EXHIBIT 10.13


                             SHAREHOLDERS' AGREEMENT


                  THIS SHAREHOLDERS'  AGREEMENT (the "Agreement") is dated as of
June 1, 1999,  by and among Jagen Pty,  Ltd.  ("Jagen")  and  Anthony  Rawlinson
("Rawlinson" and together with Jagen, the "Purchasers"), Carl D. Perry ("Perry")
and U.S. Electricar, Inc., a California corporation (the "Company"). Capitalized
terms not  otherwise  defined  herein shall have the  meanings  specified in the
Securities  Purchase  Agreement,  dated of even date herewith by and between the
Company and the Purchasers (the "Purchase Agreement").

                                R E C I T A L S:

                  A. This Agreement  shall become  effective on the date of, and
simultaneously with, the Closing (the "Effective Date");

                  B. On the Effective Date Jagen acquired  70,000,000  shares of
the Company's  Common Stock (the "Shares") and a Convertible  Note the principal
amount of which is convertible into 13,333,334  Shares and a Warrant to purchase
41,666,666  Shares (the "Warrant  Shares") and Rawlinson agreed to extend a loan
for $500,000 upon the Subsequent  Closing, to be evidenced by a Convertible Note
the  principal  amount of which is  convertible  into  16,666,666  Shares  and a
Warrant to purchase 8,333,334 Warrant Shares;

                  C. The parties hereto desire to restrict the sale, assignment,
transfer,  encumbrance or other disposition of the Shares (as defined below), to
provide for certain  rights and  obligations in respect to the Shares and by the
Company and Perry, all as hereinafter provided;

                  NOW THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I.
                                   DEFINITIONS

                  As  used in this  Agreement,  the  following  terms  have  the
following meanings:

                  "Agreement" shall have the meaning set forth in the preamble.

                  "Affiliate"  shall mean, with respect to any specified Person,
any other Person  directly or  indirectly  controlling,  controlled  by or under
direct or indirect common control with such specified  Person.  For the purposes
of this definition,  "control" (including,  with correlative meanings, the terms
"controlled  by" and "under common control  with"),  as used with respect to any
Person,  shall mean the  possession,  directly  or  indirectly,  of the power to
direct or cause the  direction  of the  management  or policies of such  Person,
whether through the ownership of voting  securities,  by agreement or otherwise.
Without limiting the foregoing,  (i) all directors and officers of a Person that
is a  corporation,  and all  managing  members  of a  Person  that is a  limited
liability  company,  shall be deemed  Affiliates of such Person for all purposes
hereunder,  and (ii) in the case


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of an individual, Affiliate shall include (a) members of such specified Person's
immediate  family (as defined in  Instruction 2 of Item 404(a) of Regulation S-K
under the Securities Act) and (b) trusts,  the trustee and all  beneficiaries of
which are such specified Person or members of such Person's  immediate family as
determined in accordance with the foregoing clause (a).

                  "Appropriately Adjusted" shall mean appropriately adjusted for
stock splits, stock dividends, combinations, recapitalizations, and the like.

                  "Approved  Plan"  shall  mean a stock  option or other  equity
participation  plan for the  Company's  employees  which has been  approved by a
majority of the Board of Directors  and the  shareholders  of the  Company.  The
Company's  existing  Stock Option Plans as identified  in the Company's  filings
with the Securities and Exchange  Commission ("SEC Filings") shall constitute an
Approved Plan hereunder.

                  "Board of Directors"  shall mean the Board of Directors of the
Company.

                  "Business  Day"  shall  mean a day other  than a  Saturday  or
Sunday or any federal holiday.

                  "Charter  Documents"  shall  mean  the  Amended  and  Restated
Articles of Incorporation and By-Laws of the Company,  each as filed as Exhibits
to SEC Filings available on EDGAR or otherwise provided to the Purchasers.

                  "Company" shall have the meaning set forth in the preamble.

                  "Convertible   Notes"  shall  mean  the  Secured   Convertible
Promissory Notes issued by the Company to Jagen and Rawlinson.

                  "Effective  Date"  shall  have the  meaning  set  forth in the
recitals.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.

                  "Exempt  Transfer"  shall  mean(i)  Transfers  by a  Purchaser
directly or indirectly to, or for the benefit of, himself, his spouse,  parents,
siblings,  children,  grandchildren,  other  close  relatives,  or  any  of  the
foregoing  of an  Affiliate,  to  another  Purchaser  or to a legally  organized
charitable organization;  (ii) Transfers by a Purchaser to his heirs, executors,
personal  representatives  or  other  assigns  as a  result  of  his  death,  if
applicable; (iii)Transfers after the second anniversary of the Effective Date so
long as Purchaser is not in default under the provisions of this Agreement; (iv)
Transfers  after the  Company  has become  listed on a  Permitted  Exchange  (as
defined below); (v) Transfers approved by a disinterested  majority of the Board
of Directors,  including but not limited to Transfers in connection  with a sale
or merger of the Company  approved by a  disinterested  majority of the Board of
Directors;  or (vi) with respect to Perry, any Transfer of Shares other than the
Shares acquired from the Itochu  Corporation  (the "Itochu  Shares"),  provided,
however that the Itochu Shares may be transferred under paragraph (v) above.

<PAGE>

                  "Itochu  Debt"  shall mean all debt  covered by and  perfected
pursuant  to those  two  certain  UCC-Financing  Statements  identified  by file
numbers  99082C0625  and  99082C0635 as filed with the  California  Secretary of
State on March 22, 1999.

                  "Permitted  Exchange"  shall mean the New York Stock Exchange,
the American Stock, the Nasdaq National Market or the Nasdaq Small Cap Market.

                  "Person"   shall  mean  an   individual   or  a   corporation,
partnership,   limited  liability  company,   trust,  or  any  other  entity  or
organization,  including a government or political  subdivision  or an agency or
instrumentality thereof.

                  "Preemptive Rights Notice" shall have the meaning set forth in
Article III(b).

                  "Pro  Rata  Share"  shall  mean the  percentage  X/Y where "X"
equals the number of Shares  that are owned  immediately  prior to the  proposed
Transfer by Purchaser and "Y" equals the number of issued and outstanding Shares
in the Company on a fully  diluted  basis  immediately  prior to the  triggering
event.

                  "Public Offering" shall mean a public offering of common stock
by the Company (other than (i) pursuant to a registration  statement on Form S-8
or  otherwise  relating  to  equity  securities  issuable  exclusively  under an
Approved Plan, or (ii) pursuant to a merger, consolidation or reorganization).

                  "Purchase  Agreement"  shall have the meaning set forth in the
recitals.

                  "Purchasers" shall have the meaning set forth in the preamble.

                  "Registrable  Securities"  shall mean (i) the Shares purchased
under the Purchase  Agreement or loan balances converted into Shares pursuant to
promissory notes  contemplated  thereby or (ii) any other shares of Common Stock
of the Company  issued as (or issuable  upon the  conversion  or exercise of any
warrant,  right or  other  security  which is  issued  as) a  dividend  or other
distribution with respect to, or in exchange for or in replacement of (including
but not  limited to shares of Common  Stock  issued  upon a stock  split),  such
Shares;  provided,  however,  that the foregoing definition shall exclude in all
cases  Registrable  Securities  held  by  a  person  other  than  a  Transferee.
Notwithstanding  the  foregoing,  Shares  shall only be  treated as  Registrable
Securities  if and so long as they  have not been (A) sold to or though a broker
or  dealer  or  underwriter  in a public  distribution  or a  public  securities
transaction,  or (B) sold in a  transaction  exempt  from the  registration  and
prospectus  delivery  requirements  of the  Securities  Act under  Section  4(1)
thereof so that all transfer restrictions,  and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale.

                  "SEC" shall mean the Securities and Exchange Commission.

                  "Qualified  Public  Offering"  shall mean a Public Offering in
which (i) the gross proceeds to the Company from the shares of Common Stock sold
are at least $10 million,  (ii) the minimum  public  offering  price is at least
Twenty Cents( $0.20) per share (Appropriately


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Adjusted),  and (iii)  immediately  after such  offering the Common Stock of the
Company is listed for trading on a Permitted Exchange.

                  "Qualified    Reorganization"   shall   mean   a   merger   or
consolidation  with or into another  corporation or a sale of the shares of this
Company's Common Stock or a sale of all or  substantially  all of this Company's
properties and assets in which the  shareholders of this Company receive cash or
marketable  securities  equal to a per share  valuation of at least Twenty cents
($0.20) per share (Appropriately Adjusted).

                  "Remaining Shares" shall have the meaning set forth in Section
2.5.

                  "Securities  Act" shall mean the  Securities  Act of 1933,  as
amended, and the rules and regulations thereunder.

                  "Shares"  shall mean,  collectively,  (a) all of the shares of
any class of capital stock of the Company  including,  without  limitation,  the
Common Stock,  the Preferred  Stock and any shares which may be issued by reason
of   stock   splits,   reverse   stock   splits,   stock   dividends   or  other
recapitalizations  of the  Company,  (b)  all  shares  issuable  under  options,
warrants,  convertible promissory notes and other rights of any kind to purchase
any class of such capital stock,  and (c) all shares  issuable under  securities
convertible into or exchangeable  for any of the securities  described in clause
(a) or clause (b).  Shares with  respect to a Purchaser  shall also  include the
Common Shares and Warrant Shares and any Shares now owned or hereafter  acquired
by a Purchaser,  including  any interest of a spouse or Affiliate of a Purchaser
in any of the Shares,  whether  that  interest  is asserted  pursuant to marital
property laws,  contract or otherwise.  Notwithstanding  the  foregoing,  Shares
shall not include the Warrant  Shares for purposes of  determining a Purchaser's
Pro Rata Share under the preemptive rights established in Article III, and shall
not include the Itochu Shares after they are Transferred in an Exempt Transfer.

                  "Term"  shall  mean a period of not less than five  years from
the date of this  Agreement,  which period shall terminate when the Investors or
Transferees  own  Shares  representing  less  than  five  percent  (5%)  of  the
outstanding Shares of the Corporation or when seventy-five  percent (75%) of the
Shares of the Investors or Transferees have been registered  pursuant to Article
V.

                  "Transfer"  shall mean (i) when used as a noun:  any direct or
indirect transfer, sale, assignment,  pledge, hypothecation,  encumbrance, gift,
bequest,  devise,  descent or other disposition and (ii) when used as a verb: to
directly or  indirectly,  whether  voluntary or by  operation of law,  transfer,
sell, assign, pledge,  hypothecate,  encumber, gift, bequest, devise, descent or
otherwise dispose of.

                  "Transferee"  shall mean any Person to whom  Shares  have been
Transferred in compliance with the terms of this Agreement.


<PAGE>

                                   ARTICLE II.
                  RESTRICTIONS ON TRANSFERS /SHARE ACQUISITIONS

                  Section 2.1 Transfers in Contravention of this Agreement.  Any
attempt to Transfer,  or  purported  Transfer of, any Shares in violation of the
terms of this  Agreement  shall be null and void and neither the Company nor any
transfer agent shall  register upon its books any such Transfer.  A copy of this
Agreement  shall be filed with the  Secretary  of the  Company and kept with the
records of the Company.

                  Section 2.2 Permitted Transfers. The Purchasers shall not, and
Perry in the case of the Itochu  Shares,  shall not Transfer  any Shares  (other
than Transfers to the Company)  except for Exempt  Transfers and with respect to
Exempt  Transfers  under clauses (i) through (iv) of such definition only if (a)
the  certificates  representing  such Shares issued to the  Transferee  bear the
legend  provided  in Section  2.3,  if  required  by such  Section,  and (b) the
Transferee  (if not already a party  hereto) has executed and  delivered to each
other party hereto, as a condition precedent to such Transfer,  an instrument or
instruments,  reasonably  satisfactory  to such  parties,  confirming  that  the
Transferee  agrees to be bound by the terms of this Agreement in the same manner
as such Transferee's  transferor,  except as otherwise  specifically provided in
this Agreement.

                  Section 2.3 Legend.  Each  Purchaser  hereby  agrees that each
outstanding  certificate or instrument representing Shares issued or issuable to
it or any certificate issued in exchange for or upon conversion of any similarly
legended certificate, shall bear a legend reading substantially as follows:

         THE SHARES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN  REGISTERED
         UNDER  THE  SECURITIES  ACT OF 1933,  AS  AMENDED,  OR UNDER  ANY STATE
         SECURITIES  LAWS,  AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR
         AN EXEMPTION FROM  REGISTRATION IS AVAILABLE.  OTHER THAN IN CONNECTION
         WITH  TRANSFERS  TO  AFFILIATES,  THE  HOLDER  OF THESE  SHARES  MAY BE
         REQUIRED  TO DELIVER TO THE  COMPANY,  IF THE COMPANY SO  REQUESTS,  AN
         OPINION OF COUNSEL  (REASONABLY  SATISFACTORY  IN FORM AND SUBSTANCE TO
         THE COMPANY) TO THE EFFECT THAT AN EXEMPTION  FROM  REGISTRATION  UNDER
         THE SECURITIES ACT (OR  QUALIFICATION  UNDER STATE  SECURITIES LAWS) IS
         AVAILABLE  WITH  RESPECT TO ANY  TRANSFER OF THESE  SHARES THAT HAS NOT
         BEEN SO REGISTERED (OR QUALIFIED).

         THE COMPANY IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. A COPY
         OF THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF EACH CLASS AND
         SERIES  WILL BE  PROVIDED  TO EACH  STOCKHOLDER  WITHOUT  CHARGE,  UPON
         WRITTEN REQUEST.

         THE  SHARES  REPRESENTED  BY  THIS  CERTIFICATE  ALSO  ARE  SUBJECT  TO
         ADDITIONAL   RESTRICTIONS   ON  TRANSFER  AND  ON  VOTING   RIGHTS  AND
         OBLIGATIONS,  TO WHICH ANY TRANSFEREE AGREES BY HIS ACCEPTANCE


<PAGE>

         HEREOF, AS SET FORTH IN THE SHAREHOLDERS'  AGREEMENT,  DATED AS OF JUNE
         1, 1999.  NO  TRANSFER  OF SUCH SHARES WILL BE MADE ON THE BOOKS OF THE
         COMPANY UNLESS  ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF
         SUCH AGREEMENT AND BY AN AGREEMENT OF THE TRANSFEREE TO BE BOUND BY THE
         RESTRICTIONS SET FORTH IN SUCH AGREEMENT.  THE COMPANY WILL MAIL A COPY
         OF  SUCH  AGREEMENT  TO THE  HOLDER  HEREOF  WITHOUT  CHARGE  UPON  THE
         COMPANY'S RECEIPT OF A WRITTEN REQUEST THEREFOR.

                  Section 2.4  Acquisitions.  Except  pursuant  to the  Purchase
Agreement,  the  Convertible  Notes,  the exercise of Warrants  issued under the
Convertible  Notes or a Purchaser's  preemptive  rights set forth in Article III
below, a Purchaser shall not acquire any Shares before the second anniversary of
the date of this  Agreement  without  the  consent  of this  Company's  Board of
Directors.

                                  ARTICLE III.
                                PREEMPTIVE RIGHTS

                  (a) Until the  Company is listed on a Permitted  Exchange,  if
the Company shall issue any (i) shares of capital stock, (ii) rights, options or
warrants directly or indirectly to purchase shares of its capital stock or (iii)
securities  convertible  directly or  indirectly  into such capital stock (other
than (A) any such equity or any such rights to acquire  equity  which are issued
or issuable  and  outstanding  as of the date of this  Agreement,  (B) any stock
options or equity issued or issuable in connection with any stock option plan or
other  compensatory  plan  approved by the Board of Directors for the benefit of
employees, officers, directors or consultants of the Company, or (C) pursuant to
a merger,  consolidation or acquisition of assets or technology or in connection
with any strategic  relationship approved by the Board of Directors),  then each
Purchaser  shall be entitled to  participate  in such issuance on the same terms
and conditions, on a Pro Rata Share basis in respect of such Purchaser's Shares,
so that following such issuance,  each  Purchaser,  if it has elected to acquire
the new  securities  to be issued,  will have (or in the case of the issuance of
options, warrants, rights or convertible securities,  have the right to acquire)
the same  percentage of beneficial  ownership of the Common Stock of the Company
as such  Purchaser  had by reason of its  ownership  of  Shares  (excluding  the
Warrant Shares) immediately prior to such issuance.

                  (b)  The  Company   shall   provide  a  written   notice  (the
"Preemptive  Rights  Notice") of any such issuance to each  Purchaser,  and each
Purchaser may elect to purchase  such  securities in any such issuance by giving
written notice to the Company  together with payment in full within fifteen (15)
Business Days following the date of the Preemptive Rights Notice. If, subsequent
to the date of the  Preemptive  Rights  Notice,  the Company alters the price or
other  significant  terms  and  conditions  of the  offering  that a  reasonable
investor would consider material to the decision to purchase such securities, or
the  Company has not sold such  securities  within 90 days after the date of the
Preemptive  Rights Notice,  the Company shall provide another  Preemptive Rights
Notice to each  Purchaser  with  respect  to any  subsequent  issuance  and will
otherwise  comply  with  the  provisions  of  this  Article  III to  the  extent
applicable to such issuance.


<PAGE>

                  (c) The  rights  set  forth in this  Article  III  shall  also
terminate  upon the  consummation  of a Qualified  Public  Offering or Qualified
Reorganization. Notwithstanding the foregoing, the Company shall not be required
to offer or issue any shares to the Purchaser  under  paragraph  III(a) above if
counsel  for the Company  reasonably  concludes  that there is not an  available
securities law exemption for an offer or issuance to the Purchaser.

                                   ARTICLE IV.
                         CORPORATE GOVERNANCE AND VOTING

                  (a)  Until  a   Qualified   Public   Offering   or   Qualified
Reorganization,  the  Purchasers and their  Transferees  shall have the right to
submit one designee  and a majority of the board of  directors  shall submit the
remaining  designees to be (i) elected to the  Corporation's  Board of Directors
until the Corporation's next  shareholder's  meeting in the case of a vacancy on
the board of directors, (ii) nominated, recommended for election by the Board of
Directors  of the  Corporation  in the case of board  seats  to be  filled  in a
shareholders'  meeting and (iii)  included  for  election  in the  Corporation's
future proxy statements.  Perry, the Purchasers and their Transferees shall vote
their Shares in favor of such designees.

                  (b)  Until  a   Qualified   Public   Offering   or   Qualified
Reorganization,  so  long as the  Purchasers  or  their  Transferees  shall  own
beneficially and of record at least 75,000,000 Shares (Appropriately  Adjusted),
and so long as he is willing to serve, Perry shall vote their Shares in favor of
Anthony Rawlinson as the Chairman of the Corporation's Board of Directors.

                  (c) Each  Purchaser,  its Transferees and Perry shall vote all
of the Shares they own  beneficially  or of record in favor of the removal (with
or without  cause) of any  director  designated  by the Board of  Directors if a
majority  of the Board of  Directors  then in  office  request  such  director's
removal in writing for any reason.  None of Purchasers,  their  Transferees  and
Perry shall vote the Shares they own  beneficially  or of record in favor of the
removal (with or without cause) of any director  unless such removal shall be at
the request of the Board of Directors or the Purchasers, as the case may be, who
nominated such director.  Any vacancy created or existing on the Company's Board
of Directors shall be filled by a successor Director who shall be designated and
elected in the manner by which his or her predecessor was designated and elected
as provided above.

                  (c) Until a Qualified Reorganization,  during the Term of this
Agreement, the Corporation shall not increase the size of the board of directors
of the Corporation  above seven (7) members without the consent of a majority in
interest of the Purchasers and their Transferees.

                  (d) Each  Purchaser  and its  Transferees  shall  refrain from
voting the Shares  held  beneficially  or of record by it in favor of, and shall
vote  such  Shares  against  any (i)  sale,  transfer  or  other  assignment  or
hypothecation of this Company's assets or merger, reorganization or similar sale
of this Company or (ii)  amendment,  modification,  change or termination to any
provision of this Company's  Charter Documents unless such action is recommended
or approved by a majority of the Board of  Directors  then in office or pursuant
to a unanimous written consent of the Board of Directors.

<PAGE>

                  (e) Perry shall refrain from (i) demanding payment for or (ii)
foreclosing  on the  Company's  assets  pursuant to the Itochu Debt  without the
consent of a majority in interest of the  Purchasers  and their  Transferees  so
long as the  Purchasers  and their  Transferees  own  25,000,000  or more Shares
(Appropriately Adjusted) during the Term of this Purchase Agreement.

                                   ARTICLE V.
                               REGISTRATION RIGHTS

         Section 5.1        Request for Registration.

                  (a) If the Company  shall receive at any time after the second
anniversary of the date of this Agreement and during the Term of this Agreement,
at a time when the Shares are listed on a Permitted Exchange,  a written request
from the  Purchasers or their  Transferees  that the Company file a registration
statement  under the Securities Act covering the  registration of at least fifty
percent  (50%)  of the  Registrable  Securities  then  outstanding  (or a lesser
percent  if the  anticipated  aggregate  offering  price,  net  of  underwriting
discounts and commissions,  would exceed  $10,000,000),  then the Company shall,
within  twenty (20) days of the receipt  thereof,  give  written  notice of such
request  to all  Purchasers  or their  Transferees  and  shall,  subject  to the
limitations  of  subsection  5.1(b),  use its best  efforts to effect as soon as
practicable,  the  registration  under  the  Securities  Act of all  Registrable
Securities  which the Purchasers or their  Transferees  request to be registered
within thirty (30) days of the mailing of such notice by the Company.

                  (b) If the  Purchasers  or their  Transferees  initiating  the
registration request hereunder  ("Initiating  Holders") intend to distribute the
Registrable  Securities  covered by their  request by means of an  underwriting,
they shall so advise the  Company as a part of their  request  made  pursuant to
this Section 5.1 and the Company shall include such  information  in the written
notice  referred  to in  subsection  5.1(a).  In such  event,  the  right of any
Purchaser or Transferee to include  Registrable  Securities in such registration
shall be conditioned upon such Purchaser's or Transferee's participation in such
underwriting and the inclusion of such Purchaser's Registrable Securities in the
underwriting  (unless otherwise mutually agreed by a majority in interest of the
Initiating  Holders and such  Purchaser or  Transferee)  to the extent  provided
herein.  All  Initiating  Holders,   Purchasers  and  Transferees  proposing  to
distribute their securities  through such underwriting  shall (together with the
Company as provided in subsection  5.1(e)) enter into an underwriting  agreement
in  customary  form  with the  underwriter  or  underwriters  selected  for such
underwriting.  Notwithstanding  any other  provision of this Section 5.1, if the
underwriter  advises the Initiating  Holders in writing that  marketing  factors
require a  limitation  of the  number of  shares  to be  underwritten,  then the
Initiating  Holders  shall so  advise  all  Purchasers  or  Transferees  holding
Registrable  Securities which would otherwise be underwritten  pursuant thereto,
and the number of shares of Registrable  Securities  that may be included in the
underwriting  shall be allocated in proportion (as nearly as practicable) to the
amount of  Registrable  Securities  of the  Company  held by each  Purchaser  or
Transferee;  provided,  however,  that  the  number  of  shares  of  Registrable
Securities to be included in such  underwriting  shall not be reduced unless all
other securities are first entirely excluded from the underwriting.


<PAGE>

         (c)  Notwithstanding  the  foregoing,  if the Company  shall furnish to
Initiating Holders requesting a registration  statement pursuant to this Section
5.1 a  certificate  signed by the  President of the Company  stating that in the
good  faith  judgment  of the Board of  Directors  of the  Company,  it would be
seriously  detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore  essential to defer the filing of such
registration  statement,  the Company  shall have the right to defer such filing
for a period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders;  provided,  however, that the Company may not
utilize this right more than once in any twelve (12) month period.

         (d) In addition,  the Company  shall not be obligated to effect,  or to
take any action to effect, any registration pursuant to this Section 5.1:

                  (i) after the Company has  effected in the  aggregate  two (2)
registrations   pursuant   to  this   Section  5.1  and  Section  5.3  and  such
registrations have been declared or ordered effective;

                  (ii) during the period starting with the date ninety (90) days
prior to the Company's  good faith estimate of the date of filing of, and ending
on a date  one  hundred  eighty  (180)  days  after  the  effective  date  of, a
registration  subject  to  Section  5.2  hereof;  provided  that the  Company is
actively   employing  in  good  faith  all  reasonable  efforts  to  cause  such
registration statement to become effective; or

                  (iii) If the Initiating  Holders  propose to dispose of shares
of  Registrable  Securities  that  may be  immediately  registered  on Form  S-3
pursuant to a request made pursuant to Section 5.3 below.

         Section 5.2        Company Registration.

         If (but  without  any  obligation  to do so) the  Company  proposes  to
register (including for this purpose a registration  effected by the Company for
shareholders  other than the  Purchasers)  any of its stock under the Securities
Act in  connection  with the public  offering of such  securities  (other than a
registration on Form S-4, Form S-8 or any successors  forms, or any registration
on any form which does not include  substantially  the same information as would
be required to be included in a registration  statement covering the sale of the
Registrable  Securities),  the Company shall,  at such time,  promptly give each
Purchaser  or its  Transferees  written  notice of such  registration.  Upon the
written request of each Purchaser or its  Transferees  given within fifteen (15)
days after mailing of such notice by the Company,  the Company shall, subject to
the provisions of Section 5.7,  cause to be registered  under the Securities Act
all of the  Registrable  Securities  that such Purchaser or its  Transferees has
requested to be registered.

         Section 5.3        Form S-3 Registration.

         In case  the  Company  shall  receive  from  any  Purchasers  or  their
Transferees a written  request that the Company effect a registration  on Form S
3, and any related  qualification or



<PAGE>

compliance with respect to all or a part of the Registrable  Securities owned by
such Holder or Holders, the Company will:

         (a) promptly give written notice of the proposed registration,  and any
related  qualification  or  compliance,   to  all  other  Purchasers  and  their
Transferees; and

         (b) as soon as  practicable,  effect  such  registration  and all  such
qualifications  and  compliances  as may be so requested  and as would permit or
facilitate the sale and  distribution  of all or such portion of the Registrable
Securities as are  specified in such request,  together with all or such portion
of the Registrable  Securities of any other  Purchaser or Transferee  joining in
such request given within fifteen (15) days after receipt of such written notice
from the Company; provided,  however, that the Company shall not be obligated to
effect any such  registration,  qualification  or  compliance,  pursuant to this
Section 5.3:

                  (i) if Form S-3 is not available for such offering;

                  (ii) if the  Purchasers or their  Transferees  propose to sell
Registrable  Securities  at an  aggregate  price  to the  public  of  less  than
$1,000,000;

                  (iii) if the Company shall furnish a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors of the Company,  it would be seriously  detrimental to the Company and
its  shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration  statement  for a period of not more than one hundred  twenty (120)
days after  receipt of the request  under this Section 5.3;  provided,  however,
that the Company  shall not utilize this right more than once in any twelve (12)
month period;

                  (iv) if the Company has already effected two  registrations on
either Form S-3 or Form S-1 (or any  combination  thereof) for the Purchasers or
their Transferees pursuant to Section 5.1 or this Section 5.3;

                  (v) in any particular  jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance;

                  (vi) during the period  ending one hundred  eighty  (180) days
after the effective date of a registration  statement  subject to Section 5.1 or
5.2;

                  (vii)  prior  to the  second  anniversary  of the date of this
Agreement and thereafter,  if the Shares are not listed on a Permitted Exchange,
provided, however that this exception does not apply to rights of the Purchasers
or their Transferees under Section 5.2 hereof; or

                  (viii) after all of the Registrable Securities shall have been
lawfully sold by the holder thereof to the public.


<PAGE>

         (c) Subject to the  foregoing,  the Company  shall file a  registration
statement covering the Registrable  Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Purchasers or their Transferees.  Registration  effected pursuant to this
Section  5.3 shall not be  counted  as demands  for  registration  registrations
effected pursuant to Section 5.2.

         Section 5.4       Obligations of the Company.

         Whenever  required under this Section 5 to effect the  registration  of
any Registrable  Securities,  the Company shall, as  expeditiously as reasonably
possible:

         (a) Prepare and file with the SEC a registration statement with respect
to such  Registrable  Securities  and use all  reasonable  efforts to cause such
registration statement to become effective, and keep such registration statement
effective  for up to one hundred  twenty  (120) days.  The Company  shall not be
required to file, cause to become effective or maintain the effectiveness of any
registration statement (other than a registration statement on Form S-3 pursuant
to Section 5.3) that  contemplates a distribution  of securities on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act.

         (b) Prepare and file with the SEC such  amendments  and  supplements to
such  registration  statement and the  prospectus  used in connection  with such
registration  statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for up to one hundred twenty (120) days.

         (c) Furnish to the Purchaser or its Transferees  such numbers of copies
of a prospectus,  including a  preliminary  prospectus,  in conformity  with the
requirements  of the  Securities  Act,  and  such  other  documents  as they may
reasonably  request  in order  to  facilitate  the  disposition  of  Registrable
Securities owned by them.

         (d) Use its best efforts to register and qualify the securities covered
by such  registration  statement under such other securities or Blue Sky laws of
such  jurisdictions  as shall be  reasonable  requested by the  Purchaser or its
Transferees,  provided  that the Company  shall not be  required  in  connection
therewith  or as a  condition  thereto to qualify  to do  business  or to file a
general consent to service of process in any such states or jurisdictions.

         (e) In the event of any underwritten  public  offering,  enter into and
perform its obligations under an underwriting  agreement, in usual and customary
form,  with the managing  underwriter  of such  offering.  Each Purchaser or its
Transferee  participating in such underwriting shall also enter into and perform
its obligations under such an agreement.

         (f) Notify each Purchaser or its  Transferee of Registrable  Securities
covered by such  registration  statement 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, includes an untrue statement of a material fact or
omits to state a material  fact  required to be stated  therein or  necessary to
make


<PAGE>

the  statements  therein not misleading in the light of the  circumstances  then
existing, such obligation to continue for one hundred twenty (120) days and file
any  supplements  or amendments as required  under Section  5.4(b) to update the
prospectus for such event.

         (g) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities  exchange or market on which similar  securities
issued by the Company are then listed.

         (h)  Provide  a  transfer  agent  and  registrar  for  all  Registrable
Securities  registered  pursuant  hereunder  and a CUSIP  number  for  all  such
Registrable  Securities,  in each case not later than the effective date of such
registration.

         (i) Use its best efforts to furnish, at the request of any Purchaser or
its Transferee  requesting  registration of Registrable  Securities  pursuant to
this Section 5, on the date that such  Registrable  Securities  are delivered to
the  underwriters  for sale in connection  with a registration  pursuant to this
Section 5, if such securities are being sold through  underwriters,  or, if such
securities  are not  being  sold  through  underwriters,  on the  date  that the
registration statement with respect to such securities becomes effective:

                  (i) an opinion,  dated such date, of the counsel  representing
the Company for the purposes of such  registration,  in form and substance as is
customarily given to underwriters in an underwritten public offering,  addressed
to the underwriters,  if any, and to the Purchaser or its Transferees requesting
registration of Registrable Securities and

                  (ii) a letter dated such date, from the independent  certified
public accountants of the Company, in form and substance as is customarily given
by independent  certified public  accountants to underwriters in an underwritten
public offering, addressed to the underwriters,  if any, and to the Purchaser or
its Transferees requesting registration of Registrable Securities.

         (j) To the extent  reasonably  necessary to effect the  registration of
any  Registrable  Securities,  make  available for  inspection by each seller of
Registrable  Securities,  any  underwriter  participating  in  any  distribution
pursuant to such registration statement,  and any attorney,  accountant or other
agent retained by such seller or underwriter,  all pertinent financial and other
records,  pertinent corporate documents and properties of the Company, and cause
the  Company's  officers,  directors  and  employees  to supply all  information
reasonably requested by any such seller,  underwriter,  attorney,  accountant or
agent in connection with such registration statement.

         Section 5.5       Furnish Information.

         It shall be a condition  precedent to the obligations of the Company to
take any action  pursuant  to this  Section 5 with  respect  to the  Registrable
Securities of any selling Purchaser or its Transferee that such Purchaser or its
Transferee shall furnish to the Company such information  regarding itself,  the
Registrable  Securities  held by it, and the intended  method of  disposition of
such  securities  as  shall be  required  to  effect  the  registration  of such
Purchaser or its Transferee's Registrable Securities.  The Company shall have no
obligation with respect to any registration requested pursuant to Section 5.1 or
Section  5.3 of  this  Agreement  if,  as a  result  of the


<PAGE>

application of the preceding  sentence,  the number of shares or the anticipated
aggregate  offering  price of the  Registrable  Securities to be included in the
registration  does not equal or exceed the  number of shares or the  anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such  registration  as specified in subsection  5.1(a) or subsection
5.3(b)(2), whichever is applicable.

         Section 5.6       Expenses of Registration.

         (a) All expenses (other than  underwriting  discounts and  commissions)
incurred in connection with registrations, filings or qualifications pursuant to
Section  5.1,  including  (without  limitation)  all  registration,  filing  and
qualification  fees,  printers' and accounting  fees, fees and  disbursements of
counsel  for the  Company,  and the  reasonable  fees and  disbursements  of one
counsel for the selling  Purchaser or its Transferees  selected by them with the
approval of the Company not to exceed  $15,000 for such counsel,  which approval
shall not be  unreasonably  withheld,  shall be borne by the Company;  provided,
however,  that the Company  shall not be required to pay for any expenses of any
registration  proceeding  begun  pursuant  to  Section  5.1 if the  registration
request  is  subsequently  withdrawn  at the  request  of the  Purchaser  or its
Transferees  of a majority of the  Registrable  Securities to be registered  (in
which  case all  participating  Purchaser  or its  Transferees  shall  bear such
expenses),  unless  the  Purchaser  or  its  Transferees  of a  majority  of the
Registrable  Securities agree to forfeit their right to one demand  registration
pursuant  to  Section  5.1 or  Section  5.3 as the case may be,  or  unless  the
registration  request  is  withdrawn  due to a  material  adverse  change in the
Company's  financial  condition  or business  which was not known by the selling
Purchaser or its Transferees at the time the registration was requested.

         (b) All expenses (other than  underwriting  discounts and  commissions)
incurred in connection  with two  registrations,  filings or  qualifications  of
Registrable  Securities  pursuant  to  Section  5.2 for  each  Purchaser  or its
Transferee,  including  (without  limitation)  all  registration,   filing,  and
qualification  fees,  printers' and accounting  fees, fees and  disbursements of
counsel  for the  Company,  and the  reasonable  fees and  disbursements  of one
counsel for the selling  Purchaser or its Transferees  selected by them with the
approval of the Company,  not to exceed $5,000 for such counsel,  which approval
shall not be unreasonably withheld, shall be borne by the Company.

         (c) All expenses (other than  underwriting  discounts and  commissions)
incurred in connection  with a registration  requested  pursuant to Section 5.3,
including  (without   limitation)  all  registration,   filing,   qualification,
printers' and accounting fees and the reasonable fees and  disbursements  of one
counsel  for  the  selling  Purchaser  or its  Transferee  or  Purchaser  or its
Transferees  selected by them with the  approval of the  Company,  not to exceed
$10,000 for such counsel, which approval shall not be unreasonably withheld, and
counsel for the Company shall be borne by the Company.

         (d) All underwriting  discounts and commissions  incurred in connection
with registrations in connection with each registration  statement under Section
5 shall be borne by the participating  sellers (and the Company,  if the Company
is a seller)  in  proportion  to the number of shares  sold by each,  or as they
otherwise may agree.


<PAGE>

         Section 5.7 Underwriting Requirements.

         In connection with any offering  involving an underwriting of shares of
the Company's capital stock, the Company shall not be required under Section 5.2
to  include  any of  the  Purchaser  or  its  Transferees'  securities  in  such
underwriting  unless  they accept the terms of the  underwriting  as agreed upon
between  the Company and the  underwriters  selected by it (or by other  persons
entitled  to select the  underwriters),  and then only in such  quantity  as the
underwriters  determine in their sole discretion will not jeopardize the success
of the offering by the Company.  If the total  amount of  securities,  including
Registrable Securities, requested by Purchaser or its Transferees to be included
in such offering exceeds the amount of securities sold other than by the Company
that the underwriters  determine in their sole discretion is compatible with the
success of the  offering,  then the Company  shall be required to include in the
offering only that number of such securities,  including Registrable Securities,
which the  underwriters  determine in their sole  discretion will not jeopardize
the success of the offering (the  securities so included to be  apportioned  pro
rata among the selling shareholders  according to the total amount of securities
entitled to be included  therein  owned by each selling  shareholder  or in such
other  proportions as shall mutually be agreed to by such selling  shareholders)
but in no event shall (i) any shares being sold by a Purchaser or its Transferee
exercising a demand registration right set forth in Section 5.1 be excluded from
such offering and (ii) the amount of securities of the selling  Purchaser or its
Transferees  included in the offering be reduced  below ten percent (10%) of the
total amount of securities  included in such  offering,  unless such offering is
the first public  offering of the  Company's  securities  made after the date of
this  Agreement,   in  which  case,  except  as  provided  in  (i)  the  selling
shareholders  may  be  excluded  if  the  underwriters  make  the  determination
described above and no other shareholder's securities are included. For purposes
of  the  preceding  parenthetical  concerning  apportionment,  for  any  selling
shareholder  which  is  a  holder  of  Registrable  Securities  and  which  is a
partnership or corporation,  the partners,  retired partners and shareholders of
such holder,  or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single  "selling  shareholder,"  and any pro rata  reduction with
respect to such "selling  shareholder"  shall be based upon the aggregate amount
of shares  carrying  registration  rights owned by all entities and  individuals
included in such "selling shareholder," as defined in this sentence.

         Section 5.8 Delay of Registration.

         No Purchaser or its  Transferee  shall have any right to obtain or seek
an injunction  restraining or otherwise  delaying any such  registration  as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 5.

         Section 5.9  Indemnification.  In the event any Registrable  Securities
are included in a registration statement under this Section 5:

         (a) To the extent permitted by law, the Company will indemnify and hold
harmless each Purchaser or its  Transferee,  any  underwriter (as defined in the
Securities  Act) for such Purchaser or its  Transferee and each person,  if any,
who controls such Purchaser or its Transferee or underwriter  within the meaning
of the Securities Act or the Exchange Act, against any losses, claims,  damages,
or  liabilities  (joint or several) to which they may become  subject  under the

<PAGE>

Securities Act, the Exchange Act or other federal or state law,  insofar as such
losses,  claims,  damages,  or liabilities (or actions in respect thereof) arise
out  of or  are  based  upon  any  of the  following  statements,  omissions  or
violations (collectively a "Violation"):

                  (i) any untrue  statement  or alleged  untrue  statement  of a
material  fact  contained  in  such   registration   statement,   including  any
preliminary  prospectus or final prospectus  contained therein or any amendments
or supplements thereto,

                  (ii) the  omission  or  alleged  omission  to state  therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or

                  (iii) any violation or alleged violation by the Company of the
Securities  Act,  the  Exchange  Act,  any state  securities  law or any rule or
regulation  promulgated  under the Securities Act, the Exchange Act or any state
securities law;

and the Company will pay to each such Purchaser or its  Transferee,  underwriter
or  controlling  person,  as incurred,  any legal or other  expenses  reasonably
incurred by them in connection  with  investigating  or defending any such loss,
claim,  damage,  liability,  or action;  provided,  however,  that the indemnity
agreement contained in this subsection 5.9(a) shall not apply to amounts paid in
settlement  of any such  loss,  claim,  damage,  liability,  or  action  if such
settlement is effected  without the consent of the Company  (which consent shall
not be unreasonably withheld),  nor shall the Company be liable to any Purchaser
or its Transferee,  underwriter or controlling  person for any such loss, claim,
damage,  liability,  or action to the  extent  that it arises out of or is based
upon a Violation  which occurs in reliance upon and in  conformity  with written
information  furnished expressly for use in connection with such registration by
any such Purchaser or its Transferee, underwriter or controlling person.

         (b)  To  the  extent  permitted  by  law,  each  selling  Purchaser  or
Transferee will indemnify and hold harmless the Company,  each of its directors,
each of its officers who has signed the registration statement,  each person, if
any,  who  controls the Company  within the meaning of the  Securities  Act, any
underwriter,  any other  Purchaser  or  Transferee  selling  securities  in such
registration  statement and any  controlling  person of any such  underwriter or
other  Purchaser  or  Transferee,   against  any  losses,  claims,  damages,  or
liabilities  (joint or several) to which any of the foregoing persons may become
subject,  under the  Securities  Act, the Exchange Act or other federal or state
law,  insofar as such losses,  claims,  damages,  or liabilities  (or actions in
respect  thereto) arise out of or are based upon any Violation,  in each case to
the extent (and only to the extent) that such Violation  occurs in reliance upon
and in  conformity  with  written  information  furnished  by such  Purchaser or
Transferee expressly for use in connection with such registration; and each such
Purchaser  or  Transferee  will pay, as  incurred,  any legal or other  expenses
reasonably  incurred by any person  intended to be indemnified  pursuant to this
subsection  5.9(b), in connection with investigating or defending any such loss,
claim,  damage,  liability,  or action;  provided,  however,  that the indemnity
agreement contained in this subsection 5.9(b) shall not apply to amounts paid in
settlement  of any  such  loss,  claim,  damage,  liability  or  action  if such
settlement is effected without the consent of the Purchaser or Transferee, which
consent shall not be unreasonably withheld; provided, that in no event shall any
indemnity under

<PAGE>

this  subsection  5.9(b) exceed the net proceeds  from the offering  received by
such  Purchaser  or  Transferee,  except  in the case of  willful  fraud by such
Purchaser or Transferee.

         (c) Promptly after receipt by an  indemnified  party under this Section
5.9 of notice of the  commencement  of any action  (including  any  governmental
action),  such  indemnified  party will, if a claim in respect  thereof is to be
made  against any  indemnifying  party under this  Section  5.9,  deliver to the
indemnifying  party  a  written  notice  of the  commencement  thereof,  and the
indemnifying  party shall have the right to  participate  in, and, to the extent
the indemnifying  party so desires,  jointly with any other  indemnifying  party
similarly  noticed,   to  assume  the  defense  thereof  with  counsel  mutually
satisfactory  to the  parties;  provided,  however,  that an  indemnified  party
(together with all other  indemnified  parties which may be represented  without
conflict by one counsel)  shall have the right to retain one  separate  counsel,
with the reasonable fees and expenses to be paid by the  indemnifying  party, if
representation  of  such  indemnified  party  by  the  counsel  retained  by the
indemnifying  party would be inappropriate due to actual or potential  differing
interests between such indemnified party and any other party represented by such
counsel  in such  proceeding.  The  failure  to  deliver  written  notice to the
indemnifying  party within a  reasonable  time of the  commencement  of any such
action, if prejudicial to its ability to defend such action,  shall relieve such
indemnifying  party of any liability to the indemnified party under this Section
5.9, but the omission so to deliver  written  notice to the  indemnifying  party
will not relieve it of any liability that it may have to any  indemnified  party
otherwise than under this Section 5.9.

         (d) If the indemnification  provided for in this Section 5.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss,  liability,  claim,  damage or expense referred to therein,
then the  indemnifying  party, in lieu of indemnifying  such  indemnified  party
hereunder,  shall  contribute to the amount paid or payable by such  indemnified
party as a result of such loss,  liability,  claim,  damage,  or expense in such
proportion as is appropriate  to reflect the relative fault of the  indemnifying
party on the one hand and of the  indemnified  party on the other in  connection
with the statements or omissions that resulted in such loss,  liability,  claim,
damage  or  expense  as well as any  other  relevant  equitable  considerations;
provided,  that in no event shall any  contribution by a Purchaser or Transferee
under this Subsection  5.9(d) exceed the net proceeds from the offering received
by such  Purchaser or  Transferee,  except in the case of willful  fraud by such
Purchaser or Transferee. The relative fault of the indemnifying party and of the
indemnified  party shall be  determined  by reference  to,  among other  things,
whether  the  untrue or  alleged  untrue  statement  of a  material  fact or the
omission  to state a  material  fact  relates  to  information  supplied  by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge,  access to  information,  and  opportunity to correct or prevent such
statement or omission.

         (e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection  with the  underwritten  public offering are in conflict with
the foregoing  provisions,  the provisions in the  underwriting  agreement shall
control;   provided,   however,   that  except  as  expressly  provided  in  the
underwriting  agreement,  the obligations of the persons selling shares pursuant
to such  underwriting  agreement  to  indemnify  the  underwriters  shall not be
considered to conflict with the


<PAGE>

indemnification   obligations   between  the  Company  and  the   Purchasers  or
Transferees under this Section 5.9.

         (f) The obligations of the Company and Purchasers or Transferees  under
this Section 5.9 shall  survive the  completion  of any offering of  Registrable
Securities in a registration statement under this Section 5, and otherwise.

         Section 5.10 Reports Under Securities Exchange Act of 1934.

         With a view to making  available to the Purchasers or  Transferees  the
benefits of Rule 144 promulgated  under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Purchaser or its Transferees
to sell securities of the Company to the public without registration or pursuant
to a registration on Form S 3, the Company agrees to:

         (a) make and keep  public  information  available,  as those  terms are
understood  and  defined in SEC Rule 144,  at all times  after  ninety (90) days
after  the  effective  date of the  first  registration  statement  filed by the
Company for the offering of its  securities to the general public so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;

         (b) take such  action,  including  the  voluntary  registration  of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Purchasers or Transferees to utilize Form S-3 for the sale of their  Registrable
Securities,  such action to be taken as soon as practicable after the end of the
fiscal year in which the first  registration  statement filed by the Company for
the offering of its securities to the general public is declared effective;

         (c)  file  with  the SEC in a  timely  manner  all  reports  and  other
documents required of the Company under the Securities Act and Exchange Act; and

         (d) furnish to any  Purchaser or  Transferee,  so long as the Purchaser
owns any  Registrable  Securities  or the  Transferee  owns at least  50,000,000
shares  of  Registrable  Securities  (Appropriately  Adjusted),  forthwith  upon
request (i) a written  statement by the Company  that it has  complied  with the
reporting requirements of SEC Rule 144 (at any time after ninety (90) days after
the effective date of the first  registration  statement  filed by the Company),
the Securities Act and the Exchange Act (at any time after it has become subject
to such  reporting  requirements),  or that it qualifies  as a registrant  whose
securities  may  be  resold  pursuant  to  Form S 3 (at  any  time  after  it so
qualifies),  (ii) a copy of the most recent  annual or  quarterly  report of the
Company and such other reports and documents so filed by the Company,  and (iii)
such other information as may be reasonably  requested in availing any Purchaser
or its  Transferees  of any rule or  regulation  of the SEC  which  permits  the
selling of any such securities without registration or pursuant to such form.

         Section 5.11 Termination of Registration  Rights.  Notwithstanding  the
foregoing  provisions  of this  Article  V, the rights to  registration  and the
designation  of Shares  as  Registrable  Securities  shall  terminate  as to any
particular  securities and any particular  Purchaser or Transferee  when (i) all
such  securities  shall have been  lawfully  sold by the  holder  thereof to the
public,  (ii) on


<PAGE>

the fifth anniversary of the date the Shares are listed on a Permitted  Exchange
or (iii) on such date as such  securities  may both be sold pursuant to Rule 144
without  registration  during  any three (3) month  period  and are  listed on a
Permitted Exchange.

         Section 5.12  Assignability  of  Registration  Rights.  Notwithstanding
anything to the contrary in this Article V, the registration rights set forth in
this Article V are only  assignable  to the original  Transferee of a Purchaser,
and only provided that such assignee Transferee promptly agrees in writing to be
bound by the terms and conditions of this Agreement.



                                   ARTICLE VI.
                    ADDITIONAL OBLIGATIONS OF THE CORPORATION

         Section 6.1 Increase in Authorized Shares. Until the second anniversary
of this Agreement,  the Corporation  shall not increase the authorized number of
shares of  Common  Stock of the  Corporation  above  500,000,000  (Appropriately
Adjusted)  without the consent of a majority  in interest of the  Purchasers  or
their Transferees.

         Section 6.2 Financial Statements. The Corporation shall provide current
financial  statements  to the  Purchasers  within thirty (30) Business Days of a
reasonable request for such financial statements.

         Section  6.3  Filings.   The  Corporation   shall  provide   reasonable
assistance  to the  Purchasers  or  their  Transferees,  at the  expense  of the
Corporation,  in filing such reports and filings as are required  under Sections
13(d),  13(g) and 16 of the  Securities  Act of 1934, as amended,  and the rules
promulgated thereunder.

         Section  6.4  Inspection.  Until a  Qualified  Reorganization  and only
during  the  Term of this  Agreement,  Company  shall  permit a  Purchaser  or a
Transferee  holding all of a  Purchaser's  Shares  acquired  under the  Purchase
Agreement  and  the  promissory  notes  contemplated  thereby,  so  long as such
Transferee continues to hold at least 50% of the Shares acquired from Purchaser,
at such  person's  expense,  to visit and inspect the Company's  properties,  to
examine its books of account and records and to discuss the  Company's  affairs,
finances and accounts with its officers,  all at such reasonable times as may be
requested by the Purchaser or Transferee;  provided,  however,  that the Company
shall not be  obligated  pursuant to this  Section 6.4 to provide  access to any
information  which it  reasonably  considers  to be a trade  secret  or  similar
confidential information.

                                  ARTICLE VII.
                                  MISCELLANEOUS

                  Section  7.1 No  Inconsistent  Agreements.  Each party  hereto
hereby  consents to the termination of any other prior written or oral agreement
or understanding restricting,  conditioning or limiting the ability of any party
to transfer or vote Shares other than the Carl Perry Equity Side Letter executed
in May 1999.  Each  Purchaser  represents  and agrees that,  as of the


<PAGE>

Effective Date,  there is no (and from and after the Effective Date it will not,
and will cause its  Affiliates not to, enter into any) agreement with respect to
any securities of the Company or any of its  Affiliates  (and from and after the
Effective  Date  Purchaser  shall not take,  or permit any of its  Affiliates to
take,  any  action)  that is  inconsistent  in any  material  respect  with  the
provisions in this Agreement.

                  Section 7.2 Recapitalization,  Exchanges,  etc. If any capital
stock or other  securities  are issued in respect  of, in  exchange  for,  or in
substitution of, any Shares by reason of any  reorganization,  recapitalization,
reclassification,   merger,   consolidation,   spin-off,   partial  or  complete
liquidation,   stock  dividend,   split-up,  sale  of  assets,  distribution  to
stockholders  or  combination  of the  Shares  or any other  change  in  capital
structure  of the  Company,  then  appropriate  adjustments  shall be made  with
respect  to the  relevant  provisions  of this  Agreement  so as to  fairly  and
equitably preserve,  as far as practicable,  the original rights and obligations
of the parties  hereto under this  Agreement  and the terms "Common  Stock,  and
"Shares," each as used herein, shall be deemed to include shares of such capital
stock or other  securities,  as  appropriate.  Without  limiting the  foregoing,
whenever a particular number of Shares is specified herein, such number shall be
adjusted  to  reflect  stock  dividends,  stock-splits,  combinations  or  other
reclassifications of stock or any similar transactions.

                  Section 7.3  Successors and Assigns.  This Agreement  shall be
binding  upon and shall inure to the benefit of the  parties  hereto,  and their
respective  successors  and  permitted  assigns;  provided that (i) neither this
Agreement nor any rights or obligations hereunder may be transferred or assigned
by  the  Company  (except  by  operation  of  law in  any  merger  or  Qualified
Reorganization);  (ii)  neither  this  Agreement  nor any rights or  obligations
hereunder may be  transferred  or assigned by a Purchaser or Perry except to any
Person to whom it has  Transferred  Shares in compliance with this Agreement and
who has become bound by this Agreement pursuant to Section 2.2 hereof; and (iii)
the rights of the parties  under  Articles  III and Articles V hereof may not be
assigned  to any Person  except as  explicitly  provided  therein.  If any party
hereto shall acquire additional Shares,  such Shares shall,  except as otherwise
expressly  provided herein, be held subject to (and entitled to all the benefits
of) all of the terms of this Agreement,  it being expressly understood that such
additional  Shares  are  not  subject  to (i)  Article  III  for  determining  a
Purchaser's  Pro Rata  Share or (ii)  Article  V for  purposes  of  registration
rights.

                  Section 7.4       No Waivers; Amendments.

                  (a) No failure or delay by any party in exercising  any right,
power or privilege  hereunder shall operate as a waiver  thereof,  nor shall any
single or  partial  exercise  thereof  preclude  any other or  further  exercise
thereof or the exercise of any other right,  power or privilege.  The rights and
remedies  herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.

                  (b) This Agreement may not be amended or modified, nor may any
provision hereof be waived, other than by a written instrument signed by (i) the
Company,  (ii) the  holders of 66% of the Shares  held by  Purchasers  and their
direct or indirect Transferees and (iii) Perry or his Transferees.

<PAGE>

                  The parties  hereto shall use their best efforts not to effect
any amendments to the Charter  Documents that would circumvent the provisions of
this Section 7.4(b).

                  Section   7.6   Notices.   Any   notice,   request   or  other
communication  required or permitted  hereunder  will be in writing and shall be
deemed to have been duly  given if  personally  delivered  or if  telecopied  or
mailed by registered  or certified  mail,  postage  prepaid,  at the  respective
addresses of the parties as set forth  below.  Any party hereto may by notice so
given change its address for future notice  hereunder.  Notice will be deemed to
have been given  when  personally  delivered  or when  deposited  in the mail or
telecopied  in the  manner  set  forth  above  and will be  deemed  to have been
received when delivered.

                  (a)      If to Jagen

                           9 Oxford Street
                           South Yarra 3141
                           Melbourne, Victoria
                           Australia
                           Telecopier 011-613-9826-5499

                           with a copy to:

                           Gray Cary Ware & Freidenrich LLP
                           4365 Executive Drive, Suite 1600
                           San Diego, California  92121
                           Telecopier (619) 677-1477
                           Attention:  Robert W. Ayling, Esq.

                  (b)      if to Rawlinson

                           5 Shenton Way, #1301
                           UIC Building
                           Singapore 068808, Singapore
                           Telecopier (65) 220-5338

                           with a copy to:

                           Gray Cary Ware & Freidenrich LLP
                           4365 Executive Drive, Suite 1600
                           San Diego, California  92121
                           Telecopier (619) 677-1477
                           Attention:  Robert W. Ayling, Esq.

<PAGE>


                  (c)      if to the Company

                           U.S. Electricar, Inc.
                           19850 South Magellan Drive
                           Torrance, California  90502
                           Attention:  President

                           with a copy to:

                           Bay Venture Counsel, LLP
                           1999 Harrison Street, Suite 1300
                           Oakland, CA 94612
                           Attention:  Donald C. Reinke, Esq.
                           Telecopier (510) 834-7440

                  Section 6.10  Consistency.  In the event of a conflict between
this  Agreement  on the one  hand and the  Charter  Documents  or any  agreement
relating  to the  securities  of the  Company on the other  hand,  the terms and
provisions of this Agreement shall be deemed to set forth the true intentions of
the parties (to the extent  permitted by applicable law) and shall supersede the
terms of any other agreement.

                  Section 6.11  Confidentiality  The Purchasers shall not at any
time (a)  disclose  the  Company's  business  plans  and  objectives,  financial
projections,  marketing  plans,  technical  data,  patentable  and  unpatentable
designs,  concepts,  ideas, inventions,  know-how and other trade secrets of the
Company (the Confidential Information") to any Person whatsoever, (b) examine or
make copies of any reports or other documents,  papers,  memoranda,  or extracts
containing  Confidential  Information,  nor (c) utilize for their own benefit or
for the benefit of any other party other than the Company any such  Confidential
Information except:

                           (i)  Information   which  such  party  can  show  was
rightfully in its possession at the time of disclosure by the Company.

                           (ii)  Information  which  such  party  can  show  was
received from a third party who
lawfully developed the information independently of the Company or obtained such
information  from the Company under  conditions which did not require that it be
held in confidence.

                           (iii)  Information  which, at the time of disclosure,
is in the public domain.

                  Section 6.12  Applicable  Law. This Agreement and all acts and
transactions  pursuant  hereto  and the rights and  obligations  of the  parties
hereto shall be governed,  construed and interpreted in accordance with the laws
of the State of California,  without giving effect to principles of conflicts of
law.

                  Section 6.13  Counterparts.  This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together  shall  constitute  one  instrument.  This Agreement may be executed by
facsimile.


<PAGE>

                  Section 6.14 Title and  Subtitles.  The titles of the Sections
and  subsections of this Agreement are for the convenience of reference only and
are not to be considered in construing this Agreement.

                  Section 6.15  Severability.  If one or more provisions of this
Agreement are held to be  unenforceable  under applicable law, the parties agree
to renegotiate  such  provision in good faith to achieve the closest  comparable
terms as is  possible.  In the event that the  parties  cannot  reach a mutually
agreeable  and  enforceable  replacement  for  such  provision,  then  (a)  such
provision  shall  be  excluded  from  this  Agreement,  (b) the  balance  of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.



<PAGE>


                                SIGNATURE PAGE TO
                             SHAREHOLDERS' AGREEMENT


PURCHASER                                   U.S. ELECTRICAR, INC.

JAGEN PTY, LTD.

By:/s/ Boris Liberman                                By:/s/ Carl Perry
   --------------------------                           ---------------------
     (Signature)                                           (Signature)


PURCHASER

ANTHONY N. RAWLINSON

/s/ Anthony N. Rawlinson
----------------------------
(Signature)




/s/ Carl Perry
-----------------
CARL PERRY