LETTER AGREEMENT
This Letter Agreement entered into this 16th day of December, 1998 at
Bangalore, between:
XXXXXXXXX X.XXXXX, an Indian citizen, having his address at Xxxxx Sadan,
Lavelle Road, Bangalore, acting for himself and
XXXXX MATERIALS MOVEMENT XXX.XXX., a company incorporated and registered
under the Companies Act, 1956 and having its registered office at 000
Xxxxxxxxxxx Xxxxxxxxxx Xxxxxx, Xxxxxxxxx, and
XXXXX PRECISION PRODUCTS XXX.XXX., a company incorporated and registered
under the Companies Act, 1956 and having registered office at X-00 Xxxxxx
Xxxxxxxxxx Xxxxxx, Xxxxxxxxx,
HEREINAFTER COLLECTIVELY REFERRED TO AS "XXXXX" (which expression shall
unless be repugnant to the context or meaning thereof be deemed to include
their successors in interest and permitted assigns) of THE FIRST PART.
AND
Amerigon Incorporated, a company incorporated under the laws of the United
States of America, having is principal place of business at 0000, Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx, 00000, X.X.X., HEREINAFTER REFERRED TO AS "AMERIGON",
(which expression shall unless it be repugnant to the context or meaning
thereof, be deemed to include its successors in interest and permitted
assigns) of THE SECOND PART.
This letter sets forth our agreement with respect to the formation,
capitalization and operation of a proposed joint venture company ("NEWCO") which
will design,
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manufacture, test, distribute, sell, and service ROAD WORTHY (as defined
below) electric powered vehicles (collectively, the "PRODUCTS") in India, Sri
Lanka, Bangladesh, Pakistan, Nepal, Myanmar, Seychelles and the Maldives
(collectively, the "TERRITORY") utilizing technology owned by Amerigon
Incorporated ("AMERIGON"). ROAD WORTHY vehicles shall mean cars, vans,
trucks, busses, 3-wheel and 2-wheel electric vehicles for on-road use, but
excluding industrial, construction, agricultural, golf and other non-road
vehicle types.
Our understanding includes the following terms and conditions to be
incorporated in DEFINITIVE AGREEMENTS:
1. BACKGROUND.
(a) Amerigon has developed, designed and tested preproduction
prototypes of an electric powered automobile known as the "XXXX" (the
"XXXX") and has manufactured XXXX vehicles is small quantities. Amerigon
owns a variety of technology relevant to the design and manufacturing of
electric automobiles, including a patented energy management system.
Amerigon owns certain tooling for pre-production of the XXXX and has
considerable production know-how. Amerigon will license its technology and
know-how for Road Worthy electric vehicles to Newco which will include:
(1) exclusive rights to manufacture and sell the XXXX in the Territory, (2)
exclusive license to all of Amerigon's patents related to its Energy
Management System, Climate Control Seat System and Electric Vehicle Safety
Systems for all electric vehicles manufactured in the Territory and (3)
exclusive license to all of
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Amerigon's current and future electric vehicle technology in connection
with the manufacture and sale of electric vehicles in the Territory.
(b) Xxxxxxxxx X. Xxxxx, acting for himself, Xxxxx Materials
Movement (an Indian corporation) and Xxxxx Precision Products, Pvt. Ltd.
(collectively "Xxxxx") manufactures and assembles precision automotive
components, castings and granite tiles. In addition, Xxxxx designs,
manufactures, sells and services in-plant material handling equipment
including electric tow tractors, pallet trucks, stackers and dock levelers.
Xxxxx has also been involved in various aspects of the XXXX project
including market research, vehicle design, vendor development, part
costing, homologation and testing. Xxxxx has land, buildings, equipment,
infrastructure, capital and management expertise that would be valuable to
launching Newco and desires to have an equity stake in Newco. Xxxxx may
include as investors in such members of his family and also such companies
or bodies corporate owned and controlled by Xxxxx and nominated by him to
be participants in Newco.
(c) Xxxxxx Xxxxx ("CM") has been an employee of Amerigon and the
program manager for the XXXX project for over four years. He is also the
son of Xxxxxxxxx Xxxxx. It is anticipated that CM will initially serve as
the Managing Director of Newco.
(d) It is contemplated that Newco will be jointly owned by
Amerigon, Xxxxx, XX, Xxxxx Xxxx, Xxx Xxxxxxxxxx and one or more additional
investors (the "INVESTORS") who have yet to be determined.
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2. FORMATION OF NEWCO.
(a) Newco will be an Indian Private Limited Company registered
under the Company Act. Xxxxx and Amerigon shall take the necessary steps
for registration of Newco. If legally available, the name of the new
company will be "XXXX Electric Car Company Private Limited". Mutually
acceptable charter and bylaw documents shall be prepared and shall give
effect to the terms agreed upon between Xxxxx and Amerigon in conformity
with the terms hereof. Xxxxx shall take responsibility for securing
additional investors and Amerigon shall assist Xxxxx in the process.
(b) The principal business purposes of Newco will be (i) the
design, manufacture, assembly and testing of the Product(s) throughout the
Territory, (ii) marketing, distributing and selling the Product(s)
throughout the Territory, (iii) servicing the Product(s) sold throughout
the Territory, (iv) developing technology related to electric vehicles, (v)
establishing a manufacturing facility as further described in the mutually
agreed upon outline of the Operating Plan attached hereto as SCHEDULE A and
(vi) engaging in such other activities as may be incidental or necessary to
the foregoing.
3. CAPITALIZATION OF NEWCO
(a) The parties will seek to capitalize Newco as described in
SCHEDULE B attached hereto. Amerigon's capital contribution to Newco
shall consist of (1) the license to Newco of its electric vehicle ("EV")
technology on an exclusive basis for the manufacture, distribution, sale
and servicing of the
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Products in the Territory, (2) the contribution in-kind of certain
tangible assets (electric vehicles and manufacturing kits as set forth
on SCHEDULE A), and (3) those other assets described in SCHEDULE A
attached hereto. Maini's capital contribution will consist of (1) the
homologation certification including sales tax and road tax
exemptions/concessions, (2) market research and studies for the XXXX,
(3) supplier information and test results and (4) cash and in-kind
capital contribution as described in SCHEDULE A attached hereto and
shall be made at the times and in the manner specified in SCHEDULE A
hereto. CM, Xxx Xxxxxxxxxx and Xxxxx Xxxx will each receive equity as
set forth on SCHEDULE B in the form of a restricted stock grant for
services rendered in the past and future. Such restricted stock will be
non-transferable until vested. 30% of such stock for each will vest
immediately and the remainder will vest in equal monthly amounts over a
three year period from the formation of Newco or earlier upon such
person completing providing services to Newco as specified in the
SCHEDULE A. Failure to provide services as contemplated by the
Operating Plan will result in a forfeiture of the restricted stock
grant. In addition, US$2.67 million is intended to be raised from
Investors. A portion of the equity (4.5%) will be reserved for future
issuance for purposes including a stock option plan (which may not
exceed 2% of the total capital), raising additional capital, and
issuance to employees in exchange for salary reduction (for such
purpose, at a price of 50% of the then fair market value of the equity).
Except as set forth in the preceding sentence, all future non-cash
contributions shall be valued at fair market value or other mutually
agreeably valuation method.
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(b) The charter documents of Newco will contain effective
prohibitions on Xxxxx and CM individually or collectively having 50% or
greater ownership of Newco or having the right to appoint a majority of the
members or the Board of Directors of Newco. It is understood that if at
start-up we do not have all the investors, and hence there exists
unclassified shares, Xxxxx Group and CM will not be allowed to purchase
additional shares such that their cumulative ownership in the company
exceeds 50%. Notwithstanding the previous sentences, under the following
conditions Xxxxx and CM, collectively or individually can be allowed to
have greater than 50% ownership and consequently rights to appoint a
majority of the Board of Directors: (1) if Amerigon sells more than half
of its initial equity holding in Newco to Xxxxx or any other third party,
excluding transfers to persons as required by contracts existing on the
date hereof, (2) if future additional financing is required and approved by
the Board of Directors, and Amerigon or other investors do not invest
additional funds to maintain their proportionate ownership, and Xxxxx
provides financing and obtains a 50% or greater ownership interest in
Newco, (3) per section 6(c), if a third party sells its interest in Newco,
and Xxxxx participates in such a sale that its ownership exceeds 50% and
(4) if financial guarantees are required as per section 13(c), then the
resultant compensation for providing such guarantees may result in Xxxxx
and CM owning greater than 50%.
(c) No party to Newco shall have any obligation to contribute
additional capital to Newco unless agreed upon by such party.
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4. NEWCO GOVERNANCE.
(a) Newco shall have a Board of Directors (the "BOARD")
consisting of not more than fifteen (15) directors, with at least one
director to be selected by each of Xxxxx, Amerigon and the Investors. The
Board will also have outside directors. One director shall be the Managing
Director of Newco. The Managing Director shall be appointed by the mutual
consent of Amerigon and Xxxxx and shall be a professionally qualified
person. The Managing Director shall serve at the pleasure of the Board of
Directors and be appointed upon such terms and conditions as the parties
may mutually agree upon. Xxxxxx Xxxxx shall be the first Managing Director
of the company. The Chairman of the Board shall be a director appointed by
Xxxxx and the Vice-Chairman shall be a director appointed by Amerigon. The
term of each of the other directors, except the Chairman, shall be for
three (3) years. A director appointed by a particular party may be
replaced at any time by such party upon notice to the other parties. Any
replacement director shall be satisfactory to the other parties. A
director may be removed only by the party appointing such director or by a
majority vote of the other directors, but only for cause (e.g. breach of
fiduciary duty or malfeasance). In the event that the number of directors
is increased, the number of directors a party will appoint in general will
be proportionate to its ownership interest in Newco. For every Amerigon
director, Amerigon will and for every Xxxxx director, Xxxxx may, appoint an
alternate director resident in India, approved by the Board of Directors of
Newco as required by The Companies Act of India. The
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attendance of at least one Amerigon director of his alternate and at
least one Xxxxx director or his alternate shall constitute a quorum.
(b) Except for the actions described in the immediately
succeeding sentence or as may otherwise be agreed upon, all actions of
Newco require the affirmative vote of a majority of the directors present
and voting at the meeting. Certain actions (including without limitation
amendments or changes to the charter documents of Newco, liquidation or
winding-up of Newco, merger of Newco with another entity, sale or transfer
of all or substantially all of the business or of certain key assets of
Newco, changes in capital structure of Newco, recapitalization,
restructuring or stock reclassification of Newco, issuance of additional
equity interests in Newco, admittance of new investors or shareholders into
Newco, amendment of the Operating Plan, borrowing of monies or granting of
loans to third parties, undertaking any substantial expansion of Newco
operations, any related party transactions, declaration of dividends, etc.)
will be regarded as Reserved Matters. Reserved Matters required (i) at
lease one affirmative vote from each of Amerigon and Xxxxx and (ii) the
approval of at least 75% of the directors constituting a quorum.
(c) The Board shall appoint the officers of the Newco, which
shall include a Managing Director, a Chief Operating Officer, a Chief
Financial Officer and a Secretary. The same person may hold more than one
officer position. Officers shall serve at the pleasure of the Board and
may be removed by the Board at any time. The Board shall meet on a regular
basis (not less frequently than quarterly) and, in the first two years
after the formation of the JV,
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management shall have monthly meetings and subsequent telephonic
conference calls with the members of the Board to discuss Newco's
operations and progress relative to the Operating Plan. The shareholders
of Newco shall meet at least once per year at a time and place to be
determined by the Board. All Board members are to be notified on the
agenda to be discussed at the board meeting, at least one week prior to
the board meeting unless mutually agreed upon in writing by Amerigon and
Xxxxx.
(d) Newco shall maintain true and accurate accounts and records
in accordance with generally accepted accounting principles in India
consistently applied. Subject to Indian law, Xxxxx, Amerigon and the
Investors shall be provided with monthly, quarterly and annual financial
reports, which shall include income statements, balance sheets and cash
flow statements. Xxxxx, Amerigon and the Investors shall also receive from
Newco projected cash flow reports, sales and marketing reports, production
and quality control reports, annual budgets, business plans and such other
information and reports as may be agreed upon and at such times as may be
agreed upon Newco shall hire an internationally recognized "Big Five"
independent accounting firm, satisfactory to Amerigon and Xxxxx, to audit
the annual financial statements. Such auditor's report shall be supplied
to all shareholders. The books and records of Newco shall be accessible to
the Xxxxx, Amerigon and the Investors and their representatives.
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(e) It is understood that section 4(a), 4(b), 4(c) and 4(d) may
possibly need to be modified to conform to existing company laws in India.
It is anticipated that such changes will not significantly alter the
content of the above.
5. TRANSACTIONS BETWEEN NEWCO AND AMERIGON OR XXXXX OR OTHERS.
(a) Concurrently with formation and capitalization of Newco,
Amerigon will enter into a royalty bearing license (the "EV LICENSE") with
Newco pursuant to which Amerigon will license Amerigon's EV technology on
an exclusive basis in the Territory. Newco will have no right to
sublicense and no rights to the EV technology outside the Territory;
provided, however, that with Amerigon's prior written consent, which will
not be unreasonably withheld, Newco may manufacture products in the
Territory for export outside the Territory in order to fulfill commitments
given to the Indian government and outlined in the Operating Plan
(currently, 15%-20% of vehicles manufactured). The parties recognize that
Amerigon retains all rights to the technology outside the Territory and may
limit or restrict Newco's exports of finished products incorporating the
technology. Amerigon intends to enter into additional joint ventures with
other parties outside the Territory and may grant to such parties exclusive
rights which would prevent Newco from exporting products to certain areas.
Prior to making any significant investments to modify the XXXX for export
outside the Territory, Newco will consult with Amerigon to determine
appropriate terms and conditions on such exports to assure minimum export
time period and volume. Newco will pay Amerigon royalties of 5% on
domestic sales and 8% on export sales for a period of 5 years (commencing
with the first year of operating profit, which the
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parties anticipate to be year 3). Royalty payments will be calculated
per the Indian Industrial Policy. Royalties will be paid no less
frequently than annually and once a quarter in the 3rd, 4th and 5th year
of royalty payment, and the EV License will contain other customary
terms and conditions acceptable to Amerigon. If in year 3 Newco has an
operating profit but would have a net loss if it paid Amerigon the
required royalty, Newco will have an option to defer payment of such
part of the royalty for year 3 as would cause it to have a net loss and
pay such portion of the royalty the following year, without interest.
(b) Amerigon will enter into an exclusive, royalty-free,
non-transferable license with Newco to manufacture and sell Amerigon's
proprietary Climate Control Seat system ("CCS") in the Territory, but
only for electric vehicles manufactured in the Territory (the "CCS
LICENSE"). the CCS License will contain other terms and conditions
acceptable to Amerigon. In connection with the CCS License, Newco will
send one engineer to visit Amerigon's offices to learn more about the
CCS for the purpose of integrating it into the XXXX. It is anticipated
that this process would take about 6 weeks. It is also anticipated that
Newco will select one of Amerigon's existing CCS models for integration
into the XXXX. If Newco desires to purchase finished CCS modules from
Amerigon, Amerigon will supply them, regardless of quantity ordered, at
the same price that Amerigon charges its principal customer for the same
model. If Newco assembles CCS units in the Territory but desires to
purchase parts from Amerigon, Amerigon will attempt to supply Newco with
parts and will charge Newco cost plus 10% (plus all applicable taxes,
duties, etc.), FOB Amerigon's
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facility in Irwindale, California. All sales of products will be made
pursuant to Amerigon's standard terms and conditions of sale. If Newco
desires to manufacture the CCS in the Territory, Amerigon will cooperate
with Newco and provide technical assistance; provided, however, that
Newco will reimburse Amerigon for all direct costs associated with such
assistance.
(c) Except as otherwise provided herein, all services, parts,
components, supplies and other materials and services provided to Newco by
Amerigon or Xxxxx or any other owner of Newco shall be valued at prevailing
world market rates or such other mutually acceptable valuation method. All
agreements, contracts or other arrangements between Newco and Xxxxx,
Amerigon, the Investors or any other third party shall be at arms-length
and the valuation of the services or goods subject to such agreements,
contracts or arrangements shall be at fair market value or such other
valuation method unanimously approved by the Board. Any non-fair market
value valuation is subject to independent verification by independent
accountants approved by the Board.
(d) Upon the formation of Newco, Newco will be responsible to
complete all design and development activity to take the XXXX to
production. All technology developed by Newco will belong to Newco.
(e) Newco shall be formed and capitalized and the Technology
License Agreement between Amerigon and Newco shall be concluded latest by
31st March 1999.
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6. TRANSFER OF SHARES; SHAREHOLDER PROTECTION.
(a) No shareholder may sell, assign, pledge, offer, transfer or
otherwise dispose of or encumber any shares of Newco or any title or rights
to such shares in Newco owned by such shareholder without the prior written
consent of the Board of Newco and by each of Amerigon and Xxxxx; PROVIDED
that Amerigon or Xxxxx may transfer its shares to third parties in
accordance with its presently existing contractual commitments and provided
that such commitments are made known in advance to the Board of Newco.
Notwithstanding anything contained in clause (b) of paragraph 3, in the
event of a permitted transfer of shares of Newco, such permitted transferee
may be required to enter into an agreement, in form and substance
satisfactory to Newco, with Newco and the non-transferring shareholders
whereby such permitted transferee agrees to take the place of the
transferring shareholder with respect to, and to be bound as a party to,
the joint venture agreement and to assume such of the rights and
obligations of the transferring shareholder. All permitted transfers shall
be subject to terms and conditions agreed upon by the parties to Newco.
(b) In the event the Newco must raise additional funds, per
Indian Company Laws, all shareholders will have preemptive rights to
subscribe for pro rata and purchase additional shares and contribute
additional capital to maintain its then existing ownership interest in
Newco. Such pre-emptive rights shall be on terms and conditions agreed
upon by Amerigon and Xxxxx in the definitive agreements.
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(c) Amerigon and Xxxxx shall have the right to participate, pro
rata, with respect to the any sale by any party of its interest in Newco.
In the event that the Board of Newco has approved a sale of Newco, each
shareholder shall be required to participate in such sale and sell its
shares of Newco on the terms approved by the Board.
7. LIQUIDITY.
The definitive agreements shall include reasonable
provisions for Amerigon, Xxxxx and the Investors to sell and/or obtain
liquidity with respect to their investment in Newco after a five to ten
year holding period. Subject to approval of the Indian Foreign Investment
Promotion Board and any other Indian governmental authority, possible
provisions include (i) the right to participate in public offerings by
Newco, (ii) the right to require Newco or the other shareholders of Newco
to purchase their equity interests in Newco (which may be satisfied by a
down payment and payments over time), and (iii) the right to cause a sale
of Newco.
8. DEFINITIVE AGREEMENTS.
The definitive agreements shall contain terms, conditions,
representations, warranties, covenants and indemnities customary and
appropriate for a transaction of the type contemplated, including those
summarized herein.
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9. EXPENSES.
Each party shall bear its own expenses in connection with the
preparation, negotiation and execution of this letter agreement (except the
Newco will reimburse Amerigon for travel expenses related to the execution of
this letter agreement). Following execution of this letter agreement, all
expenses related to Newco and which are approved by CM (such approval not to
be unreasonably withheld), including its formation, registration, preparation
of definitive documentation, travel expenses, and other expenses directly
related to the business of Newco (including planning, organization, kiting,
technical development, etc.) shall be borne by Newco. If initially expended
by a party hereto, such expenses will be reimbursed by Newco promptly (but in
no event later than two weeks) upon such party submitting appropriate
documentation; provided, however, that the first reimbursement to Amerigon
may take up to four weeks because of the time needed to obtain the required
government approvals to transfer funds. However, if any party shall require
separate legal advice, such expenses will be borne by such party and not
Newco. Until Newco is formed and capitalized, Xxxxx will reimburse such
expenses and provide all monetary payments on behalf of Newco, which shall be
treated as capital contributions to Newco by Xxxxx. The parties hereto
recognize that projected expenses in the U.S. by Amerigon and the key
employees relating to Newco are approximately $115,000 for the first three
months following execution hereof.
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10. CONFIDENTIALITY.
Each party hereto shall agree to keep confidential certain
confidential information obtained by it in connection with this agreement,
any related agreements or the management and operation of Newco, except as
otherwise required by law.
11. DISPUTE RESOLUTION.
Any disagreement, dispute, controversy or claim (a "DISPUTE")
arising out of or relating to Newco, this agreement or any related
agreements, the obligations of the shareholders of Newco or the parties to
this agreement, shall be resolved first through friendly consultations among
the parties in dispute and if such Dispute is not resolved through friendly
consultations, then through binding arbitration conducted by the
International Chamber of Commerce (Paris), in accordance with its
International Arbitration Rules. The arbitral panel shall consist of a
single arbitrator who is independent of the shareholders and such arbitration
shall be conducted in London, England, or any other location agreed to in
writing by the parties. The language to be used in the arbitration shall be
English, although documentary evidence may be in other languages. The
decision of the arbitration panel shall be final and binding on all the
shareholders and may be entered in any court having jurisdiction and enforced
against the shareholders. The arbitration provisions shall not preclude in
any way a shareholder from seeking or obtaining preliminary or injunctive or
other equitable relief from a court of competent jurisdiction. If the
subject matter of the Dispute relates to the infringement or misappropriation
of copyrights, patents, trade secrets or other proprietary rights, the party
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alleging such infringement or misappropriation may elect to institute an
action in a court of competent jurisdiction without using the arbitration
provisions set forth herein.
12. GOVERNING LAW.
This letter and the legal relations between the parties shall be
governed by the law of India.
13. GENERAL.
(a) Upon execution of this document, Amerigon shall not solicit
or engage in negotiations with any entity other than Xxxxx for the purpose
of such entity becoming an operating partner (in place of Xxxxx) in a joint
venture to produce electric vehicles in the Territory; provided, however,
that this shall not restrict Amerigon from having discussions with possible
investors in Newco consistent with terms hereof.
(b) Amerigon shall use commercially reasonable efforts to
retrieve all information Amerigon has provided to various parties in India
regarding the XXXX project, such as KPMG, SIL, BEML, C&L and others, and to
cause such parties to maintain the confidentiality of such information.
(c) As per the Operating Plan, it is anticipated that Newco will
require additional funds in year 2001. However, Newco may need additional
funds before 2001 to cover unforeseen circumstances. It is recognized that
if such funding is sought from financial institutions that require
guarantees, all promoter and shareholders in Newco holding more than 5% of
equity in Newco may be
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requested to provide such guarantees to the financial institutions.
Promoters and shareholders with more than 5% equity in Newco that
provide such guarantees will receive fair compensation, for every time
such a guarantee in undertake, in the form of additional stock (maximum
of 2% of the guarantee amount) for taking on the additional liability
associated with such financial guarantees. In addition, in order to
prevent dilution to smaller shareholders in Newco, the parties will
consider offering to them the opportunity to provide financial
guarantees and to receive the same proportionate compensation therefor
as is given to the larger shareholders.
(d) If any party hereto breaches or fails to perform its
obligations under this letter agreement, it shall be liable to the other
party for such party's actual damages, in addition to any other rights it
may have. Furthermore, Amerigon's obligations under Section 5(a) and 5(b)
hereof are conditioned upon continued compliance and performance by Xxxxx
of its obligations hereunder. The license under Section 5(a) and 5(b)
shall not be affected by a breach by Amerigon and will survive such breach
by Amerigon. The obligation of Amerigon hereunder shall survive and be
otherwise unaffected by any change of control or merger transactions.
(e) This letter agreement shall be binding upon and inure to the
benefit of each party and its respective successors and permitted assigns,
and nothing herein, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever.
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(f) This letter agreement constitutes and contains the entire
agreement concerning the subject matter hereof between the parties and may
only be amended or superceded by a written agreement signed by both
parties. This letter agreement supercedes and replaces all prior
negotiations and all agreements proposed or otherwise, whether written or
oral, concerning the subject matter hereof. This is a fully integrated
agreement.
(g) The responsibility to prepare all legal documents will be
Newco's and such documents will be prepared in India.
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IN WITNESS WHEREOF, THE PARTIES HEREUNTO HAVE AFFIXED THEIR RESPECTIVE HANDS
AND SEALS, THE DATE AND YEAR, FIRST HEREINABOVE WRITTEN.
SIGNED AND DELIVERED
ON BEHALF OF:
AMERIGON INCORPORATED ("AMERIGON")
By Xx. Xxx X. Xxxx
/s/ XXX X. XXXX
Name: Xxx X. Xxxx
Designation: Chairman and Chief Executive Officer
SIGNED AND DELIVERED TO
XX. XXXXXXXXX X. XXXXX
ON BEHALF OF:
HIMSELF AND
XXXXX MATERIALS MOVEMENT XXX.XXX.
XXXXX PRECISION PRODUCTS PVT. LTD.
(COLLECTIVELY "XXXXX")
BY: XX. XXXXXXXXX X. XXXXX
/s/ XXXXXXXXX X. XXXXX
Name: Xxxxxxxxx X. Xxxxx
Designation: Chairman
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SCHEDULE A
OPERATING PLAN
I) AMERIGON'S CONTRIBUTION
Amerigon shall transfer all of its right, title and interest (for the
Territory only) in and to the following as it exists on the date hereof to
Newco as part of its capital contribution:
1. All CAD models, drawings, electrical schematics for the XXXX design
2. All software and hardware information for the REVA's EMS
3. Test reports, XXXX specific test software, test results etc.
4. Database of all information about suppliers, part cost, weight, build
level, BOM, etc.
5. All interior and exterior concept sketches related to XXXX design
6. Exterior pictures and masters of the XXXX
7. XXXX 1/4 scale mold
8. 5 complete vehicles (yellow, green, 2 white and red). Amerigon will
transfer least arrangements with CALSTART (for the XXXX used in Alameda)
and WINROCK (for the 2 REVA's used in Delhi. The Newco will keep one
vehicle at all times at Amerigon.
9. 3 aluminum running chassis and 16 vehicle kits
10. Prototype tooling and fixtures for the XXXX including all body, chassis,
interior, door frame, seats.
11. Electric Vehicle Test equipment used by the XXXX program: IPS bench tester
(including dedicated computer), date acquisition, harness tester, specific
electronic testing and assembly tools.
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12. All specific equipment including computers for assembly, programming,
debugging and testing of the EMS and IPS for the XXXX.
13. Library of all books, magazines, technical papers and supplier catalogs
related to XXXX.
14. Miscellaneous EV equipment that is required by the XXXX Program. This
would include floor chargers, motors, controllers, spare parts, etc.
OTHER
SPACE REQUIREMENTS: It is anticipated that approximately 4-6 months of
design effort will be required in the US prior to transferring the
information to India. To allow smooth continuation of the program,
Amerigon will allow Newco, the continued use of the current EV office,
infrastructure (computers, phones, fax, etc.) and shop space for a period
of 6 months. The EMS development for the XXXX may continue for 2
additional months and would require a small work place for 2-3 people and
shop space to test the vehicle. During this period, Amerigon will bear all
expenses related to rent, utilities, etc., but not any marginal out of
pocket costs (e.g. phone charges).
COMPUTERS: Amerigon will allow Newco use of IDEAS and CATIA stations that
originally belong to the XXXX program for a period of 6 months. In
addition, Amerigon will transfer 1 CATIA computer station and 1 IDEAS
computer station with all software and accessories of Newco, if permitted
by the terms of the software licenses.
EMPLOYEES: To enable the program to continue smoothly, Amerigon will
continue to employ Xxxxxx Xxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxxx and Xxxxxx
2
Hurter for a period of 4-6 months on its payroll. Newco will reimburse
Amerigon for all direct employee costs including benefits (20% of base
salary). Amerigon will be liable for all previously accrued vacation cost
and severance costs. If the period exceeds 6 months, Amerigon and Newco
will need to re-discuss this issue. Amerigon will also allow the use of
Xxxxx Xxxxxxx for the EV program on a priority basis. It is anticipated
that Newco will require his services for 8-10 hrs a week. Xxxxx Xxxx is
key to the proper execution of the REVA's electrical system and EMS and
hence the technical success of the program. Upon signing of the MOU, Xxxxx
Xxxx will be immediately allowed to work on the XXXX Program for a minimum
of 25% of his time. It is understood that it would take Xxxxx Xxxx
approximately 10 weeks to transition the radar program responsibility to
another person. It is expected that his time commitment to the XXXX
program will gradually increase to 75% by the end of 10 weeks, and to 100%
in less than 18 weeks. Amerigon will do its best to make sure that this
happens. During this period, Amerigon will continue to employ Xxxxx Xxxx
and be reimbursed by Newco for his direct costs including benefits.
II) MAINI'S CONTRIBUTION
1. Indian component costing and supplier information and quotations
2. Marketing studies, research including all results of India 2010 Exhibition
3. Test results including Shaker tests conducted at ARAI, safely tests and
road tests in Bangalore
4. Homologation and roadworthiness certification for the earlier XXXX
prototype
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5. Transfer of employees to the JV, that are currently employed by the Xxxxx
Group and that worked on the XXXX program.
6. US $ 1 million in new cash. A significant portion will be invested in
Indian Rupees.
7. Land, buildings and infrastructure for the first 3 years. Sufficient land
and building space would be provided so as to accommodate the production
per the current business plan. This would work out to approximately 1000
cars per single shift. Infrastructure support would include use of Xxxxx
group's current power and generator system, water, security, canteen
services, etc. The JV will pay monthly costs for all utility services such
as power, water, etc. to Xxxxx Group. Where costs are difficult to
determine, a fair market value will be assessed.
8. Xxxxx Group will provide the JV a 15 acre plot of land in Malur, for
production expansion. Although the business plan required the use of the
additional land in 2001, it is free to use it prior to that for the
expansion of its manufacturing facilities.
9. Xxxxx group will assist in hiring required personnel operations,
engineering, vendor development, purchasing, administration, vehicle
assembly, accounting, etc. Xxxxx Group will also transfer a few people
from its other divisions to the JV, so as to provide the JV with a start-up
team. This would include people with experience in operations, planning
and vendor development.
10. Xxxxx Group will allow the JV the use of its Pro-E computer stations for
production development of the XXXX. In addition, it will provide
engineering support required to go to production on a actual cost basis.
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11. Xxxxx Group will be responsible for arranging any additional initial
financing required to get into production as per the current business plan.
III) TIME AND MANNER OF CONTRIBUTION
Subject to government approvals, all in-kind contributions by Xxxxx and
Amerigon shall be made before March 31st 1999 or no later than 3 weeks after
the formation of Newco, whichever occurs earlier.
Cash commitments by Xxxxx and other investors are laid out in the table
below. It is anticipated that all the investors will be finalized prior to
March 31st 1999.
--------------------------------------------------------------------------------
X0-00 X0-00 X0-00 X0-00 X0-0000 TOTAL
--------------------------------------------------------------------------------
XXXXX 160 160 300 230 150 1000
--------------------------------------------------------------------------------
INVESTORS 870 670 670 460 2670
--------------------------------------------------------------------------------
TOTAL 160 1030 970 900 610 3670
--------------------------------------------------------------------------------
All amounts are in thousands of US dollars
Conversion rate assumed at Rs 42.5 equals US $1
IV) EMPLOYEE STOCK PLAN
Per the operating plan it is anticipated that the services Xxxxx Xxxx will be
required to transfer all the technology related to the EMS, IPS as well as the
entire XXXX electrical system. It is anticipated that Xxxxx Xxxx will need to
spend 2-4 months in India and that his task will be completed by September 1999.
It is anticipated that Xxxxxx Xxxxx and Xxx Xxxxxxxxxx would assist the Newco to
productionise the XXXX and that their efforts would be required for a maximum
period of 3 years.
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The definitive agreements will contain detail clauses that better define the
time periods of vesting and commitments of Xxxxxx Xxxxx, Xxx Xxxxxxxxxx and
Xxxxx Xxxx that allow vesting of their respective options.
V) KEY HIGHLIGHTS OF THE IMPLEMENTATION PLAN
A. PROJECT SCHEDULE AND START-UP PLAN
A summary of the project schedule and key milestones is shown below. Based
on finalizing financing by the end of December 1998, production will commence
by February 1, 2000. The critical path item is testing which is a 1-year
period for the prototype vehicles and 3-month period for pre-production
vehicles. This is essential to ensure that the quality and reliability of
the vehicle is to the highest standards.
The start-up plan would include detail project planning supported by a key
person in India. Simultaneously, an organizing and operating team in India
will be formed. In the US, the focus on the first 3 months will be data
compilation, shipping of kits, and working on key long term items - body
panels, transmission and electrical system.
The production design effort will be for 5 months and all tools and fixtures
should be completed by October 1999, giving 2 months for tooling verification
and pilot production run.
B. ORGANIZATION AND STAFFING PLAN
For the first year (prior to production), the JV would employ a team of 55
people as shown in the table below. The proposed organization chart is shown
as two phases:
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Phase One for initial start-up and Phase Two as the company matures. Xxxxx
Group will be able to transfer a skeleton staff of 15 people for start-up
that are ideally suited for the project. The remaining to be hired. The
company will recruit 8-10 people who have previously worked on the XXXX
project. The recruitment process will take 2-4 months. Work using the
skeleton team will start prior to that. Candidates who potentially fit the
roles of key managers have been identified and will be recruited.
In addition to regular employees, 4 consultants are required to assist in the
body development, interior surfacing and suspension optimization. Parametric
Technologies (creators of Pro-E software and consultants with extensive
automotive experience) have assured the company that they can provide all
required support.
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