . . . . . . . . . . . . . . . . . . . . . . 13
7. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8. Life of the Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 15
9. Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10. Termination by THE REGENTS . . . . . . . . . . . . . . . . . . . . . . . 16
11. Termination by the Licensee. . . . . . . . . . . . . . . . . . . . . . . 17
12. Disposition of Licensed Products on Hand upon Termination. . . . . . . . 17
13. Patent Prosecution and Maintenance . . . . . . . . . . . . . . . . . . . 17
14. Use of Names and Trademarks and Nondisclosure of Agreement . . . . . . . 19
15. Limited Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
16. Patent Infringement. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
17. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
18. Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
19. Indemnification and Insurance. . . . . . . . . . . . . . . . . . . . . . 23
20. Late Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
21. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
22. Governing Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
23. Patent Marking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
24. Government Approval or Registration. . . . . . . . . . . . . . . . . . . 26
25. Export Control Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
26. Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
27. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Exhibit A: "The Regents Intellectual Property Rights". . . . . . . . . . 29
Exhibit B: License Fees and Royalty Rates . . . . . . . . . . . . . . . 30
2
No. TCL-698-93
LICENSE AGREEMENT FOR
ULTRA-WIDEBAND (UWB) IMPULSE RADAR-BASED TECHNOLOGY
FOR AUTOMOTIVE FIELD OF USE
This Limited Exclusive Agreement is made this 20 day of January, 1994 (the
"Effective Date") between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA,
(hereinafter referred to as "THE REGENTS"), a corporation organized and existing
under the laws of the State of California and having its statewide
administration address at 300 Lakeside Drive, Oakland, California 94612-3550,
and AMERIGON, INCORPORATED (hereinafter referred to as "Licensee"), a
corporation duly organized under the laws of California, and having its
principal place of business at 3601 Empire Avenue, Burbank, CA 91505. Both
Parties to this Agreement are hereinafter jointly referred to as the "Parties".
This Agreement and the resulting license is subject to overriding obligations to
the Federal Government pursuant to the provisions of THE REGENTS' Contract No.
W-7405-ENG 48 with the United States Department of Energy (DOE) for the
operation of the Lawrence Livermore National Laboratory ("LLNL"), and the
license grant is subject to DOE grant of rights in THE REGENTS' Intellectual
Property Rights to THE REGENTS.
1. BACKGROUND
1.1 Certain inventions related to the UWB Impulse Radar are described in
LLNL Invention Disclosures IL-9092, "Ultra Wideband Radar Motion
Sensor," (U.S. Patent Application No. 08044717); IL-9091, "A
Differential Receiver for Ultra-Wideband Signals," (U.S. Patent
Application No. 08044745); and IL-9318: "Two Terminal Micropower Radar
Sensor" [hereinafter collectively referred to as "THE REGENTS'
Intellectual Property Rights"] which were made in the course of LLNL
research.
WHEREAS, THE REGENTS is the owner of certain intellectual property rights
described herein;
3
No. TCL-698-93
WHEREAS, THE REGENTS desires to have THE REGENTS' Intellectual Property
Rights (as later defined herein) utilized in the public interest and is
willing to grant a license thereunder;
WHEREAS, Licensee has represented to THE REGENTS to induce THE REGENTS to
enter into this Agreement, that Licensee is experienced in the
development, production, manufacture, marketing and sale of products
similar to the "Licensed Product(s)" (as later defined herein), and
that it shall commit itself to a thorough, vigorous and diligent
program of exploiting the THE REGENTS' Intellectual Property Rights
commercially so that public utilization and royalty income to THE
REGENTS shall result therefrom; and
WHEREAS, Licensee desires to obtain a license under THE REGENTS' Intellectual
Property Rights upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
2. DEFINITIONS
2.1 "Affiliate(s)" of a party means any entity which, directly or
indirectly, controls such party, is controlled by such party or is
under common control with such party, "control" for these purposes
being defined as the actual, present capacity to elect a majority of
the directors of such Affiliate, or if not, the capacity to elect at
least half of the members that control at least fifty percent (50%) of
the outstanding stock or other voting rights entitled to elect
directors; provided, however, that in any country where the local law
shall not permit foreign equity participation of a majority, then an
"Affiliate" shall include any company in which Licensee shall own or
control, directly or indirectly, the maximum percentage of such
outstanding stock
4
No. TCL-698-93
or voting rights permitted by local law. Each reference to Licensee
herein shall be meant to include its Affiliate(s).
2.2 "Field-of-Use" shall mean use of the Licensed Product in the following
three applications for passenger vehicles, trucks, minivans, and buses:
(a) Application: Intelligent Cruise Control.
Broad band radar sensors for use as part of an intelligent
cruise control system. An example is a forward looking radar sensor
that measures the distance and/or velocity to a car in the direction of
travel and is part of a system that regulates the spacing between cars.
(b) Application: Airbag Crash Systems.
Broad band radar sensors that sense a crash and sensors that
activate, monitor, arm and modify the deployment of driver and
passenger airbag systems, seat belt pretensioning systems, and seat
belt systems. Examples are frontal, side and rear collision sensors
used to deploy these airbags.
(c) Application: Position Sensors.
Sensor and control devices that employ position sensing in
their function, and that measure attributes within and external to the
vehicle (e.g., throttle position, occupant sensors, blind spot,
suspension system sensing, seat position, steering wheel position, and
vehicle height sensing).
All applications not specifically set forth above are excluded from
this license including, but not limited to, collision warning,
collision avoidance, fuel tank fill status, and car alarm systems.
2.3 "Licensed Patent(s)" shall mean any and all of THE REGENTS Patent
Rights granted to Licensee under this Agreement.
2.4 A "Licensed Product" shall mean any product or part thereof which:
(a) is covered in whole or in part by an issued, unexpired claim or a
pending claim contained in THE REGENTS'
5
No. TCL-698-93
Intellectual Property Rights in the country in which any Licensed
Products are made, used or sold;
(b) is derived from THE RIGHTS' Intellectual Property Rights related to
or described in patents and disclosures in Exhibit A; and
(c) is sold, manufactured or used in any country under this Agreement.
2.5 "Net Selling Price" as used in this Agreement for the purpose of
computing royalties shall mean gross invoice selling price of the
Licensed Product, f.o.b. factory, after deduction of normal and
customary trade, quantity and cash discounts and allowances or credits
to customers on account of returns, but before deduction of any other
items, including but not limited to, freight allowances, packing costs,
costs of insurance or agents' commissions.
2.6 "Net Sales" shall mean LICENSEE'S billings for Licensed Products
produced hereunder, less the sum of the following:
(a) discounts allowed in amounts customary in the trade;
(b) sales taxes, customs and tariff duties, and/or use taxes which are
directly imposed and are with reference to particular sales;
(c) outbound transportation prepaid or allowed; and
(d) amounts allowed or credited on returns.
Net sales shall not include sales to the U.S. Government. No
deductions shall be made for commissions paid to individuals whether
they be with independent sales agencies or regularly employed by
LICENSEE and on its payroll, or for cost of collections.
6
No. TCL-698-93
Licensed Products shall be considered "sold" when billed out or invoiced.
2.7 "Patent Right(s)" shall mean all of the following of THE REGENTS'
Intellectual Property Rights:
(a) the United States and foreign patents and/or patent applications
listed in Exhibit A;
(b) United States and foreign patents issued from the applications
covered by the technology listed in Exhibit A and from divisionals
and continuations of these applications;
(c) claims of U.S. and foreign continuation-in-part applications, and of
the resulting patents, which are directed to subject matter
specifically described in the U.S. and foreign applications listed in
Exhibit A;
(d) any reissues of United States patents described in (a), (b), or (c)
above.
2.8 "THE REGENTS' Intellectual Property Rights" shall mean patent rights to
subject matter claimed in or disclosed in Exhibit A, which is attached
and incorporated herein.
2.9 "Territory": Worldwide, for countries covered by Licensed Patents.
3. LICENSE GRANT
3.1 Subject to certain conditions stated herein, THE REGENTS hereby grants
to the Licensee a nontransferable (except as expressly provided herein)
limited exclusive, royalty-bearing license under THE REGENTS Patent
Rights to make, have made, use, lease and sell the Licensed Products in
the Territory for the
7
No. TCL-698-93
Field-of-Use set forth under Article 2.2 for the term set forth under
Article 8, unless sooner terminated according to the terms hereof.
3.2 THE REGENTS also grants to LICENSEE the right to issue royalty-bearing
sublicenses to third parties, only in said Field of Use (set forth in
Article 2.2), to make, use, and sell Licensed Products, provided
LICENSEE has current rights in said Field of Use herein under this
Agreement at the time of such sublicenses.
However, the LICENSEE shall notify THE REGENTS in writing in advance of
final license negotiations and prior to execution of a sublicense with
all potential sublicensees.
LICENSEE agrees to require its sublicensees to give preference that any
Licensed Products for applications, use or sale shall be manufactured
substantially in the United States.
The LICENSEE hereby agrees that every sublicensing agreement to which
it shall be a party and which shall relate to the rights, privileges
and license granted hereunder shall contain a statement setting forth
the date upon which the LICENSEE's exclusive rights, privileges and
license hereunder shall terminate.
The LICENSEE agrees that any sublicenses granted by it shall provide
that the obligations to THE REGENTS of this Agreement shall be binding
upon the sublicensee as if it were a party to this Agreement. The
LICENSEE further agrees to attach copies of this Agreement to
sublicense agreements.
The LICENSEE shall not receive from sublicensees anything of value in
lieu of cash payments in consideration for any sublicense under this
Agreement, without the express prior written permission of THE REGENTS,
which shall not be unreasonably withheld.
8
No. TCL-698-93
3.3 Any sublicenses granted by LICENSEE shall include all of the rights and
obligations due THE REGENTS that are contained in this Agreement.
3.4 LICENSEE shall provide THE REGENTS with a copy of each sublicense
issued hereunder within thirty (30) days of the execution of such
sublicense agreement; collect payment of all royalties due THE REGENTS
from the sale of Licensed Product by any sublicensees; pay THE REGENTS
the amounts due and collected from sublicensees in a timely manner; and
summarize and deliver all reports due TO REGENTS from sublicensees
according to the schedule set forth in Article 6 (PROGRESS AND ROYALTY
REPORTS) of this Agreement.
3.5 The license granted hereunder shall not be construed to confer any
rights upon the LICENSEE by implication, estoppel or otherwise as to
any technology not specifically set forth herein.
3.6 THE REGENTS expressly reserve the right to use THE REGENTS'
Intellectual Property Rights, Licensed Product(s), and associated
technology for educational and research purposes.
3.7 Any license granted hereunder shall be subject to the prior license
retained by the Federal Government which consists of a nonexclusive,
nontransferable, irrevocable, paid-up license to practice the Licensed
Patent(s) or have the Licensed Patent(s) practiced for or on behalf of
the United States throughout the world.
3.8 The parties acknowledge that the Federal Government has certain
march-in rights to THE REGENTS' Intellectual Property Rights in
accordance with 35 USC 203.
9
No. TCL-698-93
3.9 Nothing in this License Agreement shall cause LICENSEE to give up or
transfer to Licensor any rights to improvements or developments made by
LICENSEE.
4. ROYALTIES AND PAYMENTS
4.1 The license-issue fee and royalty rate for the license that is the
subject of this Agreement shall be in accordance with this Article 4.
4.2 Royalties and fees due hereunder shall accrue and be paid to THE
REGENTS according to this Article 4 and the attached Exhibit B which is
incorporated herein as if fully set forth.
4.3 Where Licensed Products are not sold, but are otherwise disposed of or
used, the Net Selling Price of such products and/or processes for the
purposes of computing royalties shall be the selling price at which
products of similar kind and quality, sold in similar quantities, are
currently being offered for sale by the LICENSEE. Where such products
are not currently being offered for sale by the LICENSEE, the Net
Selling Price of products otherwise disposed of or used, for the
purpose of computing royalties, shall be the average selling price at
which products of similar kind and quality, sold in similar quantities,
are then currently being offered for sale by other manufacturers.
Where such products are not currently sold or offered for sale by
others, then the Net Selling Price, for the purpose of computing
royalties, shall be the LICENSEE's cost of manufacture determined by
the LICENSEE's customary accounting procedures, plus the LICENSEE's
standard mark-up. Nothing in this paragraph shall require licensee to
keep track of or account for Licensed Products used internally by
LICENSEE for process development, test, demonstration, prototype
samples for the purpose of creating customer interest or acceptance, or
Licensed Products manufactured but unsold and unused.
10
No. TCL-698-93
4.4 Under this Agreement, Licensed Products shall be considered to be sold
when invoiced, or if not invoiced, when delivered for use or lease to a
third party, except that upon expiration of any patent covering such
Licensed Products, or upon any termination of license, all shipments
made on or prior to the day of such expiration or termination which
have not been billed out prior thereto shall be considered as sold (and
therefore subject to royalty). Royalties paid on Licensed Products
which are not accepted or paid by the customer shall be credited to
the LICENSEE.
4.5 The LICENSEE shall pay to THE REGENTS a minimum annual royalty as
defined in Exhibit B. This minimum annual royalty shall be paid to THE
REGENTS by January 1 of each year and shall be credited against the
earned royalty due and owing for that calendar year.
4.6 The LICENSEE shall pay THE REGENTS an earned royalty, as defined in the
attached Exhibit B, which is incorporated herein as if fully set forth,
on all Licensed Products sold or used by Licensee and any sublicensee.
4.7 Earned royalties for Licensed Products sold under this Agreement in any
country outside the United States shall accrue to THE REGENTS for the
duration of THE REGENTS' patent rights in that country.
4.8 Earned royalties accruing to THE REGENTS shall be paid to THE REGENTS
by February 28, May 31, August 31, and November 30. Each such payment
to THE REGENTS will be for any and all royalties which accrued to THE
REGENTS within the most recently completed calendar quarter, less any
credits for minimum royalties paid per Article 4.5 above.
4.9 All monies due THE REGENTS shall be payable in United States funds
collectible at par in San Francisco, California. When
11
No. TCL-698-93
Licensed Products are sold for monies other than United States dollars,
the earned royalties will first be determined in the foreign currency
of the country in which Licensed Products were sold and then converted
into equivalent United States Funds. The exchange rate will be that
established by the Bank of America in New York, New York on the last
business day of the reporting period and will be quoted in the
Continental terms methods of quoting exchange rates (local currency per
U.S. dollar).
4.10 Royalties earned with respect to sales occurring in any country outside
the United States shall not be reduced by any value-added taxes, fees,
or other charges imposed by the government of such country on the
remittance of royalty income. The LICENSEE shall be responsible for
all bank transfer charges.
4.11 If at any time legal restrictions prevent the prompt remittance by the
LICENSEE of part or all royalties due with respect to any country
outside the United States where a Licensed Product is sold, the
LICENSEE shall have the right and option to make such payments by
depositing the amount thereof in local currency to THE REGENTS' account
in a bank or other depository in such country.
4.12 No royalties shall be collected or paid hereunder on Licensed Products
distributed to or used by the United States Government including any
agency thereof and the amount charged for such sales to the United
States Government will be reduced by an amount equal to the royalty
otherwise due THE REGENTS.
4.13 Notwithstanding any other provision of this agreement, no royalty payments
are due or payable on any products not covered by outstanding patent
filing(s) or then currently valid Licensed Patent(s).
12
No. TCL-698-93
5. DUE DILIGENCE
5.1 The LICENSEE, upon execution of this Agreement, shall diligently
proceed with the development, manufacture and sale of Licensed Products
and shall earnestly and diligently endeavor to market the same within a
reasonable time after execution of this Agreement and in quantities
sufficient to meet the market demands therefor, and comply with the
minimum royalties specified in Part C of Exhibit B.
In addition, LICENSEE, as a condition to maintain the exclusive license
for each of the three applications identified in Article 2.1, the
LICENSEE must achieve commercial sales of products by the end of 1998.
Commercial sales are defined as sales or non-prototype products to at
least one original equipment manufacturer. Failure to achieve
commercial sales for a particular application will result in the loss
of exclusivity of the license for that application, in which event THE
REGENTS will have the right to grant other entities a non-exclusive
license for that application at terms no more favorable than those of
the LICENSEE.
5.2 The LICENSEE shall be entitled to exercise prudent and reasonable
business judgment in meeting its due diligence obligations in
accordance with this Agreement.
6. PROGRESS AND ROYALTY REPORTS
6.1 Prior to the first sale of Licensed Product(s) anywhere in the world,
the LICENSEE shall submit a progress report covering the LICENSEE's
activities related to the development and testing of the Licensed
Product(s). After the first such sale and/or commercial use, the
LICENSEE shall submit a quarterly royalty report by February 28, May
31, August 31, and November 30 of each calendar year for the most
recently completed calendar
13
No. TCL-698-93
quarter, giving such particulars of the business conducted by the
LICENSEE under this Agreement as shall be pertinent to a royalty
accounting hereunder. These shall include at least the following:
(a) number of Licensed Products in each application manufactured and
sold;
(b) the gross sales and Net Selling Price of Licensed Products sold by
LICENSEE during the most recently completed calendar quarter;
(c) the royalties, in U.S. dollars, payable hereunder with respect to
such sales;
(d) the names and addresses of the sublicenses, if any, granted, and
royalty consideration received, and the number, description, and
aggregate Net Selling Price of Licensed Products sold or otherwise
disposed of during the preceding three (3) calendar months and upon
which royalty is payable as provided in Article 4 above. (The first
royalty report shall include such sublicenses and/or Licensed
Products sold or otherwise disposed of, between the date of patent
application filing and the date of such report); and
(e) with each such report submitted, the LICENSEE shall pay to THE
REGENTS the royalties due and payable under this Agreement. If no
royalties shall be due, the LICENSEE shall so report.
6.2 On or before the sixtieth (60th) day following the close of the
LICENSEE's fiscal year, the LICENSEE shall provide THE REGENTS with the
LICENSEE's certified financial statements for the preceding fiscal year
including, at a minimum, a Balance Sheet and an Operating Statement.
14
No. TCL-698-93
6.3 If no acquisition of Licensed Product(s) has been made during any
reporting period, a statement to that effect shall be required in the
royalty report filed for that period.
7. BOOKS AND RECORDS
7.1 The LICENSEE shall keep books and records accurately showing all
Licensed Product(s) developed, manufactured, used, and/or acquired
under the terms of this Agreement. Such books and records shall be
preserved for at least five (5) years from the date of the royalty
payment to which they pertain and shall be open to inspection by
representatives or agents of THE REGENTS at all reasonable times,
provided that reasonable notice is given.
7.2 The fees and expenses incurred by THE REGENTS' representatives or
agents to perform an examination of the royalty reports shall be borne
by THE REGENTS. However, if an error in the royalty accounting of more
than five percent (5%) of the total royalties due for any year is
discovered, then the fees and expenses incurred by THE REGENTS'
examination shall be borne by the LICENSEE.
8. LIFE OF THE AGREEMENT
8.1 Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement
shall be in force from the Effective Date and shall remain in effect
for the life of the last-to-expire issued Licensed Patent(s) licensed
under this Agreement. As patents expire, Licensed Product(s) covered by
an expired patent but not by other Licensed Patent(s) will not be
subject to further royalty payments.
8.2 Any termination of this Agreement shall not affect the rights and
obligations set forth in the following Articles:
15
No. TCL-698-93
Article 7 Books and Records
Article 13 Patent Prosecution and Maintenance
Article 14 Use of Names and Trademarks
Article 19 Indemnification and Insurance
Article 25 Export Control Laws
9. DISPUTES
9.1 The Parties shall attempt to jointly resolve all disputes (such joint
resolution may include non-binding arbitration) arising from this
Agreement. If the Parties are unable to jointly resolve a dispute
within a reasonable time, then the Parties or either of them shall have
the right to commence proceedings in a court of competent jurisdiction.
U.S. Federal law is to govern the Agreement to the extent there is
such law. To the extent that there is no applicable U.S. Federal law,
this Agreement and performance thereunder shall be governed by the law
of the State of California without reference to that state's conflicts
of law provisions.
10. TERMINATION BY THE REGENTS
10.1 The right to terminate this Agreement, if exercised by THE REGENTS,
supersedes the rights granted in Article 3 (LICENSE GRANT). If the
LICENSEE should fail to perform any material term or covenant of this
Agreement, then THE REGENTS may give written notice of such default
("Notice of Default") to the LICENSEE. If the LICENSEE should fail to
remedy such default or initiate satisfactory action toward the remedy
with satisfaction and tangible evidence that the deficiency has been
cured within sixty (60) days of the effective date of such Notice of
Default, THE REGENTS shall have the right to terminate this Agreement
and the licenses granted herein by a second written notice ("Notice of
Termination"). If Notice of Termination is sent to the LICENSEE, this
Agreement shall automatically terminate on the effective date of such
notice. The LICENSEE's failure to pay any royalty or other fee by the
date required under Exhibit B shall be considered to be a material
breach subject to termination of the license.
16
No. TCL-698-93
10.2 Termination of this Agreement shall not relieve the LICENSEE of any
obligation or liability accrued hereunder prior to such termination, or
rescind any payments due or paid to THE REGENTS hereunder prior to the
time such termination becomes effective. Such termination shall not
affect, in any manner, any rights of THE REGENTS arising under this
Agreement prior to such termination.
11. TERMINATION BY THE LICENSEE
11.1 The LICENSEE shall have the right at any time to terminate this
Agreement in whole or as to any portion of THE REGENTS' Intellectual
Property Rights by giving notice in writing to THE REGENTS.
Termination of this Agreement by the LICENSEE shall be effective ninety
(90) days from the effective date of such notice. Any termination of
this Agreement shall not affect the rights and obligations set forth in
Article 8.2.
12. DISPOSITION OF LICENSED PRODUCTS
ON HAND UPON TERMINATION
12.1 Upon termination of this Agreement for any reason other than expiration
of Licensed Patent(s), LICENSEE shall provide THE REGENTS within
forty-five (45) days following the effective date of termination with
written inventory of all Licensed Products in process of manufacture or
in stock, and shall dispose of such Licensed Products within one
hundred and twenty (120) days of the effective date of termination,
provided, however, that the sales of all such Licensed Products shall
be subject to the terms of this Agreement.
13. PATENT PROSECUTION AND MAINTENANCE
13.1 THE REGENTS shall diligently pursue and maintain the United States
patents for Licensed Patent(s) using counsel of its choice,
17
No. TCL-698-93
and such patents will be held in the name of THE REGENTS. THE REGENTS
shall provide the LICENSEE with copies of all relevant documentation so
that the LICENSEE may be informed and apprised of the continuing
prosecution and to comment on and/or make suggestions, and the LICENSEE
agrees to keep this documentation confidential.
13.2 THE REGENTS may, at its option, amend any patent application to include
claims reasonably requested by the LICENSEE to protect the products
contemplated to be sold or methods used under this Agreement.
13.3 The cost of preparing, filing, prosecuting and maintaining existing
United States and foreign patents filed as of the Effective Date of
this Agreement shall be borne by THE REGENTS.
13.4 The LICENSEE shall have the right to request that THE REGENTS obtain
patent protection on THE REGENTS' Intellectual Property Rights in
foreign countries if available and if it so desires. The LICENSEE must
notify THE REGENTS within seven (7) months of the filing of the
corresponding United States application of its decision to obtain
foreign patents. This notice concerning foreign filing shall be in
writing and identify the countries desired. The absence of such a
notice to THE REGENTS shall be considered an election not to secure
foreign rights.
13.5 The cost of preparation, filing and prosecution of foreign patent
applications filed at the LICENSEE's request, as well as the
maintenance of all resulting patents, shall be borne by the LICENSEE,
so long as the LICENSEE has an exclusive license in at least one
application. Such patents shall be held in the name of THE REGENTS and
shall be obtained using counsel of THE REGENTS' choice.
13.6 The LICENSEE's obligation to underwrite and to pay patent prosecution
costs shall continue for so long as this Agreement
18
No. TCL-698-93
remains in effect, provided, however, that the LICENSEE may terminate
its obligations with respect to any given patent application or patent
upon ninety (90) days' written notice to THE REGENTS. THE REGENTS may
continue prosecution and/or maintenance of such application(s) or
patent(s) at its sole discretion and expense; provided, however, that
the LICENSEE shall have no further rights or licenses thereunder.
13.7 THE REGENTS shall have the right to file patent applications at its own
expense in any country in which the LICENSEE has not elected to secure
patent rights.
14. USE OF NAMES AND TRADEMARKS
AND NONDISCLOSURE OF AGREEMENT
14.1 Nothing contained in this Agreement shall be construed as conferring
any right to use in advertising, publicity or other promotional
activities any name, trade name, trademark, or other designation of
either party hereto (including any contraction, abbreviation, or
simulation of any of the foregoing). The use of the name "LLNL" or
"the Regents of the University of California" or the name of any
University of California campus is expressly prohibited.
It is understood that THE REGENTS shall be free to release to the
inventors the terms and conditions of this Agreement upon request of
the inventors. If such release is made, THE REGENTS shall request that
the inventors not disclose such terms and conditions to others. It is
further understood that should a third party inquire whether a license
to Licensed Patents is available, THE REGENTS may disclose the
existence of this Agreement and the extent of the grant in Article 3
(GRANT) to such third party, but shall not disclose the terms of this
Agreement or the name of the LICENSEE, except where THE REGENTS is
required to release information under either the California Public
Records Act or other applicable law.
19
No. TCL-698-93
15. LIMITED WARRANTY
15.1 THIS LICENSE AND THE ASSOCIATED THE REGENTS' INTELLECTUAL PROPERTY
RIGHTS ARE PROVIDED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. THE
REGENTS MAKES NO REPRESENTATION OR WARRANTY THAT THE REGENTS'
INTELLECTUAL PROPERTY RIGHTS, LICENSED PATENT(S), OR LICENSED
PRODUCT(S) WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.
15.2 IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR THE
USE OF THE REGENTS' INTELLECTUAL PROPERTY RIGHTS, LICENSED PATENT(S),
OR LICENSED PRODUCT(S).
15.3 NEITHER THE UNITED STATES DEPARTMENT OF ENERGY, NOR ANY OF ITS
EMPLOYEES, MAKES ANY WARRANTY, EXPRESS OR IMPLIED, OR ASSUMES ANY LEGAL
LIABILITY OR RESPONSIBILITY FOR THE ACCURACY, COMPLETENESS, OR
USEFULNESS OF ANY INFORMATION, APPARATUS, OR PRODUCT DISCLOSED, OR
REPRESENTS THAT ITS USE WOULD NOT INFRINGE PRIVATELY OWNED RIGHTS.
15.4 Nothing in this Agreement shall be construed as:
15.4a A warranty or representation by THE REGENTS as to the validity or
scope of any of THE REGENTS' Intellectual Property Rights,
Licensed Patent(s) or Patent Rights;
15.4b A warranty or representation that anything made, used, sold or
otherwise disposed of under any license granted in
20
No. TCL-698-93
this Agreement is or will be free from infringement of patent(s)
of third parties;
15.4c Any obligation to bring or prosecute actions or suits against
third parties for patent infringement;
15.4d Conferring by implication, estoppel or otherwise any license or
rights under any patents of THE REGENTS, other than Licensed
Patent(s) as defined herein, regardless of whether such patents
are dominant or subordinate to Licensed Patent(s); or
15.4e An obligation to furnish any know-how not provided in Licensed
Patent(s).
16. PATENT INFRINGEMENT
16.1 In the event that the LICENSEE shall learn of the substantial
infringement of any Licensed Patent(s), the LICENSEE shall call THE
REGENTS' attention thereto in writing and shall provide THE REGENTS
with reasonable evidence of such infringement. Both parties shall use
their best efforts in cooperation with each other to terminate such
infringement without litigation.
16.2 The LICENSEE may request that THE REGENTS take legal action against the
infringement of THE REGENTS' Patent Rights. Such request shall be made
in writing and shall include reasonable evidence of such infringement
and damages to the LICENSEE. If the infringing activity has not been
abated within ninety (90) days following the effective date of such
request, THE REGENTS shall have the right to:
16.2a Commence suit on their own account; or
16.2b Refuse to participate in such suit, and THE REGENTS shall give
notice of their election in writing to the
21
No. TCL-698-93
LICENSEE by the end of the one-hundredth (100th) day after
receiving notice of such request from the LICENSEE. The LICENSEE
may thereafter bring suit for patent infringement, if and only
if, THE REGENTS elect not to commence suit (other than as nominal
party plaintiff) and if the infringement occurred during the
period and in a jurisdiction where the LICENSEE has rights under
this Agreement. However, in the event the LICENSEE elects to
bring suit in accordance with this Article, THE REGENTS may
thereafter join such suit at its own expense.
16.3 Such legal action as is decided upon shall be at the expense of the
party on account of whom suit is brought and all recoveries thereby
shall belong to such party, provided, however, the legal action brought
jointly by THE REGENTS and the LICENSEE and fully participated in by
both shall be at the joint expense of the parties and all recoveries
shall be shared jointly by them in proportion to the share of expense
paid by each party.
16.4 Each party agrees to cooperate with the other in litigation proceedings
instituted hereunder but at the expense of the party on account of whom
suit is brought. Such litigation shall be controlled by the party
bringing the suit, except that THE REGENTS at its expense may be
represented by counsel of its choice pursuant to THE REGENTS'
determination in any suit brought by the LICENSEE.
17. WAIVER
17.1 It is agreed that no waiver by either party hereto of any breach or
default of any of the covenants or agreements herein set forth shall be
deemed a waiver as to any subsequent and/or similar breach or default.
22
No. TCL-698-93
18. ASSIGNABILITY
18.1 This Agreement is binding upon and shall inure to the benefit of THE
REGENTS, its successors and assigns, but shall be personal to the
LICENSEE and assignable by the LICENSEE only with the written consent
of THE REGENTS.
19. INDEMNIFICATION AND INSURANCE
19.1 The LICENSEE agrees to indemnify, hold harmless and defend THE REGENTS
and DOE, their officers, employees, and agents; the inventors of the
inventions disclosed in the patents and patent applications in Licensed
Patent(s) against any and all claims, suits, losses, damage, costs,
fees, and expenses resulting from or arising out of exercise of this
license. The LICENSEE shall pay any and all costs incurred by THE
REGENTS in enforcing this indemnification, including reasonable
attorney fees.
19.2 The LICENSEE, at its sole cost and expense, shall insure its activities
in connection with the work under this Agreement and obtain, keep in
force, and maintain insurance with an insurance company acceptable to
THE REGENTS, which acceptance shall conform to reasonable business
standards, as follows: A minimum level of two million dollars
($2,000,000) of Comprehensive or Commercial Form General Liability
Insurance (including contractual liability and products liability).
The coverages referred to in this Article 19 shall not in any way limit
the liability of the LICENSEE. The LICENSEE shall furnish THE REGENTS
with certificates of insurance, including renewals, evidencing
compliance with all requirements at least thirty (30) days prior to the
first commercial sale, or distribution of Licensed Product.
19.2a If such insurance is written on a claims-made form, coverage
shall provide for a retroactive date of placement
23
No. TCL-698-93
prior to or coinciding with the effective date of this License
Agreement.
19.2b The LICENSEE shall maintain the general liability insurance
specified herein during (a) the period that the Licensed Product
is being commercially distributed or sold (other than for the
purpose of obtaining regulatory approvals) by the LICENSEE or by
a sublicensee, affiliate, or agent of the LICENSEE, and (b) a
reasonable period thereafter, but in no event less than one (1)
year.
19.3 Insurance coverage as required under Article 19.2 above shall:
(a) Provide for thirty (30) days advance written notice to THE REGENTS of
cancellation or of any modification.
(b) Indicate that DOE, THE REGENTS and its officers, employees, students,
and agents, have been endorsed thereon as additional insureds.
(c) Include a provision that the coverages will be primary and will not
participate with, nor will be excess over, any valid and collectible
insurance or program or self-insurance carried or maintained by THE
REGENTS.
19.4 The provisions of this Article 19 shall survive the term of this
Agreement.
20. LATE PAYMENTS
20.1 In the event royalty payments or fees are not received by THE REGENTS
when due, LICENSEE shall pay to THE REGENTS interest charges at the
rate of five percent (5%) plus the rate of interest that is charged by
the San Francisco Federal Reserve Bank to member banks twenty-five (25)
days prior to the date the payment was due.
24
No. TCL-698-93
21. NOTICES
21.1 Any royalty payment, royalty report, notice or other communication
required or permitted to be given to either party hereto shall be in
writing and shall be deemed to have been properly given and to be
effective on (a) the date of delivery if delivered in person, or (b)
the fifth day after mailing if mailed by first-class certified mail,
postage paid, to the respective address given below, or to such other
address as shall be designated by written notice given to the other
party as follows:
In the case of the LICENSEE: AMERIGON, INCORPORATED
3601 Empire Avenue
Burbank, CA 91505
Attn: President
In the case of THE REGENTS: LAWRENCE LIVERMORE
NATIONAL LABORATORY
Technology Transfer Initiatives Program
P.O. Box 808, L-795
Livermore, CA 94550
Attention: Program Leader, TTIP
22. GOVERNING LAWS
22.1 This Agreement shall be interpreted and construed in accordance with
the University of California/DOE Contract No. W-7405-ENG-48 and the
laws of the State of California, USA, without regard to the doctrine of
the conflict of laws.
23. PATENT MARKING
23.1 When Licensed Product(s) are made, used, and/or sold under Licensed
Patent(s), the LICENSEE agrees to mark all Licensed Product(s), and
their containers, in accordance with the applicable patent marking laws.
25
No. TCL-698-93
24. GOVERNMENT APPROVAL OR REGISTRATION
24.1 If this Agreement or any associated transaction is required by the law
of any nation to be approved or registered with any governmental
agency, the LICENSEE shall assume all associated costs and legal
obligations to do so.
25. EXPORT CONTROL LAWS
25.1 The LICENSEE shall observe all applicable United States and foreign
laws and regulations with respect to the International Traffic in Arms
Regulations (ITAR) and the Export Administration Regulations.
26. FORCE MAJEURE
26.1 No failure or omission by The Regents or LICENSEE in the performance of
any obligation under this agreement shall be deemed a breach of this
agreement or create any liability if the same shall arise from any
cause or causes beyond the control of The Regents or LICENSEE,
including but not limited to the following: Acts of God, acts or
omission of any government or agency thereof, compliance with
requirements, rules, regulations, or orders of any governmental
authority or any office, department, agency, or instrumentality
thereof, fire, storm, flood, earthquake, accident, acts of the public
enemy, war rebellion, insurrection, riot, sabotage, invasion,
quarantine, restriction, transportation embargoes, or failures or
delays in transportation if beyond the control of the party in question.
27. MISCELLANEOUS
27.1 The headings of the several sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement.
26
No. TCL-698-93
27.2 This Agreement will be binding upon the parties when it has been
executed by each of the parties hereto as of the date of execution by
the last signing party.
27.3 No amendment or modification hereof shall be valid or binding upon the
parties unless made in writing and signed on behalf of each party.
27.4 This Agreement embodies the entire understanding of the parties and
shall supersede all previous communications, representations, or
understandings, either oral or written, between the parties relating to
the subject matter hereof.
27.5 In case any of the provisions contained in this Agreement shall be held
to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, but this Agreement shall be construed as if such
invalid or illegal or unenforceable provisions had never been contained
herein.
27.6 This Agreement may be executed in counterparts.
27
No. TCL-698-93
IN WITNESS WHEREOF, both THE REGENTS and the LICENSEE have executed this
Agreement, in duplicate originals, by their respective officers hereunto
duly authorized, on the day and year hereinafter written.
THE REGENTS OF THE AMERIGON, INCORPORATED
UNIVERSITY OF CALIFORNIA
By: /s/ Ronald W. Cochran By: /s/ Lon E. Bell
-------------------------------- --------------------------------
(Signature) (Signature)
Name: Ronald W. Cochran Name: Lon E. Bell
------------------------------ ------------------------------
Title: Laboratory Executive Officer Title: President
----------------------------- -----------------------------
Date: January 20, 1994 Date: 11-January 1994
------------------------------ ------------------------------
28
No. TCL-698-93
EXHIBIT A
"THE REGENTS' INTELLECTUAL PROPERTY RIGHTS"
"THE REGENTS' Intellectual Property Rights" shall mean the intellectual property
covering technology described by the following invention disclosure(s):
INVENTION DISCLOSURES:
Certain inventions related to the UWB Impulse Radar Technology as described
in the following LLNL Invention Disclosures: IL-9092, "Ultra-Wideband Radar
Motion Sensor," dated September 3, 1992, (U.S. Patent Application No.
08044717), by Thomas Edward McEwan; IL-9091, "A Differential Receiver for
Ultra-Wideband Signals," dated September 1, 1992 (U.S. Patent Application No.
08044745), by Thomas Edward McEwan; and IL-9318, "Two Terminal Micropower
Radar Sensor," dated July 16, 1993, by Thomas Edward McEwan.
29
No. TCL-698-93
EXHIBIT B
LICENSE FEES AND ROYALTY RATES
NOTICE
This Exhibit B contains financial and commercial information deemed Business
Confidential and the parties hereby agree not to use or to disclose the terms
agreed to herein to any third party without the express written consent of the
other party hereto except as necessary to enable the parties to perform under
this Agreement or as may be required by the Regents' contract with the U.S.
Department of Energy under the same restrictions.
A. *
B. *
- ----------------------------
* Confidential portions omitted and filed separately with the Commission.
30
No. TCL-698-93
C. *
- ----------------------------
* Confidential portions omitted and filed separately with the Commission.
31
LAWRENCE LIVERMORE NATIONAL LABORATORY
INDUSTRIAL PARTNERSHIPS & COMMERCIALIZATION
September 19, 1996
LIC96-319
Josh Newman
Amerigon, Incorporated
404 East Huntington Drive
Monrovia, CA 91016-3600
SUBJECT: Amerigon Micropower Impulse Radar (MIR) License
No. TL-796-94
Dear Mr. Newman:
As you requested, this confirms that in Article 2.2 of the subject license
"Field of Use" and "applications" cover Blind Spot Sensing for highway passenger
vehicles to provide back up parking assistance.
William J. Grant
/s/ William J. Grant
Business Specialist
University of California - P.O. Box 808, L-795-Livermore, California
94550 - Telephone (510) 422-6416 - Facsimile (510) 423-8988 - An Equal
Opportunity Employer
AMENDMENT 1 TO THE LICENSE AGREEMENT
BETWEEN
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
AND
AMERIGON INCORPORATED
Whereas Amerigon Incorporated ("LICENSEE") and Lernout & Hauspie Speech Products
N.V. ("LICENSOR") have entered into a license agreement, effective on October
19, 1993;
Whereas the parties are bound by the terms of the foresaid license agreement of
the parties between the parties as of October 19, 1993 except for terms and
conditions contradicted hereto;
Whereas the parties wish to modify foresaid license agreement as set out below,
IT HAS BEEN AGREED AS FOLLOWS:
1. LICENSEE commits to license from and pay to LICENSOR for a non-refundable
fee for royalties of $200,000 for the period starting April 1, 1996 to be
consumed over a 5 year time frame.
LICENSOR will reduce the royalty price to 3% on hardware selling price
for units up to 75,000.
Payment by LICENSEE of a non-refundable fixed fee for royalties of
$200,000, as follows:
$ 30,000 on or before March 31, 1996
$ 35,000 on or before June 30, 1996
$ 40,000 on or before September 30, 1996
$ 45,000 on or before December 31, 1996
$ 50,000 on or before March 31, 1997
--------
$ 200,000
Royalties shall be computed quarterly, beginning April 1, 1996 through
March 31, 2001 and the aggregate amount each quarter shall be compared to
the $200,000 non refundable royalty fee. For the first such quarter in
which the aggregate fees exceed $200,000, the excess shall be paid to
LICENSOR and for each succeeding quarter through March 31, 2001, the
calculated quarterly royalties will also be paid to L&H.
2. For all the copies of the Designated Equipment with Software bundled and
delivered by LICENSEE to its customers on top of these committed copies
or after the 5 year period starting from April 1, 1996, whichever comes
first, royalties will be paid at the royalty prices mentioned in the
initial license agreement.
3. APPLICABILITY. Covered products include: NRR, ASR 1000 and 1500,
text-to-speech and speech compression that are used in any car
application. Free improvements to these products are included. Royalty
rates for the NRR and the ASR1000/1500 for the navigator will be at the
3% rate. Equitable royalty rates for the text-to-speech and the speech
compression will be negotiated. No upfront royalty fees will be charged
for the these other technologies.
------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC.
4. PRICE ADJUSTMENTS.
It is the intent that royalty and NRE prices will be kept competitive to
allow LICENSEE's products to be competitive in the market place.
5. PORTING & INTEGRATION.
With reasonable notice, LICENSOR will provide porting & integration
services of the NRR200 to the IDT or comparable platform at no charge.
Other porting and integration projects will be handled under separate
agreements and will not be unreasonably withheld by LICENSOR.
6. RAPID DEPLOYMENT TEAM.
LICENSOR and LICENSEE will set up regular meetings (once per quarter)
with both party's engineering teams to discuss new technology features,
implementations, etc. Both parties will engage in joint marketing
activities, customer presentations and discussions on the integration of
new features and technologies for the automotive market. Engineering for
these services will be for 2 years from signing this Amendment and will
not exceed 20 man days per year.
7. SOFTWARE DEVELOPMENT KIT.
LICENSEE agrees having received the ASR SDK and TTS SDK. As new SDK's
become available, they will also be provided.
8. USE OF LOGO.
LICENSEE agrees to use its best effort to include the "L&H Speech
Quality" logo to its Designated Equipment using Software or any other
logo at the request of LICENSOR. This logo has to appear on the packaging
of the Designated Equipment, as well as in the accompanying user
documentation.
9. LICENSEE acknowledges that this offer shall only be valid if signed and
returned before March 31, 1996.
LICENSOR LICENSEE
Lernout & Hauspie Speech Products N.V. Amerigon
BY: /s/ Joe Lernout BY: /s/ Joshua M. Neuman
--------------------------- ----------------------
NAME: JOE LERNOUT NAME: JOSHUA M. NEUMAN
------------------------- --------------------
TITLE: PRESIDENT TITLE: VICE PRESIDENT
------------------------ -------------------
------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC.
LICENSE AGREEMENT
This Agreement is made and entered into as of this 19th day of October 1993
(hereinafter the "Effective Date") BY AND BETWEEN
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V., a company organized and existing under
the laws of Belgium and having its registered offices at Rozendaalstraat 14,
8900 leper - Belgium, hereinafter referred to as LICENSOR
represented by Jo Lernout, Managing Director
AND
AMERIGON INCORPORATED, a corporation organized and existing under the laws of
California, and having an office at 3601 Empire Avenue, Burbank, CA 91505,
hereinafter referred to as LICENSEE
represented by Lon Bell, President
WITNESSETH THAT:
WHEREAS, LICENSOR is engaged in developing and licensing computer software
programs and related documentation thereto;
WHEREAS, LICENSEE desires to obtain certain rights, as hereinafter described, in
said software programs and its related documentation and to purchase certain
services relating thereto;
WHEREAS, LICENSOR is willing to grant LICENSEE said rights with respect to said
software programs;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, the parties hereby agree as follows:
------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p1/25
ARTICLE I : DEFINITIONS
The following terms shall have the meanings ascribed to them herein wherever
they are used in this Agreement unless otherwise clearly indicated by the
context.
1.1. "Software" shall mean the computer programs in object code form,
embodying certain proprietary algorithms, as specified in Addendum A,
which will satisfy the Functional Specification. Said Software shall
include all Corrections to any portion thereof made by or for LICENSOR.
1.2. "Documentation" shall mean those visually readable materials, in English,
developed by or for LICENSOR for use in connection with the Software.
Documentation includes operating instructions, input information, format
specifications, instructional and other documentation, including all
guides and manuals. Documentation also includes all revisions thereto
made by or for LICENSOR including, but not limited to, new documents and
corrected documents to properly reflect changes made in the Software.
1.3. "Designated Equipment" means the platform of LICENSEE, as identified in
Addendum A, and fully incorporated into this Agreement. In addition to
the description of "Designated Equipment" contained in Addendum A, this
definition includes any improvements, additions or modifications of
"Designated Equipment" made by LICENSOR.
1.4. "Functional Specification" shall mean the performance criteria for the
Software set forth in Addendum A.
1.5. "Software Performance Test" shall refer to the tests set forth in
Addendum C which are required to assure LICENSEE that all or part of the
Software to be provided by LICENSOR meets the Functional Specification.
1.6. "Third Party" shall include original equipment manufacturers, system
houses, value added resellers, distributors, and other such entities
engaged in doing business with LICENSEE, and who acquire the LICENSEE's
Navigation Product(s) for manufacture, sale, lease, license or other
transfer or whom LICENSEE sublicenses for the manufacture of Navigation
Products and/or related Software, including Software and Documentation.
1.7. "End User" shall mean the customers of LICENSEE, or of Third Parties, who
are granted a sublicense which includes the right to use the Software and
Documentation, incorporated in LICENSEE's Navigation Product(s).
1.8. "Corrections" shall mean changes made in the Software and/or
Documentation by LICENSOR to correct errors or defects in the Software
and/or Documentation.
------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p2/25
1.9. "Integration" shall mean the adaption of a specific Ported algorithm to
constraints of an execution environment, for example, to the requirements
of an execution unit (processor), if not completely adapted by the
Porting of the algorithm, and to the requirements of run-time
environments (in the case of hardware, addressing memory limitations and
specific interfacing, and in the case of software, addressing operating
system constraints, program interface specifications, asynchronous events
handling (interrupts), other run-time conventions (e.g. register usage)
and other tasks running in the same environment).
1.10. "Porting" shall mean the activity where mathematical operations are
transformed to algorithmic procedures for execution on specific execution
units (processors), with a standardized interface to the outside of the
system.
1.11. "Order" shall mean LICENSEE's form of purchase order or schedule used for
the purpose of ordering the license or maintenance of Software and
Documentation, provided that the terms and conditions of such purchase
order are consistent with the terms of this Agreement.
1.12. "Navigation Products" shall mean all hardware and software comprising
LICENSEE's audio navigation system which is manufactured and sold by
LICENSEE or under license from LICENSEE.
1.13. "Hardware Unit" shall mean a single unit of LICENSEE's Audio Navigation
product hardware.
1.14. "Commercial Sale" shall mean a sale of a Hardware Unit by LICENSEE or its
Affiliates or by LICENSEE's or Affiliates' sublicensee's, excluding those
units made available for evaluation, testing, promotional or related
purposes, provided however that the number of units made available for
said purposes shall not exceed one (1) percent of the total units shipped
or involved in that sale, and provided further that the customer does not
pay for these units separately.
1.15. "Net Hardware Unit Sales" shall mean the amounts actually collected from
Commercial Sales of Hardware Units, not taken into account the taxes,
duties, insurance premiums or shipping charges, which LICENSEE or its
customer pays or has to pay.
Furthermore, Net Hardware Unit Sales shall not include rebates paid to
the purchaser as part of such sale, nor refunds or credits issued upon
the return of Hardware Units, except to those returns which are
substantial and which are not replaced by other Hardware Units to the
customer.
1.16. "Global Position Satellite (GPS), Transmitter, Beacon and Sensor based
product" means navigation systems which utilize any or all of these
technologies to locate the vehicle's position relative to map data.
------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p3/25
A navigation system shall not be considered as being with this
definition simply because it uses the input of the standard odometer
function as the only sensor input.
ARTICLE II : GRANT OF SOFTWARE LICENSE
2.1. LICENSOR hereby grants to LICENSEE and LICENSEE accepts from LICENSOR
under LICENSOR's patents, copyrights and trade secrets related to the
Software and Documentation, a worldwide non-transferable license subject
to all applicable terms and conditions hereof, to:
a. use, copy, have copied, distribute, have distributed and maintain
the Software and Documentation for use on or in connection with the
Designated Equipment to be integrated in LICENSEE's Navigation
Product(s);
b. merge the Software with other programs for use on or in connection
with the Designated Equipment to be integrated in LICENSEE's
Navigation Product(s);
c. merge the Documentation with other written materials for use on or
in connection with the Designated Equipment to be integrated in
LICENSEE's Navigation Product(s);
d. advertise the availability of the Software or any portion thereof;
e. grant non-exclusive sublicenses to Third Parties containing the same
rights as are granted to LICENSEE in subparagraphs a through d
above. This subparagraph shall be construed as authorizing LICENSEE
to permit cascaded sublicensing such that, for example, LICENSEE may
sublicense a Third Party such as a distributor, which will have the
right to sublicense another Third Party such as a dealer, which
shall have the right to sublicense an End User, provided that
LICENSEE complies with the requirements of article 2.2.
2.2. All sublicensing by LICENSEE shall be pursuant to written agreements that
incorporate applicable terms and conditions hereof, including a) the
limitations on LICENSOR's warranties and liabilities provided in articles
7 and 9.1.; b) LICENSOR's right to control intellectual property claims
as provided in article 14.3.; and c) methods of calculation, reporting
and payment of applicable royalties. This should be interpreted to
require a payment from LICENSEE for each Hardware Unit ultimately sold to
an End User. Each such sublicense shall require separate accounting and
provide a right of inspection by LICENSOR of the sublicensee, and shall
obligate the sublicensee and its sublicensees to include in all licenses
of the Software to End Users the limitations on LICENSOR's warranties and
liabilities provided
------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p4/25
in article 7 and 9.1. and LICENSOR's right to control intellectual
property claims as provided in article 14.3.
2.3. The license shall include future improvements to the Software and
Documentation.
"Future improvements" shall include any and all improvements, additions
or modifications made by LICENSOR to or in the Software after the
acceptance date specified in Article V, which improve the efficiency and
effectiveness of the basic Software functions described in Addendum A.
Future improvements shall be furnished to LICENSEE at no additional
charges, except as provided for in Addendum B.
ARTICLE III : EXCLUSIVITY PROVISIONS
3.1. The grant of license shall be exclusive as to the use of licensed
Software and Documentation in conjunction with automotive Navigation
systems, excluding Global Positioning Satellite (GPS), Transmitter,
Beacon and Sensor based systems, subject to the provisions of article
3.2.
3.2. The grant of license shall be exclusive starting at the Effective Date of
this Agreement and shall continue to be exclusive subject to the
following cumulative conditions:
A. The license will remain exclusive as long as LICENSEE pays the
following royalties within the indicated period of time:
- US$ 800,000 within two(2) years after the first day of the
month following the Acceptance Date;
- US$ 2,000,000 each year thereafter.
Royalty payments for each period of time shall include running
royalties paid during the period from sales of Hardware Units as
well as any additional royalty payments LICENSEE elects to make to
bring total payments to the above stated amounts.
LICENSEE shall have thirty (30) days after the end of each period of
time (year) during which payments can be made and counted towards
the amount paid in that prior year.
Failure to achieve these payments within each indicated time-period,
the exclusive license shall immediately revert to a non-exclusive
license.
------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p5/25
B. In the event LICENSEE should market its products which incorporates
software which competes with the Software licensed from LICENSOR,
the grants of exclusive license shall automatically revert to a
non-exclusive license.
3.3. As long as the abovementioned cumulative conditions are met by LICENSEE,
LICENSOR agrees to provide LICENSEE a right of first refusal to the
exclusive license of new software for automotive navigation systems,
(excluding GPS, Transmitter, Beacon and Sensor based systems).
ARTICLE IV : ROYALTIES/PAYMENTS
4.1. LICENSEE shall make royalty payments to LICENSOR on Net Hardware Unit
Sales by LICENSEE or any Third Party. No Hardware Unit however is to be
counted more than one time for royalty computation purposes hereunder.
4.2. a) LICENSEE will provide LICENSOR with reports showing the quantity of
Hardware Units shipped or otherwise transferred to a Third Party
hereunder and of Net Hardware Unit Sales, commencing after the
initial sublicense has been granted by LICENSEE or Third Party.
LICENSOR shall issue an invoice to LICENSEE accordingly for royalty
payments for Software licenses as defined in Addendum B. Payment
shall be made by LICENSEE no later than thirty (30) days following
the end of each calendar quarter. Royalties for each quarter will
be computed on Net Hardware Unit Sales for the quarter and
calculated from the appropriate royalty schedule in Addendum B.
In the event that the Navigation Product is combined directly into
other equipment (such as a CD player) or has additional components
added not contemplated in the current design (as covered in the
allowed patent claims), the Hardware Selling Price can be adjusted
to reflect that portion of the total revenues which are attributable
to the value of the Navigation Product Hardware Units.
In no event will the resulting royalty per unit be less than the
minimum amounts listed in Addendum B.
If parties cannot reach a fair adjustment, LICENSOR shall have the
right to select an independent auditing firm to conduct an audit of
LICENSEE's cost prices and all other such information reasonably
required to decide on a fair adjustment. Both parties agree that
its decision shall be final.
-------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p6/25
b) LICENSOR shall issue an invoice to LICENSEE for maintenance support
provided within ten (10) days of the completion of each quarter in
which such services are provided by LICENSOR.
All invoices shall be submitted to the address specified in
LICENSEE's Order or such address as LICENSEE shall identify to
LICENSOR in writing.
4.3. LICENSEE shall keep a separate register in which it shall record the
exact number of Hardware Units, as well as the type of the products
incorporating the Software and any other information relevant for
determining the amounts of royalties payable.
LICENSOR shall have the right to conduct, or to select an independent
auditing firm to conduct, an audit of LICENSEE's separate register
relative to the performance of this Agreement no more than once yearly.
LICENSEE's approval of the time and place for the audit requested by
LICENSOR shall not be unreasonably withheld.
Any audit shall be performed during normal business hours. In the event
such audit reveals an underpayment to LICENSOR exceeding five(5) percent
of the total amount owed for that quarter, LICENSEE shall pay LICENSOR
such underpayment within thirty (30) days, as well as the audit costs.
Otherwise, LICENSOR shall bear the expenses of audit.
LICENSOR agrees to keep any and all information derived from any audits
confidential. This information shall not be used by LICENSOR for any
purposes other than to verify or resolve any discrepancy involving the
payment of royalties due from LICENSEE under this Agreement.
4.4. At any time that LICENSEE ceases to incorporate Software, as defined
herein, in any of LICENSEE's Navigation Products, including hardware or
software then being manufactured or sold by LICENSEE, all royalty
obligations of LICENSEE shall terminate, except as provided in article
8.3.
Should LICENSEE use Software, as defined herein, in some of the
Navigation Products (as currently contemplated, the CD discs) but not in
others, the number of Navigation Product Hardware Units counted for
purposes of royalty computations for each accounting period will be
computed by multiplying the total number of Hardware Units sold during
the period times the ratio of Navigation Products software units (e.g.
discs) sold by LICENSEE which incorporate LICENSOR's Software, divided by
the total Navigation Product software discs sold by LICENSEE (including
those that do and do not contain LICENSOR's Software).
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p7/25
For example, if LICENSEE sold 10 Hardware Units in an accounting period
and sold 15 CD discs, 10 of which used LICENSOR's Software and 5 used a
replacement software, then the Hardware Units counted for royalty
payments to LICENSOR would be (10) (10/15) = 6.67
ARTICLE V : ACCEPTANCE
5.1. All Software to be delivered to LICENSEE by LICENSOR under this Agreement
shall be subject to LICENSEE's evaluation, testing, and acceptance for
conformance to the Functional Specification thereof. In the event that
any item is found not to conform to the Functional Specifications during
the thirty (30) days following its delivery to LICENSEE, LICENSEE shall
notify LICENSOR of the respect(s) in which the item so fails to conform.
Upon receipt of such notice, LICENSOR shall use its best efforts to make
those corrections or modifications required to achieve such conformance
and will deliver to LICENSEE the corrected and modified items for
LICENSEE's further evaluation, testing and acceptance.
5.2. LICENSEE will thereafter give written notice to LICENSOR within thirty
(30) days after delivery of the corrected items, either
(i) that acceptance tests have been successfully passed (as soon as
that has occurred), or
(ii) that acceptance tests have revealed deficiencies in the
Software, which shall be described in reasonable detail.
5.3. If LICENSEE gives notice under 4.2. (ii) above, this Agreement shall
continue in effect and LICENSOR shall supply revised copies in a
reasonable time span. If LICENSEE does not provide such 4.2. (ii)
notice, the acceptance tests shall be deemed passed.
5.4. The performance tests applicable to the Software and Documentation shall
be the procedures and tests set forth in Addendum C.
ARTICLE VI : PORTING AND INTEGRATION SERVICES
6.1. At the request of LICENSEE, LICENSOR shall perform the Porting and/or
Integration of the Software to the Designated Equipment, free of charge.
6.2. LICENSOR shall provide qualified engineers throughout the Porting and
Integration processes.
6.3. LICENSEE shall timely make available to LICENSOR a Development
Environment. "Development Environment" shall consist of a set of
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p8/25
Designated Equipment and of all hardware and software development tools
available and required by LICENSOR to successfully complete the Porting
and/or Integration.
6.4. LICENSEE shall assist LICENSOR in giving the necessary information and in
resolving problems with respect to the Development Environment.
ARTICLE VII : WARRANTY
7.1. LICENSOR warrants that the Software and Documentation, as supplied, will
perform in accordance with the Functional Specification listed in
Addendum A, and be free from material programming errors and viruses.
7.2. If at any time during the 12-month period immediately following the
Acceptance Date, LICENSOR or LICENSEE shall discover one or more defects
or errors in the Software or any other respect in which the Software
fails to conform to the provisions of the above warranty, LICENSOR shall,
entirely at its own expense, promptly correct such defect, error or
non-conformity by, supplying LICENSEE with such corrective codes and
making such additions, modifications, or adjustment to the Software as
may be necessary to keep the Software in operating order in conformity
with the warranties herein.
These free of charge corrections shall not apply to other causes, such as
errors due to production or decoding process of the CD-Rom, and any other
errors due to the download mechanism of the Software to the Navigation
Product, or errors due to changes made by LICENSEE in the source code of
the communication software, as provided to LICENSEE.
However, LICENSEE acknowledge that the Software is of such complexity
that it may have inherent defects and agrees that if any deviations from
the Specification or material programming errors exist, as LICENSEE's
exclusive remedy and LICENSOR's sole responsibility LICENSOR shall use
its best efforts to eliminate promptly any such deviations or programming
errors reported to it by LICENSEE.
7.3. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR MAKES AND
LICENSEE RECEIVES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p9/25
ARTICLE VIII : TERM
8.1. The term of this Agreement shall commence on the Effective Date herein
and shall continue unless terminated or canceled as provided below:
a) This Agreement may be canceled by LICENSEE for cause, upon written
notice to LICENSOR in the event that LICENSOR fails to perform any
of its material obligations hereunder and said cause is not
corrected within a ninety (90) day notice period.
b) Either LICENSOR or LICENSEE may cancel this Agreement upon written
notice to the other party in the event the other party:
(i) fails to comply with any material obligation under, or material
condition of this Agreement, and any such failure is not
remedied within ninety (90) days after receipt by the other
party of written notice;
(ii) ceases its business activities as a result of bankruptcy,
dissolution, liquidation or other causes.
8.2. Any termination of this Agreement shall terminate LICENSEE's right to
advertise and promote the Software and Documentation and to copy the
Software and Documentation and to grant additional sublicenses after such
termination, provided, however, that such termination shall not terminate
or affect sublicenses previously and properly granted to End Users and
Third Parties, or required to be granted under binding contracts or
purchase orders, and further provided, that LICENSEE and its Sublicenses
shall be permitted to continue to use the Software and Documentation to
enable LICENSEE to meet its obligations to support Sublicensees existing
at the time of such termination.
8.3. No termination or cancellation of this Agreement shall affect the
obligation of LICENSEE to collect and distribute to LICENSOR all payments
which have become or will be due from sublicenses and any other payments
which have become due hereunder.
ARTICLE IX : LIABILITY
9.1. Limitation on Damages :
LICENSOR shall have no liability to LICENSEE for any damages, losses,
costs or expenses resulting from the failure of the Software to perform
in accordance with its Specifications or from material programming errors
or viruses in the Software. Except for Claims arising under Article XIV
below, in which LICENSOR's liability is described: (a) LICENSOR's total
liability to LICENSEE for damages, losses, costs or expenses arising out
of or related to
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p10/25
this Agreement from any and all causes, including negligence, shall be
limited to 50% of the total amounts actually paid by LICENSEE to
LICENSOR, and (b) IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY
SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING
OUT OF EITHER PARTY'S PERFORMANCE OR NONPERFORMANCE HEREUNDER, EVEN WHERE
SUCH DAMAGES WERE FORESEEABLE.
ARTICLE X : FORCE MAJEURE
10.1. Neither LICENSEE nor LICENSOR shall be liable to the other for delays in
the performance of or completion of this Agreement if such delay is
caused by strikes, riots, wars, government regulations, acts of God,
fire, flood, or other similar causes beyond its reasonable control;
provided, however, if such delay continues for ninety (90) days, the
other party shall have the option, exercisable by written notice, to
cancel the Agreement without additional charge or liability, except
payment of sums due to LICENSOR as provided in Article 8.3. above.
ARTICLE XI : LICENSEE FURNISHED ITEMS
11.1. LICENSEE shall, at no charge to LICENSOR, provide LICENSOR, from time to
time, information and copies of LICENSEE's documents, including data
which is confidential to LICENSEE and which is reasonably required or
reasonably requested by LICENSOR in order to perform any required
Porting or Integration of the Software. However, LICENSEE reserves the
right not to provide any information and documentation which LICENSEE
does not have the right to disclose. Such LICENSEE-provided information
and documents shall be subject to the provisions of Article XIV.
11.2. When such documentation and information are no longer required for
LICENSOR's performance hereunder, LICENSOR shall, upon LICENSEE's
request, promptly return to LICENSEE such documentation, including copies
or extracts of any portion thereof, except as may be reasonably required
for LICENSOR's recordkeeping requirements.
11.3. It is understood and agreed that title to all items furnished or provided
by LICENSEE to LICENSOR shall remain in LICENSEE.
11.4. All such documentation and information shall only be used by LICENSOR for
purposes of this Agreement, and all such items if in tangible form shall
be clearly labeled "Property of LICENSEE's name".
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p11/25
ARTICLE XII : PERSONNEL AND COMMUNICATIONS
12.1. For LICENSEE
1. General administration and liaison for LICENSEE will be performed by
YOSUFI M. TYEBKHAN (referred to herein as "LICENSEE's contract
administrator") or a designee or successor.
2. Technical liaison for LICENSEE will be performed by YOSUFI M.
TYEBKHAN (referred to herein as "LICENSEE's technical
administrator") or a designee or successor.
12.2. For LICENSOR
1. General administration and liaison for LICENSOR will be performed by
PATRICK DE SCHRIJVER (referred to herein as "LICENSOR's contract
administrator") or a designee or successor.
2. Technical liaison for LICENSOR will be performed by JOHAN THYS
(referred to herein as "LICENSOR's technical administrator") or a
designee or successor.
12.3. All notices under this Agreement shall be in writing, sent by mail,
courier service, telefax or telex, to the respective contract
administrator, unless otherwise specified.
12.4. Technical administrators shall be the principal liaisons for LICENSEE and
LICENSOR on technical matters and they may clarify, explain and provide
further details as required for performance under this Agreement, but
shall have no authority to make any agreements between them which change
the cost or any of the terms and conditions of this Agreement.
ARTICLE XIII : CONFIDENTIAL INFORMATION
13.1. Both parties agree not to disclose any trade secrets or confidential
information transferred to it by the other party which are identified in
writing as confidential ("TRADE SECRETS").
Each party shall take the same action and utilize at least the same
precautions in preventing unauthorized disclosures of the other party's
Trade Secrets as it uses with regard to its own secrets and confidential
information of similar nature.
13.2. The obligation of each party not to use or disclose Trade Secrets of the
other party shall survive the termination or cancellation of this
Agreement.
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p12/25
However, neither party shall be obligated to protect Trade Secrets of the
other party under any provision of this Agreement in the event the
aforesaid:
a. are known to or developed by the receiving party without restriction
independently of the disclosing party,
b. are or become generally known to the public by other than a breach
of duty hereunder by the receiving party,
c. which the disclosing party agrees in writing is free of such
restrictions, or
d. which at the time of disclosure to the receiving party was known to
such party free of restrictions.
The obligation of one party not to use or disclose said Trade Secrets of
the other party will remain in effect until one of these exceptions
occurs.
13.3. Since unauthorized transfer of one party's Trade Secrets will
substantially diminish their value and injure that party in ways that may
not be remedied fully by money, either LICENSOR's or LICENSEE's breach of
these Article XIII obligations may entitle the other party to equitable
relief (including orders for specific performance and injunctions) as
well as monetary damages. Notwithstanding any termination of this
Agreement, the parties shall continue to be obligated to protect the
confidentiality of the Confidential Information as described above for a
period of five (5) years, subject to the exception set forth in Paragraph
13.2.
ARTICLE XIV: INFRINGEMENT
14.1. LICENSOR represents and warrants that it knows of no trade secrets
misappropriation that has occurred and has no reason to believe that any
such misappropriation will occur with regard to any Software and/or
Documentation, to be delivered to LICENSEE, and it knows of no claim of
patent or copyright infringement, and has no reason to believe any patent
or copyright infringement will occur with regard to the above.
14.2. LICENSOR's Obligation to Indemnify.
LICENSOR shall, at its sole expense, indemnify, defend and hold harmless
LICENSEE from and against any and all claims, demands, suits, actions,
proceedings, judgments, losses, damages, injuries, penalties, liabilities
and reasonable costs and expenses, including, without limitation,
attorney's fees, brought against, or incurred or suffered by, LICENSEE
arising out of allegations that any use of the Software, in whole or in
part, as delivered by LICENSOR, infringes any patent, copyright, trade
secrets or other intellectual
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p13/25
or industrial property right of any third party (collectively, "Claims"),
provided that LICENSEE shall give LICENSOR notice of all suits or threats
of patent or copyright or infringement and other claims concerning
misappropriation of trade secrets against LICENSEE. LICENSOR shall
defend or settle any such Claim through LICENSOR's counsel, provided,
however, that if Licensor fails to assume such defense within a
reasonable period of time after initiation of such Claim, LICENSEE shall
have the right to assume such defense through LICENSEE's counsel. The
party assuming such defense shall not settle any such Claim in a manner
which would result in substantial liability or damage to the other party
without first obtaining such party's prior written consent, which shall
not be unreasonable withheld. The parties shall provide each other with
all reasonable information and assistance necessary to defend or settle
Claims.
14.3. If use of an item furnished by LICENSOR is claimed or held to constitute
such an infringement of a patent, copyright, trade secret or similar
intellectual property right, or if LICENSOR determines that such a claim
or holding is likely to be made, LICENSOR, at its option and expense,
may either procure for LICENSEE the right to continue using the allegedly
infringing item; modify the item so that it becomes non-infringing; or
replace the item with a non-infringing counterpart; or, failing each of
the foregoing, if required by court order or the terms of a settlement
approved in writing by LICENSEE, terminate the associated license rights,
require the return of the applicable item, and refund (or adjust, if less
than all of the Software was returned and LICENSEE continues to possess
license rights with respect to a usable portion of the Software) payments
made or to be made by LICENSEE to LICENSOR.
During the pendency of any Claim, at the request of LICENSOR, LICENSEE
and its sublicensees and Third Parties shall refrain from any further
promotion, sale or distribution of the allegedly infringing item,
provided however that LICENSEE shall be permitted to fill orders for
products incorporating the Software which were in existence at the time
of LICENSOR's request. LICENSOR shall use all reasonable efforts to
eliminate such Claim as soon as possible so that LICENSEE is permitted to
resume such promotion, sale or distribution.
14.4. This indemnity shall not apply to the portion of any such Claim of
infringement that is based upon use of the allegedly infringing item with
an article or process acquired from a source other than LICENSOR which
combination was not installed, recommended or expressly approved by
LICENSOR, or arises from activities outside the scope of the Article 2.1.
license, or arises from uses of the Software in ways that were not
intended.
The foregoing constitutes LICENSOR's sole responsibility, and the
exclusive remedy of LICENSEE and its sublicensees and Third Parties, in
connection with any Claim of infringement or misappropriation of
intellectual or industrial property rights.
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p14/25
14.4. Except as otherwise provided, nothing contained in this Agreement shall
be construed as licensing LICENSEE to use any other trademark or trade
name owned or used by LICENSOR or as licensing LICENSOR to use any
trademark or trade name owned or used by LICENSEE.
ARTICLE XV : RESTRICTED USE
15.1. LICENSEE shall not use the Software and Documentation in connection with
or on any equipment other than the Designated Equipment.
15.2. LICENSEE shall not recreate, generate or reverse-engineer any portion or
version of the Software or attempt any of the foregoing or aid, or abet
others to do so.
15.3. LICENSEE acknowledges that unauthorized reproduction or use of the
Software as provided in this Article XV is a breach of a material
obligation of this Agreement and is subject to any available remedies for
such breach.
ARTICLE XVI : TITLE AND RIGHTS TO SOFTWARE AND MODIFICATIONS
16.1. The grant of license and sublicense rights to LICENSEE under Article 2
hereof are LICENSEE's only rights to the Software and Documentation.
Title, interests and rights to the Software and Documentation, and any
corrections and/or improvements shall always remain in LICENSOR.
Furthermore, the grant of such license and sublicense rights shall not
restrict licensing by LICENSOR in any manner, and LICENSOR shall have
full rights, use and access to any modifications jointly developed by
LICENSEE and LICENSOR as a result of the Porting and/or Integration of
the Software to LICENSEE's Designated Equipment.
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p15/25
ARTICLE XVII : ASSIGNMENT
17.1. LICENSEE is not allowed to assign the license rights granted hereunder
without LICENSOR's prior written consent, which shall not be unreasonably
withheld.
ARTICLE XVIII : AGREEMENT DOCUMENTS
18.1. The addenda referenced in this Agreement, and the specifications and
drawings referenced therein, as well as other documentation referenced in
this Agreement which define the obligations of the parties, are a part of
this Agreement with the same force and effect as if fully set forth
herein.
ARTICLE XIX : GENERAL
19.1. This Agreement shall be deemed to have been entered into and shall be
construed, governed and interpreted in accordance with the laws of the
State of California.
19.2. The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions, and this Agreement shall
be constructed in all respects as if such invalid or unenforceable
provisions were omitted.
19.3. The failure of either party to insist, in any one or more instances, upon
the performance of any of the terms of this Agreement or to exercise any
right hereunder, shall not be construed as a waiver of the future
performance of any such term or the future exercise of such right.
19.4. Whenever any occurrence (e.g. an event of Force Majeure) is delaying or
threatens to delay a party's timely performance under this Agreement,
that party will promptly within seven (7) days or less, give notice
thereof in writing, as well as by any expeditious means available. Such
notice to the other party shall include all relevant information
regarding the cause of the delay and its anticipated duration. The
providing of such notice however, does not prejudice the other party's
right to object to the nonperformance of any obligation under this
Agreement.
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p16/25
ARTICLE XX : TAXES
20.1. The Software licensed hereunder is intended principally for sublicense to
End Users and therefore should be exempt from sales, use, excise and
other similar taxes. However, if such tax, or any import duty, or export
duty, should be imposed on LICENSOR, LICENSEE shall either bear such tax
or duty by a direct payment to the taxing authority or shall reimburse
LICENSOR for such tax or duty paid by LICENSOR, provided, however,
LICENSEE shall have no obligation to pay any income, revenues or gross
receipts taxes attributable to LICENSOR's income.
ARTICLE XXI : SURVIVAL OF PROVISION
21.1. It is hereby agreed that the rights and obligations of the parties hereto
contained in Article IV, XV, XVIII, XIX and XX shall survive and continue
after any termination or cancellation of this Agreement and shall bind
the parties and their successors, assigns and legal representatives.
ARTICLE XXII : ENTIRE AGREEMENT
22.1. This Agreement shall constitute the entire agreement between LICENSEE and
LICENSOR with respect to the subject matter thereof, and shall supersede
any and all prior agreements, understandings, promises and
representations made by one party to the other concerning the subject
matter herein and the terms and conditions applicable thereto.
This Agreement may not be released, discharged, supplemented,
interpreted, amended or modified in any manner except by an instrument in
writing signed by a duly authorized officer or representative of each of
the parties hereto as is specially provided elsewhere in this Agreement.
22.2. In making and performing this Agreement, the parties have acted and shall
act at all times as independent contractors and nothing contained in this
Agreement shall be construed or implied to create the relationship of
partner or of employer and employee between the parties. At no time
shall either party make commitments for or in the name of the other
party.
ARTICLE XXIII : ARBITRATION
23.1. All disputes arising in connection with this Agreement shall be finally
settled under the then current rules of the American Arbitration
Association. Such arbitration shall be conducted in English, and the
place of arbitration shall be New York. The parties agree to be bound by
the decision of the arbitrator and judgment. The award rendered may be
entered in any court having jurisdiction. The prevailing party, in such
action shall be entitled
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p17/25
to recover from the other party, reasonable attorney's fees, and its
share of the actual cost of the arbitrators, in addition to any relief to
which the prevailing party may be entitled.
ARTICLE XXIV : RIGHT TO REPRODUCE
24.1. Nothing in the Agreement shall limit LICENSEE's right to reproduce for
internal use all of the Software and Documentation as defined herein, for
its internal use, subject to the restrictions on use as set forth herein.
ARTICLE XXV : SUCCESSORS
25.1. This Agreement shall inure to the benefit of and be binding upon the
parties, their successors in interest, affiliated entities and
administrators.
IN WITNESS WHEREOF, this Agreement has been duly executed in duplicate by the
parties hereto, as of the Effective Date.
LICENSOR LICENSEE
LERNOUT & HAUSPIE AMERIGON INC.
SPEECH PRODUCTS N.V.
BY: /s/ Joe Lernout BY: /s/ Lon E. Bell
-------------------------------- -------------------------------------
NAME: Joe Lernout NAME: Lon E. Bell
------------------------------ -----------------------------------
(print) (print)
TITLE: President TITLE: President
----------------------------- ----------------------------------
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p18/25
ADDENDUM A
DESIGNATED EQUIPMENT
AND
FUNCTIONAL SPECIFICATIONS
OF THE SOFTWARE
1. Functional Specification
The Software that will be delivered consists of the voice I/O software
for speech recognition for in car use, the Noise Robust Recognizer (NRR).
The Software consists of the following parts :
- NRR with alphabet recognition
- NRR with alphabet recognition and word spotting capabilities
- NRR with alphabet recognition and word spotting capabilities + free
format digits
Functional Specification of the NRR, the Isolated HMM based in car
recognizer for alphabet and command words.
The main functional characteristics of the HMM based in car recognizer
for alphabet and command words are the following:
- ISOLATED WORD RECOGNITION : The speech utterances to be recognized
are delimited by silence or car noise before and after the spoken
utterance.
- SPEAKER INDEPENDENT : The speech recognizer recognizes speech input
from any native speaker of a certain language class or dialect group
without the user having to train the system beforehand. The
specified language in the first stage is American English (see also
Addendum B : Specific Development Fees).
- VOCABULARY : The vocabulary of the recognizer consists of the
letters of the alphabet, the digits zero to nine and an additional
25 control words. The product includes the vocabulary as specified
by LICENSEE for American English. Additional languages or
vocabularies are available at conditions as specified in Addendum B,
item 4.
- MICROPHONE : The product will be specified for a particular kind of
microphone. LICENSOR will specify the recommended position of the
microphone.
- ENERGY DETECTION : Both energy detection (vocal trigger) and a
push-to-talk button can be used to trigger the speech signal.
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p19/25
- SIGNAL-TO-NOISE RATIO : The signal to noise ratio in the car should
not be less than 6DB in order not to degrade the recognition
performance.
FUNCTIONAL SPECIFICATION OF THE NRR WITH ALPHABET RECOGNITION AND WORD
SPOTTING CAPABILITIES AND THE NRR WITH ALPHABET RECOGNITION AND WORD
SPOTTING CAPABILITIES + FREE FORMAT DIGITS.
The main functional characteristics are the same as for the NRR, without
free format digits except that the Vocabulary characteristics are changed
to:
Vocabulary: The vocabulary of the recognizer consists of the letters of
the alphabet, the digits zero to nine pronounced individually or as free
format digits or in any format of maximum 4 digits that is of common
usage, and an additional 25 control words. The product includes the
vocabulary as specified by LICENSEE for American English. Additional
languages or vocabularies are available at conditions as specified in
Addendum B, item 4.
2. DESIGNATED EQUIPMENT
The designated equipment consists of LICENSEE's Audio Navigator platform.
This platform is based on ADSP 2105 (12.5 MHz version) and a M68000
general purpose microprocessor. The configuration has a minimum of 8 KW
of fast SRAM for the DSP and a minimum of 1 Mb of DRAM for the
microprocessor.
3. TECHNICAL DESCRIPTION OF THE PROJECT
A detailed technical description will be worked out after signing of the
agreement.
-------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p20/25
ADDENDUM B
I. ROYALTIES
A. CALCULATION OF THE NUMBER OF ROYALTY BEARING COPIES
A.1. The number of royalty bearing copies equals the number of Hardware Units
shipped by LICENSEE or otherwise transferred to a Third Party hereunder.
B. ROYALTY PRICE LIST
B.1. Based on the target hardware selling price of the Hardware Unit of
US$ 130, and furthermore taken into consideration the commitment of
LICENSEE to bundle the Software, LICENSOR agrees that the royalties will
equal a percentage of the Hardware selling price of the Hardware Unit.
- Royalty per Unit for the Noise Robust Recognizer with alphabet
recognition:
From Unit number to Unit number Royalty per Unit
0-5.000 7%
5.001 - 25.000 4%
25.001 - 100.000 3.5%
100.001 - 1.000.000 3%
1.000.000 + 1.5%
Notes: 1. The abovementioned percentages will also be applicable to
the Noise Robust Recognizer with alphabet recognition
and word spotting capabilities.
2. In the event that the royalty to be paid to LICENSOR
should be less than US$ 0.75, LICENSEE agrees to pay a
minimum royalty of US$ 0.75 per sold Hardware Unit, or the
lowest price received by LICENSOR from other customers
under similar circumstances.
This commitment will be valid for the first five (5)
million units.
-------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p21/25
- Royalty per Unit for the Noise Robust Recognizer with alphabet
recognition, word spotting capabilities and free format digits :
From Unit number to Unit number Royalty per Unit
0-5.000 7.5%
5.001 - 25.000 4.5%
25.001 - 100.000 4%
100.001 - 1.000.000 3.5%
1.000.000 + 1.75%
Note: 1. In the event that the royalty to be paid to LICENSOR
should be less than US$ 0.90, LICENSEE agrees to pay a
minimum royalty of US$ 0.90 per sold Hardware Unit, or the
lowest price received by LICENSOR from other customers
under similar circumstances.
This commitment will be valid for the first five (5)
million units.
II. PORTING/INTEGRATION FEES
There will be no fees charged to LICENSEE for the Porting and/or
Integration on the Designated Equipment, as defined in Addendum A.
III. SUPPORT FEES
Consultancy services will be provided at the then prevailing rates,
provided however that for a period of maximum twelve (12) months starting
at Acceptance Date, the support shall be free of charge (excluding travel
and lodging).
IV. SPECIFIC DEVELOPMENT
1) Development of a specific language or vocabulary US $ 60K/vocabulary
This covers languages other than the major languages and/or those
that are not planned to be developed by LICENSOR within a reasonable
time.
2) Development of communication software between processor and DSP.
This software consists of the DSP source code of the communication
between processor and DSP.
One-time fee : 6.500 US$ to be paid at delivery of the software.
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p22/25
ADDENDUM C
ACCEPTANCE CRITERIA
REMARK
The criteria, as mentioned hereunder and agreed to upon signature of this
Agreement shall be interpreted as minimum criteria for the Performance
Tests. Therefore, both parties shall act in good faith to agree to an
adopted version of these criteria, within two (2) months after the
Effective Date of this Agreement.
CRITERIA:
1. Cluster 1,2,3,4 and 9
- Each cluster is treated independently
- For each situation, the recognition rate will be calculated, for
each cluster
- An average recognition rate and a standard deviation of the
individual means will be calculated, across all situations
Different situations are defined as different people, cars, speeds,
etc.
- In all the situations, SNP>6dB
- The test set should be a representative set of the American
population
The average recognition rate (Y) is defined by :
A minimum of X% of the situations must have an average recognition rate
of greater than Y%. The average recognition rate in the top X%
percentile must have a standard deviation of less than S%.
Cs = recognition rate for situation s.
(Ng)s, cl = test utterances spoken in situation s in cluster cl which are
correctly recognized
(Nt)s, cl = test utterances spoken in situation s in cluster cl.
Cs = (Ng)s, cl/(Nt)s,cf
Cs = average recognition rate in the top X% percentile
C = number of situations in the top X% percentile.
Cs = (sum(Cs))/C
(sum over the values in top X% percentile)
S = standard deviation of recognition rate over people in the top X%
percentile tested.
- -------------------------------------------------------------------------------
Lernout & Hauspie Speech Products N.V./AMERIGON INC. 19-10-93 p23/25
LICENSE AGREEMENT
between
Amerigon Incorporated
and
Navigation Technologies Corporation
This Agreement is made and entered into between Navigation Technologies
Corporation, a Delaware corporation ("NavTech"), and Amerigon
Incorporated, a California corporation ("Customer"), as of this 15th day
of March, 1995 ("Effective Date").
WHEREAS, NavTech is the owner of the Navigation Database and the
intellectual and proprietary rights with respect thereto;
WHEREAS, Customer has an interest in sensor-free audio navigation systems
and desires to secure a license for the use of the Navigation Database in
connection with such systems; and
WHEREAS, NavTech is willing to grant such a license on the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing recitals and the
promises and covenants contained herein, the parties hereby agree as
follows:
ARTICLE 1. DEFINITIONS
1.1 "Copy" shall mean a reproduction in any form of a Database Section (or
Derivative Work thereof) which has been distributed to and is usable by
an End-User. In any case where more than one Database Section has been
reproduced on a single physical media, each such Database Section
reproduced thereon shall constitute a separate and distinct Copy, as and
when each such Copy is unlocked, activated or otherwise becomes usable by
the End-User (except that duplicate Database Sections with the same
coverage area and release date on a single physical media shall
constitute a single Copy). Copy shall not include small extracts used
for instruction, promotional, or similar purposes.
1.2 "Customer" shall also include its Subsidiaries, collectively and singly,
unless the context clearly requires otherwise.
Amerigon License Agreement -v.6.0- March 10, 1995 Page 1
1.3 "Database Section" shall mean (i) each section of the Detailed City
Database covering not more than one metropolitan area as specified in
Exhibit E, (ii) each section of the Inter-Town Database covering not more
than one state, or (iii) the Long-Haul Database.
1.4 "Derivative Work" shall mean a work of authorship fixed in a tangible
medium of expression which is based upon one or more pre-existing works,
such as a revision, modification, translation, abridgment, condensation,
expansion, collection, compilation or any other form in which such
pre-existing works may be recast, transformed, or adapted, and which, if
prepared without authorization of the owner of the pre-existing work,
would constitute a copyright infringement.
1.5 "End-User" shall mean any person or entity to whom Customer or its
authorized agent distributes a Copy for use in a Licensed Product.
1.6 "Intellectual Property Rights" shall mean patents, copyrights,
trademarks, service marks, and any and all other statutory and legal
rights and protections available under applicable laws for the protection
of intellectual property with respect to, among other things, software,
maps, and databases generally, and the Navigation Database in particular.
1.7 "Licensed Product" shall mean a sensor-free audio navigation system
manufactured by or for Customer which meets all of the specifications,
terms and limitations set forth in Section 4.2 of this Agreement.
1.8 "Navigation Database" shall mean all or any portion of the street
characteristics and other geographic data in North America developed,
under development, or to be developed by and for NavTech for use in
navigation systems, and the updates, modifications, and changes thereto.
The Navigation Database includes the Detailed City Database, the
Inter-Town Database, and the Long-Haul Database.
(a) "Detailed City Database" shall mean those portions of the
Navigation Database which include the significant driveable roads
in a covered area, including those identified by U.S. and Canadian
government agencies as Interstate, Federal, U.S., Provincial,
State, County, arterial, collector, and residential. The current
content of the Detailed City Database is defined in Exhibit A which
is attached hereto.
Amerigon License Agreement -v.6.0- March 10, 1995 Page 2
(b) "Inter-Town Database" shall mean those portions of the Navigation
Database which include, for both the U.S. and Canada, the center
point of: (i) incorporated cities, (ii) selected unincorporated
cities, and (iii) national and state/provincial parks
(collectively, "Named Places"). For the U.S., roads included are
the numbered Interstate, U.S., and State routes, exit and entrance
ramps of limited access highways, and any other roads necessary to
connect to Named Places that would otherwise be detached, as well
as the intersections of the included roadways with one another. For
Canada, roads included are the numbered Federal and Provincial
routes, exit and entrance ramps of limited access highways, and any
other roads necessary to connect to Named Places that would
otherwise be detached, as well as the intersections of the included
roadways with one another. In both the U.S. and Canada, ferry
routes are also included if they are principal mechanisms to
connect to a Named Place or part of an included roadway. The
current content of the Inter-Town Database is defined in Exhibit A
which is attached hereto.
(c) "Long-Haul Database" shall mean those portions of the Navigation
Database which include the main roads connecting metropolitan areas
of population over 25,000 and classified as limited access, and
those roads necessary to connect such metropolitan areas which are
not connected by limited access roads.
1.9 "North America" shall mean the area covered by the 50 states of the
United States of America and its possessions, the District of Columbia,
and the area covered by the provinces and territories of the Dominion of
Canada.
1.10 "R&D Period" shall mean the period between the Effective Date and
December 31, 1995.
1.11 "Release Date" shall mean the date that a version of the Navigation
Database is delivered to Customer in accordance with the provisions of
Paragraphs 2.2(a), 2.2(d), or otherwise.
1.12 "Subsidiary" shall mean a company or organization over which a parent
company or organization ("Parent") exerts direct or indirect control.
Such control shall mean the ownership by the Parent, directly or
indirectly, of (a) more than 50% of the stock ownership interest of such
company or organization, representing the legal right to elect a majority
of the company's or organization's board of directors or other managing
authority, or (b), if such
Amerigon License Agreement -v.6.0- March 10, 1995 Page 3
company or organization is a non-stock entity, including, but not
limited to a partnership, joint venture, or unincorporated association,
the possession of the majority ownership interest and legal right to make
decisions for such company or organization.
1.13 "Support Period" shall mean the 12 month period following distribution of
a Copy to an End-User, and each extension or renewal thereof, provided
that NavTech has been paid all such license fees required hereunder with
respect to End-User.
ARTICLE 2. REPRESENTATIONS. WARRANTIES AND OBLIGATIONS
2.1 NAVTECH WARRANTIES. NavTech represents and warrants as follows:
(a) It is a corporation duly organized and existing under the laws of
the State of Delaware and is in good standing under such laws. It
has a wholly-owned subsidiary, Navigation Technologies U.S., Inc.,
which is a corporation duly organized and existing under the laws
of the State of Delaware and is in good standing under such laws.
(b) It has the requisite corporate power to enter into this Agreement
and to perform under this Agreement according to its terms. All
actions on its own part and on the part of its directors and
stockholders necessary for the authorization, execution, delivery,
and performance of this Agreement have been taken as of the
Effective Date. Its execution, delivery, and performance of this
Agreement will not result in any material violation of any
agreement to which it is a party nor any law to which it is
subject.
(c) It has all title and ownership interests and all Intellectual
Property Rights in the Navigation Database, subject to its granting
licenses and similar rights. No encumbrance of any kind exists
which would prevent it from granting the rights and licenses
granted hereunder.
2.2 NAVTECH OBLIGATIONS. In addition to NavTech's other obligations under
this Agreement:
(a) Within 10 days after Customer's request, but no more often than
once per quarter, NavTech shall deliver to Customer the then
current version of the Navigation Database (or any portion thereof,
at Customer's
Amerigon License Agreement -v.6.0- March 10, 1995 Page 4
option), including any updates and modifications made by or for
NavTech since the last delivery of the Navigation Database to
Customer. NavTech will provide this information in GDF 2.2 (or
successor) format or in another format mutually agreed to by
NavTech and Customer.
(b) NavTech shall use commercially reasonable efforts to revise and
update the Navigation Database in a timely manner. NavTech shall
strive for continual improvement in the quality of the Navigation
Database. The Navigation Database shall meet the Criteria for
Accuracy and Completeness as defined in Exhibit B, which is
attached hereto, and compliance therewith shall satisfy all of
NavTech's obligations hereunder with respect to the accuracy and
completeness of the Navigation Database.
(c) The versions of the Navigation Database delivered to Customer under
Paragraph 2.2(a) shall be free of material defects. In the event
that Customer notifies NavTech of a material defect, NavTech shall
take commercially reasonable steps to correct such defect.
(d) In the event that Customer notifies NavTech of a problem or
condition in the Navigation Database that in Customer's reasonable
business judgment necessitates the reissuance of Copies of the
database to End-Users, then NavTech will provide Customer with a
corrected version of the Navigation Database within 20 business
days of such notification. NavTech will investigate and correct,
if appropriate, any other problems and conditions in the Navigation
Database within 45 days of NavTech's receipt of notice thereof.
(e) NavTech will notify Customer of any change to the content
definition of the Navigation Database set forth in Exhibit A at
least six months before any such change occurs.
(f) NavTech will endeavor to make additions and enhancements to the
Navigation Database including, but not limited to, the addition of
phonetic street name pronunciation information and any other data
mutually beneficial to Customer and NavTech, subject to Section 5.4
and Exhibit D hereof. Proposed additions or enhancements to the
Navigation Database will not be considered mutually beneficial
unless NavTech is permitted, in its sole discretion, to make such
additions and enhancements available to third parties.
Amerigon License Agreement -v.6.0- March 10, 1995 Page 5
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NAVTECH MAKES NO
REPRESENTATIONS OR WARRANTY WITH RESPECT TO THE NAVIGATION DATABASE OR
OTHERWISE. NAVTECH EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF
QUALITY, PERFORMANCE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
2.3 CUSTOMER WARRANTIES. Customer represents and warrants as follows:
(a) Customer is a corporation duly organized and existing under the
laws of California and is in good standing under such laws.
(b) It has the requisite corporate power to enter into this Agreement
and to perform under this Agreement according to its terms. All
actions on its own part and on the part of its directors and
stockholders necessary for the authorization, execution, delivery,
and performance of this Agreement have been taken as of the
Effective Date. Its execution, delivery, and performance of this
Agreement will not result in any material violation of any
agreement to which it is a party nor any law to which it is
subject.
(c) Customer has, and shall continue to have, the right, license and
legal authority: (i) to manufacture the Licensed Product; (ii) to
combine the Licensed Product with the Navigation Database; and
(iii) to sell and distribute the Licensed Product, combined with
the Navigation Database, in accordance with the terms and
conditions of this Agreement.
2.4 CUSTOMER OBLIGATIONS. In addition to Customer's other obligations under
this Agreement:
(a) Customer shall be responsible for, and shall exercise any and all
legally required care and diligence in connection with, the design,
manufacturing, workmanship, testing, distribution, operation, and
safety of any Licensed Products which incorporate or otherwise
utilize the Navigation Database pursuant to the license granted to
Customer hereunder.
(b) Any Licensed Products developed by or for Customer which
incorporate or otherwise utilize the Navigation Database shall be
free of material defects in design, manufacturing, workmanship, or
otherwise. In the event that NavTech notifies Customer of a
material defect in any Licensed Product, Customer shall take
commercially reasonable steps to correct such defect.
Amerigon License Agreement -v.6.0- March 10, 1995 Page 6
(c) Customer shall not make any modifications, adaptations,
alterations, or Derivative Works of the Navigation Database which
introduce or cause errors or omissions in the Navigation Database
not otherwise present.
(d) Customer shall not combine, incorporate, utilize, or distribute
Copies with or in connection with any product which, alone or in
combination with such Copies, infringes any other person's or
entity's Intellectual Property Rights or any other rights.
(e) Customer shall comply with any and all United States and foreign
export laws, regulations, and restrictions to the extent applicable
to the Navigation Database.
ARTICLE 3. PAYMENTS
3.1 MANNER OF PAYMENT. All payments made by Customer to NavTech hereunder
shall be in U.S. currency and paid to NavTech's bank account by means of
telegraphic transfer of funds.
3.2 FEES ON PAYMENTS. Customer shall pay any and all fees, currency
conversion costs, withholdings, taxes, and other costs or charges on its
payments and transfers to NavTech, exclusive of any income taxes on
NavTech's net income.
ARTICLE 4. LICENSES
4.1 GRANT OF LICENSE. Subject to Customer's performance of its obligations
under this Agreement, NavTech hereby grants Customer a non-exclusive,
non-transferable (except to a purchaser of Customer's entire navigation
system business), non-sublicensable (except as set forth in Section 4.3)
license under NavTech's Intellectual Property Rights for the term of this
Agreement to produce, distribute, sell, or transfer Copies of the
Navigation Database, solely for use in North America in Licensed Products
developed by or for Customer.
4.2 LICENSED PRODUCT. In order to qualify as a Licensed Product under this
Agreement, a product must satisfy all of the following specifications,
terms, and limitations:
(a) The product shall be comprised of and limited to the sensor-free
audio navigation system utilizing a voice input/output interface
for routing a driver from a source point to a destination point,
which system is more particularly described in U.S. Patent No.
5,274,560 dated December 28, 1993, except that any such product
shall not, directly or indirectly, comprise,
Amerigon License Agreement -v.6.0- March 10, 1995 Page 7
incorporate, be coupled with or connected to any device of the type
(or which has the capabilities) described in Claim No. 12 of such
Patent or described in Paragraphs 4.2(b).
(b) The product shall not, directly or indirectly, comprise,
incorporate, be coupled with or connected to any of the following:
(i) sensors or any similar devices, including, but not limited
to, distance sensors, wheel rotation sensors, drive shaft
rotation sensors, velocity sensors, accelerometers,
gyroscopes, odometer feeds, or any other sensors or devices
which perform similar functions;
(ii) compasses;
(iii) geo-location devices, including, but not limited to, GPS or
satellite positioning devices, radio-based positioning
devices, or any other devices which receive, process or
provide positioning information, positioning guidance or
other positioning instructions;
(iv) devices or software capable of performing map matching, dead
reckoning or similar functions;
(v) visual, textual or graphic displays, interfaces or
presentations, except the product may display single words
or short phrases limited solely to instructions for
operating, or the operational status of, the product (no
navigation, route guidance, driving direction, positioning,
turn, destination, map or geographic information of any kind
may be visually provided); and
(vi) any other devices, software or technologies which provide
similar functionality or have similar capabilities to any of
the devices, matters or other things described in the
preceding sub-paragraphs of Paragraph 4.2(b).
(c) Customer shall not, directly or indirectly, itself or through
others, offer or provide to End-Users any upgrades, enhancements,
parts, components, or accessories which, if incorporated, coupled
with, or connected to a Licensed Product, would result in a
violation of any of the provisions of Section 4.2.
Amerigon License Agreement -v.6.0- March 10, 1995 Page 8
(d) Customer acknowledges and understands that the license granted
under Section 4.1 is restricted to Licensed Products as defined in
Section 4.2. Customer shall not produce, use, distribute, sell or
transfer the Navigation Database in connection with any product,
system, device, or other thing whatsoever which fails in any
respect to satisfy all of the specifications, terms, and
limitations of Section 4.2.
4.3 END-USER LICENSES. NavTech grants Customer the non-exclusive,
non-transferable, non-sublicensable right to grant end-user licenses to
its End-Users, but only as set forth in this Article. Customer shall
provide each End-User with a copy of an End-User License Agreement which
restricts use of Copies to Licensed Products and which contains all of
the terms described in Exhibit C ("End-User Terms"). Customer shall not
modify any of the End-User Terms without NavTech's prior written consent.
4.4 TERM. The term of this Agreement is the Effective Date through DECEMBER
31, 2001 and any extension thereof pursuant to Section 4.5.
4.5 TERM EXTENSION. The term of this Agreement may, upon Customer's written
notice delivered to NavTech at least six months prior to the expiration
of the term of this Agreement or any extension thereof, be extended for
additional five year periods. NavTech may terminate this right of
extension by providing at least five years advance written notice to
Customer, but in no event may the effective date of any such termination
be prior to December 31, 2011.
4.6 PROHIBITED USES. Customer shall not produce, distribute, sell, or
otherwise transfer Copies to End-Users or anyone else, or otherwise
provide End-Users or anyone else with information or services derived
therefrom, except as expressly authorized under the terms of this
Agreement. Without limiting the generality of the foregoing, any and all
unauthorized, unlawful, or illegal uses of the Navigation Database are
expressly prohibited.
4.7 USE OF TRADEMARKS. During the term of this Agreement, Customer shall
have the non-exclusive, non-transferable, non-sublicensable right to use
the trademarks and tradenames that NavTech may adopt from time to time
("NavTech Trademarks") in Customer's advertising, promotional and
packaging materials; provided, however, that Customer must conspicuously
indicate in any and all such materials that NavTech is the owner of the
NavTech Trademarks and/or that the NavTech Trademarks are registered
trademarks of NavTech, as the case may be. Nothing stated herein shall
constitute
Amerigon License Agreement -v.6.0- March 10, 1995 Page 9
a grant or other transfer to Customer of any right, title, or interest in
the NavTech Trademarks or any other Intellectual Property Rights of
NavTech. Upon termination of this Agreement for any reason, Customer
will immediately cease all use of NavTech Trademarks.
4.8 PROPRIETARY RIGHTS LEGENDS AND NOTICES. Customer shall conspicuously
display any and all of NavTech's proprietary rights legends, copyright
notices, and similar information on Copies of the Navigation Database
which Customer or its authorized agent produces, sells, transfers, and/or
distributes to End-Users.
4.9 DERIVATIVE WORKS. In the event that Customer develops any Derivative
Works which incorporate the Navigation Database, such Derivative Works
shall be subject to the terms and conditions of this Agreement (to the
same extent as Copies) and Customer agrees that all Intellectual Property
rights to the portions of the Navigation Database incorporated in such
Derivative Works shall belong exclusively to NavTech, free of any claim
or retention of rights thereto on the part of Customer.
4.10 OBLIGATIONS ON TERMINATION. Except for the limited rights set forth in
this Section, upon expiration or termination of this Agreement for any
reason, Customer shall cease any and all use and distribution of the
Navigation Database, undistributed Copies, Derivative Works, related
documentation, and all other information and materials provided by
NavTech to Customer, and Customer shall return all of the foregoing items
and materials to NavTech within ten days of such termination.
Notwithstanding the foregoing, in the event that this Agreement expires
or is terminated for reasons other than Customer's breach of its payment
obligations under Article 5 or breach of Customer's obligations under
Paragraphs 2.4(a) or 2.4(b), then Customer shall have the limited rights:
(a) to continue to distribute Copies, for a period of 60 days from such
expiration or termination, solely in order to fulfill signed
agreements or purchase orders in existence as of the date of such
expiration or termination; and
(b) to retain a copy of the Navigation Database and related
documentation, information and materials for the purpose of
providing ongoing support (excluding any further distribution of
Copies) and maintenance to End-Users.
Amerigon License Agreement -v.6.0- March 10, 1995 Page 10
4.11 RIGHTS RESERVED. Customer acknowledges that NavTech owns all
Intellectual Property rights in and to the Navigation Database, and that
NavTech retains all such rights under this Agreement. Nothing contained
in this Agreement shall transfer, assign, or set over to Customer or
anyone else any of NavTech's title and ownership rights to the Navigation
Database or any of NavTech's Intellectual Property rights with respect
thereto. NavTech hereby expressly reserves all rights not expressly
granted in this Agreement.
ARTICLE 5. LICENSE FEES
5.1 R&D PERIOD LICENSE FEES. During the R&D Period, Customer shall pay
NavTech license fees in the amount of $250,000. Customer shall pay the
foregoing amount to NavTech in four equal installments of $62,500, with
the first such payment due upon execution of this Agreement; the second
payment due on March 31, 1995; the third payment due on June 30, 1995,
and the fourth payment due on September 30, 1995.
5.2 PER-COPY LICENSE FEES.
After the R&D Period:
(a) Customer shall pay NavTech per-copy license fees ("Per Copy License
Fees") in the amount yielded by multiplying the number of Copies
distributed by or for Customer times $4.00 per Copy. (In the event
that Customer distributes multiple Copies to an End-User on a
single physical media or otherwise, then each such Copy shall be
considered distributed, and a separate $4.00 Per Copy License Fee
shall become due and payable for each such Copy, as and when each
such Copy is unlocked, activated or otherwise becomes usable by the
End-User.) Customer shall pay NavTech Per Copy License Fees within
30 days after the end of the calendar month in which such Copies
are distributed.
(b) No additional license fee shall be payable by Customer for the
distribution of any Copy obtained from another who is licensed by
NavTech to make such Copies and who has paid or is contractually
obligated to pay NavTech all required license fees under the terms
of a license agreement with NavTech.
(c) No additional license fee shall he payable by Customer for a Copy
distributed to replace a damaged or otherwise physically
non-working Copy, provided, however, that such Copy be (i) replaced
within 30 days of the purchase by the End-User at no additional
cost to End-User, (ii) replaced with a Copy that covers the
Amerigon License Agreement -v.6.0- March 10, 1995 Page 11
same portion of the Navigation Database, and (iii) has the same
Release Date as the originally purchased Copy.
(d) No additional license fee shall be payable by Customer for
including the Inter-town Database and/or Long-Haul Database as part
of a Copy which also includes the Detailed City Database, provided
that Customer does not charge the End-User any fees for the
Inter-town Database or Long-Haul Database subsequent to the initial
distribution and activation of the Copy.
5.3 LICENSE FEE ADJUSTMENTS. During the term of this Agreement, the initial
$4.00 Per Copy License Fee shall be adjusted in each calendar year to
reflect the actual increase or decrease in the U.S. Consumer Price Index
for Urban Wage Earners and Clerical Workers, U.S. City Averages for All
Items, from September 1993 to the September preceding the start of each
calendar year.
5.4 ADDITIONAL LICENSE FEES. Subject to further mutual agreement of the
parties, Customer shall pay NavTech additional license fees for
enhancements to the Navigation Database which provide additional
functionality and/or reductions in work for Customer, including, but not
limited to, the matters specified in Exhibit D.
5.5 MOST FAVORED PRICING.
(a) Customer shall be entitled to the most favored prices which NavTech
provides to any other licensee of the Navigation Database under an
agreement executed after the Effective Date of this Agreement, for
similar applications and quantities used in in-vehicle navigation
systems in North America.
(b) The determination of most favored prices shall take into account
the fees for an entire agreement including, without limitation, all
license fees, annual minimums, and additional charges over the
entire term of an agreement (as opposed to particular fees to the
exclusion of others fees, or fees for a specific period of time to
the exclusion of other periods).
(c) The determination of most favored prices shall exclude any credits,
discounts, abatements, or other similar consideration extended to
other NavTech licensees by reason of advance or pre-paid license
payments and the like (and imputed interest thereon, provided that
the interest rate shall not exceed 15% per annum).
Amerigon License Agreement -v.6.0- March 10, 1995 Page 12
(d) Within 60 days of the execution thereof, NavTech will notify
Customer of the license and pricing terms ("New Terms") of each
license agreement it executes after the Effective Date of this
Agreement with another licensee of the Navigation Database for
similar applications and quantities used in in-vehicle navigation
systems in North America.
(e) In the event that Customer receives notice pursuant to Paragraph
5.5(d), Customer may elect to pay future license fees in accordance
with the New Terms, such New Terms substituting in their entirety
for the license and pricing terms otherwise in effect under this
Agreement.
(f) Customer's right to make such an election with respect to any
particular set of New Terms shall expire if Customer does not
notify NavTech of such election in writing within 60 days after
NavTech provides notice to Customer of the New Terms.
(g) The New Terms shall become effective as of the effective date of
the subsequent agreement which contains the New Terms. All license
fees incurred before such date shall be assessed in accordance with
the Old Terms. Customer and NavTech shall make equitable
adjustment with respect to any license fees already paid under the
Old Terms which, based on Customer's election pursuant to Paragraph
5.5(e), become subject to the New Terms.
5.6 LICENSE FEES DURING EXTENSION PERIODS. In the event that the term of this
Agreement is extended pursuant to Section 4.5 and a fee schedule for any
years in the extension period is not agreed upon, license fees during any
such years shall be paid in accordance with the rates, amounts, and
charges prevailing under this Agreement for the last year for which
license fees were agreed upon, including any and all adjustments thereto,
including the continued adjustment provided in Section 5.3.
5.7 LICENSE FEE REPORTS. Within 30 days of the end of each calendar quarter,
Customer shall provide NavTech with a written report setting forth the
number of all Copies distributed by or for Customer during the prior
quarter. Such reports shall also include the Release Date and geographic
coverage of each Copy distributed.
5.8 CUSTOMER RIGHT TO INSPECT. Customer shall have the right, at its own
expense, on reasonable notice and not more often than once annually, to
appoint an independent auditor to
Amerigon License Agreement -v.6.0- March 10, 1995 Page 13
inspect during reasonable business hours, license agreements between
NavTech and licensees of the Navigation Database for similar applications
and quantities used in in-vehicle navigation systems in North America
executed after the Effective Date. Further, such auditor shall have the
right to inspect NavTech's files to the extent necessary to assure that
such license fees and payments are collected according to the terms of
such agreements. Such auditor shall only report back to Customer the
fact, if any, that better license and pricing terms are available to a
NavTech licensee under the aforesaid agreements and the details of such
terms, but only if such terms were not previously disclosed to Customer
pursuant to Paragraph 5.5(d). All other information of NavTech shall be
kept in confidence by such auditor and not disclosed to Customer or any
other party. If the audit demonstrates that NavTech has not disclosed to
Customer any more favorable New Terms as required under this Agreement,
then the expense of the inspection shall be borne by NavTech and Customer
shall have the right for 60 days after completion of the inspection to
make an election with respect to such New Terms according to the
provisions of Paragraph 5.5(e).
5.9 NAVTECH RIGHT TO AUDIT. NavTech shall have the right, at its own
expense, on reasonable notice and not more often than once annually, to
inspect and audit during reasonable business hours Customer's records and
other relevant information for the purpose of verifying the amount of
license fees and other charges due. NavTech shall maintain the
confidentiality of such information to the extent required under Section
7.18, and shall put the information and records inspected to no other use
than the verification of license fees due. If such an audit determines
that payments made during any period audited were 5% or more below the
amount actually due, then the expense of the audit shall be borne by
Customer. Customer shall pay Navtech any amount shown to be due by the
audit within ten days of completion of the audit with interest as
specified in Section 7.9 on the amount of the underpayment.
ARTICLE 6. ADDITIONAL PROVISIONS
6.1 TECHNICAL SUPPORT. NavTech will, without further charge to Customer,
provide completed portions of the Navigation Database for Customer's
internal testing and experimentation, along with basic technical training
and support to enable Customer to understand and use the Navigation
Database. NavTech will make additional specific technical support
available on a mutually convenient basis at its fully burdened cost for
time and materials.
Amerigon License Agreement -v.6.0- March 10, 1995 Page 14
6.2 CUSTOMER SUPPORT.
(a) NavTech will provide Customer, free of any additional charge, with
reasonable assistance and support, including analysis of problems
reported by End-Users through Customer and any necessary
corrections thereof, during the respective Support Periods
hereunder; provided, however, that NavTech shall not be responsible
under this Paragraph for providing any Distribution And End-User
Services as defined in Section 6.3.
(b) Customer agrees that any and all information and documentation
concerning alleged and/or actual errors, problems, complaints, and
related matters concerning the Navigation Database of which
Customer is or becomes aware (including, but not limited to,
database modification requests, missing information requests,
customer complaints, error reports, and any other similar
information and documentation) shall be made fully and freely
available to NavTech, without charge, for NavTech's unlimited use
in its sole discretion, including, but not limited to, NavTech's
incorporation of such information and documentation into the
Navigation Database. Customer shall promptly notify NavTech in
writing of any and all such errors, problems, complaints and
related matters concerning the Navigation Database, so that NavTech
may have a fair and reasonable opportunity to investigate such
matters and make any appropriate revisions, updates, and
corrections in accordance in Paragraphs 2.2(b), 2.2(d), and 6.2(a).
Customer shall not retain, acquire or assert any right, title or
interest in or to the Navigation Database based on the transfer of
the foregoing information and documentation to NavTech, NavTech's
use or incorporation of such information and documentation (or
derivatives thereof) in the Navigation Database or otherwise.
(c) Upon the expiration of the respective Support Periods hereunder,
NavTech shall be absolved of any and all updating, support,
warranty, and other obligations to Customer, including, but not
limited to, those set forth in Paragraphs 2.2(b), 2.2(d), and
6.2(a), with respect to such End-Users whose Support Periods have
expired.
(d) In the event that an End-User desires to receive further updates,
support, or other assistance from Customer after the expiration of
a Support Period, NavTech will extend or renew the Support Period
with
Amerigon License Agreement -v.6.0- March 10, 1995 Page 15
respect to such End-User for an additional 12 month period, subject
to Customer's payment to NavTech of additional license fees, which
shall be calculated and paid in accordance with Section 5.2.
6.3 DATABASE DISTRIBUTION.
(a) In the event that Customer produces, sells, or distributes Copies
of the Navigation Database to End-Users or otherwise provides
End-Users with information or services contained in or derived from
the Navigation Database, Customer shall provide such End-Users with
any and all legally required and otherwise necessary training,
instruction, warnings, disclaimers, and safety information,
including, but not limited to, the End-User Licenses required under
Section 4.3 and any other reasonable information and materials
which NavTech requests Customer to provide to End-Users.
(b) Customer may utilize the services of Audio Navigation Systems, Inc.
("ANSI") in connection with the production and distribution of
Copies for use in Licensed Products provided that ANSI first enters
into a separate written agreement with NavTech which, among other
things: (i) grants ANSI the right to engage in such production and
distribution, and (ii) requires ANSI to comply with all of the
terms, conditions, duties and obligations imposed on Customer under
this Agreement with respect to production and distribution of
Copies, including, but not limited to, payment obligations (the
"ANSI Agreement"). In the event that ANSI and NavTech enter into
the ANSI Agreement, Customer hereby agrees that Customer shall be
jointly and severally responsible to NavTech for ANSI's payment
obligations to NavTech. In all events, Customer shall remain
directly responsible for all of Customer's duties and obligations
under this Agreement regardless of whether they are performed by
Customer or ANSI and regardless of any agreements, relationships or
divisions of responsibilities between Customer and ANSI.
(c) Customer and NavTech may jointly elect to have NavTech perform the
following additional services which NavTech otherwise has no
obligation to provide (collectively, "Distribution And End-User
Services"):
(i) Formatting the Navigation Database, any software provided by
Customer to NavTech for inclusion with the formatted
Navigation Database, such software to be provided at no
charge to NavTech for this
Amerigon License Agreement -v.6.0- March 10, 1995 Page 16
purpose, and Customer-specific information (including, but
not limited to, locations of dealerships, business
directories, tourist guides, and other information);
provided, however, if any of the above information is in a
proprietary data format not belonging to NavTech, Customer
shall supply to NavTech at no charge all software necessary
to such formatting, engineered to operate in a computer
environment acceptable to NavTech;
(ii) Packaging, maintaining inventory, and distributing
information and other matters directly to End-Users;
(iii) Providing direct support during Support Periods to End-Users
with respect to the Navigation Database, including analysis
of any problems that would be reported directly to NavTech
by End-Users and any necessary corrections, updates,
modifications, and changes to portions of the Navigation
Database which NavTech would provide directly to End-Users;
and
(iv) Maintaining a help desk for End-Users to reach NavTech
directly for problem reporting and resolution.
(d) In the event Customer and NavTech jointly elect to have NavTech
perform any Distribution and End-User Services, Customer shall pay
NavTech's fully burdened costs, calculated in accordance with
generally accepted accounting principles, consistently applied, of
such Distribution And End-User Services, plus a 10% service fee.
NavTech shall invoice Customer monthly for Distribution Services
provided pursuant to this Section 6.3. Payment shall be due within
30 days of invoice date. Customer shall have the right, at its own
expense, on reasonable notice and not more than once annually, to
inspect and audit NavTech's records and other relevant information
for the purpose of verifying the amount of costs charged by NavTech
for Distribution Services. Customer shall maintain the
confidentiality of all confidential information of NavTech and
shall put the information and records inspected to no other use
than the verification of costs due. If such an audit determines
that costs charged by NavTech during the period were 5% or more
above the amount actually due, then the expense of such audit shall
be borne by NavTech.
Amerigon License Agreement -v.6.0- March 10, 1995 Page 17
(e) In no event shall any payments for Distribution And End-User
Services be credited or otherwise applied against any license fees
or any other fees or charges due and owing from Customer to NavTech
under this Agreement.
6.4 CUSTOMER EQUIPMENT. At NavTech's request, Customer shall provide
NavTech, without charge and as soon as each is available, test and
production versions of Licensed Products ("Test Systems") in each area
where NavTech has a field office and in which Customer intends to offer
Test Systems. NavTech will use such systems solely for purposes of
testing and verifying the Navigation Database.
NavTech and Customer will jointly determine if additional Test Systems
are required by NavTech in each area. If so, Customer shall promptly
deliver any such additional Test Systems without charge to NavTech.
Customer will provide NavTech with the technical assistance necessary for
NavTech to properly install, analyze, and use Test Systems.
NavTech shall be absolved of its obligations to Customer under Paragraphs
2.2(b), 2.2(d), 6.1, and 6.2(a) in any and all areas where NavTech has a
field office and in which Customer distributes Licensed Products if
Customer fails to provide NavTech with Test Systems in such areas.
All Test Systems provided to NavTech pursuant to this Section 6.4 are
loaned to NavTech solely for the purpose of facilitating NavTech's
support of Customer's operations. All Test Systems will remain the
property of Customer and NavTech obtains no rights whatsoever in the
same. NavTech may not lend, transfer, sublicense, encumber, pledge or
assign Test Systems, and NavTech shall not move any of the foregoing
outside the North America without the express written authorization of
Customer. NavTech shall, at the written request of Customer, promptly
return any and all Test Systems. NavTech shall not permit any third
party to examine, access or use any of the Test Systems supplied
hereunder. ALL TEST SYSTEMS ARE PROVIDED TO NAVTECH AS-IS, AND EXCEPT
FOR CUSTOMER'S OBLIGATION TO PROVIDE TECHNICAL ASSISTANCE TO NAVTECH,
CUSTOMER DISCLAIMS ALL WARRANTIES OF ANY KIND WITH RESPECT TO SUCH TEST
SYSTEMS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Amerigon License Agreement -v.6.0- March 10, 1995 Page 18
ARTICLE 7. GENERAL PROVISIONS
7.1 GOVERNING LAW. This Agreement shall be construed and governed by the
substantive laws of the State of Delaware without giving effect to the
conflict of laws provisions.
7.2 SEVERABILITY. If any provision of this Agreement is held to be invalid,
illegal, or unenforceable, the remaining provisions hereof shall be
nonetheless unaffected thereby and remain valid and enforceable as if
such provision had not been set forth herein. The parties agree to
substitute for such provision a valid provision which most closely
approximates the intent and economic effect of such severed provision.
7.3 CONDITIONS NOT EXPLICITLY COVERED BY THIS AGREEMENT. The parties agree
that conditions may occur in the development of the navigation business
that may not he precisely covered in this Agreement ("Uncovered
Conditions"). If an Uncovered Condition is identified, the parties will
attempt in good faith to reach an equitable understanding in the spirit
of the provisions of this Agreement. Uncovered Conditions may occur in
the packaging of databases, software, and hardware; in the distribution
approaches and sales channels used; and in other areas. None of the
Uncovered Conditions constitute a condition precedent to the
enforceability or effectiveness of this Agreement. In addition, nothing
stated in this Section shall alter the interpretation, meaning, or legal
effect of any of the other provisions of this Agreement, nor shall the
existence or occurrence or any Uncovered Conditions (or the parties'
failure to reach an equitable understanding with respect thereto)
constitute a breach of this Agreement, a basis for the termination,
cancellation, or rescission of this Agreement or otherwise excuse any
party's performance hereunder.
7.4 ADVICE OF COUNSEL. The parties acknowledge that prior to executing this
Agreement they have been advised by legal counsel and fully understand
and agree to all of their rights and obligations under this Agreement,
and that this Agreement is the result of informed negotiations between
sophisticated parties. The parties further acknowledge and agree that
they have not relied on any representation, inducement, or anything else
in executing this Agreement that is not set forth expressly herein.
7.5 INDEPENDENT CONTRACTORS. The relationship of NavTech and Customer
established by this Agreement is that of independent contractors, and
nothing contained in this Agreement will be construed to (a) give either
party the power to direct and control the day-to-day activities of the
Amerigon License Agreement -v.6.0- March 10, 1995 Page 19
other, (b) constitute the parties as partners, joint venturers, co-owners
or otherwise as participants in a joint or common undertaking, or (c)
allow either party to create or assume any obligation on behalf of the
other party for any purpose whatsoever. All financial obligations
associated with each party's business are the sole responsibility of that
party. All sales and other agreements between each party and its
customers are each party's exclusive responsibility and will have no
effect on that party's obligations under this Agreement.
7.6 FORCE MAJEURE. Neither party shall be liable to the other for a failure
to perform any of its obligations under this Agreement, except for
payment obligations previously incurred, during any period in which such
performance is delayed due to circumstances beyond its reasonable
control, provided such party notifies the other of the delay.
7.7 HOLD HARMLESS. Each party shall indemnify and hold harmless the other
party, its officers, directors, employees, agents and affiliates from and
against any and all liabilities arising out of any cause or event which
is attributable to the indemnifying party's failure to perform or comply
with any term of this Agreement, including liabilities for personal
injury or product liability, but only to the extent to which such
liabilities are not covered by the damaged party's insurance. Each party
agrees to cooperate fully with the other in defending against such
claims.
7.8 LIMIT ON LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR PUNITIVE DAMAGES FOR ANY
CAUSE OF ACTION ARISING OUT OF OR IN RESPECT OF THIS AGREEMENT,
REGARDLESS OF THE THEORY OF LIABILITY. THE FOREGOING LIMITATION SHALL
APPLY EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
7.9 PAYMENT DEFAULT. In the event that Customer is late or otherwise in
default with respect to any payment due hereunder, Customer shall pay to
NavTech interest at an annual rate of 15% (or the maximum rate permitted
by law for any period in which the permitted rate is less than 15%), on
the sum due from the due date of the payment until the full payment
thereof.
7.10 WAIVER OF BREACH. No waiver of any kind under this Agreement will be
deemed effective unless set forth in writing and signed by the party
charged with such waiver, and no waiver of any right arising from any
breach or failure to perform will be deemed to be a waiver or
Amerigon License Agreement -v.6.0- March 10, 1995 Page 20
authorization of any other breach or failure to perform or of any other
right arising under this agreement.
7.11 ENTIRE AGREEMENT. This Agreement together with its Exhibits constitutes
the entire agreement between the parties regarding the subject matter
hereof.
7.12 MODIFICATION. This Agreement may be modified only by a written
instrument duly executed by the parties hereto.
7.13 NOTICES. All notices required or permitted under this Agreement shall be
delivered by hand, or sent by express mail or fax addressed as follows:
If to NavTech:
Navigation Technologies Corporation
Attn: Vice President, Administration & Finance
740 East Arques Avenue
Sunnyvale, California 94086-3833
Fax: +1-408-736-3734
If to Customer:
Amerigon Incorporated
Attn: Joshua Newman
404 East Huntington Drive
Monrovia, California 91016-3600
Fax: +1-818-932-1220
or at such other address as either party shall have furnished to the
other in writing. All such notices and other written communications
shall be effective (1) if sent by express mail, two business days after
mailing, and (2) otherwise, upon delivery.
7.14 SUCCESSORS AND ASSIGNS. The rights and obligations of each party under
this Agreement may not be transferred or assigned directly or indirectly
without the prior written consent of the other party, which consent will
not be unreasonably withheld. 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. Notwithstanding the foregoing, each
party shall have the right to assign or transfer all of its respective
rights and obligations under this Agreement to any of its Subsidiaries.
7.15 DERIVED BENEFIT. Only the parties and/or their respective Subsidiaries
are intended to derive any direct or indirect benefits from this
Agreement. All Subsidiaries shall be
Amerigon License Agreement -v.6.0- March 10, 1995 Page 21
bound by this Agreement and will respect the parties' respective rights
hereunder.
7.16 TERMINATION FOR BREACH. If either party materially breaches any of the
terms of this Agreement and fails to cure such a breach within 30 days
after receiving written notification of such breach from the
non-breaching party, the non-breaching party may terminate this Agreement
upon further written notification to the breaching party and may protect
its interests by any means available to it.
7.17 ARBITRATION.
(a) If a dispute arises between the parties relating to the
interpretation or performance of this Agreement or the grounds for
the termination hereof, the parties agree to hold a meeting,
attended by individuals with decision-making authority, regarding
the dispute, to attempt in good faith to negotiate a resolution of
the dispute prior to pursuing other available remedies.
(b) If, within 30 days after such meeting, the parties have not
succeeded in resolving the dispute, such dispute, on the written
request of one party delivered to the other party, shall be
submitted to and settled by final and binding arbitration, in
accordance with the Licensing Agreement Arbitration Rules of the
American Arbitration Association and shall be arbitrated by three
arbitrators. The arbitration decision, including the allocation of
legal expenses and the expenses of arbitration, shall be final and
binding on both parties subject to the foregoing rules. The parties
agree that any award granted pursuant to such decision may be
entered forthwith in any court of competent jurisdiction. The seat
of arbitration will be Wilmington, Delaware, USA, and the official
arbitration language will be English.
7.18 CONFIDENTIALITY. All technical, experimental, development, business
and/or other information disclosed hereunder by either party to the other
shall be considered by the informed party to be confidential. Each party
agrees to take all reasonable precautions to prevent disclosure to third
parties of any such information that it receives from the disclosing
party, except with written consent of the disclosing party, and to return
such information to the disclosing party on its request. This provision
shall not apply to any information which is or becomes available to the
public generally without violation of this Agreement, nor to any
information that is already in the possession of the informed party as a
matter of right. This provision
Amerigon License Agreement -v.6.0- March 10, 1995 Page 22
applies for the entire term of this Agreement and for two years
thereafter.
7.19 SURVIVAL OF TERMS. The rights and obligations which by their nature are
intended to survive expiration or termination of this Agreement,
including but not limited to the provisions of Section 4.8 (Proprietary
Rights Legends And Notices), Section 4.10 (Obligations On Termination),
Section 4.11 (Rights Reserved), Section 7.7 (Hold Harmless), Section 7.8
(Limit on Liability), Section 7.9 (Payment Default), Section 7.17
(Arbitration), and Section 7.18 (Confidentiality), shall survive the
termination of this Agreement for any reason.
7.20 HEADINGS. The headings and subheadings used in this Agreement and in the
exhibits hereto are only used for convenience of reference, and are not
to be considered in construing this Agreement.
7.21 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement as of the date above first written.
NAVIGATION TECHNOLOGIES CORP. AMERIGON INCORPORATED
/s/ T.A. Cerone /s/ Joshua M. Newman
- ------------------------- -------------------------
Signature Signature
Thomas A. Cerone Joshua M. Newman
- ------------------------- -------------------------
Name Name
Chief Financial Officer Vice President
- ------------------------- -------------------------
Title Title
Amerigon License Agreement -v.6.0- March 10, 1995 Page 23
EXHIBIT A
DATABASE CONTENTS SPECIFICATION
I. DETAILED CITY DATABASE SPECIFICATION
- Road network geometry including:
- named roads
- named and addressed walkways
- ferry connections
- unnamed roads leading to or within selected
cartographic features
- Street names, five digit zip codes (U.S.) or six digit postal codes
(Canada), and municipality names for street segments
- Alias/alternate street names and alternate municipality names for
street segments
- Connectivity of street segments
- Block-by-block address ranges (both sides of the street)
- Vanity address handling (e.g., IBM Plaza, Town and Country Shopping
Center, United Nations Building, etc.)
- Roadway classifications, including toll roads, freeways, expressways,
major arteries, main streets, residential streets, and low-access
roads (private, gated, unpaved)
- Roadway characteristics, including one-way information, turn
restrictions, dividedness, and construction status
- Overpasses and underpasses represented as relative vertical levels
- Sign text at decision points
- Points of Interest and Landmarks, including selected items of:
- ATMs
- Gas stations
- Golf Courses
- Hospitals
- Hotels, restaurants, tourist attractions
Amerigon License Agreement -v.6.0- March 10, 1995 A-1
- Parks
- Public transportation terminals, e.g., inter-city bus
stations/terminals, rail stations, and airports
- Schools
- Shopping centers and malls
- Cartographic Features including national, state, county and city
boundaries, lakes, rivers, coastlines, railroads, and airports
II. INTER-TOWN DATABASE SPECIFICATION
- Road network geometry including:
- numbered routes - Interstate, Federal, State, County
- roads that lead to named areas GREATER THAN 250,000 square
meters or a population GREATER THAN 500 people
- ramps for limited access roads
- ramps between qualifying roads
- exits, on and off for a qualifying road, that lead only to
qualifying POIs. These exits only allow for a return to the same
qualifying road (e.g., rest areas)
- ferry connections between qualifying roads
- Administrative area information (state and county names) for each
street segment
- Street names for street segments
- Alias/alternate street names for street segments
- Connectivity of street segments
- Bridges and tunnels
- Roadway characteristics, including one-way information, turn
restrictions with time validity, construction information, toll
booths, and dividedness
- Roadway classifications, including toll roads, freeways, expressways,
major arteries, main streets
- Overpasses and underpasses represented as relative vertical levels
- Sign text at decision points
Amerigon License Agreement -v.6.0- March 10, 1995 A-2
- Points of Interest, including selected items of:
- Airports
- Automobile Ferries
- Named Places
- Petrol stations at rest areas
- Rest areas on limited access highways with rest rooms
- Restaurants at rest areas
- Cartographic Features including national, state and county boundaries,
lakes, rivers, coastlines, railroads, and airports
Amerigon License Agreement -v.6.0- March 10, 1995 A-3
EXHIBIT B
CRITERIA FOR ACCURACY AND COMPLETENESS
I. DETAILED CITY PORTION
A. PORTION. These criteria for accuracy and completeness shall be applied to
a portion of the Navigation Database covering one or more contiguous areas,
certified by NavTech as a completed Detailed City Database area ("Detailed
City Portion").
B. CRITERIA FOR ACCURACY. In each Detailed City Portion, the Navigation
Database will contain the following data elements, each type of which shall
be at least 97% accurate:
For each intersection of included roads ("Intersection"):
- Latitude and longitude of the Intersection (within 15 meters)
- Turn restrictions
- Intersection geometry
- Street segments connected to the Intersection
For each street segment:
- Length (within 15 meters)
- Primary name
- Address range for each side of the street segment
- Aliases
- Street segment type
- Divider information
- Municipality in which the street segment is located
- One-way restrictions
- Ramp signage
- Construction status
C. CRITERIA FOR COMPLETENESS. For each Detailed City Portion, the Navigation
Database will contain at least 97% of the valid addresses in the Detailed
City Portion identified to their correct street segment.
D. VERIFICATION PROCEDURES. Customer may choose to verify the accuracy and/or
completeness of any current release of a Detailed City Portion identified
as being complete by NavTech. NavTech is not required to reverify a
Detailed City Portion that previously passed such verification, within 24
months after the successful verification.
Amerigon License Agreement -v.6.0- March 10, 1995 B-1
1. ACCURACY. Customer may test the accuracy of a Detailed City Portion
by choosing up to 100 Intersections in the Detailed City Portion (the
actual number to be specified by Customer) randomly selected in
accordance with standard statistical practice. For each Intersection,
NavTech will provide a listing from the Navigation Database of the
information specified in Paragraph I.B of this Exhibit for the 100
selected Intersections and for each street segment attached to the
selected Intersections ("Detailed City Test Listing").
Within 30 days after the delivery of the Detailed City Test Listing to
Customer, Customer will independently verify the information provided.
The Detailed City Portion will be deemed accurate if at least 97% of
each type of database element listed in the Detailed City Test Listing
is correct (latitude and longitude correct if within 15 meters). If
upon proper delivery of a Detailed City Test Listing by NavTech,
Customer does not conduct and complete the validation within the time
limits prescribed herein, then the Detailed City Portion shall be
deemed accurate.
2. COMPLETENESS. Customer may test the completeness of a Detailed City
Portion by providing to NavTech, in a mutually agreeable machine
readable format, a list containing between 1,000 and 5,000 randomly
selected routine mailable addresses within the Detailed City Portion
("Test Mailing List").
Upon receipt of a Test Mailing List, NavTech shall use its standard
software program, reasonably acceptable to Customer, to match
addresses from the Test Mailing List against the content of the
Detailed City Portion. The Detailed City Portion will be deemed
complete if at least 97% of the addresses in the Test Mailing List are
matched to the proper street segment in the Navigation Database.
NavTech shall promptly provide Customer with a print-out showing the
results of the test.
Amerigon License Agreement -v.6.0- March 10, 1995 B-2
II. INTER-TOWN DATABASES
A. PORTION. This criteria for accuracy and completeness shall be applied to a
portion of the Navigation Database covering one or more contiguous areas,
certified by NavTech as a complete Inter-Town Database area ("Inter-Town
Portion").
B. CRITERIA FOR ACCURACY. In each Inter-Town Portion, the Navigation Database
will contain the following data elements, each type of which shall be at
least 97% accurate:
For each Named Place: Name
For each Intersection:
- Latitude and longitude of the Intersection (within 100 meters)
- Turn restrictions
- Road segments connected to the Intersection
For each included road segment:
- Length (within 100 meters)
- Primary name
- Aliases
- Road type
- Divider information
- One-way restrictions
- Ramp exit information
- Construction status
C. CRITERIA FOR COMPLETENESS. For each Inter-Town Portion, the Navigation
Database will contain at least 97% of the Named Places.
D. VERIFICATION PROCEDURES. Customer may choose to verify the accuracy and/or
completeness of any current release of an Inter-Town Portion identified as
being complete by NavTech. NavTech is not required to reverify a Inter-Town
Portion that previously passed such verification, within 24 months after
the successful verification.
1. ACCURACY. Customer may test the accuracy of a Inter-Town Portion by
choosing up to 100 Intersections in the Inter-Town Portion (the actual
number to be specified by Customer) randomly selected in accordance
with standard statistical practice. For each Intersection, NavTech
will provide a listing from the Navigation Database of the information
specified in Paragraph II.B of this Exhibit for the 100 selected
Intersections and for road segment attached to the selected
Intersections ("Inter-Town Test Listing").
Amerigon License Agreement -v.6.0- March 10, 1995 B-3
Within 30 days after the delivery of the Inter-Town Listing to
Customer, Customer will independently verify the information provided.
The Inter-Town Portion will be deemed accurate if at least 97% of each
type of database element listed in the Inter-Town Listing is correct
(latitude and longitude correct if within 100 meters). If upon proper
delivery of a Inter-Town Listing by NavTech, Customer does not conduct
and complete the validation within the time limits prescribed herein,
then the Inter-Town Portion shall be deemed accurate.
2. COMPLETENESS. Customer may test the completeness of a Inter-Town
Portion by providing to NavTech, in a mutually agreeable machine
readable format, a list containing between 100 and 500 randomly
selected incorporated cities and national and state/provincial parks
within the Inter-Town Portion ("Test Place List").
Upon receipt of a Test Place List, NavTech shall use its standard
software program, reasonably acceptable to Customer, to identify the
location of the places named in the Test Place List against the
content of the Inter-Town Portion. The Inter-Town Portion will be
deemed complete if at least 97% of the places in the Test Place List
are matched to the proper Named Place in the Navigation Database.
NavTech shall promptly provide Customer with a print-out showing the
results of the test.
Amerigon License Agreement -v.6.0- March 10, 1995 B-4
EXHIBIT C
END-USER TERMS
Customer (for purposes of End-User License Agreements "Licensor") shall include
the following terms in its End-User license agreements:
1. LICENSE GRANT. Copies of the NavTech Database and related documentation
shall be licensed to End-Users under a non-exclusive, nontransferable license
which restricts the use of such copies and documentation to Licensed Products.
The license granted to End-Users shall not include the right to grant
sublicenses.
2. FURTHER LIMITATIONS ON USE. End-Users shall be licensed to use copies of
the NavTech Database only for internal purposes, and not for service bureau,
time-sharing or other similar purposes. End-Users shall agree not to, and not
to permit others to, modify, decompile, disassemble, or reverse engineer any
portion of the NavTech Database. End-Users will be allowed to make one copy of
the NavTech Database for archival or backup purposes only. End-Users shall
agree that all copies of the NavTech Database must display the copyright notice
and information relating to proprietary rights as they appear on the NavTech
Database, including, without limitation, any "limited rights" legend. End-Users
shall agree not to copy the documentation provided with the NavTech Database.
3. OWNERSHIP. End-Users shall be informed that the NavTech Database and
related documentation and the copyrights and other proprietary rights therein
are owned by Navigation Technologies Corporation and that Licensor has obtained
the right to license End-Users to use such components on the terms and
conditions contained in the End-User License Agreement. All rights not
expressly granted in the End-User License Agreement shall be expressly retained
by and for Navigation Technologies Corporation.
4. GOVERNMENT END-USERS. If the NavTech Database is being acquired by or on
behalf of the United States government or any other entity seeking or applying
rights similar to those customarily claimed by the United States government, the
End-User License Agreement shall provide that the NavTech Database and related
documentation are licensed with "limited rights." Utilization of the NavTech
Database shall be subject to the restrictions specified in the "Rights in
Technical Data and Computer Software" clause at DFARS 252.227-7013, or the
equivalent clause for non-defense agencies. Manufacturers are Navigation
Technologies Corporation, 740 East Arques Avenue, Sunnyvale, California
94086-3833, USA and [FILL IN LICENSOR'S NAME AND ADDRESS.]
Amerigon License Agreement -v.6.0- March 10, 1995 C-1
5. INDEMNITY. End-Users shall agree to indemnify, defend and hold NavTech,
including its licensors, assignees, subsidiaries and affiliated companies,
officers, directors, employees, shareholders, agents and representatives of each
of them, free and harmless from and against any loss, injury, demand, cost,
expense, or claim of any kind or character, including but not limited to
attorney's fees, arising out of (a) any use of the NavTech Database, or (b) any
breach of any warranties or representations made by End-User in the End-User
License Agreement or of End-User's obligations under the End-User License
Agreement.
6. LIMITED WARRANTY. End-Users shall be informed that the only warranty made
by NavTech with respect to the NavTech Database is that for a period of time of
12 months after each End-User's purchase of its Copy of the NavTech Database, it
will conform substantially to NavTech's Criteria for Accuracy and Completeness
existing as of the date of the End-User's purchase. End-Users shall be informed
that their sole remedy if the NavTech Database does not perform as described is
that NavTech [or Licensor] will use all reasonable efforts to repair or replace
the nonconforming units of the NavTech Database or, in NavTech's discretion,
will refund the license fees paid by the End-Users for the nonconforming units
of the NavTech Database. End-Users shall be advised that, except as expressly
provided in the limited warranty described in this Paragraph: neither NavTech
nor Licensor warrants or makes any representations regarding the use or results
of the use of the NavTech Database or related documentation in terms of its
correctness, accuracy, reliability, or otherwise; no oral or written information
or advice given by Licensor or any other person shall create a warranty or in
any way increase the scope of the warranty described above, and NavTech does not
warrant the NavTech Database to be error free.
7. END-USER SIGNATURE. [NOTE: THIS PARAGRAPH SHALL APPLY ONLY WITH RESPECT TO
THE SIMULTANEOUS DISTRIBUTION OF COPIES OF THE NAVTECH DATABASE WITH LICENSED
PRODUCTS.] End-Users shall be informed that the limited warranty set forth in
Paragraph 6 shall become effective only upon Licensor's or its authorized
agent's receipt of a warranty registration card which must be fully completed
and signed by each End-User. End-Users shall also be informed that, by signing
and returning the warranty registration card, End-Users thereby acknowledge that
they have read and understand the End-User License Agreement and intend to be
legally bound by it.
8. DISCLAIMER OF WARRANTY. End-Users shall be informed that except as
expressly provided in the limited warranty described in Paragraph 6, NEITHER
NAVTECH NOR LICENSOR MAKES ANY WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO ANY ITEM OR SERVICE TO BE PROVIDED TO END-USER. WITHOUT
LIMITING THE FOREGOING, NAVTECH EXPRESSLY DISCLAIMS ANY WARRANTIES OF QUALITY,
PERFORMANCE, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. The
foregoing disclaimer shall appear in all uppercase
Amerigon License Agreement -v.6.0- March 10, 1995 C-2
letters, in bold-type face, or shall otherwise be conspicuously set off from the
surrounding text ("Conspicuous Type"). The End-User Agreement shall also
contain, in Conspicuous Type, the following notice: SOME STATES DO NOT ALLOW
THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO
YOU.
9. LIMITATION OF LIABILITY. End-Users shall acknowledge and agree that the
fees charged for the NavTech Database do not include any consideration for
assumption of the risk of consequential or incidental damages or unlimited
direct damages which may arise in connection with End-Users' use of the NavTech
Database. Accordingly, End-Users shall agree that neither NavTech nor Licensor
shall he responsible for any loss of profit or indirect, incidental, special, or
consequential damages, including, without limitation, loss of revenue, data, or
use, incurred by End-Users or any third party arising out of the licensing or
use of the NavTech Database, whether in an action in contract or tort or based
on a warranty, even if NavTech or Licensor has been advised of the possibility
of such damages.
End-Users shall agree that NavTech's and Licensor's maximum liability to an
End-User with respect to all claims arising out of the End-User Agreement or the
use of the NavTech Database shall be limited to the license fee paid by the
End-User for the NavTech Database, depreciated on a straight line basis over a
specific period.
10. WARNING. End-Users shall be warned that:
A. Copies of the NavTech Database reflect conditions as they existed at
various points in time before end users' purchase of copies of the NavTech
Database. Accordingly, copies of the NavTech Database may contain inaccurate or
incomplete data or information due to the passage of time, road construction,
changing conditions, and otherwise.
B. Copies of the NavTech Database are comprised of compilations of data
and information from government and other sources which may contain errors and
omissions. Accordingly, copies of the NavTech Database may contain inaccurate
or incomplete data and information due to the nature and processing of such
sources.
C. Copies of the NavTech Database do not include, analyze, process,
consider or reflect any of the following categories of information, I.E.,
neighborhood quality or safety; population density; availability or proximity of
law enforcement, emergency, rescue, medical, or other assistance; construction
work, zones, or hazards; road and lane closures; legal restrictions (such as
vehicular type, weight, load, height and speed restrictions); road slope or
grade; bridge height, width, weight or other limits; road, traffic or traffic
facilities safety or conditions; weather conditions; pavement characteristics or
conditions; special events; traffic congestion; or travel time.
Amerigon License Agreement -v.6.0- March 10, 1995 C-3
11. DEFAULT AND TERMINATION. The End-User License Agreement shall be
terminable by Licensor or NavTech upon ten (10) days written notice to End-User
for any material failure to comply with any provisions of the End-User License
Agreement; provided, however, that Licensor or NavTech may terminate such
Agreement upon forty-eight (48) hours written notice if End-User fails in any
respect to comply with the requirements described in Paragraphs 1, 2, or 3
above. Upon termination of the End-User Agreement, the license granted under it
shall cease and End-User shall immediately return the NavTech Database
(including all copies) and related documentation to Licensor.
12. EQUITABLE REMEDIES. End-Users shall agree that because of the unique
nature of the NavTech Database and the proprietary rights of NavTech therein,
breach of the End-User License Agreement by End-Users would irreparably harm
NavTech, and monetary damages would be inadequate compensation. End-Users shall
further agree that NavTech shall be entitled to preliminary and permanent
injunctive relief to enforce the provisions of the End-User License Agreement.
13. TRANSFER. End-Users shall agree that neither copies of the NavTech
Database nor their rights under the End-User License Agreement may be
transferred to third parties, unless the transferee is bound by all of the
provisions of the End-User License Agreement.
14. THIRD PARTY BENEFICIARY. NavTech shall be expressly named as a third party
beneficiary of the End-User License Agreement entitled to the same rights and
protections as Licensor, and entitled to enforce the End-User License Agreement
directly against End-Users.
15. SURVIVAL AFTER TERMINATION. The End-User License Agreement shall provide
that at least the provisions dealing with indemnification by End-Users,
limitation of liability, return of all copies of the NavTech Database after
termination of the license and NavTech's third party beneficiary status shall
survive termination of the End-User License Agreement.
16. GOVERNING LAW. This Agreement shall be construed and governed by the
substantive laws of Delaware without giving effect to the conflict of laws
provisions.
Amerigon License Agreement -v.6.0- March 10, 1995 C-4
SAMPLE END-USER LICENSE AGREEMENT
IMPORTANT--PLEASE READ THIS END-USER LICENSE AGREEMENT CAREFULLY BEFORE USING
THE NAVTECH DATABASE. THIS AGREEMENT CONTAINS IMPORTANT WARRANTY AND OTHER
INFORMATION.
This is a legal agreement between you, the end user, and Amerigon,
Incorporated ("Licensor"), the terms and conditions of which are set forth
below. By using your copy of the NavTech Database, you agree to the terms and
conditions of this License Agreement, so you should read the following terms and
conditions carefully BEFORE you use your copy of the NavTech Database. [If the
NavTech Database is being distributed simultaneously with a Licensed Product,
also include the following sentence: You also must sign and return the
accompanying warranty registration card to Licensor in order to activate your
warranty rights and to further acknowledge your acceptance of the License
Agreement.] If you do not agree with the terms and conditions of this License
Agreement, do not use your copy of the NavTech Database, but rather return it,
along with all other accompanying items, to your supplier for a refund.
1. LICENSE GRANT. Licensor grants you a non-exclusive, nontransferable
license to use your copy of the NavTech Database and related documentation for
your personal use or, if the end user is a business, for use only in your
business' internal operations, solely as a component part of your Amerigon
AudioNav System. This license does not include the right to grant sublicenses.
2. FURTHER LIMITATIONS ON USE. You are permitted to use your copy of the
NavTech Database only for your own internal purposes, and not for service
bureau, time-sharing or other similar purposes. You shall not modify,
decompile, disassemble, or reverse engineer any portion of the NavTech Database.
You may make one copy of the NavTech Database for archival or backup purposes
only. Any such copy of the NavTech Database must display the copyright notice
and information relating to proprietary rights as they appear on your original
copy of the NavTech Database, including, without limitation, any "limited
rights" legend. You shall not copy the documentation provided with the NavTech
Database.
3. OWNERSHIP. You acknowledge that the NavTech Database, related
documentation and the copyrights and other proprietary rights therein are owned
by Navigation Technologies Corporation ("NavTech") and that Licensor has
obtained the right to grant you a license to use such components on the terms
and conditions contained in this End-User License Agreement. All rights not
expressly granted in this End-User License Agreement are expressly retained by
and for NavTech.
Amerigon License Agreement -v.6.0- March 10, 1995 C-5
4. GOVERNMENT END-USERS. If the NavTech Database is being acquired by or on
behalf of the United States government or any other entity seeking or applying
rights similar to those customarily claimed by the United States government, the
NavTech Database and related documentation are licensed with "limited rights."
Utilization of the NavTech Database is subject to the restrictions specified in
the "Rights in Technical Data and Computer Software" clause at DFARS
252.227-7013, or the equivalent clause for non-defense agencies. Manufacturers
are Navigation Technologies Corporation, 740 East Arques Avenue, Sunnyvale,
California 94086-3833, USA and [FILL IN LICENSOR'S NAME AND ADDRESS.]
5. INDEMNITY. You agree to indemnify, defend and hold NavTech, including its
licensors, assignees, subsidiaries, affiliated companies, and the respective
officers, directors, employees, shareholders, agents and representatives of each
of them, free and harmless from and against any liability, loss, injury, demand,
cost, expense, or claim of any kind or character, including but not limited to
attorney's fees, arising out of (a) any use of the NavTech Database, or (b) any
breach of any warranties or representations made by you in this End-User License
Agreement or of your obligations under this End-User License Agreement.
6. LIMITED WARRANTY. NavTech warrants that, for a period of time of 12 months
after your purchase of your copy of the NavTech Database, it will conform
substantially to NavTech's Criteria for Accuracy and Completeness existing as of
the date you purchased your copy of the NavTech Database. Your sole remedy if
the NavTech Database does not perform in accordance with this limited warranty
is that NavTech will use all reasonable efforts to repair or replace your
nonconforming copy of the NavTech Database or, in NavTech's discretion, NavTech
will refund the license fees paid by or for you for your nonconforming copy of
the NavTech Database. Except as expressly provided in this section, neither
NavTech nor Licensor warrants or makes any representations regarding the use or
results of the use of the NavTech Database or related documentation in terms of
its correctness, accuracy, reliability, or otherwise. NavTech does not warrant
that the NavTech Database is or will be error free. No oral or written
information or advice provided by Licensor or any other person shall create a
warranty or in any way increase the scope of the limited warranty described
above.
7. END-USER SIGNATURE. [NOTE: INCLUDE THIS SECTION ONLY IF THE NAVTECH
DATABASE IS BEING DISTRIBUTED SIMULTANEOUSLY WITH A LICENSED PRODUCT.] The
limited warranty set forth in Section 6 shall become effective only upon
Licensor's receipt of the attached warranty registration card which must be
fully completed and signed by you. By signing and returning the warranty
registration card to Licensor, you acknowledge that you have read and understand
this End-User License Agreement and that you
Amerigon License Agreement -v.6.0- March 10, 1995 C-6
intend to be legally bound by all of the terms and conditions of this End-User
License Agreement.
8. DISCLAIMER OF WARRANTY. Except as expressly provided in the limited
warranty set forth in Section 6, NEITHER NAVTECH NOR LICENSOR MAKES ANY
WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO ANY
ITEM OR SERVICE TO BE PROVIDED TO YOU. WITHOUT LIMITING THE FOREGOING, NAVTECH
EXPRESSLY DISCLAIMS ANY WARRANTIES OF QUALITY, PERFORMANCE, MERCHANTABILITY, OR
FITNESS FOR A PARTICULAR PURPOSE. SOME STATES DO NOT ALLOW THE EXCLUSION OF
IMPLIED WARRANTIES, S0 THE ABOVE EXCLUSION MAY NOT APPLY TO YOU.
9. LIMITATION OF LIABILITY. The fees charged for your copy of the NavTech
Database do not include any consideration for assumption of the risk of
consequential or incidental damages or unlimited direct damages which may arise
in connection with your use of the NavTech Database. Accordingly, NEITHER
NAVTECH NOR LICENSOR SHALL BE RESPONSIBLE FOR ANY LOSS OF PROFIT OR INDIRECT,
INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION,
LOSS OF REVENUE, DATA, OR USE, INCURRED BY YOU OR ANY THIRD PARTY ARISING OUT OF
YOUR USE OF THE NAVTECH DATABASE, WHETHER IN AN ACTION IN CONTRACT OR TORT OR
BASED ON A WARRANTY, EVEN IF NAVTECH OR LICENSOR HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. NavTech's and Licensor's maximum liability to you
with respect to all claims arising out of this End-User Agreement or your use of
the NavTech Database shall be limited to the license fee paid by you for your
copy of the NavTech Database, depreciated on a straight line basis over a
specific period.
10. WARNINGS.
A. Copies of the NavTech Database reflect conditions as they existed at
various points in time before end users' purchase of copies of the NavTech
Database. Accordingly, copies of the NavTech Database may contain inaccurate or
incomplete data or information due to the passage of time, road construction,
changing conditions, and otherwise.
B. Copies of the NavTech Database are comprised of compilations of data and
information from government and other sources which may contain errors and
omissions. Accordingly, copies of the NavTech Database may contain inaccurate
or incomplete data and information due to the nature and processing of such
sources.
C. Copies of the NavTech Database do not include, analyze, process,
consider or reflect any of the following categories of information, I.E.,
neighborhood quality or safety; population density; availability or proximity of
law enforcement, emergency, rescue, medical, or other assistance; construction
work, zones, or hazards; road and lane closures; legal restrictions (such as
Amerigon License Agreement -v.6.0- March 10, 1995 C-7
vehicular type, weight, load, height and speed restrictions); road slope or
grade; bridge height, width, weight or other limits; road, traffic or traffic
facilities safety or conditions; weather conditions; pavement characteristics or
conditions; special events; traffic congestion; or travel time.
11. DEFAULT AND TERMINATION. This End-User License Agreement is terminable by
Licensor or NavTech upon ten (10) days written notice to you for any material
failure to comply with any provisions of this End-User License Agreement;
provided, however, that Licensor or NavTech may terminate such Agreement upon
forty-eight (48) hours written notice if you fail in any respect to comply with
the requirements described in Sections 1, 2, or 3 above. Upon termination of
this End-User License Agreement, the license granted under it shall cease and
you shall immediately return your copies of the NavTech Database and related
documentation to Licensor or NavTech.
12. EQUITABLE REMEDIES. You acknowledge that because of the unique nature of
the NavTech Database and the proprietary rights of NavTech therein, breach of
this End-User License Agreement by you would irreparably harm NavTech, and
monetary damages would be inadequate compensation. You agree that NavTech shall
be entitled to preliminary and permanent injunctive relief to enforce the
provisions of this End-User License Agreement.
13. TRANSFER. You agree that neither your copies of the NavTech Database nor
your rights under this End-User License Agreement may be transferred to third
parties, unless the transferee is bound by all of the provisions of this
End-User License Agreement.
14. THIRD PARTY BENEFICIARY. NavTech is hereby expressly named as a third
party beneficiary of this End-User License Agreement. Accordingly, you agree
that NavTech is entitled to the same rights and protections under this End-User
License Agreement as Licensor, and NavTech is entitled to enforce this End-User
License Agreement directly against you.
15. SURVIVAL AFTER TERMINATION. The provisions of this End-User License
Agreement contained in Section 5 (Indemnity), Section 9 (Limitation of
Liability), Section 11 (regarding Return of All Copies of the NavTech Database
After Termination), and Section 14 (NavTech's Third Party Beneficiary Status)
shall survive termination of this End-User License Agreement.
16. GOVERNING LAW. This Agreement shall be governed by the laws of the State
of Delaware, without giving effect to its conflict of laws provisions.
Amerigon License Agreement -v.6.0- March 10, 1995 C-8
EXHIBIT D
OPPORTUNITIES FOR ADDITIONAL LICENSE FEES
Subject to further discussion and mutual agreement, Customer will pay additional
license fees to NavTech for enhancements to the Navigation Database which add
functionality and/or reduce the work required to be performed by Customer with
respect to the Navigation Database. Potential items for Customer and NavTech to
discuss in this regard include the following:
ADDITIONAL FUNCTIONALITY:
- Predicted road speed by time of day and day of week
- Locations of traffic lights or stop signs
- Yellow pages data including complete business listings with
comprehensive data such as phone number, short descriptions of
offerings, business type classifications, restaurant reviews and the
like
- Ranking of priorities of multiple location occurrences (e.g., if there
are 10 addresses called "100 Main" street in a database, which
locations are most likely to be used versus least likely
REDUCTIONS IN WORK:
- Identifying Road "Pathologies" (i.e., intersection configurations that
cause routing ambiguity)
- Phonetic street pronunciation
- Simplified egress and ingress instruction set for major landmarks
(e.g., airports, Disneyland, etc.)
- Recorded street names
- Field testing of AudioNav units in a particular metro area
- Map editing, including off-ramp signage, quality checking and uniform
naming of points of interest
- Identification of "Preferred" names for roadways and points of
interest
Amerigon License Agreement -v.6.0- March 10, 1995 D-1
EXHIBIT E
SPECIFICATION OF METROPOLITAN AREAS
A "Metropolitan Area" shall mean and include NavTech's Detailed City Database
coverage for each of the following cities and their respective metropolitan
areas:
Albuquerque, NM Oklahoma City, OK
Atlanta, GA Omaha/Lincoln, NE
Austin/San Antonio, TX Orlando, FL
Baltimore, MD Philadelphia, PA
Boston, MA Phoenix, AZ
Buffalo/Niagara Falls, NY Pittsburgh, PA
Central Valley Area, CA Portland, OR
Charlotte, NC Raleigh/Durham, NC
Chicago, IL Richmond, VA
Cincinnati/Dayton, OH Sacramento, CA
Cleveland, OH Salt Lake City, UT
Columbus, OH San Diego,CA
Dallas/Ft. Worth, TX San Francisco Bay Area, CA
Daytona Beach, FL Santa Barbara, CA
Denver/Boulder, CO Seattle, WA
Detroit, MI St. Louis, MO
Flint, MI Toledo, OH
Grand Rapids, MI Toronto, Canada
Greensboro/Winston/Salem, NC Tulsa, OK
Hartford, CT/Springfield, MA Washington, D.C.
Houston, TX
Indianapolis/Kokomo, IN
Jacksonville, FL
Kansas City, MO
Lansing, MI
Las Vegas, NV
Los Angeles, CA
Memphis, TN
Miami/Ft. Lauderdale/West Palm
Beach, FL
Milwaukee, WI
Minneapolis/St. Paul, MN
Nashville, TN
New Jersey (northern)
New Orleans, LA
New York, NY
Amerigon License Agreement -v.6.0- March 10, 1995 E-1
EXHIBIT 10.22.3
MODIFICATION TO SECURITY AND LOAN AGREEMENT ("Security and Loan Agreement")
DATED NOVEMBER 20, 1995, BETWEEN AMERIGON, INC. (BORROWER) AND IMPERIAL BANK
AND THE ADDENDUM THERETO (Collectively, THE SECURITY AND LOAN AGREEMENT AND
THE ADDENDUM ARE REFERRED TO AS THE "AGREEMENT").
Effective June 26, 1996, the Agreement is hereby amended to include the
following:
- - Late Charges. If any installment payment, interest payment, principal
payment or principal balance due hereunder is delinquent ten (10) or more
days, Borrower agrees to pay Bank a late charge in the amount of 5% of the
payment so due and unpaid, in addition to the payment; but nothing in this
paragraph is to be construed as any obligation on the part of the Bank to
accept payment of any payment past due or less than the total unpaid
principal balance after maturity. All payments shall be applied first to any
late charges owing, then to interest and the remainder, if any, to principal.
- - The Maturity of the Agreement shall be extended through September 30, 1996.
- - Except as provided above, the Agreement remains unchanged.
- - This Modification is effective as of June 26, 1996, and the parties hereby
confirm that the Agreement as modified is in full force and effect.
AMERIGON, INC. "BORROWER"
By: /s/ R. John Hamman, Jr.
------------------------------------
R. John Hamman, Jr., Vice President
IMPERIAL BANK
By: /s/ Julie Yen
------------------------------------
Julie Yen, Senior Vice President
Exhibit 10.22.4
[LETTERHEAD OF IMPERIAL BANK]
December 4, 1996
Mr. John Hamman, Jr.
Amerigon, Inc.
404 E. Huntington Drive
Monrovia, CA 91106
Re: Loan #00709056728-3
Dear Mr. Hamman:
Imperial Bank has approved an extension of your credit facility shown above
as evidenced by that Security and Loan Agreement and related Credit Terms and
Condition Agreement both dated November 20, 1995, as amended on June 26,
1996, from its current maturity of November 30, 1996 to December 31, 1996.
Also, Imperial Bank will forbear in exercising any rights under the loan
documents in respect to the company's current and anticipated non-compliance
with any of the financial covenants contained therein until December 31, 1996.
Except as modified and extended hereby, the existing documentation as amended
concerning your obligation remains in full force and effect.
Sincerely,
/s/ Valerie C. Brosset
Valerie C. Brosset
Commercial Loan Officer
AMERIGON
CLIENT CONTRACT
As of April 1, 1996, Technology Strategies & Alliances, a California
corporation ("TS&A"), hereby agrees with Amerigon, a California corporation
("Amerigon") as follows:
1. ENGAGEMENT
1.1 SERVICES Amerigon engages TS&A as an independent consultant to
establish corporate partnerships to exploit technology underlying Amerigon's
Interactive Voice System (IVS-TM-) in new vertical markets. The tasks and
timeframe over which this project will be completed is outlined in Schedule B.
1.2 EXCLUSIVITY Amerigon will use TS&A on an exclusive basis to establish
the subject corporate partnerships during the term of this contract.
1.3 STAFFING The services under this contract will be performed by TS&A
working as a team with Amerigon. The TS&A team members will consist of
Lawrence W. Roberts, as Project Manager, assisted by colleagues Eliott D.
James, L. Owen Brown and Grant A. Dove. TS&A will be assisted by independent
consultant, Robert S. winter. TS&A partner Bob O. Evans, who currently
resides in Taiwan, may provide assistance on a targeted basis.
2. FEES AND EXPENSES Amerigon shall pay TS&A a retainer fee and a
transaction fee as follows. The retainer is owed independent of the
successful completion of a transaction. The transaction fee is owed only to
the extent that a successful transaction is consummated with the BONE FIDE
assistance of TS&A for the IVS technology between Amerigon and a corporate
partner that is identified in the mutually agreed to list set forth in
Schedule A. Amerigon and TS&A shall use good faith to distinguish between
divisions, subsidiaries, etc. of large companies where TS&A has made a BONE
FIDE contact from other divisions, etc. that are part of these same large
companies but were not involved in TS&A's efforts.
2.1 RETAINER FEE Amerigon shall pay TS&A a cash fee of twelve thousand
dollars ($12,000) per month for five months.
2.2 TRANSACTION FEES
Amerigon shall pay TS&A a transaction fee for each type of relationship
as follows:
2.2.1 CONSTRUCTED ALLIANCE PERCENTAGE TRANSACTION FEES
For consummating constructed alliance agreements for each candidate, Amerigon
constructed alliance agreement as indicated:
a. Ten percent (10%) of net licensing fees and royalties paid to Amerigon
or accrued over a four year period from the date of inception of a
strategic alliance.
b. Five percent (5%) of development revenues received, accrued or
contracted over a two year period.
c. Three percent (3%) of sales made directly to an alliance partner or
distribution commission paid to Amerigon from an alliance partner over
two years, where such fees accrue on product sales defined at inception
of the alliance or from products that are a direct technological
derivative therefrom.
The payments may be staged to TS&A as the financial benefit is received by
Amerigon. The parties may elect, at any time, to negotiate in good faith a
single payment per partner.
2.2.2 EQUITY INVESTMENT TRANSACTION FEES
Although an equity investment is not sought within the scope of this
engagement, should such an investment occur as part of the corporate
partnering activities, Amerigon shall pay TS&A a transaction fee equal to
five percent (5%) of the first $5 million in total value of the equity
transaction plus a transaction fee equal to two percent (2%) of the total
value of the equity transaction that exceeds $5 million. The total value of
the transaction shall include: the amount of cash, the fair market value of
any securities, indebtedness assumed or other consideration paid at the
closing of the transaction, plus the net present value of any future
payments, as mutually agreed in good faith by Amerigon and TS&A.
Alternatively, payment to TS&A for future payment values may be made
concurrently as value is received by Amerigon.
2.3 EXPENSES
Travel, meals, lodging, legal and other specific out-of-pocket expenses
incurred by TS&A in support of this Contract, approved in advance by
Amerigon, will be reimbursed by Amerigon and will be billed to Amerigon on a
regular basis. Such expenses are expected to average less than $3,000 per
month.
3. TERMS AND CONDITIONS
All expenses are payable within thirty (30) days of billing. Retainer fees
are due on the first day of each month in advance, and transaction fees are
due on the closing of the transaction.
3.1 TERMINATION
The initial term of this Contract will be one (1) year from the date of
execution. Thereafter, the term shall be extended automatically on a
month-to-month basis, unless earlier terminated. Notwithstanding the
foregoing, after four (4) months either party may terminate this Contract at
any time upon thirty (30) days prior written notice. In any event, the
provisions of Section 3.3 shall survive pursuant to the details of Section
3.3. The provisions of Section 2.2 shall survive any termination of this
Contract by Amerigon for a period of one (1) year from the date of
termination for those potential partners mutually agreed to in Schedule A
where TS&A has initiated bone fide contacts.
3.2 INDEMNIFICATION
Amerigon hereby agrees to indemnify and hold harmless TS&A and its officers,
directors, employees and agents against any losses, claims, damages or
liabilities (including legal fees and expenses) arising from this Contract or
TS&A's relationship with Amerigon, unless and to the extent such losses,
claims, damages or liabilities are proven to be the result of the gross
negligence or willful misconduct of TS&A or its officers, directors,
employees or agents.
3.3 CONFIDENTIAL INFORMATION
All confidential or proprietary information furnished or disclosed under this
engagement shall be governed by the Confidentiality Agreement, executed
separately as part of Schedule C.
3.4 RELATIONSHIP BETWEEN PARTIES
In performing its services under this Contract. TS&A shall operate as an
independent contractor and shall not act as or be an agent or employee of
Amerigon. TS&A shall in no way have authority to bind or obligate Amerigon in
any respect.
3.5 COMPLIANCE WITH LAWS
TS&A and Amerigon agree to conduct their business in accordance with the laws
of the State of California and the United States.
3.6 ENTIRE AGREEMENT
This Contract constitutes the entire agreement between Amerigon and TS&A
relating to the subject matter set forth herein. It supersedes all prior
agreements between the parties, whether oral or written, and may only be
amended in writing, signed by both parties.
3.7 GOVERNING LAW
This Contract shall be governed in all respects by the laws of the State of
California, without regard to conflict of laws principles.
Accepted and effective this First day of April, 1996.
----- -----
TECHNOLOGY STRATEGIES AMERIGON
& ALLIANCES
By: /s/ Lawrence W. Roberts By: /s/ Joshua M. Newman
-------------------------- --------------------------
Title: President Title: Vice President
----------------------- -----------------------
SCHEDULE A
CORPORATE PARTNERS SOLICITED
SCHEDULE B
IVS PROJECT SCOPE AND PROCESS OUTLINE
TS&A proposes to act as an investment banker in the project, taking primary
responsibility for making contacts, follow-up and pursuit of agreements. We
also will be actively engaged in negotiations on a team basis with Amerigon.
Our objective is to achieve one or more partnerships with substantial and
lasting benefit to Amerigon.
While all TS&A principals will be involved, Larry Roberts will be the project
leader, with active assistance from Robert Winter. Messrs. Roberts, James and
Brown already have spent time together in preliminary brainstorming.
We expect that Joshua Newman will be the primary interface at Amerigon, and
that Lon Bell will be available at key selling and negotiating points. We do
not envisage that Josh's time commitment would exceed one day per week. We
anticipate calling on Amerigon for some support in preparing presentations.
You asked for a view of process and timelines:
- - We believe there is a fair amount of front-end effort required to
establish a matrix of products and markets, identify potential partners on
a more formalized basis than what you and I created during our meeting,
understand competitive advantages and review competing technologies, and
establish a semi-custom presentation that reflects the foregoing and the
strategic opportunity we wish to present to candidate partners. These
activities should consume a month, at which time we will be well positioned
to initiate contacts with a prioritized list of firms.
- - Commencing - mid-May, we would initiate company contacts on a concentrated
basis using all the participants. Our practice is to attempt to target the
most relevant executive rather than a generic CFO, COO or the like. Our
preference is to have direct contact via the phone if possible, followed
by a letter or fax.
- - By early June we should be in initial meetings with targets, a process
that probably stretches over the summer. Goal of the meetings will be to
get them sufficiently interested to undertake an internal review of the
opportunity and to review the technology in detail.
- - By Labor Day, we expect to be in negotiations with several firms, leading
to a mou by early October, definitive agreements by early to mid-November
and a close before year end.
SCHEDULE C
SECRECY AGREEMENT
AGREEMENT made and entered into as of 01 April 1996 by and between
Technology Strategies & Alliances, a California corporation, acting for and on
behalf of itself and all of its subsidiaries and having offices at 3000 Sand
Hill Road, Building 2, Suite 235, Menlo Park, CA 94025 ("TS&A"), and AMERIGON
INCORPORATED, a California corporation with offices at 404 E. Huntington
Drive, Monrovia, California 91016 ("AMERIGON").
WHEREAS, AMERIGON wishes to disclose to TS&A details of its Interactive
Voice System (IVS-TM) technology and general business plans, in order that
TS&A may be able to develop a strategic partner for AMERIGON's IVS
technology; and
WHEREAS, TS&A wishes to disclose to AMERIGON the details of TS&A's
potential strategic partners for Amerigon's IVS technology, in order that
AMERIGON may be able to work with TS&A in developing a strategic partner for
AMERIGON's IVS technology; and
WHEREAS, AMERIGON considers the details of its Interactive Voice System
technology and general business plans to be trade secrets of and proprietary
to AMERIGON; and
WHEREAS, TS&A considers the details of its potential strategic partners
for Amerigon's IVS technology to be trade secrets of and proprietary to TS&A;
NOW THEREFORE, in view of the foregoing premises and in consideration of
the mutual promises and covenants contained in this Agreement, AMERIGON and
TS&A agree as follows:
1. PROPRIETARY INFORMATION. "Proprietary Information" means:
(a) all samples, models, and prototypes of AMERIGON's Interactive
Voice System technology and general business plans delivered to TS&A by
AMERIGON; and all samples, models, and prototypes of TS&A's potential
strategic partners for Amerigon's IVS technology delivered to AMERIGON by
TS&A; and
(b) any other information disclosed to TS&A by AMERIGON relating to
AMERIGON's Interactive Voice System technology and general business plans
or to AMERIGON by TS&A relating to TS&A's potential strategic partners
for Amerigon's IVS technology, provided such other information is
disclosed either (i) in writing or other tangible form, bearing a label
or stamp identifying the information as secret, confidential, or
proprietary or (ii) orally with a designation of such information as
secret, confidential, or proprietary prior to or during oral disclosure
and with a subsequent reduction of such information to writing, the
writing being labeled as set out in Section 1(b)(i) above and sent to
recipient within thirty (30) days after the oral disclosure.
2. USE AND OBLIGATION OF CONFIDENCE. In consideration of receiving any
Proprietary Information from discloser and for a period of 5 years after
recipient
receives each item of Proprietary Information from discloser, recipient
(including all of its subsidiaries) shall:
(a) use such item of Proprietary Information only to make technical
and economic evaluations pertinent to the purposes above stated and for
no other purpose; that is, recipient will not use the Proprietary
Information to design, make or sell any product;
(b) hold the Proprietary Information in confidence and disclose it
only to recipient's employees (including employees of recipient's
subsidiaries) who will use the Proprietary Information only in accordance
with Section 2(a) above, unless otherwise agreed in writing by
discloser; and
(c) not remove any item of Proprietary Information from the United
States of America.
Recipient's obligations under this Section 2 will survive the termination of
this agreement.
3. EXCEPTIONS. Notwithstanding Sections 1 and 2, this Agreement shall
impose no obligation upon recipient with respect to any Proprietary
Information which (a) is now or subsequently becomes publicly known or
available by publication, commercial use or otherwise without breach of this
Agreement by recipient; (b) is known to recipient at the time of receipt; (c)
is subsequently rightfully furnished to recipient by a third person without a
restriction on disclosure; (d) is independently developed by employees of
recipient who have not had access to Proprietary Information; or (e) is
delivered to recipient after the expiration of this Agreement.
4. NO LICENSE. Neither the execution of this Agreement nor the
furnishing of any Proprietary Information hereunder shall be construed as
granting, either expressly or by implication, estoppel; or otherwise, any
license under or title to any invention or patent now or hereafter owned or
controlled by either party.
5. NO COMMITMENT TO FURTHER AGREEMENTS; NO CLAIMS. This Agreement is
not, and shall not be construed to be, an obligation to enter into any other
agreement or contract or to result in any claim whatsoever by either party
against the other party for reimbursement of cost for any effort expended.
6. NO OWNERSHIP OR COPYING. All samples, models, prototypes,
photographs, drawings, information, and data submitted to recipient under
this Agreement will remain the property of discloser, shall not be copied or
reproduced by recipient without discloser's written consent, and may be
recalled by discloser at any time. Upon receipt of a written request from
discloser for return of such samples, models, prototypes, photographs,
drawings, information, and data, recipient will immediately deliver to
discloser all such samples, models, prototypes, photographs, drawings,
information, and data, including all copies, reproductions and facsimiles.
7. WORKING WITH OTHERS. This Agreement will not preclude either party
from working with others in any connection, so long as the obligations of
Section 2 are respected.
8. TERM. This agreement shall be effective on the date written in the
first paragraph (unnumbered) of this Agreement, upon execution by both
parties. Except for the rights and obligations of Section 2 above with
respect to Proprietary Information disclosed prior to expiration, this
Agreement shall expire 1 year after the date written above, unless earlier
terminated upon written notice by one party to the other. Early termination
upon written notice shall be effective 30 days after mailing said notice.
Each party's rights and obligations under Section 2 above shall terminate as
to particular items of Proprietary Information in accordance with the time
limitation of Section 2 or one or more of the exceptions of Section 3.
9. NO ASSIGNMENT. Neither party shall assign or transfer any of its
rights or obligations under this Agreement without the prior written consent
of the other party, except to a successor in ownership of substantially all
of party's assets, which successor in ownership shall expressly assume in
writing the performance of the terms and conditions of this Agreement.
10. RELATIONSHIP OF THE PARTIES. The relationship of the parties shall
be that of independent contractors, and nothing contained herein shall be
deemed to create any relationship of agency, joint venture, or partnership.
Neither party hereto shall have any power to commit, contract for or
otherwise obligate the other party to any third person.
11. ENTIRE AGREEMENT; CHOICE OF LAW. This Agreement is the entire
Agreement between the parties and supersedes all other agreements and
understandings relating to the subject matter hereof. This Agreement (a) may
be amended only by a written amendment duly executed by the parties and (b)
will be governed by and construed in accordance with the law of the State of
California. Each of the parties submits to the exclusive jurisdiction of the
courts located in the State of California in connection with any action
brought under this Agreement. Further, the terms of the Agreement are in lieu
of and override any contrary terms or conditions, preprinted or otherwise,
that may appear on any form used by either party to purchase or offer to
purchase samples, models, or prototypes from the other party or (b) by either
party to acknowledge such a purchase or accept such an offer.
IN WITNESS WHEREOF, the parties have caused this Secrecy Agreement to be
executed by their duly authorized representatives.
AMERIGON INCORPORATED Technology Strategies & Alliances
By /s/ JOSHUA NEWMAN By /s/ LAWRENCE W. ROBERTS
------------------------------ ------------------------------
Joshua Newman
Vice President
TABLE OF CONTENTS
PAGE
PREAMBLE 1
RECOGNITION 1
RESPONSIBILITIES 1
UNION SECURITY & CHECK-OFF 3
HOURS OF EMPLOYMENT 4
REPORTING, MINIMUM & CALL BACK PAY 4
SHIFT TRANSFER 5
REST PERIODS 5
OVERTIME 5
PERSONAL LEAVE TIME 6
HOLIDAYS 6
BEREAVEMENT PAY 6
WAGE RATES 7
LEAD PERSON PAY 8
JOB CLASSIFICATIONS/PROMOTIONS LADDERS 8
NEW OR REVISED JOB CLASSIFICATION 9
SENIORITY 9
UNION REPRESENTATION 9
ACCESS TO FACILITY 10
GRIEVANCE ADJUSTMENT & ARBITRATION 10
TEMPORARY OFF-PLANT AND TRAVEL ASSIGNMENT 12
NON-DISCRIMINATION 12
SAVING CLAUSE 12
HEALTH AND WELFARE 12
PENSION 13
DURATION 14
PREAMBLE
This Agreement is made and entered into this FIRST day of June, 1996 by and
between AMERIGON, INCORPORATED, whose office is currently located at 404 East
Huntington Drive, Monrovia, California 91016-3600, hereinafter referred to as
AMERIGON, and the INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS,
DISTRICT LODGE 725, hereinafter referred to as the IAM.
PURPOSE OF AGREEMENT
The purpose of this Agreement is to promote continuity of friendly relations
between Amerigon and the IAM and to define wage, hours and conditions of
employment for employees covered by the Agreement, and to jointly develop a
partnership that will accomplish goals of mutual benefit to all employees,
customers, suppliers, the Union and the communities in which we function while
at the same time retaining and creating more good and decent jobs with Amerigon.
RECOGNITION
AMERIGON recognizes the IAM, its designated agents and representatives, its
successors, as the sole and exclusive collective bargaining agent on behalf of
all of the employees of the company at the facilities in Alameda County and
elsewhere (excluding the corporate facilities currently located at 404 East
Huntington Drive, Monrovia, California) within the bargaining unit defined
below, with respect to wages, hours and all other terms or conditions of
employment.
a. All vehicle technicians, machinists, welders, planners, operators, shipping
and receiving, reproduction and development production and maintenance
employees employed in the manufacture of vehicles; and
b. excluding all professionals, office clerical, and other employees employed
in the production of electronic sensors, controls and vehicle guidance
systems and supervisors, as defined in the act.
From time to time, it may be necessary for engineers and supervisory
personnel to work with bargaining unit employees. However, it is understood
that non-bargaining unit employees shall not perform bargaining unit work
while those who normally perform such work are on layoff or where such
performance would create a reduction in force of the bargaining unit
employees.
RESPONSIBILITIES
AMERIGON MANAGEMENT WILL BE RESPONSIBLE FOR:
- - Discharge decisions;
- - Assigning jobs;
- - Providing company tools:
- - Promotion decisions;
- - Disciplinary decisions;
- - Equipment and property;
- - Necessary workforce reduction.
1
Amerigon management has approval authority for these decisions unless otherwise
covered by the labor agreement. Information will be provided to the IAM either
voluntarily or by request.
JOINTLY DEVELOP/IMPLEMENT WITH JOINT APPROVAL
It is the full intent of the parties to work together to insure the success in
this endeavor of partnering of responsibilities. To that end the parties will
try a new approach to working together.
Each party may present an idea or a concept to the other. We will then jointly
review and, if acceptable, develop the idea with a plan for implementation for
the following topics:
- - Screening of applicants and making recommendations for hiring;
- - Contracting in or contracting out of components and sub-components that
relate to the production plan;
- - Responding to the production schedule such as, overtime hours of work and
- - need for additional resources including equipment, material and personnel;
- - Skill requirements; training needs in order to create a multi skill
environment;
- - Reasonable rules and regulations.
Intentions to do the above will be communicated in a timely manner with the
Union. Both parties will attempt to reach consensus agreement prior
to implementation. Any decisions concerning the above matters enacted without
consensus may be subject to the grievance procedure.
However, if the procedure for joint development and joint approval does not work
to the satisfaction of either the Union or the Company, one party shall notify
the other in writing and the practice of joint development and joint approval
shall be discontinued .
SHARED RESPONSIBILITIES
Amerigon management and the IAM share responsibility for all or part of the
following topics:
- - Safety and health of employees;
- - Investigations;
- - Represent employees and their work;
- - Payment of dues;
- - Community involvement (i.e., United Way, Blood Drives, Community Services
Committee);
- - Support teaming/team/work;
- - Require employees to follow rules;
- - Involve the right people in decision-making;
- - Protect the environment (i.e., recycling, pollution control, conservation
of energy);
- - Leadership for a successful company;
- - High quality of work;
- - Solve problems at the lowest level;
2
- - Preservation of jobs;
- - Promote maximum efficiency.
Where information is developed, it will be provided either voluntarily or by
request.
EMPLOYEES' RESPONSIBILITIES (AMERIGON AND IAM MEMBERS)
In addition to the roles and responsibilities for the IAM and Amerigon, all of
us have to be responsible and accountable for our following actions:
- - Work safely;
- - Provide personal tools (when required);
- - Notice for family and medical leave;
- - Do high quality work;
- - Follow rules and regulations;
- - Work efficiently
- - Offer suggestions for improvement where you can;
- - Resolve problems at the lowest level;
- - Be responsible for your actions;
- - Work within the labor agreement
- - Change of address to Personnel Records.
Through shared responsibility we will ensure our success in the future.
UNION SECURITY AND CHECK-OFF
All present employees covered by this Agreement shall, as a condition of
continued employment, become members of the IAM by the thirty-first (31) day
following the execution of this agreement, and shall remain members of the IAM
during the term of the agreement, to the fullest extent permissible by law.
All new employees covered by this agreement shall, as a condition of employment,
become members of the IAM by the thirty-first (31) day following the beginning
of employment, and shall remain members during the term of this agreement, to
the fullest extent permissible by law.
Amerigon will, within three (3) working days after receipt of notice from the
Union, discharge any employee who has failed to comply with the provisions of
the preceding paragraphs.
The IAM shall indemnify and save Amerigon harmless against any and all claims,
demands, lawsuits or other forms of liability that may arise out of or by reason
of action taken by the company at the direction of the union in making payroll
deductions of membership dues, reinstatement, initiation fees, or discharge of
an employee at the IAM's request in accordance with the paragraph above.
Upon receipt of authorization signed by the employee, Amerigon shall deduct from
the employee's pay the initiation fee, or reinstatement fee and monthly dues or
fees payable to the IAM, in an amount directed by the Union for the period
specified, so long as the employee remains in the bargaining unit.
3
HOURS OF EMPLOYMENT
Forty hours shall constitute a work week, eight hours per day, five days per
week, Monday through Friday.
The regularly established starting time of the Day Shift shall be recognized as
the beginning of the twenty-four hour work day period. When irregular or broken
shifts are worked, overtime rates shall apply before the regular starting time
and after the regular quitting time of the shift on which the employee is
regularly employed.
First, or regular day shift: A consecutive eight and one-half hours period,
between the hours of 6:00 a.m. and 5:30 p.m., less thirty minutes for meals on
the employee's time. Pay for a full shift period shall be a sum equivalent to
eight times the regular hourly rate with no premium. By mutual agreement between
the Employer and the Union the lunch period may be extended to one hour,
provided, however, that it does not change the hours of the second shift.
Second shift: A consecutive eight and one-half hour period, between the hours
of 2:30 p.m. and 2:00 a.m., less thirty minutes for meals on the employee's
time. Pay for the swing shift period shall be a sum equivalent to eight (8)
times the employee's regular rate including a fifty cent (50-cent) per hour
shift differential.
Three Shift Operation: The hours worked, should a three shift operation be
established, will be a consecutive eight hour period, less thirty minutes for
meals, between the hours of 10:00 p.m. and 8:00 a.m. Pay for the grave shift
shall be a sum equivalent to eight (8) times the employee's regular rate
including a fifty cent ($.50) per hour shift differential.
For work on any shift less than the full shift period, pay shall be for the
number of hours worked, provided such amount not be less than the specified
minimum pay.
REPORTING, MINIMUM & CALL BACK PAY
1. Any employee reporting for work at the regular starting time on any day at
the request of Amerigon and not permitted to work on such day shall receive
four hours pay at appropriate rate.
Any employee shall be deemed as requested to report on his regular shift
unless notified by any authorized Amerigon representative to the contrary
prior to the close of the previous day's work or notified by telephone or
written message at least four hours before his regular start time.
2. Employees who start work, at the regular starting time, shall received a
minimum of four hours work or pay, at the appropriate regular rate, or pay
for the number of hours worked, whichever is greater, except that any
employee who voluntarily leaves his work shall be paid only for actual time
worked.
3. Any employee who is called back to work by the employer, before or after,
but not in continuation with his regular shift, shall receive not less than
four hours pay at the overtime rate. This provision shall not apply
4
in case of overtime work which is continuous with the hours of the
employee's shift exclusive of his meal period.
4. The provisions of this section "shall not apply if work is unavailable as a
result of causes beyond the control of Amerigon.
SHIFT TRANSFER
Employees transferred from one shift to another shift by direction of Amerigon
shall be given five working days notice. Otherwise they shall be paid at the
overtime rate for the first shift worked. Such changes shall not result in any
loss of time to the employee. Whenever such transfer is for three days or less,
the applicable overtime rate and shift differential shall be paid. In all cases,
the transfer of employees shall be by seniority within a job classification and
the affected employee shall have a minimum rest period of eight hours between
shifts.
REST PERIODS
It is the intent of the parties to establish reasonable rest periods. The
running break will be recognized as dictated by efficient work force and
operational requirements. In the event it is deemed necessary by management to
change an established rest period within a work department or organization,
seven (7) calendar days' notification will be given prior to implementing such
change.
The length of rest periods will be ten (10) minutes during the first half of an
employee's shift and ten (10) minutes during the last half of an employee's
shift.
Wash up time of five (5) minutes shall be provided for before lunch breaks and
at the end of the shift.
An uninterrupted thirty (30) minute period, beginning and ending within five (5)
hours of the start time shall be provided as a lunch break.
OVERTIME
Overtime will be paid at the rate of one and one half times the employees base
rate for all hours worked, at Amerigon's request or instruction, in excess of
eight hours per day or forty hours in a work week. Double time will be paid for
hours worked in excess of twelve in a workday, or in excess of eight on the
seventh day of work within a work week. For the purposes of computing overtime,
holidays and paid personal leave time will be counted as hours worked.
Upon request, employees shall be excused from working overtime for reasonable
causes.
Employees performing work on a job shall be given preference to all overtime on
that job. Otherwise, overtime shall be assigned to employees sequentially down
the seniority list. On subsequent occasions that overtime is required to be
worked, it shall be assigned to employees sequentially down the seniority list
commencing with the employee next in line from the previous occasion. In this
respect, employees means those employees who have previously satisfactorily
performed the assigned work.
5
Amerigon is under no obligation for errors in overtime assignment except for
making provisions for overtime to be worked by the aggrieved employee at the
first reasonable opportunity.
The Human Resources Manager and the District Lodge Business Representative will
meet within thirty (30) days of the anniversary of this agreement to review the
overtime distribution and premium rates.
PERSONAL LEAVE TIME
Amerigon will provide personal leave time to employees which can be used for
vacation, sick leave and personal time off from work.
Personal leave time is accrued each pay period (every two weeks) at the
following rate:
0 to 5 years of employment 5.10 hours
5 plus years of employment 6.15 hours
Leave time may be requested after an employee completes sixty (60) days of
employment.
Employees may request to be paid those accumulated hours over forty (40), at any
time. Upon termination of employment all accrued hours are to paid to the
employee.
HOLIDAYS
The following shall be recognized as paid holidays:
New Years Day Thanksgiving Day
Memorial Day The Day after Thanksgiving Day
Independence Day Christmas Day
The Day after Independence Day One Floating Holiday*
Labor Day
*Amerigon shall designate by January 15 of each year
BEREAVEMENT PAY
Any employee who has completed his/her probationary period will be paid for
three days time off for death in the immediate family, i.e., spouse, child,
mother, father, brother or sister, mother-in-law, father-in-law, grandparents or
spouse's grandparents, and parents in absentia or spouse's parents in absentia.
The names of the parents in absentia shall be on tile with Amerigon. When
attending a funeral out of State, any eligible employee will be provided one
additional day off without pay. All bereavement time must be taken within ten
days following the day of the funeral.
6
WAGE RATES
Effective June 1, 1996, AMERIGON will pay the following per hour wage rates for
the Labor Grades listed below:
RATE RANGE
----------
Entry Top
Labor Grade 7 $19.00 $20.00
Labor Grade 5 $17.00 $18.00
Labor Grade 3 $15.OO $16.00
Labor Grade 1 $13.00 $14.00
Effective June 1, 1997, AMERIGON will pay a 3% (three percent) General Wage
Increase, which shall be applied to the individual base rate of each employee
and to maximum of each rate range in the following procedure:
Labor Grade 7 $19.60 $20.60
Labor Grade 5 $17.54 $18.54
Labor Grade 3 $15.48 $16.48
Labor Grade 1 $13.42 $14.42
Effective June 1, 1998, AMERIGON will pay a 3% (three percent) General Wage
Increase, which shall be applied to the individual base rate of each employee
and to maximum of each rate range in the following procedure:
Labor Grade 7 $20.22 $21.22
Labor Grade 5 $18.10 $19.10
Labor Grade 3 $15.97 $16.97
Labor Grade 1 $13.85 $14.85
All employees hired prior to June 1, 1996 shall be paid at the top of the rate
of their classification.
Employees hired or promoted after June 1, 1996, shall start at the entry rate
for respective classification and shall receive automatic progressional
increases of fifty ($.50) per hour on December 1 and June 1 of each calendar
year. It shall take no longer than twelve (12) months or two (2) automatic
progressions to reach the top of their labor grades.
An applicant for employment may be hired at any rate within the above ranges
which is determined by AMERIGON to be in accordance with the applicant's
qualifications and experience.
7
LEAD PERSON PAY
Employees assigned to lead status will be paid a lead bonus of the highest rate
of either 10% (ten percent) of their current rate of pay, or $.25 (twenty-five
cents) per hour above the highest classification lead.
JOB CLASSIFICATIONS/PROMOTIONAL LADDERS
The following job classifications and ladders are covered by this Agreement:
Vehicle Assembly Technician - Machinist, Senior LG 7
Vehicle Assembly Technician - Weldor, Senior LG 7
Vehicle Assembly Technician - Machinist LG 5
Vehicle Assembly Technician - Weldor LG 5
Vehicle Assembly Fabricator LG 3
Shipping/Receiving Clerk LG 3
Vehicle Assembler LG 1
Ladder 1
Vehicle Assembly Technician - Machinist, Senior LG 7
Vehicle Assembly Technician - Machinist LG 5
*Vehicle Assembly Fabricator LG 3
*Vehicle Assembler LG 1
Ladder 2
Vehicle Assembly Technician - Weldor, Senior LG 7
Vehicle Assembly Technician - Weldor LG 5
*Vehicle Assembly Fabricator LG 3
*Vehicle Assembler LG 1
Ladder 3
Shipping/Receiving Clerk LG 3
*The Vehicle Assembly Fabricator/Vehicle Assembler classification shall be in
each of these ladders for promotional consideration.
8
NEW OR REVISED JOB CLASSIFICATION
It is recognized that the establishment of new or revised job classifications
within the collective bargaining unit heretofore defined may be warranted
because of changes in job content growing out of the introduction of new
products, changes in equipment, tooling, or in methods of processing or in
materials processed, etc. Under each circumstance, Amerigon shall prepare and
submit to the IAM for negotiation the descriptions and appropriate wage rates
for such job classifications as will have been determined within the collective
bargaining unit. If agreement can not be reached within fifteen (15) working
days, Amerigon may place the job classification into effect. The IAM shall have
the right within fifteen (15) working days thereafter to file a grievance over
any alleged improper job description and/or wage rate for such classification.
If the IAM does not file a grievance within the time limit specified above, the
job classification and wage rate established by Amerigon shall be considered to
fair and equitable and shall remain in effect.
SENIORITY
For purpose of this Agreement, seniority shall be defined as the period of
continuous employment which the employee has accumulated with Amerigon.
Employees shall not attain seniority until they have completed a probationary
period of thirty (30) calendar days after which time their seniority shall date
from date of hire. Any employee who takes a salaried position shall not accrue
seniority for the time he/she is out of the bargaining unit.
In the event that work becomes slack and the Employer deems it necessary to
reduce the working force, the last employee hired into the classification
affected by such reduction, shall be the first employee laid off, and in
rehiring, the last employee laid off in the classification shall be the first to
be rehired. Persons retained or rehired because of seniority must be willing and
able to perform the work remaining to be done. When layoffs are necessary due to
lack of work, the employees selected for layoff shall be given five (5) working
days notice whenever practicable. Employees laid off and re-employed within
twenty-four (24) months shall not suffer loss of seniority. If not re-employed
within twenty-four (24) months, such seniority rights shall cease. If an
employee is recalled to work and fails to report for work within five (5)
working days, his seniority rights shall cease, except in cases where the
employee did not receive the notice. Under this condition he shall not lose his
seniority rights. If an employee is discharged or voluntarily quits his job, his
seniority rights shall cease.
Failure to report for work for a period of three (3) working days without giving
satisfactory explanation will be cause for termination.
UNION REPRESENTATION
a. STEWARD PROVIDED FOR - the purpose of representation within a plant the
union shall be entitled to a reasonable and adequate number of Stewards,
who shall restrict their activities to the handling of grievances and/or
concerns involving wages, hours and all other terms or conditions of
employment. The company will provide a reasonable amount of time each
9
day, not to exceed 1 (one) hour (unless mutually agreed), for this
purpose. A steward should not leave their work assignments for the
foregoing without notifying their supervisor.
b. BUSINESS REPRESENTATIVE TO ACT FOR STEWARD - Where for any reason a plant
does not have a Steward, union members may be represented by a Business
Representative of the union who may process a grievance in place of a
Steward. The union will make every reasonable effort to maintain an
active Steward with credentials and authority to act as such.
c. UNION MAY USE BULLETIN BOARD - The company shall provide bulletin board
space to the union for the posting of notices concerning meetings,
election of officers, notice of union recreational or social events, and
other matters, dealing with the affairs of the union. All such notices
shall be submitted to a designated company representative prior to
posting. Any question over appropriateness of material will be resolved
prior to posting.
d. The union will supply the company with a list of Stewards showing the area
of their jurisdiction and shift they represent.
ACCESS TO FACILITY
It is agreed by both parties hereto that for the purpose of carrying out and
enforcing the terms of this agreement, the duly authorized representative of the
IAM will have full access to the facility. It is further agreed that said
representative(s) will not unduly interfere with the production and/or operation
of said facility and whenever possible, prior notice of intent to visit will be
given to the company.
GRIEVANCE ADJUSTMENT & ARBITRATION
A. GRIEVANCE DEFINED
A grievance is defined to be any difference or issue raised by an employee
or the Union regarding the application or interpretation of any provision
of this Agreement.
B. TIME LIMITS
Any grievance involving discharge or layoff must be filed within five (5)
working days after the occurrence of the event upon which the grievance is
based. Other grievances must be filed within fifteen (15) working days
after the occurrence of the event upon which the grievance is based. Awards
for settlements of grievances may or may not be retroactive as the equities
of each case may demand, but in no event shall any arbitration award to
retroactive beyond thirty (30) calendar days prior to the date on which the
grievance was first presented to the Employer.
C. GRIEVANCE PROCEDURE
If a grievance arises, it shall be taken up by the employee involved with
his immediate supervisor, with the presence of the shop steward, or may be
10
taken up by the shop steward alone. The supervisor should give an answer
within two (2) work days.
If the above efforts fail to settle the grievance, or if the Union has a
grievance, the grievance shall be presented to the Employer's authorized
representative by the steward.
The Employer's authorized representative should give an answer within a
reasonable time. If the shop steward is dissatisfied with the Employer's
answer, the grievance shall be taken up by the Business Representative and
a representative of the Employer who is empowered to act.
If the Union is dissatisfied with the Employer's answer it may appeal the
case to arbitration by giving the Employer written notice of the Union's
intent to appeal the case to arbitration. The period following the
Employer's answer during which such appeal must be filed is extended from
thirty (30) to sixty (60) days with the understanding that the Employer is
relieved of any additional liability associated with the thirty (30) day
extension. Grievances not appealed to arbitration within sixty (60) days
following the Employer's answer shall be considered settled.
For disciplinary suspension and termination cases only, the parties may
establish a Board of Adjustment for such cases if mutually agreed upon.
Each party will be represented by two (2) persons who have had no direct
interaction in the issue(s) previously, nor have any vested interest in the
outcome and it is understood that the assigned Business Representative will
not be eligible to participate on such Board.
Prior to such grievances being appealed to arbitration, either party may,
within ten (10) working days of the company's answer, request a Board of
Adjustment meeting. Should both parties agree, the Board will meet within
ten (10) working days of receipt of notification. The Board must decide
the grievance within three (3) working days of the completion of the
hearing.
The Board of Adjustment is hereby authorized to reach a final and binding
decision on the grievance provided. However, the Board's decision must be
within the scope and terms of this Contract. A majority vote by the Board
constitutes a final and binding issue. However, the Board has no
authority to add to, subtract from, alter or amend any of the terms of this
contract.
D. ARBITRATION
Upon receipt of a written appeal by the Union of a case to arbitration,
the employer and the union will attempt to agree on an arbitrator to
decide the cease. If no agreement is reached, the American Arbitration
Association or State Mediation and Conciliation Service will be asked by
either the employer or the union to furnish a list of five (5)
established local arbitrators (those within one day's drive) and the
union and the employer will select an arbitrator from this list by
alternately striking names. The arbitrator is hereby authorized to reach
a final and binding decision on the grievance, provided, however, that
the arbitrator's decision must be within the scope and terms of this
contract, the arbitrator has no authority to add to, detract from,
alter or amend any
11
of the terms of this contract. The fee to the arbitrator, and the court
reporter if one is used, will be paid one-half by the employer and one-half
by the union.
E. All time limits set forth in this Section may be extended by mutual
agreement between the employer and the union.
TEMPORARY OFF-PLANT AND TRAVEL ASSIGNMENTS
All authorized company travel related expenses i.e., air fare, hotel
accommodations, per diem, vehicle rental, will be paid in accordance with
company policy.
Employees who travel on company business during their regular work hours will be
paid at their normal rate of pay. Employees who travel on company business
outside of their work hours will be paid in accordance with company policy.
NON-DISCRIMINATION
The company and the union agree not to discriminate in any way against any
employee because of race, color, creed, religion, national origin, sex, age or
disability (reasonably accommodated by Amerigon) and agrees to comply with all
state and federal anti-discrimination laws.
The company agrees not to discriminate against any employee for union activity.
As used in this Agreement, it is understood that the designation of the
masculine gender shall apply equally to the feminine gender.
SAVING CLAUSE
Should any provision of this Agreement, including amendments, if any, be
declared invalid by any competent court or governmental agency due to existing
or subsequent legislation or through failure to receive necessary government
and/or agency approval, shall not affect the remaining provisions of this
Agreement, which shall remain in full force and effect.
It is the intent of the parties that this agreement shall remain in force and in
its entirety even if there is a change of any kind in the legal status,
ownership and management of either party hereto.
HEALTH AND WELFARE/
LONG TERM DISABILITY
Amerigon shall provide to the bargaining unit employees, medical/dental,
prescription drugs, life insurance coverage, and long term disability insurance,
at the same cost if any, provided to non-bargaining unit employees.
12
MEDICAL PREMIUM CO-PAYMENT SCHEDULE
EMPLOYEE + EMPLOYEE &
EMPLOYEE ONE DEPENDENT TWO + DEPENDENTS
6/96-5/97 $.00 $83.00/Mo. $112.43/Mo.
6/97-5/98 $.00 $83.00-$87.15/Mo. $112.43-$118.05/Mo.
6/98-5/99 $.00 $83.00-$91.51/Mo. $112.43-$123.95/Mo.
These employee premium co-payment rate ranges are based on a maximum allowable
increase of 5% (five percent) over the established entry rate in any one
coverage year. Any increase will be fully explained to the Union prior to
implementation.
FLEX PLAN 125
Amerigon will automatically deduct your medical insurance co-payment through the
Flex Plan 125, unless you elect to waive your right to participate. The Flex
Plan 125 uses your pre-tax income to minimize your out-of-pocket expense by
deducting the insurance cost before taxes and increasing your net pay.
Amerigon will provide the Safeguard Dental Plan, or a comparable dental plan, at
no cost to the employees.
A $10,000 (ten thousand dollar) term life insurance policy is provided, at no
additional cost, to any employee enrolled in the medical plan. This policy
includes accidental death and dismemberment provisions.
A Long Term Disability Insurance Plan designed to cover loss of income when an
employee becomes totally disabled will be available at no cost. This benefit is
integrated with any other income benefits, such as state disability, to a total
benefit amount of 60% (sixty percent) or a maximum of $5,000 (five thousand
dollars) per month of an employees monthly wages. Payments start 90 (ninety)
days after the employee becomes disabled.
The parties agree to continue to explore avenues to provide the most
comprehensive health care coverage at the least expense to the company and its
employees.
PENSION PLAN
Effective June 1, 1996, Amerigon Incorporated, agrees to participate and
contribute to the IAM National Pension Fund at the rate of forty (40) hours per
week, the amounts listed below for all bargaining unit employees.
Amerigon agrees to be bound to the conditions set forth by Trustees of the IAM
Pension Fund.
Amerigon shall, effective June 1, 1996, agree to participate on behalf of the
current bargaining unit employees in the IAM National Pension Fund, at the rate
13
of $.30 (thirty cents) per hour, and will automatically include all new
employees of the bargaining unit henceforth.
Amerigon shall, effective June 1, 1997, increase the participation contribution
to $.60 (sixty cents) per hour for each said employee.
Amerigon shall, effective June 1, 1998, increase the participation contribution
to $.90 (ninety cents) per hour for each said employee.
DURATION
This agreement, entered into on June 1, 1996, shall remain in full force and
effect through May 31, 1999, and shall be automatically renewed from year to
year thereafter unless either party gives written notice of a desire to modify,
amend, or terminate same at least sixty (60) days prior to the termination date
of this agreement.
AMERIGON, INCORPORATED INTERNATIONAL ASSOCIATION OF
MACHINISTS & AEROSPACE WORKERS,
AFL-CIO, DISTRICT LODGE 725
BY /s/ Carol Caraway BY /s/ Charles Toby
--------------------------------- --------------------------------
Carol Caraway, HR Charles Toby, BR
BY BY
--------------------------------- --------------------------------
BY BY
--------------------------------- --------------------------------
14
LETTER OF UNDERSTANDING
The parties agree that for purposes of seniority all employees currently working
in the seat assembly department and identified below, shall have bumping rights
to the Vehicle Assembler classification. Their original dates of hire, or date
of assignment into the Alameda facility, shall be used for purposes of their
classification seniority.
Those exercising their bumping rights into the bargaining unit shall be `red
circled' and maintained at their current rate of pay.
Per this Agreement, no general wage increases shall be automatically applied to
their rate until the maximum of the rate range within their job classification,
surpasses their current rate of pay.
Tyrone Scott
Stephanie Robinson
Sammie Debose
Stacy Fox
MAY 1, 1996
/s/ Carol Caraway /s/ Charles Toby
- ------------------------------ --------------------------------
Carol Caraway Charles Toby
Manager, Human Resources Business Representative
Amerigon IAM&AW DL 725
Appendix II
EXHIBIT 21.1
LIST OF SUBSIDIARIES
1. Amerigon Mauritius Incorporated - incorporated in the
Republic of Mauritius.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-2 of our report dated February 26, 1996,
except as to Note 14 which is as of December 4, 1996, relating to the
financial statements of Amerigon Incorporated, which appears in such
Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the three years ended December 31, 1995
listed under Item 14(a) of Amerigon Incorporated's Annual Report on Form 10-K
for the year ended December 31, 1995 when such schedule is reead in
connection with the financial statements referred to in our report. The
audits referred to in such report also included this Financial Statement
Schedule. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
PRICE WATERHOUSE LLP
Costa Mesa, California
December 4, 1996